[Federal Register: December 6, 2006 (Volume 71, Number 234)]
[Notices]
[Page 70804-70810]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr06de06-107]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-54839; File No. SR-Amex-2006-82]
Self-Regulatory Organizations; American Stock Exchange LLC; Order
Granting Accelerated Approval to a Proposed Rule Change and Amendment
No. 1 Thereto and Notice of Filing and Order Granting Accelerated
Approval to Amendment No. 2 Thereto Relating to MACRO Tradeable Shares
November 29, 2006.
I. Introduction
On August 23, 2006, the American Stock Exchange LLC (``Amex'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change pursuant to Section 19(b)(1)
of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4
thereunder.\2\ On October 20, 2006, Amex filed Amendment No. 1 to the
proposed rule change.\3\ The proposed rule change, as amended by
Amendment No. 1, was published for comment in the Federal Register on
November 2, 2006 for a 15-day comment period.\4\ The Commission
received no comments on the proposal, as amended. On November 22, 2006,
the Exchange filed Amendment No. 2 to the proposed rule change.\5\ This
order approves the proposed rule change on an accelerated basis, grants
accelerated approval to Amendment No. 2 to the proposed rule change,
and solicits comments from interested persons on Amendment No. 2.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ Amendment No. 1 supersedes and replaces the original filing
in its entirety.
\4\ See Securities Exchange Act Release No. 54658 (October 26,
2006), 71 FR 64573 (November 2, 2006) (``MACRO Notice'').
\5\ In Amendment No. 2, the Exchange revised details included in
the description of its proposal to reflect changes made to the
issuer's Form S-1 Registration Statement since the publication of
notice of the proposed rule change. The Exchange also makes
clarifying changes to the rule text and description of the proposed
rule change.
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II. Description of the Proposal
The Exchange proposes to adopt rules that would provide for the
listing and trading of Paired Trust Shares. As defined in proposed Amex
Rule 1400, Paired Trust Shares consist of ``Holding Shares'' issued by
a ``Holding Trust,'' and ``Tradeable Shares'' issued by a ``Tradeable
Trust,'' whose values track changes in a designated ``Reference
Price.'' \6\ Under proposed Amex Rule
[[Page 70805]]
1401, a Reference Price is an index or other numerical variable that
may measure assets, prices or other economic interests. Proposed Amex
Rule 1402 establishes listing and trading criteria for Paired Trust
Shares. Pursuant to Commentary .01 to proposed Amex Rule 1402, the
Exchange will submit a filing pursuant to Section 19(b) of the Act \7\
subject to Commission review and approval for each new series of Paired
Trust Shares.
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\6\ Paired Trust Shares track changes in the Reference Price
through a structure whereby the paired Holding Trusts enter into one
or more reciprocal settlement contracts and earnings distribution
agreements.
\7\ 15 U.S.C. 78s(b).
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Pursuant to these new rules, the Exchange proposes to list and
trade: (1) Claymore MACROshares Oil Up Tradeable Shares (the ``Up-MACRO
Tradeable Shares''), and (2) Claymore MACROshares Oil Down Tradeable
Shares (the ``Down-MACRO Tradeable Shares''). The Up-MACRO Tradeable
Shares and the Down-MACRO Tradeable Shares (collectively, the ``MACRO
Tradeable Shares'') are issued by and represent an undivided beneficial
interest in (1) the Claymore MACROshares Oil Up Tradeable Trust (the
``Up-MACRO Tradeable Trust'') and (2) the Claymore MACROshares Oil Down
Tradeable Trust (the ``Down-MACRO Tradeable Trust''), respectively. The
assets of these trusts (collectively, the ``MACRO Tradeable Trusts'')
each will consist exclusively of a majority of the Claymore MACROshares
Oil Up Holding Shares (``Up-MACRO Holding Shares'') issued by the
Claymore MACROshares Oil Up Holding Trust (``Up-MACRO Holding Trust'')
and the Claymore MACROshares Oil Down Holding Shares (``Down-MACRO
Holding Shares'') issued by the Claymore MACROshares Oil Down Holding
Trust (``Down-MACRO Holding Trust'').\8\
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\8\ The Up-MACRO Holding Shares and Down-MACRO Holding Shares
(collectively, MACRO Holding Shares'') will not be listed or traded
on the Exchange.
