Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change Relating to the Listing and Trading of the SiM Dynamic Allocation Diversified Income ETF and SiM Dynamic Allocation Growth Income ETF, 81697-81701 [2010-32608]

Download as PDF Federal Register / Vol. 75, No. 248 / Tuesday, December 28, 2010 / Notices 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 20549–1090 on official business days between 10 a.m. and 3 p.m. Copies of the filing will also be available for inspection and copying at the Exchange’s principal office. 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-2010–117 and should be submitted on or before January 18, 2011. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.14 Florence E. Harmon, Deputy Secretary. [FR Doc. 2010–32513 Filed 12–27–10; 8:45 am] BILLING CODE 8011–01–P 8.600: SiM Dynamic Allocation Diversified Income ETF and SiM Dynamic Allocation Growth Income ETF. The text of the proposed rule change is available at the Exchange, the Commission’s Public Reference Room, and https://www.nyse.com. 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 the Statutory Basis for, the Proposed Rule Change 1. Purpose SECURITIES AND EXCHANGE COMMISSION [Release No. 34–63587; File No. SR– NYSEArca–2010–118] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change Relating to the Listing and Trading of the SiM Dynamic Allocation Diversified Income ETF and SiM Dynamic Allocation Growth Income ETF December 21, 2010. emcdonald on DSK2BSOYB1PROD with NOTICES Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’ or ‘‘Exchange Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that, on December 15, 2010, NYSE Arca, Inc. (‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 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 Managed Fund Shares under NYSE Arca Equities Rule 14 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 VerDate Mar<15>2010 22:37 Dec 27, 2010 Jkt 223001 The Exchange proposes to list and trade the following Managed Fund Shares 3 (‘‘Shares’’) under NYSE Arca Equities Rule 8.600: SiM Dynamic Allocation Diversified Income ETF and SiM Dynamic Allocation Growth Income ETF (each a ‘‘Fund’’ and, collectively, the ‘‘Funds’’).4 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 3 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. 4 The Commission previously approved listing and trading on the Exchange of actively-managed funds under Rule 8.600. See, e.g., Securities Exchange Act Release Nos. 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). PO 00000 Frm 00138 Fmt 4703 Sfmt 4703 81697 company.5 The investment advisor to the Funds is AdvisorShares Investments, LLC (the ‘‘Advisor’’). Strategic Income Management, LLC (‘‘Sub-Advisor’’ or ‘‘SiM’’) serves as investment sub-advisor to the Funds. The Sub-Advisor is responsible for selecting the Funds’ investments according to the Funds’ investment objectives, policies and restrictions. Each of the Funds will periodically change the composition of its portfolio to best meet its investment objective. Foreside Fund Services, LLC (the ‘‘Distributor’’) is the principal underwriter and distributor of the Funds’ shares. The Bank of New York Mellon Corporation serves as the administrator (‘‘Administrator’’), custodian, transfer agent and fund accounting agent for the Funds. Each Fund is an actively-managed exchange-traded fund and thus does not seek to replicate the performance of a specified index, but uses an active investment strategy to meet its investment objective. Accordingly, the Sub-Advisor manages each Fund’s portfolio in accordance with each Fund’s investment objective. Commentary .06 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 brokerdealer with respect to access to information concerning the composition and/or changes to such Investment Company portfolio.6 In addition, Commentary .06 further 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 .06 to Rule 8.600 is similar 5 The Trust is registered under the 1940 Act. On October 14, 2010, the Trust filed with the Commission Post-Effective Amendment No. 13 to Form N–1A under the Securities Act of 1933 (15 U.S.C. 77a), and under the 1940 Act relating to the Funds (File Nos. 333–157876 and 811–22110) (‘‘Registration Statement’’). The description of the operation of the Trust and the Funds herein is based on the Registration Statement. 6 An investment adviser to an open-end fund is required to be registered under the Investment Advisers Act of 1940 (the ‘‘Advisers Act’’). As a result, the Advisor and Sub-Advisor are subject to the provisions of Rule 204A–1 under the Advisers Act relating to codes of ethics. This Rule requires investment advisers to adopt a code of ethics that reflects the fiduciary nature of the relationship to clients as well as compliance with other applicable securities laws. Accordingly, procedures designed to prevent the communication and misuse of nonpublic information by an investment adviser must be consistent with Rule 204A–1 under the Advisers Act. E:\FR\FM\28DEN1.SGM 28DEN1 81698 Federal Register / Vol. 75, No. 248 / Tuesday, December 28, 2010 / Notices to Commentary .03(a)(i) and (iii) to NYSE Arca Equities Rule 5.2(j)(3); however, Commentary .06 in connection with the establishment of a ‘‘fire wall’’ between the investment adviser and the broker-dealer reflects the applicable open-end fund’s portfolio, not an underlying benchmark index, as is the case with index-based funds. Neither the Advisor nor the Sub-Advisor is affiliated with a broker-dealer.7 In the event (a) the Advisor or the Sub-Advisor becomes newly affiliated with a brokerdealer, or (b) any new advisor or subadvisor becomes affiliated with a broker-dealer, they 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, and will be subject to procedures designed to prevent the use and dissemination of material