[Federal Register Volume 75, Number 139 (Wednesday, July 21, 2010)]
[Notices]
[Pages 42471-42473]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-17749]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62502; File No. SR-NYSEArca-2010-57]
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting
Accelerated Approval of Proposed Rule Change Regarding Listing and
Trading Shares of AdvisorShares WCM/BNY Mellon Focused Growth ADR ETF
July 15, 2010.
On June 16, 2010, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange''),
through its wholly owned subsidiary, NYSE Arca Equities, Inc. (``NYSE
Arca Equities''), filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to list and trade shares (``Shares'') of the
AdvisorShares WCM/BNY Mellon Focused Growth ADR ETF (the ``Fund'')
under NYSE Arca Equities Rule 8.600 (Managed Fund Shares). The proposed
rule change was published in the Federal Register on June 29, 2010.\3\
The Commission received no comments on the proposal. This order
approves the proposed rule change on an accelerated basis.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 62344 (June 21,
2010), 75 FR 37498 (``Notice'').
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I. Description of the Proposal
The Exchange proposes to list and trade the Shares pursuant to NYSE
Arca Equities Rule 8.600, which governs the listing of Managed Fund
Shares. The Shares will be offered by AdvisorShares Trust (the
``Trust''), a statutory trust organized under the laws of the State of
Delaware and registered with the Commission as an open-end management
investment company.\4\ The investment advisor to the ADR Fund is
AdvisorShares Investments, LLC (the ``Advisor''). WCM Investment
Management (``WCM'') is the sub-advisor (``Sub-Advisor'') to the ADR
Fund and the portfolio manager.\5\ The Sub-Advisor selects securities
for the Fund in which to invest pursuant to an ``active'' management
strategy for security selection and portfolio construction. The Fund's
investment objective is long-term capital appreciation above
international benchmarks such as the BNY Mellon Classic ADR Index, the
Fund's primary benchmark, and the MSCI EAFE Index, the Fund's secondary
benchmark. WCM seeks to achieve the Fund's investment objective by
selecting a portfolio of U.S. traded securities of non-U.S.
organizations included in the BNY Mellon Classic ADR Index. The BNY
Mellon Classic ADR Index predominantly includes American Depositary
Receipts (``ADRs'') and in addition includes other Depositary Receipts
(``DRs''), which include Global Depositary Receipts (``GDRs''), Euro
Depositary Receipts (``Euro DRs'') and New York Shares (``NYSs'').\6\
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\4\ The Trust is registered under the 1940 Act. On April 23,
2010, the Trust filed with the Commission Post-Effective Amendment
No. 5 to Form N-1A under the Securities Act of 1933 (15 U.S.C. 77a),
and under the 1940 Act relating to the Fund (File Nos. 333-157876
and 811-22110) (the ``Registration Statement''). The Trust has also
filed an Amended Application for an Order under Section 6(c) of the
1940 Act for exemptions from various provisions of the 1940 Act and
rules thereunder (File No. 812-13677 dated May 14, 2010)
(``Exemptive Application'').
\5\ The Exchange has represented that neither the Advisor nor
the Sub-Advisor is affiliated with a broker-dealer.
\6\ According to the Registration Statement, DRs, which include
ADRs, GDRs, Euro DRs and NYSs, are negotiable securities that
generally represent a non-U.S. company's publicly traded equity or
debt. Depositary Receipts may be purchased in the U.S. secondary
trading market. They may trade freely, just like any other security,
either on an exchange or in the over-the-counter market. Although
typically denominated in U.S. dollars, Depositary Receipts can also
be denominated in Euros. Depositary Receipts can trade on all U.S.
stock exchanges as well as on many European stock exchanges.
