Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change Relating to Listing and Trading of AdvisorShares Global Echo ETF Under NYSE Arca Equities Rule 8.600, 20660-20666 [2012-8149]
Download as PDF
<![CDATA[
20660
Federal Register / Vol. 77, No. 66 / Thursday, April 5, 2012 / Notices
significant burden on competition; and
(iii) by its terms, does not become
operative for 30 days after the date of
the filing, or such shorter time as the
Commission may designate if consistent
with the protection of investors and the
public interest. NASDAQ believes that
the proposed rule change does not
significantly affect the protection of
investors or the public interest because
it adopts a provision that is already in
effect on another market; will operate to
minimize excessive messaging and
therefore maximize system and intermarket stability; and is an order type
that participants may elect to use but are
not mandated to use.
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. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or 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:
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–2012–041 and
should be submitted on or before April
26, 2012.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–8150 Filed 4–4–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Tkelley on DSK3SPTVN1PROD with NOTICES
[Release No. 34–66696; File No. SR–
NYSEArca–2012–24]
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–NASDAQ–2012–041. 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
March 30, 2012.
16:20 Apr 04, 2012
Jkt 226001
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of Proposed
Rule Change Relating to Listing and
Trading of AdvisorShares Global Echo
ETF Under NYSE Arca Equities Rule
8.600
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Exchange Act’’ or ‘‘Act’’) 1 and Rule
19b–4 thereunder,2 notice is hereby
given that, on March 16, 2012, NYSE
Arca, Inc. (‘‘Exchange’’ or ‘‘NYSE Arca’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been substantially prepared by the
Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
11 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
PO 00000
Frm 00051
Fmt 4703
The Exchange proposes to list and
trade the following under NYSE Arca
Equities Rule 8.600 (‘‘Managed Fund
Shares’’): AdvisorShares Global Echo
ETF. The text of the proposed rule
change is available at the Exchange,
www.nyse.com, and the Commission’s
Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, 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
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number SR–NASDAQ–2012–041 on the
subject line.
VerDate Mar<15>2010
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Sfmt 4703
The Exchange proposes to list and
trade shares (‘‘Shares’’) of the following
under NYSE Arca Equities Rule 8.600,
which governs the listing and trading of
Managed Fund Shares: 3 AdvisorShares
Global Echo ETF (‘‘Fund’’).4 The Shares
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–1) (‘‘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 a number of
actively managed funds under Rule 8.600. See, e.g.,
Securities Exchange Act Release Nos. 57801 (May
8, 2008), 73 FR 27878 (May 14, 2008) (SR–
NYSEArca–2008–31) (order approving Exchange
listing and trading of twelve actively-managed
funds of the WisdomTree Trust); 60460 (August 7,
2009), 74 FR 41468 (August 17, 2009) (SR–
NYSEArca–2009–55) (order approving listing of
Dent Tactical ETF); 63076 (October 12, 2010), 75 FR
63874 (October 18, 2010) (SR–NYSEArca–2010–79)
(order approving Exchange listing and trading of
Cambria Global Tactical ETF); 63802 (January 31,
2011), 76 FR 6503 (February 4, 2011) (SR–
NYSEArca–2010–118) (order approving Exchange
listing and trading of the SiM Dynamic Allocation
E:\FR\FM\05APN1.SGM
05APN1
Federal Register / Vol. 77, No. 66 / Thursday, April 5, 2012 / Notices
Tkelley on DSK3SPTVN1PROD with NOTICES
will be offered by AdvisorShares Trust
(‘‘Trust’’), a statutory trust organized
under the laws of the State of Delaware
and registered with the Commission as
an open-end management investment
company.5 The investment adviser to
the Fund is AdvisorShares Investments,
LLC (‘‘Adviser’’). The Fund’s subadvisers (‘‘Sub-Advisers’’ and each a
‘‘Sub-Adviser’’), which provide day-today portfolio management of the Fund,
are First Affirmative Financial Network
LLC; Reynders, McVeigh Capital
Management, LLC; Baldwin Brothers
Inc.; and Community Capital
Management Inc.
Foreside Fund Services, LLC
(‘‘Distributor’’) is the principal
underwriter and distributor of the
Fund’s Shares. The Bank of New York
Mellon Corporation serves as the
administrator (‘‘Administrator’’),
custodian, transfer agent, and fund
accounting agent for the Fund.
Commentary .06 to Rule 8.600
provides that, if the investment adviser
to the investment company issuing
Managed Fund Shares is affiliated with
a broker-dealer, such investment adviser
shall erect a ‘‘fire wall’’ between the
investment adviser and the brokerdealer with respect to access to
information concerning the composition
and/or changes to such investment
company portfolio.6 In addition,
Commentary .06 further requires that
personnel who make decisions on the
open-end fund’s portfolio composition
must be subject to procedures designed
to prevent the use and dissemination of
material non-public information
regarding the open-end fund’s portfolio.
Commentary .06 to Rule 8.600 is similar
to Commentary .03(a)(i) and (iii) to
NYSE Arca Equities Rule 5.2(j)(3);
however, Commentary .06 in connection
with the establishment of a ‘‘fire wall’’
between the investment adviser and the
broker-dealer reflects the applicable
open-end fund’s portfolio, not an
underlying benchmark index, as is the
case with index-based funds. Neither
the Adviser nor the Sub-Advisers are
affiliated with a broker-dealer. In the
event (a) the Adviser or the SubAdvisers become 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 the portfolio, and will be
subject to procedures designed to
prevent the use and dissemination of
material non-public information
regarding such portfolio.
Diversified Income ETF and SiM Dynamic
Allocation Growth Income ETF).
5 The Trust is registered under the 1940 Act. On
July 15, 2011, the Trust filed with the Commission
Post-Effective Amendment No. 32 to Form N–1A
under the Securities Act of 1933 (15 U.S.C. 77a),
and under the 1940 Act relating to the Fund (File
Nos. 333–157876 and 811–22110) (‘‘Registration
Statement’’). The description of the operation of the
Trust and the Fund herein is based, 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. 29291
(May 28, 2010) (File No. 812–13677) (‘‘Exemptive
Order’’).
6 An investment adviser to an open-end fund is
required to be registered under the Investment
Advisers Act of 1940 (‘‘Advisers Act’’). As a result,
the Adviser and Sub-Advisers and their related
personnel are subject to the provisions of Rule
204A–1 under the Advisers Act relating to codes of
ethics. This Rule requires investment advisers to
adopt a code of ethics that reflects the fiduciary
nature of the relationship to clients as well as
compliance with other applicable securities laws.
Accordingly, procedures designed to prevent the
communication and misuse of non-public
information by an investment adviser must be
consistent with Rule 204A–1 under the Advisers
Act. In addition, Rule 206(4)–7 under the Advisers
Act makes it unlawful for an investment adviser to
provide investment advice to clients unless such
investment adviser has (i) Adopted and
implemented written policies and procedures
reasonably designed to prevent violation, by the
investment adviser and its supervised persons, of
the Advisers Act and the Commission rules adopted
thereunder; (ii) implemented, at a minimum, an
annual review regarding the adequacy of the
According to the Registration
Statement, the Fund will seek to achieve
long-term capital appreciation with an
emphasis on absolute (positive) returns
and low sensitivity to traditional
financial market indices, such as the
S&P 500 Index, over a full market cycle.
The Fund will seek to achieve its
investment objective by investing under
normal market circumstances 7 at least
80% of its total assets in the following
securities: U.S. exchange-listed equity
securities; 8 American Depository
VerDate Mar<15>2010
16:20 Apr 04, 2012
Jkt 226001
Description of the Fund
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.
7 The term ‘‘under normal market circumstances’’
includes, but is not limited to, the absence of
extreme volatility or trading halts in the equities or
fixed income 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 manmade disaster, act of God, armed conflict, act of
terrorism, riot or labor disruption or any similar
intervening circumstance.
8 The Fund may invest in equity securities of
domestic and foreign companies, including
common stocks, preferred stocks, warrants to
acquire common stock, securities convertible into
common stock, and investments in master limited
partnerships.
PO 00000
Frm 00052
Fmt 4703
Sfmt 4703
20661
Receipts (‘‘ADRs’’); 9 fixed income
securities (including municipal bonds);
and exchange-traded products
(‘‘Underlying ETPs’’) 10 that provide
diversified exposure to various asset
classes and market segments.
