[Federal Register: March 11, 2008 (Volume 73, Number 48)]
[Notices]
[Page 13060-13064]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr11mr08-116]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-57430; File No. SR-NASDAQ-2008-012]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Order Granting Accelerated Approval of Proposed
Rule Change To Trade Shares of the GreenHaven Continuous Commodity Fund
Pursuant to Unlisted Trading Privileges
March 4, 2008.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on February 27, 2008, The NASDAQ Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been substantially prepared by the Exchange.
This order provides notice of the proposed rule change and approves it
on an accelerated basis.
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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
Nasdaq proposes to trade, pursuant to unlisted trading privileges
(``UTP''), shares (``Shares'') of the GreenHaven Continuous Commodity
Fund (``Fund'').
The text of the proposed rule change is available from the
Exchange's Web site (http://nasdaq.complinet.com), at the principal
office of the Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange 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 III below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Nasdaq proposes to trade pursuant to UTP the Shares, which
represent beneficial ownership interests in the GreenHaven Continuous
Commodity Index Master Fund's (``Master Fund'') net assets, consisting
solely of the common units of beneficial interest of the Master Fund
(``Master Fund Units''). A rule proposal to list and trade the Shares
has been filed by the American Stock Exchange LLC (``Amex'') and
approved by the Commission.\3\
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\3\ See Securities Exchange Act Release No. 56969 (December 14,
2007), 72 FR 724211 (December 20, 2007) (SR-Amex-2007-53) (``Amex
Proposal'').
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The investment objective of the Fund and the Master Fund is to
reflect the performance of the Continuous Commodity Total Return Index
(``Index'' or ``CCI-TR'') over time, less the expenses of the
operations of the Fund and the Master Fund. The Index is widely viewed
as a broad measure of overall commodity price trends because of the
diverse nature of the Index's constituent commodities. The CCI-TR
consists of 17 commodity futures prices. The 17 commodities are
currently corn, wheat, soybeans, live cattle, lean hogs, gold, silver,
copper, cocoa, coffee, sugar 11, cotton, orange juice,
platinum, crude oil, heating oil, and natural gas. The Index is
calculated to produce an unweighted geometric mean of the individual
commodity price relatives, i.e., a ratio of the current price to the
base year average price. The Fund pursues its investment objective by
investing substantially all of its assets in the Master Fund. The
Master Fund pursues its investment objective by investing in a
portfolio of exchange-traded futures contracts (``Commodity Futures
Contracts'') on the commodities comprising the Index (``Index
Commodities''). The Master Fund also holds cash and U.S. Treasury
securities for deposit with the Master Fund's Commodity Broker as
margin and other high-credit-quality short-term fixed income
securities. The Master Fund's portfolio is managed to reflect the
performance of the Index over time.
The Funds will not be subject to registration and regulation under
the Investment Company Act of 1940. The Master Fund is not actively
managed, but instead seeks to track the performance of the CCI-TR. To
maintain the correspondence between the composition and weightings of
the Index Commodities comprising the
[[Page 13061]]
Index, GreenHaven Commodity Services LLC (``Managing Owner'') \4\ may
adjust the portfolio on a daily basis to conform to periodic changes in
the identity and/or relative weighting of the Index Commodities. The
Managing Owner will also make adjustments and changes to the portfolio
in the case of significant changes to the Index.
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\4\ GreenHaven Commodity Services LLC, a Delaware limited
liability company, will serve as the Managing Owner of the Fund and
the Master Fund. The Managing Owner will serve as the commodity pool
operator (``CPO'') and commodity trading advisor (``CTA'') of the
Fund and the Master Fund. The Managing Owner is registered as a CPO
and CTA with the Commodity Futures Trading Commission (``CFTC'') and
is a member of the National Futures Association (``NFA'').
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Dissemination and Availability of Information About the Underlying
Index, Underlying Futures Contracts and the Shares
According to the Amex Proposal, Reuters is the owner, publisher,
and custodian of CCI-TR, which represents a total return version of the
ninth revision (as of 1995) of the original Commodity Research Bureau
(CRB) Index. Values of the underlying Index are computed by Reuters and
widely disseminated every 15 seconds during Amex's trading hours, which
corresponds to Nasdaq's regular market session.
