[Federal Register Volume 82, Number 248 (Thursday, December 28, 2017)]
[Notices]
[Pages 61625-61635]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-28078]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82390; File No. SR-NYSE Arca-2017-107]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Amendment No. 1, and Order Granting Approval on an Accelerated Basis 
of a Proposed Rule Change, as Modified by Amendments No. 1 and No. 3, 
to List and Trade of Shares of the Breakwave Dry Bulk Shipping ETF 
Under NYSE Arca Rule 8.200-E, Commentary .02

December 22, 2017.

I. Introduction

    On September 8, 2017, NYSE Arca, Inc. (``Exchange'' or ``NYSE 
Arca'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1)\1\ of the Securities 
Exchange Act of 1934 (``Act'' or ``Exchange Act'')\2\ and Rule 19b-4 
thereunder,\3\ a proposed rule change to

[[Page 61626]]

list and trade shares (``Shares'') of the Breakwave Dry Bulk Shipping 
ETF (``Fund'') under NYSE Arca Rule 8.200-E, Commentary .02. The 
proposed rule change was published for comment in the Federal Register 
on September 28, 2017.\4\ On December 5, 2017, the Exchange filed 
Amendment No. 1 to the proposed rule change, which amended and replaced 
the proposed rule change in its entirety.\5\ On December 20, 2017, the 
Exchange filed Amendment No. 2 to the proposed rule change. The 
Exchange withdrew Amendment No. 2 on December 21, 2017, and on the same 
day filed Amendment No. 3.\6\ No comments have been received regarding 
the proposed rule change. The Commission is providing notice of the 
filing of Amendment No. 1 to interested persons, and is approving the 
proposed rule change, as modified by Amendments No. 1 and No. 3, on an 
accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
    \4\ See Securities Exchange Act Release No. 81681(September 22, 
2017), 82 FR 45342.
    \5\ In Amendment No. 1, the Exchange: (1) Disclosed information 
regarding the dissemination of the Reference Indexes (defined 
below); (2) described further the exchanges that trade Freight 
Futures (defined below); (3) described the regulatory framework 
under which brokers that trade Freight Futures operate; (4) 
described how options held by the fund would be valued in 
calculating the Fund's net asset value; (5) discussed why it 
believes that the cut-off time for creation and redemption orders 
will not negatively impact arbitrage opportunities for the shares; 
(6) modified its description of how the indicative fund value would 
be calculated; (7) provided information regarding the availability 
of pricing information for Freight Futures and exchange listed 
options on such futures; (8) expanded its description of the scope 
of information that will be made available regarding the Fund's 
portfolio holdings; (9) expanded the continued listing standards 
applicable to the Shares; (10) limited the amount of exchange-listed 
options that may be held by the Fund that are not listed on an ISG/
CSSA market; (11) expanded its description of the surveillance 
applicable to Freight Futures and exchange-listed options on such 
futures; and (12) made other technical amendments. Amendment No. 1 
to the proposed rule change is available at: https://www.sec.gov/comments/sr-nysearca-2017-107/nysearca2017107-2759312-161596.pdf.
    \6\ In Amendment No. 3, the Exchange provided background 
information to support its proposal. Specifically, the Exchange: (1) 
identified the regulators of the markets that list Freight Futures; 
and (2) stated that Freight Futures have been cleared since 2005. 
Because Amendment No. 3 does not materially alter the substance of 
the proposed rule change or raise unique or novel regulatory issues, 
Amendment No. 3 is not subject to notice and comment. Amendment No. 
3 to the proposed rule change is available at: https://www.sec.gov/comments/sr-nysearca-2017-107/nysearca2017107-2837568-161712.pdf.
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II. Description of the Proposed Rule Change, as Modified by Amendment 
No. 1 and No. 3

    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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to list and trade shares (``Shares'') of the 
following under NYSE Arca Rule 8.200-E, Commentary .02, which governs 
the listing and trading of Trust Issued Receipts: Breakwave Dry Bulk 
Shipping ETF (the ``Fund'').\7\
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    \7\ Commentary .02 to NYSE Arca Rule 8.200-E applies to Trust 
Issued Receipts that invest in ``Financial Instruments.'' The term 
``Financial Instruments,'' as defined in Commentary .02(b)(4) to 
NYSE Arca Rule 8.200-E, 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 Fund will be a series of ETF Managers Group Commodity Trust I 
(the ``Trust).\8\ The Fund and the Trust will be managed and controlled 
by their sponsor and investment manager, ETF Managers Capital LLC (the 
``Sponsor''). The Sponsor is registered with the Commodity Futures 
Trading Commission (``CFTC'') as a commodity pool operator (``CPO'') 
and is a member of the National Futures Association (``NFA''). 
Breakwave Advisors LLC (``Breakwave'') is registered as a commodity 
trading advisor with the CFTC and will serve as the Fund's commodity 
trading advisor. ETFMG Financial LLC will be the Fund's distributor 
(``Distributor'' or ``Marketing Agent''). US Bancorp Fund Services LLC 
will be the Fund's ``Administrator'' and ``Transfer Agent''.
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    \8\ On June 2, 2017, the Trust filed with the Commission a 
registration statement on Form S-1 under the Securities Act of 1933 
(15 U.S.C. 77a) (``Securities Act'') relating to the Fund (File No. 
333-218453) (the ``Registration Statement''). The description of the 
operation of the Trust and the Fund herein is based, in part, on the 
Registration Statement.
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    The Fund's Investment Objective and Strategy
    According to the Registration Statement, the Fund's investment 
objective will be to provide investors with exposure to the daily 
change in the price of dry bulk freight futures, before expenses and 
liabilities of the Fund, by tracking the performance of a portfolio 
(the ``Benchmark Portfolio'') consisting of a three-month strip of the 
nearest calendar quarter of futures contracts on specified indexes 
(each a ``Reference Index'') that measure rates for shipping dry bulk 
freight (``Freight Futures''). Each Reference Index is published each 
U.K. business day by the London-based Baltic Exchange Ltd \9\ and 
measures the charter rate for shipping dry bulk freight in a specific 
size category of cargo ship--Capesize, Panamax or Supramax. The three 
Reference Indexes are as follows: Capesize: The Capesize 5TC Index; 
Panamax: The Panamax 4TC Index; and Supramax: the Supramax 6TC 
Index.\10\ The value of the Capesize

[[Page 61627]]

