[Federal Register Volume 75, Number 46 (Wednesday, March 10, 2010)]
[Notices]
[Pages 11216-11220]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-5068]
[[Page 11216]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61642; File No. SR-NYSEArca-2010-07]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change Relating to Listing of AdvisorShares WCM/BNY
Mellon Focused Growth ADR ETF
March 3, 2010.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that on February 23, 2010, NYSE Arca, Inc. (the ``Exchange'' or
``NYSE Arca'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 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
The Exchange proposes to list and trade the following under NYSE
Arca Equities Rule 8.600 (``Managed Fund Shares''): AdvisorShares WCM/
BNY Mellon Focused Growth ADR ETF. The text of the proposed rule change
is available on the Exchange's Web site at http://www.nyx.com, at the
Exchange's principal office 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 self-regulatory organization
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 those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to list and trade the following Managed Fund
Shares \4\ (``Shares'') under NYSE Arca Equities Rule 8.600:
AdvisorShares WCM/BNY Mellon Focused Growth ADR ETF (``ADR Fund'' or
``Fund'').\5\ 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.\6\
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\4\ A Managed Fund Share is a security that represents an
interest in an investment company registered under the Investment
Company Act of 1940 (15 U.S.C. 80a) (``1940 Act'') organized as an
open-end investment company or similar entity that invests in a
portfolio of securities selected by its investment advisor
consistent with its investment objectives and policies. In contrast,
an open-end investment company that issues Investment Company Units,
listed and traded on the Exchange under NYSE Arca Equities Rule
5.2(j)(3), seeks to provide investment results that correspond
generally to the price and yield performance of a specific foreign
or domestic stock index, fixed income securities index or
combination thereof.
\5\ The Commission previously approved listing and trading on
the Exchange of the following actively managed funds under Rule
8.600. See Securities Exchange Act Release Nos. 57619 (April 4,
2008), 73 FR 19544 (April 10, 2008) (SR-NYSEArca-2008-25) (order
approving Rule 8.600 and Exchange listing and trading of PowerShares
Active AlphaQ Fund, PowerShares Active Alpha Multi-Cap Fund,
PowerShares Active Mega-Cap Portfolio and PowerShares Active Low
Duration Portfolio); 57801 (May 8, 2008), 73 FR 27878 (May 14, 2008)
(SR-NYSEArca-2008-31) (order approving Exchange listing and trading
of twelve actively-managed funds of the WisdomTree Trust); 59826
(April 28, 2009), 74 FR 20512 (May 4, 2009) (SR-NYSEArca-2009-22)
(order approving Exchange listing and trading of Grail American
Beacon Large Cap Value ETF); 60460 (August 7, 2009), 74 FR 41468
(August 17, 2009) (SR-NYSEArca-2009-55) (order approving Exchange
listing and trading of Dent Tactical ETF); 60975 (November 10, 2009)
(SR-NYSEArca-2009-83) (order approving listing of Grail American
Beacon International Equity ETF); 60981 (November 10, 200 [sic])
(SR-NYSEArca-2009-79) (order approving listing of five fixed income
funds of the PIMCO ETF Trust).
\6\ The Trust is registered under the 1940 Act. On September 8,
2009, the Trust filed with the Commission 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 description of the operation of the
Trust and the Fund herein is based on the Registration Statement.
