[Federal Register Volume 75, Number 200 (Monday, October 18, 2010)]
[Notices]
[Pages 63874-63876]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-26132]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63076; File No. SR-NYSEArca-2010-79]
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting
Approval of a Proposed Rule Change To List and Trade Shares of Cambria
Global Tactical ETF
October 12, 2010.
I. Introduction
On August 23, 2010, NYSE Arca, Inc. (``NYSE Arca'' or ``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
list and trade shares (``Shares'') of the Cambria Global Tactical ETF
(``Fund'') under NYSE Arca Equities Rule 8.600. The proposed rule
change was published for comment in the
[[Page 63875]]
Federal Register on September 8, 2010.\3\ The Commission received no
comments on the proposal. 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. 62788 (August 30,
2010), 75 FR 54676 (``Notice'').
---------------------------------------------------------------------------
II. Description of the Proposed Rule Change
The Exchange proposes to list and trade Shares of the Fund under
NYSE Arca Equities Rule 8.600, which governs the listing of Managed
Fund Shares.\4\ The Shares will be offered by AdvisorShares Trust
(``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.\5\ The investment advisor to the Fund is
AdvisorShares Investments, LLC (``Advisor''), and the day-to-day
portfolio management of the Fund is provided by the sub-advisor to the
Fund, Cambria Investment Management, Inc. (``Sub-Advisor'').\6\ The
Exchange represents that the Shares will conform to the initial and
continued listing criteria under NYSE Arca Equities Rule 8.600 and that
the Fund will be in compliance with Rule 10A-3 under the Act,\7\ as
provided by NYSE Arca Equities Rule 5.3.
---------------------------------------------------------------------------
\4\ See NYSE Arca Equities Rule 8.600.
\5\ The Trust is registered under the Investment Company Act of
1940. On June 30, 2010, the Trust filed with the Commission a
registration statement on Form N-1A (File Nos. 333-157876 and 811-
22110) (``Registration Statement'').
\6\ The Exchange represents that neither the Advisor nor the
Sub-Advisor is affiliated with a broker-dealer. See Commentary .06
to NYSE Arca Equities Rule 8.600.
\7\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------
The Fund is a ``fund of funds,'' which means that the Fund seeks to
invest primarily in other exchange-traded funds listed and traded in
the United States (``Underlying ETFs'') and certain other exchange-
traded products including, but not limited to, exchange-traded notes,
exchange-traded currency trusts and closed-end funds. The Fund seeks to
achieve its investment objective of preserving and growing capital from
investments in the U.S. and foreign equity, fixed income, commodity and
currency markets, independent of market direction, by producing
absolute returns with reduced volatility and manageable risk and
drawdowns. The Sub-Advisor will utilize a proprietary quantitative
trend-following approach to actively manage the Fund's portfolio. No
effort is made by the Sub-Advisor to forecast future market trends or
direction; rather, the Fund seeks to capture profits in these trends
when and where they develop. The strategy is diversified across markets
and timeframes with strict risk control methods that are rules-based
and systematic. Except for Underlying ETFs that may hold non-U.S.
issues, the Fund will not otherwise invest in non-U.S. issues.
Additional information regarding the Fund, the Shares, the Fund's
investment objective, strategies, methodology, and restrictions, the
Advisor and Sub-Advisor, risks, fees and expenses, creations and
redemptions of Shares, availability of information, trading rules and
halts, and surveillance procedures, among other things, can be found in
the Registration Statement and in the Notice, as applicable.\8\
---------------------------------------------------------------------------
\8\ See supra notes 3 and 5.
---------------------------------------------------------------------------
III. Discussion and Commission's Findings
After careful review, the Commission finds that the Exchange's
proposal to list and trade the Shares is consistent with the Act and
the rules and regulations thereunder applicable to a national
securities exchange.\9\ In particular, the Commission finds that the
proposed rule change is consistent with Section 6(b)(5) of the Act,\10\
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.
---------------------------------------------------------------------------
\9\ 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).
