Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting Approval of Proposed Rule Change, as Modified by Amendment No. 1 Thereto, To List and Trade the International Bear ETF Under NYSE Arca Equities Rule 8.600, 30372-30376 [2013-12162]
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Federal Register / Vol. 78, No. 99 / Wednesday, May 22, 2013 / Notices
open market and a national market
system, and, in general, to protect
investors and the public interest.
Clarifying the manner in which the
Marketing Fee exemption for strategy
transactions can be accomplished will
eliminate any confusion and provide a
clear procedure for applicants to get
such an exemption for their strategy
transactions, thereby removing
impediments to and perfecting the
mechanism of a free and open market.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
CBOE 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. The
Exchange does not believe that the
proposed rule change will impose any
burden on intramarket competition that
is not necessary or appropriate in
furtherance of the purposes of the Act
because the proposed change does not
change to whom the Marketing Fee
exemption for strategy executions
applies; it merely states the manner for
those executing such transactions to
receive the exemption. The Exchange
does not believe that the proposed rule
change will impose any burden on
intermarket competition that is not
necessary or appropriate in furtherance
of the purposes of the Act because the
proposed change because only applies
to trading on CBOE and does not amend
any fees, or to whom such fees apply.
To the extent that the more clear
explanation of the manner by which a
market participant executing a strategy
transaction may apply for such
transaction’s exemption from the
Marketing Fee may be attractive to
market participants on other exchanges,
such market participants may elect to
become market participants on CBOE.
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C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 6 and paragraph (f) of Rule
19b–4 7 thereunder. At any time within
60 days of the filing of the proposed rule
change, the Commission summarily may
6 15
7 17
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f).
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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 will institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–CBOE–
2013–051 and should be submitted on
or before June 12, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.8
Kevin M. O’Neill,
Deputy Secretary.
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:
[FR Doc. 2013–12164 Filed 5–21–13; 8:45 am]
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–CBOE–2013–051 on the
subject line.
Self-Regulatory Organizations; NYSE
Arca, Inc.; Order Granting Approval of
Proposed Rule Change, as Modified by
Amendment No. 1 Thereto, To List and
Trade the International Bear ETF Under
NYSE Arca Equities Rule 8.600
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–CBOE–2013–051. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 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
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BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–69591; File No. SR–
NYSEArca–2013–33]
May 16, 2013.
I. Introduction
On March 21, 2013, 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’’ or
‘‘Exchange Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
list and trade shares (‘‘Shares’’) of the
International Bear ETF (‘‘Fund’’) under
NYSE Arca Equities Rule 8.600. On
April 3, 2013, the Exchange filed
Amendment No. 1 to the proposed rule
change.3 The proposed rule change, as
modified by Amendment No. 1 thereto,
was published for comment in the
Federal Register on April 10, 2013.4
The Commission received no comments
on the proposal. This order approves the
proposed rule change, as modified by
Amendment No. 1 thereto.
II. Description of the Proposal
The Exchange proposes to list and
trade Shares of the Fund under NYSE
Arca Equities Rule 8.600, which governs
the listing and trading of Managed Fund
Shares. The Shares will be offered by
AdvisorShares Trust (‘‘Trust’’), a
statutory trust organized under the laws
of the State of Delaware and registered
8 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 In Amendment No. 1, the Exchange made
certain technical changes to the proposed rule
change.
4 See Securities Exchange Act Release No. 69303
(April 4, 2013), 78 FR 21475 (‘‘Notice’’).
1 15
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Federal Register / Vol. 78, No. 99 / Wednesday, May 22, 2013 / Notices
with the Commission as an open-end
management investment company.5 The
investment adviser to the Fund is
AdvisorShares Investments, LLC
(‘‘Adviser’’). The Fund will have a subadviser (‘‘Sub-Adviser’’) that provides
day-to-day portfolio management of the
Fund. Foreside Fund Services, LLC will
be the principal underwriter and
distributor of the Fund’s Shares. The
Bank of New York Mellon will serve as
the administrator, custodian, transfer
agent, and accounting agent for the
Fund. According to the Exchange, the
Adviser is not affiliated with a brokerdealer.6
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Principle Investments
The Sub-Adviser will seek to achieve
the Fund’s investment objective by short
selling a portfolio of foreign equity
securities, U.S. exchange-listed and
traded equity securities of non-U.S.
organizations, and American Depositary
Receipts (‘‘ADRs’’). The Fund may
invest in such equity securities of any
capitalization range and in any market
sector at any time as necessary to seek
to achieve the Fund’s investment
objective. Under normal circumstances,7
at least 80% of the Fund’s net assets
will be such equity securities, which the
Fund will short sell.
The Fund will be actively managed
and thus will not seek to replicate the
performance of a specified passive
index of securities. Instead, it will use
an active investment strategy to seek to
meet its investment objective. The SubAdviser, subject to the oversight of the
5 The Trust is registered under the Investment
Company Act of 1940 (‘‘1940 Act’’). On October 19,
2012, the Trust filed with the Commission an
amendment to its registration statement on Form N–
1A under the Securities Act of 1933 and the 1940
Act relating to the Fund (File Nos. 333–157876 and
811–22110) (‘‘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).
6 See NYSE Arca Equities Rule 8.600,
Commentary .06. In the event (a) the Adviser
becomes newly affiliated with a broker-dealer, (b)
the Sub-Adviser is affiliated with a broker-dealer,
or (c) 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.
7 The term ‘‘under normal circumstances’’
includes, but is not limited to, the absence of
adverse market, economic, political or other
conditions, including 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 manmade disaster, act of God, armed conflict, act of
terrorism, riot or labor disruption, or any similar
intervening circumstance.
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Adviser and the Board of Trustees, will
have discretion on a daily basis to
manage the Fund’s portfolio in
accordance with the Fund’s investment
objective and investment policies. The
Sub-Adviser will utilize various
fundamental and technical research
techniques in security selection. In
selecting short positions, the SubAdviser will seek to identify securities
that may be overvalued and due for
capital depreciation. Once a position is
included in the Fund’s portfolio, it will
be subject to regular fundamental and
technical risk management review.
