Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change To List and Trade the Meidell Tactical Advantage ETF, 24936-24942 [2011-10717]

Download as PDF 24936 Federal Register / Vol. 76, No. 85 / Tuesday, May 3, 2011 / Notices proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b–4(f)(6) (iii) thereunder. A proposed rule change filed under Rule 19b–4(f)(6) 13 normally does not become operative prior to 30 days after the date of the filing. However, pursuant to Rule 19b4(f)(6)(iii),14 the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has requested that the Commission waive the 30-day operative delay to ensure that NASDAQ OMX is able to implement the rule changes. The Commission finds that waiver of the operative delay is consistent with the protection of investors and the public interest. The Commission notes in waiving the 30-day operative delay that the Commission published for comment in the Federal Register the initial filing to amend NASDAQ OMX’s By-Laws, did not receive any comments,15 and subsequently approved the proposed rule change.16 Further, the Commission notes that the Exchange’s proposal is identical to the proposed rule change previously approved by the Commission.17 Accordingly, the Commission finds that it is consistent with investor protection and the public interest to waive the 30day operative delay in accordance with 19b–4(f)(6)(iii) so that NASDAQ OMX’s By-Laws can be effective without undue delay, and therefore designates the proposal operative upon filing.18 At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. srobinson on DSKHWCL6B1PROD with NOTICES IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, 13 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6)(iii) requires that a self-regulatory organization submit to the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the filing of the proposed rule change, or such shorter time as designated by the Commission. The Commission notes that the Exchange has satisfied this requirement. 14 17 CFR 240.19b–4(f)(6)(iii). 15 See supra note 6. 16 See supra note 3. 17 Id. 18 For purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). VerDate Mar<15>2010 20:39 May 02, 2011 Jkt 223001 including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–BX–2011–022 on the subject line. SECURITIES AND EXCHANGE COMMISSION [Release No. 34–64357; File No. SR– NYSEArca–2011–18] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change To List and Trade the Meidell Tactical Advantage ETF April 28, 2011. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’ or ‘‘Exchange Act’’) 1 and Rule 19b–4 Paper Comments thereunder,2 notice is hereby given that • Send paper comments in triplicate on April 15, 2011, NYSE Arca, Inc. to Elizabeth M. Murphy, Secretary, (‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with Securities and Exchange Commission, the Securities and Exchange 100 F Street, NE., Washington, DC Commission (‘‘Commission’’) the 20549–1090. proposed rule change as described in All submissions should refer to File Items I and II below, which Items have Number SR–BX–2011–022. This file been prepared by the Exchange. The number should be included on the Commission is publishing this notice to subject line if e-mail is used. To help the solicit comments on the proposed rule Commission process and review your change from interested persons. comments more efficiently, please use I. Self-Regulatory Organization’s only one method. The Commission will Statement of the Terms of Substance of post all comments on the Commission’s the Proposed Rule Change Internet Web site (http://www.sec.gov/ The Exchange proposes to list and rules/sro.shtml). Copies of the trade the following under NYSE Arca submission, all subsequent Equities Rule 8.600 (‘‘Managed Fund amendments, all written statements Shares’’): The Meidell Tactical with respect to the proposed rule Advantage ETF. The text of the change that are filed with the proposed rule change is available at the Commission, and all written Exchange, the Commission’s Public communications relating to the Reference Room, and http:// proposed rule change between the Commission and any person, other than www.nyse.com. those that may be withheld from the II. Self-Regulatory Organization’s public in accordance with the Statement of the Purpose of, and provisions of 5 U.S.C. 552, will be Statutory Basis for, the Proposed Rule available for Web site viewing and Change printing in the Commission’s Public In its filing with the Commission, the Reference Room, 100 F Street, NE., self-regulatory organization included Washington, DC 20549, on official statements concerning the purpose of, business days between the hours of 10 and basis for, the proposed rule change a.m. and 3 p.m. Copies of such filing also will be available for inspection and and discussed any comments it received on the proposed rule change. The text copying at the principal office of the of those statements may be examined at Exchange. All comments received will the places specified in Item IV below. be posted without change; the The Exchange has prepared summaries, Commission does not edit personal set forth in sections A, B, and C below, identifying information from of the most significant parts of such submissions. You should submit only statements. information that you wish to make available publicly. All submissions A. Self-Regulatory Organization’s should refer to File No. SR–BX–2011– Statement of the Purpose of, and 022 and should be submitted on or Statutory Basis for, the Proposed Rule before May 24, 2011. Change For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.19 Cathy H. Ahn, Deputy Secretary. [FR Doc. 2011–10650 Filed 5–2–11; 8:45 am] BILLING CODE 8011–01–P 19 17 PO 00000 Fmt 4703 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 A Managed Fund Share is a security that represents an interest in an investment company 2 17 CFR 200.30–3(a)(12). Frm 00089 1. Purpose The Exchange proposes to list and trade the following Managed Fund Shares 3 (‘‘Shares’’) under NYSE Arca Sfmt 4703 E:\FR\FM\03MYN1.SGM 03MYN1 Federal Register / Vol. 76, No. 85 / Tuesday, May 3, 2011 / Notices srobinson on DSKHWCL6B1PROD with NOTICES Equities Rule 8.600: The Meidell Tactical Advantage ETF (‘‘Fund’’).4 The Shares will be offered by AdvisorShares Trust (‘‘Trust’’), a statutory trust organized under the laws of the State of Delaware and registered with the Commission as an open-end management investment company.5 The investment adviser to the Fund is AdvisorShares Investments, LLC (‘‘Adviser’’). American Wealth Management is the Fund’s sub-adviser (‘‘Sub-Adviser’’) and provides day-to-day portfolio management of the Fund. Foreside Fund Services, LLC (‘‘Distributor’’) is the principal underwriter and distributor of the Fund’s Shares. 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 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 adviser 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 approved NYSE Arca Equities Rule 8.600 and the listing and trading of certain funds of the PowerShares Actively Managed Exchange-Traded Funds Trust on the Exchange pursuant to Rule 8.600 in Securities Exchange Act Release No. 57619 (April 4, 2008) 73 FR 19544 (April 10, 2008) (SR–NYSEArca–2008–25). The Commission also has approved listing and trading on the Exchange of a number 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); 60460 (August 7, 2009), 74 FR 41468 (August 17, 2009) (SR–NYSEArca–2009–55) (order approving listing of Dent Tactical ETF); 63076 (October 12, 2010), 75 FR 63874 (October 18, 2010) (SR–NYSEArca–2010–79) (order approving Exchange listing and trading of Cambria Global Tactical ETF); 63802 (January 31, 2011), 76 FR 6503 (February 4, 2011) (SR–NYSEArca–2010–118) (order approving Exchange listing and trading of the SiM Dynamic Allocation Diversified Income ETF and SiM Dynamic Allocation Growth Income ETF). 5 The Trust is registered under the 1940 Act. On March 15, 2011, the Trust filed with the Commission Post-Effective Amendment No. 20 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’’). The description of the operation of the Trust and the Fund herein is based on the Registration Statement. VerDate Mar<15>2010 20:39 May 02, 2011 Jkt 223001 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 Adviser nor the Sub-Adviser is affiliated with a broker-dealer. In the event (a) the Adviser or the Sub-Adviser becomes newly affiliated with a brokerdealer, or (b) any new adviser or subadviser becomes affiliated with a brokerdealer, 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. Description of the Fund According to the Registration Statement, the Fund’s investment objective is to seek to provide long-term capital appreciation with a secondary emphasis on capital preservation. The Fund is an actively managed exchangetraded fund (‘‘ETF’’) and thus does not seek to replicate the performance of a specified index. The Fund is considered 6 An investment adviser to an open-end fund is required to be registered under the Investment Advisers Act of 1940 (‘‘Advisers Act’’). As a result, the Adviser and Sub-Adviser and their related personnel 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. In addition, Rule 206(4)–7 under the Advisers Act makes it unlawful for an investment adviser to provide investment advice to clients unless such investment adviser has (i) adopted and implemented written policies and procedures reasonably designed to prevent violation, by the investment adviser 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. PO 00000 Frm 00090 Fmt 4703 Sfmt 4703 24937 a ‘‘fund-of-funds’’ that seeks to achieve its investment objective by primarily investing in other ETFs that offer diversified exposure to global regions, countries, styles (market capitalization, value, growth, etc.) or sectors, and other exchange-traded products (‘‘ETPs,’’ and, together with ETFs, ‘‘Underlying ETPs’’),7 including but not limited to exchange-traded notes (‘‘ETNs’’),8 exchange-traded currency trusts, and closed-end funds.9 The Fund will primarily invest in U.S.-listed domestic and foreign equity-based, fixed incomebased, currency-based, and commoditybased Underlying ETPs. The Sub-Adviser will seek to achieve the Fund’s investment objective by managing a tactical strategy that has the ability to dynamically rebalance the Fund’s portfolio from as much as 100% equity-based assets to 100% fixed income-based assets or cash and cash equivalents depending on market trends. This is a long-only tactical strategy that seeks to minimize portfolio losses by rotating out of higher volatility assets and into lower volatility assets when the Sub-Adviser believes there are significant risks in the equity markets. Risk management is an integral part of the Sub-Adviser’s investment strategy. The Fund will not invest in leveraged, inverse, or inverse leveraged Underlying ETPs. The Sub-Adviser uses a quantitative tactical methodology to identify the Underlying ETPs believed to be participating in long-term ‘‘durable trends’’ within the market. This model enables the Sub-Adviser to evaluate, rank, and select the appropriate mix of investments in Underlying ETPs given market conditions. The Sub-Adviser’s investment philosophy emphasizes investments in broad market indexes and market sector indexes. In general, the Fund will 7 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. 