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In its proposal, the Exchange provided detailed description
regarding the structure and operation of the MACRO Holding Trusts and
MACRO Tradeable Trusts, as well as the listing and trading of MACRO
Tradeable Shares. In particular, the Exchange addressed (i) the
designation and calculation of the applicable Reference Price, (ii) the
calculation of underlying value, (iii) the application of initial and
continued listing criteria in proposed Amex Rule 1402, (iv) the
creation and redemption process, (v) the dissemination of pricing
information, including intraday indicative value, share price, changes
in the applicable Reference Price, (vi) events triggering trading halts
and/or delisting, (vii) applicable Exchange trading rules, (viii) the
distribution of an information circular to Exchange members, and (ix)
surveillance procedures. Key features of the proposal are noted below.
Product Description
Pursuant to proposed Amex Rules 1400 and 1401, the value of the
MACRO Paired Trust Shares is based on a Reference Price, which is the
settlement price as established by the NYMEX ``Settlement Price
Committee'' \9\ of the light sweet crude oil futures contract of
``Designated Maturity'',\10\ traded on the NYMEX Division of the New
York Mercantile Exchange, Inc. (``NYMEX'') as established and reported
by NYMEX on a per barrel basis in U.S. dollars at the end of each
``Price Determination Day'' \11\ (the ``Applicable Reference Price'').
Both MACRO Holding Trusts will be holding bills, bonds and notes issued
and guaranteed by the United States Treasury, and repurchase agreements
fully collateralized by U.S. Treasury securities.\12\
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\9\ In the event that no settlement price is determined for the
light sweet crude oil contract on the NYMEX on a given Price
Determination Day and no substitute oil price provider can be
utilized, then the settlement price on the prior Price Determination
Day will be utilized as that day's settlement price on which to base
the Applicable Reference Price of Crude Oil.
\10\ A light sweet futures contract of Designated Maturity means
the contract that matures (i) during the next succeeding calendar
month if the date of determination is the first day of the current
calendar month through and including the tenth business day of the
current calendar month, and (ii) during the second succeeding
calendar month if the date of determination is the eleventh business
day through the last day of the current calendar month.
\11\ A ``Price Determination Day'' for this purpose is each day
on which trading of the light sweet crude oil futures contract of
the Designated Maturity occurs by open outcry on the trading floor
of the NYMEX (located in New York City, New York), rather than
through electronic or other means. If a substitute reference oil
price is being used, the ``Price Determination Day'' will be each
day on which this price is determined by, or in accordance with the
rules of, the substitute oil price provider. If a benchmark other
than the light sweet crude oil futures contract traded on the NYMEX
is used to determine the Applicable Reference Price of Crude Oil,
the Exchange will file with the Commission a proposed rule change
pursuant to Rule 19b-4, seeking approval to continue trading the
MACRO Tradeable Shares, which must be approved by the Commission for
continued trading of the shares.
\12\ The repurchase agreements will be entered into with
counterparties that are (i) banks with at least one billion U.S.
dollars in assets or (ii) registered securities dealers that are
deemed creditworthy by the administrative agent. Such repurchase
agreements must terminate overnight, and the obligation of a
counterparty to repurchase U.S. Treasury securities from a MACRO
Holding Trust will be fully collateralized, as defined in Rule 5b-3
under the 1940 Act. None of the counterparties may be ``affiliated
persons'' (as defined in the 1940 Act) with respect to the trustee,
the administrative agent, the depositor, any of the MACRO Holding
Trusts or MACRO Tradeable Trusts or any affiliated persons with
respect to any of the foregoing entities.
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The Up-MACRO Holding Trust will enter into an income distribution
agreement and multiple settlement contracts with the Down-MACRO Holding
Trust.\13\ If the Applicable Reference Price rises above its starting
level, the Up-MACRO Holding Trust's underlying value will increase
proportionately to include all of its assets plus an obligation of the
Down-MACRO Holding Trust to transfer a portion of its assets. The Down-
MACRO Holding Trust's underlying value will decrease proportionately
because an obligation to transfer a portion of the Down-MACRO Holding
Trust's assets will be included in the calculation of the underlying
value of the Up-MACRO Holding Trust. Conversely, if the level of the
Applicable Reference Price of Crude Oil falls below its starting level,
the Up-MACRO Holding Trust's underlying value will decrease
proportionately because an obligation to transfer a portion of the Up-
MACRO Holding Trust's assets will be included in the calculation of the
underlying value of the Down-MACRO Holding Trust. The Down-MACRO
Holding Trust's underlying value will increase to include all of its
assets plus an obligation of the Up-MACRO Holding Trust to transfer a
portion of its assets.