The equity securities in which the
Fund may invest consist of common
stocks, preferred stocks, warrants to
acquire common stock, securities
convertible into common stock,
investments in master limited
partnerships, rights, and REITs. The
Fund may transact in equity securities
traded in the U.S. on registered
exchanges or, in the case of ADRs, the
over-the-counter market. The Fund may
short sell up to 10% of its total assets
in unsponsored ADRs. The Fund may
invest in the equity securities of foreign
issuers, including the securities of
foreign issuers in emerging market
countries.8
The Fund may invest in issuers
located outside the United States
directly, or in financial instruments that
are indirectly linked to the performance
of foreign issuers. Examples of such
financial instruments include ADRs,
Global Depositary Receipts (‘‘GDRs’’),
European Depositary Receipts (‘‘EDRs’’),
International Depository Receipts
(‘‘IDRs’’), ‘‘ordinary shares,’’ and ‘‘New
York shares.’’ 9 Except for up to 10% of
8 Emerging or developing markets exist in
countries that are considered to be in the initial
stages of industrialization. The Fund will invest
only in foreign equity securities that trade in
markets that are members of the Intermarket
Surveillance Group (‘‘ISG’’) or are parties to a
comprehensive surveillance sharing agreement with
the Exchange.
9 ADRs are U.S. dollar denominated receipts
typically issued by U.S. banks and trust companies
that evidence ownership of underlying securities
issued by a foreign issuer. The underlying securities
may not necessarily be denominated in the same
currency as the securities into which they may be
converted. The underlying securities are held in
trust by a custodian bank or similar financial
institution in the issuer’s home country. The
depositary bank may not have physical custody of
the underlying securities at all times and may
charge fees for various services, including
forwarding dividends and interest and corporate
actions. Generally, ADRs in registered form are
designed for use in domestic securities markets and
are traded on exchanges or over-the-counter in the
U.S. GDRs, EDRs, and IDRs are similar to ADRs in
that they are certificates evidencing ownership of
shares of a foreign issuer, however, GDRs, EDRs,
and IDRs may be issued in bearer form and
denominated in other currencies, and are generally
designed for use in specific or multiple securities
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30373
ADRs, which may be unsponsored, such
financial instruments will all be listed
and traded on registered exchanges in
the U.S. or markets that are members of
the ISG or are parties to a
comprehensive surveillance sharing
agreement with the Exchange.
The Fund may engage regularly in
short sales transactions in which the
Fund sells a security it does not own. To
complete such a transaction, the Fund
must borrow or otherwise obtain the
security to make delivery to the buyer.
The Fund then is obligated to replace
the security borrowed by purchasing the
security at the market price at the time
of replacement. The price at such time
may be more or less than the price at
which the security was sold by the
Fund. Until the security is replaced, the
Fund will be required to pay to the
lender amounts equal to any dividends
or interest, which accrue during the
period of the loan. To borrow the
security, the Fund also may be required
to pay a premium, which would
increase the cost of the security sold.
The Fund may also use repurchase
agreements to satisfy delivery
obligations in short sales transactions.
The proceeds of the short sale will be
retained by the broker, to the extent
necessary to meet the margin
requirements, until the short position is
closed out.
Until the Fund closes its short
position or replaces the borrowed
security, the Fund will: (a) Maintain a
segregated account containing cash or
liquid securities at such a level that (i)
the amount deposited in the account
plus the amount deposited with the
broker as collateral will equal the
current value of the security sold short
and (ii) the amount deposited in the
segregated account plus the amount
deposited with the broker as collateral
will not be less than the market value
of the security at the time the security
was sold short; or (b) otherwise cover
the Fund’s short position. The Fund
may use up to 100% of its portfolio to
engage in short sales transactions and
collateralize its open short positions.
Other Investments
While the Fund will invest at least
80% of its assets as described above, the
Fund may invest in certain other
investments, as described below. The
markets outside the U.S. EDRs, for example, are
designed for use in European securities markets,
while GDRs are designed for use throughout the
world. Ordinary shares are shares of foreign issuers
that are traded abroad and on a U.S. exchange. New
York shares are shares that a foreign issuer has
allocated for trading in the U.S. ADRs, ordinary
shares, and New York shares all may be purchased
with and sold for U.S. dollars.
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Fund may invest in exchange-traded
funds (‘‘ETFs’’) registered pursuant to
the 1940 Act, exchange-traded notes
(‘‘ETNs’’),10 and other exchange-traded
products (together with ETFs and ETNs,
collectively, ‘‘ETPs’’).11 The Fund will
invest only in ETPs that trade in
markets that are members of the ISG or
are parties to a comprehensive
surveillance sharing agreement with the
Exchange.
The Fund may invest in several
different types of investment companies
from time to time, including mutual
funds and business development
companies (‘‘BDCs’’),12 when the
Adviser or the Sub-Adviser believes
such an investment is in the best
interests of the Fund and its
shareholders. For example, the Fund
may elect to invest in another
investment company when such an
investment presents a more efficient
investment option than buying
securities individually. The Fund also
may invest in investment companies
that are included as components of an
index, such as BDCs, to seek to track the
performance of that index. The Fund
will invest only in BDCs that trade in
markets that are members of the ISG or
10 ETNs are senior, unsecured unsubordinated
debt securities issued by an underwriting bank that
are designed to provide returns that are linked to
a particular benchmark less investor fees. ETNs
have a maturity date and, generally, are backed only
by the creditworthiness of the issuer. It is expected
that the issuer’s credit rating will be investment
grade at the time of investment.
11 ETPs may 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 ETPs all will be listed and
traded in the U.S. on registered exchanges. The
Fund may invest in the securities of 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 Fund may invest in ETPs that
are pooled investment vehicles not registered
pursuant to the 1940 Act. Closed-end funds are
pooled investment vehicles that are registered
under the 1940 Act and whose shares are listed and
traded on U.S. national securities exchanges.
12 According to the Exchange, a BDC is a less
common type of closed-end investment company
that more closely resembles an operating company
than a typical investment company. BDCs generally
focus on investing in, and providing managerial
assistance to, small, developing, financially
troubled, private companies or other companies
that may have value that can be realized over time
and with management assistance.
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are parties to a comprehensive
surveillance sharing agreement with the
Exchange.
