[Federal Register: January 24, 2007 (Volume 72, Number 15)]
[Notices]
[Page 3171-3178]
[DOCID:fr24ja07-91]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-55110; File No. SR-Amex-2006-86]

Self-Regulatory Organizations; American Stock Exchange LLC;
Notice of Filing of a Proposed Rule Change and Amendment Nos. 1, 2, and
3 Thereto Relating to the Listing and Trading of Shares of the
PowerShares DB U.S. Dollar Index Bullish Fund and the PowerShares DB
U.S. Dollar Index Bearish Fund

January 16, 2007.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'' or ``Exchange Act'')\1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that on September 13, 2006, the American Stock Exchange
LLC (``Amex'' or ``Exchange'') filed with the Securities and Exchange
Commission (``Commission'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared
substantially by Amex. On November 17, 2006, Amex filed Amendment No. 1
to the proposed rule change. On December 19, 2006, Amex filed Amendment
No. 2 to the proposed rule change. On January 12, 2007, Amex filed
Amendment No. 3 to the proposed rule change. The Commission is
publishing this notice to solicit comments on the proposed rule change,
as amended, from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    Pursuant to Commentary .07 to Amex Rule 1202, which permits the
listing and trading of shares of trust-issued receipts (``TIRs'') that
invest in shares or securities (the ``Investment Shares'') issued by a
trust, partnership, commodity pool, or other similar entity that holds
investments comprising, or otherwise based on, any combination of
securities, futures contracts, swaps, forward contracts, options on
futures contracts, commodities, or portfolios of investments, the
Exchange seeks to list and trade shares of the PowerShares DB U.S.
Dollar Index Bullish Fund (the ``Bullish Fund'') and the PowerShares DB
U.S. Dollar Index Bearish Fund (the ``Bearish Fund,'' and together with
the Bullish Fund, collectively, the ``Funds'').
    The text of the proposal is available at Amex, at the Commission's
Public Reference Room, and on Amex's Web site at http://www.amex.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, Amex 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 these statements may be examined at the places specified in
Item IV below, and the most significant aspects of such statements are
set forth in Sections A, B, and C below.

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

1. Purpose
    Pursuant to Commentary .07 to Amex Rule 1202, the Exchange may
approve for listing and trading TIRs investing in Investment Shares
that hold investments in any combination of securities, futures
contracts, options on futures contracts, swaps, forward contracts,
commodities, or portfolios of investments. Amex proposes to list for
trading the shares of the Bullish Fund and the Bearish Fund (the
``Shares''), which represent beneficial ownership interests in the
corresponding common units of beneficial interests of the DB U.S.
Dollar Index Master Bullish Fund (the ``Master Bullish Fund'') and the
DB U.S. Dollar Index Master Bearish Fund (the ``Master Bearish Fund,''
and together with the Master Bullish Fund, collectively, the ``Master
Funds''), respectively.
    The PowerShares DB U.S. Dollar Index Trust (the ``Trust'') is
organized as a Delaware statutory trust with each of the Funds
representing a series of the Trust. The DB U.S. Dollar Index Master
Trust (the ``Master Trust'') is also organized as a Delaware statutory
trust with each of the Master Funds representing a series of the Master
Trust.
    The overall investment objective of each of the Funds and the
Master Funds is to reflect the performance of their respective
benchmark index, less expenses, plus the excess, if any, of the
corresponding Master Fund's interest income from its holdings of U.S.
Treasury and other high-credit-quality, short-term fixed income
securities over its expenses. The Bullish Fund will seek to track the
``Long Index'' by investing in long positions in futures contracts
(``DX Contracts'') on the U.S. Dollar Index[supreg] (USDX[supreg]). The
Bearish Fund will seek to track the ``Short Index'' by investing in
short positions in DX Contracts on the USDX[supreg].

    Both the Long and Short Indexes (collectively, the ``Indexes'') are
designed to reflect the performance of the nearest expiration month DX
Contract on the USDX[supreg]. The Long Index is created by taking a
long position in a DX Contract. As a result, the Long Index will
reflect the performance of the DX Contract, i.e., the percentage gain
or loss sustained by the DX Contract. Conversely, the Short Index is
created by taking a short position in a DX Contract. The Short Index
will reflect the inverse of the performance of the DX Contract, i.e.,
the inverse of the percentage gain or loss sustained by the DX
Contract. The Master Bullish Fund will invest in long positions in DX
Contracts, while the Master Bearish Fund will invest in short positions
in DX Contracts. Each of the Funds and each of the Master Funds are
commodity pools operated by DB Commodity Services LLC (the ``Managing
Owner''). The Managing Owner is registered as a commodity pool operator
(``CPO'') and commodity trading advisor (``CTA'') with the Commodity
Futures Trading Commission (``CFTC'') and a member of the National
Futures Association (``NFA'').
    The Master Funds will include U.S. Treasury securities for margin
purposes and other high-credit-quality, short-term fixed income
securities. The Exchange states that the Master Funds are not
``actively managed,'' which typically means effecting changes in the
composition of a portfolio on the basis of judgment relating to
economic, financial, and market considerations with a view to obtaining
positive results under all market conditions. Rather, the Master Funds
seek to track the performance of their respective Indexes. The Exchange
submits that Commentary .07 to Amex Rule 1202 accommodates the listing
and trading of the Shares.

Introduction

    In January 2006, the Commission approved Commentary .07 to Amex
Rule 1202, which expanded the ability of the Exchange to list and trade
TIRs based on a portfolio of underlying investments.\3\ The Exchange
recently commenced the trading of shares of both the PowerShares DB
Commodity Index Tracking Fund \4\ and the PowerShares DB G10 Currency
Harvest Fund (formerly known as the DB Currency Index Value Fund) \5\
pursuant to this Commentary .07 to Amex Rule 1202. The Exchange notes
that the Commission has permitted Amex to list and trade other products
linked to the performance of underlying currencies and commodities.\6\
In the instant proposal, the Exchange proposes to list and trade the
Shares pursuant to such rule.
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    \3\ See Securities Exchange Act Release No. 53105 (January 11,
2006), 71 FR 3129 (January 19, 2006).
    \4\ See id. (approving the listing and trading of the DB
Commodity Index Tracking Fund).
    \5\ See Securities Exchange Act Release No. 54450 (September 14,
2006), 71 FR 55230 (September 21, 2006) (approving the listing and
trading of shares of the PowerShares DB G10 Currency Harvest Fund,
formerly known as the DB Currency Index Value Fund).
    \6\ See, e.g., Securities Exchange Act Release Nos. 53582 (March
31, 2006), 71 FR 17510 (April 6, 2006) (approving the listing and
trading of shares of the United States Oil Fund, LP); 53521 (March
20, 2006), 71 FR 14967 (March 24, 2006) (approving the listing and
trading of shares of the iShares Silver Trust); 53059 (January 5,
2006), 71 FR 2072 (January 12, 2006) (approving the listing and
trading of shares of the Euro Currency Trust); 51058 (January 19,
2005), 70 FR 3749 (January 26, 2005) (approving the listing and
trading of shares of the iShares COMEX Gold Trust); and 50603
(October 28, 2004), 69 FR 64614 (November 5, 2004) (approving the
listing and trading of shares of the streetTRACKS Gold Shares).
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    Under Commentary .07(c) to Amex Rule 1202, the Exchange may list
and trade TIRs investing in Investment Shares such as the Shares. The
Shares will conform to the initial and continued listing criteria under
Commentary .07(d) to Amex Rule 1202. Each of the Funds will be formed
as a separate series of a Delaware statutory trust pursuant to a
Certificate of Trust and a Declaration of Trust and Trust Agreement
among Wilmington Trust Company, as trustee, the Managing Owner, and the
holders of the Shares.\7\
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    \7\ The Trust and the Funds will not be subject to registration
and regulation under the Investment Company Act of 1940 (the ``1940
Act'').
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Description of the Indexes