non-public information regarding such portfolio. emcdonald on DSK2BSOYB1PROD with NOTICES SiM Dynamic Allocation Diversified Income ETF According to the Registration Statement, the Fund will seek to provide total return, consisting primarily of reinvestment and growth of income with some long-term capital appreciation. The Fund is considered a ‘‘fund-of-funds’’ that will seek to achieve its investment objective by primarily investing in other exchange-traded 7 With respect to the Funds, the Exchange represents that the Advisor, as the investment advisor of the Funds, and SiM as the Sub-Advisor, 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. VerDate Mar<15>2010 22:37 Dec 27, 2010 Jkt 223001 funds (‘‘ETFs’’) that offer diversified exposure to various investment types (equities, bonds, etc.), global regions, countries, styles (market capitalization, value, growth, etc.) or sectors, and exchange-traded products (‘‘ETPs,’’ and, together with ETFs, the ‘‘Underlying ETPs’’) including, but not limited to, exchange-traded notes (‘‘ETNs’’), exchange-traded currency trusts and closed-end funds.8 The Fund will seek to offer the potential for total return from a high level of income and a low level of capital growth, with exposure to a low level of principal risk. The Fund through its investments in the Underlying ETPs generally will invest at least 60% of its net assets in domestic and international fixed income funds. The Fund will allocate its assets among Underlying ETPs in accordance with the Sub-Advisor’s outlook for the economy, the financial markets and the relative market valuations of the Underlying ETPs. The Fund will sell interests or reduce investment exposure among market segments or Underlying ETPs, if appropriate, when the SubAdvisor’s fundamental and quantitative factors indicate a low relative strength of such market segments and that such market segments are likely to underperform the market as a whole. According to the Registration Statement, under normal market conditions, the Fund’s portfolio will generally: • Invest up to 85% of its assets in Underlying ETPs that hold fixed-income securities as well as cash equivalents; • Not invest more than 40% of its net assets in Underlying ETPs that primarily hold equity securities; and • Invest up to 20% of its assets in any single Underlying ETP. The Fund’s portfolio may temporarily exceed these percentage ranges for short periods without notice, and the SubAdvisor, due to certain market conditions, may alter the percentage ranges when it deems appropriate. 8 Underlying ETPs include Investment Company Units (as described in NYSE Arca Equities Rule 5.2(j)(3)); Index-Linked Securities (as described in NYSE Arca Equities Rule 5.2(j)(6)); Portfolio Depositary Receipts (as described in NYSE Arca Equities Rule 8.100); Trust Issued Receipts (as described in NYSE Arca Equities Rule 8.200); Commodity-Based Trust Shares (as described in NYSE Arca Equities Rule 8.201); Currency Trust Shares (as described in NYSE Arca Equities Rule 8.202); Commodity Index Trust Shares (as described in NYSE Arca Equities Rule 8.203); Trust Units (as described in NYSE Arca Equities Rule 8.500); Managed Fund Shares (as described in NYSE Arca Equities Rule 8.600), and closed-end funds. PO 00000 Frm 00139 Fmt 4703 Sfmt 4703 SiM Dynamic Allocation Growth Income ETF According to the Registration Statement, the Fund will seek to provide total return, consisting primarily of long term capital appreciation with some reinvestment and growth of income. The Fund is considered a ‘‘fund-of-funds’’ that will seek to achieve its investment objective by primarily investing in Underlying ETPs that offer diversified exposure to various investment types (equities, bonds, etc.), global regions, countries, styles (market capitalization, value, growth, etc.) or sectors, and ETPs including, but not limited to, ETNs, exchange-traded currency trusts and closed-end funds.9 In general, the Fund will seek to offer investors the potential for total return from a low to medium level of income and a medium to high level of capital growth, while exposing them to a medium to high level of principal risk. The Fund, through its investments in the Underlying ETPs, generally will invest at least 60% of its net assets in domestic and international equity funds. The Fund will allocate its assets among Underlying ETPs in accordance with the Sub-Advisor’s outlook for the economy, the financial markets and the relative market valuations of the Underlying ETPs. The Fund will sell interests or reduce investment exposure among market segments or Underlying ETPs when the Sub-Advisor’s fundamental and quantitative factors indicate a low relative strength of such market segments and that such market segments are likely to underperform the market as a whole. Under normal market conditions, the Fund’s portfolio will generally: • Invest up to 85% of its assets in Underlying ETPs that hold equity securities as well as cash equivalents; • Not invest more than 40% of its net assets in Underlying ETPs that primarily hold fixed income securities; and • Invest up to 20% of its assets in any single Underlying ETP. The Fund’s portfolio may temporarily exceed these percentage ranges for short periods without notice, and the SubAdvisor, due to certain market conditions, may alter the percentage ranges when it deems appropriate. Other Investments The Funds and the Underlying ETPs may invest in equity securities representing ownership interests in a company or partnership and that consist 9 See E:\FR\FM\28DEN1.SGM note 7 supra [sic]. 