[Federal Register Volume 79, Number 120 (Monday, June 23, 2014)]
[Notices]
[Pages 35610-35623]
[FR Doc No: 2014-14540]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72412; File No. SR-NASDAQ-2014-065]

Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing of Proposed Rule Change To Adopt New Rule 5713 and
List Paired Class Shares Issued by AccuShares[supreg] Commodities Trust
I

June 17, 2014.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'' or ``Exchange Act''),\1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that on June 11, 2014, The NASDAQ Stock Market LLC
(``NASDAQ'' or ``Exchange'') filed with the Securities and Exchange
Commission (``SEC'' or ``Commission'') the proposed rule change as
described in Items I and II below, which Items have been prepared by
NASDAQ. 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\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change

    NASDAQ proposes to add new Rule 5713 (Paired Class Shares), and to
list Paired Class Shares issued by AccuShares[supreg] Commodities Trust
I (the ``AccuShares Trust'') on behalf of each of the following seven
segregated series thereof: AccuShares S&P GSCI[supreg] Spot Fund,
AccuShares S&P GSCI Agriculture and Livestock Spot Fund, AccuShares S&P
GSCI Industrial Metals Spot Fund, AccuShares S&P GSCI Crude Oil Spot
Fund, AccuShares S&P GSCI Brent Oil Spot Fund, AccuShares S&P GSCI
Natural Gas Spot Fund, and AccuShares Spot CBOE[supreg] VIX[supreg]
Fund (each an ``AccuShares Fund'', and collectively the ``AccuShares
Funds'').\3\
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    \3\ AccuShares[supreg] is a registered trademark of AccuShares
Holdings LLC. S&P[supreg], S&P GSCI[supreg], S&P 500[supreg] and
Standard & Poor's[supreg] are registered trademarks of Standard &
Poor's[supreg] Financial Services LLC. CBOE[supreg], Chicago Board
Options Exchange[supreg], CBOE Volatility Index[supreg] and
VIX[supreg] are registered trademarks of Chicago Board Options
Exchange[supreg], Incorporated (``CBOE''). Dow Jones[supreg] is a
registered trademark of Dow Jones[supreg] Trademark Holdings LLC.
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    The text of the proposed rule change is available at http://nasdaq.cchwallstreet.com/, at NASDAQ's principal office, 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
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this proposed rule change is to add new Rule 5713
regarding Paired Class Shares. The purpose is to also enable the
Exchange to list Paired Class Shares issued by the AccuShares Trust on
behalf of the AccuShares Funds pursuant to new Rule 5713 (also known as
``Shares'') as follows:

------------------------------------------------------------------------
                  Fund                         Paired class shares
------------------------------------------------------------------------
AccuShares S&P GSCI Spot Fund..........  AccuShares S&P GSCI Spot Up
                                          Shares.
                                         AccuShares S&P GSCI Spot Down
                                          Shares.
AccuShares S&P GSCI Agriculture and      AccuShares S&P GSCI Agriculture
 Livestock Spot Fund.                     and Livestock Spot Up Shares.
                                         AccuShares S&P GSCI Agriculture
                                          and Livestock Spot Down
                                          Shares.
AccuShares S&P GSCI Industrial Metals    AccuShares S&P GSCI Industrial
 Spot Fund.                               Metals Spot Up Shares.
                                         AccuShares S&P GSCI Industrial
                                          Metals Spot Down Shares.
AccuShares S&P GSCI Crude Oil Spot Fund  AccuShares S&P GSCI Crude Oil
                                          Spot Up Shares.
                                         AccuShares S&P GSCI Crude Oil
                                          Spot Down Shares.
AccuShares S&P GSCI Brent Oil Spot Fund  AccuShares S&P GSCI Brent Oil
                                          Spot Up Shares.
                                         AccuShares S&P GSCI Brent Oil
                                          Spot Down Shares.
AccuShares S&P GSCI Natural Gas Spot     AccuShares S&P GSCI Natural Gas
 Fund.                                    Spot Up Shares.
                                         AccuShares S&P GSCI Natural Gas
                                          Spot Down Shares.
AccuShares Spot CBOE VIX Fund..........  AccuShares Spot CBOE VIX Up
                                          Shares.
                                         AccuShares Spot CBOE VIX Down
                                          Shares.
------------------------------------------------------------------------

A discussion of Paired Class Shares that will be listed pursuant to
proposed new Rule 5713 will follow the description of new Rule 5713.
    Proposed Rule 5713 is based, in part, on NYSE Arca (``Arca'')
Equities Rule 8.400 (the ``Arca rule'').\4\ While the Arca rule deals
with an unmanaged investment product called Paired Trust Shares
(``PTS''),\5\ proposed Rule 5713 deals with products called Paired
Class Shares, also an unmanaged investment product.\6\ Subsequent to
the initial listing of PTS on Arca in 2007,\7\ variants of the original
PTS were listed until 2009.\8\ It became evident, however, that PTS had
inherent design issues that led to severely diminished use of the
product. PTS are not currently listed and have not been listed and
traded for more than two years.
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    \4\ See Securities Exchange Act Release No. 55033 (December 29,
2006), 72 FR 1253 (January 10, 2007) (SR-NYSEArca-2006-75) (order
approving Arca Equities Rule 8.400). See also Securities Exchange
Act Release No. 54839 (November 29, 2006), 71 FR 70804 (December 6,
2006) (SR-Amex-2006-82) (order approving NYSE MKT (formerly AMEX)
Options Rules 1401-1403). The Exchange believes the proposed rule
change raises no significant issues not previously addressed in
those prior Commission orders.
    \5\ For the definition of PTS, see Arca Equities Rule
8.400(b)(1)(A)(i).
    \6\ For the definition of Paired Class Shares, see proposed Rule
5713(c).
    \7\ See supra note 4.
    \8\ See Securities Exchange Act Release Nos. 58873 (October 28,
2008), 73 FR 65709 (November 4, 2008) (SR-NYSEArca-2008-110)
(Claymore MacroShares $100 Oil Up/Down Trust (UOY and DOY)); and
58704 (October 1, 2008), 73 FR 59026 (October 8, 2008) (SR-NYSEArca-
2008-92) (Claymore MacroShares Major Metro Housing Up/Down Shares
(UMM and DMM)).

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    PTS were designed to be a passive unmanaged investment vehicle with
an objective to provide investors with exposure to changes in an
underlying benchmark or index. PTS were to provide retail investors
with a simple, liquid and cost effective means of simulating an
investment in an underlying benchmark asset or index. One PTS trust
issuer seeking to deliver to investors the gains from any positive
movements (or losses from negative movements) in the underlying
benchmark or index (``Up PTS''), would be paired with another PTS trust
issuer seeking to deliver to investors the gains from any negative
movements (or losses from positive movements) in the same underlying
benchmark or index (``Down PTS''). Principally, the PTS trust issuers
sought to track underlying benchmark or index performance through re-
balancing assets between the trusts by means of a swap agreement
between the trusts based on the underlying benchmark or index. The
referenced value or notional amount of this swap agreement was equal to
the aggregate amount of investment in the PTS trusts held by investors.
Thus, any change in value attributable to a change in the underlying
benchmark or index would be allocated between the PTS trust issuers by
transferring assets pursuant to the swap agreement between them, and
such change would directly affect the liquidation value of each PTS.
    Despite the purported benefits of PTS, the PTS products in
operation suffered from several fundamental design flaws that led to
their ultimate demise and disappearance from the market within the span
of a few years. First, the trading prices of PTS did not track the
changes in the levels of the underlying benchmark or index. PTS
products had no mechanism to prevent one of the PTS from trading at a
premium to its underlying or net asset value (``NAV'') while the other
PTS was trading at a discount to NAV. Once opposing PTS traded in
offsetting premium and discount conditions, this condition became
``locked.'' There was no incentive for market participants to seek PTS
creation or redemption arbitrage opportunities since PTS always had to
be created and redeemed in equal quantities (pairs) of Up PTS and Down
PTS. This premium and discount condition occurred and persisted over
the life of the previously traded PTS products.
    Second, PTS products had no mechanism to prevent one PTS trust from
exhausting its capital--where the value of its swap exposure became
zero--and thereby forcing a liquidation of both of the PTS issuer
trusts. Instead, the PTS issuer trusts, by operation of their charter
documents, would be forced to liquidate if their underlying benchmark
or index increased by a fixed amount after their inception date. Such a
liquidation occurred in the first PTS product issued within two years
of its commencement of operations and PTS trading.
    Third, PTS never reset their exposure to, or participation in, the
reference value of their underlying benchmark or index. Consequently,
the percentage changes in the price of a Down PTS did not correlate to
the percentage changes in the underlying benchmark or index once the
underlying benchmark or index increased or decreased over time. This
problem is referred to as ``leverage drift.'' For instance, if a PTS
product initially set its exposure to its benchmark asset at $60 and
the benchmark subsequently rose to $90, an investor seeking a short
exposure to the benchmark asset would buy the Down PTS at $30 per
share. Thereafter, any percentage change in Down PTS price experienced
by the investor would be three times the percentage change in the
underlying benchmark (e.g., a $10 change in the benchmark results in
about an 11% change in the benchmark and a 33% change in Down PTS
price).\9\ The combination of these deficiencies frustrated market
maker arbitrage opportunities and the overall utility of PTS to
investors. The Exchange believes that the structural differences
between Paired Class Shares and PTS make the proposed Paired Class
Shares a superior product that should eliminate the fundamental
problems inherent with PTS.
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    \9\ In this scenario, the percentage of Up PTS price changes
tracks the percentage changes of the benchmark. However, this was
not the case for PTS products that tracked a multiple of changes in
the underlying benchmark or index. For such ``leveraged return'' PTS
products, both UP PTS and Down PTS experienced leverage drift.
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Paired Class Shares--A Short Background \10\
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    \10\ Paired Class Shares that will be listed by the AccuShares
Trust are described in detail below, after the description of
proposed new Rule 5713, under the heading ``Paired Class Shares That
Will Be Listed on Behalf of the AccuShares Trust--the Details.''
This short description is intended to provide context for discussion
of the proposed new rule.
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    As noted in proposed Rule 5713, Paired Class Shares will be issued
by a trust (``Trust'') on behalf of a segregated series of the Trust
(``Fund''). Paired Class Shares will have values that are based on an
index or other numerical variable (``Underlying Benchmark'') whose
value reflects the value of assets, prices, price volatility or other
economic interests (``Reference Asset'').\11\ The Trust will always
issue Paired Class Shares in pairs of shares of opposing classes of
each Fund. The values of the opposing classes will move in opposite
directions as the value of the Fund's Underlying Benchmark varies from
its starting level, where one constituent of the pair is positively
linked to the Fund's Underlying Benchmark (``Up Shares'') and the other
constituent is negatively linked to the Fund's Underlying Benchmark
(``Down Shares''). The rate of linkage or leverage of a Fund's Up
Shares and Down Shares performance to the performance of the Fund's
referenced Underlying Benchmark will be one-to-one. The calculation of
the liquidation value of a Fund attributable to each of its classes of
Paired Class Shares (``Class Value''), and each Share of such class'
pro rata portion of Class Value (``Class Value per Share''), will be
determined according to a mathematical formula.\12\
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    \11\ Other economic interests would include, for example,
currencies, interest rates, non-investable economic indices and
other measures of financial instrument value.
    \12\ The mathematical formula is based on the following factors:
(1) The value of Fund assets, (2) the allocation of such value based
on changes in the level of the Fund's Underlying Benchmark which may
be limited, reduced, capped or otherwise modified according to
formula or pre-set parameters, and (3) the daily accrual of gain and
income or loss on the assets of the Fund, less the liabilities of
the Fund, as such gains, income losses and liabilities are allocated
to each class of the Fund.
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    Each Fund will engage in (1) scheduled ``regular distributions,''
(2) ``special distributions'' that are automatically triggered upon the
Underlying Benchmark exceeding a fixed rate of change since the Fund's
prior regular or special distribution date or inception date in the
case of the first such distribution (each a ``prior distribution
date''), and (3) ``corrective distributions'' that are automatically
triggered when the trading price of a Paired Class Share deviates by a
specified amount from its Class Value per Share for a specified period
of time. Immediately after each regular, special and corrective
distribution, the Fund's Underlying Benchmark participation or exposure
will be reset and the Fund's Class Value per Share for each of its
classes will be set to equal the lowest Class Value per Share of the
two classes of Paired Class Shares. To the extent any class of Paired
Class Shares of a Fund has a positive net income from income or gain on
class assets, after deduction of class liabilities, on a regular or
special distribution date as measured from the prior distribution date,
such class of Paired Class Shares will receive a distribution in cash
equal to such