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The Exchange states that the Shares will conform to the initial and
continued listing criteria under NYSE Arca Equities Rule 8.600
applicable to Managed Fund Shares \7\ and that the Shares will comply
with Rule 10A-3 under the Act,\8\ as provided by NYSE Arca Equities
Rule 5.3. Additionally, among other things, the composition of the
Fund's portfolio, on a continual basis, will be subject to the
following: component stocks that in the aggregate account for at least
90% of the weight of the Fund's portfolio each shall have a minimum
global market value of at least $100 million; component stocks that in
the aggregate account for at least 70% of the weight of the Fund's
portfolio each shall have a minimum global monthly trading volume of
250,000 shares, or minimum global notional volume traded per month of
$25,000,000, averaged over the last six months; a minimum of 20
component stocks of which the most heavily weighted component stock
shall not
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exceed 25% of the weight of the portfolio, and the five most heavily
weighted component stocks shall not exceed 60% of the weight of the
portfolio; and each non-U.S. equity security underlying ADRs held by
the Fund will be listed and traded on an exchange that has last-sale
reporting. Additional information regarding the Trust, the Fund, the
Shares, the Fund's investment objectives, strategies, policies, and
restrictions, risks, fees and expenses, creation and redemption
procedures, portfolio holdings and policies, distributions and taxes,
availability of information, trading rules and halts, and surveillance
procedures, among other things, can be found in the Notice and
Registration Statement, as applicable.\9\
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\7\ The Exchange states that a minimum of 100,000 Shares will be
outstanding at the commencement of trading on the Exchange, and the
Exchange will obtain a representation from the issuer of the Shares
that the net asset value (``NAV'') per Share will be calculated
daily and that the NAV and the Disclosed Portfolio will be made
available to all market participants at the same time. See Notice,
supra note 3.
\8\ 17 CFR 240.10A-3.
\9\ See supra notes 3 and 4.
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II. Discussion and Commission's Findings
The Commission has carefully reviewed the proposed rule change and
finds that it is consistent with the requirements of Section 6 of the
Act \10\ and the rules and regulations thereunder applicable to a
national securities exchange.\11\ In particular, the Commission finds
that the proposal is consistent with Section 6(b)(5) of the Act,\12\
which requires, among other things, that the Exchange's rules be
designed to promote just and equitable principles of trade, to remove
impediments to and perfect the mechanism of a free and open market and
a national market system, and, in general, to protect investors and the
public interest. The Commission notes that the Shares must comply with
the requirements of NYSE Arca Equities Rule 8.600 to be listed and
traded on the Exchange.
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\10\ 15 U.S.C. 78f.
\11\ 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).
\12\ 17 U.S.C. 78f(b)(5).
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The Commission finds that the proposal to list and trade the Shares
on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the
Act,\13\ 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. Quotation and last-sale
information for the Shares will be available via the Consolidated Tape
Association high-speed line, and the Portfolio Indicative Value
(``PIV'') will be updated and disseminated by one or more major market
data vendors at least every 15 seconds during the Core Trading Session.
In addition, the Fund will make available on its Web site on each
business day, before the commencement of trading in Shares in the Core
Trading Session, the Disclosed Portfolio that will form the basis for
the calculation of the NAV, which will be determined at the end of the
business day.\14\ The Fund's Web site will also include additional
quantitative information updated on a daily basis relating to daily
trading volume, the prior business day's reported NAV, mid-point of the
bid/ask spread at the time of calculation of such NAV (the ``Bid/Ask
Price''),\15\ and a calculation of the premium and discount of the Bid/
Ask Price against the NAV and data in chart format displaying the
frequency distribution of discounts and premiums of the daily Bid/Ask
Price against the NAV, within appropriate ranges, for each of the four
previous calendar quarters. Information regarding the market price and
volume of the Shares will be continually available on a real-time basis
throughout the day on brokers' computer screens and other electronic
services, and the previous day's closing price and trading volume
information for the Shares will be published daily in the financial
sections of newspapers.
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\13\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
\14\ Under accounting procedures followed by the Fund, trades
made on the prior business day (``T'') will be booked and reflected
in NAV on the current business day (``T+1''). Accordingly, the Fund
will be able to disclose at the beginning of the business day the
portfolio that will form the basis for the NAV calculation at the
end of the business day.
\15\ The Bid/Ask Price of the Fund is determined using the
midpoint of the highest bid and the lowest offer on the Exchange as
of the time of calculation of the NAV. The records relating to Bid/
Ask Prices will be retained by the Fund and its service providers.
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The Commission further believes that the proposal is reasonably
designed to promote fair disclosure of information that may be
necessary to price the Shares appropriately and to prevent trading when
a reasonable degree of transparency cannot be assured. The Commission
notes that the Exchange will obtain a representation from the issuer
that the NAV per Share will be calculated daily and that the NAV and
the Disclosed Portfolio will be made available to all market
participants at the same time.\16\ Additionally, if it becomes aware
that the NAV or the Disclosed Portfolio is not disseminated daily to
all market participants at the same time, the Exchange will halt
trading in the Shares until such information is available to all market
participants.\17\ Further, if the PIV is not being disseminated as
required, the Exchange may halt trading during the day in which the
disruption occurs; if the interruption persists past the day in which
it occurred, the Exchange will halt trading no later than the beginning
of the trading day following the interruption.\18\ The Exchange
represents that neither the Advisor nor the Sub-Advisor is affiliated
with a broker-dealer. However, the Commission notes that the Reporting
Authority that provides the Disclosed Portfolio must implement and
maintain, or be subject to, procedures designed to prevent the use and
dissemination of material non-public information regarding the actual
components of each of the portfolios.\19\
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\16\ See NYSE Arca Equities Rule 8.600(d)(1)(B).