The Fund will be a multi-manager,
multi-strategy, broadly diversified,
actively managed exchange-traded fund
with a focus on ‘‘Sustainable Investing.’’
Sustainable Investing generally refers to
an investment methodology that takes
into consideration economic,
environmental, technology, and a
variety of social factors when making
investment decisions. Accordingly, the
Fund is designed as a core allocation
that proactively seeks Sustainable
Investment-themed investment
opportunities that may socially and
environmentally benefit the earth, with
a focus on water, clean energy,
community development, innovation,
and other sustainable themes across
asset classes. Sustainable Investment
themes that the Fund may pursue
include, but are not limited to, the
following: economic themes (corporate
governance, risk and crisis management,
community investment, energy
efficiency, food, green building);
environmental themes (air, water,
earth); technology themes (mobility,
renewable energy, technology, and
access); and social themes (human
health, such as occupational health and
safety).
The Fund will seek to achieve its
investment objective by allocating a
portion of the Fund’s assets to each of
the Fund’s Sub-Advisers who will
employ their respective investment
9 The Fund generally will invest in sponsored
ADRs, but it may invest up to 10% of total assets
in unsponsored ADRs.
10 Underlying ETPs include Investment Company
Units (as described in NYSE Arca Equities Rule
5.2(j)(3)); Index-Linked Securities (as described in
NYSE Arca Equities Rule 5.2(j)(6)); Portfolio
Depositary Receipts (as described in NYSE Arca
Equities Rule 8.100); Trust Issued Receipts (as
described in NYSE Arca Equities Rule 8.200);
Commodity-Based Trust Shares (as described in
NYSE Arca Equities Rule 8.201); Currency Trust
Shares (as described in NYSE Arca Equities Rule
8.202); Commodity Index Trust Shares (as described
in NYSE Arca Equities Rule 8.203); Trust Units (as
described in NYSE Arca Equities Rule 8.500);
Managed Fund Shares (as described in NYSE Arca
Equities Rule 8.600); and closed-end funds. The
Underlying ETPs all will be listed and traded in the
U.S. on registered exchanges. The Fund may invest
in the securities of Underlying ETPs registered
under the 1940 Act consistent with the
requirements of Section 12(d)(1) of the 1940 Act, or
any rule, regulation, or order of the Commission or
interpretation thereof. The Fund will only make
such investments in conformity with the
requirements of Section 817 of the Internal Revenue
Code of 1986. The Underlying ETPs in which the
Fund may invest will primarily be index-based
exchange-traded funds that hold substantially all of
their assets in securities representing a specific
index.
E:\FR\FM\05APN1.SGM
05APN1
20662
Federal Register / Vol. 77, No. 66 / Thursday, April 5, 2012 / Notices
Tkelley on DSK3SPTVN1PROD with NOTICES
strategies to generate absolute returns
over a full market cycle. Generally, a
full market cycle consists of a bull
market followed by a bear market and a
return to a bull market, or vice versa.
Initially, an equal proportion of the
Fund’s assets will be allocated to each
Sub-Adviser to obtain the desired
exposure to the strategies described
below. The allocation among SubAdvisers will vary over time in response
to a variety of factors including
prevailing market conditions. The
Adviser has designated First Affirmative
Financial Network, LLC to allocate and
monitor the allocation of the Fund’s
assets to each Sub-Adviser to ensure
that the Fund’s portfolio maintains the
proper investment exposure to seek to
achieve its investment objective. Each
Sub-Adviser will seek to identify and
invest either directly or indirectly
through other Underlying ETPs in
securities of companies that are making
a positive impact in the world and
reflect Sustainable Investment themes,
including corporate sustainability. The
Fund’s investments in companies that
practice corporate sustainability will
provide an additional layer of
diversification because such
investments are designed to increase
long-term shareholder value. Companies
focused on corporate sustainability also
can provide more attractive risk return
profiles for investors, and can leverage
various other Sustainable Investment
themes.
The Fund may take both long and
short positions in any of these
investments. The Fund may invest up to
65% (and intends to always invest at
least 15%) of its net assets in domestic
and foreign fixed income securities. The
Fund may invest in securities of any
capitalization range and may employ
one or more investment styles (from
growth to value) at any time as
necessary to seek to achieve the Fund’s
investment objective.
Each Sub-Adviser will determine
whether to buy or sell an investment for
the Fund’s portfolio by applying one or
more of the following strategies:
Core Strategies
Æ Fixed Income Strategies. Fixed
income strategies consist of investment
strategies that invest primarily in debt
securities of domestic and foreign
governments, agencies,
instrumentalities, municipalities and
companies of all maturities and
qualities (including ‘‘junk bonds’’ and
up to 15% of total assets in defaulted
debt securities), TIPS (Treasury Inflation
Protected Securities), and Underlying
ETPs that provide exposure to fixed
income securities or strategies. 85% or
VerDate Mar<15>2010
16:20 Apr 04, 2012
Jkt 226001
more of the Fund’s investments in fixed
income strategies will be in investment
grade debt securities. Debt securities of
foreign governments are sometimes
referred to as sovereign debt obligations
and may be issued or guaranteed by
foreign governments or their agencies.
The Fund may invest up to 10% of total
assets in mortgage-backed securities or
other asset-backed securities.11 Fixed
income strategies also may involve
hedging through the use of investments
in other Underlying ETPs to enhance
risk-adjusted return.
Æ Equity Strategies. Equity strategies
will consist of both domestic and
international/emerging markets
strategies. The domestic equity
strategies will seek to invest in
securities of companies that the SubAdvisers believe will outperform other
equity securities over the long term.12
The international/emerging markets
equity strategies will seek to invest in
securities of undervalued international
companies through ADRs that provide
the Fund with exposure to businesses
outside of the U.S. and that are
attractively priced relative to their
economic fundamentals. Both U.S. and
international investments will be
selected using fundamental analysis of
factors such as earnings, cash flows, and
valuations based upon them, and will be
diversified among the economic and
industry sectors in the S&P 500® Index,
the Morgan Stanley Capital
International (‘‘MSCI’’) All Country
World Index, MSCI Europe, Australasia
and Far East Index, and MSCI Emerging
Markets Index.
Alternative Strategies
Æ Long/Short and Hedging Strategies.
Alternative strategies will consist of
strategies that combine short sales of
equities (including shares of Underlying
ETPs) or purchase of shares of inverse
Underlying ETPs. As such, long/short
strategies may utilize securities that
seek to track indexes on markets,
sectors, strategies, and/or industries to
hedge against potential adverse
movements in security prices. The Fund
may implement multiple variations of
long/short and hedging strategies. The
11 This limitation does not apply to securities
issued or guaranteed by federal agencies and/or
U.S. government sponsored instrumentalities, such
as the Government National Mortgage
Administration (‘‘GNMA’’), the Federal Housing
Administration (‘‘FHA’’), the Federal National
Mortgage Association (‘‘FNMA’’), and the Federal
Home Loan Mortgage Corporation (‘‘FHLMC’’).
12 Telephone conference between Michael
Cavalier, Chief Counsel, NYSE Euronext and Kristie
Diemer, Special Counsel, Division of Trading and
Markets, Commission, on March 28, 2012,
confirmed domestic equities strategies will apply to
all Sub-Advisers.
PO 00000
Frm 00053
Fmt 4703
Sfmt 4703
basic long/short equity strategies
generally will seek to increase net long
exposure in a bull market and decrease
net long exposure, by holding high
concentrations in cash or investing
100% short in a bear market.
Other Investments
The Fund may enter into repurchase
agreements with financial institutions,
which may be deemed to be loans. The
Fund will follow certain procedures
designed to minimize the risks inherent
in such agreements. These procedures
will include effecting repurchase
transactions only with large, wellcapitalized, and well-established
financial institutions whose condition
will be continually monitored by the
Sub-Advisers. In addition, the value of
the collateral underlying the repurchase
agreement will always be at least equal
to the repurchase price, including any
accrued interest earned on the
repurchase agreement. The Fund may
enter into reverse repurchase
agreements without limit as part of the
Fund’s investment strategy. Reverse
repurchase agreements involve sales by
the Fund of portfolio assets
concurrently with an agreement by the
Fund to repurchase the same assets at a
later date at a fixed price.