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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. 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 ADR Fund will periodically
change the composition of its portfolio to best meet its investment
objective. Neither the Advisor nor the Sub-Advisor is affiliated with a
broker-dealer.\7\
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\7\ With respect to the Fund, the Exchange represents that the
Advisor, as the investment advisor of the Fund, as well as the Sub-
Advisor to the Fund and their related personnel, are subject to
Investment Advisers Act Rule 204A-1. This Rule specifically requires
the adoption of a code of ethics by an investment advisor to
include, at a minimum: (i) Standards of business conduct that
reflect the firm's/personnel fiduciary obligations; (ii) provisions
requiring supervised persons to comply with applicable federal
securities laws; (iii) provisions that require all access persons to
report, and the firm to review, their personal securities
transactions and holdings periodically as specifically set forth in
Rule 204A-1; (iv) provisions requiring supervised persons to report
any violations of the code of ethics promptly to the chief
compliance officer (``CCO'') or, provided the CCO also receives
reports of all violations, to other persons designated in the code
of ethics; and (v) provisions requiring the investment advisor to
provide each of the supervised persons with a copy of the code of
ethics with an acknowledgement by said supervised persons. In
addition, Rule 206(4)-7 under the Advisers Act makes it unlawful for
an investment advisor to provide investment advice to clients unless
such investment advisor has (i) adopted and implemented written
policies and procedures reasonably designed to prevent violation, by
the investment advisor and its supervised persons, of the Advisers
Act and the Commission rules adopted thereunder; (ii) implemented,
at a minimum, an annual review regarding the adequacy of the
policies and procedures established pursuant to subparagraph (i)
above and the effectiveness of their implementation; and (iii)
designated an individual (who is a supervised person) responsible
for administering the policies and procedures adopted under
subparagraph (i) above.
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According to the Registration Statement, the ADR Fund's investment
objective is long-term capital appreciation above international
benchmarks, such as the BNY Mellon Classic ADR Index and the MSCI EAFE
Index. WCM seeks to achieve the Fund's investment objective by
primarily investing in other exchange-traded funds (``ETFs''), as well
as a portfolio of American Depositary Receipts (``ADRs'') included in
the BNY Mellon Classic ADR Index,\8\ and swap contracts. The ADR Fund's
portfolio will typically have exposure to fewer than 30 companies
concentrating on the best ideas developed in WCM's investment process.
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\8\ According to the Registration Statement, Depositary
Receipts, which include ADRs, Global Depositary Receipts, Euro
Depositary Receipts and New York Shares, are negotiable U.S.
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 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 Fund currently intends to invest primarily in the securities of
other ETFs
[[Page 11217]]
consistent with the requirements of Section 12(d)(1) of the 1940 Act,
or any rule, regulation or order of the SEC or interpretation thereof.
The Fund will only make such investments in conformity with the
requirements of Section 817 of the Internal Revenue Code of 1986, as
amended (``Internal Revenue Code''). The ETFs in which the Fund will
invest will primarily be index-based ETFs that hold substantially all
of their assets in securities representing a specific index. Typically
the components of such indexes will be short-term U.S. government
securities.
Although WCM currently seeks to achieve the Fund's investment
objective by investing primarily in ETFs, WCM could at any point seek
to achieve the Fund's investment objective by investing primarily in
ADRs.
The Investment Process
According to the Registration Statement, WCM employs a team
approach through Investment Strategy Group, consisting of four senior
investment professionals (the ``Portfolio Managers''). This team
establishes portfolio guidelines for sector and industry analysis and
develops the portfolio of the ADR Fund. The Portfolio Managers analyze
the major trends in the global economy in order to identify those
economic sectors and industries that are most likely to benefit.
According to the Registration Statement, typical themes incorporated in
the Portfolio Managers' investment process include demographics, global
commerce, outsourcing, the growing global middle class and the
proliferation of technology. A portfolio strategy is then implemented
using a combination of low duration fixed income ETFs, direct
investment in ADRs selected by WCM, and swap contracts based on the
ADRs selected by WCM, that will best capitalize on these investment
themes and subsequent expected growth of the underlying assets. All buy
and sell decisions are made by the Portfolio Managers.
Portfolio Construction
According to the Registration Statement, WCM seeks, either directly
or through swap exposure, non-US domiciled quality growth businesses.
WCM focuses its attention on conventional growth sectors such as
technology, consumer discretionary and staples, and healthcare.
The ADR Fund utilizes quantitative analysis that entails backward-
looking screens to help narrow the non-U.S. universe of companies in
which the ADR Fund invests. The ADR Fund looks for companies with
market capitalization of $3.5 billion or greater within traditional
growth sectors, and that have high returns on invested capital; low or
no debt; high gross, operating margins; and a history of sustainable
growth. Typical portfolio construction would entail exposure to 15 or
more industries with initial positions of approximately 2-5%; maximum
position size of approximately 10%; maximum sector size of
approximately 45%; maximum industry exposure of approximately 15%; and
maximum emerging markets exposure of approximately 35%.