8 ETNs are debt obligations of investment banks that are traded on exchanges and the returns of which are linked to the performance of market indexes. 9 The Fund, through its investment in Underlying ETPs, may invest in closed-end funds, pooled investment vehicles that are registered under the 1940 Act and whose shares are listed and traded on U.S. national securities exchanges. E:\FR\FM\03MYN1.SGM 03MYN1 24938 Federal Register / Vol. 76, No. 85 / Tuesday, May 3, 2011 / Notices The Fund will only make such investments in conformity with the requirements of Section 817 of the Internal Revenue Code of 1986, as amended (‘‘Code’’).10 The Fund, through its investment in Underlying ETPs, may invest in equity securities. Equity securities represent ownership interests in a company or partnership and consist of common stocks, preferred stocks, warrants to acquire common stock, securities convertible into common stock, investments in master limited partnerships securities traded in the U.S. on registered exchanges or the over-the-counter market, rights, and Depositary Receipts.11 The Fund, through its investments in Underlying ETPs, may invest in the equity securities of foreign issuers, including the securities of foreign issuers in emerging market countries. Emerging or developing markets exist in countries that are considered to be in the initial stages of industrialization. The Fund, through its investment in Underlying ETPs, may invest in debt securities. A debt security is a security consisting of a certificate or other ASSETS HELD BY UNDERLYING ETPS evidence of a debt (secured or unsecured) on which the issuing Equity-Based .............................. 0%–100% company or governmental body Fixed Income-Based/Cash ......... 0%–100% promises to pay the holder thereof a fixed, variable, or floating rate of Depending on the economic and interest for a specified length of time, market climate, the portfolio may and to repay the debt on the specified increase or decrease portfolio maturity date. Some debt securities, concentrations within the ranges shown such as zero coupon bonds, do not make below. regular interest payments, but are issued at a discount to their principal or Foreign Equity ............................ 0%–50% maturity value. Debt securities include Large Cap Equity ........................ 0%–50% a variety of fixed income obligations, Mid Cap Equity ........................... 0%–30% including, but not limited to, corporate Small Cap Equity ........................ 0%–30% Commodities ............................... 0%–20% debt securities, government securities, Currencies .................................. 0%–10% municipal securities, convertible securities, and mortgage-backed The Fund’s portfolio may temporarily securities. Debt securities include exceed these percentage ranges for short investment-grade securities, noninvestment-grade securities, and periods without notice, and the SubAdviser may alter the percentage ranges unrated securities. Debt securities are subject to a variety of risks, such as when it deems appropriate. Additional quantitative tools are used interest rate risk, income risk, call/ to evaluate the probability of investment prepayment risk, inflation risk, credit success within the equity market. These risk, and currency risk. tools allow the Sub-Adviser to get into 10 26 CFR 1.817–5. or out of equity positions, and include 11 American Depositary Receipts (‘‘ADRs’’), as but are not limited to: well as Global Depositary Receipts (‘‘GDRs’’), are • Interest rate spreads. certificates evidencing ownership of shares of a • Options activity. foreign issuer. Depositary Receipts may be sponsored or unsponsored. These certificates are • Market breadth. issued by depositary banks and generally trade on • Equity index trends. an established market in the United States or The Fund intends to invest primarily elsewhere. The underlying shares are held in trust in the securities of Underlying ETPs by a custodian bank or similar financial institution in the issuer’s home country. The depositary bank consistent with the requirements of may not have physical custody of the underlying Section 12(d)(1) of the 1940 Act, or any securities at all times and may charge fees for rule, regulation, or order of the various services, including forwarding dividends Commission or interpretation thereof. and interest and corporate actions. srobinson on DSKHWCL6B1PROD with NOTICES purchase or increase its exposure to Underlying ETPs that track equity markets or market sectors when the SubAdviser’s quantitative tactical asset allocation model and risk analysis indicates that the applicable market or sector is at low risk of losing value or presents opportunity for growth and appreciation. The Fund will generally sell interests in, or reduce investment exposure to, Underlying ETPs tracking equity markets or market sectors in favor of fixed income-based Underlying ETPs or cash positions when the SubAdviser’s quantitative tactical asset allocation model and risk analysis indicates that such markets have become, or are becoming, risky. The Sub-Adviser uses a quantitative metric to rank and select the appropriate mix of investments given prevailing market conditions. The Sub-Adviser’s quantitative tactical asset allocation model determines asset allocation between bonds and stocks, equity selection, sector concentration, as well as limiting portfolio drawdown. The general guidelines for the Fund’s portfolio are as follows: VerDate Mar<15>2010 20:39 May 02, 2011 Jkt 223001 PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 The Fund, or the Underlying ETPs in which it invests, may invest in U.S. government securities, U.S. Treasury zero-coupon bonds, and real estate investment trusts. Other Investments To respond to adverse market, economic, political, or other conditions, the Fund may invest 100% of its total assets, without limitation, in highquality debt securities and money market instruments either directly or through Underlying ETPs. The Fund may be invested in these instruments for extended periods, depending on the Sub-Adviser’s assessment of market conditions. These debt securities and money market instruments include shares of other mutual funds, commercial paper, certificates of deposit, bankers’ acceptances, U.S. Government securities, repurchase and reverse repurchase agreements,12 and bonds that are BBB or higher. The Fund 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. For purposes of this policy, the issuer of the underlying security will be deemed to be the issuer of any respective Depositary Receipt.13 The Fund may not invest 25% or more of its total assets in the securities of one or more issuers conducting their principal business activities in the same industry or group of industries. This limitation does not apply to investments in securities issued or guaranteed by the U.S. Government, its agencies or 12 The Fund may enter into repurchase agreements with financial institutions, which may be deemed to be loans. The Fund follows certain procedures designed to minimize the risks inherent in such agreements. These procedures include effecting repurchase transactions only with large, well-capitalized and well-established financial institutions whose condition will be continually monitored by the Sub-Adviser. In addition, the value of the collateral underlying the repurchase agreement will always be at least equal to the repurchase price, including any accrued interest earned on the repurchase agreement. In the event of a default or bankruptcy by a selling financial institution, the Fund will seek to liquidate such collateral. In addition, the Fund may enter into reverse repurchase agreements without limit as part of the Fund’s investment strategy. Reverse repurchase agreements involve sales by the Fund of portfolio assets concurrently with an agreement by the Fund to repurchase the same assets at a later date at a fixed price. 13 The diversification standard is set forth in Section 5(b)(1) of the 1940 Act. E:\FR\FM\03MYN1.SGM 03MYN1 Federal Register / Vol. 76, No. 85 / Tuesday, May 3, 2011 / Notices srobinson on DSKHWCL6B1PROD with NOTICES instrumentalities, or shares of investment companies. The Fund will not invest 25% or more of its total assets in any investment company that so concentrates. For purposes of this policy, the issuer of the underlying security will be deemed to be the issuer of any respective ADRs or GDRs.14 The Fund may not purchase illiquid securities.15 Except for Underlying ETPs that may hold non-U.S. issues, the Fund will not otherwise invest in non-U.S. issues. According to the Registration Statement, the Fund will seek to qualify for treatment as a Regulated Investment Company (‘‘RIC’’) pursuant to Subchapter M under the Code.16 The Fund calculates net asset value (‘‘NAV’’) by: (i) Taking the current market value of its total assets; (ii) subtracting any liabilities; and (iii) dividing that amount by the total 14 See Form N–1A, Item 9. The Commission has taken the position that a fund is concentrated if it invests more than 25% of the value of its total assets in any one industry. See, e.g., Investment Company Act Release No. 9011 (October 30, 1975), 40 FR 54241 (November 21, 1975). 15 The Commission has stated that long-standing Commission guidelines have required open-end funds to hold no more than 15% of their net assets in illiquid securities and other illiquid assets. See Investment Company Act Release No. 28193 (March 11, 2008), 73 FR 14617 (March 18, 2008), footnote 34. See also, Investment Company Act Release No. 5847 (October 21, 1969), 35 FR 19989 (December 31, 1970) (Statement Regarding ‘‘Restricted Securities’’); Investment Company Act Release No. 18612 (March 12, 1992), 57 FR 9828 (March 20, 1992) (Revisions of Guidelines to Form N–1A). A fund’s portfolio security is illiquid if it cannot be disposed of in the ordinary course of business within seven days at approximately the value ascribed to it by the ETF. See Investment Company Act Release No. 14983 (March 12, 1986), 51 FR 9773 (March 21, 1986) (adopting amendments to Rule 2a–7 under the 1940 Act); Investment Company Act Release No. 17452 (April 23, 1990), 55 FR 17933 (April 30, 1990) (adopting Rule 144A under the Securities Act of 1933). 