5TC Index is disseminated at 11:00 a.m., London Time and the value of 
the Panamax 4TC Index and the Supramax 6TC Index each is disseminated 
at 1:00 p.m., London Time. The Reference Index information disseminated 
by the Baltic Exchange also includes the components and value of each 
component in each Reference Index. Such Reference Index information 
also is widely disseminated by Reuters and/or other major market data 
vendors.
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    \9\ The Baltic Exchange, which is a wholly owned subsidiary of 
the Singapore Exchange Ltd (``SGX''), is a membership organization 
and an independent source of maritime market information for the 
trading and settlement of physical and derivative shipping 
contracts. According to the Baltic Exchange, this information is 
used by shipbrokers, owners and operators, traders, financiers and 
charterers as a reliable and independent view of the dry and tanker 
markets.
    \10\ The Reference Indexes are published by the Baltic 
Exchange's subsidiary company, Baltic Exchange Information Services 
Ltd (``Baltic''), which publishes a wide range of market reports, 
fixture lists and market rate indicators on a daily and (in some 
cases) weekly basis. The Baltic indices, which include the Reference 
Indexes, are an assessment of the price of moving the major raw 
materials by sea. The indices are based on assessments of the cost 
of transporting various bulk cargoes, both wet (e.g., crude oil and 
oil products) and dry (e.g., coal and iron ore), made by leading 
shipbroking houses located around the world on a per tonne and daily 
hire basis. The information is collated and published by the Baltic 
Exchange. Procedures relating to administration of the Baltic 
indices are set forth in ``The Baltic Exchange, Guide to Market 
Benchmarks'' November 2016 (the ``Guide''), including production 
methods, calculation, confidentiality and transparency, duties of 
panelists, code of conduct, audits and quality control. The Guide is 
available at www.balticexchange.com. According to the Guide, these 
procedures are in compliance with the ``Principles for Financial 
Benchmarks'' issued by the International Organization of Securities 
Commissioners (or ``IOSCO'') (the ``IOSCO Principles''). The IOSCO 
Principles are designed to enhance the integrity, the reliability 
and the oversight of benchmarks by establishing guidelines for 
benchmark administrators and other relevant bodies in the following 
areas: Governance: to protect the integrity of the benchmark 
determination process and to address conflicts of interest; 
Benchmark quality: to promote the quality and integrity of benchmark 
determinations through the application of design factors; Quality of 
the methodology: To promote the quality and integrity of 
methodologies by setting out minimum information that should be 
addressed within a methodology. These principles also call for 
credible transition policies in case a benchmark may cease to exist 
due to market structure change. Accountability mechanisms: to 
establish complaints processes, documentation requirements and audit 
reviews. The IOSCO Principles provide a framework of standards that 
might be met in different ways, depending on the specificities of 
each benchmark. In addition to a set of high level principles, the 
framework offers a subset of more detailed principles for benchmarks 
having specific risks arising from their reliance on submissions 
and/or their ownership structure. For further information concerning 
the IOSCO Principles, see http://www.iosco.org/library/pubdocs/pdf/IOSCOPD415.pdf.
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    The Fund will seek to achieve its investment objective by investing 
substantially all of its assets in the Freight Futures currently 
constituting the Benchmark Portfolio. The Benchmark Portfolio will 
include all existing positions to maturity and settle them in cash. 
During any given calendar quarter, the Benchmark Portfolio will 
progressively increase its position to the next calendar quarter three-
month strip, thus maintaining constant exposure to the Freight Futures 
market as positions mature.
    The Benchmark Portfolio will maintain long-only positions in 
Freight Futures. The Benchmark Portfolio will hold a combination of 
Capesize, Panamax and Supramax Freight Futures. More specifically, the 
Benchmark Portfolio will hold 50% exposure in Capesize Freight Futures 
contracts, 40% exposure in Panamax Freight Futures contracts and 10% 
exposure in Supramax Freight Futures contracts. The Benchmark Portfolio 
will not include and the Fund will not invest in swaps, non-cleared dry 
bulk freight forwards or other over-the-counter derivative instruments 
that are not cleared through exchanges or clearing houses. The Fund may 
hold exchange-traded options on Freight Futures. The Benchmark 
Portfolio is maintained by Breakwave and will be rebalanced annually.
    When establishing positions in Freight Futures, the Fund will be 
required to deposit initial margin with a value of approximately 10% to 
40% of the notional value of each Freight Futures position at the time 
it is established. These margin requirements are established and 
subject to change from time to time by the relevant exchanges, clearing 
houses or the Fund's futures commission merchant (``FCM''). On a daily 
basis, the Fund will be obligated to pay, or entitled to receive, 
variation margin in an amount equal to the change in the daily 
settlement level of its Freight Futures positions. Any assets not 
required to be posted as margin with the FCM will be held at the Fund's 
custodian in cash or cash equivalents.\11\
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    \11\ The Fund will hold cash or cash equivalents, such as U.S. 
Treasuries or other high credit quality, short-term fixed-income or 
similar securities for direct investment or as collateral for the 
U.S. Treasuries and for other liquidity purposes, and to meet 
redemptions that may be necessary on an ongoing basis.
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    The Fund will seek to achieve its objective by purchasing Freight 
Futures that are cleared through major exchanges (see description of 
Freight Futures below). The Fund will place purchase orders for Freight 
Futures with an execution broker. The broker will identify a selling 
counterparty and, simultaneously with the completion of the 
transaction, will submit the block traded Freight Futures to the 
relevant exchange or clearing house for clearing, thereby completing 
and creating a cleared futures transaction. If the exchange or clearing 
house does not accept the transaction for any reason, the transaction 
will be considered null and void and of no legal effect.
    The principal markets for Freight Futures are Nasdaq Stockholm AB 
and SGX. Other exchanges that clear Freight Futures are ICE Futures US 
(the ``ICE''), the Chicago Mercantile Exchange (``CME'') and the 
European Energy Exchange (``EEX''). In each case, the applicable 
exchange acts as a counterparty for each member for clearing 
purposes.\12\ The Fund's investments in Freight Futures will be cleared 
by Nasdaq Stockholm AB, CME, SGX, ICE and/or the European Energy 
Exchange (``EEX'').\13\ Nasdaq Stockholm AB is regulated by the Swedish 
Financial Supervisory Authority. SGX is regulated by the Monetary 
Authority of Singapore. EEX is regulated by the Federal Financial 
Supervisory Authority in Germany. The ICE and CME are regulated in the 
U.S. by the CFTC.
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    \12\ LCH.Clearnet currently clears Freight Futures but has 
announced that, as of December 28, 2017, it will no longer clear 
Freight Futures.
    \13\ Nasdaq Stockholm AB, SGX, CME and ICE are members of the 
Intermarket Surveillance Group (``ISG''). See note 19, infra.
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    Freight futures clearing has been occurring since 2005.
    The Benchmark Portfolio will consist of positions in the three-
month strip of the nearest calendar quarter of Freight Futures and roll 
them constantly to the next calendar quarter. The four-calendar 
quarters are January, February, and March (Q1), April, May, and June 
(Q2), July, August, and September (Q3), and October, November and 
December (Q4). The Benchmark Portfolio will consist of an equal number 
of Freight Futures in each of the three months comprising the nearby 
calendar quarter at the beginning of such quarter.
    Throughout the quarter, the Fund will attempt to roll positions in 
the nearby calendar quarter, on a pro rata basis. For example, if the 
Fund was currently holding the Q1 calendar quarter comprising the 
January, February and March monthly contracts, each week in the month 
of February, the Fund will attempt to purchase Q2 contracts in an 
amount equal to approximately one quarter of the expiring February 
positions. As a result, by the end of February, the Fund would have 
rolled the February position to Q2 contracts, leaving the Fund with 
March and Q2 contracts. At the end of March, the Fund will have 
completed the roll and will then hold only Q2 exposure comprising 
April, May and June monthly contracts. Since Freight Futures contracts 
are cash settled, the Fund need not sell out of existing contracts. 
Rather, it will hold such contracts to expiration and apply the above 
methodology in order acquire the nearby calendar contract.
    The Benchmark Portfolio will be rebalanced annually. The Benchmark 
Portfolio's initial allocation will be approximately 50% Capesize 
Freight Futures contracts, 40% Panamax Freight Futures contracts and 
10% Supramax Freight Futures contracts. The above allocation will be 
based on contract value, not number of lots. Given each asset's 
individual price movements during the year, such percentages might 
deviate from the targeted allocation.
    During the month of December of each year, the Fund will rebalance 
its portfolio in order to bring the allocation of assets back to the 
desirable levels. During this period, the Fund would purchase or sell 
Freight Futures to achieve its targeted allocation.
    The Sponsor anticipates that the Fund's Freight Futures positions 
will be held to expiration and settle in cash against the respective 
Reference Index as published by the Baltic Exchange. However, positions 
may be closed out to meet orders for redemption of baskets, in which 
case the proceeds from the closed positions will not be reinvested.
    The Fund's portfolio will be traded with a view to reflecting the 
performance of the Benchmark Portfolio, whether the Benchmark Portfolio 
is rising, falling or flat over any particular period. To maintain the 
correlation between the Fund and the change in the Benchmark Portfolio, 
the Sponsor may adjust the Fund's portfolio of investments on a daily 
basis in response to creation and redemption orders or otherwise as 
required.