28DEN1 emcdonald on DSK2BSOYB1PROD with NOTICES Federal Register / Vol. 75, No. 248 / Tuesday, December 28, 2010 / Notices of common stocks, preferred stocks, warrants to acquire common stock, securities convertible into common stock, and investments in master limited partnerships.10 The Funds may enter into repurchase agreements with financial institutions, which may be deemed to be loans. The Funds may enter into reverse repurchase agreements as part of the Funds’ investment strategy. The Funds may invest in U.S. government securities and in U.S. Treasury zero-coupon bonds. The Funds may invest in shares of real estate investment trusts (‘‘REITs’’), which are pooled investment vehicles which invest primarily in real estate or real estate related loans. To respond to adverse market, economic, political or other conditions, the Funds may invest 100% of their total assets, without limitation, in high-quality short-term debt securities and money market instruments. The Funds may not (i) with respect to 75% of its total assets, purchase securities of any issuer (except securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities or shares of investment companies) 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 issuer. The Funds may not invest 25% or more of total assets in the securities of one or more issuers conducting their principal business activities in the same industry or group of industries. The Funds will not invest 25% or more of total assets in any investment company that so concentrates. Underlying ETPs will be listed on a national securities exchange. Except for Underlying ETPs that may hold nonU.S. issues, the Funds will not otherwise invest in non-U.S. issues. 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 Funds will be in compliance with Rule 10A–3 11 under the Exchange Act, as provided by NYSE Arca Equities Rule 5.3. A minimum of 100,000 Shares for each Fund 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 (‘‘NAV’’) and the Disclosed Portfolio will be made 10 The Funds will hold only equity securities traded in the U.S. on registered exchanges. 11 17 CFR 240.10A–3. VerDate Mar<15>2010 22:37 Dec 27, 2010 Jkt 223001 available to all market participants at the same time. Creation and Redemption of Shares The Funds will offer and issue shares at NAV only in aggregated lots of 50,000 or more shares (each a ‘‘Creation Unit’’ or a ‘‘Creation Unit Aggregation’’), generally in exchange for: (i) A basket of portfolio securities (the ‘‘Deposit Securities’’); and (ii) an amount of cash (the ‘‘Cash Component’’). Together, the Deposit Securities and the Cash Component constitute the ‘‘Fund Deposit.’’ Shares are redeemable only in Creation Unit Aggregations, and, generally, in exchange for portfolio securities and a specified cash payment. Creations or redemptions of Shares will be effected by or through an Authorized Participant, as described in the Registration Statement, or a Depository Trust Company participant. The Administrator, through the National Securities Clearing Corporation (‘‘NSCC’’), will make available on each Business Day,12 immediately prior to the opening of business on the NYSE, the list of the names and the required number of shares of each Deposit Security to be included in the current Fund Deposit (based on information at the end of the previous Business Day) for a Fund. The identity and number of shares of the Deposit Securities required for a Fund Deposit for a Fund will change as rebalancing adjustments and corporate action events are reflected from time to time by the Sub-Advisor with a view to the investment objective of a Fund.13 In addition to the list of names and numbers of securities constituting the current Deposit Securities of a Fund Deposit, the Administrator, through the NSCC, also will make available on each Business Day, the estimated Cash Component, effective through and including the previous Business Day, per outstanding Creation Unit of a Fund. 81699 and taken into account for purposes of determining NAV. The NAV per Share for the Funds will be calculated by the Administrator and determined as of the close of the regular trading session on the NYSE Arca (ordinarily 4 p.m., Eastern Time) on each day that the Exchange is open. In computing each Fund’s NAV, each Fund’s securities holdings will be valued based on their last readily available market price. Price information on listed securities is taken from the exchange where the security is primarily traded. Securities regularly traded in an over-the-counter market are valued at the latest quoted sales price on the primary exchange or national securities market on which such securities are traded. Securities not listed on an exchange or national securities market, or securities in which there was no last reported sales price, are valued at the most recent bid price. Other portfolio securities and assets for which market quotations are not readily available will be valued based on fair value as determined in good faith by the Sub-Advisor in accordance with procedures adopted by the Funds’ Board of Trustees. Availability of Information Net Asset Value According to the Registration Statement, the NAV per Share of each Fund will be computed by dividing the value of the net assets of such Fund (i.e., the value of its total assets less total liabilities) by the total number of Shares of the Fund outstanding, rounded to the nearest cent. Expenses and fees, including without limitation, the management, administration and distribution fees, will be accrued daily The Funds’ Web site (https:// www.advisorshares.com), which will be publicly available prior to the public offering of Shares, will include a form of the Prospectus for the Funds that may be downloaded. The Funds’ Web site will include additional quantitative information updated on a daily basis, including, for the Funds, (1) daily trading volume, the prior business day’s reported closing price, NAV and midpoint 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 Funds will disclose on their Web site the Disclosed Portfolio as defined in NYSE Arca Equities Rule 8.600(c)(2) that will form the basis for 12 A ‘‘Business Day’’ with respect to the Funds is any day on which the New York Stock Exchange (‘‘NYSE’’) is open for business. 