    Both the Long Index and Short Index are designed to reflect the
return from investing in the first-to-expire (i.e., nearest-expiration-
month) DX Contract, whose performance is tied to the USDX[supreg]. The
first-to-expire DX Contract is the futures contract that expires in
March, June, September, or December. DX Contracts are traded through
the FINEX currency markets of the New York Board of Trade
(``NYBOT'').\8\
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    \8\ The DX Contract is a futures contract tied to the
USDX[supreg] that is traded on NYBOT. The DX Contracts have been
trading on NYBOT since 1985. The contract calls for the receipt/
delivery of the underlying six component currencies, or ``Index
Currencies'' (as defined herein), of the USDX[supreg]. The trading
session for the DX Contract on NYBOT is from 8:05 a.m. to 3 p.m.
Eastern time (``ET''). Futures contracts on the USDX[supreg] are
also traded in Dublin, Ireland, through the FINEX Europe market from
7 p.m to 10 p.m. ET and from 2 a.m. to 8:05 a.m. ET. Liquidity of
the DX Contract is derived from the underlying foreign exchange
market with respect to each Index Currency. The daily average volume
of the foreign currency exchange market as calculated by the Bank
for International Settlements (BIS) is approximately $1.2 trillion
(for the three-year period from 1999-2001). The Index Currencies
account for approximately 94.5% of that daily volume. The minimum
price movement of a DX Contract is .01 of an USDX[supreg] point, or
$10.00 per DX Contract. The settlement value of the underlying
USDX[supreg] is computed using a trade-weighted geometric average of
the six component currencies (as described in more detail herein).
The Exchange states that NYBOT's Web site contains additional
information regarding the DX Contracts at http://www.nybot.com.

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    The Long Index is created by taking a long position in a DX
Contract. As a result, the Long Index will reflect the performance of
the DX Contract, i.e., the percentage gain or loss sustained by the DX
Contract. The use of long positions in DX Contracts in the construction
of the Long Index will cause the Long Index level to rise as a result
of any upward price movement in the DX Contracts. This would reflect
any rise of the U.S Dollar (``USD'') versus the underlying basket of
Index Currencies (as defined herein). An example of the Long Index
methodology is as follows: Assume that the USDX[supreg] index level is
100, and the price of the DX Contract is currently $2. The notional DX
Contract amount (or number of DX contracts bought for the Long Index)
would be 50. The DX Contract value would be 50 multiplied by $2 and
equal to the USDX[supreg] level. In the case of the Long Index, 50 DX
Contracts would be purchased in order to be fully invested. The Long
Index would accordingly be adjusted to account for the long position in
the additional DX Contracts. The calculation of the Long Index level
each trading day would be as follows: Long Index level = Number of DX
Contractst-1 x (DX Contract Pricet-DX Contract
Pricet-1) + Long Index levelt-1. For purposes of
the example, the Long Index level would be calculated to be 125, where
the number of DX Contractst-1 is 50 (Long Index
levelt-1/DX Contract Pricet-1), the DX Contract
Pricet is 2.5, the DX Contract Pricet-1 is 2, and
the Long Index levelt-1 is 100.\9\
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    \9\ The Exchange notes that the example applies if
t-1 is an Index Roll Day (as defined herein). For all
other days the number of DX Contracts held is equal to the number of
contracts held on the previous business day.
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    Conversely, the Short Index is created by taking a short position
in a DX Contract. The Short Index will reflect the inverse of the
performance of the DX Contract, i.e., the inverse of the percentage
gain or loss sustained by the DX Contract. The use of short positions
in DX Contracts in the construction of the Short Index causes the Short
Index level to rise as a result of any downward price movement in the
DX Contracts. This would reflect any fall of the USD versus the
underlying basket of Index Currencies. Using the example above, 50 DX
Contracts would be sold to maintain

the appropriate short position in the DX Contract. The calculation of
the Short Index level each trading day would similarly be as follows:
Short Index level = Number of DX Contractst-1 x (DX Contract
Pricet-DX Contract Pricet-1) +/-Short Index
levelt-1. The only difference in the case of the Short Index
is that the DX Contract value would be negative due to the short
position in the DX Contract. For purposes of the example, the Short
Index level would be calculated to be 75, where the number of DX
Contractst-1 is -50 (Short Index levelt-1/DX
Contract Pricet-1), the DX Contract Pricet is 2.5, the DX
Contract Pricet-1 is 2, and the Short Index
levelt-1 is 100.\10\ Due to the ``rolling'' characteristic
of the Long and Short Indexes (as described in more detail herein), the
potential returns will be compounded, unlike a traditional futures
contract, which would expire at the end of its term.
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    \10\ Id.
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    The performance of the DX Contracts is related to the six
underlying currencies (the ``Index Currencies'') of the USDX[supreg].
The Index Currencies are the Euro, Japanese Yen, British Pound,
Canadian Dollar, Swedish Krona, and Swiss Franc. These currencies
represent the currencies of the major trading partners of the United
States. The USDX[supreg] is composed of notional amounts of each Index
Currency reflecting a geometric average of the change in the Index
Currencies' exchange rates against the USD relative to those as of
March 1973.\11\ The USDX[supreg] provides a general indication of the
international value of the USD by averaging the exchange rates between
the USD and the Index Currencies. The USDX[supreg] is calculated 24
hours a day based on exchange rates supplied to Reuters by 500 banks
worldwide.
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    \11\ The Exchange states that March 1973 was chosen as the base
period of the USDX[supreg] because it represents a significant
milestone in foreign exchange history when the world's major trading
nations allowed their currencies to float freely against each other.
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    The sponsor of the Indexes is Deutsche Bank AG London (the ``Index
Sponsor''). The Indexes are calculated by the Index Sponsor during the
trading day on the basis of the most recently reported trade price for
the DX Contract.\12\ The market value of the Indexes during the trading
day will be equal to the number of DX Contracts represented in the
Indexes, multiplied by the real-time DX Contract price. As described
below, the Index levels will be calculated and disseminated at least
every 15 seconds.\13\ The closing level of the Indexes is calculated by
the Index Sponsor on the basis of the closing price for the DX Contract
and applying such price to the relevant notional amount. The Indexes
include provisions for the replacement of expiring DX Contracts. The DX
Contracts will be rolled quarterly on the Index Roll Day, which is
defined as the Wednesday prior to the applicable IMM Date.\14\ The
procedure for replacing expiring DX Contracts occurs as follows: (1)
The DX Contract that expires on the next IMM Date is sold, and (2) a
position in the DX Contract that expires on the IMM Date following the
next IMM Date is purchased.
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    \12\ The Index Sponsor has in place procedures to prevent the
improper sharing of information between different affiliates and
departments. Specifically, an information barrier exists between the
personnel of the Index Sponsor that calculate and reconstitute the
Indexes and other personnel of the Index Sponsor, including, without
limitation, the Managing Owner, employees involved in sales and
trading activities, external or internal fund managers, and bank
personnel who are involved in hedging the bank's exposure to
instruments linked to the Indexes, in order to prevent the improper
sharing of information relating to the composition and calculation
of the Indexes.
    \13\ While the Indexes are calculated and disseminated by the
Index Sponsor, an affiliate of a registered broker-dealer, a number
of independent sources verify both the intraday and closing Index
values, and the Index Sponsor uses independent feeds from Reuters to
verify all NYBOT pricing information used to calculate the Indexes.
    \14\ The third Wednesday of each month of March, June,
September, and December are the traditional settlement dates in the
International Money Market (``IMM Dates''). Due to the ``rolling''
characteristic of the Long and Short Indexes, the potential returns
will be compounded, unlike a traditional futures contract, which
would expire at the end of its term.
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    The following table reflects the base weights for each Index
Currency as of March 1973 with respect to the USDX[supreg]:

------------------------------------------------------------------------
                                                            Base weight
                     Index currency                             (%)
------------------------------------------------------------------------
Euro....................................................           57.60
Japanese Yen............................................           13.60
British Pound...........................................           11.90
Canadian Dollar.........................................            9.10
Swedish Krona...........................................            4.20
Swiss Franc.............................................            3.60
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    If prices for the DX Contract are not available, the Index Sponsor
will typically use the prior day's DX Contract price. In exceptional
cases (such as when a daily price limit is reached), the Index Sponsor
may employ a ``fair value'' price (i.e., the price for unwinding the
futures position by over-the-counter or ``OTC'' dealers). This is
similar to the case of index options whose prices are unavailable or
unreliable.\15\
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    \15\ The Exchange represents that The Options Clearing
Corporation (``OCC''), pursuant to Article XVII, Section 4 of its
By-Laws, is permitted to use the prior day's closing price to fix an
index options exercise settlement value. In addition, the Exchange
submits that OCC may also use the next day's opening price, a price
or value at such other time as determined by OCC, or an average of
prices or values as determined by OCC.
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    The Managing Owner represents that it will seek to arrange to have
each Index calculated and disseminated at least every 15 seconds on a
daily basis through a third party if the Index Sponsor ceases to
calculate and disseminate an Index. If, however, the Managing Owner is
unable to arrange the calculation and dissemination of any Index value,
the Exchange will undertake to delist the Shares related to such Index.