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\13\ The assets in each of the MACRO Holding Trusts will serve
the function, among others, of securing the contractual obligations
between the two trusts.
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Creation and Redemption of MACRO Tradeable Shares
Similar to other exchange-traded fund products, the MACRO Paired
Trust Shares will be issued and redeemed on a continuous basis on any
Price Determination Day at a price equal to their respective underlying
values. Only certain qualified entities (``Authorized Participants'')
may create or redeem MACRO Paired Trust Shares. The process by which
Authorized Participants create and redeem MACRO Paired Trust Shares is
detailed in Amex's proposal. Notably, MACRO Tradeable Shares may only
be created and redeemed in paired aggregations of 50,000 Up-MACRO
Tradeable Shares and 50,000 Down-MACRO Tradeable Shares.
To create MACRO Paired Trust Shares, the Authorized Participant
deposits cash in an amount equal to the combined per share value of the
shares to be created. The proceeds will be used to purchase the
holdings of the MACRO Holding Trusts, which will be Treasuries maturing
prior to the next
[[Page 70806]]
quarterly distribution date (e.g., three-month U.S. Treasury
securities).
Depending upon whether the Authorized Participant(s) who placed the
creation order requested holding shares,\14\ the trustee for the MACRO
Holding Trusts will then deliver all or a portion of the issued MACRO
Holding Shares to the MACRO Tradeable Trusts any remainder of MACRO
Holding Shares to the creating Authorized Participant(s). The trustee
for the Up-MACRO Tradeable Trust will cause such trust to issue
additional Up-MACRO Tradeable Shares and deliver such shares to the
creating Authorized Participant(s).
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\14\ Concurrently with any Paired Issuance, an Authorized
Participant will be deemed to have directed the deposit of the MACRO
Holding Shares into the respective MACRO Tradeable Trusts and the
issuance by each MACRO Tradeable Trust of MACRO Tradeable Shares in
exchange for the deposited MACRO Holding Shares. If an Authorized
Participant wishes instead to receive MACRO Holding Shares, it must
specify this preference in its creation order.
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A similar process governs redemption of MACRO Paired Trust Shares.
In summary, the Authorized Participant must properly place a redemption
order and deliver MACRO Holding Shares or MACRO Tradeable Shares that
in the aggregate constitute the requisite number of MACRO Units being
redeemed, plus the applicable ``redemption cash component'' \15\ and
applicable transaction fee. The trustee will effect the redemption by
delivering cash and/or U.S. Treasury securities to the redeeming
Authorized Participant.\16\
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\15\ The ``redemption cash component'' is the cash that must be
delivered to a MACRO Holding Trust in connection with a paired
optional redemption by the redeeming Authorized Participant to
compensate the trust for the excess value that will be delivered to
such redeeming Authorized Participant in the form of U.S. Treasury
securities delivered to it as a Redemption Distribution.
\16\ The amount of cash and/or U.S. Treasury securities
delivered on the redemption date in a paired optional redemption by
Authorized Participants will always be equal to the aggregate per
share underlying values of the MACRO Holding Shares being redeemed,
calculated as of the redemption order date.
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Distributions
As described more fully in the publication of notice of the
proposed rule change,\17\ the MACRO Holding Trusts will make periodic
income distributions. Generally, each MACRO Holding Trust will make
Quarterly Income Distributions on its MACRO Holding Shares using the
income realized on the Treasuries held by the paired MACRO Holding
Trusts that remains available after payment of applicable fees and
expenses, and payment or receipt of income pursuant to the applicable
income distribution agreement.\18\ The MACRO Holding Trusts would also
make Redemption Distributions in response to Authorized Participant
orders (as described above), and a Final Distribution upon termination.
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\17\ See MACRO Notice, 71 FR at 64580.
\18\ If a MACRO Holding Trust fails to make either (i) a payment
under the income distribution agreement or (ii) a Quarterly Income
Distribution to its shareholders on any Quarterly Income
Distribution date because it does not have any funds available for
distribution, it will not be required to make up that payment or
Quarterly Income Distribution on subsequent Quarterly Income
Distribution dates, even if it has funds available to do so.
