[Federal Register: May 28, 2008 (Volume 73, Number 103)]
[Notices]
[Page 30649-30655]
[DOCID:fr28my08-72]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57838; File No. SR-NYSEArca-2008-09]

Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting
Approval of Proposed Rule Change, as Modified by Amendment Nos. 1 and 2
Thereto, Relating to the Listing and Trading of Shares of the
AirShares\TM\ EU Carbon Allowances Fund

May 20, 2008.

I. Introduction

    On March 14, 2008, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange''),
through its wholly owned subsidiary, NYSE Arca Equities, Inc. (``NYSE
Arca Equities''), filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to: (1) Adopt new NYSE Arca Equities Rule 8.204
relating to the listing and trading of Commodity Futures Trust Shares;
(2) incorporate cross-references to Commodity Futures Trust Shares and
proposed NYSE Arca Equities Rule 8.204 in certain Exchange rules; and
(3) permit the listing and trading, or trading pursuant to unlisted
trading privileges (``UTP''), of shares (``Shares'') of the
AirSharesTM EU Carbon Allowances Fund (``Fund'') under the
proposed rule. On April 4, 2008, the Exchange filed Amendment No. 1 to
the proposed rule change. The proposed rule change, as amended by
Amendment No. 1 thereto, was published for comment in the Federal
Register on April 15, 2008.\3\ On May 14, 2008, the Exchange filed
Amendment No. 2 to the proposed rule change.\4\ The Commission received
no comments regarding the proposal. This order approves the proposed
rule change, as modified by Amendment Nos. 1 and 2 thereto.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 57636 (April 8,
2008), 73 FR 20344 (``Notice'').
    \4\ In Amendment No. 2, the Exchange made minor, non-substantive
changes to incorporate cross-references to Trust Units under NYSE
Arca Equities Rule 8.500: (1) in the list of securities for which
the Core Trading Session (as defined herein) on the Exchange
concludes at 4:15 p.m. Eastern Time (``ET''), as provided in NYSE
Arca Equities Rule 7.34(a)(3); (2) in the definition of ``Derivative
Securities Product'' as set forth in NYSE Arca Equities Rule
7.34(a)(4); and (3) in the list of securities included under the
term ``Derivative Securities Products'' set forth in note 3 of the
NYSE Arca Equities Schedule of Fees and Charges for Exchange
Services. See Securities Exchange Act Release No. 57059 (December
28, 2007), 73 FR 909 (January 4, 2008) (SR-NYSEArca-2006-76)
(approving, among other things, the adoption of NYSE Arca Equities
Rule 8.500 relating to the listing and trading of Trust Units). In
addition, the Exchange made clarifying changes to NYSE Arca Equities
Rule 7.34(a) and the NYSE Arca Equities Schedule of Fees and Charges
for Exchange Service to reflect the incorporation of cross-
references to Managed Fund Shares under NYSE Arca Equities Rule
8.600 that was approved by the Commission subsequent to the date of
the Notice. See Securities Exchange Act Release No. 57619 (April 4,
2008), 73 FR 19544 (April 10, 2008) (SR-NYSEArca-2008-25)
(approving, among other things, the adoption of NYSE Arca Equities
Rule 8.600 relating to the listing and trading of Managed Fund
Shares). Amendment No. 2 is technical in nature, and therefore is
not subject to notice and comment.
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II. Description of the Proposed Rule Change

A. Proposed Listing Rules for Commodity Futures Trust Shares

    The Exchange proposes to adopt new NYSE Arca Equities Rule 8.204 to
permit the listing and trading, or trading pursuant to UTP, of
Commodity Futures Trust Shares. Proposed NYSE Arca Equities Rule
8.204(c) defines a Commodity Futures Trust Share as a security that:
(1) Is issued by a trust that (a) is a commodity pool, as defined in
the Commodity Exchange Act (``CEA'') and regulations thereunder,
managed by a commodity pool operator registered with the Commodity
Futures Trading Commission (``CFTC''), and (b) holds positions in
futures contracts \5\ that track the performance of a specified
commodity, or interests in a commodity pool which, in turn, holds such
positions; and (2) is issued and redeemed daily in specified aggregate
amounts at net asset value (``NAV'').
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    \5\ For purposes of the proposed rule: (1) The term ``futures
contract'' is a ``contract of sale of a commodity for future
delivery'' set forth in Section 2(a) of the CEA; and (2) the term
``commodity'' is defined in Section 1(a)(4) of the CEA.
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    Proposed NYSE Arca Equities Rule 8.204(d) provides that the
Exchange may trade, either by listing or pursuant to UTP, Commodity
Futures Trust Shares that are based on an underlying commodity futures
contract. Each issue of Commodity Futures Trust Shares would be
designated as a separate series and would be identified by a unique
symbol.
    The criteria for listing and trading Commodity Futures Trust Shares
are set forth in proposed NYSE Arca Equities Rule 8.204(e). Proposed
NYSE Arca Equities Rule 8.204(e)(1) provides that the Exchange will
establish a minimum number of Commodity Futures Trust Shares that will
be required to be outstanding at the time of commencement of trading.
The continued listing criteria in proposed NYSE Arca Equities Rule
8.204(e)(2) provide for the suspension of trading in, or removal from
listing of, the Commodity Futures Trust Shares under any of the
following circumstances:
     If, following the initial 12-month period beginning upon
the commencement of trading of the Shares: (1) The trust has fewer than
50,000 Shares issued and outstanding; (2) the market value of all
Shares is less than $1,000,000; or (3) there are fewer than 50 record
and/or beneficial holders of Commodity Futures Trust Shares for 30
consecutive trading days;
     If the value of the underlying futures contract is no
longer calculated or available on at least a 15-second delayed basis
during the Exchange's Core Trading Session, as defined in NYSE Arca
Equities Rule 7.34(a), from a source unaffiliated with the sponsor, the
trust, or the trustee;
     If the NAV for the trust is no longer disseminated to all
market participants at the same time;
     If the Indicative Trust Value is no longer disseminated on
at least a 15-second delayed basis during the Exchange's ``Core Trading
Session,'' as defined in NYSE Arca Equities Rule 7.34(a); \6\ or
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    \6\ The Core Trading Session on the Exchange is from 9:30 a.m.
to 4 or 4:15 p.m. ET. See NYSE Arca Equities Rule 7.34(a).
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     If such other event shall occur or condition exists that,
in the opinion of the Exchange, makes further dealings on the Exchange
inadvisable.