16 26 U.S.C. 851. One of several requirements for RIC qualification is that the Fund must receive at least 90% of the Fund’s gross income each year from dividends, interest, payments with respect to securities loans, gains from the sale or other disposition of stock, securities or foreign currencies, or other income derived with respect to the Fund’s investments in stock, securities, foreign currencies and net income from an interest in a qualified publicly traded partnership (‘‘90% Test’’). A second requirement for qualification as a RIC is that the Fund must diversify its holdings so that, at the end of each fiscal quarter of the Fund’s taxable year: (a) At least 50% of the market value of the Fund’s total assets is represented by cash and cash items, U.S. Government securities, securities of other RICs, and other securities, with these other securities limited, in respect to any one issuer, to an amount not greater than 5% of the value of the Fund’s total assets or 10% of the outstanding voting securities of such issuer; and (b) not more than 25% of the value of its total assets are invested in the securities (other than U.S. Government securities or securities of other RICs) of any one issuer or two or more issuers which the Fund controls and which are engaged in the same, similar, or related trades or businesses, or the securities of one or more qualified publicly traded partnership (‘‘Asset Test’’). VerDate Mar<15>2010 20:39 May 02, 2011 Jkt 223001 number of Shares owned by shareholders. The NAV of the Fund will normally be determined as of the close of the regular trading session on the New York Stock Exchange (‘‘NYSE’’) (ordinarily 4:00 p.m. Eastern Time) on each business day. In calculating NAV, the Fund generally values investment portfolios at market price. If market prices are unavailable or are unreliable, or when the value of a security has been materially affected by events occurring after the relevant market closes, the Fund will price those securities at fair value as determined in good faith using methods approved by the Fund’s Board of Trustees. Creations and redemptions of Shares occur in large specified blocks of Shares, referred to as ‘‘Creation Units.’’ According to the Registration Statement, the Shares of the Fund are ‘‘created’’ at their NAV by Authorized Participants only in block-size Creation Units of 25,000 Shares or more. An Authorized Participant enters into an agreement (‘‘Participant Agreement’’) with the Fund’s Distributor or a Depository Trust Company participant that has executed a Participant Agreement with the Distributor, and deposits into the Fund a portfolio of securities closely approximating the holdings of the Fund and a specified amount of cash, together totaling the NAV of the Creation Unit(s), in exchange for 25,000 Shares of the Fund (or multiples thereof). Similarly, Shares can only be redeemed in Creation Units, generally 25,000 Shares or more, principally in-kind for a portfolio of securities held by the Fund and a specified amount of cash together totaling the NAV of the Creation Unit(s). Shares are not redeemable from the Fund except when aggregated in Creation Units. The prices at which creations and redemptions occur are based on the next calculation of NAV after an order is received in a form prescribed in the Participant Agreement. The Shares will conform to the initial and continued listing criteria under NYSE Arca Equities Rule 8.600. The Exchange represents that, for initial and/or continued listing, the Fund will be in compliance with Rule 10A–3 under the Exchange Act,17 as provided by NYSE Arca Equities Rule 5.3. A minimum of 100,000 Shares will be outstanding at the commencement of trading on the Exchange. The Exchange will obtain a representation from the issuer of the Shares that the NAV per Share will be calculated daily and that the NAV and the Disclosed Portfolio 17 17 PO 00000 CFR 240.10A–3. Frm 00092 Fmt 4703 Sfmt 4703 24939 will be made available to all market participants at the same time. Availability of Information The Fund’s Web site (http:// www.advisorshares.com), which will be publicly available prior to the public offering of Shares, will include a form of the Prospectus for the Fund that may be downloaded. The Fund’s Web site will include additional quantitative information updated on a daily basis, including, for the Fund, (1) daily trading volume, the prior business day’s reported closing price, NAV and midpoint of the bid/ask spread at the time of calculation of such NAV (‘‘Bid/Ask Price’’),18 and a calculation of the premium and discount of the Bid/Ask Price against the NAV, and (2) data in chart format displaying the frequency distribution of discounts and premiums of the daily Bid/Ask Price against the NAV, within appropriate ranges, for each of the four previous calendar quarters. On each business day, before commencement of trading in Shares in the Core Trading Session on the Exchange, the Fund will disclose on its Web site the Disclosed Portfolio, as defined in NYSE Arca Equities Rule 8.600(c)(2), that will form the basis for the Fund’s calculation of NAV at the end of the business day.19 On a daily basis, the Adviser will disclose for each portfolio security or other financial instrument of the Fund the following information: Ticker symbol (if applicable); name of security or financial instrument; number of Shares or dollar value of financial instruments held in the portfolio; and percentage weighting of the security or financial instrument in the portfolio. The Web site information will be publicly available at no charge. In addition, a basket composition file, which includes the security names and share quantities required to be delivered in exchange for Fund Shares, together with estimates and actual cash components, will be publicly disseminated daily prior to the opening of the NYSE via the National Securities Clearing Corporation. The basket represents one Creation Unit of the Fund. 18 The Bid/Ask Price of the Fund is determined using the highest bid and the lowest offer on the Exchange as of the time of calculation of the Fund’s NAV. The records relating to Bid/Ask Prices will be retained by the Fund and its service providers. 19 Under accounting procedures followed by the Fund, trades made on the prior business day (‘‘T’’) will be booked and reflected in NAV on the current business day (‘‘T+1’’). Accordingly, the Fund will be able to disclose at the beginning of the business day the portfolio that will form the basis for the NAV calculation at the end of the business day. E:\FR\FM\03MYN1.SGM 03MYN1 24940 Federal Register / Vol. 76, No. 85 / Tuesday, May 3, 2011 / Notices srobinson on DSKHWCL6B1PROD with NOTICES Investors can also obtain the Trust’s Statement of Additional Information (‘‘SAI’’), the Fund’s Shareholder Reports, and its Form N–CSR and Form N–SAR, filed twice a year. The Trust’s SAI and Shareholder Reports are available free upon request from the Trust, and those documents and the Form N–CSR and Form N–SAR may be viewed on-screen or downloaded from the Commission’s Web site at http://www.sec.gov. Information regarding market price and trading volume of the Shares is and will be continually available on a real-time basis throughout the day on brokers’ computer screens and other electronic services. Information regarding the previous day’s closing price and trading volume information for the Shares 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, and, for the Underlying ETPs, will be available from the national securities exchange on which they are listed. In addition, the Portfolio Indicative Value, as defined in NYSE Arca Equities Rule 8.600(c)(3), will be disseminated by the Exchange at least every 15 seconds during the Core Trading Session by one or more major market data vendors. The dissemination of the Portfolio Indicative Value, together with the Disclosed Portfolio, will allow investors to determine the value of the underlying portfolio of the Fund on a daily basis and will provide a close estimate of that value throughout the trading day. Additional information regarding the Trust and the Shares, including investment strategies, risks, creation and redemption procedures, fees, portfolio holdings disclosure policies, distributions, and taxes is included in the Registration Statement. All terms relating to the Fund that are referred to, but not defined in, this proposed rule change are defined in the Registration Statement. Trading Halts With respect to trading halts, the Exchange may consider all relevant factors in exercising its discretion to halt or suspend trading in the Shares of the Fund.20 Trading in Shares of the Fund will be halted if the circuit breaker parameters in NYSE Arca Equities Rule 7.12 have been reached. Trading also may be halted because of market conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable. These may include: (1) The extent to which trading 20 See NYSE Arca Equities Rule 7.12, Commentary .04. VerDate Mar<15>2010 20:39 May 02, 2011 Jkt 223001 is not occurring in the securities and/or the financial instruments comprising the Disclosed Portfolio of the Fund; or (2) whether other unusual conditions or circumstances detrimental to the maintenance of a fair and orderly market are present. Trading in the Shares will be subject to NYSE Arca Equities Rule 8.600(d)(2)(D), which sets forth circumstances under which Shares of the Fund may be halted. 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 or with which the Exchange has entered into a comprehensive surveillance sharing agreement.21 In addition, the Exchange 21 For a list of the current members of ISG, see http://www.isgportal.org. The Exchange notes that not all components of the Disclosed Portfolio for the Fund may trade on markets that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. All PO 00000 Frm 00093 Fmt 4703 Sfmt 4703 could obtain information from the U.S. exchanges on which the Underlying ETPs are listed and traded. In addition, the Exchange also has a general policy prohibiting the distribution of material, non-public information by its employees. Information Bulletin Prior to the commencement of trading, the Exchange will inform its Equity Trading Permit (‘‘ETP’’) Holders in an Information Bulletin (‘‘Bulletin’’) of the special characteristics and risks associated with trading the Shares. Specifically, the Bulletin will discuss the following: (1) The procedures for purchases and redemptions of Shares in Creation Unit aggregations (and that Shares are not individually redeemable); (2) NYSE Arca Equities Rule 9.2(a), which imposes a duty of due diligence on its ETP Holders to learn the essential facts relating to every customer prior to trading the Shares; (3) the risks involved in trading the Shares during the Opening and Late Trading Sessions when an updated Portfolio Indicative Value will not be calculated or publicly disseminated; (4) how information regarding the Portfolio Indicative Value is disseminated; (5) the requirement that ETP Holders deliver a prospectus to investors purchasing newly issued Shares prior to or concurrently with the confirmation of a transaction; and (6) trading information. In addition, the Bulletin will reference that the Fund is subject to various fees and expenses described in the Registration Statement. The Bulletin will discuss any exemptive, no-action, and interpretive relief granted by the Commission from any rules under the Exchange Act. The Bulletin will also disclose that the NAV for the Shares will be calculated after 4:00 p.m. Eastern