positive net income regardless as to whether such class is entitled to
a regular or special distribution on such date.
    The structure of Paired Class Shares is designed to be a passive
unmanaged investment vehicle with the objective to provide investors
with exposure to changes in an Underlying Benchmark. Paired Class
Shares are expected to provide retail investors with a simple, liquid
and cost effective means of simulating an investment in an Underlying
Benchmark. Paired Class Shares provide distinct benefits that seek to
remedy the perceived failings of PTS and make Paired Class Shares a
unique product that would be beneficial to market participants.
    First, a Trust issuing Paired Class Shares on behalf of a Fund
actively monitors deviations of trading price to Class Value per Share.
To the extent there is a material and persistent deviation of a Paired
Class Share trading price from such Paired Class Share's Class Value
per Share according to pre-set thresholds, a Trust issuing the Paired
Class Shares will distribute, to holders of each class of shares,
shares of the opposing class, which would leave each holder with an
equal number of Up Shares and Down Shares. As each holder would own
both Up Shares and Down Shares, each holder could redeem their shares
through an authorized participant (``Authorized Participant'') \13\ for
cash at their respective Class Values per Share, which would eliminate
the premium or discount. Even if a corrective distribution is not
triggered, the existence of a Fund's corrective distribution feature is
expected to modify investor and Authorized Participant behavior to
prevent persistent and material premium and discount conditions for
Paired Class Shares from becoming locked. PTS had no similar mechanism
and did in fact trade at significant discounts from and premiums to NAV
in a locked fashion. Furthermore, regular and special distributions
have the effect of delivering changes in Class Value per Share to each
class of the Paired Class Shares either directly through the
distribution or indirectly through the dilution caused by the
distribution. Thus, market expectation of regular and special
distributions will cause the trading prices of a Fund's Paired Class
Shares to experience less pronounced conditions of premium or discount
to Class Value per Share than PTS experienced with respect to NAV per
share. PTS lacked these mechanisms and experienced significant premium
or discount conditions as well as locked premium and discount
conditions.
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    \13\ An Authorized Participant may place orders to create or
redeem one or more Creation Units, and must be (1) a registered
broker-dealer or other securities market participant such as a bank
or other financial institution which is not required to register as
a broker-dealer to engage in securities transactions, (2) a direct
participant in The Depository Trust Company, and (3) a party to an
Authorized Participant Agreement with the Sponsor setting forth the
procedures for the creation and redemption of Creation Units in an
AccuShares Fund.
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    Second, a Trust issuing Paired Class Shares on behalf of a Fund
makes regular and special distributions and resets the Fund's exposure
or participation in its Underlying Benchmark to avoid depleting all of
the capital of one class of shares. PTS had no similar mechanism and
did in fact liquidate when its underlying benchmarks or index moved
more than 80%, which occurred on numerous occasions.
    Third, for regular distributions Paired Class Shares reset their
Underlying Benchmark participation on regularly scheduled dates, and
for special distributions reset whenever their Underlying Benchmark
changes by a set percentage since the prior distribution date. Thus, on
each such date, a percentage change in the Underlying Benchmark
generally corresponds to a percentage change in the Class Value per
Share of the shares and leverage drift is minimized. PTS never reset
its index or benchmark participation and did in fact experience
significant misalignment of percentage returns due to leverage drift.
Creation and Redemption
    The Paired Class Shares creation and redemption process is similar
in nature to that of other exchange traded products. Paired Class
Shares of a Fund are created and redeemed in specified aggregations of
equal quantities of Up Shares and Down Shares (``Creation Units'') \14\
at their respective Class Values per Share. Paired Class Shares can
also only be created or redeemed by Authorized Participants. In
contrast to other exchange traded products that often allow or require
non-cash creation and redemption consideration in the form of specified
securities or other assets and do not involve multiple share classes,
Paired Class Shares creation and redemption transactions will only
occur (a) for cash consideration and (b) in equal pre-determined
quantities of Up Shares and Down Shares.
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    \14\ Each Creation Unit for each AccuShares Fund will be
comprised of 25,000 Up Shares and 25,000 Down Shares.
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New Rule 5713
    The provisions of proposed new Rule 5713 are set forth below.
    New Rule 5713(a) indicates that NASDAQ will consider for trading,
whether by listing or pursuant to unlisted trading privileges
(``UTP''), Paired Class Shares, which are defined in subsection (c), if
the Paired Class Shares meet the criteria of Rule 5713. Proposed Rule
5713(b) clarifies that the rule is applicable only to Paired Class
Shares. Subsection (b) states that except to the extent inconsistent
with this Rule, or unless the context otherwise requires, the By-laws
and all other rules and procedures of the Board of Directors shall be
applicable to the trading on NASDAQ of such securities. Paired Class
Shares, which are defined in proposed new subsection (c), are included
within the definition of ``security'' or ``securities'' as such terms
are used in the By-laws and Rules of NASDAQ.
Paired Class Shares Defined
    Proposed subsection (c) specifically states that the term ``Paired
Class Share'' means a security (1) that is issued by a Trust on behalf
of a Fund as part of a pair of shares of opposing classes whose
respective underlying values move in opposite directions as the value
of the Fund's Underlying Benchmark (which is defined in Rule 5713(e))
varies from its starting level, where one constituent of the pair is
positively linked to the Fund's Underlying Benchmark--Up Shares--and
the other constituent is inversely linked to the Fund's Underlying
Benchmark--Down Shares, (2) that is issued in exchange for cash, (3)
the issuance proceeds of which are invested and reinvested in highly
rated short-term financial instruments that mature within 90 calendar
days and that serve certain functions,\15\ (4) that represents a
beneficial interest in the Fund, (5) the value of which is determined
by the underlying value of the Fund that is attributable to the class
of which such security is a part,\16\ (6)