The Fund, or Underlying ETPs in
which it invests, may invest in U.S.
government securities and U.S. Treasury
zero-coupon bonds. The Fund, or
Underlying ETPs in which it invests,
may invest in shares of real estate
investment trusts (‘‘REITs’’).
Diversification. The Fund may not (i)
with respect to 75% of its total assets,
purchase securities of any issuer (except
securities issued or guaranteed by the
U.S. Government, its agencies or
instrumentalities or shares of
investment companies) if, as a result,
more than 5% of its total assets would
be invested in the securities of such
issuer; or (ii) acquire more than 10% of
the outstanding voting securities of any
one issuer.13
Concentration. The Fund may not
invest 25% or more of its total assets in
the securities of one or more issuers
conducting their principal business
activities in the same industry or group
of industries. This limitation does not
apply to investments in securities
issued or guaranteed by the U.S.
Government, its agencies or
instrumentalities, or shares of
investment companies. The Fund will
not invest 25% or more of its total assets
13 The diversification standard is set forth in
Section 5(b)(1) of the 1940 Act.
E:\FR\FM\05APN1.SGM
05APN1
Federal Register / Vol. 77, No. 66 / Thursday, April 5, 2012 / Notices
in any investment company that so
concentrates.14
The Fund will not purchase illiquid
securities.15 Further, in accordance with
the Exemptive Order, the Fund will not
invest in options, futures, or swaps. The
Fund’s investments will be consistent
with the Fund’s investment objective
and will not be used to enhance
leverage.
Except for Underlying ETPs that may
hold non-U.S. issues, the Fund will not
otherwise invest in non-U.S. issues.
To respond to adverse market,
economic, political, or other conditions,
the Fund may invest 100% of its total
assets, without limitation, in highquality debt securities and money
market instruments either directly or
through Underlying ETPs. The Fund
may be invested in these instruments for
extended periods, depending on the
Sub-Advisers’ assessment of market
conditions. These debt securities and
money market instruments include
shares of other mutual funds,
commercial paper, certificates of
deposit, bankers’ acceptances, U.S.
Government securities, repurchase
agreements, and bonds that are BBB or
higher. While the Fund is in a defensive
position, the opportunity to achieve its
investment objective will be limited.
Tkelley on DSK3SPTVN1PROD with NOTICES
Creations and Redemptions
The Fund will issue and redeem
Shares on a continuous basis at the net
asset value (‘‘NAV’’) only in a large
specified number of shares called a
‘‘Creation Unit.’’ The Shares are
‘‘created’’ at their NAV by market
makers, large investors, and institutions
only in block-size Creation Units of at
least 50,000 Shares. A ‘‘creator’’ will
enter into an authorized participant
agreement (‘‘Participant Agreement’’)
with the Distributor or use a Depository
Trust Company (‘‘DTC’’) participant
who has executed a Participant
Agreement (‘‘Authorized Participant’’),
and deposit into the Fund a portfolio of
securities closely approximating the
holdings of the Fund and a specified
amount of cash, together totaling the
NAV of the Creation Unit(s), in
14 See Form N–1A, Item 9. The Commission has
taken the position that a fund is concentrated if it
invests more than 25% of the value of its total
assets in any one industry. See, e.g., Investment
Company Act Release No. 9011 (October 30, 1975),
40 FR 54241 (November 21, 1975).
15 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 fund. 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).
VerDate Mar<15>2010
16:20 Apr 04, 2012
Jkt 226001
exchange for 50,000 Shares of the Fund
(or multiples thereof).
Shares may be redeemed only in
Creation Units at their NAV next
determined after receipt of a redemption
request in proper form by a Fund
through the Administrator and only on
a business day. The redemption
proceeds for a Creation Unit generally
will consist of a portfolio of securities
closely approximating the holdings of
the Fund and a specified amount of
cash, as announced by the
Administrator on the business day of
the request for redemption received in
proper form, plus cash in an amount
equal to the difference between the NAV
of the Shares being redeemed, as next
determined after a receipt of a request
in proper form, and the value of such
portfolio of securities. Orders to create
and redeem Shares must be placed with
the Administrator by 3 p.m., Eastern
Time (‘‘E.T.’’).
Net Asset Value
The NAV per Share of the Fund will
be computed by dividing the value of
the net assets of the Fund (i.e., the value
of its total assets less total liabilities) by
the total number of Shares of the Fund
outstanding, rounded to the nearest
cent. Expenses and fees, including
without limitation, the management,
administration, and distribution fees,
will be accrued daily and taken into
account for purposes of determining
NAV. The NAV per Share for the Fund
will be calculated by the Administrator
and determined as of the close of the
regular trading session on the New York
Stock Exchange (‘‘NYSE’’) (ordinarily 4
p.m., E.T.) on each day that the NYSE
is open.
In computing the Fund’s NAV, the
Fund’s securities holdings will be
valued based on their last readily
available market price. Price
information on listed securities,
including Underlying ETPs, will be
taken from the exchange where the
security is primarily traded. Securities
regularly traded in an over-the-counter
market will be valued at the latest
quoted sales price on the primary
exchange or national securities market
on which such securities are traded.
Securities not listed on an exchange or
national securities market, or securities
in which there was no last reported
sales price, will be valued at the most
recent bid price. Other portfolio
securities and assets for which market
quotations are not readily available will
be valued based on fair value as
determined in good faith by the SubAdvisers in accordance with procedures
adopted by the Fund’s Board of
Trustees.
PO 00000
Frm 00054
Fmt 4703
Sfmt 4703
20663
The Shares will conform to the initial
and continued listing criteria under
NYSE Arca Equities Rule 8.600. The
Exchange represents that, for initial
and/or continued listing, the Fund will
be in compliance with Rule 10A–3
under the Exchange Act,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
will be made available to all market
participants at the same time.
Availability of Information
The Fund’s Web site
(www.advisorshares.com), which will be
publicly available prior to the public
offering of Shares, will include a form
of the prospectus for the Fund that may
be downloaded. The Fund’s Web site
will include additional quantitative
information updated on a daily basis,
including, for the Fund, (1) daily trading
volume, the prior business day’s
reported closing price, NAV and midpoint of the bid/ask spread at the time
of calculation of such NAV (‘‘Bid/Ask
Price’’),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 Fund will disclose on its
Web site the Disclosed Portfolio as
defined in NYSE Arca Equities Rule
8.600(c)(2) that will form the basis for
the Fund’s calculation of NAV at the
end of the business day.18
On a daily basis, the Adviser will
disclose on the Fund’s Web site for each
portfolio security or other financial
instrument of the Fund the following
information: ticker symbol (if
applicable), name of security or
financial instrument, number of shares
16 17
CFR 240.10A–3.
Bid/Ask Price of the Fund is determined
using the mid-point of the highest bid and the
lowest offer on the Exchange as of the time of
calculation of the Fund’s NAV. The records relating
to Bid/Ask Prices will be retained by the Fund and
its service providers.
18 Under accounting procedures followed by the
Fund, trades made on the prior business day (‘‘T’’)
will be booked and reflected in NAV on the current
business day (‘‘T+1’’). Accordingly, the Fund will
be able to disclose at the beginning of the business
day the portfolio that will form the basis for the
NAV calculation at the end of the business day.
17 The
E:\FR\FM\05APN1.SGM
05APN1
Tkelley on DSK3SPTVN1PROD with NOTICES
20664
Federal Register / Vol. 77, No. 66 / Thursday, April 5, 2012 / Notices
or dollar value of other securities and
financial instruments held in the
portfolio, and percentage weighting of
the security or financial instrument in
the portfolio. The Web site information
will be publicly available at no charge.
In addition, a basket composition file,
which includes the security names and
share quantities required to be delivered
in exchange for Fund Shares, together
with estimates and actual cash
components, will be publicly
disseminated daily prior to the opening
of the NYSE via the National Securities
Clearing Corporation. The basket
represents one Creation Unit of the
Fund.
Investors can also obtain the Trust’s
Statement of Additional Information
(‘‘SAI’’), the Fund’s Shareholder
Reports, and its Form N–CSR and Form
N–SAR, filed twice a year. The Trust’s
SAI and Shareholder Reports are
available free upon request from the
Trust, and those documents and the
Form N–CSR and Form N–SAR may be
viewed on-screen or downloaded from
the Commission’s Web site at
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.
