[Federal Register Volume 75, Number 69 (Monday, April 12, 2010)]
[Notices]
[Pages 18554-18556]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-8221]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61842; File No. SR-NYSEArca-2010-10]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Amendment No. 1 and Order Granting Accelerated Approval of a
Proposed Rule Change, as Modified by Amendment No. 1 Thereto, Relating
to the Listing of Mars Hill Global Relative Value ETF (f/k/a HTE Global
Relative Value ETF)
April 5, 2010.
I. Introduction
On Februrary 25, 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 Mars Hill Global Relative Value ETF (f/k/a HTE
Global Relative Value ETF) (the ``Fund'') under NYSE Arca Equities Rule
8.600 (Managed Fund Shares). The proposed rule change was published in
the Federal Register on March 18, 2010.\3\ The Commission received no
comments on the proposal. On March 29, 2010, the Exchange filed
Amendment No. 1 to the proposed rule change.\4\ This order approves the
proposed rule change, as modified by Amendment No. 1, 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. 61683 (March 10,
2010), 75 FR 13194 (``Notice'').
\4\ Amendment No. 1 reflects that all references in the filing
to ``HTE Global Relative Value ETF'' are replaced with ``Mars Hill
Global Relative Value ETF'' and that all references in the filing to
``HTE Asset Management LLC'' are replaced with ``Mars Hill Partners,
LLC.'' In addition, Amendment No. 1 reflects that all other
representations in the filing remain as stated therein, except that
representations referring to ``HTE Global Relative Value ETF'' and
``HTE Asset Management LLC'' are understood to mean and apply to
``Mars Hill Global Relative Value ETF'' and ``Mars Hill Partners,
LLC,'' respectively.
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II. 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.\5\ AdvisorShares Investments, LLC is the Fund's
investment advisor (the ``Advisor'') and Mars Hill Partners, LLC
(``Mars Hill'') is the Fund's sub-advisor. Foreside Fund Services, LLC
is the principal underwriter and distributor of the Fund's shares, and
the Bank of New York Mellon is the administrator, transfer agent, and
custodian for the Fund.
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\5\ The Exchange states that the Trust is registered under the
Investment Company Act of 1940 (``1940 Act'') and that on December
29, 2009, the Trust filed with the Commission Post-Effective
Amendment No. 2 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) (``Registration Statement'').
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The investment goal of the Fund is average annual returns in excess
of the total return of the MSCI World Index (the ``Index''), with
comparable volatility and little to no correlation with the Index. The
Fund is considered a ``fund-of-funds'' that seeks to achieve its
investment objective by primarily investing in both long and short
positions in other exchange-traded funds (the ``Underlying ETFs'') that
offer diversified exposure to global regions, countries, styles (market
capitalization, value, growth, etc.) or sectors, and other exchange-
traded products, including but not limited to exchange-traded notes
(``ETNs''), exchange-traded currency trusts and closed-end funds. In
addition, the Fund may use liquid futures contracts tied to broad
market indices (e.g., futures contracts based on the S&P 500 Index, the
MSCI EAFE Index and/or the MSCI Emerging Markets Index) when
establishing net long or net short exposure on top of the core long/
short portfolio.\6\ The Underlying 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 and will be traded
on a U.S. national securities exchange. Except for Underlying ETFs that
may hold non-US issues, the Fund will not otherwise invest in non-US
issues.
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\6\ The 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.
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The Exchange states that the Shares will be subject to the initial
and continued listing criteria under NYSE Arca Equities Rule 8.600(d)
applicable to Managed Fund Shares \7\ and that the
[[Page 18555]]
Shares will comply with Rule 10A-3 under the Act,\8\ as provided by
NYSE Arca Equities Rule 5.3. Additional information regarding 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 Registration
Statement and in the Notice, 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 5.
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III. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning whether Amendment No. 1 to 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-2010-10 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-2010-10. 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 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-NYSEArca-2010-10 and should be submitted on or before
May 3, 2010.
IV. 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. The Fund's Web site will also include additional
quantitative information updated on a daily basis relating to 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''),\14\ 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\ 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 each ETF 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.\15\ 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.\16\ 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.\17\ The Exchange
represents
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that the Advisor is not affiliated with a broker-dealer and that any
additional Fund sub-advisors that are affiliated with a broker-dealer
will be required to implement a fire wall with respect to such broker-
dealer regarding access to information concerning the composition and/
or changes to a portfolio. Further, 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.\18\
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\15\ See NYSE Arca Equities Rule 8.600(d)(1)(B).
\16\ See NYSE Arca Equities Rule 8.600(d)(2)(D).
\17\ 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.
\18\ See NYSE Arca Equities Rule 8.600(d)(2)(B)(ii).
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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 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 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.
(5) The Underlying ETFs will be traded on a U.S. national
securities exchange and, except for Underlying ETFs that may hold non-
U.S. issues, the Fund will not otherwise invest in non-U.S. issues.
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.
V. Accelerated Approval
The Commission finds good cause, pursuant to Section 19(b)(2) of
the Act,\19\ 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 Funds.\20\ The Commission also
notes that it has received no comments regarding the proposed rule
change. Further, the Commission believes that the changes in Amendment
No. 1 to the name of the Fund and the Sub-Adviser do not raise any
novel regulatory concerns, particularly because Amendment No. 1 makes
clear that all other representations in the Notice remain as stated
therein, except that representations in the Notice to HTE Global
Relative Value ETF and HTE Asset Management LLC are understood to mean
and to apply to Mars Hill Global Relative Value ETF and Mars Hill
Partners, LLC, respectively. The Commission believes that 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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\19\ 15 U.S.C. 78s(b)(2).
\20\ See, e.g., Securities Exchange Act Release No. 60981
(November 10, 2009), 74 FR 59594 (November 18, 2009) (SR-NYSEArca-
2009-79) (approving the listing and trading of shares of five
actively-managed fixed income funds of the PIMCO ETF Trust).
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VI. Conclusion
It is therfore ordered, pursuant to Section 19(b)(2) of the
Act,\21\ that the proposed rule change (SR-NYSEArca-2010-10), as
modified by Amendment No. 1 thereto, be, and it hereby is, approved on
an accelerated basis.
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\21\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
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\22\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-8221 Filed 4-9-10; 8:45 am]
BILLING CODE 8011-01-P