The Fund will under normal circumstances have at least 80% of its
total assets invested in ADRs or their synthetic equivalent. Prior to
any change in this policy, the Fund will provide shareholders with 60
days written notice. This is a non-fundamental policy of the Fund and
may be changed with respect to the Fund by the Fund's board of
director.
The ADR Fund may invest in equity securities, including common and
preferred stock, warrants, convertible securities and Master Limited
Partnerships. The ADR Fund's portfolio will consist primarily of ADRs
or their synthetic equivalent and the ADR Fund will not invest in non-
U.S. equity securities outside of U.S. markets.
The Advisor represents that, with respect to Fund assets invested
in ADRs, the composition of the Fund's portfolio, on a continual basis,
will consist of:
(1) ADRs that in the aggregate account for at least 90% of the
weight of the ADRs in the Fund's portfolio each shall have a minimum
global market value of at least $100 million;
(2) ADRs that in the aggregate account for at least 70% of the
weight of the ADRs in 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; and
(3) Any portion of the Fund's portfolio consisting of ADRs will
include a minimum of 20 ADRs of which the most heavily weighted ADR
shall not exceed 25% of the weight of the ADRs in the Fund's portfolio,
and the five most heavily weighted ADRs shall not exceed 60% of the
weight of the ADRs in the Fund's portfolio.
The ADR Fund may use futures contracts and related options for bona
fide hedging; attempting to offset changes in the value of securities
held or expected to be acquired or be disposed of; attempting to gain
exposure to a particular market, index or instrument; or other risk
management purposes. As stated in the Registration Statement, the Trust
is not subject is not subject [sic] to registration or regulation as a
commodity pool operator under the Commodity Exchange Act.\9\ The ADR
Fund will reduce the risk that it will be unable to close out a futures
contract by only entering into futures contracts that are traded on a
national futures exchange regulated by the Commodity Futures Trading
Commission (``CFTC'').
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\9\ 7 U.S.C. 1 et seq.
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The ADR Fund may purchase and write put and call options on indices
and enter into related closing transactions; trade put and call options
on securities, securities indices and currencies, as the Sub-Advisor
determines is appropriate in seeking the ADR Fund's investment
objective, except as restricted by the ADR Fund's investment
limitations (as described in the Registration Statement); enter into
repurchase agreements with financial institutions; use reverse
repurchase agreements as part of the ADR Fund's investment strategy;
and make short-term investments in U.S. Government securities.
The Fund expects to enter into swap agreements, including, but not
limited to, equity index swaps and interest rate swap agreements. The
Fund will utilize swap agreements in an attempt to gain exposure to
specific securities in a market without actually purchasing those
securities, or to hedge a position.
In addition, the ADR Fund may invest up to 15% of its net assets in
illiquid securities. For this purpose, ``illiquid securities'' are
securities that the ADR Fund may not sell or dispose of within seven
days in the ordinary course of business at approximately the amount at
which the ADR Fund has valued the securities.
The ADR Fund, from time to time, in the ordinary course of
business, may purchase securities on a when-issued or delayed-delivery
basis (i.e., delivery and payment can take place between a month and
120 days after the date of the transaction). The ADR Fund may invest in
U.S. Treasury zero-coupon bonds.
As stated in the Registration Statement, it is a fundamental policy
of the ADR Fund that it may not, with respect to 75% of its total
assets, (i) purchase securities of any issuer (except securities issued
or guaranteed by the U.S. Government, its agencies or
instrumentalities) if, as a result, more than 5% of its total assets
would be invested in the securities of such issuer; or (ii) acquire
more than 10% of the outstanding voting securities of any one
[[Page 11218]]
issuer.\10\ In addition, the ADR Fund may not purchase any securities
which would cause 25% or more of its total assets to be invested in the
securities of one or more issuers conducting their principal business
activities in the same industry or group of industries, provided that
this limitation does not apply to investments in securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities,
or shares of investment companies.\11\
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\10\ This diversification standard is contained in section
5(b)(1) of the 1940 Act.
