[Federal Register: March 1, 2010 (Volume 75, Number 39)]
[Notices]
[Page 9265-9272]
[DOCID:fr01mr10-119]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61571; File No. SR-NYSEAmex-2010-09]

Self-Regulatory Organizations; NYSE Amex LLC; Notice of Filing of
Proposed Rule Change Amending Its Trust Unit Rules and Proposing the
Listing of the Nuveen Diversified Commodity Fund

February 23, 2010.
    Pursuant to Section 19(b)(1)\1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that on January 29, 2010, NYSE Amex LLC (the ``Exchange'' or
``NYSE Amex'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    NYSE Amex proposes to amend NYSE Amex Rule 1600 et seq., to provide
that the issuers of Trust Units listed thereunder may invest directly
in commodities and commodity derivatives rather than solely in the
assets of a trust, partnership, limited liability company, corporation
or other similar entity constituted as a commodity pool that holds such
investments. Other minor changes are also made to conform to changes
made to other NYSE Amex rules. Pursuant to these rules, the Exchange
proposes to list and trade shares of the Nuveen Diversified Commodity
Fund. The text of the proposed rule change is available at the
Exchange, the Commission's Public Reference Room, and http://
www.nyse.com.

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
    NYSE Amex previously adopted Rule 1600 et seq. to permit the
listing of Trust Units, which are defined as securities that are issued
by a trust or other similar entity that invests in the assets of a
trust, partnership, limited liability company, corporation or other
similar entity constituted as a commodity pool that holds investments
comprising or otherwise based on any combination of futures contracts,
options on futures contracts, forward contracts, swap contracts and/or
commodities.\4\ Rule 1600 was adopted in contemplation of the listing
of shares of the Nuveen Commodities Income and Growth Fund (the
``Fund''), a fund sponsored by Nuveen Investments, Inc. (``Nuveen'')
and the investment plan of the Fund was described in detail in the
Exchange's Form 19b-4 and the Commission's Notice.\5\ Nuveen now
proposes to go forward with a listing of shares (the ``Shares'') of the
Fund under a new name, the Nuveen Diversified Commodity Fund, and with
a somewhat modified investment plan, which is described below under
``Nuveen Diversified Commodity Fund.'' The Shares will conform to the
initial and continued listing criteria under Rule 1602. The initial
public offering and sale of the Shares will be registered under the
Securities Act of 1933.
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No. 56880 (December 3,
2007), 72 FR 69259 (December 3 [sic], 2007).
    \5\ See Securities Exchange Act Release No. 56465 (September 19,
2007), 72 FR 54489 (September 25, 2007).
---------------------------------------------------------------------------

    In order to use income tax reporting procedures more familiar to
investors in investment trusts, it was originally contemplated that the
Fund would have a ``master/feeder'' structure in which the Fund would
hold no assets directly except the equity of a separate investment
vehicle, which would serve as the conduit through which the Fund would
make its investments. However, due to a change in the interpretation of
applicable tax law by the Internal Revenue Service, the originally
expected trust reporting procedures would no longer be available under
a master/feeder structure. In light of this interpretative change,
Nuveen proposes to modify its approach and have the listed Fund make
its own direct investments. Rule 1600 as currently in effect permits
only the listing of Trust Units whose issuers utilize the master/feeder
structure originally intended to be used for the Fund. The rule was
drafted in this way simply because it accommodated the security
proposed to be listed at that time and was not designed to provide any
protections to investors, but merely facilitated the now-unavailable
trust-based tax reporting procedures. Consequently, the Exchange
proposes to amend the definition of Trust Units in Rule 1600 to remove
the master/feeder structure requirement and permit the listing of Trust
Units where the issuer is constituted as a commodity pool which invests
directly in commodities and commodity derivatives. The Exchange
believes that this amendment does not in any way increase the risk to
investors of investing in the Trust Units or give rise to any new
regulatory concerns. Nuveen has represented to the Exchange that there
are no material revisions to the Fund's structure or investment
approach other than those described in this filing and the Exchange
believes that these revisions do not give rise to any new regulatory
issues or raise significant new investor protection concerns.
    Nuveen Diversified Commodity Fund
    The Fund was formed as a Delaware statutory trust on December 7,
2005 pursuant to a Declaration of Trust signed by Wilmington Trust
Company, as the Delaware Trustee.\6\ The Fund's primary investment
objective is to seek total return through broad exposure to the
commodities markets. The Fund's secondary objective is to provide
investors with monthly income and capital distributions not commonly
associated with commodity investments. The Fund will invest in
commodity futures and forward contracts, options on commodity futures
and forward contracts and over-the-counter (``OTC'') commodity options
in the following commodity groups: energy, industrial metals, precious
metals, livestock, agriculturals, and tropical foods and fibers and may
in the future include other commodity investments that become the
subject of commodity futures trading.\7\
---------------------------------------------------------------------------

    \6\ The Fund, as a commodity pool, will not be subject to
registration and regulation under the Investment Company Act of 1940
(the ``1940 Act'').
    \7\ Following is a list of futures contracts and other commodity
interests in which the Fund intends to invest, and the exchanges on
which they trade, based on systematic calculations of global
commodity production and U.S. dollar volume traded: Lumber, Milk,
Feeder Cattle, Lean Hogs, Live Cattle, Pork Bellies--Chicago
Mercantile Exchange (``CME''); Cocoa, Arabica Coffee, Cotton, Orange
Juice, Sugar--New York Board of Trade (``NYBOT''); Gold, Silver,
Copper--Commodity Exchange (``COMEX'') which is a division of the
New York Mercantile Exchange (``NYMEX''); Palladium, Platinum, WTI
Crude Oil, Heating Oil, Natural Gas, Gasoline--NYMEX; Aluminum,
Copper, Lead, Nickel, Tin, Zinc--London Metals Exchange (``LME'');
Bean Oil, Corn, Oats, Soy Meal, Soybeans, Wheat--Chicago Board of
Trade (``CBOT''); Brent Crude Oil, Gas Oil-- InterContinental
Exchange (``ICE''); Robustta Coffee-- London International Financial
Futures Exchange (``LIFFE''); Wheat-- Kansas City Board of Trade
(``KCBOT'').
---------------------------------------------------------------------------

    The Fund is a commodity pool. The Fund is managed by Nuveen
Commodities Asset Management, LLC (the ``Manager''). The Manager is
registered as a commodity pool operator (the ``CPO'') and a commodity
trading advisor (the ``CTA'') with the Commodity Futures Trading
Commission (``CFTC'') and is a member of the National Futures
Association (``NFA'').
    The Manager will serve as the CPO and a CTA of the Fund. The
Manager will determine the Fund's overall investment strategy,
including: (i) The selection and ongoing monitoring of the Fund's sub-
advisors; (ii) the management of the Fund's business affairs; and (iii)
the provision of certain clerical, bookkeeping and other administrative
services. Gresham Investment Management LLC (the ``Commodity Sub-
Advisor'') will invest on a notional basis substantially all of the
Fund's assets in commodity futures and forward contracts pursuant to
the commodity investment strategy (its proprietary Tangible Asset
Program[reg] (``TAP[reg]'') \8\ and a risk management program. The
Commodity Sub-Advisor is a Delaware limited liability company and is
registered with the CFTC as a