13 Terms relating to the Trust and the Shares referred to, but not defined, herein are defined in the Registration Statement. 14 The Bid/Ask Price of the Funds will be determined using the highest bid and the lowest offer on the Exchange as of the time of calculation of the Funds’ NAV. The records relating to Bid/Ask Prices will be retained by the Funds and their service providers. PO 00000 Frm 00140 Fmt 4703 Sfmt 4703 E:\FR\FM\28DEN1.SGM 28DEN1 emcdonald on DSK2BSOYB1PROD with NOTICES 81700 Federal Register / Vol. 75, No. 248 / Tuesday, December 28, 2010 / Notices the Funds’ calculation of NAV at the end of the business day.15 On a daily basis, the Advisor will disclose for each portfolio security or other financial instrument of the Funds 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. 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 NYSE via the NSCC. The basket represents one Creation Unit of the Funds. The Web site information will be publicly available at no charge. Investors can also obtain the Trust’s Statement of Additional Information (‘‘SAI’’), the Funds’ 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 https://www.sec.gov. Information regarding 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. 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. Information regarding market price and trading volume of the Underlying ETPs will be continually available on a realtime basis throughout the day from major market data vendors. Last sale and closing price information for Underlying ETPs will be available on the Web site of the national securities exchange on which such securities are listed or through major market data vendors. 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 15 Under accounting procedures followed by the Funds, trades made on the prior business day (‘‘T’’) will be booked and reflected in NAV on the current business day (‘‘T+1’’). Accordingly, the Funds 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. VerDate Mar<15>2010 22:37 Dec 27, 2010 Jkt 223001 seconds during the Core Trading Session. The dissemination of the Portfolio Indicative Value, together with the securities and/or financial instruments comprising the Disclosed Portfolio, will allow investors to determine the value of the underlying portfolio of each of the Funds on a daily basis and to provide a close estimate of that value throughout the Core Trading Session. 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. 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 Funds.16 Trading in Shares of the Funds 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 and/or the financial instruments comprising the Disclosed Portfolio of the Funds; 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 Funds may be halted. 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. As provided in NYSE Arca Equities Rule 7.6, Commentary .03, the minimum price variation (‘‘MPV’’) for quoting and entry of orders in equity securities traded on the NYSE Arca Marketplace is $0.01, with the exception of securities that are priced less than 16 See NYSE Arca Equities Rule 7.12, Commentary .04. PO 00000 Frm 00141 Fmt 4703 Sfmt 4703 $1.00 for which the MPV for order entry is $0.0001. 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, including those exchanges trading the Underlying ETPs and other securities held by the Funds, described above under ‘‘Other Investments’’.17 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 17 For a list of the current members of ISG, see https://www.isgportal.org. The Exchange notes that not all components of the Disclosed Portfolio for the Funds may trade on markets that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. E:\FR\FM\28DEN1.SGM 28DEN1 Federal Register / Vol. 75, No. 248 / Tuesday, December 28, 2010 / Notices Shares prior to or concurrently with the confirmation of a transaction; and (6) trading information. In addition, the Bulletin will reference that the Funds are 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 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 an additional type of actively managed exchange-traded product that will enhance competition among market participants, to the benefit of investors and the marketplace. 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. emcdonald on DSK2BSOYB1PROD with NOTICES III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period up to 90 days (i) as the Commission may designate 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 or disapprove the proposed rule change, or 18 15 U.S.C. 78f(b)(5). VerDate Mar<15>2010 22:37 Dec 27, 2010 Jkt 223001 (B) institute proceedings to determine whether the proposed rule change should be disapproved. 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 (https://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–NYSEArca–2010–118 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. 81701 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.19 Florence E. Harmon, Deputy Secretary. [FR Doc. 2010–32608 Filed 12–27–10; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–63593; File No. SR–NYSE– 2010–83] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Making Permanent the Pilot Program That Offers Liquidity Takers a Reduced Transaction Fee Structure for Certain Bond Trades Executed on the NYSE Bonds System December 21, 2010. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that, on December 16, 2010, the New York Stock Exchange All submissions should refer to File Number SR–NYSEArca–2010–118. This LLC (‘‘NYSE’’ or the ‘‘Exchange’’) filed with the Securities and Exchange file number should be included on the subject line if e-mail is used. To help the Commission (the ‘‘Commission’’) the proposed rule change as described in Commission process and review your Items I and II below, which Items have comments more efficiently, please use only one method. The Commission will been prepared by the Exchange. The post all comments on the Commission’s Commission is publishing this notice to solicit comments on the proposed rule Internet Web site (https://www.sec.gov/ change from interested persons. rules/sro.shtml). Copies of the submission, all subsequent I. Self-Regulatory Organization’s amendments, all written statements Statement of the Terms of Substance of with respect to the proposed rule the Proposed Rule Change change that are filed with the The Exchange proposes to make Commission, and all written permanent the pilot program that offers communications relating to the liquidity takers a reduced transaction proposed rule change between the Commission and any person, other than fee structure for certain bond trades executed on the NYSE Bonds SM system those that may be withheld from the (‘‘NYSE Bonds’’). The text of the public in accordance with the proposed rule change is available at the provisions of 5 U.S.C. 552, will be Exchange’s principal office, https:// available for Web site viewing and www.nyse.com, the Commission’s printing in the Commission’s Public Public Reference Room, and on the Reference Room, 100 F Street, NE., Commission’s Web site at https:// Washington, DC 20549, on official www.sec.gov. business days between the hours of 10 a.m. and 3 p.m. Copies of such filing II. Self-Regulatory Organization’s also will be available for inspection and Statement of the Purpose of, and copying at the principal office of the Statutory Basis for, the Proposed Rule Exchange. All comments received will Change be posted without change; the In its filing with the Commission, the Commission does not edit personal self-regulatory organization included identifying information from statements concerning the purpose of, submissions. You should submit only and basis for, the proposed rule change information that you wish to make and discussed any comments it received publicly available. All submissions should refer to File Number SR– 19 17 CFR 200.30–3(a)(12). NYSEArca–2010–118 and should be 1 15 U.S.C. 78s(b)(1). submitted on or before January 18, 2011. 2 17 CFR 240.19b–4. PO 00000 Frm 00142 Fmt 4703 Sfmt 4703 E:\FR\FM\28DEN1.SGM 28DEN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 75, Number 248 (Tuesday, December 28, 2010)]
[Notices]
[Pages 81697-81701]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2010-32608]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63587; File No. SR-NYSEArca-2010-118]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Relating to the Listing and Trading of the SiM 
Dynamic Allocation Diversified Income ETF and SiM Dynamic Allocation 
Growth Income ETF

December 21, 2010.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that, on December 15, 2010, NYSE Arca, Inc. 
(``Exchange'' or ``NYSE Arca'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by the Exchange. 
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\ 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 Managed Fund 
Shares under NYSE Arca Equities Rule 8.600: SiM Dynamic Allocation 
Diversified Income ETF and SiM Dynamic Allocation Growth Income ETF. 
The text of the proposed rule change is available at the Exchange, the 
Commission's Public Reference Room, and https://www.nyse.com.

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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to list and trade the following Managed Fund 
Shares \3\ (``Shares'') under NYSE Arca Equities Rule 8.600: SiM 
Dynamic Allocation Diversified Income ETF and SiM Dynamic Allocation 
Growth Income ETF (each a ``Fund'' and, collectively, the 
``Funds'').\4\ 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\ The investment advisor to the Funds is 
AdvisorShares Investments, LLC (the ``Advisor''). Strategic Income 
Management, LLC (``Sub-Advisor'' or ``SiM'') serves as investment sub-
advisor to the Funds. The Sub-Advisor is responsible for selecting the 
Funds' investments according to the Funds' investment objectives, 
policies and restrictions. Each of the Funds will periodically change 
the composition of its portfolio to best meet its investment objective. 
Foreside Fund Services, LLC (the ``Distributor'') is the principal 
underwriter and distributor of the Funds' shares. The Bank of New York 
Mellon Corporation serves as the administrator (``Administrator''), 
custodian, transfer agent and fund accounting agent for the Funds.
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    \3\ 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.
    \4\ The Commission previously approved listing and trading on 
the Exchange of actively-managed funds under Rule 8.600. See, e.g., 
Securities Exchange Act Release Nos. 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).
    \5\ The Trust is registered under the 1940 Act. On October 14, 
2010, the Trust filed with the Commission Post-Effective Amendment 
No. 13 to Form N-1A under the Securities Act of 1933 (15 U.S.C. 
77a), and under the 1940 Act relating to the Funds (File Nos. 333-
157876 and 811-22110) (``Registration Statement''). The description 
of the operation of the Trust and the Funds herein is based on the 
Registration Statement.
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    Each Fund is an actively-managed exchange-traded fund and thus does 
not seek to replicate the performance of a specified index, but uses an 
active investment strategy to meet its investment objective. 
Accordingly, the Sub-Advisor manages each Fund's portfolio in 
accordance with each Fund's investment objective.