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The Up-MACRO Tradeable Trust will then pass through to the holders
of its Up-MACRO Tradeable Shares all Quarterly Income Distributions
(and Redemption Distributions and Final Distributions) that it receives
on the Up-MACRO Holding Shares that it holds, and the Down-MACRO
Tradeable Trust will do likewise to holders of its Down-MACRO Tradeable
Shares with respect to all distributions that it receives on the Down-
MACRO Holding Shares that it holds.
Underlying Value
The underlying value of each MACRO Holding Trust is the aggregate
amount of the assets in the paired MACRO Holding Trusts to which that
MACRO Holding Trust would be entitled if the settlement contracts
between the MACRO Holding Trusts were settled on that day.\19\
Information about the calculation of the underlying value of the MACRO
Paired Trust Shares was included in the Exchange's proposal.\20\
Importantly, if the Applicable Reference Price doubles from its
starting level, any further upside gains for holders of Up-MACRO
Tradeable Shares and Up-MACRO Holding Shares would be capped, and Down-
MACRO Tradeable Shares and Down-MACRO Holding Shares would be
valueless. Similarly, if the Applicable Reference Price decreases 100
percent from its starting level, further downside gains for holders of
Down-MACRO Tradeable Shares and Down-MACRO Holding Shares would be
capped, and the Up-MACRO Tradeable Shares and Up-MACRO Holding Shares
would be valueless.\21\
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\19\ Conceptually, the ``underlying value'' per share of MACRO
Holding Shares and MACRO Tradeable Shares is similar to the ``net
asset value'' that is calculated for many other securities. For
MACRO securities, however, net asset value is not meaningful because
the respective per share values are not determined by the total
value of the assets held by each MACRO Holding Trust at any point in
time. This is because assets are not transferred daily between the
MACRO Holding Trusts to settle the contractual transfer obligations
between them.
\20\ See MACRO Notice, 71 FR at 64583.
\21\ Among other termination triggers, if the Applicable
Reference Price rises or falls to a level at which the underlying
value of either MACRO Holding Trust is equal to 15% or less of the
assets it holds on deposit for three consecutive Price Determination
Days, the Trust shall be terminated at the end of the quarter during
which this occurs. See Amendment No. 2 supra at footnote 5.
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Arbitrage
In its proposal, the Exchange stated that market fluctuations in
the price of a MACRO Tradeable Share are expected to mirror
fluctuations in its per share underlying value (i.e., changes in the
Applicable Reference Price), similar to the manner in which an exchange
traded fund (``ETF'') share mirrors its net asset value,\22\ because,
as is the case with ETF shares, arbitrage opportunities would arise if
these values were to move out of line.
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\22\ See id.
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Periodic Dissemination of Intraday Per Share Values for MACRO Tradeable
Shares
During each trading day, the Amex, acting as the calculation agent,
will publish to the Consolidated Tape System (``CTS''), at least every
15 seconds during the entire time that the MACRO Tradeable Shares trade
on the Amex (normally 9:30 a.m. to 4:15 p.m. each Price Determination
Day), an indicative value, referred to as an Indicative Intraday Value
(``IIV''), representing the estimated underlying value per share of
both the Up-MACRO Tradeable Shares and the Down-MACRO Tradeable Shares.
The Amex will also publish these values on its Web site. To enable this
calculation, the Amex will receive real time price data from the NYMEX
for the light sweet crude oil futures contract that trades on the NYMEX
from two major market data vendors, from the opening of trading of the
light sweet crude oil futures contract on NYMEX at 10 a.m. to the close
of trading of the MACRO Tradeable Shares on the Amex at 4:15 p.m. (New
York City time).
Because the NYMEX market for the light sweet crude oil futures
contract will be closed for portions of the Amex trading day, the IIV
calculated values will become fixed at such time as the NYMEX contract
stops trading in the regular trading session.\23\ During such time
periods, however, if trading in the NYMEX light sweet crude oil futures
contract is occurring on the NYMEX electronic aftermarket system, then
those trades will be used to update IIV values.
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\23\ The IIV calculated value between the opening of trading of
the MACRO Tradeable Shares on the Amex at 9:30 a.m. and the opening
of trading of the light sweet crude oil futures contract on NYMEX at
10 a.m. (New York City time) will be based on the final price from
the prior trading day.