CCI-TR is calculated to offer investors a representation of the
investable returns that an investor should expect to receive by
attempting to replicate the CCI index by buying the respective
commodity futures and collateralizing their investment with U.S.
Government securities (i.e., 90-day T-Bills). The CCI-TR takes into
account the economics of rolling listed commodity futures forward to
avoid delivery and maintain exposure in liquid contracts. To achieve
the objectives of the index, Reuters has established rules for
calculation of the index. Specifically, only settlement and last-sale
prices are used in the Index's calculation, bids and offers are not
recognized. Where no last-sale price exists, typically in the more
deferred contract months, the previous days' settlement price is used.
According to the Amex Proposal, the Managing Owner represents that
it will seek to arrange to have the Index calculated and disseminated
on a daily basis through a third party if the Index Sponsor ceases to
calculate and disseminate the Index. If, however, the Managing Owner is
unable to arrange the calculation and dissemination of the Index, Amex
has represented in the Amex Proposal that it will undertake to delist
the Shares. In such event, the Exchange would cease trading the Shares.
The disseminated value of the Index will not reflect changes to the
prices of the Index Commodities between the close of trading of the
various Commodity Futures Contracts and the close of trading of
Nasdaq's regular market session. In addition, Reuters and Amex on their
respective Web sites will also provide any adjustments or changes to
the Index.
The daily settlement prices for each of the Commodity Futures
Contracts held by the Master Fund are publicly available on the NYBOT,
New York Mercantile Exchange (``NYMEX''), Chicago Mercantile Exchange
(``CME''), and Chicago Board of Trade (``CBOT'') Web sites.\5\ In
addition, various data vendors and news publications publish futures
prices and data. Futures contract quotes and last-sale information for
the Commodity Futures Contracts on the Index Commodities is widely
disseminated through a variety of market data vendors worldwide,
including Bloomberg and Reuters. In addition, complete real-time data
for the Commodity Futures Contracts are available by subscription from
Reuters and Bloomberg. The various futures exchanges also provide
delayed futures information on current and past trading sessions and
market news free of charge on their respective Web sites. The specific
contract specifications for each Commodity Futures Contract are also
available from the various futures exchanges on their Web sites as well
as other financial informational sources.
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\5\ See http://www.nybot.com, http://www.nymex.com, http://
www.cme.com and http;//www.cbot.com.
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The Web site for the Fund and/or Amex, which are publicly
accessible at no charge, will contain the following information: (1)
The current NAV per Share daily and the prior business day's NAV per
Share and the reported closing price; (2) the midpoint of the bid-ask
price \6\ in relation to the NAV per Share as of the time the NAV per
Share is calculated (``Bid-Ask Price''); (3) calculation of the premium
or discount of such price against such NAV per Share; (4) data in chart
form displaying the frequency distribution of discounts and premiums of
the Bid-Ask Price against the NAV per Share, within appropriate ranges
for each of the four previous calendar quarters; (5) the Prospectus;
and (6) other applicable quantitative information.
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\6\ The bid-ask price of Shares is determined using the highest
bid and lowest offer as of the time of calculation of the NAV.
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According to the Amex Proposal, Amex intends to disseminate for the
Fund on a daily basis by means of CTA/CQ High Speed Lines information
with respect to the corresponding Indicative Fund Value (as discussed
below), recent NAV's per Share and shares outstanding. Amex will also
make available on its Web site daily trading volume of the Shares,
closing prices of the Shares, and the NAV per Share. The closing prices
and settlement prices of the Commodity Futures Contracts held by the
Master Fund are also readily available from the NYMEX, CBOT, CME, and
NYBOT; automated quotation systems; published or other public sources;
or on-line information services such as Bloomberg or Reuters.