    Commentary .06 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.\6\ In addition, 
Commentary .06 further 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 .06 to 
Rule 8.600 is similar to Commentary .03(a)(i) and (iii) to NYSE Arca 
Equities Rule 5.2(j)(3); however, Commentary .06 in connection with the 
establishment of a ``fire wall'' between the investment adviser and the 
broker-dealer reflects the applicable open-end fund's portfolio, not an 
underlying benchmark index, as is the case with index-based funds. 
Neither the Advisor nor the Sub-Advisor is affiliated with a broker-
dealer.\7\ In the

[[Page 81698]]

event (a) the Advisor or the Sub-Advisor becomes newly affiliated with 
a broker-dealer, or (b) any new advisor or sub-advisor becomes 
affiliated with a broker-dealer, they 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, 
and will be subject to procedures designed to prevent the use and 
dissemination of material non-public information regarding such 
portfolio.
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    \6\ An investment adviser to an open-end fund is required to be 
registered under the Investment Advisers Act of 1940 (the ``Advisers 
Act''). As a result, the Advisor and Sub-Advisor are subject to the 
provisions of Rule 204A-1 under the Advisers Act relating to codes 
of ethics. This Rule requires investment advisers to adopt a code of 
ethics that reflects the fiduciary nature of the relationship to 
clients as well as compliance with other applicable securities laws. 
Accordingly, procedures designed to prevent the communication and 
misuse of non-public information by an investment adviser must be 
consistent with Rule 204A-1 under the Advisers Act.
    \7\ With respect to the Funds, the Exchange represents that the 
Advisor, as the investment advisor of the Funds, and SiM as the Sub-
Advisor, 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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SiM Dynamic Allocation Diversified Income ETF
    According to the Registration Statement, the Fund will seek to 
provide total return, consisting primarily of reinvestment and growth 
of income with some long-term capital appreciation. The Fund is 
considered a ``fund-of-funds'' that will seek to achieve its investment 
objective by primarily investing in other exchange-traded funds 
(``ETFs'') that offer diversified exposure to various investment types 
(equities, bonds, etc.), global regions, countries, styles (market 
capitalization, value, growth, etc.) or sectors, and exchange-traded 
products (``ETPs,'' and, together with ETFs, the ``Underlying ETPs'') 
including, but not limited to, exchange-traded notes (``ETNs''), 
exchange-traded currency trusts and closed-end funds.\8\
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    \8\ Underlying ETPs include Investment Company Units (as 
described in NYSE Arca Equities Rule 5.2(j)(3)); Index-Linked 
Securities (as described in NYSE Arca Equities Rule 5.2(j)(6)); 
Portfolio Depositary Receipts (as described in NYSE Arca Equities 
Rule 8.100); Trust Issued Receipts (as described in NYSE Arca 
Equities Rule 8.200); Commodity-Based Trust Shares (as described in 
NYSE Arca Equities Rule 8.201); Currency Trust Shares (as described 
in NYSE Arca Equities Rule 8.202); Commodity Index Trust Shares (as 
described in NYSE Arca Equities Rule 8.203); Trust Units (as 
described in NYSE Arca Equities Rule 8.500); Managed Fund Shares (as 
described in NYSE Arca Equities Rule 8.600), and closed-end funds.
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    The Fund will seek to offer the potential for total return from a 
high level of income and a low level of capital growth, with exposure 
to a low level of principal risk. The Fund through its investments in 
the Underlying ETPs generally will invest at least 60% of its net 
assets in domestic and international fixed income funds.
    The Fund will allocate its assets among Underlying ETPs in 
accordance with the Sub-Advisor's outlook for the economy, the 
financial markets and the relative market valuations of the Underlying 
ETPs. The Fund will sell interests or reduce investment exposure among 
market segments or Underlying ETPs, if appropriate, when the Sub-
Advisor's fundamental and quantitative factors indicate a low relative 
strength of such market segments and that such market segments are 
likely to underperform the market as a whole.
    According to the Registration Statement, under normal market 
conditions, the Fund's portfolio will generally:
     Invest up to 85% of its assets in Underlying ETPs that 
hold fixed-income securities as well as cash equivalents;
     Not invest more than 40% of its net assets in Underlying 
ETPs that primarily hold equity securities; and
     Invest up to 20% of its assets in any single Underlying 
ETP.
    The Fund's portfolio may temporarily exceed these percentage ranges 
for short periods without notice, and the Sub-Advisor, due to certain 
market conditions, may alter the percentage ranges when it deems 
appropriate.
SiM Dynamic Allocation Growth Income ETF
    According to the Registration Statement, the Fund will seek to 
provide total return, consisting primarily of long term capital 
appreciation with some reinvestment and growth of income. The Fund is 
considered a ``fund-of-funds'' that will seek to achieve its investment 
objective by primarily investing in Underlying ETPs that offer 
diversified exposure to various investment types (equities, bonds, 
etc.), global regions, countries, styles (market capitalization, value, 
growth, etc.) or sectors, and ETPs including, but not limited to, ETNs, 
exchange-traded currency trusts and closed-end funds.\9\
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    \9\ See note 7 supra [sic].
