Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting Approval of Proposed Rule Change To List and Trade the Huntington US Equity Rotation Strategy ETF and Huntington EcoLogical Strategy ETF Under NYSE Arca Equities Rule 8.600, 35097-35101 [2012-14192]
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Federal Register / Vol. 77, No. 113 / Tuesday, June 12, 2012 / Notices
printing in the Commission’s Public
Reference Room, 100 F Street, NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File No. SR–CBOE–
2012–053 and should be submitted on
or before July 3, 2012.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–14191 Filed 6–11–12; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–67145; File No. SR–
NYSEArca–2012–34]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Order Granting Approval of
Proposed Rule Change To List and
Trade the Huntington US Equity
Rotation Strategy ETF and Huntington
EcoLogical Strategy ETF Under NYSE
Arca Equities Rule 8.600
June 6, 2012.
srobinson on DSK4SPTVN1PROD with NOTICES
I. Introduction
On April 12, 2012, NYSE Arca, Inc.
(‘‘Exchange’’ or ‘‘NYSE Arca’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to list and trade shares
(‘‘Shares’’) of the Huntington US Equity
Rotation Strategy ETF and Huntington
EcoLogical Strategy ETF (each, a
‘‘Fund’’ and collectively, ‘‘Funds’’)
under NYSE Arca Equities Rule 8.600.
The proposed rule change was
published for comment in the Federal
Register on April 27, 2012.3 The
Commission received no comments on
the proposal. This order grants approval
of the proposed rule change.
18 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 66846
(April 23, 2012), 77 FR 25218 (‘‘Notice’’).
1 15
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II. Description of the Proposed Rule
Change
The Exchange proposes to list and
trade the Shares of the Funds pursuant
to NYSE Arca Equities Rule 8.600,
which governs the listing and trading of
Managed Fund Shares on the Exchange.
The Funds will be actively managed
exchange-traded funds. The Shares of
each Fund will be offered by
Huntington Strategy Shares (‘‘Trust’’), a
Delaware statutory trust registered with
the Commission as an open-end
management investment company.4
Huntington Asset Advisors, Inc.
(‘‘Adviser’’) is the investment adviser of
each Fund and will manage the
investment portfolios of the Funds. SEI
Investments Distribution Co.
(‘‘Distributor’’) is the principal
underwriter and distributor of the
Funds’ Shares. Citibank, N.A. is the
custodian for the Funds. The Exchange
represents that the Adviser is affiliated
with two broker-dealers and has
implemented a fire wall with respect to
each affiliated broker-dealer regarding
access to information concerning the
composition and/or changes to a Fund
portfolio.5
Huntington US Equity Rotation Strategy
ETF
The Fund’s investment objective is to
seek capital appreciation. Under normal
4 The Trust is registered under the Investment
Company Act of 1940 (‘‘1940 Act’’). On April 6,
2012, the Trust filed with the Commission an
amendment to the Trust’s Registration Statement on
Form N–1A under the Securities Act of 1933 and
under the 1940 Act relating to the Funds (File Nos.
333–170750 and 811–22497) (‘‘Registration
Statement’’). In addition, the Exchange represented
in the Notice that the Trust had also filed an
Amended and Restated Application for an Order
under Section 6(c) of the 1940 Act for exemptions
from various provisions of the 1940 Act and rules
thereunder (File No. 812–13785), dated April 3,
2012 (‘‘Exemptive Application’’). See Investment
Company Act Release No. 30032 (April 10, 2012).
In the Notice, the Exchange stated that the Shares
would not be listed on the Exchange until an order
(‘‘Exemptive Order’’) under the 1940 Act has been
issued by the Commission with respect to the
Exemptive Application. The Commission notes that
it has issued an Exemptive Order granting certain
exemptive relief to the Trust, Adviser, and
Distributor under the 1940 Act. See Investment
Company Act Release No. 30061 (May 8, 2012) (File
No. 812–13785). The Exchange represents that
investments made by the Funds will comply with
the conditions set forth in the Exemptive Order.
5 See Commentary .06 to NYSE Arca Equities
Rule 8.600. The Exchange represents that, in the
event (a) the Adviser becomes newly affiliated with
a broker-dealer, or (b) any new adviser or subadviser 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.
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conditions,6 the Fund will invest at
least 80% of its net assets in the
exchange-listed common stocks of select
companies organized in the U.S. and
included in the S&P Composite 1500®
(‘‘Companies’’). The S&P Composite
1500 is a combination of the following
indices: the S&P 500®; the S&P MidCap
400®; and the S&P SmallCap 600®. The
Fund will invest in Companies within
each of the large-cap, mid-cap, and
small-cap U.S. equity market segments
(each a ‘‘Market Segment’’). The largecap segment is represented by
companies comprising the S&P 500, the
mid-cap segment is represented by
companies comprising the S&P MidCap
400, and the small-cap segment is
represented by the companies
comprising the S&P SmallCap 600.
The Fund will also invest in
Companies operating in each of the ten
sectors represented in the S&P
Composite 1500. A sector is a large
grouping of companies operating within
the market that share similar
characteristics. The ten sectors
comprising the S&P Composite 1500 are:
utilities, consumer staples, information
technology, healthcare, financials,
energy, consumer discretionary,
materials, industrials, and
telecommunication services (‘‘Sectors’’).
As market conditions change, the
Fund intends to rotate the investment
focus of the Fund so as to overweight its
portfolio in Companies comprising
those Market Segments and Sectors that
the Adviser believes offer the greatest
potential for capital appreciation in the
given market environment and
underweight its portfolio in those
Market Segments and Sectors that the
Adviser believes offer the least potential
for capital appreciation in that same
market environment (as described in
more detail below). If the Fund’s
portfolio allocation to a particular
Market Segment or Sector exceeds that
Market Segment’s or Sector’s current
weighting in the S&P Composite 1500,
the Fund will be ‘‘overweighting’’ that
Market Segment or Sector. Similarly, if
the Fund’s portfolio allocation to a
specific Market Segment or Sector is
less than that Market Segment’s or
Sector’s current weighting in the S&P
Composite 1500, then the Fund will be
‘‘underweighting’’ that Market Segment
or Sector. The Adviser believes that
6 The term ‘‘under normal conditions’’ includes,
but is not limited to, the absence of extreme
volatility or trading halts in the equity markets or
the financial markets generally; operational issues
causing dissemination of inaccurate market
information; or force majeure type events such as
systems failure, natural or man-made disaster, act
of God, armed conflict, act of terrorism, riot or labor
disruption, or any similar intervening circumstance.
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these adjustments, collectively, will
position the Fund for continued capital
appreciation in the new market
environment.
The Adviser retains a broad mandate
and discretion to invest in Companies
consistent with its evaluation of the
capital appreciation potential of the
Market Segments and Sectors. The
strategy of overweighting and
underweighting Sectors to maximize
opportunities for capital appreciation
may result in the Fund investing greater
than 25% of its total assets in the equity
securities of Companies operating in
one or more Sectors. Sectors are
comprised of multiple individual
industries, and the Fund will not invest
more than 25% of its total assets in an
individual industry.