The Bank of New York (the ``Administrator'') calculates and
disseminates, once each trading day, the NAV per Share to market
participants. Amex has represented that it will obtain a representation
(prior to listing of the Funds) that the NAV per Share will be
calculated daily and 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 addition,
other investors can request such information directly from the
Administrator, and such information will be provided upon request.
In order to provide updated information relating to the Fund for
use by investors, professionals, and persons wishing to create or
redeem the Shares, Amex will disseminate, through the facilities of
CTA, an updated Indicative Fund Value for the Fund, according to the
Amex Proposal. The Indicative Fund Value will be disseminated on a per-
Share basis at least every 15 seconds from 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 x 50,000) for the Fund
adjusted to reflect the price changes of the Commodity Futures
Contracts and the holdings of U.S. Treasury securities and other high-
credit-quality short-term fixed income securities. In addition,
quotations and last-sale information regarding the Shares will be
disseminated through the facilities of the CTA.
The Indicative Fund Value will not reflect changes to the price of
an underlying commodity between the close of trading of the futures
contracts at the relevant futures exchanges and the close of trading of
Nasdaq's regular market session on the Exchange. The Indicative Fund
Value will not reflect changes to the price of an underlying commodity
in the pre-market or post-
[[Page 13062]]
market trading sessions. The value of a Share may accordingly be
influenced by non-concurrent trading hours between Exchange and the
various futures exchanges on which the futures contracts based on the
Index commodities are traded. While the Shares will trade on the
Exchange from 7 a.m. to 8 p.m. ET, the trading hours for each of the
Index commodities underlying the futures contracts will vary.
While the markets for futures trading for each of the Index
commodities is open, the Indicative Fund Value can be expected to
closely approximate the value per Share of the corresponding Basket
Amount. However, during Exchange trading hours when the Commodity
Futures 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 the Shares. The Indicative Fund
Value on a per-Share basis disseminated during Nasdaq's regular market
session should not be viewed as a real-time update of the NAV, which is
calculated only once a day.
Trading Halts
Nasdaq will halt trading in the Shares under the conditions
specified in Nasdaq Rules 4120 and 4121. The conditions for a halt
include a regulatory halt by the listing market. UTP trading in the
Shares will also be governed by provisions of Nasdaq Rule 4120(b)
relating to temporary interruptions in the calculation or wide
dissemination of the Indicative Fund Value. Additionally, Nasdaq may
cease trading the Shares if other unusual conditions or circumstances
exist which, in the opinion of Nasdaq, make further dealings on Nasdaq
detrimental to the maintenance of a fair and orderly market. Nasdaq
will also follow any procedures with respect to trading halts as set
forth in Nasdaq Rule 4120(c). Finally, Nasdaq will stop trading the
Shares if the listing market delists them.
Trading Rules
Nasdaq deems the Shares to be equity securities, thus rendering
trading in the Shares subject to its existing rules governing the
trading of equity securities, including Nasdaq Rule 4630, which governs
trading of Commodity-Related Securities. The trading hours for the
Shares on the Exchange would be 7 a.m. to 8 p.m., ET, unless such
trading hours are changed by a subsequent rule change.
Surveillance
Nasdaq believes that its surveillance procedures are adequate to
address any concerns about the trading of the Shares on Nasdaq. Trading
of the Shares through Nasdaq will be subject to FINRA's surveillance
procedures for equity securities in general.\7\ The Exchange may obtain
information via the Intermarket Surveillance Group (``ISG'') from other
exchanges who are members or affiliates of the ISG.\8\
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\7\ FINRA surveils trading on Nasdaq pursuant to a regulatory
services agreement. Nasdaq is responsible for FINRA's performance
under this regulatory services agreement.
\8\ For a list of the current members and affiliate members of
ISG, see http://www.isgportal.com. CBOT, CME, and NYBOT are members
of ISG.
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Information Circular
Nasdaq is able to obtain information regarding trading in the
Shares and the underlying Futures Contracts through its members in
connection with the proprietary or customer trades that such members
effect on any relevant market. Nasdaq is party to Information Sharing
Agreements with NYMEX for the purpose of providing information in
connection with trading in or related to Futures Contracts traded on
those markets. If the Fund trades on other exchanges, Nasdaq will enter
into information sharing agreements with those particular exchanges.
