Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change Relating to the Listing and Trading of the Russell Global Opportunity ETF; Russell Bond ETF; and Russell Real Return ETF Under NYSE Arca Equities Rule 8.600, 76205-76211 [2011-31263]

Download as PDF Federal Register / Vol. 76, No. 234 / Tuesday, December 6, 2011 / Notices orders subjects NOS to the requirements of Rule 15c3–5(c)(1)(i). NASDAQ has provided notice to its membership of its intent to discontinue Exchange Direct Orders.7 Although NOM did receive such orders, they do not represent significant volume, such that NASDAQ does not believe that it will have a significant impact on its participants to eliminate this order type. 2. Statutory Basis The Exchange believes that its proposal is consistent with Section 6(b) of the Act 8 in general, and furthers the objectives of Section 6(b)(5) of the Act 9 in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, and to remove impediments to and perfect the mechanisms of a free and open market and a national market system, and, in general, to protect investors and the public interest, because the Exchange is not required to make this order type available and has made a decision to eliminate it, as explained above. Moreover, in order to comply with the Market Access Rule, this order type is being eliminated rather than implementing the extensive necessary changes. Furthermore, because this order type was not widely used, NASDAQ does not believe that market quality will be impacted by its elimination. 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 not necessary or appropriate in furtherance of the purposes of the Act. jlentini on DSK4TPTVN1PROD with NOTICES C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days after the date of 7 https://www.nasdaqtrader.com/TraderNews. aspx?id=OTA2011-62. 8 15 U.S.C. 78f(b). 9 15 U.S.C. 78f(b)(5). VerDate Mar<15>2010 17:04 Dec 05, 2011 Jkt 226001 the filing, or such shorter time as the Commission may designate, it has become effective pursuant to 19(b)(3)(A) of the Act 10 and Rule 19b–4(f)(6) 11 thereunder. The Exchange has requested that the Commission waive the 30-day operative delay so that the proposed rule change may become effective and operative upon filing with the Commission. The Commission believes the waiver of the 30-day operative delay is consistent with the protection of investors and the public interest because eliminating Exchange Directed Orders will allow the Exchange’s broker-dealer affiliate, NOS, to be in timely compliance with SEC Rule 15c3–5.12 In addition, the Exchange represents that the order type is not widely used and its elimination should not have a significant impact on market quality. Therefore, the Commission designates the proposal to be operative upon filing.13 At any time within 60 days of the filing of the 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. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml;) or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NASDAQ–2011–159 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. 10 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. 12 See supra, note 6. 13 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). 11 17 PO 00000 Frm 00086 Fmt 4703 Sfmt 4703 76205 All submissions should refer to File Number SR–NASDAQ–2011–159. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR– NASDAQ–2011–159 and should be submitted on or before December 27, 2011. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.14 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2011–31230 Filed 12–5–11; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–65859; File No. SR– NYSEArca-2011–84] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change Relating to the Listing and Trading of the Russell Global Opportunity ETF; Russell Bond ETF; and Russell Real Return ETF Under NYSE Arca Equities Rule 8.600 December 1, 2011. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’ 14 17 E:\FR\FM\06DEN1.SGM CFR 200.30–3(a)(12). 06DEN1 76206 Federal Register / Vol. 76, No. 234 / Tuesday, December 6, 2011 / Notices or ‘‘Exchange Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that, on November 16, 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. 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 three series of the Russell Exchange Traded Funds Trust under NYSE Arca Equities Rule 8.600 (‘‘Managed Fund Shares’’): Russell Global Opportunity ETF; Russell Bond ETF; and Russell Real Return ETF. The text of the proposed rule change is available at the Exchange, the Commission’s Public Reference Room, and 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 Equities Rule 8.600: Russell Global 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 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. jlentini on DSK4TPTVN1PROD with NOTICES 2 17 VerDate Mar<15>2010 17:04 Dec 05, 2011 Jkt 226001 Opportunity ETF; Russell Bond ETF; and Russell Real Return ETF (each, a ‘‘Fund’’ and, collectively, ‘‘Funds’’). The Funds are series of the Russell Exchange Traded Funds Trust (‘‘Trust’’).4 Each of the Funds is a ‘‘fund of funds,’’ which means that each Fund seeks to achieve its investment objective by investing primarily in the retail shares of other exchange-traded funds that are registered under the 1940 Act (‘‘Underlying ETFs’’).5 The Funds also may invest in other types of U.S. exchange-traded products, such as Exchange Traded Notes (‘‘ETNs’’) and exchange-traded pooled investment vehicles (collectively, with Underlying ETFs, ‘‘Underlying ETPs’’).6 Russell Investment Management Company (‘‘Adviser’’) is the adviser for the Funds.7 State Street Bank & Trust 4 The Commission has previously approved listing and trading on the Exchange of actively managed funds under Rule 8.600. See, e.g., Securities Exchange Act Release Nos. 60460 (August 7, 2009), 74 FR 41468 (August 17, 2009) (SR–NYSEArca-2009–55) (order approving Exchange listing and trading of Dent Tactical ETF); 60717 (September 24, 2009), 74 FR 50853 (October 1, 2009) (SR–NYSEArca-2009–74) (order approving Exchange listing and trading of four Grail Advisors RP ETFs); 63802 (January 31, 2011), 76 FR 6503 (February 4, 2011) (SR–NYSEArca-2010–118) (order approving Exchange listing and trading of SiM Dynamic Allocation Diversified Income ETF and SiM Dynamic Allocation Growth Income ETF); 64689 (June 16, 2011), 76 FR 36608 (June 22, 2011) (SR–NYSEArca-2011–18) (order approving Exchange listing and trading of Meidell Tactical Advantage ETF). 5 The Trust is registered under the 1940 Act. On May 9, 2011, the Trust filed with the Commission Post-Effective Amendment No. 6 under the Securities Act of 1933 (15 U.S.C. 77a) and Amendment No. 9 under the 1940 Act to the Trust’s registration statement on Form N–1A relating to the Funds (File Nos. 333–160877 and 811–22320) (‘‘Registration Statement’’). The description of the operation of the Trust and the Funds herein is based, in part, on the Registration Statement. In addition, the Commission has issued an order granting certain exemptive relief to the Trust under the 1940 Act. See Investment Company Act Release No. 29164 (March 1, 2010) (File No. 812–13815 and 812–13658–01) (‘‘Exemptive Order’’). 6 ‘‘Underlying ETPs,’’ which will be listed on a national securities exchange, include the following: 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. 7 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 its 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 PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 Company serves as the custodian, [sic] transfer agent and Russell Fund Services Company as administrator for the Funds. Commentary .06 to Rule 8.600 provides that, if the investment adviser to the investment company issuing Managed Fund Shares is affiliated with a broker-dealer, such investment adviser shall erect a ‘‘fire wall’’ between the investment adviser and the brokerdealer with respect to access to information concerning the composition and/or changes to such investment company portfolio. 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. The Adviser is affiliated with multiple broker-dealers and has implemented a ‘‘fire wall’’ with respect to such brokerdealers regarding access to information concerning the composition and/or changes to the Funds’ portfolios. In the event (a) The Adviser or any sub-adviser becomes newly affiliated with a brokerdealer, or (b) any new adviser or subadviser becomes affiliated with a brokerdealer, it will 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 reflects the fiduciary nature of the relationship to clients as well as compliance with other applicable securities laws. Accordingly, procedures designed to prevent the communication and misuse of nonpublic information by an investment adviser must be consistent with Rule 204A–1 under the Advisers Act. 