The Adviser will invest in Companies
consistent with its assessment of the
capital appreciation opportunities of
each Market Segment and Sector. To
determine the percentage of the Fund’s
portfolio to invest in each Market
Segment and Sector, the Adviser will
use ‘‘top-down’’ analysis (analyzing the
impact of economic trends before
considering the performance of
individual stocks) to evaluate broad
economic trends. These trends are used
to anticipate shifts in the business cycle.
The Adviser also will analyze each
Market Segment and Sector to
determine which Market Segment(s) and
Sector(s) may benefit the most from
these trends and business shifts over the
next 12 months. Factors considered in
assessing each Market Segment and
Sector include: (1) The relationship
between each Market Segment or Sector
and the current business cycle;
(2) valuation levels; (3) earnings growth
potential; and (4) analyses of the
Companies included in the respective
Market Segments and Sectors.
The Adviser will monitor the market
environment, Market Segments, and
Sectors and may rotate the Fund’s
investment focus by adjusting the
Fund’s Market Segments and/or Sector
weightings consistent with its ongoing
assessment of the capital appreciation
potential of each Market Segment and
Sector. The Adviser may also rely, in
part, on technical analysis (such as
analyzing and examining past price
movements to anticipate or forecast
future price movements) to determine
the timing of any changes to the Market
Segment and/or Sector weightings.
The Fund will invest in those
Companies within the Market Segments
and Sectors that offer the best potential
for capital appreciation based on the
Adviser’s evaluation of company
fundamentals (including historic
earnings, revenue, cash flow, and
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valuation (such as price-earnings ratio
and book value)).
Huntington EcoLogical Strategy ETF
The Fund’s investment objective is to
seek capital appreciation. Under normal
conditions, the Fund will invest at least
80% of its net assets in the exchangelisted equity securities of ecologicallyfocused companies. The Fund will
primarily (at least 65% of total assets)
invest in the U.S. exchange-listed
common stock of ecologically-focused
companies organized in the U.S. (‘‘U.S.
Companies’’). The Fund, however, may
also invest up to 35% of total assets in
the exchange-listed common stock (or
the equivalent thereof) and sponsored
American Depositary Receipts
(‘‘ADRs’’) 7 of ecologically-focused
companies organized outside the U.S.
(‘‘Foreign Companies’’).8 The Fund may
invest in companies of all sizes.
The Adviser will apply the following
ecologically-focused criteria to identify
the equity securities of U.S. and Foreign
Companies. ‘‘Ecologically-focused
companies’’ are companies that have
positioned their business to respond to
increased environmental legislation,
cultural shifts towards environmentally
conscious consumption, and capital
investments in environmentally
oriented projects. These companies
include, but are not limited to, all U.S.
and Foreign Companies that are
components of one or more wellrecognized environmentally focused
indices (such as the Dow Jones
Sustainability Indexes and the DB
NASDAQ OMX Clean Tech Index).
The Fund will also invest in
ecologically-focused companies which
are not included in a well-recognized
environmentally-focused index, but
generate at least 1⁄3 of their revenues
from activities aligned with one or more
of the following environmental themes
(‘‘Environmental Themes’’):
• Alternative renewable power, such
as solar, wind, geothermal, hydro, or
biomass;
• Alternative renewable fuel, such as
biofuel, biomass, or hydrogen;
• Alternative engines, such as
electric, flywheel, or micro turbines;
7 ADRs are securities issued by a U.S. bank or
trust company evidencing ownership of underlying
securities issued by a foreign company. ADRs are
designed for use in U.S. securities markets.
8 The foreign equity securities, including any
depositary receipts, in which the Funds may invest
will be limited to securities that trade in markets
that are members of the Intermarket Surveillance
Group (‘‘ISG’’), which includes all U.S. national
securities exchanges and certain foreign exchanges,
or are parties to a comprehensive surveillance
sharing agreement with the Exchange. See infra
note 12.
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• Energy efficiency such as energy
efficient building materials, power,
lighting, heating, or fuel;
• Resource conservation/healthier
use of resources, such as recycling or
renewable materials; and
• Healthy lifestyle, such as pollution
control or organic foods.
A company that is not included in an
environmentally-focused index or does
not generate 1⁄3 of its revenue from
activities aligned with one or more
Environmental Themes shall also be
considered an ecologically-focused
company if the Adviser believes that
environmentally conscious trends such
as a stronger demand for chemical-free
cleaning and farming, recycling,
alternative fuel and energy, energy
efficiency, pollution control, or
environmental cleanup/restoration will
positively impact that company’s future
revenue (‘‘Environmentally Conscious
Companies’’). Ecologically-focused
companies also include those
companies that the Adviser believes
demonstrate sustainable environmental
practices (‘‘Other Environmental
Companies’’). Sustainable
environmental practices include, but are
not limited to, demonstrated progress
in:
• Improving energy and resource
efficiency;
• Reducing emissions from business
operations;
• Financial and operational support
of renewable materials and less
pollutive energy sources; or
• Using or promoting the use of
efficient buildings (measured by such
labels as LEED or Energy Star).
The Fund’s investment in the
securities of Environmentally Conscious
Companies and Other Environmental
Companies will be limited to 10% of the
Fund’s total assets.
The strategy of investing in
ecologically-focused companies may
result in the Fund investing greater than
25% of its total assets in one or more
market sectors. A sector is a large
grouping of companies operating within
the market that share similar
characteristics. The ten most commonly
recognized market sectors are: utilities,
consumer staples, information
technology, healthcare, financials,
energy, consumer discretionary,
materials, industrials, and
telecommunication services. Sectors are
comprised of multiple individual
industries, and the Fund will not invest
more than 25% of its total assets in an
individual industry.
The Adviser will review company
fundamentals and the composition of
recognized environmentally-focused
indices to identify a universe of
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Federal Register / Vol. 77, No. 113 / Tuesday, June 12, 2012 / Notices
ecologically-focused companies.
Company fundamentals include factors
reflective of a company’s financial
condition, including balance sheets and
income statements, asset history,
product or service development, and
management productivity. The Adviser
also will examine annual sustainability
reports from companies, as well as
supplemental disclosures regarding
environmental practices within
corporate investor relations materials.
The Adviser will focus on
ecologically-focused companies that it
believes have better than average
potential for growth in sales and profits.
Historical financial statements (income,
balance sheet, cash flow) will serve as
quantitative guides in the selection
process. Qualitative reviews of a
company’s competitive position and
target market potential also will
influence portfolio decisions. The Fund
will, under most market conditions,
include a blend of growth or cyclical
stocks held for price appreciation
potential and dividend growth stocks
held for their potential to deliver a
growing stream of income.9 Factors
regarding valuation such as price to
sales ratios, price to earnings ratios, and
price to book ratios will influence the
size of the Fund’s position in each
company.
srobinson on DSK4SPTVN1PROD with NOTICES
Other Permitted Investments,
Investment Limitations, and Additional
Information Applicable to Both Funds
Each Fund, to a lesser extent, may
attempt to pursue its investment
objective by employing other
investment strategies and by investing
in additional types of securities that are
not otherwise part of its principal
investment strategies as described
above. To the extent a Fund’s principal
investment policies are satisfied,
including but not limited to its 80%
investment policy, such Fund may also
invest up to 20% of its total assets in the
securities described below. Each Fund,
however, will also be subject to certain
additional investment limitations,
including those set forth below:
• A Fund may only purchase
securities of any issuer only when
consistent with the maintenance of such
Fund’s status as a diversified company
under the 1940 Act, the rules or
regulations thereunder, as such statute,
rules, or regulations may be amended
9 Growth stocks are shares in a company whose
earnings are expected to grow at an above-average
rate relative to the market. Cyclical stocks are shares
in a company that rise quickly when economic
growth is strong and fall rapidly when growth is
slowing down.