Time each trading day. 2. Statutory Basis The basis under the Exchange Act for this proposed rule change is the requirement under Section 6(b)(5) 22 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 is designed to prevent fraudulent and manipulative acts and practices in that the Shares will Underlying ETPs are listed on national securities exchanges, all of which are members of ISG. 22 15 U.S.C. 78f(b)(5). E:\FR\FM\03MYN1.SGM 03MYN1 srobinson on DSKHWCL6B1PROD with NOTICES Federal Register / Vol. 76, No. 85 / Tuesday, May 3, 2011 / Notices be listed and traded on the Exchange pursuant to the initial and continued listing criteria in NYSE Arca Equities Rule 8.600. The Exchange has in place surveillance procedures that are adequate to properly monitor trading in the Shares in all trading sessions and to deter and detect violations of Exchange rules and applicable Federal securities laws. The Exchange may obtain information via ISG from other exchanges that are members of ISG or with which the Exchange has entered into a comprehensive surveillance sharing agreement. All Underlying ETPs will be listed on national securities exchanges, all of which are members of ISG, and the listing and trading of such securities is subject to rules of the exchanges on which they are listed and traded, as approved by the Commission. The Fund will not invest in leveraged, inverse, or inverse leveraged Underlying ETPs. The Fund may not purchase illiquid securities. Except for Underlying ETPs that may hold nonU.S. issues, the Fund will not otherwise invest in non-U.S. issues. The proposed rule change is designed to promote just and equitable principles of trade and to protect investors and the public interest in 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. In addition, a large amount of information is publicly available regarding the Fund and the Shares, thereby promoting market transparency. Quotation and last-sale information for the Shares will be available via the CTA high-speed line and, for the Underlying ETPs, will be available from the national securities exchange on which they are listed. In addition, the Portfolio Indicative Value will be disseminated by the Exchange at least every 15 seconds during the Core Trading Session. The Fund’s Web site will include a form of the Prospectus for the Fund that may be downloaded, as well as additional quantitative information updated on a daily basis. On each business day, before commencement of trading in Shares in the Core Trading Session on the Exchange, the Fund will disclose on its Web site the Disclosed Portfolio that will form the basis for the Fund’s calculation of NAV at the end of the business day. On a daily basis, the Adviser will disclose for each portfolio security or other financial instrument of the Fund the following information: Ticker symbol (if applicable); name of security or financial instrument; number VerDate Mar<15>2010 20:39 May 02, 2011 Jkt 223001 of Shares or dollar value of financial instruments held in the portfolio; and percentage weighting of the security or financial instrument in the portfolio. The Web site for the Fund will include a form of the Prospectus for the Fund and additional data relating to NAV and other applicable quantitative information. Moreover, 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. Trading in Shares of the Fund will be halted if the circuit breaker parameters in NYSE Arca Equities Rule 7.12 have been reached or because of market conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable. Trading in the Shares will be subject to NYSE Arca Equities Rule 8.600(d)(2)(D), which sets forth circumstances under which Shares of the Fund may be halted. In addition, as noted above, investors will have ready access to information regarding the Fund’s holdings, the Portfolio Indicative Value, the Disclosed Portfolio, and quotation and last-sale information for the Shares. The proposed rule change is designed to perfect the mechanism of a free and open market and, in general, to protect investors and the public interest in that it will facilitate the listing and trading of additional types of actively-managed exchange-traded products that will enhance competition among market participants, to the benefit of investors and the marketplace. As noted above, the Exchange has in place surveillance procedures relating to trading in the Shares and may obtain information via ISG from other exchanges that are members of ISG or with which the Exchange has entered into a comprehensive surveillance sharing agreement. In addition, as noted above, investors will have ready access to information regarding the Fund’s holdings, the Portfolio Indicative Value, the Disclosed Portfolio, and quotation and last-sale information for the Shares. 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. PO 00000 Frm 00094 Fmt 4703 Sfmt 4703 24941 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 (i) as the Commission may designate up to 90 days of such date if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission shall: (A) By order approve or disapprove such 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 (http://www.sec.gov/ rules/sro.shtml); or • Send an e-mail to rulecomments@sec.gov. Please include File Number SR–NYSEArca–2011–18 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–2011–18. 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 E:\FR\FM\03MYN1.SGM 03MYN1 24942 Federal Register / Vol. 76, No. 85 / Tuesday, May 3, 2011 / Notices Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street, NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of the filing will also 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 No. SR–NYSEArca– 2011–18 and should be submitted on or before May 24, 2011. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.23 Cathy H. Ahn, Deputy Secretary. [FR Doc. 2011–10717 Filed 5–2–11; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–64353; File No. SR–FINRA– 2011–020] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of Proposed Rule Change Relating to FINRA’s Trading Activity Fee Rate for Transactions in Covered Equity Securities April 27, 2011. srobinson on DSKHWCL6B1PROD with NOTICES Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on April 26, 2011, the Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by FINRA. 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 FINRA is proposing to amend Section 1 of Schedule A to the FINRA By-Laws to adjust the rate of FINRA’s Trading Activity Fee (‘‘TAF’’) for transactions in covered equity securities. The text of the proposed rule change is available on FINRA’s Web site at http://www.finra.org, at the principal office of FINRA, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, FINRA 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 these statements may be examined at the places specified in Item IV below. FINRA has prepared summaries, set forth in Sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose FINRA’s primary member regulatory pricing structure consists of the following fees: The Personnel Assessment (PA); the Gross Income Assessment (GIA); and the Trading Activity Fee (TAF). These fees are used to fund FINRA’s regulatory activities, including examinations; financial monitoring; and FINRA’s policymaking, rulemaking, and enforcement activities.3 Because the proceeds from these fees are used to fund FINRA’s regulatory mandate, Section 1 of Schedule A to FINRA’s By-Laws notes that ‘‘FINRA shall periodically review these revenues in conjunction with costs to determine the applicable rate.’’ 4 FINRA initially adopted the TAF in 2002 as a replacement for an earlier regulatory fee based on trades reported to Nasdaq’s Automated Confirmation Transaction system then in place.5 Currently, the TAF is generally assessed on the sale of all exchange registered securities wherever executed (except debt securities that are not TRACE– Eligible Securities), over-the-counter equity securities, security futures, TRACE–Eligible Securities (provided that the transaction is a Reportable TRACE Transaction), and all municipal securities subject to Municipal Securities Rulemaking Board (‘‘MSRB’’) reporting requirements. The rules 3 See 23 17 CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. VerDate Mar<15>2010 20:39 May 02, 2011 FINRA By-Laws, Schedule A, § 1(a). 4 Id. 5 See Securities Exchange Act Release No. 46416 (August 23, 2002), 67 FR 55901 (August 30, 2002). Jkt 223001 PO 00000 Frm 00095 Fmt 4703 Sfmt 4703 governing the TAF also include a list of transactions exempt from the TAF.6 The current TAF rates are $0.000075 per share for each sale of a covered equity security, with a maximum charge of $3.75 per trade; $0.002 per contract for each sale of an option; $0.04 per contract for each round turn transaction of a security future; and $0.00075 per bond for each sale of a covered TRACE– Eligible Security and/or municipal security, with a maximum charge of $0.75 per trade. In addition, if the execution price for a covered security is less than the TAF rate on a per share, per contract, or round turn transaction basis, then no TAF is assessed. The current TAF rate for covered equity securities of $0.000075 per share has been in place for over six years.7 Over that time period, FINRA has proposed the restructuring of both the GIA and the PA. For example, effective January 1, 2010, the GIA and PA were restructured to stabilize cash flows by shifting a greater portion of the regulatory fees from the GIA, which is based on industry revenue, to the PA, which is based on the more constant figure of registered persons, while seeking to remain revenue neutral to FINRA.8 As FINRA noted when it restructured the GIA and the PA, because the GIA is assessed based on a member’s annual gross revenue for the preceding calendar year, FINRA’s revenues derived from the GIA are subject to the year-to-year volatility of members’ revenues. A similar unpredictability of revenue flows exists with the TAF. The TAF generally is assessed on sales of securities by members and is collected from clearing firms on a monthly basis. Although the TAF is generally charged on transactions in equity securities, TRACE-reportable securities, options, and futures, over 95% of TAF revenue is generated by transactions in covered equity securities. Thus, FINRA’s revenue from the TAF is substantially affected by changes in trading volume in the equities markets. Because of the substantial decrease in average daily share volumes (ADSV) since 2009, FINRA has seen a commensurate substantial decline in revenue from the TAF. To stabilize revenue flows necessary to support FINRA’s regulatory mission, FINRA is proposing an increase to the 6 See FINRA By-Laws, Schedule A, § 1(b)(2). Securities Exchange Act Release No. 50485 (October 1, 2004), 69 FR 60445 (October 8, 2004); NASD Notice to Members 04–84 (November 2004). 8 See Securities Exchange Act Release No. 61042 (November 20, 2009), 74 FR 62616 (November 30, 2009); see also Regulatory Notice 09–68 (November 2009). 7 See E:\FR\FM\03MYN1.SGM 03MYN1