CTA and a CPO and is a member of the NFA. The Commodity Sub-Advisor is
also registered with the Commission as an investment adviser. Nuveen
Asset Management (the ``Collateral Sub-Advisor''), an affiliate of the
Manager, will invest the Fund's collateral in short-term, investment
grade quality debt instruments. The Collateral Sub-Advisor is
registered with the Commission as an investment adviser.
---------------------------------------------------------------------------

    \8\ The Fund does not intend to utilize leverage. However, the
Fund may borrow for temporary or emergency purposes in an amount up
to 5% of the value of the Fund's net assets should the need arise.
Such short term borrowings would mature in less than 60 days from
the date of borrowing. In order to facilitate any such borrowing,
the Fund intends to establish a standby credit facility with State
Street Bank and Trust Company that will be entered into as of the
closing of the offering of its common shares. Any temporary or
emergency borrowings would be used to provide the Fund with added
potential flexibility in managing short-term portfolio liquidity
needs and managing the payment of distributions.
---------------------------------------------------------------------------

Investment Description
    The Fund's investment objective is to generate attractive risk-
adjusted total returns as compared to investments in commodity indexes.
    The Fund intends to pursue its investment objective by utilizing:
(a) An actively managed rules-based commodity investment strategy,
whereby the Fund will invest in a diversified basket of commodity
futures and forward contracts with an aggregate notional value
substantially equal to the net assets of the Fund; and (b) a risk
management program designed to moderate the overall risk and return
characteristics of the Fund's commodity investments. In pursuing the
risk management program, the Fund will write (sell) ``out-of-the-
money'' commodity call options to obtain option premium cash flow, on
individual futures and forward contracts, on baskets of commodities or
on broad based commodity indices. The Fund may also purchase ``out-of-
the-money'' commodity put options for protection against significant
asset value declines on an opportunistic basis. Initially, the Fund
does not expect to purchase commodity put options.
    The Fund will typically: (i) Invest in commodity futures and
forward contracts that are traded either on U.S. or non-U.S. commodity
futures exchanges; and (ii) sell call options on commodity futures and
forward contracts that are traded either on U.S. or non-U.S. exchanges.
The Fund may also purchase put options on commodity futures and forward
contracts that are traded either on U.S. or non-U.S. exchanges or may
purchase OTC commodity put options through dealers pursuant to
negotiated, bi-lateral arrangements. The Fund also may invest in other
commodity contracts that are presently, or may hereafter become, the
subject of commodity futures trading. Except for certain limitations
described below, there are no restrictions or limitations on the
specific commodity investments in which the Fund may invest.
    Commodity Investment Strategy (TAP[reg]). The Commodity Sub-Advisor
will invest on a notional basis substantially all of the Fund's assets
in commodity futures and forward contracts pursuant to the commodity
investment strategy TAP[reg], an actively managed, rules-based \9\
commodity investment strategy. TAP[reg] is fundamental in nature and is
designed to maintain consistent, fully collateralized exposure to
commodities as an asset class. TAP[reg] does not require the existence
of price trends in order to be successful.
---------------------------------------------------------------------------

    \9\ TAP[reg] currently requires investment in futures or forward
contracts for commodities in each of the energy, industrial metals,
livestock, agriculturals, tropical foods and fibers and precious
metal commodity groups. Commodity group weightings and individual
commodity weightings are chosen by a process that blends two-thirds
of five year global production value and one-third of five year
value of commodity futures contracts traded in dollars. The process
constrains the weightings of each commodity group such that no group
may constitute more than 35% of TAP[reg] and no single commodity
interest can constitute more than 70% of its group. In addition,
each commodity is rebalanced periodically to its target weighting if
its actual weighting deviates from its target substantially
(currently, by more than 10%).
---------------------------------------------------------------------------

    Risk Management Program. Pursuant to the risk management program,
the Fund will write (or sell) commodity call options that may be up to
20% ``out-of-the-money'' \10\ on a continual basis on up to
approximately 50% of the notional value of each of its commodity
futures and forward contract positions that have sufficient option
trading volume and liquidity. The Commodity Sub-Advisor will write call
options on individual futures and forward contracts held by the Fund,
on baskets of commodities or on broad based commodity indices. As the
writer of call options for which a premium is received, the Fund will
forego the right to any appreciation in the value of each commodity
futures or forward contract in its portfolio that effectively underlies
a call option to the extent the value of the commodity futures or
forward contract exceeds the exercise price of such option on or before
the expiration date.
---------------------------------------------------------------------------

    \10\ A call option is ``out-of-the-money'' when the strike price
is above the current trading price of the underlying commodity. A
put option is ``out-of-the-money'' when the strike price is below
the current trading price of the underlying commodity.
---------------------------------------------------------------------------

    Initially, the Fund does not expect to purchase commodity put
options. In order to seek protection against significant asset value
declines, the Fund may from time to time purchase ``out-of-the-money''
put options on broad-based commodity indices such as the DJ-UBS
Commodity Index[reg] (``DJ-UBS''), the S&P GSCI Commodity Index
(``GSCI''), or on certain custom indices, whose prices are expected to
closely correspond to a substantial portion of the long commodity
futures and forward contracts held by the Fund. The Fund also may
purchase put options on baskets of commodities and on individual
futures and forward contracts held by it. On an absolute basis, the
Fund does not expect that the cost to purchase put options at any one
time will exceed 5% of the value of the Fund's net assets.
    Debt Instruments Used as Collateral. The Fund's investments in
commodity futures and forward contracts, and options on commodity
futures and forward contracts, generally will not require significant
outlays of principal. To support its commodity investments, the Fund
anticipates that it will maintain significant collateral that will be
invested in short-term debt instruments with maturities of up to two
years that, at the time of investment, are investment grade quality,
including obligations issued or guaranteed by the U.S. government or
its agencies and instrumentalities, as well as corporate obligations
and asset-backed securities. Although earning interest income, the
collateral is subject on a continual basis to additional margin calls
by the commodity broker and to additional deposits in the commodity
account if the levels of notional trading change.
Commodity Futures and Forward Contracts and Related Options
    The prices of the commodity futures and forward contracts, options
on commodity futures and forward contracts, and OTC commodity options
are volatile with fluctuations expected to affect the value of the
Shares. Commodity futures and forward contracts and options on
commodity futures and forward contracts to be held by the Fund will be
traded on U.S. and/or non-U.S. exchanges. The commodity futures and
forward contracts to be entered into by the Fund are listed and traded
on organized and regulated exchanges based on the various commodities
in the groups described above.\11\ Forward contracts are contracts for
the purchase and sale of a commodity for delivery on or before a future
date or during a specified period at a specified price. Futures
contracts are essentially forward contracts that are traded on
exchanges. Options on commodity futures and forward contracts are
contracts giving the purchaser the right, as opposed to the obligation,
to acquire or to dispose of the commodity futures or forward contract
underlying the option on or before a future date at a specified price.
The Fund may purchase OTC commodity put options through dealers

pursuant to negotiated, bi-lateral arrangements.
---------------------------------------------------------------------------