Price information for the ADRs, debt
and equity securities held by the Fund,
including foreign equity securities, and
Underlying ETPs will be available
through major market data vendors or
securities exchanges listing and trading
such securities. Quotation and last-sale
information for the Shares will be
available via the Consolidated Tape
Association (‘‘CTA’’) high-speed line. 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
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 Fund on a daily basis
and will provide a close estimate of that
value throughout the trading day.
Additional information regarding the
Trust and the Shares, including
investment strategies, risks, creation and
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.
VerDate Mar<15>2010
16:20 Apr 04, 2012
Jkt 226001
redemption procedures, fees, portfolio
holdings disclosure policies,
distributions, and taxes is included in
the Registration Statement. All terms
relating to the Fund that are referred to,
but not defined in, this proposed rule
change are defined in the Registration
Statement.
Trading Halts
With respect to trading halts, the
Exchange may consider all relevant
factors in exercising its discretion to
halt or suspend trading in the Shares of
the Fund.20 Trading in Shares of the
Fund will be halted if the circuit breaker
parameters in NYSE Arca Equities Rule
7.12 have been reached. Trading also
may be halted because of market
conditions or for reasons that, in the
view of the Exchange, make trading in
the Shares inadvisable. These may
include: (1) The extent to which trading
is not occurring in the securities and/or
the financial instruments comprising
the Disclosed Portfolio of the Fund; or
(2) whether other unusual conditions or
circumstances detrimental to the
maintenance of a fair and orderly
market are present. Trading in the
Shares will be subject to NYSE Arca
Equities Rule 8.600(d)(2)(D), which sets
forth circumstances under which Shares
of the Fund may be halted.
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., E.T. 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
20 See NYSE Arca Equities Rule 7.12,
Commentary .04.
PO 00000
Frm 00055
Fmt 4703
Sfmt 4703
in all trading sessions and to deter and
detect violations of Exchange rules and
applicable federal securities laws.
The Exchange’s current trading
surveillance focuses on detecting
securities trading outside their normal
patterns. When such situations are
detected, surveillance analysis follows
and investigations are opened, where
appropriate, to review the behavior of
all relevant parties for all relevant
trading violations.
The Exchange may obtain information
via the Intermarket Surveillance Group
(‘‘ISG’’) from other exchanges that are
members of ISG or with which the
Exchange has entered into a
comprehensive surveillance sharing
agreement.21 All equity securities,
Underlying ETPs, and sponsored ADRs
held by the Fund will be listed on
securities exchanges, all of which are
members of ISG.
In addition, the Exchange also has a
general policy prohibiting the
distribution of material, non-public
information by its employees.
Information Bulletin
Prior to the commencement of
trading, the Exchange will inform its
Equity Trading Permit (‘‘ETP’’) Holders
in an Information Bulletin (‘‘Bulletin’’)
of the special characteristics and risks
associated with trading the Shares.
Specifically, the Bulletin will discuss
the following: (1) The procedures for
purchases and redemptions of Shares in
Creation Unit aggregations (and that
Shares are not individually redeemable);
(2) NYSE Arca Equities Rule 9.2(a),
which imposes a duty of due diligence
on its ETP Holders to learn the essential
facts relating to every customer prior to
trading the Shares; (3) the risks involved
in trading the Shares during the
Opening and Late Trading Sessions
when an updated Portfolio Indicative
Value will not be calculated or publicly
disseminated; (4) how information
regarding the Portfolio Indicative Value
is disseminated; (5) the requirement that
ETP Holders deliver a prospectus to
investors purchasing newly issued
Shares prior to or concurrently with the
confirmation of a transaction; and (6)
trading information.
In addition, the Bulletin will
reference that the Fund is subject to
various fees and expenses described in
the Registration Statement. The Bulletin
will discuss any exemptive, no-action,
and interpretive relief granted by the
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 Fund
may trade on markets that are members of ISG or
with which the Exchange has in place a
comprehensive surveillance sharing agreement.
E:\FR\FM\05APN1.SGM
05APN1
Federal Register / Vol. 77, No. 66 / Thursday, April 5, 2012 / Notices
Tkelley on DSK3SPTVN1PROD with NOTICES
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., E.T. 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. Price information for
the ADRs, debt and equity securities
held by the Fund, including foreign
equity securities, and Underlying ETPs
will be available through major market
data vendors or securities exchanges
listing and trading such securities. All
equity securities, Underlying ETPs, and
sponsored ADRs held by the Fund are
listed on securities exchanges, all of
which are members of ISG. The listing
and trading of such securities is subject
to rules of the exchanges on which they
are listed and traded, as approved by the
Commission. The Fund will not
purchase illiquid securities. Further, the
Fund will not invest in options, futures,
or swaps. The Fund’s investments will
be consistent with the Fund’s
investment objective and will not be
used to enhance leverage. Except for
Underlying ETPs that may hold nonU.S. issues and for ADRs, the Fund will
not otherwise invest in non-U.S. issues.
The proposed rule change is designed
to promote just and equitable principles
of trade and to protect investors and the
public interest in that the Exchange will
obtain a representation from the issuer
of the Shares that the NAV per Share
will be calculated daily and that the
22 15
U.S.C. 78f(b)(5).
VerDate Mar<15>2010
16:20 Apr 04, 2012
Jkt 226001
NAV and the Disclosed Portfolio will be
made available to all market
participants at the same time. In
addition, a large amount of information
is publicly available regarding the Fund
and the Shares, thereby promoting
market transparency. Quotation and
last-sale information for the Shares will
be available via the CTA high-speed
line. In addition, the Portfolio Indicative
Value will be widely disseminated at
least every 15 seconds during the Core
Trading Session by one or more major
market data vendors. On each business
day, before commencement of trading in
Shares in the Core Trading Session on
the Exchange, the Fund will disclose on
its Web site the Disclosed Portfolio that
will form the basis for the Fund’s
calculation of NAV at the end of the
business day. On a daily basis, the
Adviser will disclose for each portfolio
security or other financial instrument of
the Fund the following information:
ticker symbol (if applicable), name of
security or financial instrument, number
of shares or dollar value of other
securities and financial instruments
held in the portfolio, and percentage
weighting of the security or financial
instrument in the portfolio. The Web
site for the Fund will include a form of
the prospectus for the Fund that may be
downloaded, and additional data
relating to NAV and other applicable
quantitative information, updated on a
daily basis. Moreover, prior to the
commencement of trading, the Exchange
will inform its ETP Holders in an
Information Bulletin of the special
characteristics and risks associated with
trading the Shares. Trading in Shares of
the Fund will be halted if the circuit
breaker parameters in NYSE Arca
Equities Rule 7.12 have been reached or
because of market conditions or for
reasons that, in the view of the
Exchange, make trading in the Shares
inadvisable. Trading in the Shares will
be subject to NYSE Arca Equities Rule
8.600(d)(2)(D), which sets forth
circumstances under which Shares of
the Fund may be halted. In addition, as
noted above, investors will have ready
access to information regarding the
Fund’s holdings, the Portfolio Indicative
Value, the Disclosed Portfolio, and
quotation and last-sale information for
the Shares.
The proposed rule change is designed
to perfect the mechanism of a free and
open market and, in general, to protect
investors and the public interest in that
it will facilitate the listing and trading
of an additional type of activelymanaged exchange-traded product that
will enhance competition among market
participants, to the benefit of investors
PO 00000
Frm 00056
Fmt 4703
Sfmt 4703
20665
and the marketplace. As noted above,
the Exchange has in place surveillance
procedures relating to trading in the
Shares and may obtain information via
ISG from other exchanges that are
members of ISG or with which the
Exchange has entered into a
comprehensive surveillance sharing
agreement. In addition, as noted above,
investors will have ready access to
information regarding the Fund’s
holdings, the Portfolio Indicative Value,
the Disclosed Portfolio, and quotation
and last-sale information for the Shares.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the self-regulatory
organization consents, the Commission
will:
(A) By order approve or disapprove
the proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number SR–NYSEArca–2012–24 on the
subject line.