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. E:\FR\FM\06DEN1.SGM 06DEN1 Federal Register / Vol. 76, No. 234 / Tuesday, December 6, 2011 / Notices material non-public information regarding such portfolio. With respect to each of the Funds, the Adviser will employ an active investment strategy, meaning that it buys and holds Underlying ETPs for either a long or short period of time depending on the opportunity and replacement opportunities. jlentini on DSK4TPTVN1PROD with NOTICES Russell Global Opportunity ETF According to the Registration Statement, the Fund’s investment objective will be to seek to provide longterm capital growth. The Fund will be a ‘‘fund of funds,’’ which means that the Fund will seek to achieve its investment objective by investing primarily in shares of Underlying ETFs. In pursuing the Fund’s investment objective, the Adviser will normally invest the Fund’s assets in Underlying ETFs that seek to track various indices.8 These indices include those that track the performance of equity, fixed income, real estate, commodities, infrastructure or currency markets. There is no maximum limit on the percentage of Fund assets that may be invested in securities of non-U.S. issuers through Underlying ETFs. A minimum of 30% of Fund assets will be invested in securities of non-U.S. issuers through Underlying ETFs. The Fund also may invest in other Underlying ETPs. The Adviser will employ an asset allocation strategy that seeks to provide exposure to multiple asset classes in a variety of domestic and foreign markets. The Adviser’s asset allocation strategy will establish a target asset allocation for the Fund and the Adviser then will implement the strategy by selecting Underlying ETPs that represent each of the desired asset classes, sectors and strategies. The Adviser’s strategy also will involve periodic review of the Fund’s holdings as markets rise and fall to ensure that the portfolio adheres to the strategic allocation and to add value through tactical allocation that may over or underweight Underlying ETPs around the strategic allocation. The Adviser may modify the strategic allocation for the Fund from time to time based on capital markets research. The Adviser also may modify the Fund’s allocation based on tactical factors such as the Adviser’s outlook for the economy, financial markets 8 The terms ‘‘normally’’ and ‘‘under normal circumstances’’ as used herein includes, but is not limited to, the absence of extreme volatility or trading halts in the debt or equities markets or the financial markets generally; operational issues causing dissemination of inaccurate market information; or force majeure type events such as systems failure, natural or man-made disaster, act of God, armed conflict, act of terrorism, riot or labor disruption or any similar intervening circumstance. VerDate Mar<15>2010 17:04 Dec 05, 2011 Jkt 226001 generally and/or relative market valuation of the asset classes, sectors or strategies represented by each Underlying ETP. The Adviser intends to invest in Underlying ETPs that hold equity securities of large, medium and small capitalization companies across the globe including developed countries and emerging countries. Equity securities may include common and preferred stocks, warrants and rights to subscribe to common stock and convertible securities. The Adviser also intends to invest in Underlying ETPs that (1) Hold U.S. and non-U.S. government issued debt, investment grade corporate bonds, below investment grade bonds (generally referred to as high yield bonds or ‘‘junk’’), and mortgage and asset backed securities, and (2) track performance of commodities, real estate, infrastructure and currency markets by investing in energy, metals, agriculture, REITs, utilities, roads and bridges or construction/engineering companies. The Adviser may also, on a limited basis, sell short Underlying ETPs. The Adviser will select Underlying ETPs based on their potential to represent the underlying asset class, sector or strategy to which the Adviser seeks exposure for the Fund. The Fund will only invest in U.S.-listed Underlying ETPs. Russell Bond ETF According to the Registration Statement, the Fund will seek total return. The Fund will be a ‘‘fund of funds,’’ which means that the Fund will seek to achieve its investment objective by investing primarily in shares of Underlying ETFs. In pursuing the Fund’s investment objective, the Adviser will normally invest the Fund’s assets in Underlying ETFs that seek to track various fixed income indices.9 These indicies include those that track the performance of fixed income securities issued by governments and corporations in the United States, Europe and Asia, as well as other developed and emerging markets. There is no limit on the percentage of Fund assets that may be invested in securities of non-U.S. issuers through Underlying ETFs. The Fund also may invest in other Underlying ETPs. The Fund will invest, under normal circumstances, such that at least 80% of the value of its net assets are exposed to bonds through Underlying ETPs. The Fund considers bonds to include fixed income equivalent instruments, which may be represented by forwards or 9 See PO 00000 note 8, supra. Frm 00088 Fmt 4703 Sfmt 4703 76207 derivatives such as options, futures contracts, or swap agreements. The Adviser will employ an asset allocation strategy that provides exposure to multiple fixed income asset classes or sectors in a variety of U.S. and non-U.S. markets. The Adviser’s allocation strategy will establish a target allocation for the Fund and the Adviser then will implement the strategy by selecting Underlying ETPs that represent each of the desired exposures including asset classes or sectors. The Adviser’s strategy also will involve periodic review of the Fund’s holdings as markets rise and fall to ensure that the portfolio adheres to the strategic allocation and to add value through tactical allocation that may over or underweight Underlying ETPs around the strategic allocation. The Adviser may modify the strategic allocation for the Fund from time to time based on capital markets research. The Adviser also may modify the Fund’s allocation based on tactical factors such as the Adviser’s outlook for the economy, financial markets generally and/or relative market valuation of the asset classes or sectors represented by each Underlying ETP. The Adviser intends to invest in Underlying ETPs that hold governmentissued debt, investment grade corporate bonds, below investment grade bonds (generally referred to as high yield bonds or ‘‘junk’’) and mortgage and asset backed securities. Issuers of debt securities may be U.S. or non-U.S. (including developed and emerging markets countries) governments or corporate issuers. The Adviser also intends to select Underlying ETPs based on their exposure to asset class or sectors and the duration and credit quality of their portfolios within broader sectors of a fixed income market. The Adviser may also, on a limited basis, sell short Underlying ETPs. The Adviser will select Underlying ETPs based on their potential to represent the underlying asset class or sector to which the Adviser seeks exposure for the Fund. The Fund will only invest in U.S.-listed Underlying ETPs. Russell Real Return ETF According to the Registration Statement, the Fund will seek a total return that exceeds the rate of inflation over an economic cycle. The Fund will be a ‘‘fund of funds,’’ which means that the Fund will seek to achieve its investment objective by investing primarily in shares of Underlying ETFs. In pursuing the Fund’s investment objective, the Adviser will normally invest the Fund’s assets in Underlying E:\FR\FM\06DEN1.SGM 06DEN1 jlentini on DSK4TPTVN1PROD with NOTICES 76208 Federal Register / Vol. 76, No. 234 / Tuesday, December 6, 2011 / Notices ETFs that seek to track various indices.10 These indices include indices that track the performance of equity, fixed income (including Treasury Inflation-Protected Securities or ‘‘TIPS’’) and real assets such as real estate, commodities and infrastructure assets. The Fund will invest in Underlying ETFs that invest in U.S. and non-U.S. (including developed and emerging markets) securities. There is no limit on the percentage of Fund assets that may be invested in securities of non-U.S. issuers through Underlying ETFs. The Fund also may invest in other Underlying ETPs. The Adviser will employ an asset allocation strategy that provides exposure to multiple asset classes in a variety of domestic and foreign markets. The Adviser’s allocation strategy will establish a target asset allocation for the Fund and the Adviser will then implement the strategy by selecting Underlying ETPs that represent each of the desired asset classes, sectors or strategies. The Adviser’s strategy also will involve periodic review of the Fund’s holdings as markets rise and fall to ensure that the portfolio adheres to the strategic allocation and to add value through tactical allocation that may over or underweight Underlying ETPs around the strategic allocation. The Adviser may modify the strategic allocation for the Fund from time to time based on capital markets research. The Adviser also may modify the Fund’s allocation based on tactical factors such as the Adviser’s outlook for the economy, inflation expectations, financial markets generally and/or relative market valuation of the asset classes, sector or strategies represented by each Underlying ETP. The Adviser intends to invest in Underlying ETPs that hold equity securities of large, medium and small capitalization companies and fixed income securities, including government issued debt, investment grade corporate bonds, below investment grade bonds and mortgage and asset backed securities issued by companies across the globe including developed countries and emerging countries. The Adviser also intends to invest in Underlying ETPs that hold U.S. inflation-indexed securities and have exposure to commodities, real estate, infrastructure markets and other real assets. A real asset is a tangible or physical asset that typically has intrinsic value. The Adviser may also, on a limited basis, sell short Underlying ETPs. 10 See note 8, supra. VerDate Mar<15>2010 17:04 Dec 05, 2011 The Adviser will select Underlying ETPs based on their potential to represent the underlying asset class, sector or strategy to which the Adviser seeks exposure for the Fund. The Fund will only invest in U.S.