Structure of the Funds

    Funds. The Bullish and Bearish Funds are separate series of a
statutory trust formed pursuant to the Delaware Statutory Trust Act and
will issue units of beneficial interests or shares that represent units
of fractional undivided beneficial interests in and ownership of the
respective Fund. Unless terminated earlier, each of the Funds is of a
perpetual duration. The investment objective of each of the Bullish and
Bearish Funds is to reflect the performance of the corresponding Long
Index and Short Index, respectively, less the expenses of the
operations of such Fund and the related Master Fund. Each of the Funds
will pursue its investment objective by investing substantially all of
its assets in the respective Master Funds. Each of the Shares will
correlate with a corresponding Master Fund unit issued by the relevant
Master Fund and held by the respective Funds.
    Master Funds. Each of the Master Funds is a separate series of a
statutory trust formed pursuant to the Delaware Statutory Trust Act and
will issue units of beneficial interests or shares that represent units
of fractional undivided beneficial interests in and ownership of the
respective Master Fund. Unless terminated earlier, each of the Master
Funds is of a perpetual duration. The investment objective of each of
the Bullish and Bearish Master Funds is to reflect the performance of
the corresponding Long Index and Short Index, respectively, less the
expenses of the operations of the relevant Fund and Master Fund. Each
of the Master Funds will pursue its investment objective by investing
primarily in DX Contracts. In addition, the Master Funds will also hold
cash and U.S. Treasury securities for deposit with futures commission
merchants (``FCM'') as margin and other high-credit-quality, short-term
fixed income securities.
    Trustee. Wilmington Trust Company is the trustee (the ``Trustee'')
of the Trust and the Master Trust. The Trustee

has delegated to the Managing Owner the power and authority to manage
and operate the day-to-day affairs of each of the Funds and the Master
Funds.
    Managing Owner. The Managing Owner is a Delaware limited liability
company which is registered with the CFTC as a CPO and CTA and is
wholly-owned by the Index Sponsor. The Managing Owner will serve as the
CPO and CTA of each Fund and each Master Fund and will manage and
control all aspects of the business of the Funds. The Exchange states
that the Managing Owner, as a registered CPO and CTA, is required to
comply with various regulatory requirements under the Commodity
Exchange Act and the rules and regulations of the CFTC and the NFA,
including investor protection requirements, anti-fraud prohibitions,
disclosure requirements, and reporting and recordkeeping requirements,
and is subject to periodic inspections and audits by the CFTC and NFA.
    Commodity Broker or Clearing Broker. Deutsche Bank Securities Inc.
(the ``Commodity Broker'' or the ``Clearing Broker'') is an affiliate
of the Managing Owner and is registered with the CFTC as a FCM. The
Clearing Broker will execute and clear each Master Fund's futures
contract transactions and will perform certain administrative services
for each Master Fund.
    Administrator. The Bank of New York is the administrator for all of
the Funds and the Master Funds (the ``Administrator''). The
Administrator will perform or supervise the performance of services
necessary for the operation and administration of each Fund and each
Master Fund. These services include, but are not limited to, receiving
and processing orders from Authorized Participants (as defined herein)
to create and redeem Baskets (as defined herein), accounting, net asset
value (``NAV'') \16\ calculations, and other fund administrative
services.
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    \16\ NAV is the total assets of each Master Fund, less total
liabilities of such Master Fund, determined on the basis of
generally accepted accounting principles. NAV per Master Fund share
is the NAV of the relevant Master Fund, divided by the number of
outstanding Master Fund units. This will be the same for the Shares
because of the one-to-one correlation between the Shares and the
units of the corresponding Master Fund.
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    Distributor. ALPS Distributors, Inc. is the distributor for both
the Funds and the Master Funds (the ``Distributor''). The Distributor
will assist the Managing Owner and the Administrator with certain
functions and duties relating to distribution of the funds, including
reviewing and filing marketing materials with NASD, fielding investor
calls, and distributing prospectuses.

Product Description

A. Creation and Redemption of Shares

    Issuances of the Shares will be made only in one or more blocks of
200,000 Shares (each such block, a ``Basket''). Each of the Funds will
issue and redeem Shares on a continuous basis, by or through
participants that have entered into participant agreements (each, an
``Authorized Participant'') \17\ with the Managing Owner at the NAV per
Share next determined after an order to purchase the Shares in a Basket
is received in proper form. Following issuance, the Shares will be
traded on the Exchange similar to other equity securities. The Shares
will be registered in book entry form through DTC.
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    \17\ An ``Authorized Participant'' is a person, who at the time
of submitting to the trustee an order to create or redeem one or
more Baskets, (1) is a registered broker-dealer, (2) is a Depository
Trust Company (``DTC'') participant or an indirect participant, and
(3) has in effect a valid participant agreement.
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    Baskets will be issued in exchange for a cash amount equal to the
NAV per Share times 200,000 Shares (the ``Basket Amount''). The Basket
Amount will be determined on each business day by the Administrator.
Authorized Participants that wish to purchase a Basket must transfer
the Basket Amount to the Administrator (the ``Cash Deposit Amount'').
Authorized Participants that wish to redeem a Basket will receive cash
in exchange for each Basket surrendered in an amount equal to the NAV
per Basket (the ``Cash Redemption Amount''). The Commodity Broker will
be the custodian for the Master Funds and responsible for safekeeping
the Master Funds' assets.
    All purchase orders received by the Administrator prior to 1 p.m.
ET will be settled by depositing with the Commodity Broker the Cash
Deposit Amount disseminated by the Administrator shortly after 10 a.m.
ET on the next business day. The Basket will be issued at noon on such
business day (T+1) at the NAV as of the later of the closing time on
the Exchange or the last to close futures exchange on which a Master
Fund's assets are traded.\18\ The Basket Amount necessary for the
creation of a Basket will change from day to day. On each day that the
Exchange is open for regular trading, the Administrator will adjust the
Cash Deposit Amount as appropriate to reflect the prior day's NAV and
accrued expenses. The Administrator will determine the Cash Deposit
Amount for a given business day by multiplying the NAV for each Share
by the number of Shares in each Basket (200,000).
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    \18\ Each Master Fund is permitted to invest its assets in those
futures contracts (DX Contracts) traded on futures exchanges that
either have a comprehensive surveillance sharing agreement with the
Exchange or are members of the Intermarket Surveillance Group
(``ISG'').
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    Likewise, all redemption orders received by the Administrator prior
to 1 p.m. ET will be settled by the Commodity Broker's payment of the
Cash Redemption Amount shortly after 10 a.m. ET on the next business
day. The Shares will not be individually redeemable, but will be
redeemable only in Baskets. To redeem, an Authorized Participant will
be required to accumulate enough Shares to constitute a Basket (i.e.,
200,000 shares). Upon the surrender of the Shares and payment of
applicable redemption transaction fees, taxes, or charges, the
Administrator will deliver to the redeeming Authorized Participant the
Cash Redemption Amount.
    On each business day, the Administrator will make available
immediately prior to the opening of trading on Amex via the facilities
of the Consolidated Tape (``CT''), the most recent Basket Amount for
the creation of a Basket. The Exchange will disseminate at least every
15 seconds throughout the trading day, via the CT, an amount
representing on a per-Share basis, the current value of the Basket
Amount. It is anticipated that the deposit of the Cash Deposit Amount
in exchange for a Basket will be made primarily by institutional
investors, arbitrageurs, and the Exchange specialist. Baskets are then
separable upon issuance into identical Shares that will be listed and
traded on the Exchange.\19\ The Exchange states that the Shares are
expected to be traded on the Exchange by professionals, as well as
institutional and retail investors. Thus, the Shares may be acquired in
two ways: (1) Through a deposit of the Cash Deposit Amount with the
Administrator during normal business hours by Authorized Participants,
or (2) through a purchase on the Exchange by investors. Trading in the
Shares on the Exchange will be effected until 4:15 p.m. ET each
business day. The minimum trading increment for such shares will be
$0.01.
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    \19\ The Shares are separate and distinct from the shares of the
Master Funds consisting primarily of DX Contracts. The Exchange
expects that the number of outstanding Shares will increase and
decrease as a result of creations and redemptions of Baskets.
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    Deutsche Bank Securities Inc., as the initial purchaser (the
``Initial Purchaser''), will initially purchase and take delivery of
200,000 Shares of each Fund, which comprises the initial Basket of each
Fund, at a purchase price of $25 per share ($5 million per Basket)
pursuant to an Initial Purchaser