E:\FR\FM\05APN1.SGM
05APN1
20666
Federal Register / Vol. 77, No. 66 / Thursday, April 5, 2012 / Notices
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–2012–24. 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 Section, 100 F Street NE.,
Washington, DC 20549, on official
business days between 10 a.m. and 3
p.m. Copies of the filing will also be
available for inspection and copying at
the NYSE’s principal office and on its
Internet Web site at www.nyse.com. 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–2012–24 and
should be submitted on or before April
26, 2012.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–8149 Filed 4–4–12; 8:45 am]
Tkelley on DSK3SPTVN1PROD with NOTICES
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–66706; File No. SR–
NASDAQ–2012–045]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Extend the
Fee Pilot Program for NASDAQ Last
Sale
March 30, 2012.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on March 28,
2012, The NASDAQ Stock Market LLC
(‘‘NASDAQ’’ or the ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’) a
proposed rule change as described in
Items I, II, and III 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
NASDAQ is proposing to extend for
three months the fee pilot pursuant to
which NASDAQ distributes the
NASDAQ Last Sale (‘‘NLS’’) market data
products. NLS allows data distributors
to have access to real-time market data
for a capped fee, enabling those
distributors to provide free access to the
data to millions of individual investors
via the internet and television.
Specifically, NASDAQ offers the
‘‘NASDAQ Last Sale for NASDAQ’’ and
‘‘NASDAQ Last Sale for NYSE/Amex’’
data feeds containing last sale activity in
US equities within the NASDAQ Market
Center and reported to the FINRA/
NASDAQ Trade Reporting Facility
(‘‘FINRA/NASDAQ TRF’’), which is
jointly operated by NASDAQ and the
Financial Industry Regulatory Authority
(‘‘FINRA’’). The purpose of this
proposal is to extend the existing pilot
program for three months, from April 1,
2012 to June 30, 2012.
This pilot program supports the
aspiration of Regulation NMS to
increase the availability of proprietary
data by allowing market forces to
determine the amount of proprietary
market data information that is made
available to the public and at what
price. During the pilot period, the
program has vastly increased the
availability of NASDAQ proprietary
1 15
23 17
CFR 200.30–3(a)(12).
VerDate Mar<15>2010
16:20 Apr 04, 2012
2 17
Jkt 226001
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00057
Fmt 4703
Sfmt 4703
market data to individual investors.
Based upon data from NLS distributors,
NASDAQ believes that since its launch
in July 2008, the NLS data has been
viewed by over 50,000,000 investors on
Web sites operated by Google,
Interactive Data, and Dow Jones, among
others.
The text of the proposed rule change
is below. Proposed new language is
italicized; proposed deletions are in
brackets.
*
*
*
*
*
7039. NASDAQ Last Sale Data Feeds
(a) For a three month pilot period
commencing on [January] April 1, 2012,
NASDAQ shall offer two proprietary
data feeds containing real-time last sale
information for trades executed on
NASDAQ or reported to the NASDAQ/
FINRA Trade Reporting Facility.
(1)–(2) No change.
(b)–(c) No change.
*
*
*
*
*
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 III below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Prior to the launch of NLS, public
investors that wished to view market
data to monitor their portfolios
generally had two choices: (1) pay for
real-time market data or (2) use free data
that is 15 to 20 minutes delayed. To
increase consumer choice, NASDAQ
proposed a pilot to offer access to realtime market data to data distributors for
a capped fee, enabling those distributors
to disseminate the data at no cost to
millions of internet users and television
viewers. NASDAQ now proposes a
three-month extension of that pilot
program, subject to the same fee
structure as is applicable today.3
3 NASDAQ previously stated that it would file a
proposed rule change to make the NLS pilot fees
permanent. NASDAQ has also informed
Commission staff that it is consulting with FINRA
E:\FR\FM\05APN1.SGM
05APN1
]]>Agencies
[Federal Register Volume 77, Number 66 (Thursday, April 5, 2012)]
[Notices]
[Pages 20660-20666]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-8149]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-66696; File No. SR-NYSEArca-2012-24]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change Relating to Listing and Trading of
AdvisorShares Global Echo ETF Under NYSE Arca Equities Rule 8.600
March 30, 2012.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Exchange Act'' or ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice
is hereby given that, on March 16, 2012, NYSE Arca, Inc. (``Exchange''
or ``NYSE Arca'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been substantially prepared by the
Exchange. The Commission is publishing this notice to solicit comments
on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to list and trade the following under NYSE
Arca Equities Rule 8.600 (``Managed Fund Shares''): AdvisorShares
Global Echo ETF. The text of the proposed rule change is available at
the Exchange, www.nyse.com, and the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, 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 shares (``Shares'') of the
following under NYSE Arca Equities Rule 8.600, which governs the
listing and trading of Managed Fund Shares: \3\ AdvisorShares Global
Echo ETF (``Fund'').\4\ The Shares
[[Page 20661]]
will be offered by AdvisorShares Trust (``Trust''), a statutory trust
organized under the laws of the State of Delaware and registered with
the Commission as an open-end management investment company.\5\ The
investment adviser to the Fund is AdvisorShares Investments, LLC
(``Adviser''). The Fund's sub-advisers (``Sub-Advisers'' and each a
``Sub-Adviser''), which provide day-to-day portfolio management of the
Fund, are First Affirmative Financial Network LLC; Reynders, McVeigh
Capital Management, LLC; Baldwin Brothers Inc.; and Community Capital
Management Inc.
---------------------------------------------------------------------------
\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-1) (``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 a number of actively managed funds under Rule
8.600. See, e.g., Securities Exchange Act Release Nos. 57801 (May 8,
2008), 73 FR 27878 (May 14, 2008) (SR-NYSEArca-2008-31) (order
approving Exchange listing and trading of twelve actively-managed
funds of the WisdomTree Trust); 60460 (August 7, 2009), 74 FR 41468
(August 17, 2009) (SR-NYSEArca-2009-55) (order approving listing of
Dent Tactical ETF); 63076 (October 12, 2010), 75 FR 63874 (October
18, 2010) (SR-NYSEArca-2010-79) (order approving Exchange listing
and trading of Cambria Global Tactical ETF); 63802 (January 31,
2011), 76 FR 6503 (February 4, 2011) (SR-NYSEArca-2010-118) (order
approving Exchange listing and trading of the SiM Dynamic Allocation
Diversified Income ETF and SiM Dynamic Allocation Growth Income
ETF).
\5\ The Trust is registered under the 1940 Act. On July 15,
2011, the Trust filed with the Commission Post-Effective Amendment
No. 32 to Form N-1A under the Securities Act of 1933 (15 U.S.C.
77a), and under the 1940 Act relating to the Fund (File Nos. 333-
157876 and 811-22110) (``Registration Statement''). The description
of the operation of the Trust and the Fund herein is based, 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. 29291 (May 28,
2010) (File No. 812-13677) (``Exemptive Order'').
---------------------------------------------------------------------------
Foreside Fund Services, LLC (``Distributor'') is the principal
underwriter and distributor of the Fund's Shares. The Bank of New York
Mellon Corporation serves as the administrator (``Administrator''),
custodian, transfer agent, and fund accounting agent for the Fund.
Commentary .06 to Rule 8.600 provides that, if the investment
adviser to the investment company issuing Managed Fund Shares is
affiliated with a broker-dealer, such investment adviser shall erect a
``fire wall'' between the investment adviser and the broker-dealer with
respect to access to information concerning the composition and/or
changes to such investment company portfolio.\6\ In addition,
Commentary .06 further requires that personnel who make decisions on
the open-end fund's portfolio composition must be subject to procedures
designed to prevent the use and dissemination of material non-public
information regarding the open-end fund's portfolio. Commentary .06 to
Rule 8.600 is similar to Commentary .03(a)(i) and (iii) to NYSE Arca
Equities Rule 5.2(j)(3); however, Commentary .06 in connection with the
establishment of a ``fire wall'' between the investment adviser and the
broker-dealer reflects the applicable open-end fund's portfolio, not an
underlying benchmark index, as is the case with index-based funds.
Neither the Adviser nor the Sub-Advisers are affiliated with a broker-
dealer. In the event (a) the Adviser or the Sub-Advisers become 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 the portfolio, and will be
subject to procedures designed to prevent the use and dissemination of
material non-public information regarding such portfolio.