-listed Underlying ETPs. Other Investments of the Funds The Funds will not invest in derivatives. The Underlying ETPs in which the Funds invest may, to a limited extent, invest in derivatives; however, the Funds will not invest in Underlying ETPs that use derivatives as a principal investment strategy unless the Underlying ETP uses futures contracts and related options for bona fide hedging, attempting to gain exposure to a particular market, index or instrument, or other risk management purposes. To the extent an Underlying ETP uses futures and/or options on futures, it will do so in accordance with the Commodity Exchange Act11 and applicable rules and regulations promulgated by the Commodity Futures Trading Commission and the National Futures Association. Underlying ETPs may enter into swap agreements including interest rate, index, and credit default swap agreements. An Underlying ETP may invest in commodity-linked derivative instruments, such as structured notes, swap agreements, commodity options, futures and options on futures, to gain exposure to commodities markets. Financial futures contracts may be used by an Underlying ETP during or in anticipation of adverse market events such as interest rate changes. An Underlying ETP may purchase a put and/or sell a call option on a stock index futures contract instead of selling a futures contract in anticipation of an equity market decline. Money market instruments, including repurchase agreements, or funds that invest exclusively in money market instruments, including affiliated money market funds (subject to applicable limitations under the 1940 Act), convertible securities, variable rate demand notes, or commercial paper may be used by a Fund in seeking to meet its investment objective and in managing cash flows. The Funds expect to invest almost entirely in Underlying ETPs but may also invest in, among other investments, common stocks; sponsored American Depositary Receipts (‘‘ADRs’’), American Depositary Shares (‘‘ADSs’’) and European Depositary Receipts (‘‘EDRs’’), Global Depositary Receipts (‘‘GDRs’’); short-term instruments 11 7 Jkt 226001 PO 00000 U.S.C. 1. Frm 00089 Fmt 4703 Sfmt 4703 (including money market instruments); U.S. Government Securities; TIPS; commercial paper; and other debt instruments described in the Registration Statement. The Funds and the Underlying ETPs may enter into repurchase and reverse repurchase agreements. Investment Policies and Restrictions Each Fund will seek to qualify for treatment as a regulated investment company (‘‘RIC’’) under Subchapter M of the Internal Revenue Code of 1986, as amended.12 Each Fund may invest up to an aggregate amount of 15% of its net assets in (a) Illiquid securities, and (b) Rule 144A securities. This limitation is applied at the time of purchase. The Commission staff has interpreted the term ‘‘illiquid’’ in this context to mean a security that cannot be sold or disposed of within seven days in the ordinary course of business at approximately the amount at which a Fund has valued such security.13 12 26 U.S.C. 151. One of several requirements for RIC qualification is that a Fund must receive at least 90% of the Fund’s gross income each year from dividends, interest, [sic] 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 a Fund must diversify its holdings so that, at the end of each fiscal quarter of the Fund’s taxable year: (a) At least 50% of the market value of the Fund’s total assets is represented by cash and cash items, U.S. Government securities, securities of other RICs, and other securities, with these other securities limited, in respect to any one issuer, to an amount not greater than 5% of the value of the Fund’s total assets or 10% of the outstanding voting securities of such issuer; and (b) not more than 25% of the value of its total assets are invested in the securities (other than U.S. Government securities or securities of other RICs) of any one issuer or two or more issuers which the Fund controls and which are engaged in the same, similar, or related trades or businesses, or the securities of one or more qualified publicly traded partnership [sic] (‘‘Asset Test’’). 13 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. 8901 (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). E:\FR\FM\06DEN1.SGM 06DEN1 Federal Register / Vol. 76, No. 234 / Tuesday, December 6, 2011 / Notices Each Fund may invest in securities of other investment companies, including ETFs, closed end funds and money market funds, subject to applicable limitations under Section 12(d)(1) of the 1940 Act or exemptions granted thereunder. A Fund may not: 1. (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.14 2. Invest 25% or more of its total assets in the securities of one or more issuers conducting their principal business activities in a particular industry or group of industries; except that, to the extent the underlying index selected for a particular passive Underlying ETF is concentrated in a particular industry or group of industries, the Funds will necessarily be concentrated in that industry or group of industry [sic].15 This limitation does not apply to investments in securities issued or guaranteed by the U.S. Government, its agencies or instrumentalities, or shares of investment companies, including the Underlying ETPs. Underlying ETPs will be listed and traded in the U.S. on a national securities exchange. While the Underlying ETPs may hold non-U.S. equity securities, the Funds will not invest in non-U.S. listed equity securities. Each Fund’s investments will be consistent with its investment objective and will not be used to enhance leverage. The Funds will not hold leveraged, inverse and inverse leveraged Underlying ETPs. Consistent with the Exemptive Order, the Funds will not invest in options contracts, futures contracts or swap agreements. jlentini on DSK4TPTVN1PROD with NOTICES Creations and Redemptions of Shares The Funds will offer and issue Shares at their net asset value (‘‘NAV’’) only in aggregations of a specified number of Shares (each, a ‘‘Creation Unit’’). The Funds generally will offer and issue Shares in exchange for shares of specified Underlying ETPs (‘‘Deposit 14 The diversification standard is contained in Section 5(b)(1) of the 1940 Act (15 U.S.C. 80e). 15 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). VerDate Mar<15>2010 17:04 Dec 05, 2011 Jkt 226001 Securities’’) together with the deposit of a specified cash payment (‘‘Cash Component’’). The Trust will reserve the right to permit or require the substitution of a ‘‘cash in lieu’’ amount to be added to the Cash Component to replace any Deposit Security. The Shares will be redeemable only in Creation Unit aggregations, and generally in exchange for portfolio securities and a specified cash payment. A Creation Unit of the Funds will consist of 50,000 Shares. 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 Trust will be in compliance with Rule 10A–3 under the Exchange Act,16 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 as defined in NYSE Arca Equities Rule 8.600(c)(2) will be made available to all market participants at the same time. Availability of Information The Funds’ Web site (www.russelletfs.com), which will be publicly available prior to the public offering of Shares, will include a form of the prospectus for the Funds that may be downloaded. The Funds’ Web site will include additional quantitative information updated on a daily basis, including, for the Funds, (1) Daily trading volume, the prior business day’s reported closing price, NAV and midpoint of the bid/ask spread at the time of calculation of such NAV (‘‘Bid/Ask Price’’),17 and a calculation of the premium and discount of the Bid/Ask Price against the NAV, and (2) data in chart format displaying the frequency distribution of discounts and premiums of the daily Bid/Ask Price against the NAV, within appropriate ranges, for each of the four previous calendar quarters. On each business day, before commencement of trading in Shares in the Core Trading Session on the Exchange, the Funds will disclose on their Web site the Disclosed Portfolio that will form the basis for the Funds’ calculation of NAV at the end of the 16 17 CFR 240.10A–3. Bid/Ask Price of the Funds will be determined using the midpoint of the highest bid and the lowest offer on the Exchange as of the time of calculation of the Funds’ NAV. The records relating to Bid/Ask Prices will be retained by the Funds and their service providers. 