Agencies

[Federal Register Volume 76, Number 85 (Tuesday, May 3, 2011)]
[Notices]
[Pages 24936-24942]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-10717]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64357; File No. SR-NYSEArca-2011-18]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change To List and Trade the Meidell Tactical 
Advantage ETF

April 28, 2011.
    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 April 15, 2011, 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.
---------------------------------------------------------------------------

    \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 under NYSE 
Arca Equities Rule 8.600 (``Managed Fund Shares''): The Meidell 
Tactical Advantage ETF. The text of the proposed rule change is 
available at the Exchange, the Commission's Public Reference Room, and 
http://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 
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

[[Page 24937]]

Equities Rule 8.600: The Meidell Tactical Advantage ETF (``Fund'').\4\ 
The Shares will be offered by AdvisorShares Trust (``Trust''), a 
statutory trust organized under the laws of the State of Delaware and 
registered with the Commission as an open-end management investment 
company.\5\ The investment adviser to the Fund is AdvisorShares 
Investments, LLC (``Adviser''). American Wealth Management is the 
Fund's sub-adviser (``Sub-Adviser'') and provides day-to-day portfolio 
management of the Fund. Foreside Fund Services, LLC (``Distributor'') 
is the principal underwriter and distributor of the Fund's Shares.
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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 adviser 
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 approved NYSE Arca Equities Rule 8.600 and 
the listing and trading of certain funds of the PowerShares Actively 
Managed Exchange-Traded Funds Trust on the Exchange pursuant to Rule 
8.600 in Securities Exchange Act Release No. 57619 (April 4, 2008) 
73 FR 19544 (April 10, 2008) (SR-NYSEArca-2008-25). The Commission 
also has approved listing and trading on the Exchange of a number 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); 
60460 (August 7, 2009), 74 FR 41468 (August 17, 2009) (SR-NYSEArca-
2009-55) (order approving listing of Dent Tactical ETF); 63076 
(October 12, 2010), 75 FR 63874 (October 18, 2010) (SR-NYSEArca-
2010-79) (order approving Exchange listing and trading of Cambria 
Global Tactical ETF); 63802 (January 31, 2011), 76 FR 6503 (February 
4, 2011) (SR-NYSEArca-2010-118) (order approving Exchange listing 
and trading of the SiM Dynamic Allocation Diversified Income ETF and 
SiM Dynamic Allocation Growth Income ETF).
    \5\ The Trust is registered under the 1940 Act. On March 15, 
2011, the Trust filed with the Commission Post-Effective Amendment 
No. 20 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''). The description of the 
operation of the Trust and the Fund herein is based on the 
Registration Statement.
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    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 Adviser nor the Sub-Adviser is affiliated with a broker-
dealer. In the event (a) the Adviser or the Sub-Adviser becomes newly 
affiliated with a broker-dealer, or (b) any new adviser or sub-adviser 
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 (``Advisers 
Act''). As a result, the Adviser and Sub-Adviser and their related 
personnel 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. In addition, Rule 206(4)-7 under 
the Advisers Act makes it unlawful for an investment adviser to 
provide investment advice to clients unless such investment adviser 
has (i) adopted and implemented written policies and procedures 
reasonably designed to prevent violation, by the investment adviser 
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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Description of the Fund
    According to the Registration Statement, the Fund's investment 
objective is to seek to provide long-term capital appreciation with a 
secondary emphasis on capital preservation. The Fund is an actively 
managed exchange-traded fund (``ETF'') and thus does not seek to 
replicate the performance of a specified index. The Fund is considered 
a ``fund-of-funds'' that seeks to achieve its investment objective by 
primarily investing in other ETFs that offer diversified exposure to 
global regions, countries, styles (market capitalization, value, 
growth, etc.) or sectors, and other exchange-traded products (``ETPs,'' 
and, together with ETFs, ``Underlying ETPs''),\7\ including but not 
limited to exchange-traded notes (``ETNs''),\8\ exchange-traded 
currency trusts, and closed-end funds.\9\ The Fund will primarily 
invest in U.S.-listed domestic and foreign equity-based, fixed income-
based, currency-based, and commodity-based Underlying ETPs.
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    \7\ 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.
    \8\ ETNs are debt obligations of investment banks that are 
traded on exchanges and the returns of which are linked to the 
performance of market indexes.
    \9\ The Fund, through its investment in Underlying ETPs, may 
invest in closed-end funds, pooled investment vehicles that are 
registered under the 1940 Act and whose shares are listed and traded 
on U.S. national securities exchanges.
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    The Sub-Adviser will seek to achieve the Fund's investment 
objective by managing a tactical strategy that has the ability to 
dynamically rebalance the Fund's portfolio from as much as 100% equity-
based assets to 100% fixed income-based assets or cash and cash 
equivalents depending on market trends. This is a long-only tactical 
strategy that seeks to minimize portfolio losses by rotating out of 
higher volatility assets and into lower volatility assets when the Sub-
Adviser believes there are significant risks in the equity markets. 
Risk management is an integral part of the Sub-Adviser's investment 
strategy. The Fund will not invest in leveraged, inverse, or inverse 
leveraged Underlying ETPs.
    The Sub-Adviser uses a quantitative tactical methodology to 
identify the Underlying ETPs believed to be participating in long-term 
``durable trends'' within the market. This model enables the Sub-
Adviser to evaluate, rank, and select the appropriate mix of 
investments in Underlying ETPs given market conditions.
    The Sub-Adviser's investment philosophy emphasizes investments in 
broad market indexes and market sector indexes. In general, the Fund 
will