---------------------------------------------------------------------------
\6\ An investment adviser to an open-end fund is required to be
registered under the Investment Advisers Act of 1940 (``Advisers
Act''). As a result, the Adviser and Sub-Advisers and their related
personnel are subject to the provisions of Rule 204A-1 under the
Advisers Act relating to codes of ethics. This Rule requires
investment advisers to adopt a code of ethics that reflects the
fiduciary nature of the relationship to clients as well as
compliance with other applicable securities laws. Accordingly,
procedures designed to prevent the communication and misuse of non-
public information by an investment adviser must be consistent with
Rule 204A-1 under the Advisers Act. In addition, Rule 206(4)-7 under
the Advisers Act makes it unlawful for an investment adviser to
provide investment advice to clients unless such investment adviser
has (i) Adopted and implemented written policies and procedures
reasonably designed to prevent violation, by the investment adviser
and its supervised persons, of the Advisers Act and the Commission
rules adopted thereunder; (ii) implemented, at a minimum, an annual
review regarding the adequacy of the policies and procedures
established pursuant to subparagraph (i) above and the effectiveness
of their implementation; and (iii) designated an individual (who is
a supervised person) responsible for administering the policies and
procedures adopted under subparagraph (i) above.
---------------------------------------------------------------------------
Description of the Fund
According to the Registration Statement, the Fund will seek to
achieve long-term capital appreciation with an emphasis on absolute
(positive) returns and low sensitivity to traditional financial market
indices, such as the S&P 500 Index, over a full market cycle. The Fund
will seek to achieve its investment objective by investing under normal
market circumstances \7\ at least 80% of its total assets in the
following securities: U.S. exchange-listed equity securities; \8\
American Depository Receipts (``ADRs''); \9\ fixed income securities
(including municipal bonds); and exchange-traded products (``Underlying
ETPs'') \10\ that provide diversified exposure to various asset classes
and market segments.
---------------------------------------------------------------------------
\7\ The term ``under normal market circumstances'' includes, but
is not limited to, the absence of extreme volatility or trading
halts in the equities or fixed income 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.
\8\ The Fund may invest in equity securities of domestic and
foreign companies, including common stocks, preferred stocks,
warrants to acquire common stock, securities convertible into common
stock, and investments in master limited partnerships.
\9\ The Fund generally will invest in sponsored ADRs, but it may
invest up to 10% of total assets in unsponsored ADRs.
\10\ Underlying ETPs include Investment Company Units (as
described in NYSE Arca Equities Rule 5.2(j)(3)); Index-Linked
Securities (as described in NYSE Arca Equities Rule 5.2(j)(6));
Portfolio Depositary Receipts (as described in NYSE Arca Equities
Rule 8.100); Trust Issued Receipts (as described in NYSE Arca
Equities Rule 8.200); Commodity-Based Trust Shares (as described in
NYSE Arca Equities Rule 8.201); Currency Trust Shares (as described
in NYSE Arca Equities Rule 8.202); Commodity Index Trust Shares (as
described in NYSE Arca Equities Rule 8.203); Trust Units (as
described in NYSE Arca Equities Rule 8.500); Managed Fund Shares (as
described in NYSE Arca Equities Rule 8.600); and closed-end funds.
The Underlying ETPs all will be listed and traded in the U.S. on
registered exchanges. The Fund may invest in the securities of
Underlying ETPs registered under the 1940 Act consistent with the
requirements of Section 12(d)(1) of the 1940 Act, or any rule,
regulation, or order of the Commission or interpretation thereof.
The Fund will only make such investments in conformity with the
requirements of Section 817 of the Internal Revenue Code of 1986.
The Underlying ETPs in which the Fund may invest will primarily be
index-based exchange-traded funds that hold substantially all of
their assets in securities representing a specific index.
---------------------------------------------------------------------------
The Fund will be a multi-manager, multi-strategy, broadly
diversified, actively managed exchange-traded fund with a focus on
``Sustainable Investing.'' Sustainable Investing generally refers to an
investment methodology that takes into consideration economic,
environmental, technology, and a variety of social factors when making
investment decisions. Accordingly, the Fund is designed as a core
allocation that proactively seeks Sustainable Investment-themed
investment opportunities that may socially and environmentally benefit
the earth, with a focus on water, clean energy, community development,
innovation, and other sustainable themes across asset classes.
Sustainable Investment themes that the Fund may pursue include, but are
not limited to, the following: economic themes (corporate governance,
risk and crisis management, community investment, energy efficiency,
food, green building); environmental themes (air, water, earth);
technology themes (mobility, renewable energy, technology, and access);
and social themes (human health, such as occupational health and
safety).
The Fund will seek to achieve its investment objective by
allocating a portion of the Fund's assets to each of the Fund's Sub-
Advisers who will employ their respective investment
[[Page 20662]]
strategies to generate absolute returns over a full market cycle.
Generally, a full market cycle consists of a bull market followed by a
bear market and a return to a bull market, or vice versa. Initially, an
equal proportion of the Fund's assets will be allocated to each Sub-
Adviser to obtain the desired exposure to the strategies described
below. The allocation among Sub-Advisers will vary over time in
response to a variety of factors including prevailing market
conditions. The Adviser has designated First Affirmative Financial
Network, LLC to allocate and monitor the allocation of the Fund's
assets to each Sub-Adviser to ensure that the Fund's portfolio
maintains the proper investment exposure to seek to achieve its
investment objective. Each Sub-Adviser will seek to identify and invest
either directly or indirectly through other Underlying ETPs in
securities of companies that are making a positive impact in the world
and reflect Sustainable Investment themes, including corporate
sustainability. The Fund's investments in companies that practice
corporate sustainability will provide an additional layer of
diversification because such investments are designed to increase long-
term shareholder value. Companies focused on corporate sustainability
also can provide more attractive risk return profiles for investors,
and can leverage various other Sustainable Investment themes.
The Fund may take both long and short positions in any of these
investments. The Fund may invest up to 65% (and intends to always
invest at least 15%) of its net assets in domestic and foreign fixed
income securities. The Fund may invest in securities of any
capitalization range and may employ one or more investment styles (from
growth to value) at any time as necessary to seek to achieve the Fund's
investment objective.
Each Sub-Adviser will determine whether to buy or sell an
investment for the Fund's portfolio by applying one or more of the
following strategies:
Core Strategies
[cir] Fixed Income Strategies. Fixed income strategies consist of
investment strategies that invest primarily in debt securities of
domestic and foreign governments, agencies, instrumentalities,
municipalities and companies of all maturities and qualities (including
``junk bonds'' and up to 15% of total assets in defaulted debt
securities), TIPS (Treasury Inflation Protected Securities), and
Underlying ETPs that provide exposure to fixed income securities or
strategies. 85% or more of the Fund's investments in fixed income
strategies will be in investment grade debt securities. Debt securities
of foreign governments are sometimes referred to as sovereign debt
obligations and may be issued or guaranteed by foreign governments or
their agencies. The Fund may invest up to 10% of total assets in
mortgage-backed securities or other asset-backed securities.\11\ Fixed
income strategies also may involve hedging through the use of
investments in other Underlying ETPs to enhance risk-adjusted return.
---------------------------------------------------------------------------
\11\ This limitation does not apply to securities issued or
guaranteed by federal agencies and/or U.S. government sponsored
instrumentalities, such as the Government National Mortgage
Administration (``GNMA''), the Federal Housing Administration
(``FHA''), the Federal National Mortgage Association (``FNMA''), and
the Federal Home Loan Mortgage Corporation (``FHLMC'').
---------------------------------------------------------------------------
[cir] Equity Strategies. Equity strategies will consist of both
domestic and international/emerging markets strategies. The domestic
equity strategies will seek to invest in securities of companies that
the Sub-Advisers believe will outperform other equity securities over
the long term.\12\ The international/emerging markets equity strategies
will seek to invest in securities of undervalued international
companies through ADRs that provide the Fund with exposure to
businesses outside of the U.S. and that are attractively priced
relative to their economic fundamentals. Both U.S. and international
investments will be selected using fundamental analysis of factors such
as earnings, cash flows, and valuations based upon them, and will be
diversified among the economic and industry sectors in the S&P
500[supreg] Index, the Morgan Stanley Capital International (``MSCI'')
All Country World Index, MSCI Europe, Australasia and Far East Index,
and MSCI Emerging Markets Index.