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from time to time, or any applicable
exemptive relief.10
• A Fund may not concentrate
investments in a particular industry or
group of industries as concentration is
defined under the 1940 Act, the rules or
regulations thereunder, as such statute,
rules, or regulations may be amended
from time to time, or any applicable
exemptive relief.
• A Fund may not hold in the
aggregate more than 15% of its net
assets in illiquid investments, including
Rule 144A securities and loan
participations.
• In accordance with the Exemptive
Order, the Funds will not invest in
options, futures, or swaps.
• The Funds’ investments will be
consistent with the Funds’ investment
objectives and will not be used to
enhance leverage.
• Each Fund will elect to be treated,
and intends to qualify each year, as a
regulated investment company under
Subchapter M of the Internal Revenue
Code.
Finally, each Fund may also invest up
to 20% of total assets in fixed income
securities issued by companies
organized in the U.S., including
convertible securities that may be
exchanged for or converted into
common stock, corporate debt
securities, U.S. Government securities,
money market instruments, and zero
coupon bonds. Each Fund may invest in
other investment company securities,
including mutual funds, consistent with
the 1940 Act, the rules thereunder or
relief from the Commission, as well as
repurchase and reverse repurchase
agreements. The Funds may also
participate in foreign currency
transactions and purchase securities on
a when-issued or delayed delivery basis.
Permitted Investments and Investment
Limitations Applicable to Huntington
US Equity Rotation Strategy ETF
The Fund may invest up to 20% of
total assets in equity securities, other
than common stock of Companies,
including preferred stocks, exchangetraded funds, interests in other business
organizations, real estate investment
trusts, and other domestic equity
10 Under Section 5(b)(1) of the 1940 Act, the
Exchange states that a fund may not (i) with respect
to 75% of its total assets, purchase securities of any
issuer (except securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities
or shares of investment companies) if, as a result,
more than 5% of its total assets would be invested
in the securities of such issuer; or (ii) acquire more
than 10% of the outstanding voting securities of any
one issuer. For purposes of determining a Fund’s
compliance with Section 5(b)(1), the issuer of the
underlying security will be deemed to be the issuer
of any respective depositary receipt.
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35099
securities which the Adviser believes
have equity characteristics (‘‘Other
Domestic Equities’’).
The Fund may invest up to 20% of its
total assets in the following foreign
securities which are issued by
companies located outside of the U.S.
and principally traded in foreign
markets: (i) Equity securities and fixed
income securities of foreign entities; (ii)
obligations of foreign branches of U.S.
banks and foreign or domestic branches
of foreign banks including European
Certificates of Deposit, European Time
Deposits, Canadian Time Deposits,
Canadian Yankee Bonds, Canadian
Certificates of Deposit, and investments
in Canadian commercial paper and
europaper; (iii) depositary receipts
including ADRs, European Depositary
Receipts (‘‘EDRs’’), which are also
known as Continental Depositary
Receipts (‘‘CDRs’’), and Global
Depositary Receipts (‘‘GDRs’’);11 (iv)
securities issued or guaranteed by
foreign corporations or foreign
governments, their political
subdivisions, agencies, and
instrumentalities (e.g., fixed income
securities supported by national, state,
or provincial governments, or similar
political subdivisions); (v) debt
obligations of supranational entities,
including international organizations
designed or supported by governmental
entities to promote economic
reconstruction or development,
international banking institutions, and
related government agencies such as the
International Bank for Reconstruction
and Development (World Bank), the
Asian Development Bank, the European
Investment Bank, and the InterAmerican Development Bank; and
(vi) fixed income securities of quasigovernmental agencies that are either
issued by entities owned by a national,
state, or equivalent government, or are
obligations of a political unit that are
not backed by the national government’s
full faith and credit (collectively,
‘‘Foreign Securities’’).12
Permitted Investments and Investment
Limitations Specific to Huntington
EcoLogical Strategy ETF
The Fund may invest up to 20% of its
total assets in Other Domestic Equities
and Foreign Securities other than those
issued by Foreign Companies permitted
11 EDRs/CDRs are securities typically issued by a
non-U.S. financial institution and evidence
ownership interests in a security or a pool of
securities issued by either a U.S. or foreign issuer.
GDRs are issued globally and evidence a similar
ownership arrangement. EDRs are designed for
trading in European securities markets, and GDRs
are designed for trading in non-U.S. securities
markets.
12 See supra note 8.
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as part of the Fund’s principal
investment strategies.13
Additional information regarding the
Funds, the Trust, and the Shares,
including investment strategies, risks,
creation and redemption procedures,
fees, portfolio holdings, disclosure
policies, distributions, and taxes can be
found in the Notice and Registration
Statement, as applicable.14
srobinson on DSK4SPTVN1PROD with NOTICES
III. Discussion and Commission’s
Findings
The Commission has carefully
reviewed the proposed rule change and
finds that it is consistent with the
requirements of Section 6 of the Act 15
and the rules and regulations
thereunder applicable to a national
securities exchange.16 In particular, the
Commission finds that the proposal is
consistent with Section 6(b)(5) of the
Act,17 which requires, among other
things, that the Exchange’s rules be
designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, to foster cooperation and
coordination with persons engaged in
facilitating transactions in securities, to
remove impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, to protect investors and the
public interest. The Commission notes
that the Funds and the Shares must
comply with the requirements of NYSE
Arca Equities Rule 8.600 to be listed and
traded on the Exchange.
The Commission finds that the
proposal to list and trade the Shares on
the Exchange is consistent with Section
11A(a)(1)(C)(iii) of the Act,18 which sets
forth Congress’ finding that it is in the
public interest and appropriate for the
protection of investors and the
maintenance of fair and orderly markets
to assure the availability to brokers,
dealers, and investors of information
with respect to quotations for, and
transactions in, securities. Quotation
and last-sale information for the Shares
will be available via the Consolidated
Tape Association (‘‘CTA’’) high-speed
line. In addition, the Portfolio Indicative
Value (‘‘PIV’’), 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 Exchange’s Core
13 See
id.
supra notes 3 and 4, respectively.
15 15 U.S.C. 78f.
16 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
17 15 U.S.C. 78f(b)(5).
18 15 U.S.C. 78k–1(a)(1)(C)(iii).