    In addition, the Exchange will remove the Commodity Futures Trust
Shares from listing upon termination of the trust.
    Proposed NYSE Arca Equities Rule 8.204(e)(3) provides that the term
of a trust is as stated in the trust's prospectus, and that the trust
may be terminated ``earlier'' as may be specified in the prospectus.
Proposed NYSE Arca Equities Rule 8.204(e)(4) sets forth proposed
requirements for the trustee of a trust: (1) 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; and (2) no change is to be
made in the trustee of a listed issue without prior notice to and
approval of the Exchange. Proposed NYSE Arca Equities Rule 8.204(e)(5)
provides that voting rights will be as set forth in the applicable
trust prospectus.
    Proposed NYSE Arca Equities Rule 8.204(f) sets forth certain
restrictions on ETP Holders acting as registered Market Makers \7\ in
Commodity Futures Trust Shares to facilitate surveillance. Proposed
NYSE Arca Equities Rules 8.204(f)(2)-(3) require that the ETP Holder
acting as a registered Market Maker in the Commodity Futures Trust
Shares provide the Exchange with necessary information relating to its
trading in the underlying commodity, related futures or options on
futures, or any other related derivatives. Proposed NYSE Arca Equities
Rule 8.204(f)(4) prohibits the ETP Holder acting as a registered Market
Maker in the Commodity Futures Trust Shares from using any material
non-public information received from any person associated with an ETP
Holder or employee of such person regarding trading by such person or
employee in the underlying commodity, related futures or options on
futures, or any other related derivative (including the Commodity
Futures Trust Shares). In addition, proposed NYSE Arca Equities Rule
8.204(f)(1) prohibits the ETP Holder acting as a registered Market
Maker in the Commodity Futures Trust Shares from being affiliated with
a market maker in the underlying commodity, related futures or options
on futures, or any other related derivative, unless adequate
information barriers are in place, as provided in NYSE Arca Equities
Rule 7.26.
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    \7\ Section 1.1(u) defines ``Market Maker'' as ``an ETP Holder
that acts as a Market Maker pursuant to Rule 7.''
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    Proposed NYSE Arca Equities Rule 8.204(g) relates to the Exchange's
limitation of liability. Proposed NYSE Arca Equities Rule 8.204(h)
specifically provides that the Exchange will file separate proposals
under Section 19(b) of the Act \8\ before listing and trading separate
and distinct series of Commodity Futures Trust Shares.
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    \8\ 15 U.S.C. 78s(b).
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    Commentary .01 to proposed NYSE Arca Equities Rule 8.204 requires
ETP Holders to provide all purchasers of newly issued Commodity Futures
Trust Shares with a prospectus. Commentary .02 to proposed NYSE Arca
Equities Rule 8.204 provides that trading in the Commodity Futures
Trust Shares will occur during the trading hours specified in NYSE Arca
Equities Rule 7.34. Commentary .03 to proposed NYSE Arca Equities Rule
8.204 requires that if the Indicative Trust Value or the value of the
underlying futures contract is not being disseminated as required, the
Exchange may halt trading during the day in which the interruption to
the dissemination of the Indicative Trust Value or the value of the
underlying futures contract occurs. If the interruption to the
dissemination of the Indicative Trust Value or the value of the
underlying futures contract persists past the trading day in which it
occurred, the Exchange will halt trading no later than the beginning of
the trading day following the interruption. In addition, if the
Exchange becomes aware that the NAV with respect to a series of
Commodity Futures Trust Shares is not disseminated to all market
participants at the same time, it will halt trading in such series
until such time as the NAV or the Disclosed Portfolio is available to
all market participants. Commentary .04 to proposed NYSE Arca Equities
Rule 8.204 provides that the Exchange's rules governing the trading of
equity securities apply to Commodity Futures Trust Shares. Commentary
.05 to proposed NYSE Arca Equities Rule 8.204 provides that the
Exchange will implement written surveillance procedures for Commodity
Futures Trust Shares.