that, when timely aggregated in a specified minimum number or amount of
securities, along with an equal number or amount of the securities of
the opposite class that constitute the other part of the pair, may be
redeemed for a distribution of cash, and (7) that may be subject to
mandatory redemption of all Paired Class Shares under specified
circumstances. The Exchange notes that while the definition of Paired
Class Shares is, to a large extent, based on the Arca rule there are
structural differences between the two types of products that allow a
more compact definition of, and listing procedure regarding, Paired
Class Shares.\17\
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    \15\ These functions are (i) covering the Fund's expenses, (ii)
providing income distributions to investors, based on income (after
expenses) from the financial instruments held by the Fund, (iii)
providing cash proceeds for regular and special distributions to be
made in cash in lieu of Paired Class Shares, and (iv) providing cash
proceeds to be paid upon the redemption of Paired Class Shares.
Thus, for example, upon redeeming 100 Paired Class Shares an
investor would receive cash equal to the NAV per share for each
share redeemed. Moreover, a Trust issuing Paired Class Shares on
behalf of a Fund would engage in regular distributions, special
distributions and corrective distributions. Proposed Rule 5713(c),
subpart (3).
    \16\ The Paired Class Shares value will either (i) increase as a
result of an increase in the Underlying Benchmark and decrease as a
result of a decrease in the Underlying Benchmark (in the case of an
Up Share) or (ii) increase as a result of a decrease in the
Underlying Benchmark and decrease as the result of an increase in
the Underlying Benchmark (in the case of a Down Share). Proposed
Rule 5713(c), subpart (5).
    \17\ The basic definition of Paired Class Shares, is largely
similar in concept to that of Tradeable Shares in PTS, albeit Paired
Class Shares as discussed reflect an improved product. Thus, where
Tradeable Shares use the terms ``Up Tradeable Trust'' and ``Down
Tradeable Trust'', Paired Class Shares use the product-appropriate
terms ``Up Shares'' and ``Down Shares.'' The Paired Class Shares
definition in proposed Rule 5713(c) is straightforward in comparison
to PTS, which requires an unnecessarily complex three-part
definition (``Tradeable Shares,'' ``Holding Shares,'' and ``Trading
Shares'' in Arca Equity Rule 8.400(b)(1)(a)(i)).
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Distributions
    Proposed subsection (d) provides that a Fund may engage in
scheduled regular distributions, special distributions that are
automatically triggered upon the Underlying Benchmark exceeding a fixed
rate of change since the prior distribution, and corrective
distributions that are automatically triggered when the trading price
of a Paired Class Share deviates by a specified amount from its
underlying value for a specified period of time.
Designation
    Following on subsection (a) of the proposed rule, proposed
subsection (e) states that NASDAQ may trade, either by listing or
pursuant to unlisted trading privileges (``UTP''),\18\ Paired Class
Shares whose values are based on an Underlying Benchmark whose value
reflects the value of a Reference Asset. Each issue of Up Shares or
Down Shares of a Fund shall be designated as a separate series and
shall be identified by a unique symbol.
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    \18\ For a discussion of the UTP process, see the NASDAQ UTP
Plan. See also Rules 3381 and 3385 (off-board trading by national
securities exchange members), 4630 (commodity-related securities),
5711 (trading of certain derivative securities), 5735 (managed fund
shares), and 5740 (derivative securities traded under UTP).
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Listing Standards
Initial Listing
    Proposed subsection (f) deals with initial and continued listing.
Initial listing is specifically discussed in subsection (f)(i). There
are three initial listing requirements. (A) NASDAQ will establish a
minimum number of Paired Class Shares for each Fund required to be
outstanding at the time of commencement of trading on NASDAQ. (B)
NASDAQ will obtain a representation from the Trust on behalf of each
Fund that the underlying value per share of each Up Share and Down
Share will be calculated daily and that these underlying values and
information about the assets of the Fund will be made available to all
market participants at the same time.\19\ In addition, (C) if the
Underlying Benchmark is maintained by a broker-dealer or investment
advisor, the broker-dealer or investment advisor shall erect a
``firewall'' around the personnel who have access to information
concerning changes and adjustments to the Underlying Benchmark.\20\
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    \19\ This is similar in nature to Arca Equity Rule 8.400(d)(1).
As noted, however, the Holding, Tradeable, and Trading nomenclature
of PTS is not needed or used for Paired Class Shares.
    \20\ The firewall provision is unique to proposed Rule 5713;
there is no firewall provision in Arca Equity Rule 8.400.
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Continued Listing
    Continued listing is discussed in proposed subsection (f)(ii),
which gives the circumstances under which NASDAQ will consider the
suspension of trading in or removal from listing of a Fund's Paired
Class Shares. These circumstances include the following alternatives:
(A) If, following the initial twelve-month period beginning upon the
commencement of trading of the Paired Class Shares: (i) There are fewer
than 50 record and/or beneficial holders of the Fund's Up Shares or
Down Shares for 30 or more consecutive trading days; (ii) the Fund has
fewer than 50,000 Up Shares or 50,000 Down Shares issued and
outstanding; or (iii) the combined market value of all shares of a Fund
issued and outstanding is less than $1,000,000; (B) if the intraday
level of the Underlying Benchmark, or a substitute or replacement
Underlying Benchmark based on the same Reference Asset, is no longer
calculated or available \21\ on at least a 15-second delayed basis
during the Regular Market Session \22\ when the Fund's Paired Class
Shares trade on NASDAQ from a source unaffiliated with the sponsor, the
custodian, the trustee of the Trust, the Fund or NASDAQ that is a major
market data vendor (e.g., Reuters or Bloomberg); (C) if the underlying
value per share of each Up Share and Down Share of a Fund is no longer
made available on a daily basis to all market participants at the same
time; (D) if the estimate of the value of a share of the series of
Paired Class Shares (the ``Intraday Indicative Value'') of the
underlying value of each listed Up Share and Down Share of the Fund is
no longer made available on at least a 15-second delayed basis by a
major market vendor during the time the Paired Class Shares trade on
NASDAQ during the Regular Market Session; (E) if the ``firewall''
erected around the personnel who have access to information concerning
changes and adjustments to the Underlying Benchmark is no longer in
place; or (F) if such other event shall occur or condition exists which
in the opinion of NASDAQ makes further dealings on NASDAQ
inadvisable.\23\
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    \21\ The Underlying Benchmark may no longer be available due to
a number of circumstances, including where the publication of the
Underlying Benchmark is no longer economically viable, the data used
to compute the Underlying Benchmark is no longer available, or the
Underlying Benchmark methodology no longer tracks the same Reference
Asset. See Commentary .04 to proposed Rule 5713.
    \22\ NASDAQ market makers are open for business during normal
market hours of 9:30 a.m. to 4:00 p.m. Eastern Time. Rule 4617. The
Exchange has trading hours from 4:00 a.m. until 8:00 p.m. Eastern
Time, with trading sessions before and after normal market hours
(``Pre-Market'' and ``Post-Market''), and appropriate rules to
facilitate transactions during all trading sessions. Normal market
hours are also known as the Regular Market Session. See, e.g., Rules
5705 (ETFs: portfolio depository receipts and index fund shares),
and 5710 (securities linked to the performance of indexes and
commodities (including currencies)).
    \23\ The proposed continuing listing standards are, in all
material respects, similar in nature to Arca Equity Rule
8.400(d)(2); the structure of Paired Class Shares is, as noted,
accommodated in the proposed language. The Exchange also adds the
subsection (f)(ii)(C) continuing listing requirement that the
underlying value per share of each Up Share and Down Share of a Fund
is no longer made available on a daily basis to all market
participants at the same time.
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    Proposed subsection (f)(ii) provides also that upon termination of
a Fund, Paired Class Shares issued in connection with such Fund must be
removed from listing. A Fund may terminate in accordance with the
provisions of the Fund prospectus, which may provide for termination if
the underlying value of the Paired Class Shares falls below a specified
amount.
Firewall Procedures
    Firewall procedures are proposed in respect of the listing of
Shares. Paragraph (f)(i)(C) of proposed Rule 5713 provides that if the
Underlying

Benchmark is maintained by a broker-dealer or investment advisor, the
broker-dealer or investment advisor shall erect a ``firewall'' around
the personnel who have access to information concerning changes and
adjustments to the Underlying Benchmark. In addition, paragraph
(f)(ii)(E) provides, as one of the continued listing provisions that
would cause NASDAQ to consider the suspension of trading in or removal
from listing of a Fund's Paired Class Shares, that the ``firewall''
erected around the personnel who have access to information concerning
changes and adjustments to the Underlying Benchmark is no longer in
place. Paragraph (f)(i)(C) of proposed Rule 5713 is similar, in
relevant part, to Rule 5735(g) regarding actively managed ETFs
regarding the necessity of having a firewall provision.\24\ However,
whereas (f)(i)(C) of new Rule 5713 discusses establishment of a
``firewall'' around personnel who have access to information concerning
changes and adjustments to the Underlying Benchmark, paragraph (g) of
Rule 5735 discusses establishment of a ``fire wall'' between the
investment adviser and the broker-dealer with respect to an open-end
fund's portfolio, not an Underlying Benchmark.
---------------------------------------------------------------------------

    \24\ There are similar ``firewall'' provisions regarding other
listed products. See, e.g., Rule 5711(e)(Currency Trust Shares) and
Rule 5710(g)(Index-Linked Securities).
---------------------------------------------------------------------------

Additional Rule Provisions
    Term, trustee, and voting rights are discussed in subsection (f).
Regarding term, proposed subsection (f)(iii) states that the stated
term of a Fund shall be as stated in the Fund prospectus. However, a
Fund may be terminated under such earlier circumstances as may be
specified in the Fund prospectus. Regarding trustees, proposed
subsection (f)(iv) states that the trustee of a Trust must be a trust
company or banking institution having substantial capital and surplus
and the experience and facilities for handling corporate trust
business. In cases where, for any reason, an individual has been
appointed as trustee, a qualified trust company or banking institution
must be appointed co-trustee.\25\ No change is to be made in the
trustee of a listed issue without prior notice to and approval of
NASDAQ. Regarding voting rights, subsection (f)(v) states that such
rights, if any, shall be as set forth in the applicable Fund
prospectus.
---------------------------------------------------------------------------

    \25\ The proposed term, trustee and voting rights provisions
are, in all material respects, similar to Arca Equity Rule
8.400(d)(3), (4), and (5).
---------------------------------------------------------------------------

    Proposed subsection (g) sets forth a limitation of liability that
states that neither NASDAQ nor any agent of NASDAQ shall have any
liability for damages, claims, losses or expenses caused by any errors,
omissions, or delays in calculating or disseminating any applicable
Underlying Benchmark value; the underlying value of the Fund and its
Paired Class Shares; distribution values or any other information
relating to the purchase, redemption, or trading of the Paired Class
Shares, resulting from any negligent act or omission by NASDAQ, or any
agent of NASDAQ, or any act, condition or cause beyond the reasonable
control of NASDAQ or its agent, including, but not limited to, an act
of God; fire; flood; extraordinary weather conditions; war;
insurrection; riot; strike; accident; action of government;
communications or power failure; equipment or software malfunction; or
any error, omission or delay in the reports of transactions in the
applicable positions or interests.\26\
---------------------------------------------------------------------------

    \26\ Subsection (g) is similar in nature to Arca Equity Rule
8.400(f). For other current Exchange limitation of liability
provisions, see Rules 5735(e) and 5711(d)(vi).
---------------------------------------------------------------------------

    Regarding an Exchange member acting as a Market Maker \27\ in
Paired Class Shares, proposed subsection (h) states that such member
must file with NASDAQ, in a manner prescribed by the Exchange, and keep
current a list identifying all accounts for trading in the applicable
securities or physical commodities included in, or options, futures or
options on futures on, the Reference Asset of the Underlying Benchmark
of any Paired Class Shares or any other derivatives based on such
Reference Asset or based on any security or Reference Asset included in
the Underlying Benchmark, which the registered Market Maker may have or
over which it may exercise investment discretion. No registered Market
Maker shall trade in the applicable securities or physical commodities
included in, or options, futures or options on futures on, the
Reference Asset of the Underlying Benchmark of any Paired Class Shares
or any other derivatives based on such Reference Asset or based on any
security or Reference Asset included in the Underlying Benchmark, in an
account in which a registered Market Maker, directly or indirectly,
controls trading activities, or has a direct interest in the profits or
losses thereof, which has not been reported to NASDAQ as required by
this Rule. The subsection also provides that in addition to the
existing obligations under NASDAQ rules regarding the production of
books and records (see, e.g., Rule 4625), a registered Market Maker in
Paired Class Shares shall make available to NASDAQ such books, records
or other information pertaining to transactions by such entity or
registered or non-registered employee affiliated with such entity for
its or their own accounts for trading the applicable securities or
physical commodities included in, or options, futures or options on
futures on, the Reference Asset of the Underlying Benchmark of any
Paired Class Shares or any other derivatives based on such Reference
Asset or based on any security or Reference Asset included in the
Underlying Benchmark, as may be requested by NASDAQ.
---------------------------------------------------------------------------

    \27\ For requirements applicable to Market Maker accounts, see
proposed Rule 5713(h).
---------------------------------------------------------------------------

    The Exchange also proposes six Commentaries. Commentary .01 states
that members provide all purchasers of newly issued Paired Class Shares
a prospectus for the Fund.\28\ Commentary .02 states that transactions
in Paired Class Shares will occur during the trading hours specified in
Rule 4120. Commentary .03 states that NASDAQ will file separate
proposals under Section 19(b) of the Act before trading Paired Class
Shares. Commentary .04 states that prior to a substitute or replacement
Underlying Benchmark being selected for the Fund, NASDAQ must file a
related proposed rule change pursuant to Rule 19b-4 under the Exchange
Act to continue trading the Paired Class Shares. Commentary .05 states
that subsection (f)(ii)(D), discussed previously, is not applicable as
a continuing listing standard if a Fund's Paired Class Shares have been
approved for listing and trading by the Commission under Section
19(b)(2) of the Act without the requirement that an estimate of the
Intraday Indicative Value be made available on at least a 15-second
delayed basis by a major market vendor during the time the Paired Class
Shares trade on NASDAQ during the Regular Market Session. Commentary
.06 states that NASDAQ will implement written surveillance procedures
for trading the Paired Class Shares.
---------------------------------------------------------------------------