Prior to the commencement of trading, Nasdaq will inform its
members in an Information Circular of the special characteristics and
risks associated with trading the Shares. Specifically, the Information
Circular will discuss the following: (1) The procedures for purchases
and redemptions of Shares in Baskets (and that Shares are not
individually redeemable); (2) Nasdaq Rule 2310, which imposes
suitability obligations on Nasdaq members with respect to recommending
transactions in the Shares to customers; (3) how information regarding
the Indicative Fund Value is disseminated; (4) the requirement that
members deliver a prospectus to investors purchasing newly issued
Shares prior to or concurrently with the confirmation of a transaction;
(5) the risks involved in trading the Shares during the pre-market and
post-market trading sessions when an updated Indicative Fund Value will
not be calculated or publicly disseminated; and (6) trading
information. The Information Circular will also discuss any exemptive,
no-action, or interpretive relief granted by the Commission from any
rules under the Act.
In addition, the Information Circular will reference that the Fund
is subject to various fees and expenses described in the relevant
registration statement. The Information Circular will also reference
the fact that there is no regulated source of last-sale information
regarding physical commodities, that the Commission has no jurisdiction
over the trading of commodity futures contracts, and that the CFTC has
regulatory jurisdiction over the trading of commodity futures
contracts.
The Information Circular will also disclose the trading hours of
the Shares of the Fund and that the NAV for the Shares will be
calculated after 4 p.m. ET, each trading day.
2. Statutory Basis
Nasdaq believes that the proposed rule change is consistent with
the Act and the rules and regulations thereunder applicable to a
national securities exchange. Specifically, Nasdaq believes that the
proposed rule change is consistent with the section 6(b)(5) \9\
requirements that an exchange have rules 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. In addition,
Nasdaq believes that the proposal is consistent with Rule 12f-5 under
the Act \10\ because it deems the Shares to be equity securities, thus
rendering trading in the Shares subject to the Exchange's existing
rules governing the trading of equity securities.
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\9\ 15 U.S.C. 78f(b)(5).
\10\ 17 CFR 240.12f-5.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
The Exchange neither solicited nor received comments on the
proposal.
III. 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:
[[Page 13063]]
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 Number SR-NASDAQ-2008-012 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-NASDAQ-2008-012. 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, 100 F Street,
NE., Washington, DC 20549, on official business days between the hours
of 10 a.m. and 3 p.m. Copies of such filing also will be available for
inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NASDAQ-2008-012 and should
be submitted on or before April 1, 2008.
IV. Commission's Findings and Order Granting Accelerated Approval of
the Proposed Rule Change
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.\11\ In particular, the Commission finds that the proposed
rule change is consistent with section 6(b)(5) of the Act,\12\ which
requires that an exchange have rules designed, among other things, to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and in general to protect investors and the public
interest. The Commission believes that this proposal should benefit
investors by increasing competition among markets that trade the
Shares.
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\11\ In approving this rule change, the Commission notes that it
has considered the proposal's impact on efficacy, competition, and
capital formation. See 15 U.S.C. 78c(f).
\12\ 15 U.S.C. 78f(b)(5).
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In addition, the Commission finds that the proposal is consistent
with section 12(f) of the Act,\13\ which permits an exchange to trade,
pursuant to UTP, a security that is listed and registered on another
exchange.\14\ The Commission notes that it previously approved the
listing and trading of the Shares on Amex.\15\ The Commission also
finds that the proposal is consistent with Rule 12f-5 under the
Act,\16\ which provides that an exchange shall not extend UTP to a
security unless the exchange has ineffect a rule or rules providing for
transactions in the class or type of security to which the exchange
extends UTP. The Exchange has represented that it meets this
requirement because it deems the Shares to be equity securities, thus
rendering trading in the Shares subject to the Exchange's existing
rules governing the trading of equity securities.