B. Other Proposed Amendments \9\
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    \9\ See supra note 4.
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    The Exchange proposes to amend NYSE Arca Equities Rule 7.34(a)(3)
to add references to Commodity Futures Trust Shares and proposed NYSE
Arca Equities Rule 8.204 to the list of securities for which the Core
Trading Session on the Exchange concludes at 4:15 p.m. ET. In addition,
the Exchange proposes to amend NYSE Arca Equities Rule 7.34(a)(4) to
include Commodity Futures Trust Shares under the definition of
``Derivative Securities Product'' with respect to trading halts of
certain derivative securities products trading pursuant to UTP on the
Exchange. The Exchange also proposes to add Commodity Futures Trust
Shares to the securities included under the term ``Derivative
Securities Products'' in note 3 of the NYSE Arca Equities Schedule of
Fees and Charges for Exchange Services.
Proposal To List and Trade the Shares of the Fund
    Pursuant to proposed NYSE Arca Equities Rule 8.204, the Exchange
proposes to list and trade the Shares of the Fund.\10\ The Exchange
states that the Shares, which represent ownership of a fractional
undivided beneficial interest in the net assets of the Fund, will
conform to the initial and continued listing criteria under proposed
NYSE Arca Equities Rule 8.204.
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    \10\ The Exchange states that the Fund is not an investment
company registered under the Investment Company Act of 1940,
according to the Registration Statement on Form S-1 for the Fund,
which was filed with the Commission on December 14, 2007 (File No.
333-145448) (``Registration Statement'').
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    The investment objective of the Fund is to provide investors with
investment results that correspond generally, before payment of the
Fund's expenses and liabilities, to the performance of a basket of
exchange-traded futures contracts for carbon equivalent emissions
allowances (``EUAs'') issued under the European Union Emissions Trading
Scheme (``EU ETS'').\11\ The EU ETS is a ``cap and trade'' emissions
trading program instituted by the European Union (``EU''), in
furtherance of the joint commitment of its member states under the
Kyoto Protocol to achieve certain reductions in their emissions of
greenhouse gases from 2008 to 2012. The Fund will not be actively
managed in that it will not engage in activities designed to obtain a
profit from, or to ameliorate losses caused by, changes in the value of
its portfolio of EUAs.
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    \11\ According to the Registration Statement, while the
investment objective of the Fund is to track generally the value of
the underlying futures contracts, the Fund's portfolio of fixed
income securities, as well as other factors such as the Fund's
expenses and its hedging activities, may cause a lack of correlation
between the NAV of the Shares and the value of the Fund's portfolio
of futures contracts.
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    The net assets of the Fund will consist of long positions in ICE
Futures ECX Carbon Financial Instrument Futures Contracts (``ECX CFI
Futures