The Fund may invest, under normal
circumstances, up to 10% of its net
assets in debt securities. Debt securities
include a variety of fixed income
obligations, including, but not limited
to, corporate debt securities,
government securities, municipal
securities, convertible securities, and
mortgage-backed securities. Debt
securities include investment-grade
securities, non-investment-grade
securities, and unrated securities. The
Fund may invest in non-investmentgrade securities.13 The Fund may invest
in variable and floating rate securities.
On a day-to-day basis, the Fund may
hold U.S. government securities,14
short-term high quality fixed income
securities, money market instruments,
overnight and fixed-term repurchase
agreements, cash, and cash equivalents
with maturities of one year or less for
investment purposes and to cover its
short positions.
The Fund may enter into repurchase
agreements with financial institutions,
which may be deemed to be loans.15
The Fund may enter into reverse
repurchase agreements without limit as
part of the Fund’s investment strategy.16
13 Non-investment-grade securities, also referred
to as ‘‘high-yield securities’’ or ‘‘junk bonds,’’ are
debt securities that are rated lower than the four
highest rating categories by a nationally recognized
statistical rating organization (for example, lower
than Baa3 by Moody’s Investors Service, Inc. or
lower than BBB– by Standard & Poor’s, a division
of The McGraw-Hill Companies, Inc.) or are
determined to be of comparable quality by the
Adviser or the Sub-Adviser.
14 The Fund may invest in U.S. government
securities and U.S. Treasury zero-coupon bonds.
Securities issued or guaranteed by the U.S.
government or its agencies or instrumentalities
include U.S. Treasury securities, which are backed
by the full faith and credit of the U.S. Treasury and
which differ only in their interest rates, maturities,
and times of issuance; U.S. Treasury bills, which
have initial maturities of one-year or less; U.S.
Treasury notes, which have initial maturities of one
to ten years; and U.S. Treasury bonds, which
generally have initial maturities of greater than ten
years.
15 The Fund follows certain procedures designed
to minimize the risks inherent in such agreements.
These procedures include effecting repurchase
transactions only with large, well-capitalized and
well-established financial institutions whose
condition will be continually monitored by the SubAdviser. 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. It is the current policy of the Fund not
to invest in repurchase agreements that do not
mature within seven days if any such investment,
together with any other illiquid assets held by the
Fund, amounts to more than 15% of the Fund’s net
assets.
16 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 will
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However, the Fund does not expect to
engage, under normal circumstances, in
reverse repurchase agreements with
respect to more than 331⁄3% of its assets.
The Fund also may invest directly and
indirectly in foreign currencies.
The Fund, in the ordinary course of
business, may purchase securities on a
when-issued or delayed-delivery basis
(i.e., delivery and payment can take
place between a month and 120 days
after the date of the transaction). These
securities are subject to market
fluctuation and no interest accrues to
the purchaser during this period. At the
time the Fund makes the commitment to
purchase securities on a when-issued or
delayed-delivery basis, the Fund will
record the transaction and thereafter
reflect the value of the securities, each
day, in determining the Fund’s net asset
value (‘‘NAV’’). The Fund will not
purchase securities on a when-issued or
delayed-delivery basis if, as a result,
more than 15% of the Fund’s net assets
would be so invested.
To respond to adverse market,
economic, political or other conditions,
the Fund may refrain from short selling
and increase its investment in U.S.
government securities, short-term high
quality fixed income securities, money
market instruments, overnight and
fixed-term repurchase agreements, cash
and cash equivalents with maturities of
one year or less. The Fund may hold
little or no short positions for extended
periods, depending on the SubAdviser’s assessment of market
conditions.
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. In addition, 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. The Fund will not invest
25% or more of its total assets in any
investment company that so
concentrates. This limitation does not
apply to investments in securities
issued or guaranteed by the U.S.
establish a segregated account with the Trust’s
custodian bank in which the Fund will maintain
cash, cash equivalents, or other portfolio securities
equal in value to the Fund’s obligations in respect
of reverse repurchase agreements. Such reverse
repurchase agreements could be deemed to be a
borrowing, but are not senior securities.
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TKELLEY on DSK3SPTVN1PROD with NOTICES
Government, its agencies or
instrumentalities, or shares of
investment companies.
The Fund may hold up to an aggregate
amount of 15% of its net assets in
illiquid securities (calculated at the time
of investment), including Rule 144A
securities. The Fund will monitor its
portfolio liquidity on an ongoing basis
to determine whether, in light of current
circumstances, an adequate level of
liquidity is being maintained, and will
consider taking appropriate steps in
order to maintain adequate liquidity if,
through a change in values, net assets,
or other circumstances, more than 15%
of the Fund’s net assets are held in
illiquid securities. Illiquid securities
include securities subject to contractual
or other restrictions on resale and other
instruments that lack readily available
markets as determined in accordance
with Commission staff guidance.
The Fund will seek to qualify for
treatment as a Regulated Investment
Company under the Internal Revenue
Code. The Fund will not invest in
options contracts, futures contracts, or
swap agreements. The Fund’s
investments will be consistent with the
Fund’s investment objective and will
not be used to enhance leverage.
Additional information regarding the
Fund; Shares; investment objective,
strategies, methodology, and
restrictions; risks; fees and expenses;
creations and redemptions of Shares;
availability of information; trading rules
and halts; and surveillance procedures,
among other things, can be found in the
Registration Statement and in the
Notice, as applicable.17
III. Discussion and Commission’s
Findings
After careful review, the Commission
finds that the Exchange’s proposal to list
and trade the Shares is consistent with
the Exchange Act and the rules and
regulations thereunder applicable to a
national securities exchange.18 In
particular, the Commission finds that
the proposed rule change is consistent
with Section 6(b)(5) of the Exchange
Act,19 which requires, among other
things, that the Exchange’s rules be
designed to promote just and equitable
principles of trade, 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
17 See Notice and Registration Statement, supra
notes 4 and 5, respectively.
18 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).
19 15 U.S.C. 78f(b)(5).