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\13\ 15 U.S.C. 78 l (f).
\14\ Section 12(a) of the Act, 15 U.S.C. 78 l (a), generally
prohibits a broker-dealer from trading a security on a national
securities exchange unless the security is registered on that
exchange pursuant to Section 12 of the Act. Section 12(f) of the Act
excludes from this restriction trading in any security to which an
exchange ``extends UTP.'' When an exchange extends UTP to a
security, it allows its members to trade the security as if it were
listed and registered on the exchange even though it is not so
listed and registered.
\15\ See supra note 3.
\16\ 17 CFR 240.12f-5.
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The Commission further believes that the proposal is consistent
with section 11A(a)(1)(C)(iii) of the Act,\17\ which sets forth
Congress' finding that it is in the public interest and appropriate for
the protection of investors and the maintenance of fair and orderly
markets to assure the availability to brokers, dealers, and investors
of information with respect to quotations for and transactions in
securities. Quotations for and last-sale information regarding the
Shares are disseminated through the facilities of the CTA and the
Consolidated Quotation System. In addition, Amex will calculate and
disseminate the Indicative Fund Value per Share through the facilities
of the Consolidated Tape Association at least every 15 seconds
throughout Amex trading hours for the Shares. Amex will also make
available on its Web site daily trading volume, the closing prices, and
the NAV. Quotations and last-sale information regarding the Commodity
Futures Contracts are widely disseminated through a variety of market
data vendors worldwide, including Bloomberg and Reuters. In addition,
complete real-time data for the Commodity Futures Contracts is
available from Reuters and Bloomberg. The relevant futures exchanges
also provide various market data and contract specifications for each
Commodity Futures Contract on their respective Web sites.
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\17\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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The Commission also believes that the proposal appears reasonably
designed to preclude trading of the Shares if transparency is impaired
or there is unfair dissemination of the NAV. Trading in the Shares will
be subject to Nasdaq Rule 4120(b), which provides that, if the listing
market halts trading when the Indicative Fund Value is not being
calculated or disseminated, the Exchange also would halt trading.
Nasdaq also will halt trading in the Shares if it learns that the
listing market has instituted a regulatory halt, which would include
instances where Amex halts trading in the Shares because the NAV per
Share is not disseminated to all market participants at the same time.
Lastly, the Exchange has represented that it may halt trading in the
Shares if other unusual conditions or circumstances exist which make
further dealings on the Exchange detrimental to the maintenance of a
fair and orderly market.
In support of this proposal, the Exchange has made the following
additional representations:
1. The Exchange's surveillance procedures are adequate to properly
monitor Exchange trading of the Shares in all trading sessions and to
deter and detect violations of Exchange rules.
2. Prior to the commencement of trading, the Exchange would inform
its members in an Information Bulletin of the special characteristics
and risks associated with trading the Shares.
3. The Information Bulletin also would discuss the requirement that
members deliver a prospectus to investors purchasing newly issued
Shares prior to or concurrently with the confirmation of a transaction.
This approval order is based on the Exchange's representations.
The Commission notes that, if the Shares should be delisted by the
listing
[[Page 13064]]
exchange, the Exchange would no longer have authority to trade the
Shares pursuant to this order.
The Commission finds good cause for approving this proposal before
the thirtieth day after the publication of notice thereof in the
Federal Register. As noted above, the Commission previously found that
the listing and trading of the Shares on Amex is consistent with the
Act. The Commission presently is not aware of any regulatory issue that
should cause it to revisit this finding or would preclude the trading
of the Shares on the Exchange pursuant to UTP. Therefore, accelerating
approval of this proposal should benefit investors by creating, without
undue delay, additional competition in the market for the Shares.
It is therefore ordered, pursuant to section 19(b)(2) of the
Act,\18\ that the proposed rule change (SR-NASDAQ-2008-012) be, and it
hereby is, approved on an accelerated basis.
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\18\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E8-4749 Filed 3-10-08; 8:45 am]
BILLING CODE 8011-01-P