---------------------------------------------------------------------------
\12\ Telephone conference between Michael Cavalier, Chief
Counsel, NYSE Euronext and Kristie Diemer, Special Counsel, Division
of Trading and Markets, Commission, on March 28, 2012, confirmed
domestic equities strategies will apply to all Sub-Advisers.
---------------------------------------------------------------------------
Alternative Strategies
[cir] Long/Short and Hedging Strategies. Alternative strategies
will consist of strategies that combine short sales of equities
(including shares of Underlying ETPs) or purchase of shares of inverse
Underlying ETPs. As such, long/short strategies may utilize securities
that seek to track indexes on markets, sectors, strategies, and/or
industries to hedge against potential adverse movements in security
prices. The Fund may implement multiple variations of long/short and
hedging strategies. The basic long/short equity strategies generally
will seek to increase net long exposure in a bull market and decrease
net long exposure, by holding high concentrations in cash or investing
100% short in a bear market.
Other Investments
The Fund may enter into repurchase agreements with financial
institutions, which may be deemed to be loans. The Fund will follow
certain procedures designed to minimize the risks inherent in such
agreements. These procedures will include effecting repurchase
transactions only with large, well-capitalized, and well-established
financial institutions whose condition will be continually monitored by
the Sub-Advisers. In addition, the value of the collateral underlying
the repurchase agreement will always be at least equal to the
repurchase price, including any accrued interest earned on the
repurchase agreement. The Fund may enter into reverse repurchase
agreements without limit as part of the Fund's investment strategy.
Reverse repurchase agreements involve sales by the Fund of portfolio
assets concurrently with an agreement by the Fund to repurchase the
same assets at a later date at a fixed price.
The Fund, or Underlying ETPs in which it invests, may invest in
U.S. government securities and U.S. Treasury zero-coupon bonds. The
Fund, or Underlying ETPs in which it invests, may invest in shares of
real estate investment trusts (``REITs'').
Diversification. The Fund may not (i) with respect to 75% of its
total assets, purchase securities of any issuer (except securities
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities or shares of investment companies) if, as a result,
more than 5% of its total assets would be invested in the securities of
such issuer; or (ii) acquire more than 10% of the outstanding voting
securities of any one issuer.\13\
---------------------------------------------------------------------------
\13\ The diversification standard is set forth in Section
5(b)(1) of the 1940 Act.
---------------------------------------------------------------------------
Concentration. The Fund may not invest 25% or more of its total
assets in the securities of one or more issuers conducting their
principal business activities in the same industry or group of
industries. This limitation does not apply to investments in securities
issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, or shares of investment companies. The Fund will not
invest 25% or more of its total assets
[[Page 20663]]
in any investment company that so concentrates.\14\
---------------------------------------------------------------------------
\14\ See Form N-1A, Item 9. The Commission has taken the
position that a fund is concentrated if it invests more than 25% of
the value of its total assets in any one industry. See, e.g.,
Investment Company Act Release No. 9011 (October 30, 1975), 40 FR
54241 (November 21, 1975).
---------------------------------------------------------------------------
The Fund will not purchase illiquid securities.\15\ Further, in
accordance with the Exemptive Order, the Fund will not invest in
options, futures, or swaps. The Fund's investments will be consistent
with the Fund's investment objective and will not be used to enhance
leverage.
---------------------------------------------------------------------------
\15\ 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 fund. See Investment
Company Act Release No. 14983 (March 12, 1986), 51 FR 9773 (March
21, 1986) (adopting amendments to Rule 2a-7 under the 1940 Act);
Investment Company Act Release No. 17452 (April 23, 1990), 55 FR
17933 (April 30, 1990) (adopting Rule 144A under the Securities Act
of 1933).
---------------------------------------------------------------------------
Except for Underlying ETPs that may hold non-U.S. issues, the Fund
will not otherwise invest in non-U.S. issues.
To respond to adverse market, economic, political, or other
conditions, the Fund may invest 100% of its total assets, without
limitation, in high-quality debt securities and money market
instruments either directly or through Underlying ETPs. The Fund may be
invested in these instruments for extended periods, depending on the
Sub-Advisers' assessment of market conditions. These debt securities
and money market instruments include shares of other mutual funds,
commercial paper, certificates of deposit, bankers' acceptances, U.S.
Government securities, repurchase agreements, and bonds that are BBB or
higher. While the Fund is in a defensive position, the opportunity to
achieve its investment objective will be limited.
Creations and Redemptions
The Fund will issue and redeem Shares on a continuous basis at the
net asset value (``NAV'') only in a large specified number of shares
called a ``Creation Unit.'' The Shares are ``created'' at their NAV by
market makers, large investors, and institutions only in block-size
Creation Units of at least 50,000 Shares. A ``creator'' will enter into
an authorized participant agreement (``Participant Agreement'') with
the Distributor or use a Depository Trust Company (``DTC'') participant
who has executed a Participant Agreement (``Authorized Participant''),
and deposit into the Fund a portfolio of securities closely
approximating the holdings of the Fund and a specified amount of cash,
together totaling the NAV of the Creation Unit(s), in exchange for
50,000 Shares of the Fund (or multiples thereof).
Shares may be redeemed only in Creation Units at their NAV next
determined after receipt of a redemption request in proper form by a
Fund through the Administrator and only on a business day. The
redemption proceeds for a Creation Unit generally will consist of a
portfolio of securities closely approximating the holdings of the Fund
and a specified amount of cash, as announced by the Administrator on
the business day of the request for redemption received in proper form,
plus cash in an amount equal to the difference between the NAV of the
Shares being redeemed, as next determined after a receipt of a request
in proper form, and the value of such portfolio of securities. Orders
to create and redeem Shares must be placed with the Administrator by 3
p.m., Eastern Time (``E.T.'').
Net Asset Value
The NAV per Share of the Fund will be computed by dividing the
value of the net assets of the Fund (i.e., the value of its total
assets less total liabilities) by the total number of Shares of the
Fund outstanding, rounded to the nearest cent. Expenses and fees,
including without limitation, the management, administration, and
distribution fees, will be accrued daily and taken into account for
purposes of determining NAV. The NAV per Share for the Fund will be
calculated by the Administrator and determined as of the close of the
regular trading session on the New York Stock Exchange (``NYSE'')
(ordinarily 4 p.m., E.T.) on each day that the NYSE is open.
In computing the Fund's NAV, the Fund's securities holdings will be
valued based on their last readily available market price. Price
information on listed securities, including Underlying ETPs, will be
taken from the exchange where the security is primarily traded.
Securities regularly traded in an over-the-counter market will be
valued at the latest quoted sales price on the primary exchange or
national securities market on which such securities are traded.
Securities not listed on an exchange or national securities market, or
securities in which there was no last reported sales price, will be
valued at the most recent bid price. Other portfolio securities and
assets for which market quotations are not readily available will be
valued based on fair value as determined in good faith by the Sub-
Advisers in accordance with procedures adopted by the Fund's Board of
Trustees.
The Shares will conform to the initial and continued listing
criteria under NYSE Arca Equities Rule 8.600. The Exchange represents
that, for initial and/or continued listing, the Fund will be in
compliance with Rule 10A-3 under the Exchange Act,\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 will be made available to all market
participants at the same time.
---------------------------------------------------------------------------
\16\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------
Availability of Information
The Fund's Web site (www.advisorshares.com), which will be publicly
available prior to the public offering of Shares, will include a form
of the prospectus for the Fund that may be downloaded. The Fund's Web
site will include additional quantitative information updated on a
daily basis, including, for the Fund, (1) daily trading volume, the
prior business day's reported closing price, NAV and mid-point of the
bid/ask spread at the time of calculation of such NAV (``Bid/Ask
Price''),\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
Fund will disclose on its Web site the Disclosed Portfolio as defined
in NYSE Arca Equities Rule 8.600(c)(2) that will form the basis for the
Fund's calculation of NAV at the end of the business day.\18\
---------------------------------------------------------------------------
\17\ The Bid/Ask Price of the Fund is determined using the mid-
point of the highest bid and the lowest offer on the Exchange as of
the time of calculation of the Fund's NAV. The records relating to
Bid/Ask Prices will be retained by the Fund and its service
providers.