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public interest. The Commission notes
that the Fund 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 Exchange Act,20
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,
and for the underlying securities, from
the securities exchanges on which they
are listed. Information regarding the
equity securities, debt securities, fixed
income instruments, and other
investments held by the Fund will be
available from the U.S. and non-U.S.
securities exchanges trading such
securities, automated quotation systems,
published or other public sources, or
on-line information services such as
Bloomberg or Reuters. The Portfolio
Indicative Value, as defined in NYSE
Arca Equities Rule 8.600(c)(3), will be
widely disseminated at least every 15
seconds during the Core Trading
Session through one or more major
market data vendors.21 On each
business day, before commencement of
trading in Shares in the Core Trading
Session on the Exchange, the Fund’s
Web site will disclose 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.22
The Fund will calculate NAV once each
business day as of the regularly
scheduled close of trading on the New
York Stock Exchange, LLC (normally
4:00 p.m. Eastern Time). The Web site
for the Fund will include a form of the
prospectus for the Fund and additional
data relating to NAV and other
20 15
U.S.C. 78k–1(a)(1)(C)(iii).
Notice, supra note 4, 78 FR at 21479.
According to the Exchange, several major market
data vendors display and/or make widely available
Portfolio Indicative Values taken from CTA or other
data feeds
22 On a daily basis, the Fund’s Web site will
disclose for each portfolio security and other
financial instrument of the Fund the following
information: ticker symbol (if applicable); name of
security and financial instrument; number of shares
and dollar value of securities and financial
instruments 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
PO 00000
Frm 00109
Fmt 4703
Sfmt 4703
30375
applicable quantitative information.
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,23 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.24
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
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.25
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,26 and trading in
the Shares will be subject to NYSE Arca
Equities Rule 8.600(d)(2)(D), which sets
forth additional circumstances under
which Shares of the Fund may be
halted.27 The Exchange states that it has
a general policy prohibiting the
distribution of material, non-public
information by its employees.
Consistent with NYSE Arca Equities
Rule 8.600(d)(2)(B)(ii), the Adviser, as
the Reporting Authority, must
implement and maintain, or be subject
to, procedures designed to prevent the
use and dissemination of material, nonpublic information regarding the actual
components of the Fund’s portfolio.28
The Exchange states that the Adviser is
not affiliated with a broker-dealer.29
23 See
Notice, supra note 4, 78 FR at 21479.
id.
25 See id.
26 These reasons may include: (1) The extent to
which trading is not occurring in the securities and/
or the financial instruments composing 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.
27 See NYSE Arca Equities Rule 8.600(d)(2)(D).
28 See NYSE Arca Equities Rule 8.600(d)(2)(B)(ii).
29 An investment adviser to an open-end fund is
required to be registered under the Investment
Advisers Act of 1940 (‘‘Advisers Act’’). As a result,
the Adviser and Sub-Adviser and their related
personnel are subject to the provisions of Rule
204A–1 under the Advisers Act relating to codes of
ethics. This Rule requires investment advisers to
adopt a code of ethics that reflects the fiduciary
24 See
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22MYN1
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Federal Register / Vol. 78, No. 99 / Wednesday, May 22, 2013 / Notices
TKELLEY on DSK3SPTVN1PROD with NOTICES
Moreover, prior to the commencement
of trading, the Exchange will inform its
Equity Trading Permit Holders in an
Information Bulletin of the special
characteristics and risks associated with
trading the Shares. The Commission
notes that the Financial Industry
Regulatory Authority (‘‘FINRA’’), on
behalf of the Exchange,30 will
communicate as needed regarding
trading in the Shares with other markets
that are members of the ISG or with
which the Exchange has in place a
comprehensive surveillance sharing
agreement.
The Exchange 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 continuing listing criteria
under NYSE Arca Equities Rule 8.600.
(2) The Exchange represents that
trading in the Shares will be subject to
the existing trading surveillances,
administered by FINRA on behalf of the
Exchange, which are designed to detect
violations of Exchange rules and
applicable federal securities laws and
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.
(3) Except for up to 10% of ADRs,
which may be unsponsored, the Fund
will invest only in equity securities
(including financial instruments that are
linked to the performance of foreign
issuers),31 ETPs, and BDCs that trade in
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.
30 The Exchange states that, while FINRA surveils
trading on the Exchange pursuant to a regulatory
services agreement, the Exchange is responsible for
FINRA’s performance under this regulatory services
agreement.
31 See notes 8 and 9, supra, and accompanying
text.
VerDate Mar<15>2010
16:59 May 21, 2013
Jkt 229001
markets that are members of the ISG or
are parties to a comprehensive
surveillance sharing agreement with the
Exchange.
(4) The Exchange has appropriate
rules to facilitate transactions in the
Shares during all trading sessions.
(5) Prior to the commencement of
trading, the Exchange will inform its
Equity Trading Permit Holders in an
Information Bulletin of the special
characteristics and risks associated with
trading the Shares. Specifically, the
Information Bulletin will discuss the
following: (a) The procedures for
purchases and redemptions of Shares
and that Shares are not individually
redeemable; (b) NYSE Arca Equities
Rule 9.2(a), which imposes a duty of
due diligence on its Equity Trading
Permit 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 Portfolio Indicative
Value will not be calculated or publicly
disseminated; (d) how information
regarding the Portfolio Indicative Value
is disseminated; (e) the requirement that
Equity Trading Permit Holders deliver a
prospectus to investors purchasing
newly issued Shares prior to or
concurrently with the confirmation of a
transaction; and (f) trading information.
(6) For initial and continued listing,
the Fund will be in compliance with
Rule 10A–3 under the Exchange Act,32
as provided by NYSE Arca Equities Rule
5.3.33
(7) The Fund will not invest in
options contracts, futures contracts, or
swap agreements.
(8) The Fund’s investments will be
consistent with its respective
investment objective and will not be
used to enhance leverage.
(9) The Fund may hold up to an
aggregate amount of 15% of its net
assets in illiquid securities (calculated
at the time of investment), including
Rule 144A securities.
(10) A minimum of 100,000 Shares for
the Fund will be outstanding at the
commencement of trading on the
Exchange.
This approval order is based on all of
the Exchange’s representations,
including those set forth above and in
the Notice, and the Exchange’s
description of the Fund.
For the foregoing reasons, the
Commission finds that the proposed
rule change, as modified by Amendment
No. 1 thereto, is consistent with Section
32 17
CFR 240.10A–3.