Contracts'').\12\ The ECX CFI Futures Contracts are standardized
contractual instruments for futures on deliverable EUAs issued under
the EU ETS and developed by the European Climate Exchange (``ECX'').
ECX CFI Futures Contracts are listed and admitted to trading on ICE
Futures on the London-based electronic platform, owned and operated by
Intercontinental Exchange, Inc. (also known as the ICE Platform).\13\
Each ECX CFI Futures Contract provides for delivery of 1,000 EUAs on a
specified date at a specified price, with each EUA being an entitlement
to emit one ton of carbon dioxide equivalent gas.\14\ The Exchange
states that, if the Fund invests in EUAs other than ECX CFI Futures
Contracts, it will file a Form 19b-4 under the Act\15\ to obtain
Commission approval for the continued listing and trading of the
Shares.\16\
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    \12\ The Fund represents that the ECX CFI Futures Contracts
meets the definition of ``futures contract'' as set forth in Section
2(a) of the CEA. The Exchange further represents that carbon
equivalent emissions allowances meet the definition of ``commodity''
as defined in Section 1(a)(4) of the CEA.
    \13\ The ECX CFI Futures Contracts trade on the London-based ICE
Platform from 7:00 a.m. to 5:00 p.m. Greenwich Mean Time.
    \14\ The Exchange states that the ECX CFI Futures Contract had
average daily trading volume of $135,717,089 (USD), or approximately
87,587,602 Euro, representing 3,551 contracts traded daily from
January 1, 2008 through March 11, 2008.
    \15\ 15 U.S.C. 78a.
    \16\ The Exchange also states that it will file a proposed
change seeking approval to continue listing or trading the Shares if
the Fund invests in EUAs that constitute more than 10% of the weight
of the Fund and where the principal trading market for such
component is not a member or affiliate member of the Intermarket
Surveillance Group (``ISG'') or where the Exchange does not have a
comprehensive surveillance sharing agreement with such market.
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    More information about the structure of the Fund, the Kyoto
Protocol, the EU ETS, the ECX CFI Futures Contracts, and the Fund's
investment objective and strategy, as well as further descriptions of
the Shares, risks, NAV, and procedures for creations and redemptions of
Shares, can be found in the Notice\17\ and the Registration
Statement,\18\ as applicable.
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    \17\ See Notice, supra note 3.
    \18\ See supra note 9.
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Availability of Information Regarding the Fund and the Shares
    The daily settlement prices for the EUAs are publicly available on
the ICE Futures Web site at http://www.icefutures.com. In addition,
various market data vendors and news publications publish futures
prices and related data. Quote and last-sale information for the EUAs
are widely disseminated through a variety of market data vendors
worldwide. ICE Futures also provides delayed futures information on
current and past trading sessions and market news free of charge on its
Web site. The specific contract specifications for the EUAs are also
available on the ICE Futures Web site.
    The Web site for the Fund at http://www.airsharesfund.com, which is
publicly accessible at no charge, will contain the following
information: (1) The prior business day's NAV per Share\19\ and the
reported closing price; (2) the mid-point of the bid-ask price in
relation to the NAV per Share as of the time the NAV is calculated
(``Bid-Ask Price''); \20\ (3) calculation of the premium or discount of
such price against such NAV per Share; (4) data in chart form
displaying the frequency distribution of discounts and premiums of the
Bid-Ask Price against the NAV per Share, within appropriate ranges for
each of the four previous calendar quarters; (5) the prospectus and the
most recent periodic reports filed with the Commission or required by
the CFTC; \21\ and (6) other applicable quantitative information.
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    \19\ The most recent end-of-day NAV of the Fund and NAV per
Share will be published by the Fund sponsor as of 4 p.m. ET on
Reuters and/or Bloomberg and on the Fund's Web site at http://
www.airsharesfund.com. The end-of-day NAV per Share will also be
published the following morning on the consolidated tape.
    \20\ The Bid-Ask Price of Shares is determined using the highest
bid and lowest offer as of the time of calculation of the NAV per
Share.
    \21\ Monthly account statements conforming to CFTC and National
Futures Association requirements are posted on the Fund's Web site
at http://www.airsharesfund.com. Additional reports may be posted on
the Fund's Web site in the discretion of the Fund sponsor or as
required by regulatory authorities.
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    The Fund's total portfolio composition, consisting primarily of
long positions in ECX CFI Futures Contracts and cash, will be disclosed
each business day that the Exchange is open for trading on the Fund's
Web site. The Fund has informed the Exchange that Web site disclosure
of portfolio holdings will be made daily and will include, as
applicable, the name and value of each EUA and amount of cash held in
the portfolio of the Fund.
    As noted above, the Fund's NAV will be calculated and disseminated
daily.\22\ The Exchange will disseminate for the Fund on a daily basis
by means of Consolidated Tape Association CQ High Speed Lines
information with respect to the Indicative Fund Value (as discussed
below), recent Fund NAV, Shares outstanding, and the Basket amount. The
Exchange will also make available on its Web site daily trading volume,
closing prices, and the Fund's NAV per Share. The closing price and
settlement prices of the EUAs held by the Fund are also readily
available from ICE Futures, automated quotation systems, published or
other public sources, or on-line information services.
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    \22\ The Exchange will obtain a representation from the Fund
that the Fund's NAV per Share will be calculated daily and made
available to all market participants at the same time. See Notice at
20347, n.16.
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    Information regarding market price and volume of the Shares is and
will be continually available on a real-time basis throughout the day
on brokers' computer screens and other electronic services. The
previous day's closing price and trading volume information will be
published daily in the financial section of newspapers. Quotation and
last-sale information for the Shares will be available via the
facilities of the Consolidated Tape Association.
    All pricing information will be quoted in U.S. dollars, other than
the current trading value of the Euro-denominated EUAs, which will be
quoted in Euro. The current trading price per Share will be published
continuously as trades occur throughout each trading day on the
consolidated tape, Reuters, and/or Bloomberg. The most recent trading
value of each EUA is published on the Web site of the ECX at http://
www.ecxeurope.com, under the heading ``Market Data,'' and each vintage
futures contract in the Fund's portfolio will be published on the
Fund's Web site at http://www.airsharesfund.com, or any successor
thereto.
    To provide updated information relating to the Fund for use by
investors, professionals and persons wishing to create or redeem the
Shares, the Exchange or a major market data vendor will disseminate
through the facilities of the Consolidated Tape Association an updated
Indicative Fund Value (``Indicative Fund Value'').\23\ The Indicative
Fund Value, which is also known as intraday indicative value (IIV) or
intraday optimized portfolio value (IOPV), is an estimate, updated on a
real-time basis at least every 15 seconds, of the NAV, which is
disclosed only once per day. The Indicative Fund Value for the Fund
will be disseminated on a per-Share basis at least every 15 seconds
during the Exchange's Core Trading Session. The Indicative Fund Value
will be calculated based on the previously-disclosed portfolio
composition of the Fund, i.e., the futures contracts in the Fund's
portfolio, and will be adjusted to reflect the price changes of the
relevant EUAs.
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    \23\ The Indicative Fund Value is referred to as the Indicative
Trust Value in proposed new NYSE Arca Equities Rule 8.204(e)(2)(iv).
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    The value of a Share may be influenced by the non-concurrent