    \28\ The proposed commentaries are, in all material respects,
similar to those in Arca Equity Rule 8.400.
---------------------------------------------------------------------------

Paired Class Shares That Will Be Listed on Behalf of the AccuShares
Trust--the Details Description of the AccuShares Trust
    The Shares will be offered by the AccuShares Trust, which is a
Delaware statutory trust that was established into separate AccuShares
Funds pursuant to the Second Amended and Restated Trust Agreement of
the AccuShares Trust, by AccuShares Investment Management, LLC, a
Delaware limited liability company, as sponsor (the

``Sponsor''), and Wilmington Trust, N.A., a national banking
association, as trustee (the ``Trustee''), as it may be amended and
restated from time to time (the ``Trust Agreement'').
The Sponsor
    Under the Trust Agreement, the Sponsor has exclusive management and
control of all aspects of the business of each AccuShares Fund.
Specifically, the Sponsor selects the AccuShares Funds' service
providers, negotiates various fees and agreements and performs such
other services as the Sponsor believes that the AccuShares Trust may
require from time to time.
    Each class of an AccuShares Fund pays the Sponsor a management fee
(the ``Management Fee''), monthly in arrears, in an amount equal to a
percentage of its average daily Class Value at the rate set forth in
the applicable AccuShares Fund prospectus. No other fee is paid by the
AccuShares Funds. The Management Fee is paid in consideration of the
Sponsor's management and administrative services and the other services
provided to the AccuShares Funds for which the Sponsor pays
directly.\29\
---------------------------------------------------------------------------

    \29\ The Sponsor selects all service providers for the
AccuShares Trust and each AccuShares Fund, including each AccuShares
Fund's investment advisor.
---------------------------------------------------------------------------

Service Providers to the AccuShares Trust and AccuShares Funds

    The Trustee acts as the sole trustee of the AccuShares Trust under
the Trust Agreement for the purpose of creating the AccuShares Trust as
a Delaware statutory trust in accordance with the Delaware Statutory
Trust Act. The Trustee has only nominal duties and liabilities under
the Trust Agreement to the AccuShares Trust and the AccuShares Funds.
The Trustee will have no duty or liability to supervise or monitor the
performance of the Sponsor, nor will the Trustee have any liability for
the acts or omissions of the Sponsor.
    Wilmington Trust, N.A. also serves as the investment advisor (the
``Investment Advisor'') for each AccuShares Fund pursuant to the Non-
Custody Investment Advisory Agreement by and among the AccuShares
Trust, the Sponsor and the Investment Advisor (the ``Investment
Advisory Agreement''). The Investment Advisor, which is chosen by the
Sponsor, is responsible for investing each AccuShares Fund's available
cash in bills, bonds and notes issued and guaranteed by the United
States Treasury (``United States Treasury Securities'') with remaining
maturities of 90 days or less (``Eligible Treasuries'') and over-night
repurchase agreements collateralized by United States Treasury
Securities (``Eligible Repos,'' together with cash and Eligible
Treasuries, ``Eligible Assets''). As discussed, if the Underlying
Benchmark is maintained by the Investment Advisor, it will erect a
``firewall'' around the personnel who have access to information
concerning changes and adjustments to the Underlying Benchmark.
    State Street Bank and Trust Company, a Massachusetts trust company
(``State Street''), serves as the custodian (the ``Custodian'') for
each AccuShares Fund pursuant to appointment by the AccuShares Trust
and the terms of a domestic custodian agreement. The Custodian will
hold each AccuShares Fund's securities and cash, and will perform each
AccuShares Fund's Class Value and Class Value per Share calculations.
    State Street serves as the administrator (the ``Administrator'')
for each AccuShares Fund pursuant to appointment by the Sponsor and the
terms of an administration agreement. The Administrator, among other
things, performs or supervises the performance of services necessary
for the operation and administration of the AccuShares Funds (other
than making investment decisions or providing services provided by
other service providers), including accounting and other fund
administrative services.
    State Street serves as the transfer agent (the ``Transfer Agent'')
for each AccuShares Fund pursuant to appointment by the Sponsor and the
terms of a transfer agency and services agreement to provide certain
services to the AccuShares Funds. The Transfer Agent, among other
things, provides transfer agent services with respect to the creation
and redemption of Creation Units. The Transfer Agent will receive from
Authorized Participants creation and redemption orders and deliver
acceptances and rejections of such orders to Authorized Participants as
well as coordinate the transmission of such orders and instructions
among the Sponsor and the Authorized Participants.
    The Underlying Benchmark of each AccuShares Fund, other than the
AccuShares Spot CBOE VIX Fund (the ``VIX Fund''), is constructed,
calculated and published by S&P[supreg] Dow Jones Indices LLC (the
``Index Provider'').\30\ The CBOE Volatility Index[supreg] (the
``VIX''), which is the Underlying Benchmark of the VIX Fund, is
constructed by the CBOE and calculated and published by the Index
Provider. Both the Index Provider and the CBOE are unaffiliated with
the AccuShares Trust and the Sponsor.\31\ As discussed, to the extent
that an Underlying Benchmark is maintained by a broker-dealer or
investment advisor, such broker-dealer or investment advisor will erect
a ``firewall'' around personnel who have access to information
concerning changes and adjustments to the Underlying Benchmark.
---------------------------------------------------------------------------

    \30\ The Underlying Benchmarks for all AccuShares Funds other
than the VIX Fund are: (1) The S&P GSCI Spot index; (2) the S&P GSCI
Agricultural and Livestock Spot index; (3) the S&P GSCI Industrial
Metals Spot index; (4) the S&P GSCI Crude Oil Spot index; (5) the
S&P GSCI Brent Crude Oil Spot index; and (6) the S&P GSCI Natural
Gas Spot index, and are collectively referred to herein as the ``S&P
GSCI Commodity Indices.''
    \31\ Should, however, the Index Provider become affiliated with
the AccuShares Trust and the Sponsor, an appropriate firewall will
be warranted.
---------------------------------------------------------------------------

    The Sponsor receives the Management Fee and otherwise bears all the
routine ordinary expenses of each AccuShares Fund, including the fees
and reimbursable expenses of the Trustee, the Investment Advisor, the
Custodian, the Administrator, the Transfer Agent and the Index
Provider. The AccuShares Funds bear all their tax liabilities, which
are accrued daily, and their extraordinary, non-recurring expenses that
are not assumed by the Sponsor under the Trust Agreement.
Authorized Participants
    Each Authorized Participant must be a registered broker-dealer or
other securities market participant such as a bank or other financial
institution which is not required to register as a broker-dealer to
engage in securities transactions, and a direct participant in The
Depository Trust Company. In addition, each Authorized Participant must
be a party to an Authorized Participant Agreement with the Sponsor
setting forth the procedures for the creation and redemption of
Creation Units in an AccuShares Fund. Only Authorized Participants may
place orders to create or redeem one or more Creation Units.
Registration Statement
    The offer and sale of Paired Class Shares of each AccuShares Fund
will be registered with the SEC by means of the AccuShares Trust's
registration statement on Form S-1 (the ``Registration Statement'')
under the Securities Act of 1933 (the ``Securities Act''). The
Registration Statement was filed on March 18, 2014 and will be
effective as of the date of such offer and sale.

Description of the Underlying Benchmarks
The S&P GSCI Commodity Indices
    Each S&P GSCI Commodity Index is constructed, calculated and
published by the Index Provider. The S&P GSCI Spot index (the ``S&P
GSCI''), which serves as the Underlying Benchmark for the AccuShares
S&P GSCI Spot Fund, is an index on a production-weighted basket of
currently 24 principal physical commodities that satisfy criteria
established by the Index Provider. The commodities included in the S&P
GSCI are weighted, on a production basis, to reflect the relative
significance (in the view of the Index Provider) of those commodities
to the world economy. The referenced commodities within the S&P GSCI
Agricultural and Livestock Spot index (the ``S&P GSCI-AL'') and the S&P
GSCI Industrial Metals Spot index (the ``S&P GSCI-IN'') each receive
weightings that differ from the weightings they receive in the broader
S&P GSCI.\32\ The value of the S&P GSCI has been normalized (the
``Normalizing Constant'') such that its hypothetical level on January
2, 1970 was 100.
---------------------------------------------------------------------------

    \32\ The S&P GSCI-AL is comprised of contracts referencing the
following Reference Assets: Corn, Chicago Wheat, Soybeans, Live
Cattle, Lean Hogs, Sugar, Cotton, Kansas Wheat, Coffee, Feeder
Cattle and Cocoa. The S&P GSCI-IN is comprised of contracts
referencing the following Reference Assets: LME Copper, Aluminum,
Nickel, Zinc and Lead. The S&P GSCI is comprised of contracts
referencing the Reference Assets of the S&P GSCI-AL and the S&P
GSCI-IN, as well as West Texas Intermediate Crude Oil, Brent Crude
Oil, Gas Oil, Heating Oil, RBOB Gasoline, Gold, Natural Gas and
Silver.
---------------------------------------------------------------------------

    The S&P GSCI Crude Oil Spot index (the ``S&P GSCI-CL''), the S&P
GSCI Brent Crude Oil Spot index (the ``S&P GSCI-BR'') and the S&P GSCI
Natural Gas Spot index (the ``S&P GSCI-NG'') are single commodity sub-
indices of the S&P GSCI.\33\ The S&P GSCI-AL and the S&P GSCI-IN are
sub-indices of the S&P GSCI that comprise related groups of commodities
otherwise contained in the broader S&P GSCI. All of the S&P GSCI
Commodity Indices are the spot versions of such indices as further
discussed below.
---------------------------------------------------------------------------

    \33\ The S&P GSCI-CL, the S&P GSCI-BR and the S&P GSCI-NG are
comprised of contracts referencing West Texas Intermediate Crude
Oil, Brent Crude Oil and Natural Gas, respectively.
---------------------------------------------------------------------------