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[[Page 70807]]
Dissemination of Other Information on Price Determination Days
Pursuant to a separate calculation agency agreement with MACRO
Securities Depositor, LLC, MacroMarkets and the trusts, the calculation
agent (Amex) will perform a number of duties for the Up-MACRO Tradeable
Trust, the Up-MACRO Holding Trust, the Down-MACRO Tradeable Trust and
the Down-MACRO Holding Trust. On each Price Determination Day, the
calculation agent will periodically (at least every 15 seconds \24\)
calculate and disseminate an IIV for the Up-MACRO Tradeable Shares and
Down-MACRO Tradeable Shares and will also post this information on its
Web site at http://www.amex.com. As with all other Amex-listed
securities, the closing price of the Up-MACRO Tradeable Shares and the
Down-MACRO Tradeable Shares on the Amex will be available on the Amex
Web site.
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\24\ Telephone conference among Bill Love, Associate General
Counsel, Amex, Brian Trackman, Special Counsel, Division of Market
Regulation (``Division''), Commission, and Michou Nguyen, Special
Counsel, Division, Commission on November 27, 2006 (clarifying
timing of dissemination).
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The administrative agent, Claymore Securities, will maintain a Web
site (http://www.ClaymoreMacroShares.com) that is publicly accessible
at no charge and will contain the following information posted by the
trustee on each Price Determination Day:\25\
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\25\ The Exchange states that the issuer has represented that
all market participants will have access to this data at the same
time and, therefore, no market participant will have a time
advantage in using such data.
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The daily Price Level Percentage Change of the Applicable
Reference Price of Crude Oil;
The daily underlying value \26\ of the Up-MACRO Holding
Trust and the per share underlying value of the Up-MACRO Holding Shares
and the Up-MACRO Tradeable Shares; and
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\26\ See supra note 19.
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The daily underlying value of the Down-MACRO Holding Trust
and the per share underlying value of the Down-MACRO Holding Shares and
the Down-MACRO Tradeable Shares.
Pricing and other information for NYMEX light sweet crude oil
futures contracts, including those designated to be the Applicable
Reference Price, is available through major market data vendors such as
Reuters and Bloomberg.
Criteria for Initial and Continued Listing
The MACRO Tradeable Shares will be subject to the criteria in
proposed Amex Rule 1402 for initial and continued listing of Paired
Trust Shares. Notably, the Exchange states that it will receive a
representation on behalf of the MACRO Holding Trusts and MACRO
Tradeable Trusts that the underlying value per share of each MACRO
Holding Share and each MACRO Tradeable Share will be calculated daily
and will be made available to all market participants at the same time.
Such value will be available daily on the administrative agent's
publicly accessible Web site. The proposed continued listing criteria
provides for the delisting of the Up-MACRO Tradeable Shares or Down-
MACRO Tradeable Shares under any of the following circumstances:
Following the initial twelve month period from the date of
commencement of trading of the Up-MACRO Tradeable Shares or Down-MACRO
Tradeable Shares: (i) if the corresponding MACRO Tradeable Trust has
more than 60 days remaining until termination and there are fewer than
50 record and/or beneficial holders of the Up-MACRO Tradeable Shares or
Down-MACRO Tradeable Shares for 30 or more consecutive trading days;
(ii) if the corresponding MACRO Tradeable Trust has fewer than 50,000
Up-MACRO Tradeable Shares or Down-MACRO Tradeable Shares issued and
outstanding; or (iii) if the combined market value of all Up-MACRO
Tradeable Shares and Down-MACRO Tradeable Shares together is less than
$1,000,000;
If the intraday level of the Applicable Reference Price is
no longer calculated or available on at least a 15-second delayed basis
from a major market data vendor such as Reuters or Bloomberg during the
time the MACRO Tradeable Shares trade on the Amex from a source
unaffiliated with the depositor, the custodian, MacroMarkets, a MACRO
Holding Trust, a MACRO Tradeable Trust, or the Exchange that is a major
market data vendor (e.g., Reuters or Bloomberg);
If the IIV of each Up-MACRO Tradeable Share or Down-MACRO
Tradeable Share, as the case may be, is no longer made available on at
least a 15-second delayed basis by a major market vendor during the
time the MACRO Tradeable Shares trade on the Amex;
If a benchmark other than the light sweet crude oil
futures contract traded on the NYMEX is selected for the determination
of the Applicable Reference Price, unless the Exchange files with the
Commission a related proposed rule change pursuant to Rule 19b-4
seeking approval to continue trading the MACRO Tradeable Shares, and
such rule change is approved by the Commission; or
If such other event shall occur or condition exists which
in the opinion of the Exchange makes further dealings on the Exchange
inadvisable.