    \11\ See supra note 7.
---------------------------------------------------------------------------

    The potential futures contracts are traded on U.S. and non-U.S.
exchanges, including the CBOT, the CME, the ICE, the LIFFE, the LME,
the NYMEX, the COMEX, the NYBOT and the KCBOT.
    The Manager will assess or review, as appropriate, the
creditworthiness of each potential or existing, as appropriate,
counterparty to an OTC contract pursuant to guidelines approved by the
Manager's board of directors. Furthermore, the Manager, on behalf of
the Fund, will only enter into OTC contracts with: (a) Members of the
Federal Reserve System or foreign banks with branches regulated by the
Federal Reserve Board; (b) primary dealers in U.S. government
securities; (c) broker-dealers; (d) futures commission merchants; or
(e) affiliates of the foregoing.
Structure of the Fund
    Fund. The Fund is a statutory trust formed pursuant to the Delaware
Statutory Trust Act and will issue shares that represent units of
fractional undivided beneficial interest in and ownership of the Fund.
    Trustee. Wilmington Trust Company is the Delaware Trustee of the
Fund. The Delaware Trustee is unaffiliated with the Manager.
    Individual Trustees. The individual trustees of the Fund, all of
whom will be unaffiliated with the Manager, will fulfill those
functions required under the NYSE Amex listing standards and certain
other functions as set forth in the Fund's Trust Agreement.
    Manager. The Manager is a Delaware limited liability company that
is registered with the CFTC as a CPO and a CTA and is a wholly-owned
subsidiary of Nuveen Investments, Inc. The Manager will serve as the
CPO and a CTA of the Fund and through the Commodity Sub-Advisor will be
responsible for determining the Fund's overall investment strategy and
its implementation. It is anticipated that the individual trustees,
pursuant to the Fund's Trust Agreement, will delegate all authority
(other than the individual trustees' limited requirements to serve on
the Fund's Audit Committee and Nominating Committee) to the Manager to
operate the business of the Fund and to be responsible for the conduct
of the Fund's commodity affairs. As a registered CPO and CTA, the
Manager is required to comply with various regulatory requirements
under the CEA and the rules and regulations of the CFTC and the NFA.
    Commodity Sub-Advisor. The Commodity Sub-Advisor is a Delaware
limited liability company that is registered with the CFTC as a CTA and
a CPO and is a member of the NFA. As a registered CPO and CTA, the
Commodity Sub-Advisor is required to comply with various regulatory
requirements under the CEA and the rules and regulations of the CFTC
and the NFA. The Commodity Sub-Advisor is also registered with the SEC
as an investment adviser.
    Collateral Sub-Advisor. The Collateral Sub-Advisor is an affiliate
of the Manager and a wholly owned subsidiary of Nuveen Investments,
Inc. The Collateral Sub-Advisor is registered with the Commission as an
investment adviser.
    Custodian, Transfer Agent and Registrar. State Street Bank and
Trust Company (``State Street'') will be the Custodian and Accounting
Agent for the assets of the Fund and its affiliate, Computershare
Shareholder Services, Inc. will be the Transfer Agent and Registrar for
the Shares of the Fund.
    Commodity Broker. Newedge USA, LLC (``Newedge'') will act as the
commodity broker for the Fund and will clear transactions that may be
executed by it or other brokerage firms on a ``give-up'' basis. Newedge
is registered as a futures commission merchant and a CPO and is a
member of the NFA. Newedge also is registered with the Commission as a
broker-dealer.
    The Exchange notes that each of the Manager, the Commodity Broker,
and the Commodity Sub-Advisor have represented to the Exchange that
they each have erected and maintain firewalls within their respective
institutions to prevent the flow of non-public information regarding
the portfolio of underlying securities from the personnel involved in
the development and implementation of the investment strategy to others
such as sales and trading personnel.
Product Description
    The Shares represent units of fractional undivided beneficial
interest in and ownership of the Fund. Following the original issuance,
the Shares will be traded on the Exchange similar to other equity
securities.
    Commencing with the Fund's first distribution, the Fund intends to
make regular monthly distributions to its shareholders (stated in terms
of a fixed cents per share distribution rate) based on past and
projected performance of the Fund.\12\ The Fund's monthly distributions
are sometimes referred to as ``managed distributions.'' The Fund will
seek to establish a distribution rate that roughly corresponds to the
Manager's projections of the total return that could reasonably be
expected to be generated by the Fund over an extended period of time,
although the distribution rate will not be solely dependent on the
amount of income earned or capital gains realized by the Fund. The
Fund's ability to make regular monthly distributions will depend on a
number of factors, including, most importantly, the long-term total
returns generated by the Fund's portfolio investments and the risk
management program.
---------------------------------------------------------------------------

    \12\ The Fund's actual financial performance will vary so that
the distribution rate may exceed the Fund's actual total returns.
The Fund does not anticipate borrowing to obtain the cash necessary
to make its distributions; however, in the event that the Fund's
distribution rate exceeds its actual returns, the Fund may be
required to liquidate investments in order to make such a
distribution. To the extent that the Fund's total return exceeds the
distribution rate for an extended period of time, the Fund may
increase the distribution rate or distribute supplemental amounts to
shareholders. Conversely, if the Fund's total return is less than
the distribution rate for an extended period of time, the Fund will
be drawing upon its net assets to meet the distribution payments.
---------------------------------------------------------------------------

    As portfolio and market conditions change, the Fund's rate of
distributions and the Fund's distribution policies could change.\13\
---------------------------------------------------------------------------

    \13\ In connection with any change in distribution policies, the
Fund will provide written advance notice to investors.
---------------------------------------------------------------------------

    State Street will calculate the net asset value (``NAV'') of the
Fund's Shares shortly after 4:00 p.m. Eastern Time (``ET'') on each
trading day.\14\
---------------------------------------------------------------------------