\18\ Under accounting procedures followed by the Fund, trades
made on the prior business day (``T'') will be booked and reflected
in NAV on the current business day (``T+1''). Accordingly, the Fund
will be able to disclose at the beginning of the business day the
portfolio that will form the basis for the NAV calculation at the
end of the business day.
---------------------------------------------------------------------------
On a daily basis, the Adviser will disclose on the Fund's Web site
for each portfolio security or other financial instrument of the Fund
the following information: ticker symbol (if applicable), name of
security or financial instrument, number of shares
[[Page 20664]]
or dollar value of other securities and financial instruments held in
the portfolio, and percentage weighting of the security or financial
instrument in the portfolio. The Web site information will be publicly
available at no charge.
In addition, a basket composition file, which includes the security
names and share quantities required to be delivered in exchange for
Fund Shares, together with estimates and actual cash components, will
be publicly disseminated daily prior to the opening of the NYSE via the
National Securities Clearing Corporation. The basket represents one
Creation Unit of the Fund.
Investors can also obtain the Trust's Statement of Additional
Information (``SAI''), the Fund's Shareholder Reports, and its Form N-
CSR and Form N-SAR, filed twice a year. The Trust's SAI and Shareholder
Reports are available free upon request from the Trust, and those
documents and the Form N-CSR and Form N-SAR may be viewed on-screen or
downloaded from the Commission's Web site at 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. Price information for the ADRs, debt and equity
securities held by the Fund, including foreign equity securities, and
Underlying ETPs will be available through major market data vendors or
securities exchanges listing and trading such securities. Quotation and
last-sale information for the Shares will be available via the
Consolidated Tape Association (``CTA'') high-speed line. 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 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 Fund on a daily
basis and will 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 Fund that are referred to, but not defined in,
this proposed rule change are defined in the Registration Statement.
Trading Halts
With respect to trading halts, the Exchange may consider all
relevant factors in exercising its discretion to halt or suspend
trading in the Shares of the Fund.\20\ Trading in Shares of the Fund
will be halted if the circuit breaker parameters in NYSE Arca Equities
Rule 7.12 have been reached. Trading also may be halted because of
market conditions or for reasons that, in the view of the Exchange,
make trading in the Shares inadvisable. These may include: (1) The
extent to which trading is not occurring in the securities and/or the
financial instruments comprising the Disclosed Portfolio of the Fund;
or (2) whether other unusual conditions or circumstances detrimental to
the maintenance of a fair and orderly market are present. Trading in
the Shares will be subject to NYSE Arca Equities Rule 8.600(d)(2)(D),
which sets forth circumstances under which Shares of the Fund may be
halted.
---------------------------------------------------------------------------
\20\ See NYSE Arca Equities Rule 7.12, Commentary .04.
---------------------------------------------------------------------------
Trading Rules
The Exchange deems the Shares to be equity securities, thus
rendering trading in the Shares subject to the Exchange's existing
rules governing the trading of equity securities. Shares will trade on
the NYSE Arca Marketplace from 4 a.m. to 8 p.m., E.T. in accordance
with NYSE Arca Equities Rule 7.34 (Opening, Core, and Late Trading
Sessions). The Exchange has appropriate rules to facilitate
transactions in the Shares during all trading sessions. As provided in
NYSE Arca Equities Rule 7.6, Commentary .03, the minimum price
variation (``MPV'') for quoting and entry of orders in equity
securities traded on the NYSE Arca Marketplace is $0.01, with the
exception of securities that are priced less than $1.00 for which the
MPV for order entry is $0.0001.
Surveillance
The Exchange intends to utilize its existing surveillance
procedures applicable to derivative products (which include Managed
Fund Shares) to monitor trading in the Shares. The Exchange represents
that these procedures are adequate to properly monitor Exchange trading
of the Shares in all trading sessions and to deter and detect
violations of Exchange rules and applicable federal securities laws.
The Exchange's current trading surveillance focuses on detecting
securities trading outside their normal patterns. When such situations
are detected, surveillance analysis follows and investigations are
opened, where appropriate, to review the behavior of all relevant
parties for all relevant trading violations.
The Exchange may obtain information via the Intermarket
Surveillance Group (``ISG'') from other exchanges that are members of
ISG or with which the Exchange has entered into a comprehensive
surveillance sharing agreement.\21\ All equity securities, Underlying
ETPs, and sponsored ADRs held by the Fund will be listed on securities
exchanges, all of which are members of ISG.
---------------------------------------------------------------------------
\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 Fund 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 Fund is subject
to various fees and expenses described in the Registration Statement.
The Bulletin will discuss any exemptive, no-action, and interpretive
relief granted by the
[[Page 20665]]
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., E.T. 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. Price information for the ADRs, debt and equity securities
held by the Fund, including foreign equity securities, and Underlying
ETPs will be available through major market data vendors or securities
exchanges listing and trading such securities. All equity securities,
Underlying ETPs, and sponsored ADRs held by the Fund are listed on
securities exchanges, all of which are members of ISG. The listing and
trading of such securities is subject to rules of the exchanges on
which they are listed and traded, as approved by the Commission. The
Fund will not purchase illiquid securities. Further, the Fund will not
invest in options, futures, or swaps. The Fund's investments will be
consistent with the Fund's investment objective and will not be used to
enhance leverage. Except for Underlying ETPs that may hold non-U.S.
issues and for ADRs, the Fund will not otherwise invest in non-U.S.
issues.
The proposed rule change is designed to promote just and equitable
principles of trade and to protect investors and the public interest in
that the Exchange will obtain a representation from the issuer of the
Shares that the NAV per Share will be calculated daily and that the NAV
and the Disclosed Portfolio will be made available to all market
participants at the same time. In addition, a large amount of
information is publicly available regarding the Fund and the Shares,
thereby promoting market transparency. Quotation and last-sale
information for the Shares will be available via the CTA high-speed
line. In addition, the Portfolio Indicative Value will be widely
disseminated at least every 15 seconds during the Core Trading Session
by one or more major market data vendors. On each business day, before
commencement of trading in Shares in the Core Trading Session on the
Exchange, the Fund will disclose on its Web site the Disclosed
Portfolio that will form the basis for the Fund's calculation of NAV at
the end of the business day. On a daily basis, the Adviser will
disclose for each portfolio security or other financial instrument of
the Fund the following information: ticker symbol (if applicable), name
of security or financial instrument, number of shares or dollar value
of other securities and financial instruments held in the portfolio,
and percentage weighting of the security or financial instrument in the
portfolio. The Web site for the Fund will include a form of the
prospectus for the Fund that may be downloaded, and additional data
relating to NAV and other applicable quantitative information, updated
on a daily basis. Moreover, prior to the commencement of trading, the
Exchange will inform its ETP Holders in an Information Bulletin of the
special characteristics and risks associated with trading the Shares.
Trading in Shares of the Fund will be halted if the circuit breaker
parameters in NYSE Arca Equities Rule 7.12 have been reached or because
of market conditions or for reasons that, in the view of the Exchange,
make trading in the Shares inadvisable. Trading in the Shares will be
subject to NYSE Arca Equities Rule 8.600(d)(2)(D), which sets forth
circumstances under which Shares of the Fund may be halted. In
addition, as noted above, investors will have ready access to
information regarding the Fund's holdings, the Portfolio Indicative
Value, the Disclosed Portfolio, and quotation and last-sale information
for the Shares.
The proposed rule change is designed to perfect the mechanism of a
free and open market and, in general, to protect investors and the
public interest in that it will facilitate the listing and trading of
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 Fund's holdings,
the Portfolio Indicative Value, the Disclosed Portfolio, and quotation
and last-sale information for the Shares.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-NYSEArca-2012-24 on the subject line.
[[Page 20666]]
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-2012-24.
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 Section, 100
F Street NE., Washington, DC 20549, on official business days between
10 a.m. and 3 p.m. Copies of the filing will also be available for
inspection and copying at the NYSE's principal office and on its
Internet Web site at www.nyse.com. 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-2012-24 and should be submitted on or before
April 26, 2012.
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. 2012-8149 Filed 4-4-12; 8:45 am]
BILLING CODE 8011-01-P