A minimum of 150,000 Up-MACRO Tradeable Shares and 150,000 Down-
MACRO Tradeable Shares will be required to be outstanding at the start
of trading. The initial price of an Up-MACRO Tradeable Share and a
Down-MACRO Tradeable Share will each be approximately $60 per share, or
the price of a barrel of light sweet crude oil on the last Price
Determination Day prior to the closing date. The Exchange believes that
the anticipated minimum number of MACRO Tradeable Shares outstanding at
the start of trading is sufficient to provide adequate market liquidity
and to further the objective of providing a simple and cost effective
means of making an investment that is similar to an investment in light
sweet crude oil.
The Exchange represents that it prohibits the initial and/or
continued listing of any security that is not in compliance with Rule
10A-3 under the Act.\27\
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\27\ See Rule 10A-3(c)(7).
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Trading Rules
The Exchange represents that MACRO Tradeable Shares will be deemed
to be equity securities and will be subject to various Amex Rules
governing the trading of equity securities. MACRO Tradeable Shares will
trade on the Amex from 9:30 a.m. until 4:15 p.m. (New York City time)
each business day and will trade in a minimum price variation of $0.01
pursuant to Amex Rule 127.\28\ Importantly, specialist trading of MACRO
Paired Trust Shares will be subject to proposed Amex Rules 1403 and
1404 regarding conflicts of interest, and the maintenance and
production of books and records, respectively. Unless exemptive or no-
action relief is available, MACRO Tradeable Shares will be subject to
the short sale rules, and other rules, under the Act. If exemptive or
no-action relief is provided, the Exchange will issue a notice
detailing the terms of the exemption or relief.
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\28\ See MACRO Notice, 71 FR at 64588.
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Trading Halts
Prior to the commencement of trading, the Exchange will issue an
Information Circular (described below) to members informing them of,
among other things, Exchange policies regarding trading halts in MACRO
Tradeable Shares. First, the Information
[[Page 70808]]
Circular will advise that trading will be halted in the event the
market volatility trading halt parameters set forth in Amex Rule 117
have been reached. Second, with respect to a halt in trading that is
not specified above, the Exchange may also consider other relevant
factors and the existence of unusual conditions or circumstances that
may be detrimental to the maintenance of a fair and orderly market.
In the event that: (a) The underlying value of each MACRO Holding
Trust or the per share underlying values of each of the Up-MACRO
Holding Shares, the Up-MACRO Tradeable Shares, the Down-MACRO Holding
Shares or the Down-MACRO Tradeable Shares are not disseminated daily to
all market participants at the same time; (b) the IIV, updated at least
every fifteen (15) seconds on the CTS, for the underlying value per
share of both the Up-MACRO Tradeable Shares and the Down-MACRO
Tradeable Shares is no longer calculated or available from a major
market data vendor (e.g., Reuters or Bloomberg) during the time the
MACRO Tradeable Shares trade on the Amex; or (c) the price of the NYMEX
light sweet crude oil futures contract is no longer available at least
every fifteen (15) seconds from a major market data vendor on the Amex
Web site during the time the MACRO Tradeable Shares trade on the
Amex,\29\ then the Exchange will halt trading. However, in the case of
(b) or (c) involving interruption to the required dissemination of IIVs
or futures contract prices, the Exchange may consider relevant factors
and exercise its discretion regarding the halt or suspension of trading
during the day in which the interruption to the dissemination of the
IIVs or the futures contract prices occurs. If the interruption to the
dissemination of the IIVs or the futures contract prices 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.
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\29\ Trading in the MACRO Tradeable Shares will not be halted on
the Amex, however, simply because price data from the NYMEX based on
current trading is not available outside the normal open outcry
trading hours of light sweet crude oil futures contracts on the
NYMEX from 10 a.m. to 2:30 p.m. (New York City time).
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Information Circular
The Amex will distribute an Information Circular to its members in
connection with the trading of MACRO Tradeable Shares. The Information
Circular will discuss the special characteristics and risks of trading
this type of security. Specifically, the Information Circular, among
other things, will discuss what the MACRO Tradeable Shares are, how
they are created and exchanged for MACRO Holding Shares by Authorized
Participants, the requirement that members and member firms deliver a
prospectus to investors purchasing newly issued MACRO Holding Shares
and MACRO Tradeable Shares prior to or concurrently with the
confirmation of a transaction, applicable Amex rules, dissemination of
information regarding the underlying value of each paired MACRO Holding
Trust and the share of that underlying value allocable to one Up-MACRO
Holding Share, one Up-MACRO Tradeable Share, one Down-MACRO Holding
Share and one Down-MACRO Tradeable Share, trading information, and
applicable suitability rules. The Information Circular will also
explain that the MACRO Holding Trusts and the MACRO Tradeable Trusts
are subject to various fees and expenses described in the Registration
Statement. The Information Circular will also reference the fact that
the Commission has no jurisdiction over the trading of the NYMEX light
sweet crude oil futures contract.