[[Page 61628]]

Overview of the Dry Bulk Freight Industry
    As stated in the Registration Statement, the following is a brief 
introduction of the global dry bulk freight industry. The data 
presented below is derived from information released from various 
third-party sources. The third-party sources from which certain of the 
information presented below include the United Nations Conference on 
Trade and Development, the Baltic and International Maritime Council, 
Bloomberg and others. Dry bulk shipping is a 150-plus year-old industry 
focusing on the transportation of dry bulk commodities using oceangoing 
vessels named dry bulk carriers. Dry bulk carriers are ships that have 
cargo loaded directly into the ship's storage holds. The cargos 
transported are dry commodities that do not need to be carried in 
packaged form. Dry commodity cargos (mainly iron ore, coal and grains) 
are homogenous and are loaded with bucket cranes, conveyors or pumps. 
Crude oil and refined products, while shipped in bulk, are wet cargos 
and are transported on tanker vessels, rather than dry bulk carriers. 
Dry bulk carriers have an average useful life of approximately 25 years 
and are measured on size or capacity in dead weight tons (``DWT'').
    Dry bulk carriers come in various sizes:
    Capesizes (100,000+ DWT) are the largest of the dry bulk asset 
classes. Capesizes primarily transport iron ore and coal. Traditional 
Capesize routes are from Australia to Asia, and from Brazil to Europe 
and Asia. There are about 1,650 Capesizes worldwide. The Capesize fleet 
is about 40% of the dry bulk fleet by DWT capacity.
    Panamaxes (65,000--100,000 DWT) primarily transport coal, grain and 
iron ore. The Panamax is the largest vessel class that can transit the 
(old) Panama Canal. There are about 2,500 Panamaxes worldwide 
representing 24% of the global fleet by capacity.
    Handymaxes (40,000--65,000 DWT) are the work horse of the industry, 
carrying the whole spectrum of dry bulk commodities: grain, coal, iron 
ore, and minor bulks. A sub-category of Handymaxes are vessels with 
capacities of 50,000-65,000 that are called Supramaxes. There are 3,400 
Handymaxes worldwide representing about 25% of the global fleet by DWT 
capacity.
    Handysizes (10,000--40,000 DWT) bulkers typically transport grain, 
coal, and minor bulks. Handysize bulkers tend to trade regionally. 
There are about 3,300 Handysize bulkers in the fleet, or about 11% of 
the global fleet by DWT capacity.
Dry Bulk Vessel Supply
    According to the Registration Statement, there are approximately 
10,500 dry bulk vessels worldwide with a carrying capacity of roughly 
790 million DWT and an average age of approximately 8 years. Supply of 
dry bulk ships is dynamic.
    Factors impacting dry bulk supply include new orders, the scrapping 
of older vessels, new shipbuilding technologies, vessel congestion in 
ports, closures of major waterways, including canals, and wars and 
other geopolitical conflicts that can restrict access to vessels 
available for shipping dry bulk freight.
Demand for Dry Bulk Freight
    According to the Registration Statement, dry bulk demand has seen 
steady growth over the past two decades, as the Asian economies have 
exhibited robust demand for raw materials on the back of strong 
economic growth. Iron ore, the main component of steel production, has 
been the main driver of dry bulk freight demand growth. The higher 
demand for such raw materials has led to increasing demand for dry bulk 
shipping, as the regions that produce and consume raw materials are 
located far apart.
    Demand for dry bulk freight is generally measured in ton-miles, 
which corresponds to one ton of freight carried one mile. Such measure 
takes into consideration both the quantity of cargo transport but also 
the distance between loading and offloading ports. Over the last 10 
years, dry bulk freight demand growth for major commodities has 
averaged approximately 6% per year. In 2015, dry bulk freight demand 
growth for major commodities declined for the first time in at least 15 
years, while in 2016, it is estimated to have increased by 
approximately 2%. Weaker iron ore and coal imports to China were the 
main reasons for the below trend growth.
    Factors impacting demand for shipping dry bulk freight include 
global economic growth, demand for iron ore, demand for metallurgical 
and thermal coal, demand for grains, government regulations, taxes and 
tariffs, fuel prices, vessel speeds and new trade routes.
Dry Bulk Freight Charter Rates
    According to the Registration Statement, dry bulk freight ``charter 
rates'' reflect the price paid for the use of the ship to transport a 
bulk commodity. The most commonly used freight rate is the timecharter 
rate, which is measured in U.S. Dollars per day. Dry bulk timecharter 
rates have exhibited significant volatility in the last 15 years. From 
2003 to 2008, faster growth rates in demand for dry bulk ships was not 
matched by growth in supply of ships and thus, charter rates increased 
considerably, reaching their highest point in 2008. Following the 
global financial crisis, growth in supply of ships exceeded demand, 
leading to a considerable drop in charter rates. Over the last five 
years, rates have generally been weak compared to historical levels, as 
higher supply and relatively weak demand growth led to lower 
utilization rates in the industry.
    A common industry measure of dry bulk rates is the Baltic Dry Index 
(``BDI''). The BDI is an economic indicator issued daily by the Baltic 
Exchange. The BDI provides an assessment of the price of moving the 
major raw materials by sea throughout the world. Taking in 21 shipping 
routes measured on a timecharter basis, the index covers Handysize, 
Supramax, Panamax, and Capesize dry bulk carriers carrying a range of 
commodities including coal, iron ore and grain. Each individual asset 
class also has its own index (i.e., a Reference Index), which is also 
published daily by the Baltic Exchange and reflects a weighted average 
assessment of different standardized routes around the world.
    The BDI has reflected the volatility of charter rates over the last 
15 years, reaching its highest point on record in 2008 at 11,793. In 
2016, it reached its lowest point on record at 290. The average price 
of the BDI in the 15 years from 2001 to 2016 has been 2,567, and the 
median price has been 1,747. As of March 31, 2017, the BDI stood at 
1,200.
Freight Futures
    According to the Registration Statement, freight futures are 
financial futures contracts that allow ship owners, charterers and 
speculators to hedge against the volatility of freight rates. The 
Freight Futures are built on indices composed of baskets of routes for 
dry bulk freight, such as the Capesize 5TC Index, Panamax 4TC Index and 
Supramax 6TC Index. Freight Futures are financial instruments that 
trade off-exchange but then are cleared through an exchange. Market 
participants communicate their buy or sell orders through a network of 
execution brokers mainly through phone or instant messaging platforms 
with specific trading instructions related to price, size, and type of 
order. The execution broker receives such order and then attempts to 
match it with