    Each S&P GSCI Commodity Index reflects only the daily settlement
prices (``Daily Contract Reference Prices'') of commodities futures
contracts that are the components of such index (``Designated
Contracts'') on each business day. Each S&P GSCI Commodity Index is
based on the daily settlement prices of first nearby contract, except
during the five day ``Roll Period'' where the ``Roll Contract
Expirations'' shift to the next nearby contract and where the weighting
of the first nearby contract is decreased in favor of the next expiry
contract 20 percent per day during the Roll Period. Immediately
following the Roll Period, the next expiry contract is used for the
index until the next following Roll Period. When shifting to a next
nearby contract, contract quantities remain consistent and relative
values between the nearby and next nearby contracts may vary.
    The daily value of the S&P GSCI Commodity Indices, therefore, is
calculated solely based on the commodity production weightings assigned
by the Index Provider of each Designated Contract, and of the Daily
Contract Reference Prices of the nearby contract expiration of each
Designated Contract, and do not reflect any roll yield.
    The quantity of each of the contracts included in the S&P GSCI
Commodity Indices is determined on the basis of a five year average,
referred to as the ``world production average,'' of the production
quantity of the underlying commodity as published by the United Nations
Statistical Yearbook, the Industrial Commodity Statistics Yearbook and
other official sources. However, if a commodity is primarily a regional
commodity, based on its production, use, pricing, transportation or
other factors, the Index Provider may calculate the weight of that
commodity based on regional, rather than world, production data. At
present, natural gas is the only commodity the weights of which are
calculated on the basis of regional production data, with the relevant
region defined as North America.
    For a complete and current description the eligibility criteria,
weighting and calculation methodologies the Index Provider utilizes in
selecting commodities and Designated Contracts and their weights for an
S&P GSCI Commodity Index, see the S&P GSCI Handbook, which is available
at: www.spindices.com/documents/methodologies/methodology-sp-gsci.pdf.
The VIX
    The Underlying Benchmark of the VIX Fund is the VIX. The VIX is
constructed by the CBOE and calculated and published by the Index
Provider. The VIX seeks to serve as a measure of the expected
volatility of the S&P 500[supreg] total return stock index (the ``S&P
500 Index''). It is an up-to-the-minute market estimate of expected
volatility that is calculated by using real-time S&P 500 Index option
(ticker SPX) bid/ask quotes. The SPX is the Reference Asset of the VIX.
Each business day, the VIX uses SPX options with at least eight days
left to expiration, and then weights them to yield a constant, 30-day
measure of the expected volatility of the S&P 500 Index.
    The VIX is based on real-time option prices, which reflect
investors' consensus view of future expected stock market volatility.
During periods of financial stress, which are often accompanied by
steep market declines, SPX options prices--and the VIX--tend to rise.
As expectations of large market moves subside, SPX option prices tend
to decline, which in turn causes the VIX to decline.
    The VIX is quoted in percentage points and translates, roughly, to
the expected movement in the S&P 500 Index over the next 30-day period,
which is then annualized. The VIX is based on the spot variation of its
Reference Asset and as such does not incorporate the effects of closing
out an expiring contract and establishing a position in the next
available contact. Consequently, the VIX does not reflect any roll
yield in option contract turnover and is properly viewed as a spot
measure of 30-day expiry expected S&P 500 Index volatility measured
through SPX price movements. For additional information regarding the
VIX, see the CBOE's Web site at www.cboe.com/VIX.
Description of the AccuShares Funds
Shares Issued in Pairs as ``Up Shares'' and ``Down Shares''
    The AccuShares Trust will issue Shares on behalf of an AccuShares
Fund in offsetting pairs, where one constituent of the pair, the Up
Shares, is positively linked to the AccuShares Fund's Underlying
Benchmark and the other constituent, the Down Shares, is negatively
linked to the AccuShares Fund's Underlying Benchmark. Therefore, the
AccuShares Trust will only issue, distribute, maintain and redeem equal
quantities of Up Shares and Down Shares on behalf of an AccuShares Fund
at all times. The AccuShares Trust will create and redeem Paired Class
Shares on behalf of an AccuShares Fund in Creation Units for cash
only.\34\
---------------------------------------------------------------------------

    \34\ Once created, an AccuShares Fund's Paired Class Shares will
trade independently of each other on the Exchange.
---------------------------------------------------------------------------

Use of Proceeds
    Cash proceeds from the creation of Paired Class Shares by an
AccuShares Fund may only be held by an

AccuShares Fund in Eligible Assets that serve the functions of (1)
covering the AccuShares Fund's fees, expenses and taxes not assumed by
the Sponsor, (2) providing cash distributions to investors based on
income (after expenses) from the financial instruments held by the
AccuShares Fund (each a ``net income distribution''), (3) providing
cash proceeds for regular and special distributions to be made in cash
in lieu of Paired Class Shares, (4) providing cash proceeds to be paid
upon the redemption of Paired Class Shares and (5) providing cash
proceeds for any AccuShares Fund liquidation distribution. Each
AccuShares Fund will invest its assets so as to preserve its capital
while, at the same time, earning an investment return that is
consistent with such preservation of capital.
AccuShares Fund Assets
    Each AccuShares Fund will maintain its Eligible Assets in a
separate custody account maintained by the AccuShares Fund's Custodian
that will be segregated from the assets of any other series of the
AccuShares Trust, the Custodian or any other customer of the Custodian.
Any date on which there is cash on deposit in an AccuShares Fund's
custody account that is not required to make payments or to make
distributions to shareholders all such cash will be either held as cash
or invested by the Investment Advisor, acting in accordance with the
Investment Advisory Agreement and on behalf of the AccuShares Fund, in
cash bank deposits, Eligible Treasuries or Eligible Repos.\35\
---------------------------------------------------------------------------

    \35\ Eligible Repos will (i) be entered into with a seller that
is a bank with at least one billion U.S. dollars in assets or a
registered securities dealer that is deemed creditworthy by the
AccuShares Fund's investment advisor, (ii) terminate the business
day following their execution, (iii) be denominated in U.S. dollars,
and (iv) be ``collateralized fully,'' meaning that (A) the value of
the assets collateralizing the Eligible Repo (less transaction
costs, including loss of interest, that the AccuShares Fund
reasonably could expect to incur if the seller were to default) is,
and during the entire term of the Eligible Repo remains, at least
equal to the resale price payable by the seller under the Eligible
Repo, (B) such assets are held by a custodian bank for the benefit
of the AccuShares Fund during the term of the Eligible Repo, and (C)
such assets consist entirely of United States Treasury Securities.
---------------------------------------------------------------------------

    Each AccuShares Fund will invest its cash in Eligible Treasuries or
Eligible Repos in order to generate income to pay its fees, expenses
and taxes and to generate income to shareholders from cash on deposit
in the AccuShares Fund that is not immediately needed for other
purposes pending a later net income distribution. Each AccuShares Fund
will hold a portion of its assets in Eligible Repos, because these
agreements mature and convert to cash within one business day, which
will make it possible for the AccuShares Fund to have sufficient cash
available on each business day to be able to effect any redemptions of
its Creation Units.
    The Trust Agreement will limit, and the Investment Advisory
Agreement will direct the Investment Advisor to limit, each AccuShares
Fund's holdings of Eligible Repos.
    Daily, except on a distribution date where such proceeds are needed
to effect redemptions or net income distributions or to distribute cash
for regular and special distributions, the Investment Advisor, on
behalf of the AccuShares Fund, will reinvest the proceeds received upon
the maturity of the AccuShares Fund's Eligible Treasuries and Eligible
Repos in Eligible Assets. The Investment Advisor will also invest in
Eligible Assets all of an AccuShares Fund's cash funds delivered to it
in connection with each creation of the AccuShares Fund's Creation
Units. On the liquidation of an AccuShares Fund, all of the proceeds of
the Eligible Treasuries and Eligible Repos held by the AccuShares Fund
will be used to make final cash liquidating payments, less the fees,
expenses and taxes of the AccuShares Fund not assumed by the Sponsor,
to the AccuShares Fund's shareholders. Upon any redemption of an
AccuShares Fund's Creation Units by an Authorized Participant, the cash
of the AccuShares Fund will be used to pay the proceeds of such
redemption to the redeeming Authorized Participant.
    The Investment Advisor will select Eligible Treasuries and Eligible
Repos for acquisition by an AccuShares Fund in accordance with the
acquisition guidelines that are contained in the Investment Advisory
Agreement and the applicable AccuShares Fund prospectus.
Determination of Class Value and Class Value per Share
    The Custodian will daily determine the Class Value of each class of
an AccuShares Fund, which is based on the value of the AccuShares
Fund's Eligible Assets attributable to such class, (a) plus any accrued
income or gains or losses on such assets attributable to such class
(``Investment Income''), (b) less all fees, expenses and taxes
attributable to such class not otherwise assumed by the Sponsor, where
such income and gains after deduction of such fees, expenses and taxes
is referred to as the class ``Net Investment Income.'' Such accrued
income, gains, losses, fees, expenses and taxes will be allocated to
each Share class on a daily basis, where such allocation is equal to
the amount of such accrued income, gains, losses, fees, expenses and
taxes multiplied by a fraction the numerator of which is the closing
Class Value per Share of the referenced class and the denominator of
which is the sum of the closing Class Values per Share of both classes
of the AccuShares Fund.
    The Class Value per Share of each AccuShares Fund's Up Shares will
have a fixed one-to-one positive linear relationship with such
AccuShares Fund's Underlying Benchmark (the ``Up Share Index Factor'')
and the Class Value per Share of each AccuShares Fund's Down Shares
will have a fixed one-to-one inverse linear relationship with such
AccuShares Fund's Underlying Benchmark (the ``Down Share Index Factor''
and together with the Up Share Index Factor, the ``Share Index
Factors''). The Down Share Index Factor will equal negative one times
the Up Share Index Factor. At the inception of operations of each
AccuShares Fund, the Sponsor will establish such AccuShares Fund's
Share Index Factors. After any regular or special distribution by an
AccuShares Fund, the AccuShares Fund will reset its Share Index
Factors. This resetting of the Share Index Factors causes Class Values
per Share to be equal following each such distribution, where the Class
Values per Share will be equal to the lowest Class Value per Share of
either class calculated in determining the distribution.
    During any single distribution measurement period that starts with
the prior distribution date (the ``Measuring Period'') and in order to
create a balanced market for the Up Shares and Down Shares of the VIX
Fund, the Class Value per Share of each Up Share of the VIX Fund will
be reduced and the Class Value per Share of each Down Share of the VIX
Fund will be increased by an additional daily amount (the ``Daily
Amount''). In each Measuring Period where the VIX has a level that is
below a threshold specified in the VIX Fund's prospectus on the prior
distribution date, the Daily Amount will be a fixed percentage per day
\36\ of the Class Value per Share on the prior distribution date. If
the level of the VIX is above the threshold specified in the VIX Fund's
prospectus, the Daily Amount will be zero. The Daily Amount is intended
to reflect an attribute of the market for long

financial instruments seeking exposure to the expected volatility of
the S&P 500 Index implicit to options contracts on the performance of
the S&P 500 Index. As reflected in the historical performance of the
VIX, the market for such long instruments deteriorates over both long
and short term time frames as both S&P 500 Index volatility and the VIX
tend to return to a mean level. Under these circumstances, a long
position on the VIX will tend to decrease in value over time while a
short position will tend to increase in value. Thus, the VIX Fund will
devalue its Up Shares and increase the value of its Down Shares over a
Measuring Period by the fixed amount of the Daily Amount where the VIX
is within a range consistent with its long run mean level.
---------------------------------------------------------------------------

    \36\ The fixed percentage will vary according to the level of
the VIX on the prior distribution date. If the level of the VIX on
such prior distribution date was 30 or lower, the Daily Amount will
be 0.15% of the Class Value per Share on such prior distribution
date. If the level of the VIX was greater than 30, the Daily Amount
will be zero.
---------------------------------------------------------------------------