The Information Circular will also notify members and member
organizations about the procedures for purchases and paired optional
redemptions of the MACRO Holding Shares held in the MACRO Tradeable
Trusts, which may only be effected in MACRO Units by Authorized
Participants. The Information Circular will advise members that the
upside gains to investors are capped if the Applicable Reference Price
increases or decreases greater than 100 percent. Members should take
this feature of MACRO Paired Trust Shares into consideration in
discharging their suitability obligations. Additionally, the
Information Circular will discuss any relief, if granted, by the
Commission or the staff from any rules under the Act.
Surveillance
The Exchange represents that its surveillance procedures are
adequate to properly monitor the trading of the MACRO Tradeable Shares
listed pursuant to the proposed new listing standards. Exchange
surveillance procedures applicable to trading in the proposed MACRO
Tradeable Shares will be similar to those applicable to trust issued
receipts, Portfolio Depository Receipts and Index Fund Shares currently
trading on the Exchange. The Amex surveillance systems use data
published over CTS (e.g., the IIVs) in its normal course of business.
In the event the Exchange needs additional information to audit
transactions in MACRO Tradeable Shares, the NYMEX and Amex have
executed a comprehensive information sharing agreement (``CSSA'') to
support the surveillance responsibilities of the two exchanges.
III. Discussion and Commission's Findings
After careful consideration, the Commission finds that the proposed
rule change, as amended, is consistent with the requirements of the Act
and the rules and regulations thereunder applicable to a national
securities exchange.\30\ In particular, the Commission finds that the
proposed rule change, as amended, is consistent with the requirements
of 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.
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\30\ In approving this proposed rule change, the Commission
notes that it has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
\31\ 15 U.S.C. 78f(b)(5).
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A. Surveillance
The Commission notes that the Exchange has represented that its
surveillance procedures are adequate to monitor the trading of MACRO
Paired Trust Shares. The Exchange's CSSA with the NYMEX for the purpose
of providing information in connection with trading in or related to
futures contracts traded on the NYMEX that will serve as the Reference
Price creates the basis for the Amex to monitor for fraudulent and
manipulative practices in the trading of the Paired Trust Shares.
Moreover, adoption of proposed Amex Rule 1404 should facilitate
surveillance because it will require Exchange specialists, upon Amex's
request, to provide the Exchange with information that the specialist
uses in connection with pricing and trading the Paired Trust Shares,
including proprietary or other information relating to trading in the
asset, commodity or other economic interest underlying the Reference
Price, related options, related futures or options on futures, or any
other related derivatives by the specialist or an affiliated
entity.\32\
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\32\ Proposed Amex Rule 1404 requires that the specialist
handling the Paired Trust Shares provide the Exchange with
information relating to its trading in the shares and the accounts
of the member organization acting as specialist, member
organization, or approved person of such member organization in the
futures underlying the Applicable Reference Price, related futures
or related options on futures, or any other related derivatives.
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[[Page 70809]]
B. Dissemination of Information
The Commission believes that sufficient venues exist for obtaining
reliable information so that investors in the MACRO Paired Trust Shares
can monitor the Applicable Reference Price relative to the IIV of their
MACRO Tradeable Shares.
Real-time information about the trading of futures contracts on
NYMEX, including futures on light sweet crude oil, is available through
major market data vendors by subscription. Delayed information is often
publicly available from futures exchanges. The Exchange stated that
daily settlement prices for the oil futures contract designated as the
Applicable Reference Price for the MACRO Paired Trust Shares is
publicly available on NYMEX's Internet Web site.
Additionally, the Exchange has represented that it will calculate
and publish to the CTS and its Web site the IIV for both the Up-MACRO
Tradeable Shares and Down-MACRO Tradeable Shares, at least every 15
seconds during the time that the MACRO Tradeable Shares trade on the
Amex, representing their estimated underlying value on a per share
basis. The Commission believes that publication of such information
should promote price transparency with regard to the MACRO Tradeable
Shares.