Notice, supra note 4, 78 FR at 21478.
33 See
PO 00000
Frm 00110
Fmt 4703
Sfmt 4703
6(b)(5) of the Act 34 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 Exchange Act,35
that the proposed rule change (SR–
NYSEArca–2013–33), as modified by
Amendment No. 1 thereto, be, and it
hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.36
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–12162 Filed 5–21–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–69589; File No. SR–BYX–
2013–014]
Self-Regulatory Organizations; BATS
Y-Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Related to Fees for Use
of BATS Y-Exchange, Inc.
May 16, 2013.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on May 3,
2013, BATS Y-Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BYX’’) 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 Exchange has
designated the proposed rule change as
one establishing or changing a member
due, fee, or other charge imposed by the
Exchange under Section 19(b)(3)(A)(ii)
of the Act 3 and Rule 19b–4(f)(2)
thereunder,4 which renders the
proposed rule change effective upon
filing with the Commission. 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 to amend the
fee schedule applicable to Members 5
34 15
U.S.C. 78f(b)(5).
U.S.C. 78s(b)(2).
36 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(ii).
4 17 CFR 240.19b–4(f)(2).
5 A Member is any registered broker or dealer that
has been admitted to membership in the Exchange.
35 15
E:\FR\FM\22MYN1.SGM
22MYN1
]]>Agencies
[Federal Register Volume 78, Number 99 (Wednesday, May 22, 2013)]
[Notices]
[Pages 30372-30376]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-12162]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69591; File No. SR-NYSEArca-2013-33]
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting
Approval of Proposed Rule Change, as Modified by Amendment No. 1
Thereto, To List and Trade the International Bear ETF Under NYSE Arca
Equities Rule 8.600
May 16, 2013.
I. Introduction
On March 21, 2013, 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'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to list and trade shares (``Shares'') of the
International Bear ETF (``Fund'') under NYSE Arca Equities Rule 8.600.
On April 3, 2013, the Exchange filed Amendment No. 1 to the proposed
rule change.\3\ The proposed rule change, as modified by Amendment No.
1 thereto, was published for comment in the Federal Register on April
10, 2013.\4\ The Commission received no comments on the proposal. This
order approves the proposed rule change, as modified by Amendment No. 1
thereto.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ In Amendment No. 1, the Exchange made certain technical
changes to the proposed rule change.
\4\ See Securities Exchange Act Release No. 69303 (April 4,
2013), 78 FR 21475 (``Notice'').
---------------------------------------------------------------------------
II. Description of the Proposal
The Exchange proposes to list and trade Shares of the Fund under
NYSE Arca Equities Rule 8.600, which governs the listing and trading of
Managed Fund Shares. The Shares will be offered by AdvisorShares Trust
(``Trust''), a statutory trust organized under the laws of the State of
Delaware and registered
[[Page 30373]]
with the Commission as an open-end management investment company.\5\
The investment adviser to the Fund is AdvisorShares Investments, LLC
(``Adviser''). The Fund will have a sub-adviser (``Sub-Adviser'') that
provides day-to-day portfolio management of the Fund. Foreside Fund
Services, LLC will be the principal underwriter and distributor of the
Fund's Shares. The Bank of New York Mellon will serve as the
administrator, custodian, transfer agent, and accounting agent for the
Fund. According to the Exchange, the Adviser is not affiliated with a
broker-dealer.\6\
---------------------------------------------------------------------------
\5\ The Trust is registered under the Investment Company Act of
1940 (``1940 Act''). On October 19, 2012, the Trust filed with the
Commission an amendment to its registration statement on Form N-1A
under the Securities Act of 1933 and the 1940 Act relating to the
Fund (File Nos. 333-157876 and 811-22110) (``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).
\6\ See NYSE Arca Equities Rule 8.600, Commentary .06. In the
event (a) the Adviser becomes newly affiliated with a broker-dealer,
(b) the Sub-Adviser is affiliated with a broker-dealer, or (c) 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.
---------------------------------------------------------------------------
Principle Investments
The Sub-Adviser will seek to achieve the Fund's investment
objective by short selling a portfolio of foreign equity securities,
U.S. exchange-listed and traded equity securities of non-U.S.
organizations, and American Depositary Receipts (``ADRs''). The Fund
may invest in such equity securities of any capitalization range and in
any market sector at any time as necessary to seek to achieve the
Fund's investment objective. Under normal circumstances,\7\ at least
80% of the Fund's net assets will be such equity securities, which the
Fund will short sell.
---------------------------------------------------------------------------
\7\ The term ``under normal circumstances'' includes, but is not
limited to, the absence of adverse market, economic, political or
other conditions, including 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 be actively managed and thus will not seek to
replicate the performance of a specified passive index of securities.
Instead, it will use an active investment strategy to seek to meet its
investment objective. The Sub-Adviser, subject to the oversight of the
Adviser and the Board of Trustees, will have discretion on a daily
basis to manage the Fund's portfolio in accordance with the Fund's
investment objective and investment policies. The Sub-Adviser will
utilize various fundamental and technical research techniques in
security selection. In selecting short positions, the Sub-Adviser will
seek to identify securities that may be overvalued and due for capital
depreciation. Once a position is included in the Fund's portfolio, it
will be subject to regular fundamental and technical risk management
review.
The equity securities in which the Fund may invest consist of
common stocks, preferred stocks, warrants to acquire common stock,
securities convertible into common stock, investments in master limited
partnerships, rights, and REITs. The Fund may transact in equity
securities traded in the U.S. on registered exchanges or, in the case
of ADRs, the over-the-counter market. The Fund may short sell up to 10%
of its total assets in unsponsored ADRs. The Fund may invest in the
equity securities of foreign issuers, including the securities of
foreign issuers in emerging market countries.\8\
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\8\ Emerging or developing markets exist in countries that are
considered to be in the initial stages of industrialization. The
Fund will invest only in foreign equity securities that trade in
markets that are members of the Intermarket Surveillance Group
(``ISG'') or are parties to a comprehensive surveillance sharing
agreement with the Exchange.