\11\ Such fundamental policies may not be changed without the
vote of a majority of the outstanding voting securities of the ADR
Fund.
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According to the Registration Statement, the ADR Fund will seek to
qualify for treatment as a Regulated Investment Company (``RIC'') under
the Internal Revenue Code.\12\
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\12\ According to the Registration Statement, one of several
requirements for RIC qualification is that a Fund must receive at
least 90% of the Fund's gross income each year from dividends,
interest, payments with respect to securities loans, gains from the
sale or other disposition of stock, securities or foreign
currencies, or other income derived with respect to the Fund's
investments in stock, securities, foreign currencies and net income
from an interest in a qualified publicly traded partnership (the
``90% Test''). A second requirement for qualification as a RIC is
that a Fund must diversify its holdings so that, at the end of each
fiscal quarter of the Fund's taxable year: (a) At least 50% of the
market value of the Fund's total assets is represented by cash and
cash items, U.S. Government securities, securities of other RICs,
and other securities, with these other securities limited, in
respect to any one issuer, to an amount not greater than 5% of the
value of the Fund's total assets or 10% of the outstanding voting
securities of such issuer; and (b) not more than 25% of the value of
its total assets are invested in the securities (other than U.S.
Government securities or securities of other RICs) of any one issuer
or two or more issuers which the Fund controls and which are engaged
in the same, similar, or related trades or businesses, or the
securities of one or more qualified publicly traded partnership (the
``Asset Test'').
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To respond to adverse market, economic, political or other
conditions, the ADR Fund may invest 100% of its total assets, without
limitation, in high-quality short-term debt securities and money market
instruments. The ADR Fund may be invested in these instruments for
extended periods, depending on the Sub-Advisor's assessment of market
conditions. These debt securities and money market instruments include
shares of other mutual funds, commercial paper, certificates of
deposit, bankers' acceptances, U.S. Government securities and
repurchase agreements.
Creations and redemptions of Shares occur in large specified blocks
of Shares, referred to as ``Creation Units''. According to the
Registration Statement, the shares of the Fund are ``created'' at their
net asset value (``NAV'') by market makers, large investors and
institutions only in block-size Creation Units of 25,000 shares or
more. A ``creator'' enters into an authorized participant agreement (a
``Participant Agreement'') with the ADR Fund's distributor (the
``Distributor'') or a DTC participant that has executed a Participant
Agreement with the Distributor (an ``Authorized Participant''), and
deposits into the ADR Fund a portfolio of securities closely
approximating the holdings of the ADR Fund and a specified amount of
cash, together totaling the NAV of the Creation Unit(s), in exchange
for 25,000 shares of the ADR Fund (or multiples thereof). Similarly,
Shares can only be redeemed in Creation Units, generally 25,000 shares
or more, principally in-kind for a portfolio of securities held by the
ADR Fund and a specified amount of cash together totaling the NAV of
the Creation Unit(s). Shares are not redeemable from the ADR Fund
except when aggregated in Creation Units. The prices at which creations
and redemptions occur are based on the next calculation of NAV after an
order is received in a form prescribed in the Participant Agreement.
According to the Registration Statement, the Trust reserves the
right to offer an ``all cash'' option for creations and redemptions of
Creation Units for the ADR Fund. In addition, Creation Units may be
issued in advance of receipt of Deposit Securities subject to various
conditions, including a requirement to maintain a cash deposit with the
Trust at least equal to a specified percentage of the market value of
the missing Deposit Securities. In each instance, transaction fees may
be imposed that will be higher than the transaction fees associated
with traditional in-kind creations or redemptions. In all cases, such
fees will be limited in accordance with SEC requirements applicable to
management investment companies offering redeemable securities.