[[Page 24938]]

purchase or increase its exposure to Underlying ETPs that track equity 
markets or market sectors when the Sub-Adviser's quantitative tactical 
asset allocation model and risk analysis indicates that the applicable 
market or sector is at low risk of losing value or presents opportunity 
for growth and appreciation. The Fund will generally sell interests in, 
or reduce investment exposure to, Underlying ETPs tracking equity 
markets or market sectors in favor of fixed income-based Underlying 
ETPs or cash positions when the Sub-Adviser's quantitative tactical 
asset allocation model and risk analysis indicates that such markets 
have become, or are becoming, risky.
    The Sub-Adviser uses a quantitative metric to rank and select the 
appropriate mix of investments given prevailing market conditions. The 
Sub-Adviser's quantitative tactical asset allocation model determines 
asset allocation between bonds and stocks, equity selection, sector 
concentration, as well as limiting portfolio drawdown. The general 
guidelines for the Fund's portfolio are as follows:

                     Assets Held by Underlying ETPs
------------------------------------------------------------------------
 
------------------------------------------------------------------------
Equity-Based................................................     0%-100%
Fixed Income-Based/Cash.....................................     0%-100%
------------------------------------------------------------------------

    Depending on the economic and market climate, the portfolio may 
increase or decrease portfolio concentrations within the ranges shown 
below.

------------------------------------------------------------------------
 
------------------------------------------------------------------------
Foreign Equity..............................................      0%-50%
Large Cap Equity............................................      0%-50%
Mid Cap Equity..............................................      0%-30%
Small Cap Equity............................................      0%-30%
Commodities.................................................      0%-20%
Currencies..................................................      0%-10%
------------------------------------------------------------------------

    The Fund's portfolio may temporarily exceed these percentage ranges 
for short periods without notice, and the Sub-Adviser may alter the 
percentage ranges when it deems appropriate.
    Additional quantitative tools are used to evaluate the probability 
of investment success within the equity market. These tools allow the 
Sub-Adviser to get into or out of equity positions, and include but are 
not limited to:
     Interest rate spreads.
     Options activity.
     Market breadth.
     Equity index trends.
    The Fund intends to invest primarily in the securities of 
Underlying ETPs consistent with the requirements of Section 12(d)(1) of 
the 1940 Act, or any rule, regulation, or order of the Commission or 
interpretation thereof. The Fund will only make such investments in 
conformity with the requirements of Section 817 of the Internal Revenue 
Code of 1986, as amended (``Code'').\10\
---------------------------------------------------------------------------

    \10\ 26 CFR 1.817-5.
---------------------------------------------------------------------------

    The Fund, through its investment in Underlying ETPs, may invest in 
equity securities. Equity securities represent ownership interests in a 
company or partnership and consist of common stocks, preferred stocks, 
warrants to acquire common stock, securities convertible into common 
stock, investments in master limited partnerships securities traded in 
the U.S. on registered exchanges or the over-the-counter market, 
rights, and Depositary Receipts.\11\
---------------------------------------------------------------------------

    \11\ American Depositary Receipts (``ADRs''), as well as Global 
Depositary Receipts (``GDRs''), are certificates evidencing 
ownership of shares of a foreign issuer. Depositary Receipts may be 
sponsored or unsponsored. These certificates are issued by 
depositary banks and generally trade on an established market in the 
United States or elsewhere. The underlying shares are held in trust 
by a custodian bank or similar financial institution in the issuer's 
home country. The depositary bank may not have physical custody of 
the underlying securities at all times and may charge fees for 
various services, including forwarding dividends and interest and 
corporate actions.
---------------------------------------------------------------------------

    The Fund, through its investments in Underlying ETPs, may invest in 
the equity securities of foreign issuers, including the securities of 
foreign issuers in emerging market countries. Emerging or developing 
markets exist in countries that are considered to be in the initial 
stages of industrialization.
    The Fund, through its investment in Underlying ETPs, may invest in 
debt securities. A debt security is a security consisting of a 
certificate or other evidence of a debt (secured or unsecured) on which 
the issuing company or governmental body promises to pay the holder 
thereof a fixed, variable, or floating rate of interest for a specified 
length of time, and to repay the debt on the specified maturity date. 
Some debt securities, such as zero coupon bonds, do not make regular 
interest payments, but are issued at a discount to their principal or 
maturity value. Debt securities include a variety of fixed income 
obligations, including, but not limited to, corporate debt securities, 
government securities, municipal securities, convertible securities, 
and mortgage-backed securities. Debt securities include investment-
grade securities, non-investment-grade securities, and unrated 
securities. Debt securities are subject to a variety of risks, such as 
interest rate risk, income risk, call/prepayment risk, inflation risk, 
credit risk, and currency risk.
    The Fund, or the Underlying ETPs in which it invests, may invest in 
U.S. government securities, U.S. Treasury zero-coupon bonds, and real 
estate investment trusts.
Other Investments
    To respond to adverse market, economic, political, or other 
conditions, the Fund may invest 100% of its total assets, without 
limitation, in high-quality debt securities and money market 
instruments either directly or through Underlying ETPs. The Fund may be 
invested in these instruments for extended periods, depending on the 
Sub-Adviser's assessment of market conditions. These debt securities 
and money market instruments include shares of other mutual funds, 
commercial paper, certificates of deposit, bankers' acceptances, U.S. 
Government securities, repurchase and reverse repurchase 
agreements,\12\ and bonds that are BBB or higher.
---------------------------------------------------------------------------

    \12\ The Fund may enter into repurchase agreements with 
financial institutions, which may be deemed to be loans. The Fund 
follows certain procedures designed to minimize the risks inherent 
in such agreements. These procedures include effecting repurchase 
transactions only with large, well-capitalized and well-established 
financial institutions whose condition will be continually monitored 
by the Sub-Adviser. In addition, the value of the collateral 
underlying the repurchase agreement will always be at least equal to 
the repurchase price, including any accrued interest earned on the 
repurchase agreement. In the event of a default or bankruptcy by a 
selling financial institution, the Fund will seek to liquidate such 
collateral. In addition, the Fund may enter into reverse repurchase 
agreements without limit as part of the Fund's investment strategy. 
Reverse repurchase agreements involve sales by the Fund of portfolio 
assets concurrently with an agreement by the Fund to repurchase the 
same assets at a later date at a fixed price.
---------------------------------------------------------------------------

    The Fund 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. For purposes of this policy, the issuer of the underlying 
security will be deemed to be the issuer of any respective Depositary 
Receipt.\13\
---------------------------------------------------------------------------

    \13\ The diversification standard is set forth in Section 
5(b)(1) of the 1940 Act.
---------------------------------------------------------------------------

    The Fund may not invest 25% or more of its total assets in the 
securities of one or more issuers conducting their principal business 
activities in the same industry or group of industries. This limitation 
does not apply to investments in securities issued or guaranteed by the 
U.S. Government, its agencies or