    \14\ NAV per Share will be computed by dividing the value of all
assets of the Fund (including any accrued interest and dividends),
less all liabilities (including accrued expenses and distributions
declared but unpaid), by the total number of Shares outstanding.
Under the Fund's current operational procedures, the Fund's net
asset value will be calculated after close of the Exchange each day.
The values of the Fund's exchange-traded futures and forward
contracts and options on futures and forward contracts will be
valued at the settlement price determined by the principal exchange
through which they are traded. Market quotes for the Fund's
exchange-traded futures and forward contracts and options on futures
and forward contracts may not be readily available if a contract
cannot be liquidated due to the operation of daily limits or, due to
extraordinary circumstances, the exchanges or markets on which the
investments are traded do not open for trading the entire day and no
other market prices are available. In addition, events may occur
after the close of the relevant market, but prior to the
determination of the Fund's net asset value, that materially affect
the values of the Fund's investments. In such circumstances, the
Fund will use an independent pricing service to value such
investments. The Commodity Sub-Advisor will review the values as
determined by the independent pricing service and discuss those
valuations with the pricing service if appropriate based on
guidelines established by the Manager that it believes are
consistent with industry standards. The values of the Fund's OTC
derivatives will be valued by the Commodity Sub-Advisor by taking
either the arithmetic mean of prices obtained by several dealers,
the prices as determined by the average of two (2) or more
independent means or the prices as reported by an independent
pricing service. In the event the Commodity Sub-Advisor uses an
independent pricing service to value any of its commodity futures
and forward contracts, options on futures and forward contracts and
OTC derivatives, the pricing service typically will value such
commodity futures and forward contracts, options on futures and
forward contracts and OTC derivatives using a wide range of market
data and other information and analysis, including reference to
transactions in other comparable investments if available. The
procedures of any independent pricing service provider will be
reviewed by the Manager on a periodic basis.

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

    The normal trading hours for those investments of the Fund traded
on the various commodity exchanges may differ from the normal trading
hours of the Exchange, which are from 9:30 a.m. to 4 p.m. ET.
Therefore, there may be time periods during the trading day where the
Shares will be trading on the Exchange, but the futures contracts on
various commodity exchanges will not be trading. The value of the
Shares may accordingly be influenced by the non-concurrent trading
hours between the Exchange and the various futures exchanges on which
the futures contracts based on the underlying commodities are traded.
    The trading prices of the Fund's Shares listed on the Exchange may
differ from the NAV and can be affected not only by movements in the
NAV, but by market forces of supply and demand, economic conditions and
other factors as well. Accordingly, the trading prices of the Shares
should not be viewed as a real-time update of the NAV.
    Shares will be registered in book entry form through DTC. Trading
in the Shares on the Exchange will be effected until 4 p.m. ET each
business day. The minimum trading increment for such shares will be
$.01.
Underlying Commodity Interests Information
    The daily settlement prices for the commodity futures and forward
contracts held by the Fund are publicly available on the Web sites of
the futures and forward exchanges trading the particular contracts.
Various data vendors and news publications publish futures prices and
data. The Exchange represents that futures, forwards and related
exchange traded options quotes and last sale information for the
commodity contracts are widely disseminated through a variety of market
data vendors worldwide, including Bloomberg and Reuters. In addition,
the Exchange further represents that complete real-time data for such
futures, forwards and exchange traded options is available by
subscription from Reuters and Bloomberg. The relevant futures and
forward exchanges also provide delayed futures and forward contract
information on current and past trading sessions and market news free
of charge on their respective Web sites. The contract specifications
for the futures and forward contracts are also available from the
futures and forward exchanges on their Web sites as well as other
financial informational sources. Information related to OTC commodity
options is disclosed by the Fund on a monthly basis as discussed below.
Availability of Information Regarding the Shares
    The Web site for the Fund and the Manager, http://www.nuveen.com,
which will be publicly accessible at no charge, will contain the
following information: (a) The prior business day's NAV and the
reported closing price; (b) calculation of the premium or discount of
such price against such NAV; and (c) other applicable quantitative
information. The Fund's prospectus also will be available on the Fund's
Web site.
    The Fund's total portfolio holdings will also be disclosed and
updated on its Web site on each business day that the Exchange is open
for trading.\15\ This Web site disclosure of portfolio holdings (as of
the previous day's close) will be made daily and will include, as
applicable: (a) The name and value of each commodity investment; (b)
the value of over-the-counter commodity put options, if any, and the
value of the collateral as represented by cash; (c) cash equivalents;
and (d) debt securities held in the Fund's portfolio. The values of the
Fund's portfolio holdings will, in each case, be determined in
accordance with the Fund's valuation policies.
---------------------------------------------------------------------------

    \15\ The total portfolio holdings will be disseminated to all
market participants at the same time.
---------------------------------------------------------------------------

    As described above, the NAV for the Fund will be calculated and
disseminated daily. The Manager has represented to the Exchange that
the NAV will be disseminated to all market participants at the same
time. The Exchange will also make available on its Web site daily
trading volume, closing prices, and the NAV. The closing price and
settlement prices of the futures contracts held by the Fund are also
readily available from the relevant futures exchanges, automated
quotation systems, published or other public sources, or on-line
information services such as Bloomberg or Reuters. In addition, the
Exchange will provide a hyperlink on its Web site at http://
www.nyse.com to the Manager's Web site.
    As noted above, State Street will calculate the NAV of the Fund
once each trading day shortly after 4 p.m. ET. The NAV will be
disclosed on the Fund's Web site and the Exchange's Web site.
Termination Events
    The Fund will dissolve in certain prescribed circumstances. Upon
termination of the Fund, shareholders will surrender their shares and
receive in cash their portion of the value of the Fund.
Criteria for Initial and Continued Listing
    The Fund will be subject to the criteria in Rule 1602 for initial
and continued listing of the Shares. A minimum of 2,000,000 shares will
be required to be publicly distributed at the start of trading. It is
anticipated that the initial price of a share will be approximately
$25. The Fund will accept subscriptions for a minimum of 100 shares
during the initial offering which is expected to last no more than 60
days. After the completion of the initial offering, shares can be
bought and sold throughout the trading day like any other publicly-
traded security. The Exchange believes that the anticipated minimum
number of shares outstanding at the start of trading is sufficient to
provide adequate market liquidity and to further the Fund's objectives.
    The Fund has represented to the Exchange that, for initial and
continued listing of the Shares, it will be in compliance with Section
803 of the NYSE Amex Company Guide (Independent Directors and Audit
Committee) and Rule 10A-3 under the Act.
Original and Annual Listing Fees
    The NYSE Amex original listing fee applicable to the listing of the
Fund is $5,000. In addition, the annual listing fee applicable under
Section 141 of the NYSE Amex Company Guide will be based upon the year-
end aggregate number of shares in all series of the Fund outstanding at
the end of each calendar year.
Trading Rules
    The Shares are equity securities subject to NYSE Amex Rules
governing the trading of equity securities, including, among others,
rules governing priority, parity and precedence of orders, DMM
responsibilities and account opening and customer suitability (Rule
405--NYSE Amex Equities). Initial equity margin requirements of 50%
will apply to transactions in the Shares. Shares will trade on the
Exchange until 4 p.m. ET each business day and will trade in the
minimum price variants established