Agreement. The Exchange states that the Initial Purchaser proposes to
offer to the public these Shares at a per-share offering price that
will vary depending on, among other factors, the respective trading
price of the Shares on Amex, the NAV per Share, and the supply of and
demand for the Shares at the time of the offer. Shares offered by the
Initial Purchaser at different times may have different offering
prices. The Initial Purchaser will not receive from any Fund, the
Managing Owner, or any of their affiliates, any fee or other
compensation in connection with the sale of these Shares to the public.
The Initial Purchaser may charge a customary brokerage commission.
    The Managing Owner has agreed to indemnify certain parties against
certain liabilities, including liabilities under the Securities Act of
1933, and to contribute to payments that such parties may be required
to make in respect thereof. The Exchange believes that the anticipated
minimum number of Shares of each of the Funds outstanding at the start
of trading is sufficient to provide adequate market liquidity and to
further the objectives of the respective Funds.

B. Net Asset Value (NAV)

    Shortly after 4 p.m. ET each business day, the Administrator will
determine the NAV for each of the Funds, utilizing the current
settlement value of the long positions in the DX Contracts, in the case
of the Bullish Funds, and short positions in the DX Contracts, in the
case of the Bearish Funds. At or about 4 p.m. ET each business day, the
Administrator will determine the Basket Amounts for orders placed by
Authorized Participants received before 1 p.m. ET that day. Thus,
although Authorized Participants may place valid orders to purchase
Shares throughout the trading day until 1 p.m. ET, the actual Basket
Amounts are determined at 4 p.m. ET or shortly thereafter.
    Shortly after 4 p.m. ET each business day, the Administrator, Amex,
and the Managing Owner will disseminate the NAV per Share and the
Basket Amounts (for orders placed during the day). The Basket Amounts
and the NAV are communicated by the Administrator to all Authorized
Participants via facsimile or electronic mail message and will be
available on the Index Sponsor's Web site at http://www.index.db.com.
\20\ Amex will also disclose the NAV and Basket

Amounts on its own Web site at http://www.amex.com.

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

    \20\ If the NAV is not disseminated to all market participants
at the same time, the Exchange will halt trading in the Shares of a
Fund.
---------------------------------------------------------------------------

    In calculating the NAV, the Administrator will value all futures
contracts (e.g., the DX Contracts) based on that day's settlement
price. However, if a futures contract on a trading day cannot be
liquidated due to the operation of daily limits or other rules of an
exchange upon which such futures contract is traded,\21\ the settlement
price on the most recent trading day on which such futures contract
could have been liquidated will be used in determining each Master
Fund's NAV. Accordingly, the Administrator will typically use that
day's futures settlement price for determining NAV. When calculating
NAV for each of the Funds and each of the Master Funds, the
Administrator will value the DX Contracts held by each Master Fund on
the basis of their then current market value.
---------------------------------------------------------------------------

    \21\ See supra note 18.
---------------------------------------------------------------------------

    The NAV for the Funds is total assets of the corresponding Master
Fund, less total liabilities of such Master Fund. The NAV is calculated
by including any unrealized profit or loss on futures contracts and any
other credit or debit accruing to such Master Fund but unpaid or not
received by the Master Fund. The NAV is then used to compute all fees
(including the management and administrative fees) that are calculated
from the value of such Master Fund's assets. The Administrator will
calculate the NAV per share by dividing the NAV by the corresponding
number of Shares outstanding.
    The Exchange believes that none of the Shares will trade at a
material discount or premium to the Shares of the corresponding Master
Fund held by the corresponding Fund based on potential arbitrage
opportunities. Because Shares can be created and redeemed only in
Basket Amounts at the relevant NAV, the Exchange submits that arbitrage
opportunities should provide a mechanism to mitigate the effect of any
premiums or discounts that may exist from time to time. The value of a
Share may be influenced by non-concurrent trading hours between Amex
and the various futures exchanges on which the Index Currencies are
traded. As a result, during periods when Amex is open and the futures
exchanges on which the Index Currencies are traded are closed, trading
spreads and the resulting premium or discount on the Shares may widen,
and, therefore, increase the difference between the price of the Shares
and the corresponding NAV.

Dissemination of the Indexes and Underlying DX Contract Information

    The values of the Long Index and Short Index will be disseminated
at least every 15 seconds through CT/CQ High Speed Lines, Reuters, and/
or Bloomberg, and on the Managing Owner's Web site at http://www.dbfunds.db.com.
 The Index Sponsor will similarly provide intra-day

levels and the related closing levels for the Indexes at its Web site
at http://www.index.db.com. The disseminated value of the Indexes will

not reflect changes to the prices of the Index Currencies between the
close of trading of the DX Contract on NYBOT at 3 p.m. ET and close of
trading at Amex at 4:15 p.m. ET. In addition, the Index Sponsor \22\
and the Exchange on their respective Web sites will also provide any
adjustments or changes to any of the Indexes.
---------------------------------------------------------------------------

    \22\ See supra note 12.
---------------------------------------------------------------------------

    The daily settlement prices of the DX Contracts held by each of the
Master Funds are publicly available on NYBOT's Web site (http://www.nybot.com
). In addition, various data vendors and news publications

publish futures prices and data. The Exchange represents that futures
quotes and last sale information for the DX Contracts are widely
disseminated through a variety of major market data vendors worldwide,
including Bloomberg and Reuters. In addition, the Exchange further
represents that complete real-time data for such futures is available
by subscription from Reuters and Bloomberg. NYBOT 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 DX Contracts are also available from NYBOT on
its Web site, as well as other financial informational sources.

Availability of Information Regarding the Shares

    The Web site for each of the Funds (http://www.dbfunds.db.com) and/

or the Exchange, which are publicly accessible at no charge, will
contain the following information: (1) the current NAV per Share daily,
the prior business day's NAV, and the reported closing price; (2) the
mid-point of the bid-ask price \23\ in relation to the NAV as of the
time the NAV is calculated (the ``Bid-Ask Price''); (3) the calculation
of the premium or discount of such price against such NAV; (4) data in
chart form displaying the frequency distribution of

discounts and premiums of the Bid-Ask Price against the NAV, within
appropriate ranges for each of the four previous calendar quarters; (5)
the prospectus; and (6) other applicable quantitative information.
---------------------------------------------------------------------------

    \23\ The bid-ask price of the Shares is determined by using the
highest bid and lowest offer as of the time of calculation of the
NAV.
---------------------------------------------------------------------------

    The respective NAV per Share for the Funds will be calculated and
disseminated daily by the Administrator. Amex also intends to
disseminate for each of the Funds on a daily basis by means of CT/CQ
High Speed Lines information with respect to the corresponding
Indicative Fund Value (as discussed below), recent NAV, and Shares
outstanding. The Exchange will also make available on its Web site
daily trading volume of each of the Shares, closing prices of such
Shares, and the corresponding NAV. The closing price and settlement
prices of the DX Contracts held by the Master Funds are also readily
available from NYBOT, 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.amex.com to the Index Sponsor's Web site at http://www
.index.db.com.