    The AccuShares Funds' assets are not managed to track the
performance of their respective Underlying Benchmarks, and the Shares
of the AccuShares Funds will not rely on the investment acumen of a
manager or the precision of the investment tools used by a manager for
performance or for tracking the targeted Underlying Benchmark. Rather,
the return on an AccuShares Fund's Shares with respect to its
Underlying Benchmark will be algorithmic and delivered to AccuShares
Fund investors experiencing an increase in their Shares' Class Value
per Share by regular and special distributions and to AccuShares Fund
investors experiencing a decrease in their Shares' Class Value per
Share by the dilution of their Shares' Class Value per Share due to
regular and special distributions received by the class of Shares
opposing their Shares. The Class Values and Class Values per Share for
each AccuShares Fund will be calculated as set forth to the applicable
AccuShares Fund prospectus.
Class Value and Class Value Per Share
    The Class Value of each class of an AccuShares Fund is the portion
of that fund's net asset value, or liquidation value, that is
attributable to that class. Class Values and Class Values per Share of
each AccuShares Fund will be calculated by the fund's custodian at the
end of each Regular Market Session.\37\ The Class Value of each class
of an AccuShares Fund will be calculated by determining the liquidation
value attributable to such class, as described below.
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    \37\ The Class Values and Class Values per Share of each
AccuShares Fund will be made available to all market participants at
the same time.
---------------------------------------------------------------------------

    In determining liquidation value, each AccuShares Fund will value
all assets consistent with generally accepted industry practice for
valuation of cash and cash equivalent securities. Cash balances and
cash equivalent securities will be valued at purchase price plus
accrued interest and longer dated U.S. Treasury securities will be
valued at market prices.
    The Class Value of a specific class of an AccuShares Fund is the
fund's liquidation value, adjusted for the total Net Investment Income,
multiplied by a fraction, the numerator of which is the closing Class
Value per Share of the referenced class and the denominator of which is
the sum of the closing Class Values per Share of both classes of the
AccuShares Fund. The Class Value per Share of all outstanding Shares of
a class of an AccuShares Fund is its Class Value divided by the number
of outstanding Shares of such class.
    The Class Value per Share of each AccuShares Fund's Up Shares will
be increased or decreased, as applicable, by an amount equal to the
change in the fund's Underlying Benchmark since the prior distribution
date multiplied by the fund's Up Share Index Factor. The Class Value
per Share of each AccuShares Fund's Down Shares will be increased or
decreased, as applicable, by an amount equal to the change in the
fund's Underlying Benchmark since the prior distribution date
multiplied by the fund's Down Share Index Factor.
Arbitrage
    Similar to other exchange traded products, the AccuShares Funds
will rely on the Share creation and redemption process to reduce any
premium or discount that may occur in an AccuShares Fund's Share
trading prices on the Exchange relative to that Share's Class Value per
Share. Shares in each AccuShares Fund may be created or redeemed only
by certain Authorized Participants who have entered into Authorized
Participant Agreements with the AccuShares Trust and the Sponsor. The
creation/redemption process is important for each AccuShares Fund in
providing Authorized Participants with an arbitrage mechanism through
which they may keep Share trading prices in line with each Share's
Class Value per Share.
    As an AccuShares Fund's Shares trade intraday on the Exchange,
their market prices will fluctuate due to supply and demand. The
following scenarios generally describe the conditions surrounding a
creation/redemption:
     If the aggregate market prices of the two classes of
Shares of an AccuShares Fund exceed their aggregate Class Values per
Share,\38\ an Authorized Participant can purchase both classes of
Shares through a cash payment as part of a Creation Unit from the
AccuShares Fund, and then sell the new Shares on the market at a
profit, taking into account the value and market price of both classes
of Shares. This process of increasing the supply of Shares is expected
to bring the market prices of the Shares back to their aggregate Class
Values per Share.
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    \38\ This would include a scenario where both classes of an
AccuShares Fund are trading at a premium to their respective Class
Values per Share, as well as where one class of an AccuShares Fund
is trading at a premium to its Class Value per Share while the other
class trades at Class Value per Share or at a discount that is
smaller than the other class' [sic] premium.
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     If the aggregate Class Values per Share of the two classes
of Shares of an AccuShares Fund exceed their aggregate market
prices,\39\ an Authorized Participant can purchase Shares on the market
in an amount equal to a Creation Unit and redeem them for cash at their
Class Values per Share at a profit, taking into account the value and
market price of both classes of Shares. This process of increasing the
demand for Shares on the Exchange through decreasing supply is expected
to raise the trading price of a Share to meet its Class Value per
Share.
---------------------------------------------------------------------------

    \39\ This would include a scenario where both classes of an
AccuShares Fund are trading at a discount to their respective Class
Values per Share, as well as where one class of an AccuShares Fund
is trading at a discount to its Class Value per Share while the
other class trades at Class Value per Share or at a premium that is
smaller than the other class' [sic] discount.
---------------------------------------------------------------------------

     If the aggregate Class Values per Share of the two classes
of Shares of an AccuShares Fund are equal to their aggregate market
prices, but the market price of one of the classes of Shares exceeds
its Class Value per Share and the Class Value per Share of the opposing
class of Shares exceeds its market price, the redemption and creation
mechanism may not create an arbitrage opportunity to eliminate this
disparity. An AccuShares Fund's corrective distribution mechanism is
designed to resolve this discrepancy. As discussed above, a corrective
distribution will leave each shareholder of an AccuShares Fund with an
equal number of Up Shares and Down Shares. As each shareholder would
own both Up Shares and Down Shares, each holder could redeem their
Shares through an Authorized Participant for cash at their respective
Class Values per Share, which would eliminate the premium or discount.
Even if a corrective distribution is not triggered, the existence of an
AccuShares Fund's corrective distribution feature is

expected to modify investor and Authorized Participant behavior to
prevent persistent and material premium and discount conditions for
Paired Class Shares from becoming locked.
    The processes examined in the first two scenarios above are
referred to as the ``arbitrage mechanism.'' The arbitrage mechanism
helps to minimize the difference between the trading price of a Share
of an AccuShares Fund and its Class Value per Share. Over time, these
buying and selling pressures should balance out, and a Share's market
trading price is expected to remain at a level that is at or close to
its Class Value per Share. The arbitrage mechanism provided by the
creation and redemption process is designed, and required, in order to
maintain the relationship between the market trading price of Shares
and their Class Values per Share between distribution dates.
Distributions
    Each AccuShares Fund is expected to engage in four types of
distributions as of certain distribution dates. The first type of
distribution, regular distributions, will occur at regular intervals
for each AccuShares Fund. Regular distributions will generally occur as
long as there has been a change in the level of the Underlying
Benchmark (and, in the case of the VIX Fund, the Daily Amount) as of
the distribution date since the prior distribution date. Secondly, each
AccuShares Fund expects to make net income distributions on each
regular or special distribution date to the shareholders of any class
of such AccuShares Fund whose class Net Investment Income is positive
as of such distribution date.
    The other two types of distributions are not expected to occur
regularly and are mechanisms intended to protect the interests of
investors by providing them with the expected value of their Shares
upon specified events. Thus, the third type, special distributions,
occurs where the change in the Underlying Benchmark exceeds a specified
percentage value since the prior distribution date but before the next
regular distribution. The fourth type, corrective distributions, occur
only if the trading price of a class' Shares on the Exchange deviates
for a specified length of time over a specified threshold amount from
the Class Value per Share of such class.
Regular Distributions
    Each AccuShares Fund will engage in regular distributions on either
a monthly or quarterly basis as set forth in the applicable AccuShares
Fund prospectus.\40\ After each regular distribution, the applicable
AccuShares Fund will reset its Share Index Factors. An investor
receiving distributions in cash can then choose to either do nothing or
reinvest all or part of the distribution in the desired class of Shares
to gain more economic exposure to the Underlying Benchmark.
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    \40\ The VIX Fund and the AccuShares S&P GSCI Natural Gas Spot
Fund will engage in monthly regular distributions on the 15th day of
each calendar month (or the next following business day if the
scheduled regular distribution date is not a business day). Each of
the other five AccuShares Funds will engage in quarterly regular
distributions on March 15, June 15, September 15 and December 15 of
each year (or the next following business day if the scheduled
regular distribution date is not a business day).
---------------------------------------------------------------------------

    An investor receiving distributions in pairs of Shares can (i) sell
the Shares received for cash and maintain the proceeds in cash, (ii)
sell only the opposing class of Shares received and maintain proceeds
in cash or (iii) sell only the opposing class of Shares received and
reinvest the proceeds in the desired class of Shares to gain more
economic exposure to the Underlying Benchmark.
Special Distributions
    Special distributions are a measure designed to protect the
AccuShares Funds and the investors in the AccuShares Funds during
periods when the AccuShares Fund's Underlying Benchmark experiences
unexpected degrees of volatility. The AccuShares Funds will effect a
special distribution and a resetting of the Share Index Factors between
regular distribution dates where the change in the Underlying Benchmark
exceeds a specified percentage value since the prior distribution date,
as set forth in the applicable AccuShares Fund prospectus.\41\ A
reverse share split may also be executed in conjunction with any
special distributions.
---------------------------------------------------------------------------

    \41\ The percentage value for special distributions for each of
the AccuShares Funds will be 75%.
---------------------------------------------------------------------------

Value of Regular and Special Distributions
    When the Class Values per Share of the Up Shares and the Down
Shares of an AccuShares Fund differ at the close of a Measuring Period
(after adjusting for any net income distribution for such Shares), the
Share class with the higher Class Value per Share is expected to
receive a regular or special distribution on that distribution date.
    The value of a distribution relating to each of an AccuShares
Fund's Up Shares (where such Shares are valued at their respective
Class Values per Share) entitled to a distribution on a distribution
date will be equal to the positive amount, if any, of the closing Class
Value per Share of the AccuShares Fund's Up Shares (after adjusting for
any net income distribution) less the closing Class Value per Share of
the AccuShares Fund's Down Shares (after adjusting for any net income
distribution).
    The value of a distribution relating to each of an AccuShares
Fund's Down Shares (where such Shares are valued at their respective
Class Values per Share) entitled to a distribution on a distribution
date will be equal to the positive amount, if any, of the closing Class
Value per Share of the AccuShares Fund's Down Shares (after adjusting
for any net income distribution) less the closing Class Value per Share
of the AccuShares Fund's Up Shares (after adjusting for any net income
distribution).
    Regular and special distributions will ordinarily be made in the
form of cash during the first six months of trading in an AccuShares
Fund's Shares. Thereafter, each AccuShares Fund will pay all or any
part of any regular or special distribution in Paired Class Shares
instead of cash where further cash distributions would adversely affect
the liquidity of the market for the AccuShares Fund's Shares \42\ or
impact the AccuShares Fund's ability to meet minimum asset size
Exchange listing standards.\43\ All payments made in Paired Class
Shares shall be made in equal numbers of Up and Down Shares. To the
extent a Share distribution would result in the distribution of
fractional Shares, cash in an amount equal to the value of the
fractional Shares will be distributed rather than fractional Shares.
---------------------------------------------------------------------------