trading hours between the Exchange and the exchanges on which the EUAs
trade. While the Shares will trade from 4 a.m. to 8 p.m. ET, the ECX
CFI Futures Contracts, for example, trade on the London-based ICE
Platform from 7 a.m. to 5 p.m. local time in London, England. When the
ICE Platform and the Exchange are both open for trading, the Indicative
Fund Value can be expected to closely approximate the NAV per Share.
When the ICE Platform is closed and the Exchange is open, trading
spreads and the resulting premium or discount on the Shares may widen
and, therefore, increase the difference between the public trading
price of the Shares and the NAV per Share. The Indicative Fund Value on
a per-Share basis disseminated during the Exchange's Core Trading
Session should not be viewed as a real-time update of the Fund's NAV,
which is calculated only once a day.
Trading Halts
    With respect to trading halts, the Exchange may consider all
relevant factors in exercising its discretion to halt or suspend
trading in the Shares.\24\ Trading in the Shares will be halted if the
circuit breaker parameters under NYSE Arca Equities Rule 7.12 are
reached. Trading may also be halted because of market conditions or for
reasons that, in the view of the Exchange, make trading in the Shares
inadvisable. These may include: (1) The extent to which trading is not
occurring in the underlying EUA futures contracts; or (2) whether other
unusual conditions or circumstances detrimental to the maintenance of a
fair and orderly market are present. Trading in the Shares also will be
subject to Commentary .03 to proposed NYSE Arca Equities Rule 8.204,
which sets forth circumstances under which trading in the Shares may be
halted.
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    \24\ See Commentary .04 to NYSE Arca Equities Rule 7.12.
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Trading Rules
    Under proposed NYSE Arca Equities Rule 8.204(b), Commodity Futures
Trust Shares are included within the Exchange's definition of
``securities.'' The Exchange deems the Shares to be equity securities,
thus rendering trading in the Shares subject to the Exchange's existing
rules governing the trading of equity securities. Commentary .02 to
proposed NYSE Arca Equities Rule 8.204 provides that transactions in
Commodity Futures Trust Shares will occur during the trading hours
specified in Rule 7.34. Therefore, in accordance with such rule, the
Shares will trade on the NYSE Arca Marketplace from 4 a.m. to 8 p.m.
ET. The Exchange states that it has appropriate rules to facilitate
transactions in the Shares during all three trading sessions.
Surveillance
    The Exchange intends to utilize its existing surveillance
procedures applicable to derivative products (which will include
Commodity Futures Trust Shares) to monitor trading in the Shares. The
Exchange represents that these procedures are adequate to properly
monitor Exchange trading of the Shares in all trading sessions and to
deter and detect violations of Exchange rules and applicable federal
securities laws.
    The Exchange's current trading surveillance focuses on detecting
securities trading outside their normal patterns. When such situations
are detected, surveillance analysis follows and investigations are
opened, where appropriate, to review the behavior of all relevant
parties for all relevant trading violations.
    The Exchange may obtain information via the ISG from other
exchanges who are members or affiliate members of the ISG. In addition,
the Exchange has an information sharing agreement in place with ICE
Futures for the purpose of providing information in connection with
trading in, or related to, futures contracts traded on ICE Futures. The
Exchange states that it will file a proposed change pursuant to Rule
19b-4 under the Act \25\ seeking approval to continue trading the
Shares if the Fund invests in EUAs (or pricing information is used for
a new or existing component) that constitute more than 10% of the
weight of the Fund where the principal trading market for such
component is not a member or affiliate member of ISG or where the
Exchange does not have a comprehensive surveillance sharing agreement
with such market. In addition, the Exchange also has a general policy
prohibiting the distribution of material, non-public information by its
employees.
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    \25\ 17 CFR 240.19b-4.
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Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its
ETP Holders \26\ in an Information Bulletin (``Bulletin'') of the
special characteristics and risks associated with trading the Shares.
Specifically, the Bulletin will discuss the following: (1) The risks
involved in trading the Shares during the Opening and Late Trading
Sessions \27\ when an updated Indicative Fund Value will not be
calculated or publicly disseminated; (2) the procedures for purchases
and redemptions of Shares (and that Shares are not individually
redeemable); (3) NYSE Arca Equities Rule 9.2(a),\28\ which imposes a
duty of due diligence on its ETP Holders to learn the essential facts
relating to every customer prior to trading the Shares; (4) the risk
involved in trading the Shares during the Core and Late Trading
Sessions when the ECX CFI Futures Contracts are not trading on the ICE
Platform; (5) how information regarding the Indicative Fund Value is
disseminated; (6) the requirement that ETP Holders deliver a prospectus
to investors purchasing newly issued Shares prior to or concurrently
with the confirmation of a transaction; and (7) trading information.
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    \26\ See NYSE Arca Equities Rule 1.1(n) (defining ETP Holder).
    \27\ The Opening Trading Session is from 4 a.m. to 9:30 a.m. ET
and the Late Trading Session is from 4:15 p.m. to 8 p.m. ET. See
NYSE Arca Equities Rule 7.34.
    \28\ NYSE Arca Equities Rule 9.2(a) provides that ETP Holders,
before recommending a transaction, must have reasonable grounds to
believe that the recommendation is suitable for the customer based
on any facts disclosed by the customer as to his other security
holdings and as to his financial situation and needs. Further, the
rule provides, with a limited exception, that prior to the execution
of a transaction recommended to a non-institutional customer, the
ETP Holder shall make reasonable efforts to obtain information
concerning the customer's financial status, tax status, investment
objectives, and any other information that the ETP Holder believes
would be useful to make a recommendation.
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    In addition, the Bulletin will reference that: (1) The Fund is
subject to various fees and expenses described in the relevant
registration statement; (2) that there is no regulated source of last-
sale information regarding physical commodities; (3) the Commission has
no jurisdiction over the trading of EUAs; and (4) the Financial
Services Authority in the United Kingdom has regulatory jurisdiction
over the trading of EUAs and related options. The Bulletin will also
discuss any exemptive, no-action, and interpretive relief granted by
the Commission from any rules under the Act and disclose that the NAV
for the Shares will be calculated after 4: p.m. ET each trading day.