14 See
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Trading Session.19 On each business
day, before commencement of trading in
Shares in the Core Trading Session on
the Exchange, the Funds will disclose
on their Web site the Disclosed
Portfolio, as defined in NYSE Arca
Equities Rule 8.600(c)(2), that will form
the basis for the respective Fund’s
calculation of the net asset value
(‘‘NAV’’) at the end of the business
day.20 The NAV per Share for each
Fund will be calculated by the Trust’s
fund accountant and determined as of
the close of the regular trading session
on the NYSE Arca (ordinarily 4:00 p.m.,
Eastern Time) on each day that the
Exchange is open. In addition,
information regarding market price and
trading volume of the Shares will be
continually available on a real-time
basis throughout the day on brokers’
computer screens and other electronic
services, and 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. The Web site for
the Funds will include a form of the
prospectus for the Funds, additional
data relating to NAV, and other
applicable quantitative information. The
intra-day, closing, and settlement prices
of the portfolio securities will be readily
available from the national securities
exchanges trading such securities,
automated quotation systems, published
or other public sources, or on-line
information services such as Bloomberg
or Reuters.
The Commission further believes that
the proposal to list and trade the Shares
is reasonably designed to promote fair
disclosure of information that may be
necessary to price the Shares
appropriately and to prevent trading
when a reasonable degree of
transparency cannot be assured. The
Commission notes that the Exchange
will obtain a representation from the
issuer of the Shares that the NAV will
be calculated daily and that the NAV
and the Disclosed Portfolio will be made
available to all market participants at
the same time.21 In addition, the
Exchange will halt trading in the Shares
19 According to the Exchange, several major
market data vendors display and/or make widely
available PIVs published on the CTA or other data
feeds.
20 The Disclosed Portfolio will include, as
applicable, for each portfolio security or other
financial instrument of the Funds the following:
Ticker symbol; name of security and financial
instrument; the number of shares or dollar value of
each security and financial instrument held in the
portfolio; and percentage weighting of the security
and financial instrument in the portfolio. The Web
site information will be publicly available at no
charge.
21 See NYSE Arca Equities Rule 8.600(d)(1)(B).
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under the specific circumstances set
forth in NYSE Arca Equities Rule
8.600(d)(2)(D), and may halt trading in
the Shares if trading is not occurring in
the securities and/or the financial
instruments comprising the Disclosed
Portfolio of the Fund, or if other
unusual conditions or circumstances
detrimental to the maintenance of a fair
and orderly market are present.22 The
Exchange will consider the suspension
of trading in or removal from listing of
the Shares if the PIV is no longer
calculated or available or the Disclosed
Portfolio is not made available to all
market participants at the same time.23
The Adviser is affiliated with two
broker-dealers and has implemented a
‘‘fire wall’’ with respect to such brokerdealers regarding access to information
concerning the composition and/or
changes to each Fund’s portfolio.24 The
Commission notes that Adviser
personnel who make decisions on a
Fund’s portfolio composition must be
subject to procedures designed to
prevent the use and dissemination of
material non-public information
regarding that Fund’s portfolio.25
Further, the Commission notes that the
Reporting Authority that provides the
Disclosed Portfolio must implement and
maintain, or be subject to, procedures
22 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. 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.
23 See NYSE Arca Equities Rule 8.600(d)(2)(C)(ii).
24 See supra note 5 and accompanying text. The
Commission notes that an investment adviser to an
open-end fund is required to be registered under the
Investment Advisers Act of 1940 (‘‘Advisers Act’’).
As a result, the Adviser and its related personnel
are subject to the provisions of Rule 204A–1 under
the Advisers Act relating to codes of ethics. This
Rule requires investment advisers to adopt a code
of ethics that reflects the fiduciary nature of the
relationship to clients as well as compliance with
other applicable securities laws. Accordingly,
procedures designed to prevent the communication
and misuse of non-public information by an
investment adviser must be consistent with Rule
204A–1 under the Advisers Act. In addition, Rule
206(4)–7 under the Advisers Act makes it unlawful
for an investment adviser to provide investment
advice to clients unless such investment adviser has
(i) adopted and implemented written policies and
procedures reasonably designed to prevent
violation, by the investment adviser and its
supervised persons, of the Advisers Act and the
Commission rules adopted thereunder; (ii)
implemented, at a minimum, an annual review
regarding the adequacy of the policies and
procedures established pursuant to subparagraph (i)
above and the effectiveness of their
implementation; and (iii) designated an individual
(who is a supervised person) responsible for
administering the policies and procedures adopted
under subparagraph (i) above.
25 See Commentary .06 to NYSE Arca Equities
Rule 8.600.
E:\FR\FM\12JNN1.SGM
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srobinson on DSK4SPTVN1PROD with NOTICES
Federal Register / Vol. 77, No. 113 / Tuesday, June 12, 2012 / Notices
designed to prevent the use and
dissemination of material non-public
information regarding the actual
components of the portfolio.26 The
Exchange states that it has a general
policy prohibiting the distribution of
material, non-public information by its
employees. The Commission also notes
that all of the primary equity
investments to be held by each Fund, as
well as the non-U.S.-listed equity
securities, including any depositary
receipts, held by each Fund will trade
in markets that are ISG members or are
parties to a comprehensive surveillance
sharing agreement with the Exchange.27
The Exchange further represents that
the Shares are deemed to be equity
securities, thus rendering trading in the
Shares subject to the Exchange’s
existing rules governing the trading of
equity securities. In support of this
proposal, the Exchange has made
representations, including:
(1) The Shares will conform to the
initial and continued listing criteria
under NYSE Arca Equities Rule 8.600.
(2) The Exchange has appropriate
rules to facilitate transactions in the
Shares during all trading sessions.
(3) The Exchange’s surveillance
procedures applicable to derivative
products, which include Managed Fund
Shares, 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.
(4) 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: (a) The procedures for
purchases and redemptions of Shares in
Creation Unit aggregations (and that
Shares are not individually redeemable);
(b) NYSE Arca Equities Rule 9.2(a),
which imposes a duty of due diligence
on its ETP Holders to learn the essential
facts relating to every customer prior to
trading the Shares; (c) the risks involved
in trading the Shares during the
Opening and Late Trading Sessions
when an updated PIV will not be
calculated or publicly disseminated; (d)
how information regarding the PIV is
disseminated; (e) the requirement that
ETP Holders deliver a prospectus to
investors purchasing newly issued
Shares prior to or concurrently with the
confirmation of a transaction; and (f)
trading information.
26 See
27 See
NYSE Arca Equities Rule 8.600(d)(2)(B)(ii).
Notice, supra note 3.
VerDate Mar<15>2010
22:42 Jun 11, 2012
Jkt 226001
(5) For initial and/or continued
listing, each Fund will be in compliance
with Rule 10A–3 under the Act,28 as
provided by NYSE Arca Equities Rule
5.3.
(6) Each Fund may not hold more
than 15% of net assets in illiquid
investments, including Rule 144A
securities and loan participations.
(7) The Funds will not invest in
options, futures, or swaps, and the
Funds’ investments will be consistent
with each Fund’s investment objective
and will not be used to enhance
leverage.
(8) All of the primary equity
investments to be held by each Fund, as
well as the non-U.S.-listed equity
securities, including any depositary
receipts, held by each Fund will trade
in markets that are ISG members or are
parties to a comprehensive surveillance
sharing agreement with the Exchange.
(9) A minimum of 100,000 Shares of
each Fund will be outstanding at the
commencement of trading on the
Exchange.
This approval order is based on all of
the Exchange’s representations and
description of the Funds, including
those set forth above and in the Notice.