---------------------------------------------------------------------------
The Fund may invest in issuers located outside the United States
directly, or in financial instruments that are indirectly linked to the
performance of foreign issuers. Examples of such financial instruments
include ADRs, Global Depositary Receipts (``GDRs''), European
Depositary Receipts (``EDRs''), International Depository Receipts
(``IDRs''), ``ordinary shares,'' and ``New York shares.'' \9\ Except
for up to 10% of ADRs, which may be unsponsored, such financial
instruments will all be listed and traded on registered exchanges in
the U.S. or markets that are members of the ISG or are parties to a
comprehensive surveillance sharing agreement with the Exchange.
---------------------------------------------------------------------------
\9\ ADRs are U.S. dollar denominated receipts typically issued
by U.S. banks and trust companies that evidence ownership of
underlying securities issued by a foreign issuer. The underlying
securities may not necessarily be denominated in the same currency
as the securities into which they may be converted. The underlying
securities are held in trust by a custodian bank or similar
financial institution in the issuer's home country. The depositary
bank may not have physical custody of the underlying securities at
all times and may charge fees for various services, including
forwarding dividends and interest and corporate actions. Generally,
ADRs in registered form are designed for use in domestic securities
markets and are traded on exchanges or over-the-counter in the U.S.
GDRs, EDRs, and IDRs are similar to ADRs in that they are
certificates evidencing ownership of shares of a foreign issuer,
however, GDRs, EDRs, and IDRs may be issued in bearer form and
denominated in other currencies, and are generally designed for use
in specific or multiple securities markets outside the U.S. EDRs,
for example, are designed for use in European securities markets,
while GDRs are designed for use throughout the world. Ordinary
shares are shares of foreign issuers that are traded abroad and on a
U.S. exchange. New York shares are shares that a foreign issuer has
allocated for trading in the U.S. ADRs, ordinary shares, and New
York shares all may be purchased with and sold for U.S. dollars.
---------------------------------------------------------------------------
The Fund may engage regularly in short sales transactions in which
the Fund sells a security it does not own. To complete such a
transaction, the Fund must borrow or otherwise obtain the security to
make delivery to the buyer. The Fund then is obligated to replace the
security borrowed by purchasing the security at the market price at the
time of replacement. The price at such time may be more or less than
the price at which the security was sold by the Fund. Until the
security is replaced, the Fund will be required to pay to the lender
amounts equal to any dividends or interest, which accrue during the
period of the loan. To borrow the security, the Fund also may be
required to pay a premium, which would increase the cost of the
security sold. The Fund may also use repurchase agreements to satisfy
delivery obligations in short sales transactions. The proceeds of the
short sale will be retained by the broker, to the extent necessary to
meet the margin requirements, until the short position is closed out.
Until the Fund closes its short position or replaces the borrowed
security, the Fund will: (a) Maintain a segregated account containing
cash or liquid securities at such a level that (i) the amount deposited
in the account plus the amount deposited with the broker as collateral
will equal the current value of the security sold short and (ii) the
amount deposited in the segregated account plus the amount deposited
with the broker as collateral will not be less than the market value of
the security at the time the security was sold short; or (b) otherwise
cover the Fund's short position. The Fund may use up to 100% of its
portfolio to engage in short sales transactions and collateralize its
open short positions.
Other Investments
While the Fund will invest at least 80% of its assets as described
above, the Fund may invest in certain other investments, as described
below. The
[[Page 30374]]
Fund may invest in exchange-traded funds (``ETFs'') registered pursuant
to the 1940 Act, exchange-traded notes (``ETNs''),\10\ and other
exchange-traded products (together with ETFs and ETNs, collectively,
``ETPs'').\11\ The Fund will invest only in ETPs that trade in markets
that are members of the ISG or are parties to a comprehensive
surveillance sharing agreement with the Exchange.
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\10\ ETNs are senior, unsecured unsubordinated debt securities
issued by an underwriting bank that are designed to provide returns
that are linked to a particular benchmark less investor fees. ETNs
have a maturity date and, generally, are backed only by the
creditworthiness of the issuer. It is expected that the issuer's
credit rating will be investment grade at the time of investment.
\11\ ETPs may 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 ETPs all will be listed and traded in the U.S. on registered
exchanges. The Fund may invest in the securities of 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 Fund may invest in ETPs that
are pooled investment vehicles not registered pursuant to the 1940
Act. Closed-end funds are pooled investment vehicles that are
registered under the 1940 Act and whose shares are listed and traded
on U.S. national securities exchanges.
---------------------------------------------------------------------------
The Fund may invest in several different types of investment
companies from time to time, including mutual funds and business
development companies (``BDCs''),\12\ when the Adviser or the Sub-
Adviser believes such an investment is in the best interests of the
Fund and its shareholders. For example, the Fund may elect to invest in
another investment company when such an investment presents a more
efficient investment option than buying securities individually. The
Fund also may invest in investment companies that are included as
components of an index, such as BDCs, to seek to track the performance
of that index. The Fund will invest only in BDCs that trade in markets
that are members of the ISG or are parties to a comprehensive
surveillance sharing agreement with the Exchange.
---------------------------------------------------------------------------
\12\ According to the Exchange, a BDC is a less common type of
closed-end investment company that more closely resembles an
operating company than a typical investment company. BDCs generally
focus on investing in, and providing managerial assistance to,
small, developing, financially troubled, private companies or other
companies that may have value that can be realized over time and
with management assistance.
---------------------------------------------------------------------------
The Fund may invest, under normal circumstances, up to 10% of its
net assets in debt securities. Debt securities include a variety of
fixed income obligations, including, but not limited to, corporate debt
securities, government securities, municipal securities, convertible
securities, and mortgage-backed securities. Debt securities include
investment-grade securities, non-investment-grade securities, and
unrated securities. The Fund may invest in non-investment-grade
securities.\13\ The Fund may invest in variable and floating rate
securities. On a day-to-day basis, the Fund may hold U.S. government
securities,\14\ short-term high quality fixed income securities, money
market instruments, overnight and fixed-term repurchase agreements,
cash, and cash equivalents with maturities of one year or less for
investment purposes and to cover its short positions.