III. Discussion and Commission's Findings

    The Commission has carefully reviewed the proposed rule change and
finds that it is consistent with the requirements of Section 6 of the
Act \29\ and the rules and regulations thereunder applicable to a
national securities exchange.\30\ In particular, the

Commission finds that the proposal is consistent with Section 6(b)(5)
of the Act,\31\ which requires, among other things, that the Exchange's
rules be 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. The Commission notes that it has
approved similar NYSE Arca Equities rules to list and trade products
based on or related to commodities.\32\
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    \29\ 15 U.S.C. 78f.
    \30\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. 15 U.S.C. 78c(f).
    \31\ 15 U.S.C. 78f(b)(5).
    \32\ See Securities Exchange Act Release Nos. 54025 (June 21,
2006), 71 FR 36856 (June 28, 2006) (SR-NYSEArca-2006-12) (approving
new NYSE Arca Equities Rule 8.203 ``Commodity-Indexed Trust Shares''
for trading pursuant to UTP the iShares GSCI Commodity-Indexed
Trust); 51067 (January 21, 2005), 70 FR 3952 (January 27, 2005) (SR-
PCX-2004-132) (approving new NYSE Arca Equities Rule 8.201
``Commodity-Based Trust Shares'' for trading pursuant to UTP the
iShares COMEX Gold Trust); 56041 (July 11, 2007), 72 FR 39114 (July
17, 2007) (SR-NYSEArca-2007-43) (approving listing of shares of
iShares COMEX Gold Trust pursuant to NYSE Arca Equities Rule 8.201);
53875 (May 25, 2006), 71 FR 32164 (June 2, 2006) (SR-NYSEArca-2006-
11) (approving new NYSE Arca Equities Rule 8.300 ``Partnership
Shares'' for trading pursuant to UTP the United States Oil Fund,
LP); and 53736 (April 27, 2006), 71 FR 26582 (May 5, 2006) (SR-PCX-
2006-22) (approving new Commentary .02 to NYSE Arca Equities Rule
8.200 ``Investment Shares'' for trading pursuant to UTP the DB
Commodity Index Tracking Fund).
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A. Proposed Amendments to NYSE Arca Equities Rules