For the foregoing reasons, the
Commission finds that the proposed
rule change is consistent with Section
6(b)(5) of the Act 29 and the rules and
regulations thereunder applicable to a
national securities exchange.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,30 that the
proposed rule change (SR–NYSEArca–
2012–34) be, and it hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.31
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2012–14192 Filed 6–11–12; 8:45 am]
BILLING CODE 8011–01–P
35101
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–67147; File No. SR–Phlx–
2012–72]
Self-Regulatory Organizations;
NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change to Delay the
Implementation Date for its Excess
Order Fee
June 6, 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 May 24,
2012, NASDAQ OMX PHLX LLC
(‘‘Phlx’’ or ‘‘Exchange’’) 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 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 the Substance
of the Proposed Rule Change
The Exchange proposes a rule change
to delay the implementation date for its
Excess Order Fee. The text of the
proposed rule change is available at
https://
nasdaqomxphlx.cchwallstreet.com/, at
the Exchange’s principal office, and at
the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in Sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
28 See
17 CFR 240.10A–3.
29 15 U.S.C. 78f(b)(5).
30 15 U.S.C. 78s(b)(2).
31 17 CFR 200.30–3(a)(12).
PO 00000
Frm 00169
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Sfmt 4703
Phlx recently submitted a proposed
rule change to introduce an Excess
1 15
2 17
E:\FR\FM\12JNN1.SGM
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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]]>Agencies
[Federal Register Volume 77, Number 113 (Tuesday, June 12, 2012)]
[Notices]
[Pages 35097-35101]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-14192]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-67145; File No. SR-NYSEArca-2012-34]
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting
Approval of Proposed Rule Change To List and Trade the Huntington US
Equity Rotation Strategy ETF and Huntington EcoLogical Strategy ETF
Under NYSE Arca Equities Rule 8.600
June 6, 2012.
I. Introduction
On April 12, 2012, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'')
filed with the Securities and Exchange Commission (``Commission''),
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to
list and trade shares (``Shares'') of the Huntington US Equity Rotation
Strategy ETF and Huntington EcoLogical Strategy ETF (each, a ``Fund''
and collectively, ``Funds'') under NYSE Arca Equities Rule 8.600. The
proposed rule change was published for comment in the Federal Register
on April 27, 2012.\3\ The Commission received no comments on the
proposal. This order grants approval of the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 66846 (April 23,
2012), 77 FR 25218 (``Notice'').
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II. Description of the Proposed Rule Change
The Exchange proposes to list and trade the Shares of the Funds
pursuant to NYSE Arca Equities Rule 8.600, which governs the listing
and trading of Managed Fund Shares on the Exchange. The Funds will be
actively managed exchange-traded funds. The Shares of each Fund will be
offered by Huntington Strategy Shares (``Trust''), a Delaware statutory
trust registered with the Commission as an open-end management
investment company.\4\ Huntington Asset Advisors, Inc. (``Adviser'') is
the investment adviser of each Fund and will manage the investment
portfolios of the Funds. SEI Investments Distribution Co.
(``Distributor'') is the principal underwriter and distributor of the
Funds' Shares. Citibank, N.A. is the custodian for the Funds. The
Exchange represents that the Adviser is affiliated with two broker-
dealers and has implemented a fire wall with respect to each affiliated
broker-dealer regarding access to information concerning the
composition and/or changes to a Fund portfolio.\5\
---------------------------------------------------------------------------
\4\ The Trust is registered under the Investment Company Act of
1940 (``1940 Act''). On April 6, 2012, the Trust filed with the
Commission an amendment to the Trust's Registration Statement on
Form N-1A under the Securities Act of 1933 and under the 1940 Act
relating to the Funds (File Nos. 333-170750 and 811-22497)
(``Registration Statement''). In addition, the Exchange represented
in the Notice that the Trust had also filed an Amended and Restated
Application for an Order under Section 6(c) of the 1940 Act for
exemptions from various provisions of the 1940 Act and rules
thereunder (File No. 812-13785), dated April 3, 2012 (``Exemptive
Application''). See Investment Company Act Release No. 30032 (April
10, 2012). In the Notice, the Exchange stated that the Shares would
not be listed on the Exchange until an order (``Exemptive Order'')
under the 1940 Act has been issued by the Commission with respect to
the Exemptive Application. The Commission notes that it has issued
an Exemptive Order granting certain exemptive relief to the Trust,
Adviser, and Distributor under the 1940 Act. See Investment Company
Act Release No. 30061 (May 8, 2012) (File No. 812-13785). The
Exchange represents that investments made by the Funds will comply
with the conditions set forth in the Exemptive Order.
\5\ See Commentary .06 to NYSE Arca Equities Rule 8.600. The
Exchange represents that, in the event (a) the Adviser becomes newly
affiliated with a broker-dealer, or (b) any new adviser or sub-
adviser becomes affiliated with a broker-dealer, it will implement a
fire wall with respect to such broker-dealer regarding access to
information concerning the composition and/or changes to the
portfolio, and will be subject to procedures designed to prevent the
use and dissemination of material non-public information regarding
such portfolio.
---------------------------------------------------------------------------
Huntington US Equity Rotation Strategy ETF
The Fund's investment objective is to seek capital appreciation.
Under normal conditions,\6\ the Fund will invest at least 80% of its
net assets in the exchange-listed common stocks of select companies
organized in the U.S. and included in the S&P Composite 1500[supreg]
(``Companies''). The S&P Composite 1500 is a combination of the
following indices: the S&P 500[supreg]; the S&P MidCap 400[supreg]; and
the S&P SmallCap 600[supreg]. The Fund will invest in Companies within
each of the large-cap, mid-cap, and small-cap U.S. equity market
segments (each a ``Market Segment''). The large-cap segment is
represented by companies comprising the S&P 500, the mid-cap segment is
represented by companies comprising the S&P MidCap 400, and the small-
cap segment is represented by the companies comprising the S&P SmallCap
600.
---------------------------------------------------------------------------
\6\ The term ``under normal conditions'' includes, but is not
limited to, the absence of extreme volatility or trading halts in
the equity 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.
---------------------------------------------------------------------------
The Fund will also invest in Companies operating in each of the ten
sectors represented in the S&P Composite 1500. A sector is a large
grouping of companies operating within the market that share similar
characteristics. The ten sectors comprising the S&P Composite 1500 are:
utilities, consumer staples, information technology, healthcare,
financials, energy, consumer discretionary, materials, industrials, and
telecommunication services (``Sectors'').
As market conditions change, the Fund intends to rotate the
investment focus of the Fund so as to overweight its portfolio in
Companies comprising those Market Segments and Sectors that the Adviser
believes offer the greatest potential for capital appreciation in the
given market environment and underweight its portfolio in those Market
Segments and Sectors that the Adviser believes offer the least
potential for capital appreciation in that same market environment (as
described in more detail below). If the Fund's portfolio allocation to
a particular Market Segment or Sector exceeds that Market Segment's or
Sector's current weighting in the S&P Composite 1500, the Fund will be
``overweighting'' that Market Segment or Sector. Similarly, if the
Fund's portfolio allocation to a specific Market Segment or Sector is
less than that Market Segment's or Sector's current weighting in the
S&P Composite 1500, then the Fund will be ``underweighting'' that
Market Segment or Sector. The Adviser believes that
[[Page 35098]]
these adjustments, collectively, will position the Fund for continued
capital appreciation in the new market environment.