under Rule 62--NYSE Amex Equities. Trading rules pertaining to odd-lot
trading in NYSE Amex equities (Rule 124--NYSE Amex Equities) will also
apply.
    The Exchange states that Rule 15A--NYSE Amex Equities complies with
Rule 611 of Regulation NMS, which requires among other things, that the
Exchange adopt and enforce written policies and procedures that are
reasonably designed to prevent trade-throughs of protected quotations.
The trading of the Shares will be subject to certain conflict of
interest provisions set forth in NYSE Amex Equities Rules 1603 and
1604.
    NYSE Amex Equities Rule 1603 provides that, if a DMM unit is
operating under Rule 98 (Former)--NYSE Amex Equities, Rule 105(b)
(Former)--NYSE Amex Equities and section (m) of the Guidelines
thereunder shall be deemed to prohibit a DMM, his or her member
organization, other member, or approved person of such member
organization or employee or officer thereof from acting as a market
maker or functioning in any capacity involving market-marking
responsibilities in an underlying asset or commodity, related futures
or options on futures, or any related derivative. If an approved person
of a DMM unit is entitled to an exemption from Rule 105(b) (Former)
under Rule 98 (Former), such approved person may act in a market making
capacity, other than as a specialist in Trust Units on another market
center, in the underlying asset or commodity, related futures or
options on futures, or any other related derivatives. NYSE Amex
Equities Rule 1603 provides that, if a DMM unit is operating under Rule
98--NYSE Amex Equities, Rule 105(b)--NYSE Amex Equities and section (m)
of the Guidelines thereunder shall be deemed to prohibit the DMM unit
or officer or employee thereof from acting as a market maker or
functioning in any capacity involving market-marking responsibilities
in an underlying asset or commodity, related futures or options on
futures, or any other related derivatives.
    Under the proposed amendments, NYSE Amex Rule 1604 will provide
that DMMshandling [sic] the Shares must maintain in a readily
accessible place and provide to the Exchange upon request, and keep
current a list identifying all accounts for trading the underlying
physical assets or commodities, related futures or options on futures,
or any other related derivatives, which the DMM may have or over which
it may exercise investment discretion.
Suitability
    The Information Circular (described below) will inform members and
member organizations of the characteristics of the Fund and of
applicable Exchange rules, as well as of the requirements of Rule 405--
NYSE Amex Equities (Diligence as to Accounts).
    The Exchange notes that, pursuant to Rule 405--NYSE Amex Equities,
member organizations are required in connection with recommending
transactions in the Shares to have a reasonable basis to believe that a
customer is suitable for the particular investment given reasonable
inquiry concerning the customer's investment objectives, financial
situation, needs, and any other information known by such member.
Information Circular
    The Exchange will distribute an Information Circular to its members
in connection with the trading of the Shares. The Circular will discuss
the special characteristics and risks of trading this type of security.
Specifically, the Circular, among other things, will discuss what the
Shares are, the requirement that members and member firms deliver a
prospectus to investors purchasing the Shares prior to or concurrently
with the confirmation of a transaction during the initial public
offering, applicable NYSE Amex rules, and trading information and
applicable suitability rules. The Circular will also explain that the
Fund is subject to various fees and expenses described in the
Registration Statement. The Circular will also reference the fact that
there is no regulated source of last sale information regarding
physical commodities and note the respective jurisdictions of the SEC
and CFTC. The Circular will also note that the forward contracts are
traded on the LME, which is subject to regulation by the Securities and
Investment Board in the United Kingdom and the Financial Services
Authority. In addition, the Circular will indicate that OTC instruments
or products may effectively be unregulated.
    The Circular will advise members of their suitability obligations
with respect to recommended transactions to customers in the Shares.
The Circular will also discuss any relief, if granted, by the
Commission or the staff from any rules under the Act.
    The Circular will disclose that the NAV for shares will be
calculated shortly after 4:00 p.m. ET each trading day.
Surveillance
    The Exchange represents that its surveillance procedures are
adequate to properly monitor the trading of the Shares and to deter and
detect violations of Exchange rules and applicable Federal securities
laws.\16\ NYSE Amex will rely on its existing surveillance procedures.
The Exchange currently has in place Information Sharing Agreements with
ICE FUTURES, LME, NYMEX, and KCBOT for the purpose of providing
information in connection with trading in or related to futures
contracts traded on their respective exchanges. The Exchange also notes
that the CBOT, CME, LIFFE and NYBOT are members of the Intermarket
Surveillance Group (``ISG''). As a result, the Exchange asserts that
market surveillance information is available from the CBOT, CME, NYBOT
and LIFFE through ISG, if necessary, due to regulatory concerns that
may arise in connection with the futures contracts.
---------------------------------------------------------------------------

    \16\ See e-mail from John Carey, Chief Counsel--U.S. Equities,
Exchange, to Geoffrey Pemble and Michou Nguyen, Special Counsels,
Commission, dated February 23, 2010.
---------------------------------------------------------------------------

Conforming Changes and Updating Amendments
    Since the original adoption of Rule 1600 et seq., the Exchange has
adopted a completely new set of rules governing both equity and options
trading on the Exchange. Consequently, a number of references to
Exchange rules in Rule 1600 et seq. are no longer correct and have been
appropriately modified. References to equity specialists have been
modifiedto refer to ``designated market makers'' (``DMMs''), which is
the designation used throughout the amended NYSE Amex equity trading
rules. A typographical error in Rule 1602 is also corrected in this
filing.
    Commentary .03 to Rule 1600 provides that member organizations
shall not enter limit orders into the Exchange's order routing system
as agent (i.e. for customer agency orders) in the same trust, for the
account or accounts of the same or related beneficial owner, in such a
manner that the beneficial owner(s) effectively is operating as a
market maker by holding itself out as willing to buy and sell such
Trust Units on a regular or continuous basis. The Amex adopted
provisions of this kind because the ability of non-members to function
effectively as market makers gave those non-members an advantage over
the specialist who was required to yield priority to their orders. That
advantage no longer exists under current NYSE Amex rules, as all