Dissemination of Indicative Fund Value

    As noted above, the Administrator calculates the NAV of each of the
Funds once each trading day and disseminates such NAV to market
participants. The Exchange represents that it will obtain a
representation prior to the listing of the Funds from the Trust that
the NAV per Share for each of the Funds will be made available to all
market participants at the same time. In addition, the Administrator
causes to be made available on a daily basis the corresponding Cash
Deposit Amounts to be deposited in connection with the issuance of the
respective Shares in Baskets. Moreover, other investors can request
such information directly from the Administrator.
    In order to provide updated information relating to each of the
Funds for use by investors, professionals, and persons wishing to
create or redeem the Shares, the Exchange will disseminate through the
facilities of CT, an updated Indicative Fund Value (the ``Indicative
Fund Value'') for each of the Funds. The respective Indicative Fund
Values will be disseminated on a per-Share basis at least every 15
seconds during regular Amex trading hours of 9:30 a.m. to 4:15 p.m. ET.
The Indicative Fund Value will be calculated based on the cash required
for creations and redemptions (i.e., NAV per Share x 200,000 Shares)
for each Fund, adjusted to reflect the price changes of the DX
Contracts and the holdings of U.S. Treasury securities and other high-
credit-quality, short-term fixed income securities.
    The Indicative Fund Value will not reflect price changes to the DX
Contracts between the close of trading on NYBOT at 3 p.m. ET and the
close of trading on Amex at 4:15 p.m. ET. The value of a Share may
accordingly be influenced by non-concurrent trading hours between Amex
and NYBOT.
    While NYBOT is open for trading of DX Contracts, the respective
Indicative Fund Values can be expected to closely approximate the value
per Share of the corresponding Basket Amount. However, during Amex
trading hours, when the DX Contracts have ceased trading, spreads and
resulting premiums or discounts may widen, and therefore, increase the
difference between the price of the Shares and the NAV of such Shares.
Any Indicative Fund Value on a per Share basis disseminated during Amex
trading hours should not be viewed as a real-time update of its
corresponding NAV, which is calculated only once a day.
    The Exchange believes that dissemination of the Indicative Fund
Value based on the cash amount required for its corresponding Baskets
provides additional information that is not otherwise available to the
public and is useful to professionals and investors in connection with
the related Shares trading on the Exchange or the creation or
redemption of such Shares.

Termination Events

    A Fund would be terminated if any of the following circumstances
occur: (1) The filing of a certificate of dissolution or revocation of
the Managing Owner's charter (subject to a 90-day notice period) or
upon the withdrawal, removal, adjudication, or admission of bankruptcy
or insolvency of the Managing Owner, or an event of withdrawal, subject
to exceptions; (2) the occurrence of any event which would make
unlawful the continued existence of the Trust or any Fund, as the case
may be; (3) the event of the suspension, revocation, or termination of
the Managing Owner's registration as a CPO, or membership as a CPO with
the NFA, subject to certain conditions; (4) the Trust or any Fund, as
the case may be, becomes insolvent or bankrupt; (5) shareholders
holding Shares representing at least 50% of the NAV (excluding the
Shares of the Managing Owner) notify the Managing Owner that they wish
to dissolve the Trust; (6) the determination of the Managing Owner that
the aggregate net assets of a Fund in relation to the operating
expenses of such Fund make it unreasonable or imprudent to continue the
business of such Fund, or, in the exercise of its reasonable
discretion, the determination by the Managing Owner to dissolve the
Trust because the aggregate NAV of the Trust as of the close of
business on any business day declines below $10 million; (7) the Trust
or any Fund becomes required to register as an investment company under
the 1940 Act; or (8) DTC is unable or unwilling to continue to perform
its functions, and a compatible replacement is unavailable.
    If not terminated earlier, each Fund will endure perpetually. Upon
termination of any Fund, holders of the relevant Shares will surrender
their Shares and receive from the Administrator, in cash, their portion
of the value of such Fund.

Listing and Trading Rules

    Each of the Funds will be subject to the criteria in Commentary
.07(d) of Amex Rule 1202 for initial and continued listing of their
respective Shares. The Exchange represents that, for purposes of the
initial and continued listing of the Shares, the Shares must be in
compliance with Section 803 of the Amex Company Guide and Rule 10A-3
under the Act.\24\ The Amex original listing fee applicable to the
listing of the Shares of the Funds is $5,000 per Fund. In addition, the
annual listing fee applicable under Section 141 of the Amex Company
Guide will be based upon the year-end aggregate number of Shares in all
the Funds outstanding at the end of each calendar year.
---------------------------------------------------------------------------

    \24\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------

    The Shares are equity securities subject to Amex rules governing
the trading of equity securities, including, among others, rules
governing priority, parity, and precedence of orders, specialist
responsibilities and account opening, and customer suitability (Amex
Rule 411). Initial equity margin requirements of 50% will apply to
transactions in the Shares. Shares will trade on Amex until 4:15 p.m.
ET each business day and will trade in a minimum price variation of
$0.01 pursuant to Amex Rule 127. Trading rules pertaining to odd-lot
trading in Amex equities (Amex Rule 205) will also apply.
    Amex Rule 154, Commentary .04(c), provides that stop and stop limit
orders to buy or sell a security (other than an option, which is
covered by Amex Rule 950(f) and Commentary thereto), the price of which
is derivatively priced based upon another security or index of
securities, may with the prior approval

of a floor official, be elected by a quotation, as set forth in
Commentary .04(c)(i-v). The Exchange has designated the Shares as
eligible for this treatment.\25\
---------------------------------------------------------------------------

    \25\ See Securities Exchange Act Release No. 29063 (April 10,
1991), 56 FR 15652 (April 17, 1991) (SR-Amex-90-31) at note 9
(noting the Exchange's designation of equity derivative securities
as eligible for such treatment under Amex Rule 154, Commentary
.04(c)).
---------------------------------------------------------------------------

    The Shares will be deemed to be ``Eligible Securities,'' as defined
in Amex Rule 230,\26\ for purposes of the Intermarket Trading System
(``ITS'') Plan and therefore will be subject to the trade-through
provisions of Amex Rule 236, which requires that Amex members avoid
initiating traded through for ITS securities.
---------------------------------------------------------------------------

    \26\ The term ``Eligible Security'' means any security admitted
to dealings on a participating market center which has been
designated as eligible to be traded through the intermarket
communications system. See Amex Rule 230.
---------------------------------------------------------------------------

    Specialist transactions of the Shares made in connection with the
creation and redemption of Shares will not be subject to the
prohibitions of Amex Rule 190.\27\ The Shares will not be subject to
the short sale rule pursuant to no-action relief granted in petition to
Rule 10a-1 under the Act.\28\ The Shares will generally be subject to
the Exchange's stabilization rule, Amex Rule 170, except that
specialists may 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. Commentary .07(f) to Amex
Rule 1202 sets forth this limited exception to Amex Rule 170. In
addition, the trading of the Shares will be subject to certain
conflict-of-interest provisions set forth in Commentary .07(e) to Amex
Rule 1202.
---------------------------------------------------------------------------

    \27\ See Commentary .05 to Amex Rule 190.
    \28\ See Letter in Response to Request for No-Action from
Racquel Russell, Branch Chief, Office of Trading Practices and
Processing, Division, Commission, to George T. Simon, Esq., Foley &
Lardner LLP, dated June 21, 2006 (``Simon Letter'') (indicating that
the staff of the Division will no longer respond to requests for
relief from Rule 10a-1 under the Act relating to other similar
commodity-based investment vehicles, unless they present novel or
unusual issues). The Exchange submits that the Shares qualify for
the relief set forth in the Simon Letter.
---------------------------------------------------------------------------