[[Page 61629]]

a counterpart. Once there is a match and both parties confirm the 
transaction, the execution broker submits the transaction details 
including trade specifics, counterparty details and accounts to the 
relevant exchange for clearing, thus completing a cleared block futures 
transaction. The exchange will then require the relevant member or FCM 
to submit the necessary margin to support the position similar to other 
futures clearing and margin requirements.
    Freight Futures are listed and cleared on the following exchanges: 
Nasdaq Stockholm AB, CME, ICE Futures U.S., SGX, and EEX.
    Freight Futures settle monthly over the arithmetic average of spot 
index assessments in the contract month for the relevant underlying 
product, rounded to one decimal place. The daily index publication, 
against which Freight Futures settle, is published by the Baltic 
Exchange.
    Generally, Freight Futures trade from approximately 12:00 a.m. 
Eastern Time (``E.T.'') to approximately 12:00 p.m. E.T. The great 
majority of trading volume occurs during London business hours, from 
approximately 3:00 a.m. E.T. time to approximately 12:00 p.m. E.T. Some 
limited trading takes place during Asian business hours as well (12:00 
a.m.-3:00 a.m. E.T.).
    Exchanges have a cutoff time of 1:00 p.m. E.T. for clearing the 
respective day's trades (SGX clears Freight Futures from 6:25 p.m. E.T. 
to 3:45 p.m. E.T. (next day) or, during part of the year, from 7:25 
p.m. to 4:45 p.m. E.T. (next day)). The final closing prices for 
settlement are published daily around 1:30 p.m. E.T. Final cash 
settlement occurs the first business day following the expiry day.
    Freight Futures are quoted in U.S. Dollars per day, with a minimum 
lot size of one. One lot represents one day of freight costs, as 
freight rates are measured in U.S. Dollars per day. The nominal value 
of a contract is simply the product of lots and Freight Futures prices. 
There are Futures Contracts of up to 72 consecutive months, starting 
with the current month, available for trading for each vessel class.
    Similar to other futures, Freight Futures are subject to margin 
requirements by the relevant exchanges. The Sponsor anticipates that 
approximately 10% to 40% of the Fund's assets will be used as payment 
for or collateral for Freight Futures contracts. In order to 
collateralize its Freight Futures positions, the Fund will hold such 
assets, from which it will post margin to its FCM in an amount equal to 
the margin required by the relevant exchanges, and transfer to its FCM 
any additional amounts that may be separately required by the FCM.
    According to the Registration Statement, most of the daily trading 
takes place over phones and instant messaging platforms.\14\ Trading 
screens also exist and some trading also happens through such screens. 
Brokers are required to report to the relevant exchanges each trade 
that takes place. Freight Futures liquidity has remained relatively 
constant, in lot terms, over the last five years with approximately 1.1 
million lots trading annually. Open interest currently stands at 
approximately 290,000 lots across all asset classes representing an 
estimated value of more than $3 billion. Of such open interest, 
Capesize contracts account for approximately 50%, Panamax for 
approximately 40% and Handymax for approximately 10%. Major market 
participants in Freight Futures market include: commodity producers, 
commodity users, commodity trading houses, ship operators, major banks, 
investment funds and independent ship owners.
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    \14\ Freight Futures are primarily traded through broker members 
of the Forward Freight Agreement Brokers Association (``FFABA''), 
such as Clarkson's Securities, Simpson Spence Young, Freight 
Investor Services, GFI Group, BRS Group and ICAP. Members of the 
FFABA must be members of the Baltic Exchange and must be regulated 
by the Financial Conduct Authority if resident in the U.K., or if 
not resident in the U.K., by an equivalent body if required by the 
authorities in the jurisdiction. Source: The Baltic Code of the 
Baltic Exchange.
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Calculating Net Asset Value (``NAV'')
    The Fund's NAV will be calculated by taking the current market 
value of its total assets, subtracting any liabilities; and dividing 
that total by the total number of outstanding Shares.
    The Administrator will calculate the NAV of the Fund once each NYSE 
Arca trading day. The NAV for a particular trading day will be released 
after 4:00 p.m. E.T. The Administrator will use the Baltic Exchange 
closing price for the Freight Futures. Option contracts will be valued 
at their most recent sale price on the applicable exchange. The 
Administrator will calculate or determine the value of all other Fund 
investments using market quotations, if available, or other information 
customarily used to determine the fair value of such investments as of 
the close of the NYSE Arca Core Trading Session (normally 4:00 p.m. 
E.T.). The information may include costs of funding, to the extent 
costs of funding are not and would not be a component of the other 
information being utilized. Third parties supplying quotations or 
market data may include, without limitation, dealers in the relevant 
markets, end-users of the relevant product, information vendors, 
brokers and other sources of market information.
Indicative Fund Value
    In order to provide updated information relating to the Fund for 
use by investors and market professionals, an updated indicative fund 
value (``IFV'') will be made available through on-line information 
services throughout the Exchange Core Trading Session (normally 9:30 
a.m. to 4:00 p.m., E.T.) on each trading day. The IFV will be 
calculated by using the prior day's closing NAV per Share of the Fund 
as a base and updating that value throughout the trading day to reflect 
changes in the most recently reported trade price for the futures and/
or options held by the Fund. The IFV disseminated during NYSE Arca Core 
Trading Session hours should not be viewed as an actual real time 
update of the NAV, because the NAV will be calculated only once at the 
end of each trading day based upon the relevant end of day values of 
the Fund's investments.
    The IFV will be disseminated on a per Share basis every 15 seconds 
during regular NYSE Arca Core Trading Session hours of 9:30 a.m. E.T. 
to 4:00 p.m. E.T. The customary trading hours of the Freight Futures 
trading are 3:00 a.m. E.T. to 12:00 p.m. E.T. This means that there is 
a gap in time at the end of each day during which the Fund's Shares 
will be traded on the NYSE Arca, but real-time trading prices for 
contracts are not available. During such gaps in time the IFV will be 
calculated based on the end of day price of such contracts from the 
Baltic Exchange's immediately preceding settlement prices. In addition, 
other investments and U.S. Treasuries held by the Fund will be valued 
by the Administrator using rates and points received from client-
approved third party vendors (such as Reuters and WM Company) and 
broker-dealer quotes. These investments will not be included in the 
IFV.
    Dissemination of the IFV provides additional information that is 
not otherwise available to the public and is useful to investors and 
market professionals in connection with the trading of the Fund's 
Shares on the NYSE Arca. Investors and market professionals are able 
throughout the trading day to compare the market price of Fund Shares 
and the IFV. If the market price of the Fund Shares diverges 
significantly from the IFV, market professionals will have an incentive 
to execute arbitrage trades. For example, if the Fund's Shares appears 
to