[[Page 24939]]

instrumentalities, or shares of investment companies. The Fund will not 
invest 25% or more of its total assets in any investment company that 
so concentrates. For purposes of this policy, the issuer of the 
underlying security will be deemed to be the issuer of any respective 
ADRs or GDRs.\14\
---------------------------------------------------------------------------

    \14\ See Form N-1A, Item 9. The Commission has taken the 
position that a fund is concentrated if it invests more than 25% of 
the value of its total assets in any one industry. See, e.g., 
Investment Company Act Release No. 9011 (October 30, 1975), 40 FR 
54241 (November 21, 1975).
---------------------------------------------------------------------------

    The Fund may not purchase illiquid securities.\15\
---------------------------------------------------------------------------

    \15\ The Commission has stated that long-standing Commission 
guidelines have required open-end funds to hold no more than 15% of 
their net assets in illiquid securities and other illiquid assets. 
See Investment Company Act Release No. 28193 (March 11, 2008), 73 FR 
14617 (March 18, 2008), footnote 34. See also, Investment Company 
Act Release No. 5847 (October 21, 1969), 35 FR 19989 (December 31, 
1970) (Statement Regarding ``Restricted Securities''); Investment 
Company Act Release No. 18612 (March 12, 1992), 57 FR 9828 (March 
20, 1992) (Revisions of Guidelines to Form N-1A). A fund's portfolio 
security is illiquid if it cannot be disposed of in the ordinary 
course of business within seven days at approximately the value 
ascribed to it by the ETF. See Investment Company Act Release No. 
14983 (March 12, 1986), 51 FR 9773 (March 21, 1986) (adopting 
amendments to Rule 2a-7 under the 1940 Act); Investment Company Act 
Release No. 17452 (April 23, 1990), 55 FR 17933 (April 30, 1990) 
(adopting Rule 144A under the Securities Act of 1933).
---------------------------------------------------------------------------

    Except for Underlying ETPs that may hold non-U.S. issues, the Fund 
will not otherwise invest in non-U.S. issues.
    According to the Registration Statement, the Fund will seek to 
qualify for treatment as a Regulated Investment Company (``RIC'') 
pursuant to Subchapter M under the Code.\16\
---------------------------------------------------------------------------

    \16\ 26 U.S.C. 851. One of several requirements for RIC 
qualification is that the Fund must receive at least 90% of the 
Fund's gross income each year from dividends, interest, payments 
with respect to securities loans, gains from the sale or other 
disposition of stock, securities or foreign currencies, or other 
income derived with respect to the Fund's investments in stock, 
securities, foreign currencies and net income from an interest in a 
qualified publicly traded partnership (``90% Test''). A second 
requirement for qualification as a RIC is that the Fund must 
diversify its holdings so that, at the end of each fiscal quarter of 
the Fund's taxable year: (a) At least 50% of the market value of the 
Fund's total assets is represented by cash and cash items, U.S. 
Government securities, securities of other RICs, and other 
securities, with these other securities limited, in respect to any 
one issuer, to an amount not greater than 5% of the value of the 
Fund's total assets or 10% of the outstanding voting securities of 
such issuer; and (b) not more than 25% of the value of its total 
assets are invested in the securities (other than U.S. Government 
securities or securities of other RICs) of any one issuer or two or 
more issuers which the Fund controls and which are engaged in the 
same, similar, or related trades or businesses, or the securities of 
one or more qualified publicly traded partnership (``Asset Test'').
---------------------------------------------------------------------------

    The Fund calculates net asset value (``NAV'') by: (i) Taking the 
current market value of its total assets; (ii) subtracting any 
liabilities; and (iii) dividing that amount by the total number of 
Shares owned by shareholders. The NAV of the Fund will normally be 
determined as of the close of the regular trading session on the New 
York Stock Exchange (``NYSE'') (ordinarily 4:00 p.m. Eastern Time) on 
each business day. In calculating NAV, the Fund generally values 
investment portfolios at market price. If market prices are unavailable 
or are unreliable, or when the value of a security has been materially 
affected by events occurring after the relevant market closes, the Fund 
will price those securities at fair value as determined in good faith 
using methods approved by the Fund's Board of Trustees.
    Creations and redemptions of Shares occur in large specified blocks 
of Shares, referred to as ``Creation Units.'' According to the 
Registration Statement, the Shares of the Fund are ``created'' at their 
NAV by Authorized Participants only in block-size Creation Units of 
25,000 Shares or more. An Authorized Participant enters into an 
agreement (``Participant Agreement'') with the Fund's Distributor or a 
Depository Trust Company participant that has executed a Participant 
Agreement with the Distributor, and deposits into the Fund a portfolio 
of securities closely approximating the holdings of the Fund and a 
specified amount of cash, together totaling the NAV of the Creation 
Unit(s), in exchange for 25,000 Shares of the Fund (or multiples 
thereof). Similarly, Shares can only be redeemed in Creation Units, 
generally 25,000 Shares or more, principally in-kind for a portfolio of 
securities held by the Fund and a specified amount of cash together 
totaling the NAV of the Creation Unit(s). Shares are not redeemable 
from the Fund except when aggregated in Creation Units. The prices at 
which creations and redemptions occur are based on the next calculation 
of NAV after an order is received in a form prescribed in the 
Participant Agreement.
    The Shares will conform to the initial and continued listing 
criteria under NYSE Arca Equities Rule 8.600. The Exchange represents 
that, for initial and/or continued listing, the Fund will be in 
compliance with Rule 10A-3 under the Exchange Act,\17\ as provided by 
NYSE Arca Equities Rule 5.3. A minimum of 100,000 Shares will be 
outstanding at the commencement of trading on the Exchange. The 
Exchange will obtain a representation from the issuer of the Shares 
that the 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.
---------------------------------------------------------------------------

    \17\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------

Availability of Information
    The Fund's Web site (http://www.advisorshares.com), which will be 
publicly available prior to the public offering of Shares, will include 
a form of the Prospectus for the Fund that may be downloaded. The 
Fund's Web site will include additional quantitative information 
updated on a daily basis, including, for the Fund, (1) daily trading 
volume, the prior business day's reported closing price, NAV and mid-
point of the bid/ask spread at the time of calculation of such NAV 
(``Bid/Ask Price''),\18\ and a calculation of the premium and discount 
of the Bid/Ask Price against the NAV, and (2) data in chart format 
displaying the frequency distribution of discounts and premiums of the 
daily Bid/Ask Price against the NAV, within appropriate ranges, for 
each of the four previous calendar quarters. On each business day, 
before commencement of trading in Shares in the Core Trading Session on 
the Exchange, the Fund will disclose on its Web site the Disclosed 
Portfolio, as defined in NYSE Arca Equities Rule 8.600(c)(2), that will 
form the basis for the Fund's calculation of NAV at the end of the 
business day.\19\
---------------------------------------------------------------------------

    \18\ The Bid/Ask Price of the Fund is determined using the 
highest bid and the lowest offer on the Exchange as of the time of 
calculation of the Fund's NAV. The records relating to Bid/Ask 
Prices will be retained by the Fund and its service providers.
    \19\ Under accounting procedures followed by the Fund, trades 
made on the prior business day (``T'') will be booked and reflected 
in NAV on the current business day (``T+1''). Accordingly, the Fund 
will be able to disclose at the beginning of the business day the 
portfolio that will form the basis for the NAV calculation at the 
end of the business day.
---------------------------------------------------------------------------

    On a daily basis, the Adviser will disclose for each portfolio 
security or other financial instrument of the Fund the following 
information: Ticker symbol (if applicable); name of security or 
financial instrument; number of Shares or dollar value of financial 
instruments held in the portfolio; and percentage weighting of the 
security or financial instrument in the portfolio. The Web site 
information will be publicly available at no charge.
    In addition, a basket composition file, which includes the security 
names and share quantities required to be delivered in exchange for 
Fund Shares, together with estimates and actual cash components, will 
be publicly disseminated daily prior to the opening of the NYSE via the 
National Securities Clearing Corporation. The basket represents one 
Creation Unit of the Fund.