17 The PO 00000 Frm 00090 Fmt 4703 Sfmt 4703 76209 business day.18 The Web site information will be publicly available at no charge. On a daily basis, the Adviser will disclose for each portfolio security or other financial instrument of the Funds the following information: Ticker symbol (if applicable), name of security or financial instrument, number of shares or dollar value of financial instruments held in the portfolio, and percentage weighting of the security or financial instrument in the portfolio. In addition, a basket composition file, which includes the security names and share quantities required to be delivered in exchange for Fund Shares, together with estimates and actual cash components, will be publicly disseminated daily prior to the opening of the New York Stock Exchange (‘‘NYSE’’) via the National Securities Clearing Corporation. The basket will represent one Creation Unit of each Fund. The NAV of each Fund will normally be determined as of the close of the regular trading session on the NYSE (ordinarily 4 p.m. Eastern Time) on each business day. Investors can also obtain the Trust’s Statement of Additional Information (‘‘SAI’’), Shareholder Reports and Form N–CSR. The Trust’s SAI and Shareholder Reports are available free upon request from the Trust, and those documents and the Form N–CSR may be viewed on-screen or downloaded from the Commission’s Web site at www.sec.gov. Information regarding market price and trading volume of the Shares will be continually available on a real-time basis throughout the day on brokers’ computer screens and other electronic services. Information regarding the previous day’s closing price and trading volume information 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. The intra-day and closing values of Underlying ETPs also will be disseminated by the U.S. 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 widely disseminated by one or more major market data vendors at least every 15 seconds during 18 Under accounting procedures followed by the Funds, trades made on the prior business day (‘‘T’’) will be booked and reflected in NAV on the current business day (‘‘T+1’’). Accordingly, the Funds will be able to disclose at the beginning of the business day the portfolio that will form the basis for the NAV calculation at the end of the business day. E:\FR\FM\06DEN1.SGM 06DEN1 76210 Federal Register / Vol. 76, No. 234 / Tuesday, December 6, 2011 / Notices the Core Trading Session.19 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 Funds on a daily basis and to provide a close estimate of that value throughout the trading day. Additional information regarding the Trust and the Shares, including investment strategies, risks, creation and redemption procedures, fees, portfolio holdings disclosure policies, distributions and taxes is included in the Registration Statement. All terms relating to the Funds that are referred to, but not defined in, this proposed rule change are defined in the Registration Statement. jlentini on DSK4TPTVN1PROD with NOTICES Trading Halts With respect to trading halts, the Exchange may consider all relevant factors in exercising its discretion to halt or suspend trading in the Shares of the Funds.20 Trading in Shares of the Funds will be halted if the circuit breaker parameters in NYSE Arca Equities Rule 7.12 have been reached. Trading also may be halted because of market conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable. These may include: (1) The extent to which trading is not occurring in the securities and/or the financial instruments comprising the Disclosed Portfolio of a 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 Funds may be halted. 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 in place a comprehensive surveillance sharing agreement.21 The Exchange, therefore, will be able to obtain surveillance information from the exchanges trading the Underlying ETPs. In addition, the Exchange also has a general policy prohibiting the distribution of material, non-public information by its employees. 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 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 19 Currently, it is the Exchange’s understanding that several major market data vendors display and/ or make widely available Portfolio Indicative Values published on CTA or other data feeds. 20 See NYSE Arca Equities Rule 7.12, Commentary .04. 21 For a list of the current members of ISG, see www.isgportal.org. The Exchange notes that not all components of the Disclosed Portfolio for the Funds may trade on markets that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. VerDate Mar<15>2010 17:04 Dec 05, 2011 Jkt 226001 PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 regarding the Portfolio Indicative Value is disseminated; (5) the requirement that ETP Holders deliver a prospectus to investors purchasing newly issued Shares prior to or concurrently with the confirmation of a transaction; and (6) trading information. In addition, the Bulletin will reference that the Funds are subject to various fees and expenses described in the Registration Statement. The Bulletin will discuss any exemptive, no-action, and interpretive relief granted by the Commission from any rules under the Exchange Act. The Bulletin will also disclose that the NAV for the Shares will be calculated after 4 p.m. Eastern Time each trading day. 2. Statutory Basis The basis under the Exchange Act for this proposed rule change is the requirement under Section 6(b)(5) 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 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. Underlying ETPs will be listed and traded in the U.S. on a national securities exchange. While the Underlying ETPs may hold non-U.S. equity securities, the Funds will not invest in non-U.S. registered equity securities. Each Fund’s investments will be consistent with its investment objective and will not be used to enhance leverage. The Funds will not invest in derivatives, including options, swaps or futures. 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 Adviser is affiliated with multiple broker-dealers and has implemented a ‘‘fire wall’’ with 22 15 E:\FR\FM\06DEN1.SGM U.S.C. 78f(b)(5). 06DEN1 jlentini on DSK4TPTVN1PROD with NOTICES Federal Register / Vol. 76, No. 234 / Tuesday, December 6, 2011 / Notices respect to such broker-dealers regarding access to information concerning the composition and/or changes to the Funds’ portfolios. 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 Funds and the Shares, thereby promoting market transparency. The Funds’ portfolio holdings will be disclosed on its Web site daily after the close of trading on the Exchange and prior to the opening of trading on the Exchange the following day. Moreover, the Portfolio Indicative Value will be widely disseminated by one or more major market data vendors at least every 15 seconds during the Exchange’s Core Trading Session. On each business day, before commencement of trading in Shares in the Core Trading Session on the Exchange, the Funds will disclose on their Web site the Disclosed Portfolio that will form the basis for the Funds’ calculation of NAV at the end of the business day. Information regarding market price and trading volume of the Shares will be continually available on a real-time basis throughout the day on brokers’ computer screens and other electronic services, and quotation and last sale information will be available via the CTA high-speed line. The Web site for the Fund [sic] will include a form of the prospectus for the Funds 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 Funds 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, and trading in the Shares will be subject to NYSE Arca Equities Rule 8.600(d)(2)(D), which sets forth circumstances under which Shares of the Funds may be halted. In addition, as noted above, investors will have ready access to information regarding the Funds’ 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 VerDate Mar<15>2010 17:04 Dec 05, 2011 Jkt 226001 investors and the public interest in that it will facilitate the listing and trading of an additional type of activelymanaged exchange-traded product 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 Funds’ 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 will: (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: • Send an email to rulecomments@sec.gov. Please include File Number SR–NYSEArca–2011–84 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–2011–84. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR– NYSEArca–2011–84 and should be submitted on or before December 27, 2011. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.23 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2011–31263 Filed 12–5–11; 8:45 am] BILLING CODE 8011–01–P Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or PO 00000 Frm 00092 Fmt 4703 Sfmt 9990 76211 23 17 E:\FR\FM\06DEN1.SGM CFR 200.30–3(a)(12). 06DEN1