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    In general, the Fund will seek to offer investors the potential for 
total return from a low to medium level of income and a medium to high 
level of capital growth, while exposing them to a medium to high level 
of principal risk. The Fund, through its investments in the Underlying 
ETPs, generally will invest at least 60% of its net assets in domestic 
and international equity funds.
    The Fund will allocate its assets among Underlying ETPs in 
accordance with the Sub-Advisor's outlook for the economy, the 
financial markets and the relative market valuations of the Underlying 
ETPs. The Fund will sell interests or reduce investment exposure among 
market segments or Underlying ETPs when the Sub-Advisor's fundamental 
and quantitative factors indicate a low relative strength of such 
market segments and that such market segments are likely to 
underperform the market as a whole.
    Under normal market conditions, the Fund's portfolio will 
generally:
     Invest up to 85% of its assets in Underlying ETPs that 
hold equity securities as well as cash equivalents;
     Not invest more than 40% of its net assets in Underlying 
ETPs that primarily hold fixed income securities; and
     Invest up to 20% of its assets in any single Underlying 
ETP.
    The Fund's portfolio may temporarily exceed these percentage ranges 
for short periods without notice, and the Sub-Advisor, due to certain 
market conditions, may alter the percentage ranges when it deems 
appropriate.
Other Investments
    The Funds and the Underlying ETPs may invest in equity securities 
representing ownership interests in a company or partnership and that 
consist of common stocks, preferred stocks, warrants to acquire common 
stock, securities convertible into common stock, and investments in 
master limited partnerships.\10\ The Funds may enter into repurchase 
agreements with financial institutions, which may be deemed to be 
loans. The Funds may enter into reverse repurchase agreements as part 
of the Funds' investment strategy.
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    \10\ The Funds will hold only equity securities traded in the 
U.S. on registered exchanges.
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    The Funds may invest in U.S. government securities and in U.S. 
Treasury zero-coupon bonds. The Funds may invest in shares of real 
estate investment trusts (``REITs''), which are pooled investment 
vehicles which invest primarily in real estate or real estate related 
loans. To respond to adverse market, economic, political or other 
conditions, the Funds may invest 100% of their total assets, without

[[Page 81699]]

limitation, in high-quality short-term debt securities and money market 
instruments.
    The Funds may not (i) with respect to 75% of its total assets, 
purchase securities of any issuer (except securities issued or 
guaranteed by the U.S. Government, its agencies or instrumentalities or 
shares of investment companies) 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 issuer. The Funds may not invest 25% or more of total assets in the 
securities of one or more issuers conducting their principal business 
activities in the same industry or group of industries. The Funds will 
not invest 25% or more of total assets in any investment company that 
so concentrates.
    Underlying ETPs will be listed on a national securities exchange. 
Except for Underlying ETPs that may hold non-U.S. issues, the Funds 
will not otherwise invest in non-U.S. issues.
    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 Funds will be in 
compliance with Rule 10A-3 \11\ under the Exchange Act, as provided by 
NYSE Arca Equities Rule 5.3. A minimum of 100,000 Shares for each Fund 
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 (``NAV'') and the Disclosed Portfolio will be 
made available to all market participants at the same time.
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    \11\ 17 CFR 240.10A-3.
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Creation and Redemption of Shares
    The Funds will offer and issue shares at NAV only in aggregated 
lots of 50,000 or more shares (each a ``Creation Unit'' or a ``Creation 
Unit Aggregation''), generally in exchange for: (i) A basket of 
portfolio securities (the ``Deposit Securities''); and (ii) an amount 
of cash (the ``Cash Component''). Together, the Deposit Securities and 
the Cash Component constitute the ``Fund Deposit.'' Shares are 
redeemable only in Creation Unit Aggregations, and, generally, in 
exchange for portfolio securities and a specified cash payment. 
Creations or redemptions of Shares will be effected by or through an 
Authorized Participant, as described in the Registration Statement, or 
a Depository Trust Company participant.
    The Administrator, through the National Securities Clearing 
Corporation (``NSCC''), will make available on each Business Day,\12\ 
immediately prior to the opening of business on the NYSE, the list of 
the names and the required number of shares of each Deposit Security to 
be included in the current Fund Deposit (based on information at the 
end of the previous Business Day) for a Fund. The identity and number 
of shares of the Deposit Securities required for a Fund Deposit for a 
Fund will change as rebalancing adjustments and corporate action events 
are reflected from time to time by the Sub-Advisor with a view to the 
investment objective of a Fund.\13\
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    \12\ A ``Business Day'' with respect to the Funds is any day on 
which the New York Stock Exchange (``NYSE'') is open for business.