[[Page 24940]]

    Investors can also obtain the Trust's Statement of Additional 
Information (``SAI''), the Fund's Shareholder Reports, and its Form N-
CSR and Form N-SAR, filed twice a year. The Trust's SAI and Shareholder 
Reports are available free upon request from the Trust, and those 
documents and the Form N-CSR and Form N-SAR may be viewed on-screen or 
downloaded from the Commission's Web site at http://www.sec.gov. 
Information regarding market price and trading volume of the Shares is 
and will be continually available on a real-time basis throughout the 
day on brokers' computer screens and other electronic services. 
Information regarding the previous day's closing price and trading 
volume information for the Shares 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, and, for the Underlying ETPs, will be 
available from the national securities exchange on which they are 
listed. In addition, the Portfolio Indicative Value, as defined in NYSE 
Arca Equities Rule 8.600(c)(3), will be disseminated by the Exchange at 
least every 15 seconds during the Core Trading Session by one or more 
major market data vendors. The dissemination of the Portfolio 
Indicative Value, together with the Disclosed Portfolio, will allow 
investors to determine the value of the underlying portfolio of the 
Fund on a daily basis and will provide a close estimate of that value 
throughout the trading day.
    Additional information regarding the Trust and the Shares, 
including investment strategies, risks, creation and redemption 
procedures, fees, portfolio holdings disclosure policies, 
distributions, and taxes is included in the Registration Statement. All 
terms relating to the Fund that are referred to, but not defined in, 
this proposed rule change are defined in the Registration Statement.
Trading Halts
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares of the Fund.\20\ Trading in Shares of the Fund 
will be halted if the circuit breaker parameters in NYSE Arca Equities 
Rule 7.12 have been reached. Trading also may be halted because of 
market conditions or for reasons that, in the view of the Exchange, 
make trading in the Shares inadvisable. These may include: (1) The 
extent to which trading is not occurring in the securities and/or the 
financial instruments comprising the Disclosed Portfolio of the Fund; 
or (2) whether other unusual conditions or circumstances detrimental to 
the maintenance of a fair and orderly market are present. Trading in 
the Shares will be subject to NYSE Arca Equities Rule 8.600(d)(2)(D), 
which sets forth circumstances under which Shares of the Fund may be 
halted.
---------------------------------------------------------------------------

    \20\ See NYSE Arca Equities Rule 7.12, Commentary .04.
---------------------------------------------------------------------------

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 or with which the Exchange has entered into a comprehensive 
surveillance sharing agreement.\21\ In addition, the Exchange could 
obtain information from the U.S. exchanges on which the Underlying ETPs 
are listed and traded.
---------------------------------------------------------------------------

    \21\ For a list of the current members of ISG, see http://www.isgportal.org. The Exchange notes that not all components of the 
Disclosed Portfolio for the Fund may trade on markets that are 
members of ISG or with which the Exchange has in place a 
comprehensive surveillance sharing agreement. All Underlying ETPs 
are listed on national securities exchanges, all of which are 
members of ISG.
---------------------------------------------------------------------------

    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its 
Equity Trading Permit (``ETP'') Holders in an Information Bulletin 
(``Bulletin'') of the special characteristics and risks associated with 
trading the Shares. Specifically, the Bulletin will discuss the 
following: (1) The procedures for purchases and redemptions of Shares 
in Creation Unit aggregations (and that Shares are not individually 
redeemable); (2) NYSE Arca Equities Rule 9.2(a), which imposes a duty 
of due diligence on its ETP Holders to learn the essential facts 
relating to every customer prior to trading the Shares; (3) the risks 
involved in trading the Shares during the Opening and Late Trading 
Sessions when an updated Portfolio Indicative Value will not be 
calculated or publicly disseminated; (4) how information regarding the 
Portfolio Indicative Value is disseminated; (5) the requirement that 
ETP Holders deliver a prospectus to investors purchasing newly issued 
Shares prior to or concurrently with the confirmation of a transaction; 
and (6) trading information.
    In addition, the Bulletin will reference that the Fund is subject 
to various fees and expenses described in the Registration Statement. 
The Bulletin will discuss any exemptive, no-action, and interpretive 
relief granted by the Commission from any rules under the Exchange Act. 
The Bulletin will also disclose that the NAV for the Shares will be 
calculated after 4:00 p.m. Eastern Time each trading day.
2. Statutory Basis
    The basis under the Exchange Act for this proposed rule change is 
the requirement under Section 6(b)(5) \22\ 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.
---------------------------------------------------------------------------

    \22\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares will

[[Page 24941]]

be listed and traded on the Exchange pursuant to the initial and 
continued listing criteria in NYSE Arca Equities Rule 8.600. The 
Exchange has in place surveillance procedures that are adequate to 
properly monitor trading in the Shares in all trading sessions and to 
deter and detect violations of Exchange rules and applicable Federal 
securities laws. The Exchange may obtain information via ISG from other 
exchanges that are members of ISG or with which the Exchange has 
entered into a comprehensive surveillance sharing agreement. All 
Underlying ETPs will be listed on national securities exchanges, all of 
which are members of ISG, and the listing and trading of such 
securities is subject to rules of the exchanges on which they are 
listed and traded, as approved by the Commission. The Fund will not 
invest in leveraged, inverse, or inverse leveraged Underlying ETPs. The 
Fund may not purchase illiquid securities. Except for Underlying ETPs 
that may hold non-U.S. issues, the Fund will not otherwise invest in 
non-U.S. issues.
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest in 
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. In addition, a large amount of 
information is publicly available regarding the Fund and the Shares, 
thereby promoting market transparency. Quotation and last-sale 
information for the Shares will be available via the CTA high-speed 
line and, for the Underlying ETPs, will be available from the national 
securities exchange on which they are listed. In addition, the 
Portfolio Indicative Value will be disseminated by the Exchange at 
least every 15 seconds during the Core Trading Session. The Fund's Web 
site will include a form of the Prospectus for the Fund that may be 
downloaded, as well as additional quantitative information updated on a 
daily basis. On each business day, before commencement of trading in 
Shares in the Core Trading Session on the Exchange, the Fund will 
disclose on its Web site the Disclosed Portfolio that will form the 
basis for the Fund's calculation of NAV at the end of the business day. 
On a daily basis, the Adviser will disclose for each portfolio security 
or other financial instrument of the Fund the following information: 
Ticker symbol (if applicable); name of security or financial 
instrument; number of Shares or dollar value of financial instruments 
held in the portfolio; and percentage weighting of the security or 
financial instrument in the portfolio. The Web site for the Fund will 
include a form of the Prospectus for the Fund and additional data 
relating to NAV and other applicable quantitative information. 
Moreover, 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. Trading 
in Shares of the Fund will be halted if the circuit breaker parameters 
in NYSE Arca Equities Rule 7.12 have been reached or because of market 
conditions or for reasons that, in the view of the Exchange, make 
trading in the Shares inadvisable. Trading in the Shares will be 
subject to NYSE Arca Equities Rule 8.600(d)(2)(D), which sets forth 
circumstances under which Shares of the Fund may be halted. In 
addition, as noted above, investors will have ready access to 
information regarding the Fund's holdings, the Portfolio Indicative 
Value, the Disclosed Portfolio, and quotation and last-sale information 
for the Shares.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
additional types of actively-managed exchange-traded products that will 
enhance competition among market participants, to the benefit of 
investors and the marketplace. As noted above, the Exchange has in 
place surveillance procedures relating to trading in the Shares and may 
obtain information via ISG from other exchanges that are members of ISG 
or with which the Exchange has entered into a comprehensive 
surveillance sharing agreement. In addition, as noted above, investors 
will have ready access to information regarding the Fund's holdings, 
the Portfolio Indicative Value, the Disclosed Portfolio, and quotation 
and last-sale information for the Shares.

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 (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission shall:
    (A) By order approve or disapprove such 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 (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2011-18 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-2011-18. 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

[[Page 24942]]

Commission and any person, other than those that may be withheld from 
the public in accordance with the provisions of 5 U.S.C. 552, will be 
available for Web site viewing and printing in the Commission's Public 
Reference Room, 100 F Street, NE., Washington, DC 20549, on official 
business days between the hours of 10 a.m. and 3 p.m. Copies of the 
filing will also 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 No. SR-NYSEArca-2011-18 and should be submitted on or before May 
24, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
---------------------------------------------------------------------------

    \23\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-10717 Filed 5-2-11; 8:45 am]
BILLING CODE 8011-01-P