[[Page 61630]]

be trading at a discount compared to the IFV, a market professional 
could buy the Fund's Shares on the NYSE Arca and take the opposite 
position in Freight Futures. Such arbitrage trades can tighten the 
tracking between the market price of the Fund's Shares and the IFV and 
thus can be beneficial to all market participants.
Creation and Redemption of Shares
    According to the Registration Statement, the Fund will create and 
redeem Shares from time to time in one or more ``Creation Baskets'' or 
``Redemption Baskets'' (collectively, the ``Baskets''). A Basket 
consists of 50,000 Shares. The creation and redemption of Baskets will 
only be made in exchange for delivery to the Fund or the distribution 
by the Fund of the amount of Treasuries and any cash represented by the 
Baskets being created or redeemed, the amount of which is based on the 
combined NAV of the number of Shares included in the Baskets being 
created or redeemed determined as of 4:00 p.m. E.T. on the day the 
order to create or redeem Baskets is properly received.
    ``Authorized Participants'' are the only persons that may place 
orders to create and redeem Baskets. Authorized Participants must be 
(1) registered broker-dealers or other securities market participants, 
such as banks and other financial institutions, that are not required 
to register as broker-dealers to engage in securities transactions 
described below, and (2) Depository Trust Company (``DTC'') 
participants.
Creation Procedures
    On any business day, an Authorized Participant may place an order 
with the Transfer Agent to create one or more Baskets. For purposes of 
processing purchase and redemption orders, a ``business day'' means any 
day other than a day when any of the NYSE Arca, the Baltic Exchange or 
the New York Stock Exchange is closed for regular trading. Purchase 
orders must be placed by 1:00 p.m. E.T. or the close of the Core 
Trading Session on NYSE Arca, whichever is earlier. The day on which a 
valid purchase order is received in accordance with the terms of the 
``Authorized Participant Agreement'' is referred to as the purchase 
order date. Purchase orders are irrevocable.
Determination of Required Payment
    The total payment required to create each Creation Basket is the 
NAV of 50,000 Shares on the purchase order date, but only if the 
required payment is timely received. To calculate the NAV, the 
Administrator will use the Baltic Exchange settlement price (typically 
determined after 2:00 p.m. E.T.) for the Freight Futures. Because 
orders to purchase Baskets must be placed no later than 1:00 p.m., 
E.T., but the total payment required to create a Basket typically will 
not be determined until after 2:00 p.m., E.T., on the date the purchase 
order is received, Authorized Participants will not know the total 
amount of the payment required to create a Basket at the time they 
submit an irrevocable purchase order.
Delivery of Required Payment
    An Authorized Participant who places a purchase order shall 
transfer to the Administrator the required amount of Freight Futures, 
U.S. Treasuries and/or cash, or a combination of them, by the end of 
the next business day following the purchase order date. Upon receipt 
of the deposit amount, the Administrator will direct DTC to credit the 
number of Baskets ordered to the Authorized Participant's DTC account 
on the next business day following the purchase order date.
Redemption Procedures
    According to the Registration Statement, the procedures by which an 
Authorized Participant can redeem one or more Baskets will mirror the 
procedures for the creation of Baskets. On any business day, an 
Authorized Participant may place an order with the Transfer Agent, and 
accepted by the Distributor, to redeem one or more Baskets. Redemption 
orders must be placed by 1:00 p.m. E.T. or the close of the Core 
Trading Session on the NYSE Arca, whichever is earlier.\15\ A 
redemption order so received will be effective on the date it is 
received in satisfactory form in accordance with the terms of the 
Authorized Participant Agreement. The day on which the Marketing Agent 
receives a valid redemption order is the redemption order date. 
Redemption orders are irrevocable. By placing a redemption order, an 
Authorized Participant agrees to deliver the baskets to be redeemed 
through DTC's book-entry system to the Fund not later than 1:00 p.m., 
E.T., on the next business day immediately following the redemption 
order date.
---------------------------------------------------------------------------

    \15\ The Sponsor represents that it believes that the designated 
time by which orders to create or redeem must be received by the 
Transfer Agent (1:00 p.m. E.T.) will not have a material impact on 
an Authorized Participant's arbitrage opportunities with respect to 
the Fund. As noted above, Freight Futures are cleared by SGX until 
3:45 p.m. E.T (or 4:45 p.m. E.T. during part of the year) and such 
clearing activity on SGX will serve as an arbitrage mechanism for 
trading in the Fund's Shares. In addition, price information 
regarding trading of Freight Futures and options on Freight Futures 
on the applicable exchange and end-of-day settlement prices 
published by the applicable exchange will be available during the 
Core Trading Session.
---------------------------------------------------------------------------

Determination of Redemption Proceeds
    The redemption proceeds from the Fund will consist of a cash 
redemption amount equal to the NAV of the number of Baskets requested 
in the Authorized Participant's redemption order on the redemption 
order date.
    Because orders to redeem Baskets must be placed no later than 1:00 
p.m., E.T., but the total amount of redemption proceeds typically will 
not be determined until after 2:00 p.m., E.T., on the date the 
redemption order is received, Authorized Participants will not know the 
total amount of the redemption proceeds at the time they submit an 
irrevocable redemption order.
    The redemption proceeds due from the Fund will be delivered to the 
Authorized Participant at 1:00 p.m., E.T., on the next business day 
immediately following the redemption order date if, by such time, the 
Fund's DTC account has been credited with the Baskets to be redeemed.
Availability of Information
    The NAV for the Fund's Shares will be disseminated daily to all 
market participants at the same time. The intraday, closing prices, and 
settlement prices of the Freight Futures will be readily available from 
the applicable futures exchange websites, automated quotation systems, 
published or other public sources, or major market data vendors.
    Complete real-time data for Freight Futures is available by 
subscription through on-line information services. Quotation and last-
sale information regarding the Shares will be disseminated through the 
facilities of the Consolidated Tape Association (``CTA''). The IFV will 
be available through on-line information services. The Freight Futures 
and exchange-traded options on Freight Futures trading prices will be 
disseminated by one or more major market data vendors during the NYSE 
Arca Core Trading Session of 9:30 a.m. to 4:00 p.m. E.T. Nasdaq 
Stockholm AB, SGX, CME, ICE Futures US and EEX provide on a daily 
basis, transaction volumes, transaction prices, trade time, and open 
interest on their respective websites. In addition, historical data 
also exists for volumes and open interest. Daily settlement prices and 
historical settlement prices are available through a subscription 
service to the Baltic Exchange, which maintains the licensing rights of 
relevant freight data. However, the exchanges provide the daily 
settlement