Agencies

[Federal Register Volume 76, Number 234 (Tuesday, December 6, 2011)]
[Notices]
[Pages 76205-76211]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-31263]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65859; File No. SR-NYSEArca-2011-84]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Relating to the Listing and Trading of the 
Russell Global Opportunity ETF; Russell Bond ETF; and Russell Real 
Return ETF Under NYSE Arca Equities Rule 8.600

December 1, 2011.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''

[[Page 76206]]

or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby 
given that, on November 16, 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to list and trade the following three series 
of the Russell Exchange Traded Funds Trust under NYSE Arca Equities 
Rule 8.600 (``Managed Fund Shares''): Russell Global Opportunity ETF; 
Russell Bond ETF; and Russell Real Return ETF. The text of the proposed 
rule change is available at the Exchange, the Commission's Public 
Reference Room, and 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 Equities Rule 8.600: Russell 
Global Opportunity ETF; Russell Bond ETF; and Russell Real Return ETF 
(each, a ``Fund'' and, collectively, ``Funds''). The Funds are series 
of the Russell Exchange Traded Funds Trust (``Trust'').\4\ Each of the 
Funds is a ``fund of funds,'' which means that each Fund seeks to 
achieve its investment objective by investing primarily in the retail 
shares of other exchange-traded funds that are registered under the 
1940 Act (``Underlying ETFs'').\5\ The Funds also may invest in other 
types of U.S. exchange-traded products, such as Exchange Traded Notes 
(``ETNs'') and exchange-traded pooled investment vehicles 
(collectively, with Underlying ETFs, ``Underlying ETPs'').\6\
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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 has previously approved listing and trading 
on the Exchange of actively managed funds under Rule 8.600. See, 
e.g., Securities Exchange Act Release Nos. 60460 (August 7, 2009), 
74 FR 41468 (August 17, 2009) (SR-NYSEArca-2009-55) (order approving 
Exchange listing and trading of Dent Tactical ETF); 60717 (September 
24, 2009), 74 FR 50853 (October 1, 2009) (SR-NYSEArca-2009-74) 
(order approving Exchange listing and trading of four Grail Advisors 
RP ETFs); 63802 (January 31, 2011), 76 FR 6503 (February 4, 2011) 
(SR-NYSEArca-2010-118) (order approving Exchange listing and trading 
of SiM Dynamic Allocation Diversified Income ETF and SiM Dynamic 
Allocation Growth Income ETF); 64689 (June 16, 2011), 76 FR 36608 
(June 22, 2011) (SR-NYSEArca-2011-18) (order approving Exchange 
listing and trading of Meidell Tactical Advantage ETF).
    \5\ The Trust is registered under the 1940 Act. On May 9, 2011, 
the Trust filed with the Commission Post-Effective Amendment No. 6 
under the Securities Act of 1933 (15 U.S.C. 77a) and Amendment No. 9 
under the 1940 Act to the Trust's registration statement on Form N-
1A relating to the Funds (File Nos. 333-160877 and 811-22320) 
(``Registration Statement''). The description of the operation of 
the Trust and the Funds herein is based, in part, on the 
Registration Statement. In addition, the Commission has issued an 
order granting certain exemptive relief to the Trust under the 1940 
Act. See Investment Company Act Release No. 29164 (March 1, 2010) 
(File No. 812-13815 and 812-13658-01) (``Exemptive Order'').
    \6\ ``Underlying ETPs,'' which will be listed on a national 
securities exchange, include the following: Investment Company Units 
(as described in NYSE Arca Equities Rule 5.2(j)(3)); Index-Linked 
Securities (as described in NYSE Arca Equities Rule 5.2(j)(6)); 
Portfolio Depositary Receipts (as described in NYSE Arca Equities 
Rule 8.100); Trust Issued Receipts (as described in NYSE Arca 
Equities Rule 8.200); Commodity-Based Trust Shares (as described in 
NYSE Arca Equities Rule 8.201); Currency Trust Shares (as described 
in NYSE Arca Equities Rule 8.202); Commodity Index Trust Shares (as 
described in NYSE Arca Equities Rule 8.203); Trust Units (as 
described in NYSE Arca Equities Rule 8.500); Managed Fund Shares (as 
described in NYSE Arca Equities Rule 8.600); and closed-end funds.
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    Russell Investment Management Company (``Adviser'') is the adviser 
for the Funds.\7\ State Street Bank & Trust Company serves as the 
custodian, [sic] transfer agent and Russell Fund Services Company as 
administrator for the Funds.
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    \7\ 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 its 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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    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. 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. The Adviser is 
affiliated with multiple broker-dealers and has implemented a ``fire 
wall'' with respect to such broker-dealers regarding access to 
information concerning the composition and/or changes to the Funds' 
portfolios. In the event (a) The Adviser or any sub-adviser becomes 
newly affiliated with a broker-dealer, or (b) any new adviser or sub-
adviser becomes affiliated with a broker-dealer, it will 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

[[Page 76207]]