The Commission notes that the Exchange will receive a
representation on behalf of the MACRO Holding Trusts and MACRO
Tradeable Trusts that the underlying value per share of each MACRO
Holding Share and each MACRO Tradeable Share will be calculated daily
and will be made available to all market participants at the same time.
Furthermore, if the IIV or Applicable Reference Price is not
disseminated as described in its proposal, the Exchange may halt
trading during the day in which the interruption to the dissemination
of the IIVs or the futures contract prices occurs. If the interruption
to the dissemination of the IIVs or the futures contract prices
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. The Commission believes that these trading halt
rules, together with the NAV dissemination requirements and Exchange's
proposed delisting criteria, will help ensure that an appropriate level
of transparency exists with respect to the MACRO Tradeable Shares to
allow for the maintenance of fair and orderly markets.
C. Listing and Trading
The Commission finds that the Exchange's proposed rules and
procedures for the listing and trading of the Paired Trust Shares are
consistent with the Act. The Paired Trust Shares will trade as equity
securities subject to Amex rules including, among others, rules
governing priority, parity and precedence of orders, specialist
responsibilities, account opening and customer suitability
requirements. The Commission finds that proposed Amex Rule 1403
relating to certain specialist prohibitions is reasonably designed to
address potential conflicts of interest in connection with acting as a
specialist in Paired Trust Shares.\33\
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\33\ Proposed Amex Rule 1403 provides that the prohibitions in
Amex Rule 175(c) apply to a specialist in Paired Trust Shares so
that the specialist or affiliated person may not act or function as
a market maker in an asset, commodity or other economic interest
underlying the Reference Price, related options, related futures or
options on futures, or any other related derivatives.
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The Commission believes that the listing and delisting criteria for
the Paired Trust Shares should help to maintain a minimum level of
liquidity and therefore minimize the potential for manipulation of the
Paired Trust Shares. Additionally, the Commission finds that proposed
Amex Rule 1404 is reasonably designed to help ensure that specialists
handling the Paired Trust Shares provide the Exchange with all the
necessary information relating to their trading in the asset, commodity
or other economic interest underlying the Reference Price, related
options, related futures or options on futures, or any other related
derivatives.
Finally, the Commission notes that the Information Circular the
Exchange will distribute will inform members and member organizations
about the terms, characteristics and risks in trading the Paired Trust
Shares, including their prospectus delivery obligations.
D. Accelerated Approval
The Commission finds good cause to approve the proposed rule change
and Amendment No. 1 thereto prior to the thirtieth day after
publication for comment in the Federal Register pursuant to Section
19(b)(2) of the Act.\34\ Accelerating approval of this proposed rule
change should benefit investors who desire to participate, through the
MACRO Paired Trust Shares, in an investment based on the value light
sweet crude oil as reflected in designated NYMEX futures contracts.
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\34\ 15 U.S.C. 78s(b)(2).
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The Commission also finds good cause to approve Amendment No. 2 to
the proposed rule change prior to the 30th day after the amendment is
published for comment in the Federal Register. Amendment No. 2 makes
certain changes to the filing to reflect minor changes made to the
issuer's Form S-1 Registration Statement since the filing of this
proposed rule change. Amendment No. 2 also makes certain clarifying
changes to the rule text and description of the proposed rule change.
The Commission believes that, as a whole, these proposed changes
strengthen the proposed rule change and do not raise any new regulatory
issues.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning Amendment No. 2, including whether Amendment No. 2
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 rule-comments@sec.gov. Please include
File No. SR-Amex-2006-82 on the subject line.
Paper Comments
Send paper comments in triplicate to Nancy M. Morris,
Secretary, Securities and Exchange Commission, Station Place, 100 F
Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-Amex-2006-82. 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 such
filing also will be available for inspection and copying at the
principal office of the Amex. All
[[Page 70810]]
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-2006-82 and should be
submitted on or before December 27, 2006.
V. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the Act,
that the proposed rule change (SR-Amex-2006-82), as amended by
Amendments No. 1 and 2, be, and it hereby is, approved on an
accelerated basis.
For the Commission, by the Division of Market Regulation,
pursuant to delegated authority.\35\
Nancy M. Morris,
Secretary.
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\35\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E6-20657 Filed 12-5-06; 8:45 am]
BILLING CODE 8011-01-P