    \42\ The AccuShares Fund would engage in distributions of Paired
Class Shares in order to maintain a net asset value sufficient to
meet the net asset value expectations of certain institutional
shareholders that condition their investment in ETPs to only those
ETPs having more than a minimum amount of net assets. Consequently,
Paired Class Share distributions will have the effect of preserving
an AccuShares Fund's net assets (aggregate Class Values) to attract
and retain these institutional investors and thereby increase the
liquidity of the market for an AccuShares Fund's Shares for the
benefit all of an AccuShares Fund's shareholders.
    \43\ For the minimum asset size Exchange listing standards, see
proposed Rule 5713(f)(ii)(A)(iii).
---------------------------------------------------------------------------

Corrective Distributions
    Corrective distributions will occur for the AccuShares Funds after
the trading price of an AccuShares Fund's Shares deviates materially
and persistently from Class Value per Share according to fixed
thresholds as set forth in the applicable AccuShares Fund prospectus.
Corrective distributions are

a formulaic process that continuously measures for any material
deviation between the Class Value per Share of the Shares and the
closing trading prices of the Shares as reported on the Exchange. After
a specified period of time following an AccuShares Fund's inception, if
the closing trading prices of the Shares of the AccuShares Fund deviate
significantly from their Class Value per Share by a specified amount
over a specified period of time, as set forth in the applicable
AccuShares Fund prospectus, the AccuShares Fund will make a corrective
distribution in addition to a regular distribution or special
distribution on the next scheduled regular distribution date or special
distribution date if previously triggered.\44\ In a corrective
distribution, each Share (including those to be distributed on the
related regular or special distribution date) will be resolved into a
risk neutral position comprised of an equal number of Up Shares and
Down Shares. The corrective distribution will distribute (1) a number
of Down Shares equal to the number of outstanding Up Shares to the Up
Shares holders and (2) a number of Up Shares equal to the number of
outstanding Down Shares to the Down Shares holders. Once the
requirements for a corrective distribution are triggered, the
corrective distribution will occur on the next available regular or
special distribution date.
---------------------------------------------------------------------------

    \44\ The corrective distribution threshold for the VIX Fund will
be a 10.0% deviation for three consecutive business days. The
corrective distribution threshold for the AccuShares S&P GSCI
Natural Gas Spot Fund will be a 7.5% deviation for three consecutive
business days. The corrective distribution threshold for each of the
other five AccuShares Funds will be a 5.0% deviation over three
consecutive business days.
---------------------------------------------------------------------------

Net Income Distributions
    Whenever an AccuShares Fund engages in a regular or special
distribution, such AccuShares Fund will determine whether any of its
classes has a positive Net Investment Income. Shareholders of any class
that has a positive Net Investment Income will receive a net income
distribution. Net income distributions may occur for any class
regardless of whether such class receives a regular or special
distribution on that date.
Share Splits
    Reverse share splits will be declared to maintain a positive Class
Value per Share for either the Up Shares or the Down Shares of an
AccuShares Fund should the Class Value per Share of either class
approach zero. Reverse share splits are expected to occur in the
context of special distributions and are expected to be triggered after
Class Value per Share declines below a specified dollar threshold as
set forth in the applicable AccuShares Fund prospectus.\45\ No other
share splits are expected to occur, although the Sponsor will have the
right to declare in its sole discretion a share split, either forward
or reverse, pursuant to the Trust Agreement. In the event of a reverse
share split, the Share Index Factors and the per Share calculations for
Net Investment Income will be adjusted to reflect the split to maintain
continuity in tracking the AccuShares Fund's Underlying Benchmark.
---------------------------------------------------------------------------

    \45\ The specified dollar threshold for each AccuShares Fund
will be $4.00.
---------------------------------------------------------------------------

Notification
    Each AccuShares Fund engaging in a regular distribution, a special
distribution, a corrective distribution or a net income distribution
will provide at least three business days' advance notice (or longer
advance notice as may be required by the Exchange) \46\ of such an
event. Each AccuShares Fund engaging in a share split will provide at
least ten calendar days' advance notice (or longer advance notice as
may be required by the Exchange) \47\ of such an event. In each
instance, the Sponsor will notify the Exchange, and post a notice of
such event and its details on the Sponsor's Web site
(www.AccuShares.com).
---------------------------------------------------------------------------

    \46\ The Exchange may determine that longer notice is advisable
in some circumstances (e.g. an extended, or unexpected, market
break).
    \47\ Id.
---------------------------------------------------------------------------

    With respect to regular distributions, the information provided
will consist of the schedule of distributions and associated
distribution dates, and a notification, as of the record date for such
regular distribution, on the Sponsor's Web site (www.AccuShares.com) as
to whether or not the regular distribution will occur. For regular
distributions that occur on schedule, the Sponsor will cause a press
release to be issued identifying the receiving class, the amount of
cash, the amount of Paired Class Shares (if any), and any other
information the Sponsor deems relevant regarding the distribution and
post such information on the Sponsor's Web site. This information will
also be contained in the AccuShares Fund's quarterly and annual reports
on Forms 10-Q and 10-K and annual reports to shareholders.
    With respect to special distributions, corrective distributions and
share splits, the information provided will include the relevant ex-,
record and payment dates for each such event and relevant data
concerning each such event. These events will also be reported in press
releases, on the Sponsor's Web site (www.AccuShares.com) and under
current reports on Form 8-K as material events as well as the
AccuShares Fund's periodic reports.
    In addition, notice of net income distributions for each class of
an AccuShares Fund, if any, will also be included in the notifications
of regular, special and corrective distributions.
Information Available to the Public
    Information about the AccuShares Trust, the AccuShares Funds and
Shares will appear in the AccuShares Fund prospectuses as well as in
periodic and current reports by the AccuShares Trust under the Exchange
Act. Information about the AccuShares Trust, the AccuShares Funds and
the Shares will also be available from the Web site www.AccuShares.com.
Intraday Indicative Value
    For each AccuShares Fund, an estimated value, defined in proposed
Rule 5713(f)(ii)(D) as the ``Intraday Indicative Value,'' will be
disseminated. The Intraday Indicative Value, made available by a major
market vendor, will be based upon the previous day's Class Value per
Share, as adjusted throughout the day based on changes in the value of
the AccuShares Fund's Underlying Benchmark or the value of an
equivalent front futures contract price, and will be updated and widely
disseminated and broadly displayed on at least a 15-second delayed
basis during the Regular Market Session.\48\ Premiums and discounts
between a Share's Intraday Indicative Value and its Class Value per
Share may occur. The Intraday Indicative Value should not be viewed as
an actual real-time update of Class Value per Share because Class Value
per

Share is calculated only once at the end of each business day. The
Intraday Indicative Value also should not be viewed as a precise value
of the Shares. The dissemination of the Intraday Indicative Value will
provide a close estimate of that value throughout the trading day.
---------------------------------------------------------------------------

    \48\ The value of an equivalent futures contract price may be
used for calculation of the IIV only (a) during such time that the
value of the AccuShares Fund's Underlying Benchmark is unavailable,
and (b) if the equivalent futures contract price is available and
used in calculation of the Underlying Benchmark. Once the Underlying
Benchmark becomes available again, the calculation of the AccuShares
Fund's IIV promptly will resume based on the Underlying Benchmark.
During such time that an equivalent futures contract price is
utilized, the Sponsor will so note for the affected AccuShares Fund
on its Web site at www.AccuShares.com. The substitution of
equivalent futures contract price in lieu of the Underlying
Benchmark value may be needed where the provider of the Underlying
Benchmark is unable to use the Underlying Benchmark for calculation
of the IIV due to unforeseen circumstances arising with the provider
of the Underlying Benchmark or its service providers (e.g.,
technical or continuity issues). The Exchange, the Sponsor and the
AccuShares Trust believe that a substitution of an equivalent
futures contract price in lieu of an Underlying Benchmark value
would rarely, if ever, occur.
---------------------------------------------------------------------------

Trading Halts and Trading Pauses
    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 an AccuShares Fund. NASDAQ will halt or pause
trading in an AccuShares Fund's Shares under the conditions specified
in NASDAQ Rules 4120 and 4121, including the trading pauses under
NASDAQ Rules 4120(a)(11) and (12). Trading may be halted for reasons
that, in the view of the Exchange, make trading in the AccuShares
Fund's Shares inadvisable.\49\ Additionally, trading in an AccuShares
Fund's Shares will be subject to proposed Rule 5713(f)(ii), which sets
forth additional circumstances under which trading in Paired Class
Shares may be halted.
---------------------------------------------------------------------------

    \49\ For instance, a trading halt may be instituted where
unusual conditions or circumstances detrimental to the maintenance
of a fair and orderly market are present.
---------------------------------------------------------------------------

    If the intraday level of an AccuShares Fund's Underlying Benchmark
or the Intraday Indicative Value is not being disseminated as required,
the Exchange may halt trading during the day in which the disruption
occurs; if the interruption persists past the day in which it occurred,
the Exchange will halt trading no later than the beginning of the
trading day following the interruption. The Exchange will obtain a
representation from the AccuShares Trust on behalf of each AccuShares
Fund that the Class Value per Share of each of its Up Shares and Down
Shares will be calculated daily and that these Class Values per Share
and information about the assets of the AccuShares Fund will be made
available to all market participants at the same time.
Availability of Information
    The Sponsor's Web site (www.AccuShares.com), which will be publicly
available prior to the public offering of Shares, will include a form
of the prospectus for each AccuShares Fund that may be downloaded. The
Sponsor's Web site will include additional information updated on a
daily basis, including, for each AccuShares Fund: (1) The prior
business day's reported Class Values and Class Values per Share; and
(2) notifications with respect to distributions and share splits.
    Investors will also be able to obtain each AccuShares Fund's annual
and quarterly reports (together, ``Reports''). Each AccuShares Fund's
Reports will be available free upon request from the AccuShares Trust,
and those documents may be viewed on-screen or downloaded from the
Commission's Web site at www.sec.gov. Information regarding market
price and volume of the Shares will be continually available on a real-
time basis throughout the day on brokers' computer screens and other
electronic services. Information regarding the previous day's closing
price and trading volume information for the Shares will be published
daily in the financial section of newspapers. Quotation and last sale
information will also be available via NASDAQ proprietary quote and
trade services, as well as in accordance with any UTP plans for an
AccuShares Fund's Shares, if applicable. The value of each AccuShares
Fund's Underlying Benchmark will be published by one or more major
market data vendors on at least a 15-second delayed basis during the
Regular Market Session. Information about each AccuShares Fund's
Underlying Benchmark constituents, the weighting of the constituents,
the Underlying Benchmark's methodology and the Underlying Benchmark's
rules will be available at no charge on the Index Provider's Web site
at us.spindices.com or, in the case of the VIX Fund, the CBOE's Web
site at www.cboe.com/VIX.
    Additional information regarding the AccuShares Funds and the
Shares, including risks, creation and redemption procedures, fees,
distributions and taxes, is included in the Registration Statement.
Trading Rules
    The Exchange deems the Shares to be equity securities, which
include, among other things, exchange traded funds and exchange traded
notes, thus rendering trading in the Shares subject to the Exchange's
existing rules governing the trading of such securities. The Exchange
will allow trading Paired Class Shares during all trading sessions.\50\
As provided in Rule 4613(a)(2)(I), the minimum quotation increment for
quotations of $1.00 and above in Paired Class Shares on the Exchange is
$0.01.
---------------------------------------------------------------------------