\10\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
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, which sets forth Congress's 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 Exchange will disseminate the
Portfolio Indicative Value (``PIV'') at least every 15 seconds during
the Core Trading Session through one or more major market data vendors.
In addition, the Fund will make available on its website on each
business day before commencement of the Core Trading Session the
Disclosed Portfolio that will form the basis for the Fund's calculation
of the net asset value (``NAV'').\11\ A basket composition file, which
includes the security names and share quantities required to be
delivered in exchange for Fund shares, together with estimates and
actual cash components, will be publicly disseminated daily prior to
the opening of the NYSE via the National Securities Clearing
Corporation. The Fund's website will also include additional
quantitative information updated on a daily basis relating to 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''),\12\ 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
trading 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.
---------------------------------------------------------------------------
\11\ On a daily basis, the Advisor will disclose for each
portfolio security or other financial instrument of the Fund the
following information: Ticker symbol (if applicable), name of
security or financial instrument, number of shares or dollar value
of financial instruments held in the portfolio, and percentage
weighting of the security or financial instrument in the portfolio.
The NAV of the Fund will normally be determined as of the close of
the regular trading session on the New York Stock Exchange, Inc.
(``NYSE'') (ordinarily 4:00 p.m. Eastern Time) on each business day.
\12\ 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.
---------------------------------------------------------------------------
The Commission further believes that the proposal to list and trade
the Shares is reasonably designed to promote fair disclosure of
information that may be necessary to price the Shares appropriately and
to prevent trading when a reasonable degree of transparency cannot be
assured. The Commission notes that the Advisor and Sub-Advisor to the
Fund are not affiliated with a broker-dealer.\13\ The
[[Page 63876]]
Commission also notes that the Exchange will obtain a representation
from the Fund 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.\14\ Additionally, if it becomes
aware that the NAV or the Disclosed Portfolio is not disseminated 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. Further, if the PIV is not being disseminated as
required, the Exchange may halt trading during the day in which the
interruption 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.\15\ Finally, 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 the
portfolio.\16\
---------------------------------------------------------------------------
\13\ See Commentary .06 to NYSE Arca Equities Rule 8.600. The
Commission notes that Commentary .06 to NYSE Arca Equities Rule
8.600 requires that any investment advisers to the Fund that are
affiliated with a broker-dealer are required to implement a fire-
wall with respect to such broker-dealer regarding access to
information concerning the composition of the portfolio. Commentary
.06 to NYSE Arca Equities Rule 8.600 also requires that any
personnel who make decisions on the Fund's portfolio composition
must be subject to procedures designed to prevent the use and
dissemination of material non-public information regarding the
portfolio.
\14\ See NYSE Arca Equities Rule 8.600(d)(1)(B).
\15\ See NYSE Arca Equities Rule 8.600(d)(2)(D). 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.
\16\ See NYSE Arca Equities Rule 8.600(d)(2)(B)(ii).
---------------------------------------------------------------------------
The Exchange has represented that the Shares are equity securities
subject to the Exchange's rules governing the trading of equity
securities. In support of this proposal, the Exchange has made
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 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 or concurrently
with the confirmation of a transaction; and (f) trading information.
(4) The Fund will be in compliance with Rule 10A-3 under the
Act.\17\
---------------------------------------------------------------------------
\17\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------
(5) Except for Underlying ETFs that may hold non-U.S. issues, the
Fund will not otherwise invest in non-U.S. issues.
In addition, the Commission notes that it has not received any
comments regarding the proposed rule change.
For the forgoing reasons, the Commission believes that the
Exchange's proposal to list and trade the Shares is consistent with the
Act. This order is based on the Exchange's representations.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\18\ that the proposed rule change (SR-NYSEArca-2010-79) be, and it
hereby is, approved.
---------------------------------------------------------------------------
\18\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
---------------------------------------------------------------------------
\19\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-26132 Filed 10-15-10; 8:45 am]
BILLING CODE 8011-01-P