The Adviser retains a broad mandate and discretion to invest in
Companies consistent with its evaluation of the capital appreciation
potential of the Market Segments and Sectors. The strategy of
overweighting and underweighting Sectors to maximize opportunities for
capital appreciation may result in the Fund investing greater than 25%
of its total assets in the equity securities of Companies operating in
one or more Sectors. Sectors are comprised of multiple individual
industries, and the Fund will not invest more than 25% of its total
assets in an individual industry.
The Adviser will invest in Companies consistent with its assessment
of the capital appreciation opportunities of each Market Segment and
Sector. To determine the percentage of the Fund's portfolio to invest
in each Market Segment and Sector, the Adviser will use ``top-down''
analysis (analyzing the impact of economic trends before considering
the performance of individual stocks) to evaluate broad economic
trends. These trends are used to anticipate shifts in the business
cycle. The Adviser also will analyze each Market Segment and Sector to
determine which Market Segment(s) and Sector(s) may benefit the most
from these trends and business shifts over the next 12 months. Factors
considered in assessing each Market Segment and Sector include: (1) The
relationship between each Market Segment or Sector and the current
business cycle; (2) valuation levels; (3) earnings growth potential;
and (4) analyses of the Companies included in the respective Market
Segments and Sectors.
The Adviser will monitor the market environment, Market Segments,
and Sectors and may rotate the Fund's investment focus by adjusting the
Fund's Market Segments and/or Sector weightings consistent with its
ongoing assessment of the capital appreciation potential of each Market
Segment and Sector. The Adviser may also rely, in part, on technical
analysis (such as analyzing and examining past price movements to
anticipate or forecast future price movements) to determine the timing
of any changes to the Market Segment and/or Sector weightings.
The Fund will invest in those Companies within the Market Segments
and Sectors that offer the best potential for capital appreciation
based on the Adviser's evaluation of company fundamentals (including
historic earnings, revenue, cash flow, and valuation (such as price-
earnings ratio and book value)).
Huntington EcoLogical Strategy ETF
The Fund's investment objective is to seek capital appreciation.
Under normal conditions, the Fund will invest at least 80% of its net
assets in the exchange-listed equity securities of ecologically-focused
companies. The Fund will primarily (at least 65% of total assets)
invest in the U.S. exchange-listed common stock of ecologically-focused
companies organized in the U.S. (``U.S. Companies''). The Fund,
however, may also invest up to 35% of total assets in the exchange-
listed common stock (or the equivalent thereof) and sponsored American
Depositary Receipts (``ADRs'') \7\ of ecologically-focused companies
organized outside the U.S. (``Foreign Companies'').\8\ The Fund may
invest in companies of all sizes.
---------------------------------------------------------------------------
\7\ ADRs are securities issued by a U.S. bank or trust company
evidencing ownership of underlying securities issued by a foreign
company. ADRs are designed for use in U.S. securities markets.
\8\ The foreign equity securities, including any depositary
receipts, in which the Funds may invest will be limited to
securities that trade in markets that are members of the Intermarket
Surveillance Group (``ISG''), which includes all U.S. national
securities exchanges and certain foreign exchanges, or are parties
to a comprehensive surveillance sharing agreement with the Exchange.
See infra note 12.
---------------------------------------------------------------------------
The Adviser will apply the following ecologically-focused criteria
to identify the equity securities of U.S. and Foreign Companies.
``Ecologically-focused companies'' are companies that have positioned
their business to respond to increased environmental legislation,
cultural shifts towards environmentally conscious consumption, and
capital investments in environmentally oriented projects. These
companies include, but are not limited to, all U.S. and Foreign
Companies that are components of one or more well-recognized
environmentally focused indices (such as the Dow Jones Sustainability
Indexes and the DB NASDAQ OMX Clean Tech Index).
The Fund will also invest in ecologically-focused companies which
are not included in a well-recognized environmentally-focused index,
but generate at least \1/3\ of their revenues from activities aligned
with one or more of the following environmental themes (``Environmental
Themes''):
Alternative renewable power, such as solar, wind,
geothermal, hydro, or biomass;
Alternative renewable fuel, such as biofuel, biomass, or
hydrogen;
Alternative engines, such as electric, flywheel, or micro
turbines;
Energy efficiency such as energy efficient building
materials, power, lighting, heating, or fuel;
Resource conservation/healthier use of resources, such as
recycling or renewable materials; and
Healthy lifestyle, such as pollution control or organic
foods.
A company that is not included in an environmentally-focused index
or does not generate \1/3\ of its revenue from activities aligned with
one or more Environmental Themes shall also be considered an
ecologically-focused company if the Adviser believes that
environmentally conscious trends such as a stronger demand for
chemical-free cleaning and farming, recycling, alternative fuel and
energy, energy efficiency, pollution control, or environmental cleanup/
restoration will positively impact that company's future revenue
(``Environmentally Conscious Companies''). Ecologically-focused
companies also include those companies that the Adviser believes
demonstrate sustainable environmental practices (``Other Environmental
Companies''). Sustainable environmental practices include, but are not
limited to, demonstrated progress in:
Improving energy and resource efficiency;
Reducing emissions from business operations;
Financial and operational support of renewable materials
and less pollutive energy sources; or
Using or promoting the use of efficient buildings
(measured by such labels as LEED or Energy Star).
The Fund's investment in the securities of Environmentally
Conscious Companies and Other Environmental Companies will be limited
to 10% of the Fund's total assets.
The strategy of investing in ecologically-focused companies may
result in the Fund investing greater than 25% of its total assets in
one or more market sectors. A sector is a large grouping of companies
operating within the market that share similar characteristics. The ten
most commonly recognized market sectors are: utilities, consumer
staples, information technology, healthcare, financials, energy,
consumer discretionary, materials, industrials, and telecommunication
services. Sectors are comprised of multiple individual industries, and
the Fund will not invest more than 25% of its total assets in an
individual industry.
The Adviser will review company fundamentals and the composition of
recognized environmentally-focused indices to identify a universe of
[[Page 35099]]
ecologically-focused companies. Company fundamentals include factors
reflective of a company's financial condition, including balance sheets
and income statements, asset history, product or service development,
and management productivity. The Adviser also will examine annual
sustainability reports from companies, as well as supplemental
disclosures regarding environmental practices within corporate investor
relations materials.
The Adviser will focus on ecologically-focused companies that it
believes have better than average potential for growth in sales and
profits. Historical financial statements (income, balance sheet, cash
flow) will serve as quantitative guides in the selection process.
Qualitative reviews of a company's competitive position and target
market potential also will influence portfolio decisions. The Fund
will, under most market conditions, include a blend of growth or
cyclical stocks held for price appreciation potential and dividend
growth stocks held for their potential to deliver a growing stream of
income.\9\ Factors regarding valuation such as price to sales ratios,
price to earnings ratios, and price to book ratios will influence the
size of the Fund's position in each company.
---------------------------------------------------------------------------
\9\ Growth stocks are shares in a company whose earnings are
expected to grow at an above-average rate relative to the market.
Cyclical stocks are shares in a company that rise quickly when
economic growth is strong and fall rapidly when growth is slowing
down.