material non-public information regarding such portfolio.
    With respect to each of the Funds, the Adviser will employ an 
active investment strategy, meaning that it buys and holds Underlying 
ETPs for either a long or short period of time depending on the 
opportunity and replacement opportunities.
Russell Global Opportunity ETF
    According to the Registration Statement, the Fund's investment 
objective will be to seek to provide long-term capital growth. The Fund 
will be a ``fund of funds,'' which means that the Fund will seek to 
achieve its investment objective by investing primarily in shares of 
Underlying ETFs. In pursuing the Fund's investment objective, the 
Adviser will normally invest the Fund's assets in Underlying ETFs that 
seek to track various indices.\8\ These indices include those that 
track the performance of equity, fixed income, real estate, 
commodities, infrastructure or currency markets. There is no maximum 
limit on the percentage of Fund assets that may be invested in 
securities of non-U.S. issuers through Underlying ETFs. A minimum of 
30% of Fund assets will be invested in securities of non-U.S. issuers 
through Underlying ETFs. The Fund also may invest in other Underlying 
ETPs.
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    \8\ The terms ``normally'' and ``under normal circumstances'' as 
used herein includes, but is not limited to, the absence of extreme 
volatility or trading halts in the debt or equities markets or the 
financial markets generally; operational issues causing 
dissemination of inaccurate market information; or force majeure 
type events such as systems failure, natural or man-made disaster, 
act of God, armed conflict, act of terrorism, riot or labor 
disruption or any similar intervening circumstance.
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    The Adviser will employ an asset allocation strategy that seeks to 
provide exposure to multiple asset classes in a variety of domestic and 
foreign markets. The Adviser's asset allocation strategy will establish 
a target asset allocation for the Fund and the Adviser then will 
implement the strategy by selecting Underlying ETPs that represent each 
of the desired asset classes, sectors and strategies. The Adviser's 
strategy also will involve periodic review of the Fund's holdings as 
markets rise and fall to ensure that the portfolio adheres to the 
strategic allocation and to add value through tactical allocation that 
may over or underweight Underlying ETPs around the strategic 
allocation. The Adviser may modify the strategic allocation for the 
Fund from time to time based on capital markets research. The Adviser 
also may modify the Fund's allocation based on tactical factors such as 
the Adviser's outlook for the economy, financial markets generally and/
or relative market valuation of the asset classes, sectors or 
strategies represented by each Underlying ETP.
    The Adviser intends to invest in Underlying ETPs that hold equity 
securities of large, medium and small capitalization companies across 
the globe including developed countries and emerging countries. Equity 
securities may include common and preferred stocks, warrants and rights 
to subscribe to common stock and convertible securities. The Adviser 
also intends to invest in Underlying ETPs that (1) Hold U.S. and non-
U.S. government issued debt, investment grade corporate bonds, below 
investment grade bonds (generally referred to as high yield bonds or 
``junk''), and mortgage and asset backed securities, and (2) track 
performance of commodities, real estate, infrastructure and currency 
markets by investing in energy, metals, agriculture, REITs, utilities, 
roads and bridges or construction/engineering companies. The Adviser 
may also, on a limited basis, sell short Underlying ETPs.
    The Adviser will select Underlying ETPs based on their potential to 
represent the underlying asset class, sector or strategy to which the 
Adviser seeks exposure for the Fund. The Fund will only invest in U.S.-
listed Underlying ETPs.
Russell Bond ETF
    According to the Registration Statement, the Fund will seek total 
return. The Fund will be a ``fund of funds,'' which means that the Fund 
will seek to achieve its investment objective by investing primarily in 
shares of Underlying ETFs. In pursuing the Fund's investment objective, 
the Adviser will normally invest the Fund's assets in Underlying ETFs 
that seek to track various fixed income indices.\9\ These indicies 
include those that track the performance of fixed income securities 
issued by governments and corporations in the United States, Europe and 
Asia, as well as other developed and emerging markets. There is no 
limit on the percentage of Fund assets that may be invested in 
securities of non-U.S. issuers through Underlying ETFs. The Fund also 
may invest in other Underlying ETPs.
---------------------------------------------------------------------------

    \9\ See note 8, supra.
---------------------------------------------------------------------------

    The Fund will invest, under normal circumstances, such that at 
least 80% of the value of its net assets are exposed to bonds through 
Underlying ETPs. The Fund considers bonds to include fixed income 
equivalent instruments, which may be represented by forwards or 
derivatives such as options, futures contracts, or swap agreements.
    The Adviser will employ an asset allocation strategy that provides 
exposure to multiple fixed income asset classes or sectors in a variety 
of U.S. and non-U.S. markets. The Adviser's allocation strategy will 
establish a target allocation for the Fund and the Adviser then will 
implement the strategy by selecting Underlying ETPs that represent each 
of the desired exposures including asset classes or sectors. The 
Adviser's strategy also will involve periodic review of the Fund's 
holdings as markets rise and fall to ensure that the portfolio adheres 
to the strategic allocation and to add value through tactical 
allocation that may over or underweight Underlying ETPs around the 
strategic allocation. The Adviser may modify the strategic allocation 
for the Fund from time to time based on capital markets research. The 
Adviser also may modify the Fund's allocation based on tactical factors 
such as the Adviser's outlook for the economy, financial markets 
generally and/or relative market valuation of the asset classes or 
sectors represented by each Underlying ETP.
    The Adviser intends to invest in Underlying ETPs that hold 
government-issued debt, investment grade corporate bonds, below 
investment grade bonds (generally referred to as high yield bonds or 
``junk'') and mortgage and asset backed securities. Issuers of debt 
securities may be U.S. or non-U.S. (including developed and emerging 
markets countries) governments or corporate issuers. The Adviser also 
intends to select Underlying ETPs based on their exposure to asset 
class or sectors and the duration and credit quality of their 
portfolios within broader sectors of a fixed income market. The Adviser 
may also, on a limited basis, sell short Underlying ETPs.
    The Adviser will select Underlying ETPs based on their potential to 
represent the underlying asset class or sector to which the Adviser 
seeks exposure for the Fund. The Fund will only invest in U.S.-listed 
Underlying ETPs.
Russell Real Return ETF
    According to the Registration Statement, the Fund will seek a total 
return that exceeds the rate of inflation over an economic cycle. The 
Fund will be a ``fund of funds,'' which means that the Fund will seek 
to achieve its investment objective by investing primarily in shares of 
Underlying ETFs. In pursuing the Fund's investment objective, the 
Adviser will normally invest the Fund's assets in Underlying

[[Page 76208]]

ETFs that seek to track various indices.\10\ These indices include 
indices that track the performance of equity, fixed income (including 
Treasury Inflation-Protected Securities or ``TIPS'') and real assets 
such as real estate, commodities and infrastructure assets. The Fund 
will invest in Underlying ETFs that invest in U.S. and non-U.S. 
(including developed and emerging markets) securities. There is no 
limit on the percentage of Fund assets that may be invested in 
securities of non-U.S. issuers through Underlying ETFs. The Fund also 
may invest in other Underlying ETPs.
---------------------------------------------------------------------------

    \10\ See note 8, supra.
---------------------------------------------------------------------------

    The Adviser will employ an asset allocation strategy that provides 
exposure to multiple asset classes in a variety of domestic and foreign 
markets. The Adviser's allocation strategy will establish a target 
asset allocation for the Fund and the Adviser will then implement the 
strategy by selecting Underlying ETPs that represent each of the 
desired asset classes, sectors or strategies. The Adviser's strategy 
also will involve periodic review of the Fund's holdings as markets 
rise and fall to ensure that the portfolio adheres to the strategic 
allocation and to add value through tactical allocation that may over 
or underweight Underlying ETPs around the strategic allocation. The 
Adviser may modify the strategic allocation for the Fund from time to 
time based on capital markets research. The Adviser also may modify the 
Fund's allocation based on tactical factors such as the Adviser's 
outlook for the economy, inflation expectations, financial markets 
generally and/or relative market valuation of the asset classes, sector 
or strategies represented by each Underlying ETP.
    The Adviser intends to invest in Underlying ETPs that hold equity 
securities of large, medium and small capitalization companies and 
fixed income securities, including government issued debt, investment 
grade corporate bonds, below investment grade bonds and mortgage and 
asset backed securities issued by companies across the globe including 
developed countries and emerging countries. The Adviser also intends to 
invest in Underlying ETPs that hold U.S. inflation-indexed securities 
and have exposure to commodities, real estate, infrastructure markets 
and other real assets. A real asset is a tangible or physical asset 
that typically has intrinsic value. The Adviser may also, on a limited 
basis, sell short Underlying ETPs.
    The Adviser will select Underlying ETPs based on their potential to 
represent the underlying asset class, sector or strategy to which the 
Adviser seeks exposure for the Fund. The Fund will only invest in U.S.-
listed Underlying ETPs.
Other Investments of the Funds
    The Funds will not invest in derivatives. The Underlying ETPs in 
which the Funds invest may, to a limited extent, invest in derivatives; 
however, the Funds will not invest in Underlying ETPs that use 
derivatives as a principal investment strategy unless the Underlying 
ETP uses futures contracts and related options for bona fide hedging, 
attempting to gain exposure to a particular market, index or 
instrument, or other risk management purposes. To the extent an 
Underlying ETP uses futures and/or options on futures, it will do so in 
accordance with the Commodity Exchange Act\11\ and applicable rules and 
regulations promulgated by the Commodity Futures Trading Commission and 
the National Futures Association.
---------------------------------------------------------------------------

