[Federal Register Volume 75, Number 69 (Monday, April 12, 2010)]
[Notices]
[Pages 18558-18559]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-8222]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-61843; File No. SR-NYSEArca-2010-12]
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting
Accelerated Approval of a Proposed Rule Change Relating to Listing of
the One Fund Under NYSE Arca Equities Rule 8.600
April 5, 2010.
On March 2, 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 of One Fund (the ``Fund''), a series of the U.S.
One Trust (the ``Trust'') 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. This order grants approval of 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. 61689 (March 11,
2010), 75 FR 13181 (``Notice'').
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I. Description of the Proposal
The Fund seeks to achieve its investment objective by investing
primarily in the retail shares of other exchange-traded funds that are
registered under the Investment Company Act of 1940 (``1940 Act'')
(``Underlying ETFs'').\4\ U.S. One, Inc. (the ``Adviser'') is the
adviser for the Fund. The Adviser is not affiliated with a broker-
dealer. If the Adviser becomes affiliated with a broker-dealer, the
Adviser would be required to comply with the ``fire wall'' provisions
contained in Commentary .07 to NYSE Arca Equities Rule 8.600.\5\ PNC
Global Investment Servicing, Inc. serves as the custodian, transfer
agent and administrator for the Fund.
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\4\ The Trust is registered under the 1940 Act. On February 5,
2010, the Trust filed with the Commission 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. 333-160877 and 811-22320)
(``Registration Statement'').
\5\ Commentary .07 to Rule 8.600 provides that, if the
investment adviser to the Investment Company issuing Managed Fund
Shares is affiliated with a broker-dealer, such investment adviser
shall erect a ``fire wall'' between the investment adviser and the
broker-dealer with respect to access to information concerning the
composition and/or changes to such Investment Company portfolio. In
addition, Commentary .07 requires that personnel who make decisions
on the open-end fund's portfolio composition must be subject to
procedures designed to prevent the use and dissemination of material
nonpublic information regarding the open-end fund's portfolio.
Commentary .07 to Rule 8.600 is similar to Commentary .03(a)(i) and
(iii) to NYSE Arca Equities Rule 5.2(j)(3); however, in connection
with the establishment of a ``fire wall'' between the investment
adviser and the broker-dealer, Commentary .07 reflects the
applicable open-end fund's portfolio, not an underlying benchmark
index, as is the case with index-based funds.
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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 and that
the Fund will be in compliance with Rule 10A-3 under the Act,\6\ as
provided by NYSE Arca Equities Rule 5.3. The Fund's investment
objective is to seek long-term capital appreciation. In pursuing its
investment objective, the Adviser will normally invest at least 80% of
its total assets in Underlying ETFs. The Adviser invests in Underlying
ETFs that track various securities indices comprised of large, mid and
small capitalization companies in the United States, Europe and Asia,
as well as other developed and emerging markets.
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\6\ 17 CFR 240.10A-3.
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Additional information regarding the Fund, the Shares, the Fund's
investment objective, investment strategies, policies, restrictions,
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.\7\
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\7\ 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 \8\ and the rules and regulations thereunder applicable to a
national securities exchange.\9\ In particular, the Commission finds
that the proposal 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.
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\8\ 15 U.S.C. 78f.
\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\ 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, 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 (``CTA'') high-speed line, and the Exchange will
disseminate the Portfolio Indicative Value (``PIV'') at least every 15
seconds during the Core Trading Session through the facilities of the
CTA. In addition, the Fund will make available on its Web site on each
business day before commencement of trading of the Core Trading Session
the Disclosed Portfolio as defined in NYSE Arca Equities Rule
8.600(c)(2) \11\ that will form the basis for its calculation of
[[Page 18559]]
the net asset value (``NAV''), which will be determined as of the close
of the regular trading session on the New York Stock Exchange
(ordinarily 4:00 p.m. Eastern Time) on each business day. 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 components, will be publicly
disseminated daily prior to the opening of the New York Stock Exchange
via the National Securities Clearing Corporation. The Fund's Web site
will also include additional quantitative information updated on a
daily basis relating to trading volume, prices, and NAV. Information
regarding the market price and trading volume of the Shares will be
continually available on a real-time basis throughout the day via
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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\11\ The Exchange represents that the Fund will disclose on the
Fund's Web site 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.
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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 Exchange will obtain a
representation from the issuer of the Shares 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.\12\
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. 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.\13\ 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.\14\
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\12\ See NYSE Arca Equities Rule 8.600(d)(1)(B).
\13\ See NYSE Arca Equities Rule 8.600(d)(2)(D). The Exchange
states that 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.
\14\ 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 and 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). 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.\15\
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\15\ See supra note 6.
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(5) Underlying ETFs will be listed and traded in the U.S. on a
national securities exchange. While the Underlying ETFs may hold non-
U.S. equity securities, the Fund will not invest in non-U.S. equity
securities.
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 Section 6(b)(5) of the Act\16\ and the rules
and regulations thereunder applicable to a national securities
exchange.
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\16\ 15 U.S.C. 78f(b)(5).
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III. Accelerated Approval
The Commission finds good cause, pursuant to Section 19(b)(2) of
the Act,\17\ 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.\18\ The Commission also
notes that it has received no comments regarding the proposed rule
change. Further, the Commission believes that proposed rule change does
not raise any novel regulatory concerns. 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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\17\ 15 U.S.C. 78s(b)(2).
\18\ See, e.g., Securities Exchange Act Release No. 60460
(August 7, 2009), 74 FR 41468 (August 17, 2009) (SR-NYSEArca-2009-
55) (approving the listing and trading of shares of the Dent
Tactical ETF).
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IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\19\ that the proposed rule change (SR-NYSEArca-2010-12) be, and it
hereby is, approved on an accelerated basis.
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\19\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-8222 Filed 4-9-10; 8:45 am]
BILLING CODE 8011-01-P