The Shares will conform to the initial and continued listing
criteria under NYSE Arca Equities Rule 8.600. The Exchange represents
that, for initial and/or continued listing, the Fund will be in
compliance with Rule 10A-3 \13\ under the Exchange Act, as provided by
NYSE Arca Equities Rule 5.3. A minimum of 100,000 Shares will be
outstanding at the commencement of trading on the Exchange. The
Exchange will obtain a representation from the issuer of the Shares
that the net asset value and the Disclosed Portfolio will be made
available to all market participants at the same time.
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\13\ 17 CFR 240.10A-3.
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Availability of Information
The Fund's Web site (http://www.advisorshares.com), which will be
publicly available prior to the public offering of Shares, will include
a form of the Prospectus for the Fund that may be downloaded. The
Fund's Web site will include additional quantitative information
updated on a daily basis, including, for the Fund, (1) daily trading
volume, the prior business day's reported closing price, NAV and mid-
point of the bid/ask spread at the time of calculation of such NAV (the
``Bid/Ask Price''),\14\ and a calculation of the premium and discount
of the Bid/Ask Price against the NAV, and (2) 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. On each business day,
before commencement of trading in Shares in the Core Trading Session on
the Exchange, the Fund will disclose on its Web site the Disclosed
Portfolio as defined in NYSE Arca Equities Rule 8.600(c)(2) that will
form the basis for the Fund's calculation of NAV at the end of the
business day.\15\
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\14\ The Bid/Ask Price of the Fund is determined using the
highest bid and the lowest offer on the Exchange as of the time of
calculation of the Fund's NAV. The records relating to Bid/Ask
Prices will be retained by the Fund and its service providers.
\15\ 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.
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On a daily basis, for each portfolio security of the Fund, the Fund
will disclose on its Web site the following information: Ticker symbol,
name of security, number of shares held in the portfolio, and
percentage weighting of the security in the portfolio. 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 Web site information will be publicly
available at no charge.
In addition, 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
[[Page 11219]]
components, will be publicly disseminated daily prior to the opening of
the New York Stock Exchange (``NYSE'') via the National Securities
Clearing Corporation. The basket represents one Creation Unit of the
Fund. The NAV of the Fund will normally be determined as of the close
of the regular trading session on the NYSE (ordinarily 4 p.m. Eastern
Time) on each business day.
Investors can also obtain the Trust's Statement of Additional
Information (``SAI''), the Fund's Shareholder Reports, and its Form N-
CSR and Form N-SAR, filed twice a year. The Trust's SAI and Shareholder
Reports are available free upon request from the Trust, and those
documents and the Form N-CSR and Form N-SAR may be viewed on-screen or
downloaded from the Commission's Web site at http://www.sec.gov.
Information regarding market price and trading volume of the Shares is
and will be continually available on a real-time basis throughout the
day on brokers' computer screens and other electronic services.
Information regarding the previous day's closing price and trading
volume information will be published daily in the financial section of
newspapers. Quotation and last sale information for the Shares will be
available via the Consolidated Tape Association (``CTA'') high-speed
line. In addition, the Portfolio Indicative Value, as defined in NYSE
Arca Equities Rule 8.600 (c)(3), will be disseminated by one or more
major market data vendors at least every 15 seconds during the Core
Trading Session. The dissemination of the Portfolio Indicative Value,
together with the Disclosed Portfolio, will allow investors to
determine the value of the underlying portfolio of the Fund on a daily
basis and to provide a close estimate of that value throughout the
trading day.
Additional information regarding the Trust and the Shares,
including investment strategies, risks, creation and redemption
procedures, fees, portfolio holdings disclosure policies, distributions
and taxes is included in the Registration Statement. All terms relating
to the Fund that are referred to, but not defined in, this proposed
rule change are defined in the Registration Statement.
Trading Halts
With respect to trading halts, the Exchange may consider all
relevant factors in exercising its discretion to halt or suspend
trading in the Shares of the Fund.\16\ Trading in Shares of the Fund
will be halted if the circuit breaker parameters in NYSE Arca Equities
Rule 7.12 have been reached. Trading also may 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. Trading in
the Shares will be subject to NYSE Arca Equities Rule 8.600(d)(2)(D),
which sets forth circumstances under which Shares of the Fund may be
halted.