\17\ See NYSE Arca Equities Rule 8.600(d)(2)(D).
\18\ Id. Trading in the Shares may also be halted because of
market conditions or for reasons that, in the view of the Exchange,
make trading in the Shares inadvisable. These may include: (1) The
extent to which trading is not occurring in the securities
comprising the Disclosed Portfolio and/or the financial instruments
of the Fund; or (2) whether other unusual conditions or
circumstances detrimental to the maintenance of a fair and orderly
market are present.
\19\ See NYSE Arca Equities Rule 8.600(d)(2)(B)(ii).
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The Exchange has deemed the Shares to be equity securities subject
to the Exchange's rules governing the trading of equity securities. In
support of this proposal, the Exchange has made representations,
including:
(1) The Shares will conform to the initial and continued listing
criteria under NYSE Arca Equities Rule 8.600.
(2) 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 and applicable Federal
securities laws.
(3) Prior to the commencement of trading, the Exchange will inform
its ETP Holders in an Information Bulletin of the special
characteristics and risks associated with trading the Shares.
Specifically, the Information Bulletin will discuss the following: (a)
The procedures for purchases and redemptions of Shares in Creation Unit
aggregations and that Shares are not individually redeemable; (b) NYSE
Arca Equities Rule 9.2(a), which imposes a duty of due diligence on its
ETP Holders to learn the essential facts relating to every customer
prior to trading the Shares; (c) the risks involved in trading the
Shares during the Opening and Late Trading Sessions when an updated PIV
will not be calculated or publicly disseminated; (d) how information
regarding the PIV is disseminated; (e) the requirement that ETP Holders
deliver a prospectus to investors purchasing newly issued Shares prior
to
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or concurrently with the confirmation of a transaction; and (f) trading
information.
(4) The Funds will be in compliance with Rule 10A-3 under the Act.
(5) The Funds will not invest in non-U.S. equity securities outside
of U.S. markets. This approval order is based on the Exchange's
representations.
For the foregoing reasons, the Commission finds that the proposed
rule change is consistent with the Act and the rules and regulations
thereunder applicable to a national securities exchange.
III. Accelerated Approval
The Commission finds good cause, pursuant to Section 19(b)(2) of
the Act,\20\ for approving the proposal prior to the thirtieth day
after the date of publication of the Notice in the Federal Register.
The Commission notes that it has approved the listing and trading on
the Exchange of shares of other actively managed exchange-traded funds
based on a portfolio of securities, the characteristics of which are
similar to those to be invested by the Fund.\21\ The Commission also
notes that it has not received any comments regarding this proposal,
nor did it receive any comments on a previously filed proposed rule
change relating to the Fund.\22\ The Commission believes that the
proposal to list and trade the Shares of the Fund do not raise any
novel regulatory issues and accelerating approval of this proposal
should benefit investors by creating, without undue delay, additional
competition in the market for Managed Fund Shares.
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\20\ 15 U.S.C. 78s(b)(2).
\21\ See, e.g., Securities Exchange Act Release Nos. 61365
(January 15, 2010), 75 FR 4124 (January 26, 2010) (SR-NYSEArca-2009-
114) (approving the listing and trading of shares of two actively
managed funds of the Grail Advisors ETF Trust) and 60975 (November
10, 2009), 74 FR 59590 (November 18, 2009) (SR-NYSEArca-2009-83)
(approving the listing and trading of shares of the Grail American
Beacon International Equity ETF).
\22\ The Exchange previously filed a proposed rule change
relating to listing on the Exchange of the AdvisorShares WCM/BNY
Mellon Focused Growth ADR ETF in File No. SR-NYSEArca-2010-07. See
Securities Exchange Act Release No. 61642 (March 3, 2010), 75 FR
11216 (March 10, 2010). No comments were received on the proposal.
The Exchange withdrew the proposed rule change on April 9, 2010. See
Securities Exchange Act Release No. 61953 (April 21, 2010), 75 FR
22169 (April 27, 2010).
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IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\23\ that the proposed rule change (SR-NYSEArca-2010-57), be, and
it hereby is, approved on an accelerated basis.
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\23\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
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\24\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-17749 Filed 7-20-10; 8:45 am]
BILLING CODE 8010-01-P