    The Commission finds that NYSE Arca's proposal contains adequate
rules and procedures to govern the listing and trading of Commodity
Futures Trust Shares on the Exchange. Prior to listing and/or trading
on the Exchange, NYSE Arca must file a separate proposed rule change
pursuant to Section 19(b) of the Act for each series of Commodity
Futures Trust Shares.\33\ All such securities listed and/or traded
under proposed NYSE Arca Equities Rule 8.204 will be subject to the
full panoply of NYSE Arca rules and procedures that currently govern
the trading of equity securities on the Exchange.\34\ For the initial
listing of each series of Commodity Futures Trust Shares under proposed
NYSE Arca Equities Rule 8.204, the Exchange must establish a minimum
number of Commodity Futures Trust Shares required to be outstanding at
the commencement of trading on the Exchange.\35\
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    \33\ See proposed NYSE Arca Equities Rule 8.204(h).
    \34\ Commentary .04 to proposed NYSE Arca Equities Rule 8.204
provides that the Exchange's rules governing the trading of equity
securities apply to Commodity Futures Trust Shares.
    \35\ See proposed NYSE Arca Equities Rule 8.204(e)(1).
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    The Commission believes that the proposed continued listing and
trading standards under proposed NYSE Arca Equities Rule 8.204 are
adequate to ensure transparency of key values and information regarding
the securities. The Exchange may consider suspending trading in, or
removing from listing, a series of Commodity Futures Trust Shares if:
(1) Following the initial twelve-month period beginning upon the
commencement of trading of the Commodity Futures Trust Shares, (a) The
Trust has fewer than 50,000 Commodity Futures Trust Shares issued and
outstanding; (b) the market value of all Commodity Futures Trust Shares
issued and outstanding is less than $1,000,000, or (c) there are fewer
than 50 record and/or beneficial holders of Commodity Futures Trust
Shares for 30 consecutive trading days; (2) the value of the underlying
futures contracts is no longer calculated or available on at least a
15-second delayed basis during the Exchange's Core Trading Session, as
defined in NYSE Arca Equities Rule 7.34(a), from a source unaffiliated
with the sponsor, the trust or the trustee of the trust; (3) the NAV
for the trust is no longer disseminated to all market participants at
the same time; (4) the Indicative Trust Value is no longer disseminated
on at least a 15-second delayed basis during the Corporation's Core
Trading Session, as defined in NYSE Arca Equities Rule 7.34(a); or (5)
such other event shall occur or condition exists which in the opinion
of the Corporation makes further dealings on the Corporation
inadvisable.\36\
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    \36\ See proposed NYSE Arca Equities Rule 8.204(e)(2)(i)-(v).
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    The Commission finds that the Exchange's rules with respect to
trading halts under proposed NYSE Arca Equities Rule 8.204 should help
ensure the availability of key values and information relating to
Commodity Futures Trust Shares. If the Indicative Trust Value or the
value of the underlying futures contract is not being disseminated as
required, the Exchange may halt trading during the day in which the
interruption to the dissemination of the Indicative Trust Value or the
value of the underlying futures contract occurs; if the interruption to
the dissemination of the Indicative Trust Value or the value of the
underlying futures contract persists past the trading day in which it
occurred, the Exchange will halt trading no later than the beginning of
the trading day following the interruption.\37\ In addition, if the
Exchange becomes aware that the NAV with respect to a series of
Commodity Futures Trust Shares is not disseminated to all market
participants at the same time, it will halt trading in such series
until such time as the NAV is available to all market participants.\38\
Lastly, the Exchange proposes to amend NYSE Arca Equities Rule
7.34(a)(4) to include Commodity Futures Trust Shares under ``Derivative
Securities Products'' with respect to trading halts of certain
derivative securities products trading pursuant to UTP on the Exchange.
The Commission believes that the foregoing requirements of the
Exchange's proposed rules should help to prevent trading when a
reasonable degree of transparency cannot be assured and to maintain a
fair and orderly market for Commodity Futures Trust Shares.
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    \37\ See Commentary .03 to proposed NYSE Arca Equities Rule
8.204.
    \38\ See id.
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    The Commission also believes that the proposed listing and trading
rules for Commodity Futures Trust Shares are reasonably designed to
promote a fair and orderly market for such securities by, among other
things, requiring ETP Holders acting as registered Market Makers in
Commodity Futures Trust Shares to be subject to certain restrictions in
dealings and trading activities, to maintain and present, upon request,
appropriate books and records, and to be subject to restrictions
governing the use of any material, non-pubic information in connection
with the trading of Commodity Futures Trust Shares and any underlying
components.\39\ The proposed rule also requires the implementation of
written surveillance procedures \40\ and prescribes prospectus delivery
requirements for purchasers of each newly issued series of Commodity
Futures Trust Shares.\41\
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    \39\ See proposed NYSE Arca Equities Rule 8.204(f)(1)-(4).
    \40\ See Commentary .05 to proposed NYSE Arca Equities Rule
8.204.
    \41\ See Commentary .01 to proposed NYSE Arca Equities Rule
8.204.
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    As proposed, the Exchange's listing fees will be applicable to a
series of Commodity Futures Trust Shares under the Schedule of Fees and
Charges for Exchange Services. In connection with proposed NYSE Arca
Equities Rule 8.204, the Exchange also proposes to make certain
technical revisions so that Commodity Futures Trust Shares are also
included among the types of securities referenced in NYSE Arca Equities
Rule 7.34 relating to trading hours and trading halts. The

Commission finds that the changes made to the Exchange's listing fees
and the technical revisions to NYSE Arca Equities Rule 7.34 are
reasonable and promote transparency and consistent application of
certain rules imposed with respect to a series of Commodity Futures
Trust Shares.