    \13\ Terms relating to the Trust and the Shares referred to, but 
not defined, herein are defined in the Registration Statement.
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    In addition to the list of names and numbers of securities 
constituting the current Deposit Securities of a Fund Deposit, the 
Administrator, through the NSCC, also will make available on each 
Business Day, the estimated Cash Component, effective through and 
including the previous Business Day, per outstanding Creation Unit of a 
Fund.
Net Asset Value
    According to the Registration Statement, the NAV per Share of each 
Fund will be computed by dividing the value of the net assets of such 
Fund (i.e., the value of its total assets less total liabilities) by 
the total number of Shares of the Fund outstanding, rounded to the 
nearest cent. Expenses and fees, including without limitation, the 
management, administration and distribution fees, will be accrued daily 
and taken into account for purposes of determining NAV. The NAV per 
Share for the Funds will be calculated by the Administrator and 
determined as of the close of the regular trading session on the NYSE 
Arca (ordinarily 4 p.m., Eastern Time) on each day that the Exchange is 
open.
    In computing each Fund's NAV, each Fund's securities holdings will 
be valued based on their last readily available market price. Price 
information on listed securities is taken from the exchange where the 
security is primarily traded. Securities regularly traded in an over-
the-counter market are valued at the latest quoted sales price on the 
primary exchange or national securities market on which such securities 
are traded. Securities not listed on an exchange or national securities 
market, or securities in which there was no last reported sales price, 
are valued at the most recent bid price. Other portfolio securities and 
assets for which market quotations are not readily available will be 
valued based on fair value as determined in good faith by the Sub-
Advisor in accordance with procedures adopted by the Funds' Board of 
Trustees.
Availability of Information
    The Funds' Web site (https://www.advisorshares.com), which will be 
publicly available prior to the public offering of Shares, will include 
a form of the Prospectus for the Funds that may be downloaded. The 
Funds' Web site will include additional quantitative information 
updated on a daily basis, including, for the Funds, (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 Funds will disclose on their Web site the Disclosed 
Portfolio as defined in NYSE Arca Equities Rule 8.600(c)(2) that will 
form the basis for the Funds' calculation of NAV at the end of the 
business day.\15\
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    \14\ The Bid/Ask Price of the Funds will be determined using the 
highest bid and the lowest offer on the Exchange as of the time of 
calculation of the Funds' NAV. The records relating to Bid/Ask 
Prices will be retained by the Funds and their service providers.
    \15\ Under accounting procedures followed by the Funds, trades 
made on the prior business day (``T'') will be booked and reflected 
in NAV on the current business day (``T+1''). Accordingly, the Funds 
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, the Advisor will disclose for each portfolio 
security or other financial instrument of the Funds 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.
    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

[[Page 81700]]

of the NYSE via the NSCC. The basket represents one Creation Unit of 
the Funds. The Web site information will be publicly available at no 
charge.
    Investors can also obtain the Trust's Statement of Additional 
Information (``SAI''), the Funds' 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 https://www.sec.gov. 
Information regarding 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. 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. Information regarding market price and trading volume of the 
Underlying ETPs will be continually available on a real-time basis 
throughout the day from major market data vendors. Last sale and 
closing price information for Underlying ETPs will be available on the 
Web site of the national securities exchange on which such securities 
are listed or through major market data vendors. 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 
securities and/or financial instruments comprising the Disclosed 
Portfolio, will allow investors to determine the value of the 
underlying portfolio of each of the Funds on a daily basis and to 
provide a close estimate of that value throughout the Core Trading 
Session.
    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.
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 Funds.\16\ Trading in Shares of the Funds 
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 and/or the 
financial instruments comprising the Disclosed Portfolio of the Funds; 
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 Funds 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. As provided in 
NYSE Arca Equities Rule 7.6, Commentary .03, the minimum price 
variation (``MPV'') for quoting and entry of orders in equity 
securities traded on the NYSE Arca Marketplace is $0.01, with the 
exception of securities that are priced less than $1.00 for which the 
MPV for order entry is $0.0001.
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, including those exchanges trading the Underlying ETPs and other 
securities held by the Funds, described above under ``Other 
Investments''.\17\
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    \17\ For a list of the current members of ISG, see https://www.isgportal.org. The Exchange notes that not all components of the 
Disclosed Portfolio for the Funds 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 Funds are 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 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

[[Page 81701]]

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 an additional type of actively 
managed exchange-traded product that will enhance competition among 
market 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 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate 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 or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

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 (https://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2010-118 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-2010-118. 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 (https://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 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 
publicly available. All submissions should refer to File Number SR-
NYSEArca-2010-118 and should be submitted on or before January 18, 
2011.

    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. 2010-32608 Filed 12-27-10; 8:45 am]
BILLING CODE 8011-01-P

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