Suitability

    The Information Circular (as described below) will inform members
and member organizations of the characteristics of the Funds and of
applicable Exchange rules, as well as of the requirements of Amex Rule
411 (Duty to Know and Approve Customers). The Exchange notes that,
pursuant to Amex Rule 411, members and 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

    Amex 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,
such as currency fluctuation risks. Specifically, the Circular, among
other things, will discuss what the Shares are, how a Basket is created
and redeemed, applicable Amex rules, dissemination information, and
trading information. The Circular will also explain that the Funds are
subject to various fees and expenses described in the registration
statement. The Circular will also reference the fact that the CFTC has
regulatory jurisdiction over the trading of futures contracts.
    Moreover, the Information Circular will inform members and member
organizations, prior to commencement of trading, of the prospectus
delivery requirements applicable to the Funds. The Exchange notes that
investors purchasing Shares directly from the respective Funds (by
delivery of the corresponding Cash Deposit Amounts) will receive a
prospectus. Amex members purchasing Shares from the corresponding Funds
for resale to investors will deliver a prospectus to such investors.
    In addition, the Information Circular will inform Exchange members
and member organizations that the procedures for purchases and
redemptions of Shares in Basket aggregations are described in the
prospectus and that Shares are not individually redeemable, but are
redeemable only in Basket aggregations or multiples thereof. The
Circular also will advise members of their suitability obligations with
respect to recommended transactions to customers in the Shares. The
Circular will discuss any relief, if granted, by the Commission or its
staff from any rules under the Act.
    Finally, the Circular will disclose that the trading hours of the
Shares of the Funds will be from 9:30 a.m. to 4:15 p.m. ET, and that
the NAV for the Shares of the Funds will be calculated shortly after 4
p.m. ET each trading day. Information about the Shares of each Fund and
the corresponding Indexes will be publicly available on Amex's Web site
and each Fund's Web site (http://www.dbfunds.db.com).

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 applicable rules. Specifically, the Exchange will
rely on its existing surveillance procedures applicable to TIRs,
Portfolio Depository Receipts, and Index Fund Shares and will
incorporate and rely upon existing Amex surveillance procedures
governing options and equities. The Exchange currently has in place an
information sharing agreement with NYBOT for the purpose of providing
information in connection with trading in or related to futures
contracts traded on their respective exchanges comprising the Indexes.
The Exchange also notes that NYBOT is a member of ISG. As a result, the
Exchange asserts that market surveillance information is available from
NYBOT, if necessary, due to regulatory concerns that may arise in
connection with the DX Contracts.
2. Statutory Basis
    The proposed rule change is consistent with Section 6 of the
Act,\29\ in general, and furthers the objectives of Section
6(b)(5),\30\ in particular, in that it is 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 facilitating transactions in securities, and to
remove impediments to and perfect the mechanism of a free and open
market and a national market system.
---------------------------------------------------------------------------

    \29\ 15 U.S.C. 78f.
    \30\ 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 would
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

    The Exchange did not receive any written comments on 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 Amex 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.
    Amex has requested accelerated approval of this proposed rule
change prior to the 30th day after the date of publication of the
notice of the filing thereof. The Commission has determined that a 15-
day comment period is appropriate in this case.

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-Amex-2006-86 on the subject line.

Paper Comments

     Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
    All submissions should refer to File Number SR-Amex-2006-86. 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, 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 inspection
and copying in the Commission's Public Reference Room. 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-Amex-2006-86 and should be submitted on or before
February 8, 2007.

    For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\31\
---------------------------------------------------------------------------

    \31\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Nancy M. Morris,
Secretary.
 [FR Doc. E7-954 Filed 1-23-07; 8:45 am]

BILLING CODE 8011-01-P


[Federal Register Volume 82, Number 142 (Wednesday, July 26, 2017)]
[Notices]
[Pages 34717-34719]
[FR Doc No: 2017-15630]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81175; File No. SR-CBOE-2017-044]

Self-Regulatory Organizations; Chicago Board Options Exchange,
Incorporated; Order Granting Approval of Proposed Rule Change Relating
to Disaster Recovery

July 20, 2017.

I. Introduction

    On May 24, 2017, the Chicago Board Options Exchange, Incorporated
(``CBOE'' or the ``Exchange'') 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 amend CBOE Rule 6.18 relating
to disaster recovery. The proposed rule change was published for
comment in the Federal Register on June 9, 2017.\3\ The Commission
received no comments on the proposed rule change. This order grants
approval of the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 80857 (June 5,
2017), 82 FR 26825 (``Notice'').
---------------------------------------------------------------------------

II. Description of the Proposed Rule Change

    CBOE Rule 6.18 contains the Exchange's rules relating to disaster
recovery, including provisions intended to comply with Regulation
Systems Compliance and Integrity (``Regulation SCI'') concerning
business continuity and disaster recovery plans.\4\ The Exchange has
proposed to amend Rule 6.18 to provide the Exchange authority to take
additional steps that it deems necessary to preserve the Exchange's
ability to conduct business and maintain fair and orderly markets in
the event of a significant systems failure, disaster, or other unusual
circumstances. Specifically, the Exchange has proposed to amend Rule
6.18 to allow the Exchange to: (1) Establish specified additional
temporary requirements for Designated BCP/DR Participants \5\ during
use of the back-up data center; (2) temporarily allow trading in its
exclusively-licensed and/or proprietary products, on a class-by-class
basis, in an exclusively floor-based environment via open outcry if the
Exchange's primary and back-up data centers both are inoperable or
otherwise unavailable; (3) temporarily deactivate certain systems or
systems functionalities that are not essential to conducting business
on the Exchange if there is a systems disruption or malfunction,
security intrusion, systems compliance issue, or other unusual
circumstances; and (4) temporarily restrict a Trade Permit Holder's or
associated person's access to the Exchange's electronic trading systems
if the President of the Exchange determines that, because of a systems
issue, such access threatens the Exchange's ability to operate systems
essential to maintenance of a fair and orderly market.
---------------------------------------------------------------------------

    \4\ See Notice, supra note 3, at 26826; see also 17 CFR
242.1000-07.
    \5\ ``Designated BCP/DR Participants'' are Trading Permit
Holders that the Exchange has determined are, as a whole, necessary
for the maintenance of fair and orderly markets in the event of the
activation of the Exchange's business continuity and disaster
recovery plans. See Rule 6.18(b)(iv)(A). ``Trading Permit Holder''
has the meaning set forth in Section 1.1(f) of CBOE's Bylaws.
Designated BCP/DR Participants include, at a minimum, all Market-
Makers in option classes exclusively listed on the Exchange that
stream quotes in such classes and all Designated Primary Market-
Makers (``DPMs'') in multiply listed option classes. See Rule
6.18(b)(iv)(A)(2).
---------------------------------------------------------------------------

    First, the Exchange has proposed to adopt new Rule 6.18(b)(iv)(B),
which would provide that, during the use of the back-up data center, if
necessary for the maintenance of fair and orderly markets, the Exchange
may: (1) Establish heightened quoting obligations for Designated BCP/DR
Participants in a class in which the Designated BCP/DR Participant is
already an appointed Market-Maker \6\ or Lead Market-Maker \7\ up to
the standards specified for Designated Primary Market-Makers \8\ in
Rule 8.85(a); \9\ and/or (2) disallow BCP/DR Participants the ability
to deselect an appointment intraday in a class in which the BCP/DR
Participant is already an appointed Market-Maker. The Exchange would be
required to notify market participants of any of these additional
temporary requirements prior to implementing them.\10\
---------------------------------------------------------------------------