[[Page 61631]]

price change of Freight Futures on their respective websites. Certain 
Freight Futures brokers provide real time pricing information to the 
general public either through their websites or through data vendors 
such as Bloomberg or Reuters. Most Freight Futures brokers provide, 
upon request, individual electronic screens that market participants 
can use to transact, place orders or only monitor Freight Futures 
market price levels.
    In addition, the Fund's website, www.drybulketf.com, will display 
the applicable end of day closing NAV. The Freight Futures currently 
constituting the Benchmark Portfolio, as well as the daily holdings of 
the Fund will be available on the Fund's website. The daily holdings of 
the Benchmark Portfolio and the Fund will be available on the Fund's 
website before 9:30 a.m. E.T. each day. The website disclosure of 
portfolio holdings will be made daily and will include, as applicable, 
(i) the composite value of the total portfolio, (ii) the quantity and 
type of each holding (including the ticker symbol, maturity date or 
other identifier, if any) and other descriptive information including, 
in the case of an option, its strike price, (iii) the percentage 
weighting of each holding in the Fund's portfolio; (iv) the number of 
Freight Futures contracts and the value of each Freight Futures (in 
U.S. dollars), (v) the type (including maturity, ticker symbol, or 
other identifier) and value of each Treasury security and cash 
equivalent, and (vi) the amount of cash held in the Fund's portfolio. 
The Fund's website will be publicly accessible at no charge.
    The daily closing Benchmark Portfolio level and the percentage 
change in the daily closing level for the Benchmark Portfolio will be 
publicly available from one or more major market data vendors. The 
intraday value of the Benchmark Portfolio, updated every 15 seconds, 
will also be available through major market data vendors.
    This website disclosure of the Benchmark Portfolio's and the Fund's 
daily holdings will occur at the same time as the disclosure by the 
Trust of the daily holdings to Authorized Participants so that all 
market participants are provided daily holdings information at the same 
time. Therefore, the same holdings information will be provided on the 
public website as well as in electronic files provided to Authorized 
Participants. Accordingly, each investor will have access to the 
current daily holdings of the Fund through the Fund's website.
Trading Halts
    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.\16\ Trading in Shares of the Fund 
will be halted if the circuit breaker parameters in NYSE Arca Rule 
7.12-E have been reached. Trading also may be halted because of market 
conditions or for reasons that, in the view of the Exchange, make 
trading in the Shares of the Fund inadvisable.
---------------------------------------------------------------------------

    \16\ See NYSE Arca Rule 7.12-E.
---------------------------------------------------------------------------

    The Exchange may halt trading during the day in which an 
interruption to the dissemination of the IFV or the value of the 
Benchmark Portfolio occurs. If the interruption to the dissemination of 
the IFV, or the value of the Benchmark Portfolio 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.
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 a.m. to 8 p.m. E.T. in accordance with 
NYSE Arca Rule 7.34-E (Early, 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 Rule 7.6-E, 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 Rule 8.200-E. The trading of the Shares will 
be subject to NYSE Arca Rule 8.200-E, Commentary .02(e), which sets 
forth certain restrictions on Equity Trading Permit (``ETP'') Holders 
acting as registered Market Makers in Trust Issued Receipts to 
facilitate surveillance. The Exchange represents that, for initial and 
continued listing, the Funds will be in compliance with Rule 10A-3 \17\ 
under the Act, as provided by NYSE Arca Rule 5.3-E. A minimum of 
100,000 Shares will be outstanding at the commencement of trading on 
the Exchange.
---------------------------------------------------------------------------

    \17\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------

Surveillance
    The Exchange represents that trading in the Shares will be subject 
to the existing trading surveillances administered by the Exchange, as 
well as cross-market 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.\18\ The Exchange represents that 
these procedures are adequate to properly monitor Exchange trading of 
the Shares of the Funds in all trading sessions and to deter and detect 
violations of Exchange rules and federal securities laws applicable to 
trading on the Exchange.
---------------------------------------------------------------------------

    \18\ FINRA conducts cross-market surveillances on behalf of the 
Exchange pursuant to a regulatory services agreement. The Exchange 
is responsible for FINRA's performance under this regulatory 
services agreement.
---------------------------------------------------------------------------

    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.
    The Exchange or FINRA, on behalf of the Exchange, or both, will 
communicate as needed regarding trading in the Shares, Freight Futures, 
and exchange-traded options on Freight Futures with other markets and 
other entities that are members of the ISG, and the Exchange or FINRA, 
on behalf of the Exchange, or both, may obtain trading information 
regarding trading in the Shares, Freight Futures, and exchange-traded 
options on Freight Futures from such markets and other entities. In 
addition, the Exchange may obtain information regarding trading in the 
Shares, Freight Futures, and exchange-traded options on Freight Futures 
from markets and other entities that are members of ISG or with which 
the Exchange has in place a comprehensive surveillance sharing 
agreement (``CSSA'').\19\
---------------------------------------------------------------------------

    \19\ For a list of the current members of ISG, see 
www.isgportal.org. The Exchange notes that not all components of the 
Funds may trade on markets that are members of ISG or with which the 
Exchange has in place a CSSA.
---------------------------------------------------------------------------

    Not more than 10% of the net assets of the Fund in the aggregate 
invested in Freight Futures and exchange-traded options on Freight 
Futures shall consist of Freight Futures and exchange-traded

[[Page 61632]]

options on Freight Futures whose principal market is not a member of 
the ISG or is a market with which the Exchange does not have a CSSA.
    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
    All statements and representations made in this filing regarding 
(a) the description of the Reference Indexes and portfolios, (b) 
limitations on portfolio holdings or reference assets, or (c) 
applicability of Exchange listing rules specified in this filing shall 
constitute continued listing requirements for listing the Shares on the 
Exchange.
    The issuer has represented to the Exchange that it will advise the 
Exchange of any failure by the Fund to comply with the continued 
listing requirements, and, pursuant to its obligations under Section 
19(g)(1) of the Act, the Exchange will monitor for compliance with the 
continued listing requirements. If the Fund is not in compliance with 
the applicable listing requirements, the Exchange will commence 
delisting procedures under NYSE Arca Rule 5.5-E(m).
Information Bulletin
    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: (1) The risks involved 
in trading the Shares during the Early and Late Trading Sessions when 
an updated IFV will not be calculated or publicly disseminated; (2) the 
procedures for purchases and redemptions of Shares in Creation Baskets 
and Redemption Baskets (and that Shares are not individually 
redeemable); (3) NYSE Arca Rule 9.2-E(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; (4) how information 
regarding the IFV is disseminated; (5) how information regarding 
portfolio holdings is disseminated; (6) 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 (7) trading information.
    In addition, the Information Bulletin will advise ETP Holders, 
prior to the commencement of trading, of the prospectus delivery 
requirements applicable to the Fund. The Exchange notes that investors 
purchasing Shares directly from the Fund will receive a prospectus. ETP 
Holders purchasing Shares from the Fund for resale to investors will 
deliver a prospectus to such investors. The Information Bulletin will 
also discuss any exemptive, no-action, and interpretive relief granted 
by the Commission from any rules under the Act. In addition, the 
Information Bulletin will reference that the Fund is subject to various 
fees and expenses described in the Registration Statement. The 
Information Bulletin will also reference that the CFTC has regulatory 
jurisdiction over the trading of Freight Futures traded on U.S. 
markets.
    The Information Bulletin will also disclose the trading hours of 
the Shares and that the NAV for the Shares will be calculated after 
4:00 p.m. E.T. each trading day. The Information Bulletin will disclose 
that information about the Shares will be publicly available on the 
Fund's website.
    Prior to the commencement of trading, the Exchange will inform its 
ETP Holders of the suitability requirements of NYSE Arca Rule 9.2-E(a) 
in an Information Bulletin. Specifically, ETP Holders will be reminded 
in the Information Bulletin that, in recommending transactions in the 
Shares, they must have a reasonable basis to believe that (1) The 
recommendation is suitable for a customer given reasonable inquiry 
concerning the customer's investment objectives, financial situation, 
needs, and any other information known by such ETP Holder, and (2) the 
customer can evaluate the special characteristics, and is able to bear 
the financial risks, of an investment in the Shares. In connection with 
the suitability obligation, the Information Bulletin will also provide 
that ETP Holders must make reasonable efforts to obtain the following 
information: (1) The customer's financial status; (2) the customer's 
tax status; (3) the customer's investment objectives; and (4) such 
other information used or considered to be reasonable by such ETP 
Holder or registered representative in making recommendations to the 
customer.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \20\ 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.
---------------------------------------------------------------------------