B. Proposal To List and Trade the Shares of the Fund

    The Commission finds that the proposal to list and trade the Shares
on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the
Act,\42\ 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. Quotations and last-sale
information for EUAs are widely disseminated through a variety of
market data vendors worldwide, and the daily settlement prices for the
EUAs are publicly available on the ICE Futures Web site. In addition,
quotations and last-sale information for the Shares will be available
via the facilities of the Consolidated Tape Association. The daily NAV
for the Fund will be calculated and disseminated publicly to all market
participants at the same time, and the Exchange or a major market data
vendor will disseminate through the facilities of the Consolidated Tape
Association an updated Indicative Fund Value on a real-time basis at
least every 15 seconds during the Exchange's Core Trading Session. The
Fund's Web site will provide information relating to NAV, the Fund's
daily total portfolio composition, the Fund's prospectus and other
reports filed with the Commission, and other applicable quantitative
information. Additionally, the Exchange will make available on its Web
site daily trading volume of the Shares, closing prices of the Shares,
and the Fund's NAV per Share.
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    \42\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    Furthermore, the Commission believes that the proposal to list and
trade the Shares is reasonably designed to promote fair disclosure of
information that may be necessary to price the Shares appropriately and
to prevent trading when a reasonable degree of transparency cannot be
assured. The Commission notes that the Exchange will obtain a
representation from the Fund that the NAV per Share for the Fund will
be calculated daily and made available to all market participants at
the same time.\43\ The Exchange may consider the suspension of trading
in, or removal from listing of, the Shares if the value of the
underlying futures contracts, the NAV, or the Indicative Fund Value is
no longer calculated or available as required under proposed NYSE Arca
Equities Rule 8.204(e)(2). In addition, proposed NYSE Arca Equities
Rule 8.204(f) restricts ETP Holders from engaging in certain trading
activities with respect to dealings in Commodity Futures Trust Shares
and prescribes certain other restrictions regarding the use of
material, non-public information.
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    \43\ See supra note 22.
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    For the reasons discussed above, the Commission believes that the
Exchange's trading halt rules are reasonably designed to prevent
trading in the Shares when transparency is impaired. Commentary .03 to
proposed NYSE Arca Equities Rule 8.204 provides that, if the Indicative
Fund Value or the value of the underlying futures contract is not being
disseminated as required, the Exchange may halt trading during the day
in which the interruption to the dissemination of the Indicative Fund
Value or the value of the underlying futures contract occurs; if the
interruption to the dissemination of the Indicative Fund Value or the
value of the underlying futures contract persists past the trading day
in which it occurred, the Exchange will halt trading no later than the
beginning of the trading day following the interruption.\44\ In
addition, if the Exchange becomes aware that the NAV with respect to a
series of Commodity Futures Trust Shares is not disseminated to all
market participants at the same time, it will halt trading in such
series until such time as the NAV is available to all market
participants.\45\ Trading in the Shares also will be halted if the
circuit breaker parameters under NYSE Arca Equities Rule 7.12 are
reached. Trading may also be halted because of market conditions or for
reasons that, in the view of the Exchange, make trading in the Shares
inadvisable. These may include: (1) The extent to which trading is not
occurring in the underlying EUA futures contracts; or (2) whether other
unusual conditions or circumstances detrimental to the maintenance of a
fair and orderly market are present.
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    \44\ See Commentary .03 to proposed NYSE Arca Equities Rule
8.204.
    \45\ See id.
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    The Commission further believes that the trading rules and
procedures to which the Shares will be subject pursuant to this
proposal are consistent with the Act. The Exchange has represented that
the Shares are equity securities subject to the Exchange's rules
governing the trading of equity securities.
    In support of this proposal, the Exchange has made the following
representations:
    (1) The Shares will conform to the initial and continued listing
criteria under proposed NYSE Arca Equities Rule 8.204(e).
    (2) The Exchange's surveillance procedures applicable to derivative
products (which will include Commodity Futures Trust Shares) are
adequate to properly monitor Exchange trading of the Shares in all
trading sessions and to deter and detect violations of Exchange rules
and applicable federal securities laws.
    (3) Prior to the commencement of trading, the Exchange will inform
its ETP Holders in the Bulletin of the special characteristics and
risks associated with trading the Shares. Specifically, the Bulletin
will discuss, among other things, the following: (a) The risks involved
in trading the Shares during the Opening and Late Trading Sessions when
an updated Indicative Fund Value will not be calculated or publicly
disseminated; (b) the procedures for purchases and redemptions of
Shares (and that Shares are not individually redeemable); (c) NYSE Arca
Equities Rule 9.2(a), which imposes a duty of due diligence on its ETP
Holders to learn the essential facts relating to every customer prior
to trading the Shares; (d) the risk involved in trading the Shares
during the Core and Late Trading Sessions when the ECX CFI Futures
Contracts are not trading on the ICE Platform; (e) how information
regarding the Indicative Fund Value is disseminated; (f) the
requirement that ETP Holders deliver a prospectus to investors
purchasing newly issued Shares prior to or concurrently with the
confirmation of a transaction; and (g) trading information.
    This approval order is based on the Exchange's representations.
    The Commission believes that the proposal should help to facilitate
the listing and trading of additional types of exchange-traded products
that should enhance competition among market participants, to the
benefit of investors and the marketplace. In addition, the Commission
believes that the listing and trading criteria for Commodity Futures
Trust Shares set forth in proposed NYSE Arca Equities Rule 8.204 are
reasonably designed to protect investors and the public interest, as
discussed herein. For the foregoing reasons, the Commission finds that
the proposed rule change is consistent with the Act and the rules

and regulations thereunder applicable to a national securities
exchange, and, in particular, with Section 6(b)(5) of the Act.\46\
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    \46\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\47\ that the proposed rule change (SR-NYSEArca-2008-09), as
modified by Amendment Nos. 1 and 2 thereto, be, and it hereby is,
approved.
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    \47\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\48\
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    \48\ 17 CFR 200.30-3(a)(12).
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Nancy M. Morris,
Secretary.
 [FR Doc. E8-11832 Filed 5-27-08; 8:45 am]

BILLING CODE 8010-01-P