    \6\ A Market-Maker is an individual Trading Permit Holder or TPH
organization that is registered with the Exchange for the purpose of
making transactions as a dealer-specialist on the Exchange in
accordance with the provisions of Chapter VIII of the Rules. See
Rule 8.1. A ``TPH organization'' is an organization that meets the
requirements set forth in Rule 3.3.
    \7\ The Exchange may appoint one or more Market-Makers in a
class to serve as Lead Market-Makers (``LMMs''). See Rule 8.15(a).
    \8\ A DPM is a TPH organization that is approved by the Exchange
to function in allocated securities as a Market-Maker and is subject
to the obligations under Rule 8.85. See Rule 8.80.
    \9\ With respect to their allocated series, DPMs must, among
other things, provide continuous electronic quotes in the lesser of
99 percent of the non-adjusted option series or 100 percent of the
non-adjusted option series minus one call-put pair, with the term
``call-put pair'' referring to one call and one put the cover the
same underlying instrument and have the same expiration date and
exercise price, and assure that its disseminated market quotations
are accurate. See Rule 8.85(a)(i).
    \10\ See proposed Rule 6.18(b)(iv)(B). The proposal would also
renumber existing subparagraphs (B) and (C) of Rule 6.18(b)(iv) as
subparagraphs (C) and (D), respectively. See proposed Rule
6.18(b)(iv)(C) and (D).
---------------------------------------------------------------------------

    Next, the Exchange has proposed to adopt new Rule 6.18(c), which
would provide that, if the Exchange's primary and back-up data centers
become inoperable or otherwise unavailable for use due to a significant
systems failure, disaster, or other unusual circumstances, in the
interests of maintaining fair and orderly markets or for the protection
of investors, the Exchange would be able to operate in an exclusively
floor-based environment on a limited basis for certain classes.
Specifically, the Exchange could

determine, on a class-by-class basis, to temporarily allow trading in
its exclusively-licensed and/or proprietary products \11\ in an
exclusively floor-based environment via open outcry to preserve the
Exchange's ability to conduct business in those option classes.\12\
---------------------------------------------------------------------------

    \11\ According to the Exchange, its current proprietary and
exclusively-licensed products include options on CBOE Volatility
Index (VIX) futures, the S&P 500 (SPX and XSP) Index, S&P Dow Jones
Indexes (OEX, XEO and DJX), Russell 2000 (RUT) Index, FTSE Emerging
Index (FTEM/EMS), MSCI Emerging Markets Index (MXEF), and the MSCI
EAFE Index (MXEA). The Exchange will maintain a current list of all
proprietary and exclusively-licensed options products on its Web
site. See Notice, supra note 3, at 26826 n. 8. The Exchange
explained that options exclusively-listed on the Exchange may
include options also listed on other CBOE Holdings Inc. affiliated
exchanges, including C2 Options Exchange, Incorporated (``C2''), and
that currently RUT is listed on CBOE and C2. See Notice, supra note
3, at 26826 n. 9.
    \12\ See proposed Rule 6.18(c). The proposal also would renumber
existing subparagraph (c) of Rule 6.18 as subparagraph (d). See
proposed Rule 6.18(d).
---------------------------------------------------------------------------

    The Exchange has also proposed to adopt new Rule 6.18(e), which
would provide that, if there is a systems disruption or malfunction,
security intrusion, systems compliance issue, or other unusual
circumstances, the Exchange could temporarily deactivate certain
systems or systems functionalities that are not essential to conducting
business on the Exchange in accordance with the Rules or, if necessary,
to maintain fair and orderly markets or to protect investors.\13\ The
Exchange would notify market participants of any such deactivation and
subsequent reactivation promptly and in a reasonable manner determined
by the Exchange.\14\
---------------------------------------------------------------------------

    \13\ See proposed Rule 6.18(e). The Exchange stated that such
systems and systems functionalities that are non-essential to
conducting business on the Exchange include, but are not limited to,
Public Automated Routing (``PAR'') workstations, the Automated
Improvement Mechanism (``AIM''), and the Solicitation Auction
Mechanism (``SAM''). See Notice, supra note 3, at 26827-28.
    \14\ See proposed Rule 6.18(e).
---------------------------------------------------------------------------

    Finally, the Exchange has proposed to adopt new Rule 6.18(f), which
would allow the Exchange to temporarily restrict a Trading Permit
Holder's or associated person's access to the Hybrid Trading System or
other electronic trading systems if the President (or senior-level
designee) \15\ of the Exchange determines that, because of a systems
issue, such access threatens the Exchange's ability to operate systems
essential to the maintenance of fair and orderly markets.\16\ The
Exchange would continue to restrict such access until: (1) The end of
the trading session; or (2) an earlier time if the President (or
senior-level designee) of the Exchange, in consultation with the
affected Trading Permit Holder, determines that lifting the restriction
no longer poses a threat to the Exchange's ability to operate systems
essential to conducting business or continuing to maintain a fair and
orderly market on the Exchange or poses a threat to investors.\17\ In
the Notice, the Exchange also represented that it would make efforts to
contact the affected Trading Permit Holder immediately before or
contemporaneously with the restriction of access to the extent possible
while protecting the Exchange's ability to operate systems essential to
the maintenance of fair and orderly markets.\18\
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    \15\ According to the Exchange, a designee would make
determinations under this subsection only in the President of the
Exchange's absence and the designee would be a senior executive
(i.e., Vice President or above) of the Exchange. See Notice, supra
note 3, at 26828 n. 23.
    \16\ See proposed Rule 6.18(f).
    \17\ See id.
    \18\ See Notice, supra note 3, at 26828 n. 22.
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III. Discussion and Commission Findings

    After careful review, 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.\19\ In particular, the Commission finds that the proposed
rule change is consistent with Section 6(b)(5) of the Act,\20\ 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, 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 Commission also finds that the proposed rule change is consistent
with Section 6(b)(7) of the Act,\21\ which requires, among other
things, that the rules of a national securities exchange provide a fair
procedure for the prohibition or limitation by the exchange of any
person with respect to access to services offered by the exchange or a
member thereof.
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    \19\ 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).
    \20\ 15 U.S.C. 78f(b)(5).
    \21\ 15 U.S.C. 78f(b)(7).
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    The Commission believes that the proposed rule change will provide
the Exchange with additional tools to help ensure continuous operation
of the Exchange and its core systems in the event of a significant
systems failure or other unusual circumstances that threaten the
Exchange's ability to operate its systems, maintain fair and orderly
markets, and protect investors. The Commission notes that the authority
provided by the proposed provisions is limited to circumstances where
the Exchange is experiencing a disruption to its primary, or primary
and back-up, electronic systems, or where the Exchange believes it is
in imminent danger of experiencing such disruption. Further, the
Commission notes that, according to the Exchange, in accordance with
Rule 1001(a)(2)(v) of Regulation SCI, the Exchange maintains written
policies and procedures reasonably designed to ensure that its trading
systems, including its primary and back-up data centers, have levels of
capacity, integrity, resiliency, availability, and security adequate to
maintain the Exchange's operational capability and promote the
maintenance of fair and orderly markets, including, but not limited to,
business continuity and disaster recovery plans that are reasonably
designed to achieve next two-hour resumption of its critical SCI
systems, as defined in Rule 1000 of Regulation SCI.\22\ Further, the
Exchange represents that its business continuity and disaster recovery
standards are reasonably designed to achieve two-hour resumption of all
trading systems that are essential to conducting business on the
Exchange, and that the Exchange believes that its standards are
reasonably designed to support resumption in a significantly shorter
amount of time.\23\ As such, the Commission expects that the Exchange
would invoke the disaster recovery provisions in this proposed rule
change only in rare and unusual circumstances and only for very limited
periods of time.
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    \22\ See Notice, supra note 3, at 26827 n. 12.
    \23\ See id.
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    The Commission believes that the Exchange's ability, during use of
the back-up system, to invoke pre-determined heighted quoting
obligations for Designated BCP/DR Participants that are Market-Makers
(or Lead Market-Makers) in their appointed classes, or prevent them
from dropping their appointments intraday, may help to ensure that such
Designated BCP/DR Participants contribute to, and continue to help
ensure, the maintenance of fair and orderly markets in the event of a
disaster or other serious circumstances causing the Exchange to operate
out of