    \50\ See Commentary .02.
---------------------------------------------------------------------------

Surveillance
    The Exchange represents that trading in Paired Class Shares will be
subject to the existing trading surveillances, administered by both the
Exchange and 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.\51\ The Exchange
represents that these procedures are adequate to properly monitor
trading of Paired Class Shares and to deter and detect violations of
Exchange rules and applicable federal securities laws.
---------------------------------------------------------------------------

    \51\ 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.
---------------------------------------------------------------------------

    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.
    FINRA, on behalf of the Exchange, will communicate as needed
regarding trading in the Paired Class Shares and in the securities in
which the AccuShares Fund will invest with other markets and other
entities that are members of the Intermarket Surveillance Group
(``ISG'') or with which the Exchange has in place a comprehensive
surveillance sharing agreement.\52\ In addition, FINRA may obtain
trading information regarding trading in the Shares and in the
securities in which the AccuShares Fund will invest with such markets
and other entities; and the Exchange may obtain information regarding
trading in the Shares and in the securities in which the AccuShares
Fund will invest from markets and other entities that are members of
the ISG or with which the Exchange has in place a comprehensive
surveillance sharing agreement.
---------------------------------------------------------------------------

    \52\ For a list of the current members of ISG, see
www.isgportal.org.
---------------------------------------------------------------------------

    In addition, the Exchange also has a general policy prohibiting the
distribution of material, non-public information by its employees.
Information Circular
    Prior to the commencement of trading, the Exchange will inform its
members in an Information Circular of the special characteristics and
risks associated with trading Paired Class Shares. Specifically, the
Information Circular will discuss the following: (1) The procedures for
purchases and redemptions of Paired Class Shares; (2) Rule 2111A, which
imposes suitability obligations on Exchange members with respect to
recommending transactions in Paired Class Shares to customers; (3)

how information regarding the Underlying Benchmark and Intraday
Indicative Value is disseminated; (4) the risks involved in trading
Paired Class Shares during the Pre-Market and Post-Market sessions when
an updated Underlying Benchmark and Intraday Indicative Value will not
be calculated or publicly disseminated; (5) the requirement that
members deliver a prospectus to investors purchasing newly issued
Paired Class Shares; (6) trading information; and (7) how information
regarding distributions and share splits is disseminated and the
requirements of public notification of these events.\53\
---------------------------------------------------------------------------

    \53\ In addition, the Information Circular will also discuss any
exemptive, no-action and interpretive relief granted by the
Commission from any rules under the Act.
---------------------------------------------------------------------------

    The Exchange believes that its proposal to establish a rule to
enable listing Paired Class Shares is, as noted, substantively similar
to the Arca rule to establish listing PTS. In approving Arca's PTS Rule
8.400, the Commission stated that ``. . .the Exchange's proposed rules
and procedures for the listing and trading of the Paired Trust Shares
are consistent with the Act. The Paired Trust Shares will trade as
equity securities subject to the Exchange's existing rules governing
the trading of equity securities.'' \54\ Similarly, the Exchange's
existing equity rules will be applicable to Paired Class Shares.
---------------------------------------------------------------------------

    \54\ In the PTS approval order, the Commission stated further
that it ``. . .finds that proposed NYSE Arca Equities Rule 8.400(e)
establishing certain restrictions on [members] acting as registered
Market Makers in Paired Trust Shares is reasonably designed to
address potential conflicts of interest in connection with [members]
acting as registered Market Makers in Paired Trust Shares. The
Commission believes that the listing and delisting criteria for the
Paired Trust Shares should help to maintain a minimum level of
liquidity and therefore minimize the potential for manipulation of
the Paired Trust Shares.'' See Securities Exchange Act Release No.
55033 (December 29, 2006), 72 FR 1253 (January 10, 2007)(SR-
NYSEArca-2006-75).
---------------------------------------------------------------------------

    The Exchange believes that this proposal will allow investors to
execute trading and hedging decisions using a new product, Paired Class
Shares, which offers the ability to invest in securities tied to
increases or decreases in the prices of securities, commodities or
other financial assets on an unleveraged basis. Paired Class Shares
accomplishes this result without the need to replicate the return
profile using other financial assets and thus reduces or avoids typical
portfolio costs and risks, such as portfolio transaction costs, country
risk, counterparty risk and liquidity risk associated with the
underlying investments. As such, the Exchange believes that Paired
Class Shares will benefit market participants and the market in
general.\55\
---------------------------------------------------------------------------

    \55\ As discussed, the uniqueness of Paired Class Shares in
comparison to PTS lies in the periodic distributions, periodic Share
Index Factor resets, and active market monitoring of Paired Class
Shares. These unique factors allow Paired Class Shares to provide
investors with: (i) A reduction of persistent or cumulative
deviations in share trading price to actual index performance; (ii)
improved correlations over the life of the securities between
percentage changes in the index and percentage changes in the share
price of the Fund shares; and (iii) significant reduction of the
need to liquidate the issuer in response to large movements in its
related index.
---------------------------------------------------------------------------

    Moreover, we believe that the structure of Paired Class Shares in
terms of paired Up Shares and Down Shares have characteristics that
would provide unique benefits and opportunities to market participants.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section
6(b) of the Act \56\ in general, and furthers the objectives of Section
6(b)(5) of the Act \57\ in particular, in that it is designed 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.\58\
---------------------------------------------------------------------------

    \56\ 15 U.S.C. 78f(b).
    \57\ 15 U.S.C. 78f(b)(5).
    \58\ The proposal is likewise consistent with Section
11A(a)(1)(C)(iii) of the Act, 15 U.S.C. 78k-1(a)(1)(C)(iii), 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.
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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, to be listed, each Fund \59\ must meet newly-established initial
listing standards per proposed Rule 5713 that include: (1) A minimum
number of Paired Class Shares for each Fund required to be outstanding
at the time of commencement of trading on NASDAQ, (2) a representation
from the Trust issuing Paired Class Shares on behalf of each Fund that
the underlying value per share of each Up Share and Down Share will be
calculated daily and that these underlying values and information about
the assets of the Fund will be made available to all market
participants at the same time, and (3) an appropriate ``firewall'' if
the Underlying Benchmark is maintained by a broker-dealer or investment
advisor. Similarly, once listed, each Fund must meet continued listing
standards.
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    \59\ The Exchange notes that the Statutory Basis discussion
applies equally to the AccuShares Funds and the AccuShares Trust.
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    The proposed rule change is also designed to promote just and
equitable principles of trade and to protect investors and the public
interest through its distribution provision. Once listed each Fund may
engage in (1) scheduled regular distributions, (2) special
distributions that are automatically triggered upon the Underlying
Benchmark exceeding a fixed rate of change since the Fund's prior
distribution date, and (3) corrective distributions that are
automatically triggered when the trading price of a Paired Class Share
deviates by a specified amount from its Class Value per Share for a
specified period of time. These distributions provide investors with
the expected value of their Paired Class Shares periodically as well as
upon the occurrence of specified events, and are also expected to limit
the frequency and magnitude of oscillations between fund trading price
premiums and discounts to Class Value per Share.
    Moreover, a large amount of information will be publicly available
regarding the Funds and their Paired Class Shares, thereby promoting
market transparency. The Intraday Indicative Value of each listed Up
Share and Down Share of a Fund, and the intraday level of each Fund's
Underlying Benchmark, will be widely disseminated by one or more major
market data vendors, such as Reuters or Bloomberg, and broadly
displayed on at least a 15-second delayed basis during the Regular
Market Session. Information regarding market price and trading volume
of each Fund's Up Shares and Down Shares will be continually available
on a real-time basis throughout the day on brokers' computer screens
and other electronic services, and quotation and last sale information
will also be available via NASDAQ proprietary quote and trade services,
as well as in accordance with any UTP plans for a Fund's paired Class
Shares, if applicable.
    Trading in a Fund's Paired Class Shares will be halted or paused
under the conditions specified in NASDAQ Rules 4120 and 4121, including
the trading pauses under NASDAQ Rules 4120(a)(11) and (12). Trading may
be halted for reasons that, in the view of the Exchange, make trading
in the Paired Class Shares inadvisable, and trading in Paired Class
Shares will be subject to proposed Rule 5713(f)(ii), which sets forth
additional circumstances under which trading in Paired Class Shares may
be halted. In addition, as noted above, investors will have ready
access to information

regarding each Fund's Intraday Indicative Values and Underlying
Benchmark, as well as quotation and last sale information for each
Fund's Paired Class Shares.
    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
an additional type of exchange-traded product that will enhance
competition among market participants, to the benefit of investors and
the marketplace. In addition, as noted above, investors will have ready
access to information regarding each Fund's Intraday Indicative Values
and Underlying Benchmark, as well as quotation and last sale
information for each Fund's Paired Class Shares.
    For the above reasons, NASDAQ believes the proposed rule change is
consistent with the requirements of Section 6(b)(5) of the Act.

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 not necessary or appropriate in
furtherance of the purposes of the Act. To the contrary, the Exchange
believes that no burden exists in that no other Exchange has a listing
rule regarding this product. Paired Class Shares represent a
significant improvement over a product that is no longer traded, PTS,
because of the periodic distributions, periodic index resets, and
active market monitoring of Paired Class Shares. These unique factors
allow Paired Class Shares to provide investors with: (i) A reduction of
persistent or cumulative deviations in share trading price to actual
index performance; (ii) improved correlations over the life of the
securities between percentage changes in the index and the percentage
changes in the share price of the shares; and (iii) significant
reduction of the need to liquidate the issuer in response to large
movements in its related index, which represent significant benefits to
traders and investors.

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

    Written comments were neither solicited nor received.

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

    Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days after
publication (i) as the Commission may designate if it finds such longer
period to be appropriate and publishes its reasons for so finding or
(ii) as to which the self-regulatory organization consents, the
Commission will:
    (A) by order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule
change should be 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<EMAIL_ADDRESS>Please include
File Number SR-NASDAQ-2014-065 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-NASDAQ-2014-065. 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 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 such filing also will be available
for inspection and copying at the principal office of the Exchange. 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-NASDAQ-2014-065, and should
be submitted on or before July 14, 2014.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\60\
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    \60\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-14540 Filed 6-20-14; 8:45 am]
BILLING CODE 8011-01-P