    \11\ 7 U.S.C. 1.
---------------------------------------------------------------------------

    Underlying ETPs may enter into swap agreements including interest 
rate, index, and credit default swap agreements. An Underlying ETP may 
invest in commodity-linked derivative instruments, such as structured 
notes, swap agreements, commodity options, futures and options on 
futures, to gain exposure to commodities markets. Financial futures 
contracts may be used by an Underlying ETP during or in anticipation of 
adverse market events such as interest rate changes. An Underlying ETP 
may purchase a put and/or sell a call option on a stock index futures 
contract instead of selling a futures contract in anticipation of an 
equity market decline.
    Money market instruments, including repurchase agreements, or funds 
that invest exclusively in money market instruments, including 
affiliated money market funds (subject to applicable limitations under 
the 1940 Act), convertible securities, variable rate demand notes, or 
commercial paper may be used by a Fund in seeking to meet its 
investment objective and in managing cash flows.
    The Funds expect to invest almost entirely in Underlying ETPs but 
may also invest in, among other investments, common stocks; sponsored 
American Depositary Receipts (``ADRs''), American Depositary Shares 
(``ADSs'') and European Depositary Receipts (``EDRs''), Global 
Depositary Receipts (``GDRs''); short-term instruments (including money 
market instruments); U.S. Government Securities; TIPS; commercial 
paper; and other debt instruments described in the Registration 
Statement. The Funds and the Underlying ETPs may enter into repurchase 
and reverse repurchase agreements.
Investment Policies and Restrictions
    Each Fund will seek to qualify for treatment as a regulated 
investment company (``RIC'') under Subchapter M of the Internal Revenue 
Code of 1986, as amended.\12\
---------------------------------------------------------------------------

    \12\ 26 U.S.C. 151. One of several requirements for RIC 
qualification is that a Fund must receive at least 90% of the Fund's 
gross income each year from dividends, interest, [sic] 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 a Fund must diversify 
its holdings so that, at the end of each fiscal quarter of the 
Fund's taxable year: (a) At least 50% of the market value of the 
Fund's total assets is represented by cash and cash items, U.S. 
Government securities, securities of other RICs, and other 
securities, with these other securities limited, in respect to any 
one issuer, to an amount not greater than 5% of the value of the 
Fund's total assets or 10% of the outstanding voting securities of 
such issuer; and (b) not more than 25% of the value of its total 
assets are invested in the securities (other than U.S. Government 
securities or securities of other RICs) of any one issuer or two or 
more issuers which the Fund controls and which are engaged in the 
same, similar, or related trades or businesses, or the securities of 
one or more qualified publicly traded partnership [sic] (``Asset 
Test'').
---------------------------------------------------------------------------

    Each Fund may invest up to an aggregate amount of 15% of its net 
assets in (a) Illiquid securities, and (b) Rule 144A securities. This 
limitation is applied at the time of purchase. The Commission staff has 
interpreted the term ``illiquid'' in this context to mean a security 
that cannot be sold or disposed of within seven days in the ordinary 
course of business at approximately the amount at which a Fund has 
valued such security.\13\
---------------------------------------------------------------------------

    \13\ 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. 8901 (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).

---------------------------------------------------------------------------

[[Page 76209]]

    Each Fund may invest in securities of other investment companies, 
including ETFs, closed end funds and money market funds, subject to 
applicable limitations under Section 12(d)(1) of the 1940 Act or 
exemptions granted thereunder.
    A Fund may not:
    1. (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.\14\
---------------------------------------------------------------------------

    \14\ The diversification standard is contained in Section 
5(b)(1) of the 1940 Act (15 U.S.C. 80e).
---------------------------------------------------------------------------

    2. Invest 25% or more of its total assets in the securities of one 
or more issuers conducting their principal business activities in a 
particular industry or group of industries; except that, to the extent 
the underlying index selected for a particular passive Underlying ETF 
is concentrated in a particular industry or group of industries, the 
Funds will necessarily be concentrated in that industry or group of 
industry [sic].\15\ This limitation does not apply to investments in 
securities issued or guaranteed by the U.S. Government, its agencies or 
instrumentalities, or shares of investment companies, including the 
Underlying ETPs.
---------------------------------------------------------------------------

    \15\ 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).
---------------------------------------------------------------------------

    Underlying ETPs will be listed and traded in the U.S. on a national 
securities exchange. While the Underlying ETPs may hold non-U.S. equity 
securities, the Funds will not invest in non-U.S. listed equity 
securities. Each Fund's investments will be consistent with its 
investment objective and will not be used to enhance leverage. The 
Funds will not hold leveraged, inverse and inverse leveraged Underlying 
ETPs. Consistent with the Exemptive Order, the Funds will not invest in 
options contracts, futures contracts or swap agreements.
Creations and Redemptions of Shares
    The Funds will offer and issue Shares at their net asset value 
(``NAV'') only in aggregations of a specified number of Shares (each, a 
``Creation Unit''). The Funds generally will offer and issue Shares in 
exchange for shares of specified Underlying ETPs (``Deposit 
Securities'') together with the deposit of a specified cash payment 
(``Cash Component''). The Trust will reserve the right to permit or 
require the substitution of a ``cash in lieu'' amount to be added to 
the Cash Component to replace any Deposit Security. The Shares will be 
redeemable only in Creation Unit aggregations, and generally in 
exchange for portfolio securities and a specified cash payment. A 
Creation Unit of the Funds will consist of 50,000 Shares.
    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 Trust will be in 
compliance with Rule 10A-3 under the Exchange Act,\16\ 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 as defined in NYSE Arca Equities Rule 
8.600(c)(2) will be made available to all market participants at the 
same time.
---------------------------------------------------------------------------

    \16\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------

Availability of Information
    The Funds' Web site (www.russelletfs.com), which will be publicly 
available prior to the public offering of Shares, will include a form 
of the prospectus for the Funds that may be downloaded. The Funds' Web 
site will include additional quantitative information updated on a 
daily basis, including, for the Funds, (1) Daily trading volume, the 
prior business day's reported closing price, NAV and mid-point of the 
bid/ask spread at the time of calculation of such NAV (``Bid/Ask 
Price''),\17\ and a calculation of the premium and discount of the Bid/
Ask Price against the NAV, and (2) data in chart format displaying the 
frequency distribution of discounts and premiums of the daily Bid/Ask 
Price against the NAV, within appropriate ranges, for each of the four 
previous calendar quarters. On each business day, before commencement 
of trading in Shares in the Core Trading Session on the Exchange, the 
Funds will disclose on their Web site the Disclosed Portfolio that will 
form the basis for the Funds' calculation of NAV at the end of the 
business day.\18\ The Web site information will be publicly available 
at no charge.
---------------------------------------------------------------------------