market participants (including the DMM) trade on parity unless they
establish priority under Exchange rules, which can be done by all
market participants including the DMM. As such Commentary .03 to rule
1600 no longer serves any purpose and the Exchange proposes to delete
it.
    As originally adopted, Rule 1603 provided that NYSE Amex Rule
175(c) was deemed to prohibit an equity specialist, his member
organization, or any other member, limited partner, officer, or
approved person thereof from acting as a market maker or functioning in
any capacity involving market-making responsibilities in an underlying
asset or commodity, related futures or options on futures, or any other
related derivatives, unless the Exchange granted an exemption under
Rule 193. Rule 1603 as amended provides that, if a DMM unit is
operating under Rule 98 (Former)--NYSE Amex Equities, Rule 105(b)
(Former)--NYSE Amex Equities and section (m) of the Guidelines
thereunder shall be deemed to prohibit a DMM, his or her member
organization, other member, or approved person of such member
organization or employee or officer thereof from acting as a market
maker or functioning in any capacity involving market-marking
responsibilities in an underlying asset or commodity, related futures
or options on futures, or any related derivative. If an approved person
of a DMM unit is entitled to an exemption from Rule 105(b) (former)
under Rule 98 (former), such approved person may act in a market making
capacity, other than as a specialist in Trust Units on another market
center, in the underlying asset or commodity, related futures or
options on futures, or any other related derivatives.
    As originally adopted, Commentary .01 to Rule 1603 provided that
trading in the Shares was generally subject to the Exchange's
Stabilization rule, except that specialists would be permitted to buy
on ``plus ticks'' and sell on ``minus ticks,'' in order to bring the
Shares into parity with the underlying commodity or commodities and/or
futures contract price. The Exchange's new stabilization rule (Rule
104--NYSE Amex Equities) does not contain the same prohibitions on
buying on ``plus ticks'' and selling on ``minus ticks'' as was formerly
the case under Rule 170--AIMI. Consequently, the Exchange proposes to
delete Commentary .01 to Rule 1603, as it is no longer relevant.
    Rule 1604(a) as originally adopted, provided that the member
organization acting as specialist in Trust Units was obligated to
conduct all trading in the Trust Units in its specialist account,
subject only to the ability to have one or more investment accounts,
all of which must be reported to the Exchange (See Rule 170--AEMI). The
Exchange proposes to delete this requirement, as DMMs are now governed
by Rule 104--NYSE Amex Equities, which does not limit the DMM's use of
investment accounts to trade its assigned securities or require the DMM
to report activity in such accounts to the Exchange.\17\ Rule 1604(a)
also provides that the member organization acting as DMM in the Shares
must file with the Exchange, in a manner prescribed by the Exchange,
and keep current a list identifying all accounts for trading the
underlying physical asset or commodity, related futures or options on
futures, or any other related derivatives, which the member
organization acting as DMM may have or over which it may exercise
investment discretion. The Exchange proposes to amend this requirement
to provide that, rather than filing the list with the Exchange, the DMM
must maintain it in a readily accessible place and provide it to the
Exchange upon request. The Exchange believes that this is sufficient
for its regulatory needs, as it will only review the list when as
specific regulatory need arises, so it is sufficient to have the list
readily available upon request.
---------------------------------------------------------------------------

    \17\ The Exchange notes that Rule 104--NYSE Amex Equities in its
current form has been approved by the SEC on a pilot program basis.
In the event that the pilot program is not made permanent or is
amended, DMMs may at that time become subject to limitations on
their ability to trade Trust Units in investment accounts.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent
with Section 6(b) \18\ of the Act in general, and furthers the
objectives of Section 6(b)(5) of the Act \19\ in particular in that it
is designed to promote just and equitable principles of trade, to
foster cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, to remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general, to protect investors and the public interest.
The proposed rule change is designed to protect investors and the
public interest because it will impose appropriate restrictions on the
listing and trading of Trust Units.
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78f(b).
    \19\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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

    The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.

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

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

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

    Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the Exchange consents, the Commission will:
    (A) By order approve such 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 e-mail to<EMAIL_ADDRESS>Please include
File Number SR-NYSEAmex-2010-09 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEAmex-2010-09. This
file number should be included on the subject line if e-mail 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,\20\ 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 a.m. and 3
p.m. Copies of the 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-NYSEAmex-2010-09 and should be submitted
on or before March 22, 2010.
---------------------------------------------------------------------------

    \20\ The text of the proposed rule change is available on the
Commission's Web site at http://www.sec.gov.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\

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

    \21\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary
[FR Doc. 2010-4136 Filed 2-26-10; 8:45 am]
BILLING CODE 8011-01-P


Comment Info: =================

General Comment:Dear Mr. Zeller:

I am to you as an individual consumer who has quit smoking in the last two months using an e-cigarette.  I wish to request an extension of the comment period for the Food and Drug Administration's ("FDA") Proposed Rule Deeming Tobacco Products to be Subject to the Federal Food, Drug, and Cosmetic Act, as amended by the Family Smoking and Prevention and Tobacco Control Act (the "Proposed Rule") published at 79 Fed. Reg. 23,142 and Federal Register No. 2014-09491. On behalf of myself, I am requesting that the comment period for the Proposed Rule be extended by the FDA for an additional 105 days, from its current 75-day period, to 180 days.

The Proposed Rule raises a number of significant issues and questions that are important and relevant to me as well as my doctor, as a consumer of products that are proposed for regulation under the Proposed Rule. The Proposed Rule asks about a hundred different questions I might want to respond to. I want to provide my thoughts and comments on many of these issues, but my time to devote to researching and providing thoughtful comments on these important questions is limited. I have already hours researching and dissecting these issues before I switched, but they take time. I know that the FDA took many years to even come up with the Proposed Rule, so I do not think it is at all unreasonable to allow the public a mere six months to comment on it. This is our only opportunity, as consumers and citizens with a right to our opinion on this product and our own health, to provide our feedback.

I feel very strongly about e-cigarettes as an alternative to combustible cigarettes. I have COPD and I can breathe freely again so I will wish to delve into this debate strongly. I wish to provide you with my personal story, as well as science- and evidence-based responses to your questions so that you can take my comment into account. I realize that the FDA has the authority under 21 CFR 10.40 to extend this time frame and that the FDA has exercised this authority on numerous occasions in the past. I would therefore ask that you do so here, so that all stakeholders have the opportunity to provide their comments on this proposed regulation.

I appreciate your consideration of my request and am happy to discuss this issue with you further. Sincerely, Alice R. White


Memorandum

To:		Patricia Mercer, EPA

From:		Maribelle Rodríguez and Earl Harris

Date:		September 21, 2007

Subject:	Results of Analysis 7 under Technical Directive 1 of Work
Assignment Base-25, Contract No. EP-W-07-003

The above referenced technical directive asks for a graph or chart that
shows specified information for R&D labs at commercial facilities and
Federal government research labs.  Based on conversations with you, ICF
agreed to attempt to gather information about:  (1) the number and types
of students at these sites (i.e., in paid and/or unpaid position) and
(2) how long these students normally work there.

	Following are the results and status of our research.

I.	R&D Labs at Commercial Facilities

	ICF contacted Tom White of PHRMA regarding EPA’s data needs.  Mr.
White had submitted a comment letter to EPA on the proposed Subpart K
rule.  On September 12, 2007, Mr. White agreed to collect information
from its member companies to address EPA’s data needs as best they
could.  On September 21, Mr. White told ICF that he was unable to
collect the requested information.  He indicated that additional time is
needed and suggested a date of October 12, 2007, to provide the data.

Please let us know if we should ask him to go ahead.

II.	Federal Government Research Labs

	ICF reached five Federal agencies by phone to request the desired
information.  Of these, only one (National Institutes of Health) was
able to provide reliable information in a timely manner.  Another agency
(i.e., Fort Detrick, U.S. Army) agreed to provide the information for
its specific location, but has not done so yet.  The remaining three
agencies were unable to provide reliable, if any, information and do not
believe centralized data are available on students working in their
labs.

If this assessment is accurate, the information would need to be
collected agency by agency in some cases.  In other cases, ICF may find
centralized information, as was the case for NASA and, presumably, the
Department of Energy.  EPA’s decision on whether to continue this data
collection depends, in part, on the amount of time available, as well as
the amount of data that it needs for analysis and decision-making.

	Following is a summary of ICF’s calls.