---------------------------------------------------------------------------
Other Permitted Investments, Investment Limitations, and Additional
Information Applicable to Both Funds
Each Fund, to a lesser extent, may attempt to pursue its investment
objective by employing other investment strategies and by investing in
additional types of securities that are not otherwise part of its
principal investment strategies as described above. To the extent a
Fund's principal investment policies are satisfied, including but not
limited to its 80% investment policy, such Fund may also invest up to
20% of its total assets in the securities described below. Each Fund,
however, will also be subject to certain additional investment
limitations, including those set forth below:
A Fund may only purchase securities of any issuer only
when consistent with the maintenance of such Fund's status as a
diversified company under the 1940 Act, the rules or regulations
thereunder, as such statute, rules, or regulations may be amended from
time to time, or any applicable exemptive relief.\10\
---------------------------------------------------------------------------
\10\ Under Section 5(b)(1) of the 1940 Act, the Exchange states
that a fund may not (i) with respect to 75% of its total assets,
purchase securities of any issuer (except securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities
or shares of investment companies) if, as a result, more than 5% of
its total assets would be invested in the securities of such issuer;
or (ii) acquire more than 10% of the outstanding voting securities
of any one issuer. For purposes of determining a Fund's compliance
with Section 5(b)(1), the issuer of the underlying security will be
deemed to be the issuer of any respective depositary receipt.
---------------------------------------------------------------------------
A Fund may not concentrate investments in a particular
industry or group of industries as concentration is defined under the
1940 Act, the rules or regulations thereunder, as such statute, rules,
or regulations may be amended from time to time, or any applicable
exemptive relief.
A Fund may not hold in the aggregate more than 15% of its
net assets in illiquid investments, including Rule 144A securities and
loan participations.
In accordance with the Exemptive Order, the Funds will not
invest in options, futures, or swaps.
The Funds' investments will be consistent with the Funds'
investment objectives and will not be used to enhance leverage.
Each Fund will elect to be treated, and intends to qualify
each year, as a regulated investment company under Subchapter M of the
Internal Revenue Code.
Finally, each Fund may also invest up to 20% of total assets in
fixed income securities issued by companies organized in the U.S.,
including convertible securities that may be exchanged for or converted
into common stock, corporate debt securities, U.S. Government
securities, money market instruments, and zero coupon bonds. Each Fund
may invest in other investment company securities, including mutual
funds, consistent with the 1940 Act, the rules thereunder or relief
from the Commission, as well as repurchase and reverse repurchase
agreements. The Funds may also participate in foreign currency
transactions and purchase securities on a when-issued or delayed
delivery basis.
Permitted Investments and Investment Limitations Applicable to
Huntington US Equity Rotation Strategy ETF
The Fund may invest up to 20% of total assets in equity securities,
other than common stock of Companies, including preferred stocks,
exchange-traded funds, interests in other business organizations, real
estate investment trusts, and other domestic equity securities which
the Adviser believes have equity characteristics (``Other Domestic
Equities'').
The Fund may invest up to 20% of its total assets in the following
foreign securities which are issued by companies located outside of the
U.S. and principally traded in foreign markets: (i) Equity securities
and fixed income securities of foreign entities; (ii) obligations of
foreign branches of U.S. banks and foreign or domestic branches of
foreign banks including European Certificates of Deposit, European Time
Deposits, Canadian Time Deposits, Canadian Yankee Bonds, Canadian
Certificates of Deposit, and investments in Canadian commercial paper
and europaper; (iii) depositary receipts including ADRs, European
Depositary Receipts (``EDRs''), which are also known as Continental
Depositary Receipts (``CDRs''), and Global Depositary Receipts
(``GDRs'');\11\ (iv) securities issued or guaranteed by foreign
corporations or foreign governments, their political subdivisions,
agencies, and instrumentalities (e.g., fixed income securities
supported by national, state, or provincial governments, or similar
political subdivisions); (v) debt obligations of supranational
entities, including international organizations designed or supported
by governmental entities to promote economic reconstruction or
development, international banking institutions, and related government
agencies such as the International Bank for Reconstruction and
Development (World Bank), the Asian Development Bank, the European
Investment Bank, and the Inter-American Development Bank; and (vi)
fixed income securities of quasi-governmental agencies that are either
issued by entities owned by a national, state, or equivalent
government, or are obligations of a political unit that are not backed
by the national government's full faith and credit (collectively,
``Foreign Securities'').\12\
---------------------------------------------------------------------------
\11\ EDRs/CDRs are securities typically issued by a non-U.S.
financial institution and evidence ownership interests in a security
or a pool of securities issued by either a U.S. or foreign issuer.
GDRs are issued globally and evidence a similar ownership
arrangement. EDRs are designed for trading in European securities
markets, and GDRs are designed for trading in non-U.S. securities
markets.
\12\ See supra note 8.
---------------------------------------------------------------------------
Permitted Investments and Investment Limitations Specific to Huntington
EcoLogical Strategy ETF
The Fund may invest up to 20% of its total assets in Other Domestic
Equities and Foreign Securities other than those issued by Foreign
Companies permitted
[[Page 35100]]
as part of the Fund's principal investment strategies.\13\
---------------------------------------------------------------------------
\13\ See id.
---------------------------------------------------------------------------
Additional information regarding the Funds, the Trust, and the
Shares, including investment strategies, risks, creation and redemption
procedures, fees, portfolio holdings, disclosure policies,
distributions, and taxes can be found in the Notice and Registration
Statement, as applicable.\14\
---------------------------------------------------------------------------
\14\ See supra notes 3 and 4, respectively.
---------------------------------------------------------------------------
III. Discussion and Commission's Findings
The Commission has carefully reviewed the proposed rule change and
finds that it is consistent with the requirements of Section 6 of the
Act \15\ and the rules and regulations thereunder applicable to a
national securities exchange.\16\ In particular, the Commission finds
that the proposal is consistent with Section 6(b)(5) of the Act,\17\
which requires, among other things, that the Exchange's rules be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in facilitating transactions in
securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general, to
protect investors and the public interest. The Commission notes that
the Funds and the Shares must comply with the requirements of NYSE Arca
Equities Rule 8.600 to be listed and traded on the Exchange.
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\15\ 15 U.S.C. 78f.
\16\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\17\ 15 U.S.C. 78f(b)(5).
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The Commission finds that the proposal to list and trade the Shares
on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the
Act,\18\ which sets forth Congress' finding that it is in the public
interest and appropriate for the protection of investors and the
maintenance of fair and orderly markets to assure the availability to
brokers, dealers, and investors of information with respect to
quotations for, and transactions in, securities. Quotation and last-
sale information for the Shares will be available via the Consolidated
Tape Association (``CTA'') high-speed line. In addition, the Portfolio
Indicative Value (``PIV''), 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 Exchange's Core
Trading Session.\19\ On each business day, before commencement of
trading in Shares in the Core Trading Session on the Exchange, the
Funds will disclose on their Web site the Disclosed Portfolio, as
defined in NYSE Arca Equities Rule 8.600(c)(2), that will form the
basis for the respective Fund's calculation of the net asset value
(``NAV'') at the end of the business day.\20\ The NAV per Share for
each Fund will be calculated by the Trust's fund accountant and
determined as of the close of the regular trading session on the NYSE
Arca (ordinarily 4:00 p.m., Eastern Time) on each day that the Exchange
is open. In addition, information regarding market price and trading
volume of the Shares will be continually available on a real-time basis
throughout the day on brokers' computer screens and other electronic
services, and 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. The Web site for the Funds will
include a form of the prospectus for the Funds, additional data
relating to NAV, and other applicable quantitative information. The
intra-day, closing, and settlement prices of the portfolio securities
will be readily available from the national securities exchanges
trading such securities, automated quotation systems, published or
other public sources, or on-line information services such as Bloomberg
or Reuters.