---------------------------------------------------------------------------
\13\ Non-investment-grade securities, also referred to as
``high-yield securities'' or ``junk bonds,'' are debt securities
that are rated lower than the four highest rating categories by a
nationally recognized statistical rating organization (for example,
lower than Baa3 by Moody's Investors Service, Inc. or lower than
BBB- by Standard & Poor's, a division of The McGraw-Hill Companies,
Inc.) or are determined to be of comparable quality by the Adviser
or the Sub-Adviser.
\14\ The Fund may invest in U.S. government securities and U.S.
Treasury zero-coupon bonds. Securities issued or guaranteed by the
U.S. government or its agencies or instrumentalities include U.S.
Treasury securities, which are backed by the full faith and credit
of the U.S. Treasury and which differ only in their interest rates,
maturities, and times of issuance; U.S. Treasury bills, which have
initial maturities of one-year or less; U.S. Treasury notes, which
have initial maturities of one to ten years; and U.S. Treasury
bonds, which generally have initial maturities of greater than ten
years.
---------------------------------------------------------------------------
The Fund may enter into repurchase agreements with financial
institutions, which may be deemed to be loans.\15\ The Fund may enter
into reverse repurchase agreements without limit as part of the Fund's
investment strategy.\16\ However, the Fund does not expect to engage,
under normal circumstances, in reverse repurchase agreements with
respect to more than 33\1/3\% of its assets. The Fund also may invest
directly and indirectly in foreign currencies.
---------------------------------------------------------------------------
\15\ The Fund follows certain procedures designed to minimize
the risks inherent in such agreements. These procedures include
effecting repurchase transactions only with large, well-capitalized
and well-established financial institutions whose condition will be
continually monitored by the Sub-Adviser. In addition, the value of
the collateral underlying the repurchase agreement will always be at
least equal to the repurchase price, including any accrued interest
earned on the repurchase agreement. It is the current policy of the
Fund not to invest in repurchase agreements that do not mature
within seven days if any such investment, together with any other
illiquid assets held by the Fund, amounts to more than 15% of the
Fund's net assets.
\16\ 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 will establish a segregated account with the Trust's custodian
bank in which the Fund will maintain cash, cash equivalents, or
other portfolio securities equal in value to the Fund's obligations
in respect of reverse repurchase agreements. Such reverse repurchase
agreements could be deemed to be a borrowing, but are not senior
securities.
---------------------------------------------------------------------------
The Fund, in the ordinary course of business, may purchase
securities on a when-issued or delayed-delivery basis (i.e., delivery
and payment can take place between a month and 120 days after the date
of the transaction). These securities are subject to market fluctuation
and no interest accrues to the purchaser during this period. At the
time the Fund makes the commitment to purchase securities on a when-
issued or delayed-delivery basis, the Fund will record the transaction
and thereafter reflect the value of the securities, each day, in
determining the Fund's net asset value (``NAV''). The Fund will not
purchase securities on a when-issued or delayed-delivery basis if, as a
result, more than 15% of the Fund's net assets would be so invested.
To respond to adverse market, economic, political or other
conditions, the Fund may refrain from short selling and increase its
investment in U.S. government securities, short-term high quality fixed
income securities, money market instruments, overnight and fixed-term
repurchase agreements, cash and cash equivalents with maturities of one
year or less. The Fund may hold little or no short positions for
extended periods, depending on the Sub-Adviser's assessment of market
conditions.
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. In addition, 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. The Fund will not invest 25% or more of its total assets in
any investment company that so concentrates. This limitation does not
apply to investments in securities issued or guaranteed by the U.S.
[[Page 30375]]
Government, its agencies or instrumentalities, or shares of investment
companies.
The Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid securities (calculated at the time of investment),
including Rule 144A securities. The Fund will monitor its portfolio
liquidity on an ongoing basis to determine whether, in light of current
circumstances, an adequate level of liquidity is being maintained, and
will consider taking appropriate steps in order to maintain adequate
liquidity if, through a change in values, net assets, or other
circumstances, more than 15% of the Fund's net assets are held in
illiquid securities. Illiquid securities include securities subject to
contractual or other restrictions on resale and other instruments that
lack readily available markets as determined in accordance with
Commission staff guidance.
The Fund will seek to qualify for treatment as a Regulated
Investment Company under the Internal Revenue Code. The Fund will not
invest in options contracts, futures contracts, or swap agreements. The
Fund's investments will be consistent with the Fund's investment
objective and will not be used to enhance leverage.
Additional information regarding the Fund; Shares; investment
objective, strategies, methodology, and restrictions; risks; fees and
expenses; creations and redemptions of Shares; availability of
information; trading rules and halts; and surveillance procedures,
among other things, can be found in the Registration Statement and in
the Notice, as applicable.\17\
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\17\ See Notice and Registration Statement, supra notes 4 and 5,
respectively.
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III. Discussion and Commission's Findings
After careful review, the Commission finds that the Exchange's
proposal to list and trade the Shares is consistent with the Exchange
Act and the rules and regulations thereunder applicable to a national
securities exchange.\18\ In particular, the Commission finds that the
proposed rule change is consistent with Section 6(b)(5) of the Exchange
Act,\19\ which requires, among other things, that the Exchange's rules
be designed to promote just and equitable principles of trade, 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 Fund
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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\18\ 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).
\19\ 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
Exchange Act,\20\ 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, and for the underlying
securities, from the securities exchanges on which they are listed.
Information regarding the equity securities, debt securities, fixed
income instruments, and other investments held by the Fund will be
available from the U.S. and non-U.S. securities exchanges trading such
securities, automated quotation systems, published or other public
sources, or on-line information services such as Bloomberg or Reuters.
The Portfolio Indicative Value, as defined in NYSE Arca Equities Rule
8.600(c)(3), will be widely disseminated at least every 15 seconds
during the Core Trading Session through one or more major market data
vendors.\21\ On each business day, before commencement of trading in
Shares in the Core Trading Session on the Exchange, the Fund's Web site
will disclose 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.\22\ The Fund will calculate NAV
once each business day as of the regularly scheduled close of trading
on the New York Stock Exchange, LLC (normally 4:00 p.m. Eastern Time).