National Science Foundation (NSF). We spoke with Dr. Nirmala
Kannankutty, Senior Analyst of the NSF, about students in Federal labs.
Her Division of Science Resources Statistics is responsible for
compiling data on the Federal workforce.  She mentioned a survey that
her colleagues used to do annually on grad students working at Federal
labs.  She agreed to look into it and get back to us on it as well as
other ideas for getting the data desired.

She responded subsequently that she and her colleagues were unable to
provide any data.  They said that the particular data that EPA is
looking for is not available in any source that they are aware of.  The
difficulty is that EPA would like data on students specifically in
Federal labs.  She believes that data are not centralized within the
Federal government and would need to be collected on an agency-by-agency
basis, if it is available at all.

National Institutes of Health (NIH).  ICF contacted Scott Merkle and
Debbie Cohen of the NIH.  Ms. Cohen is in the NIH Office of Intramural
Training and Education, which provides coordination of student training
programs across all the NIH Institutes.  Ms. Cohen said that NIH
compiles centralized data on students.  She said that:

800 undergraduate students are employed during the summer.

500 doctoral students are employed on a 3-5 year basis.

3,500 post-doctoral students are employed on a 3-5 year basis.

NIH has 17,000 employees in total.

Based on this data, ICF estimates that students represent approximately
23 to 28 percent of NIH employees.  This is a rough approximation.

National Aeronautics and Space Administration (NASA).  ICF contacted
Mike McNeil, a NASA Environmental Engineer who commented on the proposed
rule.  Based on his past experience as a Safety and Environmental
Manager at Goddard Space Center, he estimated anecdotally that between
five and 10 percent of NASA employees are “transient” populations
from academia.  Their stay is normally a semester, but it could be
longer.  He is confident that NASA Headquarters does not collect
information on students in NASA labs.  ICF would need collect such
information on a location by location basis.

U.S. Army Medical Research Institute of Infectious Diseases at Fort
Detrick, Maryland.  ICF contacted this organization because it commented
on the proposed rule.  Its Human Resources department indicated that it
could provide information on students in its labs by September 20;
however, ICF has not heard back yet.  ICF will keep EPA informed if the
information is received.

Department of Veterans Affairs (VA), Office of Academic Affiliations.
The VA representative said that VA does not collect information on
students who work in their labs.

Office of Personnel Management, Student Educational Employment Program.
ICF left voicemails with this office; however our calls were not
returned.

  PAGE  2


[Federal Register: September 8, 2009 (Volume 74, Number 172)]
[Notices]
[Page 46280-46281]
[DOCID:fr08se09-146]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60598; File No. SR-ISE-2009-45]

Self-Regulatory Organizations; International Securities Exchange,
LLC; Order Approving a Proposed Rule Change, as Modified by Amendment
No. 1, Relating to Changes to Rule 312 in Connection With the Purchase
by International Securities Exchange Holdings, Inc. of Equity Interests
in Optifreeze, LLC

September 1, 2009.

I. Introduction

    On July 23, 2009, the International Securities Exchange, LLC
(``ISE'' or ``Exchange'') filed with the Securities and Exchange
Commission (``Commission'' or ``SEC'') a proposed rule change, pursuant
to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'')
\1\ and Rule 19b-4 thereunder,\2\ to amend ISE Rule 312 (Limitation on
Affiliation between the Exchange and Members) in connection with the
capital contribution by its parent company, International Securities
Exchange Holdings, Inc. (``ISE Holdings''), in Optifreeze LLC, a
Delaware Limited Liability Company (``Optifreeze''). The proposed rule
change was published for comment in the Federal Register on July 30,
2009.\3\ The Commission received no comments on the proposal. On August
28, 2009, ISE filed Amendment No. 1 to the proposed rule change.\4\
Because Amendment No. 1 is technical in nature, the Commission is not
publishing it for comment. This order approves the proposed rule
change, as modified by Amendment No. 1.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 60382 (July 24, 2009),
74 FR 38068 (``Notice'').
    \4\ In Amendment No. 1, the Exchange made technical corrections
to the filing. Specifically, in Amendment No. 1, ISE removed text
that is not relevant. As originally proposed, ISE Rule 312(c)(4)
would require the Exchange and Ballista Securities LLC to
``establish and maintain procedures and internal control reasonably
designed to ensure that Ballista Securities LLC and its affiliates
do not have access to nonpublic information relating to the Exchange
obtained as a result of ISE Holdings' ownership interest in Ballista
Securities LLC, until such information is available generally to
similarly situated members of the Exchange in connection with the
provision of inbound routing to the Exchange.'' Amendment No. 1
deletes the clause ``in connection with the provision of inbound
routing to the Exchange'' from proposed ISE Rule 312(c)(4) and from
the related discussion in the filing, as Ballista Securities'
services are not limited to inbound routing to the Exchange.
    In Amendment No. 1, ISE also clarified that the proposal is for
a one year pilot period.
---------------------------------------------------------------------------

II. Overview

    On June 5, 2009, ISE Holdings entered into a Membership Purchase
Agreement (``Purchase Agreement'') with Optifreeze. Ballista Securities
LLC (``Ballista Securities''), a wholly-owned subsidiary of Optifreeze,
is a member of the Exchange. Pursuant to the Purchase Agreement, ISE
Holdings contributed cash to the capital of Optifreeze in exchange for
membership interests representing 8.57% of the aggregate membership
interests in Optifreeze. As a result of the purchase, ISE Holdings
became a member of Optifreeze and is entitled to appoint one
representative to the Optifreeze Board of Directors, but does not have
any voting or other control arrangements with any other members of
Optifreeze relating to its investment in Optifreeze.
    In connection with the capital contribution by ISE Holdings in
Optifreeze, the Exchange proposes to amend ISE Rule 312 (Limitation on
Affiliation between the Exchange and Members) to allow for ISE
Holdings' ownership interest in Ballista Securities on a one year pilot
basis, and to set forth certain limitations and obligations regarding
that relationship. ISE Rule 312 provides, in part, that, without prior
Commission approval, the Exchange, or any entity with which the
Exchange is affiliated shall not, directly or indirectly, acquire or
maintain an ownership interest in a member or non-member owner. As a
result of the transaction, an affiliate of the Exchange, ISE Holdings,
maintains an indirect ownership interest in an ISE member, Ballista
Securities, which, without Commission approval, would violate ISE Rule
312.