    \17\ The Bid/Ask Price of the Funds will be determined using the 
midpoint of the highest bid and the lowest offer on the Exchange as 
of the time of calculation of the Funds' NAV. The records relating 
to Bid/Ask Prices will be retained by the Funds and their service 
providers.
    \18\ Under accounting procedures followed by the Funds, trades 
made on the prior business day (``T'') will be booked and reflected 
in NAV on the current business day (``T+1''). Accordingly, the Funds 
will be able to disclose at the beginning of the business day the 
portfolio that will form the basis for the NAV calculation at the 
end of the business day.
---------------------------------------------------------------------------

    On a daily basis, the Adviser will disclose for each portfolio 
security or other financial instrument of the Funds the following 
information: Ticker symbol (if applicable), name of security or 
financial instrument, number of shares or dollar value of financial 
instruments held in the portfolio, and percentage weighting of the 
security or financial instrument in the portfolio.
    In addition, a basket composition file, which includes the security 
names and share quantities required to be delivered in exchange for 
Fund Shares, together with estimates and actual cash components, will 
be publicly disseminated daily prior to the opening of the New York 
Stock Exchange (``NYSE'') via the National Securities Clearing 
Corporation. The basket will represent one Creation Unit of each Fund.
    The NAV of each Fund will normally be determined as of the close of 
the regular trading session on the NYSE (ordinarily 4 p.m. Eastern 
Time) on each business day.
    Investors can also obtain the Trust's Statement of Additional 
Information (``SAI''), Shareholder Reports and Form N-CSR. The Trust's 
SAI and Shareholder Reports are available free upon request from the 
Trust, and those documents and the Form N-CSR may be viewed on-screen 
or downloaded from the Commission's Web site at www.sec.gov. 
Information regarding market price and trading volume of the Shares 
will be continually available on a real-time basis throughout the day 
on brokers' computer screens and other electronic services. Information 
regarding the previous day's closing price and trading volume 
information 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. The intra-day and closing values of 
Underlying ETPs also will be disseminated by the U.S. 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 widely 
disseminated by one or more major market data vendors at least every 15 
seconds during

[[Page 76210]]

the Core Trading Session.\19\ 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 
Funds on a daily basis and to provide a close estimate of that value 
throughout the trading day.
---------------------------------------------------------------------------

    \19\ Currently, it is the Exchange's understanding that several 
major market data vendors display and/or make widely available 
Portfolio Indicative Values published on CTA or other data feeds.
---------------------------------------------------------------------------

    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 Funds 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 Funds.\20\ Trading in Shares of the Funds 
will be halted if the circuit breaker parameters in NYSE Arca Equities 
Rule 7.12 have been reached. Trading also may be halted because of 
market conditions or for reasons that, in the view of the Exchange, 
make trading in the Shares inadvisable. These may include: (1) The 
extent to which trading is not occurring in the securities and/or the 
financial instruments comprising the Disclosed Portfolio of a 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 Funds 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 in place a comprehensive 
surveillance sharing agreement.\21\ The Exchange, therefore, will be 
able to obtain surveillance information from the exchanges trading the 
Underlying ETPs.
---------------------------------------------------------------------------

    \21\ For a list of the current members of ISG, see 
www.isgportal.org. The Exchange notes that not all components of the 
Disclosed Portfolio for the Funds may trade on markets that are 
members of ISG or with which the Exchange has in place a 
comprehensive surveillance sharing agreement.
---------------------------------------------------------------------------

    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its 
Equity Trading Permit (``ETP'') Holders in an Information Bulletin 
(``Bulletin'') of the special characteristics and risks associated with 
trading the Shares. Specifically, the Bulletin will discuss the 
following: (1) The procedures for purchases and redemptions of Shares 
in Creation Unit aggregations (and that Shares are not individually 
redeemable); (2) NYSE Arca Equities Rule 9.2(a), which imposes a duty 
of due diligence on its ETP Holders to learn the essential facts 
relating to every customer prior to trading the Shares; (3) the risks 
involved in trading the Shares during the Opening and Late Trading 
Sessions when an updated Portfolio Indicative Value will not be 
calculated or publicly disseminated; (4) how information regarding the 
Portfolio Indicative Value is disseminated; (5) the requirement that 
ETP Holders deliver a prospectus to investors purchasing newly issued 
Shares prior to or concurrently with the confirmation of a transaction; 
and (6) trading information.
    In addition, the Bulletin will reference that the Funds are subject 
to various fees and expenses described in the Registration Statement. 
The Bulletin will discuss any exemptive, no-action, and interpretive 
relief granted by the Commission from any rules under the Exchange Act. 
The Bulletin will also disclose that the NAV for the Shares will be 
calculated after 4 p.m. Eastern Time each trading day.
2. Statutory Basis
    The basis under the Exchange Act for this proposed rule change is 
the requirement under Section 6(b)(5) \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 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. Underlying ETPs will be listed and traded in the U.S. on a 
national securities exchange. While the Underlying ETPs may hold non-
U.S. equity securities, the Funds will not invest in non-U.S. 
registered equity securities. Each Fund's investments will be 
consistent with its investment objective and will not be used to 
enhance leverage. The Funds will not invest in derivatives, including 
options, swaps or futures.
    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 Adviser is affiliated with multiple broker-dealers and has 
implemented a ``fire wall'' with

[[Page 76211]]

respect to such broker-dealers regarding access to information 
concerning the composition and/or changes to the Funds' portfolios. 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 Funds and the Shares, 
thereby promoting market transparency. The Funds' portfolio holdings 
will be disclosed on its Web site daily after the close of trading on 
the Exchange and prior to the opening of trading on the Exchange the 
following day. Moreover, the Portfolio Indicative Value will be widely 
disseminated by one or more major market data vendors at least every 15 
seconds during the Exchange's Core Trading Session. On each business 
day, before commencement of trading in Shares in the Core Trading 
Session on the Exchange, the Funds will disclose on their Web site the 
Disclosed Portfolio that will form the basis for the Funds' calculation 
of NAV at the end of the business day. Information regarding market 
price and trading volume of the Shares will be continually available on 
a real-time basis throughout the day on brokers' computer screens and 
other electronic services, and quotation and last sale information will 
be available via the CTA high-speed line. The Web site for the Fund 
[sic] will include a form of the prospectus for the Funds 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 Funds 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, and trading in the Shares will 
be subject to NYSE Arca Equities Rule 8.600(d)(2)(D), which sets forth 
circumstances under which Shares of the Funds may be halted. In 
addition, as noted above, investors will have ready access to 
information regarding the Funds' 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 
an additional type of actively-managed exchange-traded product 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 Funds' 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 will:
    (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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2011-84 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-2011-84. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSEArca-2011-84 and should 
be submitted on or before December 27, 2011.

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

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

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-31263 Filed 12-5-11; 8:45 am]
BILLING CODE 8011-01-P
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