The Web site for the Fund will include a form of the prospectus for the
Fund and additional data relating to NAV and other applicable
quantitative information. 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,\23\ 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.\24\
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\20\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
\21\ See Notice, supra note 4, 78 FR at 21479. According to the
Exchange, several major market data vendors display and/or make
widely available Portfolio Indicative Values taken from CTA or other
data feeds
\22\ On a daily basis, the Fund's Web site will disclose for
each portfolio security and other financial instrument of the Fund
the following information: ticker symbol (if applicable); name of
security and financial instrument; number of shares and dollar value
of securities and financial instruments 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
\23\ See Notice, supra note 4, 78 FR at 21479.
\24\ See id.
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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 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.\25\ 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,\26\ and trading in the Shares will be subject to NYSE Arca
Equities Rule 8.600(d)(2)(D), which sets forth additional circumstances
under which Shares of the Fund may be halted.\27\ The Exchange states
that it has a general policy prohibiting the distribution of material,
non-public information by its employees. Consistent with NYSE Arca
Equities Rule 8.600(d)(2)(B)(ii), the Adviser, as the Reporting
Authority, must implement and maintain, or be subject to, procedures
designed to prevent the use and dissemination of material, non-public
information regarding the actual components of the Fund's
portfolio.\28\ The Exchange states that the Adviser is not affiliated
with a broker-dealer.\29\
[[Page 30376]]
Moreover, prior to the commencement of trading, the Exchange will
inform its Equity Trading Permit Holders in an Information Bulletin of
the special characteristics and risks associated with trading the
Shares. The Commission notes that the Financial Industry Regulatory
Authority (``FINRA''), on behalf of the Exchange,\30\ will communicate
as needed regarding trading in the Shares with other markets that are
members of the ISG or with which the Exchange has in place a
comprehensive surveillance sharing agreement.
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\25\ See id.
\26\ These reasons may include: (1) The extent to which trading
is not occurring in the securities and/or the financial instruments
composing 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.
\27\ See NYSE Arca Equities Rule 8.600(d)(2)(D).
\28\ See NYSE Arca Equities Rule 8.600(d)(2)(B)(ii).
\29\ An investment adviser to an open-end fund is required to be
registered under the Investment Advisers Act of 1940 (``Advisers
Act''). As a result, the Adviser and Sub-Adviser and their related
personnel are subject to the provisions of Rule 204A-1 under the
Advisers Act relating to codes of ethics. This Rule requires
investment advisers to adopt a code of ethics that reflects the
fiduciary nature of the relationship to clients as well as
compliance with other applicable securities laws. Accordingly,
procedures designed to prevent the communication and misuse of non-
public information by an investment adviser must be consistent with
Rule 204A-1 under the Advisers Act. In addition, Rule 206(4)-7 under
the Advisers Act makes it unlawful for an investment adviser to
provide investment advice to clients unless such investment adviser
has (i) Adopted and implemented written policies and procedures
reasonably designed to prevent violation, by the investment adviser
and its supervised persons, of the Advisers Act and the Commission
rules adopted thereunder; (ii) implemented, at a minimum, an annual
review regarding the adequacy of the policies and procedures
established pursuant to subparagraph (i) above and the effectiveness
of their implementation; and (iii) designated an individual (who is
a supervised person) responsible for administering the policies and
procedures adopted under subparagraph (i) above.
\30\ The Exchange states that, while FINRA surveils trading on
the Exchange pursuant to a regulatory services agreement, the
Exchange is responsible for FINRA's performance under this
regulatory services agreement.
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The Exchange 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 continuing listing
criteria under NYSE Arca Equities Rule 8.600.
(2) The Exchange represents that trading in the Shares will be
subject to the existing trading surveillances, administered by FINRA on
behalf of the Exchange, which are designed to detect violations of
Exchange rules and applicable federal securities laws and 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.
(3) Except for up to 10% of ADRs, which may be unsponsored, the
Fund will invest only in equity securities (including financial
instruments that are linked to the performance of foreign issuers),\31\
ETPs, and BDCs that trade in markets that are members of the ISG or are
parties to a comprehensive surveillance sharing agreement with the
Exchange.
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\31\ See notes 8 and 9, supra, and accompanying text.
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(4) The Exchange has appropriate rules to facilitate transactions
in the Shares during all trading sessions.
(5) Prior to the commencement of trading, the Exchange will inform
its Equity Trading Permit Holders in an Information Bulletin of the
special characteristics and risks associated with trading the Shares.
Specifically, the Information Bulletin will discuss the following: (a)
The procedures for purchases and redemptions of Shares and that Shares
are not individually redeemable; (b) NYSE Arca Equities Rule 9.2(a),
which imposes a duty of due diligence on its Equity Trading Permit
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 Portfolio
Indicative Value will not be calculated or publicly disseminated; (d)
how information regarding the Portfolio Indicative Value is
disseminated; (e) the requirement that Equity Trading Permit Holders
deliver a prospectus to investors purchasing newly issued Shares prior
to or concurrently with the confirmation of a transaction; and (f)
trading information.
(6) For initial and continued listing, the Fund will be in
compliance with Rule 10A-3 under the Exchange Act,\32\ as provided by
NYSE Arca Equities Rule 5.3.\33\
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\32\ 17 CFR 240.10A-3.
\33\ See Notice, supra note 4, 78 FR at 21478.
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(7) The Fund will not invest in options contracts, futures
contracts, or swap agreements.
(8) The Fund's investments will be consistent with its respective
investment objective and will not be used to enhance leverage.
(9) The Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid securities (calculated at the time of investment),
including Rule 144A securities.
(10) A minimum of 100,000 Shares for the Fund will be outstanding
at the commencement of trading on the Exchange.
This approval order is based on all of the Exchange's representations,
including those set forth above and in the Notice, and the Exchange's
description of the Fund.
For the foregoing reasons, the Commission finds that the proposed
rule change, as modified by Amendment No. 1 thereto, is consistent with
Section 6(b)(5) of the Act \34\ and the rules and regulations
thereunder applicable to a national securities exchange.
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\34\ 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
Exchange Act,\35\ that the proposed rule change (SR-NYSEArca-2013-33),
as modified by Amendment No. 1 thereto, be, and it hereby is, approved.
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\35\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\36\
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\36\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-12162 Filed 5-21-13; 8:45 am]
BILLING CODE 8011-01-P