    \20\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    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 Rule 8.200-E. The 
Exchange has in place surveillance procedures that are adequate to 
properly monitor trading in the Shares of the Fund in all trading 
sessions and to deter and detect violations of Exchange rules and 
applicable federal securities laws. The Exchange or FINRA, on behalf of 
the Exchange, or both, will communicate as needed regarding trading in 
the Shares, Freight Futures, and exchange-traded options on Freight 
Futures with other markets and other entities that are members of the 
ISG, and the Exchange or FINRA, on behalf of the Exchange, or both, may 
obtain trading information regarding trading in the Shares, Freight 
Futures, and exchange-traded options on Freight Futures from such 
markets and other entities. In addition, the Exchange may obtain 
information regarding trading in the Shares, Freight Futures, and 
exchange-traded options on Freight Futures from markets and other 
entities that are members of ISG or with which the Exchange has in 
place a CSSA. Not more than 10% of the net assets of the Fund in the 
aggregate invested in Freight Futures and exchange-traded options on 
Freight Futures shall consist of Freight Futures and exchange-traded 
options on Freight Futures whose principal market is not a member of 
the ISG or is a market with which the Exchange does not have a CSSA. 
The Exchange will make available on its website daily trading volume of 
each of the Shares, closing prices of such Shares, and number of Shares 
outstanding. The intraday, closing prices, and settlement prices of 
Freight Futures will be readily available from the Baltic Exchange 
website, automated quotation systems, published or other public 
sources, or on-line information services.
    Complete real-time data for the Freight Futures is available by 
subscription from on-line information services. Quotation and last-sale 
information regarding the Shares will be disseminated through the 
facilities of the CTA. The IFV will be available through on-line 
information services. The Freight Futures trading prices 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. 
E.T. Nasdaq Stockholm AB, SGX, CME, ICE

[[Page 61633]]

Futures US and EEX provide on a daily basis, transaction volumes, 
transaction prices, trade time, and open interest on their respective 
websites. In addition, the Fund's website, will display the applicable 
end of day closing NAV. The daily holdings of the Fund will be 
disclosed on the Fund's website before 9:30 a.m. E.T. each day. The 
daily holdings of the Fund will be available on the Fund's website 
before 9:30 a.m. E.T. each day. The Fund's website disclosure of 
portfolio holdings will be made daily and will include, as applicable, 
(i) the composite value of the total portfolio, (ii) the quantity and 
type of each holding (including the ticker symbol, maturity date or 
other identifier, if any) and other descriptive information including, 
in the case of an option, its strike price, (iii) the value of each 
Freight Futures (in U.S. dollars), (iv) the type (including maturity, 
ticker symbol, or other identifier) and value of each Treasury security 
and cash equivalent, and (v) the amount of cash held in the Fund's 
portfolio.
    Moreover, prior to the commencement of trading, the Exchange will 
inform its Equity Trading Permit Holders in an Information Bulletin of 
the special characteristics and risks associated with trading the 
Shares. Trading in Shares of the Fund will be halted if the circuit 
breaker parameters in NYSE Arca Rule 7.12-E have been reached or 
because of market conditions or for reasons that, in the view of the 
Exchange, make trading in the Shares inadvisable.
    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 
Trust Issued Receipts based on Freight Futures 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 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.

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 a new 
type of Trust Issued Receipts based on Freight Futures 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. Discussion and Commission Findings

    After careful review, the Commission finds that the Exchange's 
proposal to list and trade the Shares is consistent with the Exchange 
Act and the rules and regulations thereunder applicable to a national 
securities exchange.\21\ In particular, the Commission finds that the 
proposed rule change, as modified by Amendments No. 1 and No. 3 
thereto, is consistent with: (1) Section 6(b)(5) of the Exchange 
Act,\22\ 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 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; and (2) Section 11A(a)(1)(C)(iii) of the Exchange 
Act,\23\ which sets forth Congress' finding that it is in the public 
interest and appropriate for the protection of investors and the 
maintenance of fair and orderly markets to assure the availability to 
brokers, dealers and investors of information with respect to 
quotations for and transactions in securities.
---------------------------------------------------------------------------

    \21\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \22\ 15 U.S.C. 78f(b)(5).
    \23\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
---------------------------------------------------------------------------

    The Commission notes that the Exchange has represented that the 
Freight Futures trade on well-established, regulated markets that are 
members of the ISG.\24\ The Commission finds that the Exchange will be 
able to share surveillance information with a significant regulated 
market for trading futures on dry bulk freight.
---------------------------------------------------------------------------

    \24\ See generally Amendments No. 1 and No. 3.
---------------------------------------------------------------------------

    To be listed and traded on the Exchange, the Shares must comply 
with the requirements of NYSE Arca Rule 8.200-E, Commentary .02 thereto 
on an initial and continuing basis. 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.
    Quotation and last-sale information regarding the Shares will be 
disseminated through the facilities of the CTA. The intraday, closing 
prices, and settlement prices of the Freight Futures will be readily 
available from the applicable futures exchange websites, automated 
quotation systems, published or other public sources, or major market 
data vendors. Complete real-time data for Freight Futures is available 
by subscription through on-line information services. Trading prices 
for the Freight Futures will be disseminated by one or more major 
market data vendors during the NYSE Arca Core Trading Session of 9:30 
a.m. to 4:00 p.m. E.T. Nasdaq Stockholm AB, SGX, CME, ICE Futures US 
and EEX provide on a daily basis, transaction volumes, transaction 
prices, trade time, and open interest on their respective websites.
    In addition, the Fund's website, www.drybulketf.com, will display 
the applicable end of day closing NAV. The daily holdings of the Fund 
will be disclosed on the Fund's website before 9:30 a.m. E.T. each day, 
and will be made available to all market participants at the same time. 
The Fund's website disclosure of portfolio holdings will include, as 
applicable: (1) The composite value of the total portfolio, (2) the 
quantity and type of each holding (including the ticker symbol, 
maturity date or other identifier, if any) and other descriptive 
information including, in the case of an option, its strike price, (3) 
the value of each Freight Futures (in U.S. dollars), (4) the type 
(including maturity, ticker symbol, or other identifier) and value of 
each Treasury security and cash equivalent, and (5) the amount of cash 
held in the Fund's portfolio.
    The intraday value of the Benchmark Portfolio, updated every 15 
seconds, will be available through major market data vendors. The IFV 
will be disseminated on a per Share basis every 15 seconds during 
regular NYSE Arca Core Trading Session hours of 9:30 a.m. E.T. to 4:00 
p.m. E.T. The Administrator will calculate the NAV of the Fund on each 
NYSE Arca trading day, and will disseminate that value after 4:00 p.m. 
E.T. The NAV for the Shares will be disseminated daily to all market 
participants at the same time.
    The Commission also 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