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\16\ See NYSE Arca Equities Rule 7.12, Commentary .04.
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Trading Rules
The Exchange 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. Shares will trade on
the NYSE Arca Marketplace from 4 a.m. to 8 p.m. Eastern Time in
accordance with NYSE Arca Equities Rule 7.34 (Opening, Core, and Late
Trading Sessions). The Exchange has appropriate rules to facilitate
transactions in the Shares during all trading sessions. The minimum
trading increment for Shares on the Exchange will be $0.01.
Surveillance
The Exchange intends to utilize its existing surveillance
procedures applicable to derivative products (which include Managed
Fund Shares) to monitor trading in the Shares. The Exchange represents
that these 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.
The Exchange's current trading surveillance focuses on detecting
securities trading outside their normal patterns. When such situations
are detected, surveillance analysis follows and investigations are
opened, where appropriate, to review the behavior of all relevant
parties for all relevant trading violations.
The Exchange may obtain information via the Intermarket
Surveillance Group (``ISG'') from other exchanges that are members of
ISG.\17\
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\17\ For a list of the current members of ISG, see http://www.isgportal.org. The Exchange may obtain information from futures
exchanges with which the Exchange has entered into a surveillance
sharing agreement or that are ISG members. The Exchange notes that
not all components of the Disclosed Portfolio for the Fund may trade
on markets that are members of ISG or with which the Exchange has in
place a comprehensive surveillance sharing agreement.
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In addition, the Exchange also has a general policy prohibiting the
distribution of material, non-public information by its employees.
Information Bulletin
Prior to the commencement of trading, the Exchange will inform its
Equity Trading Permit (``ETP'') Holders in an Information Bulletin
(``Bulletin'') of the special characteristics and risks associated with
trading the Shares. Specifically, the Bulletin will discuss the
following: (1) The procedures for purchases and redemptions of Shares
in Creation Unit aggregations (and that Shares are not individually
redeemable); (2) 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; (3) the risks
involved in trading the Shares during the Opening and Late Trading
Sessions when an updated Portfolio Indicative Value will not be
calculated or publicly disseminated; (4) how information regarding the
Portfolio Indicative Value is disseminated; (5) 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 (6) trading information.
In addition, the Bulletin will reference that the Fund is subject
to various fees and expenses described in the Registration Statement.
The Bulletin will discuss any exemptive, no-action, and interpretive
relief granted by the Commission from any rules under the Exchange Act.
The Bulletin will also disclose that the NAV for the Shares will be
calculated after 4:00 p.m. Eastern Time each trading day.
2. Statutory Basis
The basis under the Exchange Act for this proposed rule change is
the requirement under Section 6(b)(5) \18\ that an exchange have rules
that are designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to remove
impediments to, and perfect the mechanism of a free and open market
and, in general, to protect investors and the public interest. The
Exchange believes that the proposed rule change will facilitate the
listing and trading of additional types of actively-managed exchange-
traded products that will enhance competition among market
[[Page 11220]]
participants, to the benefit of investors and the marketplace.
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\18\ 15 U.S.C. 78f(b)(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
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve the proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
The Exchange has requested accelerated approval of this proposed
rule change prior to the 30th day after the date of publication of
notice in the Federal Register. The Commission is considering granting
accelerated approval of the proposed rule change at the end of a 15-day
comment period.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an e-mail to [email protected]. Please include
File Number SR-NYSEArca-2010-07 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2010-07. 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 Web site
viewing and printing 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 the filing also will be
available for inspection and copying at the principal office of the
Exchange. All comments received will be posted without change; the
Commission does not edit personal identifying information from
submissions. You should submit only information that you wish to make
available publicly. All submissions should refer to File Number SR-
NYSEArca-2010-07 and should be submitted on or before March 25, 2010.
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. 2010-5068 Filed 3-9-10; 8:45 am]
BILLING CODE 8011-01-P