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\18\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
\19\ According to the Exchange, several major market data
vendors display and/or make widely available PIVs published on the
CTA or other data feeds.
\20\ The Disclosed Portfolio will include, as applicable, for
each portfolio security or other financial instrument of the Funds
the following: Ticker symbol; name of security and financial
instrument; the number of shares or dollar value of each security
and financial instrument held in the portfolio; and percentage
weighting of the security and financial instrument in the portfolio.
The Web site information will be publicly available at no charge.
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The Commission further believes that the proposal to list and trade
the Shares is reasonably designed to promote fair disclosure of
information that may be necessary to price the Shares appropriately and
to prevent trading when a reasonable degree of transparency cannot be
assured. The Commission notes that the Exchange will obtain a
representation from the issuer of the Shares that the NAV will be
calculated daily and that the NAV and the Disclosed Portfolio will be
made available to all market participants at the same time.\21\ In
addition, the Exchange will halt trading in the Shares under the
specific circumstances set forth in NYSE Arca Equities Rule
8.600(d)(2)(D), and may halt trading in the Shares if trading is not
occurring in the securities and/or the financial instruments comprising
the Disclosed Portfolio of the Fund, or if other unusual conditions or
circumstances detrimental to the maintenance of a fair and orderly
market are present.\22\ The Exchange will consider the suspension of
trading in or removal from listing of the Shares if the PIV is no
longer calculated or available or the Disclosed Portfolio is not made
available to all market participants at the same time.\23\ The Adviser
is affiliated with two broker-dealers and has implemented a ``fire
wall'' with respect to such broker-dealers regarding access to
information concerning the composition and/or changes to each Fund's
portfolio.\24\ The Commission notes that Adviser personnel who make
decisions on a Fund's portfolio composition must be subject to
procedures designed to prevent the use and dissemination of material
non-public information regarding that Fund's portfolio.\25\ Further,
the Commission notes that the Reporting Authority that provides the
Disclosed Portfolio must implement and maintain, or be subject to,
procedures
[[Page 35101]]
designed to prevent the use and dissemination of material non-public
information regarding the actual components of the portfolio.\26\ The
Exchange states that it has a general policy prohibiting the
distribution of material, non-public information by its employees. The
Commission also notes that all of the primary equity investments to be
held by each Fund, as well as the non-U.S.-listed equity securities,
including any depositary receipts, held by each Fund will trade in
markets that are ISG members or are parties to a comprehensive
surveillance sharing agreement with the Exchange.\27\
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\21\ See NYSE Arca Equities Rule 8.600(d)(1)(B).
\22\ 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. 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.
\23\ See NYSE Arca Equities Rule 8.600(d)(2)(C)(ii).
\24\ See supra note 5 and accompanying text. The Commission
notes that an investment adviser to an open-end fund is required to
be registered under the Investment Advisers Act of 1940 (``Advisers
Act''). As a result, the Adviser and its related personnel are
subject to the provisions of Rule 204A-1 under the Advisers Act
relating to codes of ethics. This Rule requires investment advisers
to adopt a code of ethics that reflects the fiduciary nature of the
relationship to clients as well as compliance with other applicable
securities laws. Accordingly, procedures designed to prevent the
communication and misuse of non-public information by an investment
adviser must be consistent with Rule 204A-1 under the Advisers Act.
In addition, Rule 206(4)-7 under the Advisers Act makes it unlawful
for an investment adviser to provide investment advice to clients
unless such investment adviser has (i) adopted and implemented
written policies and procedures reasonably designed to prevent
violation, by the investment adviser and its supervised persons, of
the Advisers Act and the Commission rules adopted thereunder; (ii)
implemented, at a minimum, an annual review regarding the adequacy
of the policies and procedures established pursuant to subparagraph
(i) above and the effectiveness of their implementation; and (iii)
designated an individual (who is a supervised person) responsible
for administering the policies and procedures adopted under
subparagraph (i) above.
\25\ See Commentary .06 to NYSE Arca Equities Rule 8.600.
\26\ See NYSE Arca Equities Rule 8.600(d)(2)(B)(ii).
\27\ See Notice, supra note 3.
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The Exchange further represents that the Shares are deemed to be
equity securities, thus rendering trading in the Shares subject to the
Exchange's existing rules governing the trading of equity securities.
In support of this proposal, the Exchange has made representations,
including:
(1) The Shares will conform to the initial and continued listing
criteria under NYSE Arca Equities Rule 8.600.
(2) The Exchange has appropriate rules to facilitate transactions
in the Shares during all trading sessions.
(3) The Exchange's surveillance procedures applicable to derivative
products, which include Managed Fund Shares, 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.
(4) 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: (a) The procedures for purchases and redemptions of Shares
in Creation Unit aggregations (and that Shares are not individually
redeemable); (b) NYSE Arca Equities Rule 9.2(a), which imposes a duty
of due diligence on its ETP Holders to learn the essential facts
relating to every customer prior to trading the Shares; (c) the risks
involved in trading the Shares during the Opening and Late Trading
Sessions when an updated PIV will not be calculated or publicly
disseminated; (d) how information regarding the PIV is disseminated;
(e) the requirement that ETP Holders deliver a prospectus to investors
purchasing newly issued Shares prior to or concurrently with the
confirmation of a transaction; and (f) trading information.
(5) For initial and/or continued listing, each Fund will be in
compliance with Rule 10A-3 under the Act,\28\ as provided by NYSE Arca
Equities Rule 5.3.
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\28\ See 17 CFR 240.10A-3.
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(6) Each Fund may not hold more than 15% of net assets in illiquid
investments, including Rule 144A securities and loan participations.
(7) The Funds will not invest in options, futures, or swaps, and
the Funds' investments will be consistent with each Fund's investment
objective and will not be used to enhance leverage.
(8) All of the primary equity investments to be held by each Fund,
as well as the non-U.S.-listed equity securities, including any
depositary receipts, held by each Fund will trade in markets that are
ISG members or are parties to a comprehensive surveillance sharing
agreement with the Exchange.
(9) A minimum of 100,000 Shares of each Fund will be outstanding at
the commencement of trading on the Exchange.
This approval order is based on all of the Exchange's representations
and description of the Funds, including those set forth above and in
the Notice.
For the foregoing reasons, the Commission finds that the proposed
rule change is consistent with Section 6(b)(5) of the Act \29\ and the
rules and regulations thereunder applicable to a national securities
exchange.
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\29\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\30\ that the proposed rule change (SR-NYSEArca-2012-34) be, and it
hereby is, approved.
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\30\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\31\
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\31\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-14192 Filed 6-11-12; 8:45 am]
BILLING CODE 8011-01-P