its back-up data center. Moreover, the Commission notes that such
additional requirements will be imposed only on Designated BCP/DR
Participants, which are market participants that the Exchange has
determined that, taken as a whole, are necessary for the maintenance of
fair and orderly markets in the event of the activation of the
Exchange's business continuity and disaster recovery plans pursuant to
Regulation SCI.\24\ The Commission believes that, through the adoption
of this rule, Designated BCP/DR Participants will be on notice that
they might be called upon to meet heightened quoting obligations up to
the levels currently required for Designated Primary Market-Makers in
CBOE Rule 8.85(a) \25\ during unusual circumstances when the back-up
data center is in use and notes that the Exchange would provide
specific notice prior to invoking this new authority. The Commission
further notes that, as described above, Regulation SCI requires the
Exchange to have business continuity and disaster recovery plans
reasonably designed to achieve two-hour resumption of critical SCI
systems and next business day resumption of trading,\26\ and the
Exchange represented that its procedures are reasonably designed to
achieve two-hour resumption of all trading systems that are essential
to conducting business on the exchange and that they are designed to
support resumption in a significantly shorter amount of time.\27\ As
such, the additional requirements imposed by this provision should be
in effect for relatively short periods of time if they are ever
invoked. In addition, to the extent the Exchange invokes this authority
when necessary to support fair and orderly markets when its systems are
in back-up mode, then the additional requirements may help support
quote activity during a disruption and thereby may help protect
investors and the public interest.
---------------------------------------------------------------------------

    \24\ See Notice, supra note 3, at 26826 n. 7.
    \25\ These heighted quoting obligations could include providing
continuous electronic quotes in up to the lesser of 99 percent of
the non-adjusted option series or 100 percent of the non-adjusted
option series minus one call-put pair in classes in which the
Designated BCP/DR Participant is already an appointed LMM or Market-
Maker. See supra note 9.
    \26\ 17 CFR 242.1001(a)(v).
    \27\ See supra notes 22-23 and accompanying text.
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    The Commission believes that the Exchange's ability to temporarily
operate in an exclusively floor-based environment via open outcry in
certain proprietary and exclusively-licensed products if the Exchange's
primary and back-up data centers become inoperable or otherwise
unavailable could help ensure that the market for these securities
would continue to be available and functioning, which should protect
investors by providing the ability to continue to trade these products
until such time as the Exchange can resume normal trading. The
Commission notes that this provision would be invoked only if the
Exchange's primary and back-up data centers were both inoperable or
otherwise unavailable due to a significant systems failure, disaster,
or other unusual circumstances, and will only apply to the Exchange's
exclusively-licensed and proprietary products, which only trade on CBOE
and, in some instances, its affiliated exchanges. The Commission notes
that the period of operation for this exclusively floor-based
environment should be minimal based on Regulation SCI's requirements
and the Exchange's two-hour resumption standard for its trading
systems.\28\
---------------------------------------------------------------------------

    \28\ See supra notes 26 and 27 and accompanying text.
---------------------------------------------------------------------------

    The Commission believes that the Exchange's ability to temporarily
deactivate certain non-core systems or systems functionalities in the
event of a systems disruption or malfunction, security intrusion,
systems compliance issue, or other unusual circumstances could help
prevent systems issues from spreading and potentially causing harm to
investors or impeding the Exchange's ability to maintain fair and
orderly markets. The Commission notes that this authority will only
extend to those systems not essential to conducting business on the
Exchange. The Commission further notes that the new rule provides that
the Exchange will notify market participants of any such deactivation
and any subsequent reactivation promptly.
    The Commission believes that the Exchange's ability to temporarily
restrict a Trading Permit Holder's or associated person's access to the
Hybrid Trading System or other electronic trading system as provided in
the rule is designed to allow the Exchange to prevent a Trading Permit
Holder's systems issues from spreading across the Exchange's systems
and potentially causing a more widespread problem implicating the
Exchange's ability to maintain fair and orderly markets and thus
potentially impacting other market participants. The Commission
believes that this connectivity restriction is consistent with Section
6(b)(7) of the Act,\29\ as the proposed limitation on access is
exceptionally limited in duration and the rule provides a fair
procedure for imposing such restrictions. Specifically, the Commission
notes that the Exchange's authority under this provision is limited to
when, due to a systems issue, a Trading Permit Holder's activity poses
a present threat to the Exchange's ability to operate systems essential
to maintaining a fair and orderly market. The Commission also notes
that the decision to restrict access would be made by the highest
levels of Exchange management, namely the President (or his or her
senior-level designee), and this restriction would be temporary,
lasting only until the end of the trading session or such earlier time
that it is determined by the President, in consultation with the
affected Trading Permit Holder, that the access no longer poses a
threat. Consistent with the Exchange's representations, the Commission
expects that the Exchange would make reasonable efforts to contact the
affected Trading Permit Holder immediately before, or, if that is not
possible, contemporaneously with, any restriction of access.\30\
---------------------------------------------------------------------------

    \29\ 15 U.S.C. 78f(b)(7).
    \30\ See supra note 18 and accompanying text.
---------------------------------------------------------------------------

    Accordingly, for the reasons discussed above, the Commission
believes that the Exchange's proposal is consistent with the Act.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\31\ that the proposed rule change (SR-CBOE-2017-044) be, and
hereby is, approved.
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    \31\ 15 U.S.C. 78s(b)(2).
    \32\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\32\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-15630 Filed 7-25-17; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register: May 20, 2009 (Volume 74, Number 96)]
[Rules and Regulations]
[Page 23628]
[DOCID:fr20my09-8]

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DEPARTMENT OF HOMELAND SECURITY

Coast Guard

33 CFR Part 117

[USCG-2009-0228]

Drawbridge Operating Regulations; Back Bay of Biloxi, Biloxi, MS

AGENCY: Coast Guard, DHS.

ACTION: Notice canceling temporary deviation from regulations.

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SUMMARY: The Coast Guard is canceling the temporary deviation
concerning the operation of the I-110 bascule span bridge across the
Back Bay of Biloxi, mile 3.0, in Biloxi, Harrison County, Mississippi.
The deviation allowed the bridge to remain closed to navigation for two
(2) two-hour periods daily to facilitate the movement of vehicular
traffic.

DATES: The temporary deviation published on April 13, 2009 (74 FR
16781) is cancelled as of May 20, 2009.

ADDRESSES: The docket for this cancelled deviation is available for
inspection or copying at the Docket Management Facility (M-30), U.S.
Department of Transportation, West Building Ground Floor, Room W12-140,
1200 New Jersey Avenue, SE., Washington, DC 20590, between 9 a.m. and 5
p.m., Monday through Friday, except Federal holidays. You may also find
this docket on the Internet by going to http://www.regulations.gov,
selecting the Advanced Docket Search option on the right side of the
screen, inserting USCG-2009-0228 in the Docket ID box, pressing Enter,
and then clicking on the item in the Docket ID column.

FOR FURTHER INFORMATION CONTACT: David Frank, Bridge Administration
Branch, telephone<PHONE_NUMBER>.

Background and Purpose

    On April 13, 2009, we published a temporary deviation entitled
``Drawbridge Operating Regulations; Back Bay of Biloxi, Biloxi,
Mississippi'' in the Federal Register (74 FR 16781). The temporary
deviation concerned allowing the I-110 bridge across the Back Bay of
Biloxi, mile 3.0, in Biloxi, Harrison County, Mississippi to remain
closed to navigation for two (2) two-hour periods daily to facilitate
the movement of vehicular traffic. This deviation from the operating
regulations was authorized under 33 CFR 117.35.

Cancellation

    The deviation was established to facilitate the flow of increased
vehicular traffic on the I-110 bridge caused by the allision to the
Popps Ferry Rd. bridge. The Popps Ferry Rd. bridge was damaged in an
allision on March 20, 2009 when two sections of the roadway were
destroyed. The bridge was returned to service on April 25, 2009, thus
reducing the vehicular traffic on the I-110 bridge during the morning
and afternoon rush hours.

    Dated: April 29, 2009.
David M. Frank,
Bridge Administrator.
[FR Doc. E9-11689 Filed 5-19-09; 8:45 am]

BILLING CODE 4910-15-P