[[Page 61634]]

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 may halt trading during the day in which an interruption 
to the dissemination of the IFV or the value of the Benchmark Portfolio 
occurs; if the interruption to the dissemination of the IFV or the 
value of the Benchmark Portfolio 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. Trading in Shares of a 
Fund will be halted if the circuit breaker parameters in NYSE Arca Rule 
7.12-E have been reached. 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. The Exchange states that it has a 
general policy prohibiting the distribution of material, non-public 
information by its employees. Moreover, trading of the Shares will be 
subject to NYSE Arca Rule 8.200-E, Commentary .02(e), which sets forth 
certain restrictions on ETP Holders acting as registered Market Makers 
in Trust Issued Receipts to facilitate surveillance.
    The Commission notes that the Exchange or FINRA, on behalf of the 
Exchange, or both, will communicate as needed regarding trading in the 
Shares and Freight Futures with other markets and other entities that 
are members of the ISG, and the Exchange or FINRA, on behalf of the 
Exchange, or both, may obtain trading information regarding trading in 
the Shares and Freight Futures from such markets and other entities. In 
addition, the Exchange may obtain information regarding trading in the 
Shares and Freight Futures from markets and other entities that are 
members of ISG or with which the Exchange has in place a CSSA.
    In support of this proposal, the Exchange represented that:
    (1) The Shares will conform to the initial and continued listing 
criteria under NYSE Arca Rule 8.200-E.
    (2) The Exchange has appropriate rules to facilitate transactions 
in the Shares during all trading sessions.
    (3) Trading in the Shares will be subject to the existing trading 
surveillances administered by the Exchange, as well as cross-market 
surveillances administered by FINRA on behalf of the Exchange, which 
are designed to detect violations of Exchange rules and applicable 
federal securities laws, and 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.
    (4) Prior to the commencement of trading, the Exchange will inform 
its ETP Holders in an Information Bulletin of the special 
characteristics and risks associated with trading the Shares. 
Specifically, the Information Bulletin will discuss the following: (a) 
The risks involved in trading the Shares during the Early 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 Rule 9.2-E(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) how 
information regarding portfolio holdings is disseminated; (f) 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 (g) trading information.
    (5) For initial and/or continued listing, the Funds will be in 
compliance with Rule 10A-3 under the Act,\25\ as provided by NYSE Arca 
Rule 5.3-E.
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    \25\ 17 CFR 240.10A-3.
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    (6) A minimum of 100,000 Shares will be outstanding at the 
commencement of trading on the Exchange.
    (7) The Fund invest substantially all of its assets in the Freight 
Futures currently constituting the Benchmark Portfolio, and not more 
than 10% of the net assets of the Fund in the aggregate invested in 
Freight Futures or options on Freight Futures shall consist of 
derivatives whose principal market is not a member of the ISG or is a 
market with which the Exchange does not have a CSSA.
    (8) The Benchmark Portfolio will not include, and the Fund will not 
invest in, swaps, non-cleared dry bulk freight forwards or other over-
the-counter derivative instruments that are not cleared through 
exchanges or clearing houses.
    (9) Statements and representations made in this filing regarding 
(a) the description of the Reference Indexes and portfolios, (b) 
limitations on portfolio holdings or reference assets, or (c) 
applicability of Exchange listing rules specified in this filing shall 
constitute continued listing requirements for listing the Shares on the 
Exchange.
    (10) The issuer has represented to the Exchange that it will advise 
the Exchange of any failure by the Fund to comply with the continued 
listing requirements, and, pursuant to its obligations under Section 
19(g)(1) of the Act, the Exchange will monitor for compliance with the 
continued listing requirements.\26\ If the Fund is not in compliance 
with the applicable listing requirements, the Exchange will commence 
delisting procedures under NYSE Arca Rule 5.5-E(m).
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    \26\ The Commission notes that certain other proposals for the 
listing and trading of exchange-traded products include a 
representation that the listing exchange will ``surveil'' for 
compliance with the continued listing requirements. See, e.g., 
Securities Exchange Act Release No. 77620 (April 14, 2016), 81 FR 
23339 (April 20, 2016) (SR-BATS-2015-124). In the context of this 
representation, it is the Commission's view that ``monitor'' and 
``surveil'' both mean ongoing oversight of the Fund's compliance 
with the continued listing requirements. Therefore, the Commission 
does not view ``monitor'' as a more or less stringent obligation 
than ``surveil'' with respect to the continued listing requirements.
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    This approval order is based on all of the Exchange's 
representations and description of the Fund, including those set forth 
above and in Amendments No. 1 and No. 3.
    For the foregoing reasons, the Commission finds that the proposed 
rule change, as modified by Amendments No. 1 and No. 3 thereto, is 
consistent with Section 6(b)(5) of the Act \27\ and the rules and 
regulations thereunder applicable to a national securities exchange.
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    \27\ 15 U.S.C. 78f(b)(5).
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IV. Solicitation of Comments on Amendment No. 1

    Interested persons are invited to submit written data, views, and 
arguments concerning Amendment No. 1. 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 [email protected]. Please include 
File Number SR-NYSEArca-2017-107 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-2017-107. This 
file number should be included on the

[[Page 61635]]

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 website 
(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 website viewing and printing in the Commission's Public 
Reference Room, 100 F Street NE, Washington, DC 20549, on official 
business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of 
this filing will also be available for inspection and copying at the 
principal office of the Exchange. All comments received will be posted 
without change. Persons submitting comments are cautioned that we do 
not redact or edit personal identifying information from comment 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
NYSEArca-2017-107 and should be submitted on or before January 18, 
2018.

V. Accelerated Approval of Proposed Rule Change, as Modified by 
Amendment No. 1

    The Commission finds good cause to approve the proposed rule 
change, as modified by Amendments No. 1 and No. 3, prior to the 30th 
day after the date of publication of notice of Amendment No. 1 in the 
Federal Register.\28\ Amendment No. 1 does not expand the structure of 
the proposed rule change as it was previously published for notice and 
comment; Amendment No. 1 supplements the proposal by, among other 
things, limiting the amount of listed options held by the Fund that are 
listed on a non-ISG/CSSA market and expanding the continued listing 
requirements applicable to the Shares. These changes helped the 
Commission to evaluate the Shares' susceptibility to manipulation, and 
determine that the listing and trading of the Shares would be 
consistent with the protection of investors and the public interest. 
Accordingly, the Commission finds good cause, pursuant to Section 
19(b)(2) of the Exchange Act,\29\ to approve the proposed rule change, 
as modified by Amendments No. 1 and No. 3, on an accelerated basis.
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    \28\ As noted above, Amendment No. 2 is not subject to notice 
and comment. See supra note 6.
    \29\ 15 U.S.C. 78s(b)(2).
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VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Exchange Act,\30\ that the proposed rule change (SR-NYSEArca-2017-107), 
as modified by Amendments No. 1 and No. 3, be, and it hereby is, 
approved on an accelerated basis.
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    \30\ 15 U.S.C. 78s(b)(2).
    \31\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\31\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-28078 Filed 12-27-17; 8:45 am]
 BILLING CODE 8011-01-P