III. Discussion and Commission Findings

    After careful consideration, the Commission finds that the proposed
rule change is consistent with the requirements of the Act and the
rules and regulations thereunder applicable to a national securities
exchange.\5\ In particular, the Commission finds that the proposed rule
change is consistent with Section 6(b)(5) of the Act,\6\ which
requires, among other things, that the rules of a national securities
exchange be designed to prevent fraudulent and manipulative acts and
practices; to promote just and equitable principles of trade; to foster
cooperation and coordination with persons engaged in regulating,
clearing, settling, and processing information with respect to, and
facilitating transactions in securities; to remove impediments to and
perfect the mechanism of a free and open market and a national market
system; and, in general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \5\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
    \6\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    In the past, the Commission has expressed concern that the
affiliation of an exchange, or an affiliate of the exchange, with one
of its members raises potential conflicts of interest and the potential
for unfair competitive advantage.\7\ The proposed relationship raises
similar concerns. ISE Rule 312 provides, in relevant part, that:
``Without prior SEC approval, the Exchange, or any facility of the
Exchange, or any entity with which the Exchange or any facility of the
Exchange is affiliated shall not, directly or indirectly through one or
more intermediaries, acquire or maintain an ownership interest in a
Member or non-member owner.'' As discussed above, the Exchange's
parent, ISE Holdings, now owns 8.57% of the aggregate membership
interests in Optifreeze, and thereby maintains an indirect ownership
interest in Ballista Securities, an Exchange member. Thus, because of
its affiliation with the Exchange, ISE Holdings' ownership interest in
Ballista would violate ISE Rule 312, absent Commission approval.
---------------------------------------------------------------------------

    \7\ See, e.g., Securities Exchange Act Release Nos. 54170 (July
18, 2006), 71 FR 42149 (July 25, 2006) (SR-NASDAQ-2006-006) (order
approving Nasdaq's proposal to adopt Nasdaq Rule 2140, restricting
affiliations between Nasdaq and its members); 53382 (February 27,
2006), 71 FR 11251 (March 6, 2006) (SR-NYSE-2005-77) (order
approving combination of NYSE and Archipelago Holdings, Inc.); 58673
(September 29, 2008), 73 FR 57707 (October 3, 2008) (SR-Amex-2008-
62) (order approving acquisition of the American Stock Exchange by
NYSE Euronext); 59135 (December 22, 2008), 73 FR 79954 (December 30,
2008) (SR-ISE-2009-85) (order approving the purchase by ISE Holdings
of an ownership interest in DirectEdge Holdings LLC); and 59281
(January 22, 2009), 74 FR 5014 (January 28, 2009) (SR-NYSE-2008-120)
(order approving a joint venture between NYSE and BIDS Holdings
L.P.).
---------------------------------------------------------------------------

    ISE has requested that the Commission approve the proposed
relationship described above on a temporary basis for a period of one
year, subject to certain limitations and conditions set forth in
proposed ISE Rule 312(c). Specifically, proposed ISE Rule 312(c)
provides that (1) so long as ISE Holdings, or another affiliate of the
Exchange, maintains an ownership interest in Ballista Securities; and
(2) Ballista Securities remains a member of ISE:
     FINRA, a self-regulatory organization unaffiliated with
the Exchange or any of its affiliates (a ``non-

affiliated SRO''), will carry out oversight and enforcement
responsibilities as the designated examining authority designated by
the Commission pursuant to Rule 17d-1 under the Act \8\ with the
responsibility for examining Ballista Securities for compliance with
applicable financial responsibility rules;
---------------------------------------------------------------------------

    \8\ 17 CFR 240.17d-1.
---------------------------------------------------------------------------

     The Exchange shall enter into a plan pursuant to Rule 17d-
2 under the Act \9\ with a non-affiliated SRO to relieve the Exchange
of regulatory responsibilities for Ballista Securities with respect to
rules that are common rules between the Exchange and the SRO; \10\
---------------------------------------------------------------------------

    \9\ 17 CFR 240.17d-2.
    \10\ Common rules are ISE rules that are substantially similar
to the rules of the non-affiliated SRO.
---------------------------------------------------------------------------

     With respect to unique ISE rules, ISE shall enter into a
regulatory services contract with a non-affiliated SRO to perform
certain regulatory responsibilities for Ballista Securities;
     The regulatory services contract with the non-affiliated
SRO shall require the Exchange to provide the non-affiliated SRO with
information, in an easily accessible manner, regarding all exception
reports, alerts, complaints, trading errors, cancellations,
investigations, and enforcement matters (collectively, ``exceptions'')
in which Ballista Securities is identified as a participant that has
potentially violated ISE or Commission rules, and shall require that
the non-affiliated SRO provide a report to the Exchange quantifying
exceptions on not less than a quarterly basis;
     ISE shall establish and maintain procedures and internal
controls reasonably designed to ensure that Ballista Securities and its
affiliates do not develop or implement changes to its systems on the
basis of nonpublic information obtained as a result of ISE Holdings'
ownership interest in Ballista Securities, until such information is
available generally to similarly situated members of the Exchange; and
     The ownership interest of ISE Holdings in Ballista
Securities is subject to the foregoing conditions and is approved on a
temporary basis, for a period not to exceed one year.
    Additionally, ISE Holdings currently owns less than a 9% equity
interest in Optifreeze and does not own a controlling interest in
Optifreeze or otherwise have any veto or other special voting rights
with respect to the management or operation of Optifreeze. The Exchange
has acknowledged that neither it, nor any of its affiliates, may
directly or indirectly increase its equity ownership in Optifreeze
without prior Commission approval.\11\
---------------------------------------------------------------------------

    \11\ See Notice, 74 FR at 38069.
---------------------------------------------------------------------------

    The Commission finds the proposed limitations and conditions of
Rule 312(c) to be consistent with the Act, particularly Section 6(b)(5)
thereunder.\12\ Although the Commission continues to be concerned about
potential unfair competition and conflicts of interest between an
exchange's self-regulatory obligations and its commercial interest when
the exchange, or one of its affiliates, holds an ownership interest in
a member, the proposed conditions appear reasonably designed to
mitigate concerns about potential conflicts of interest and unfair
competitive advantage. The Commission believes that the oversight of
Ballista Securities by a non-affiliated SRO,\13\ combined with the
requirement that ISE provide the non-affiliated SRO with information
regarding exceptions relating to Ballista Securities on not less than a
quarterly basis, promote robust and independent regulation of Ballista
Securities. ISE and Ballista Securities must also establish and
maintain procedures and internal controls that are reasonably designed
to prevent Ballista Securities and its affiliates from deriving any
unfair informational advantage resulting from its relationship with
ISE. Finally, the Commission believes that ISE's proposal on a pilot
basis will provide ISE and the Commission an opportunity to assess
whether there might be any adverse consequences of the exception and
whether a permanent exception is warranted. The Commission believes
that, taken together, these limitations and conditions are reasonably
designed to mitigate potential conflicts between the commercial
interests of the Exchange or its parent company in Ballista Securities
and the Exchange's regulatory responsibilities with respect to Ballista
Securities.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78f(b)(5).
    \13\ This oversight will be accomplished through a 17d-2
agreement and a regulatory services contract between ISE and a non-
affiliated SRO. The Commission notes that ISE has not yet entered
into such agreements.
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\14\ that the proposed rule change (File No. SR-ISE-2009-45) is
hereby approved on a pilot basis through September 1, 2010.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78s(b)(2).
    \15\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-21637 Filed 9-4-09; 8:45 am]

BILLING CODE 8010-01-P