Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a Proposed Rule Change, as Modified by Amendment No. 1, Relating to the Listing and Trading of Shares of the AdvisorShares Athena High Dividend ETF Under NYSE Arca Equities Rule 8.600, 44236-44241 [2014-17879]
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Federal Register / Vol. 79, No. 146 / Wednesday, July 30, 2014 / Notices
which could potentially enhance
competition among service providers.31
Nasdaq proposes to allow a company
that applies for listing on Nasdaq before
July 31, 2014, and lists before
September 30, 2014, to elect to receive
services under the terms of the rule as
in effect before the amendment. Nasdaq
notes that companies near a listing or
switch may have relied upon the
services described in the previous
version of the rule in making their
decision to list on Nasdaq.32 The IAG
Letter received argues that Nasdaq
should go further and grandfather under
the old rule any company that can
demonstrate that it has been offered the
services under the prior version of the
rule.33 This commenter argues that
being forced to file an application by
July 31, 2014 and list with Nasdaq by
September 30, 2013 in order to receive
the services offered under the prior
version of the rule will disadvantage
companies utilizing the confidentiality
protection offered under the JOBS Act.34
In response, Nasdaq states its continued
belief that the grandfather period as
proposed is appropriate and consistent
with the Act and fully addresses the
situation where companies made a
listing decision based, in part, on the
services provided under the old rule.35
Nasdaq states its view that companies
that have not applied to list by July 31,
2014 will be able to make their listing
decision based on the services provided
under the amended rule and would,
therefore, not be disadvantaged.36 In
addition, Nasdaq states that the
commenter’s suggestion would result in
unfair treatment of certain companies
that read the current rule but did not
meet with Nasdaq, introduces
unnecessary complexity into the rule by
having to indefinitely track such
companies, and would be impractical to
administer.37 The Commission agrees
with Nasdaq that the grandfather period
proposed is consistent with the Act. The
Commission believes that the
application and listing deadlines
proposed by Nasdaq in order to receive
services under the prior version of the
rule are reasonable, and that adequate
notice of the cutoff dates has been
provided to issuers. The Commission
31 See
Notice, supra note 3, 79 FR at 33241.
at 33240.
33 See IAG Letter, supra note 4, at 2. The IAG also
commented on the reduction in the dollar value of
the services and encouraged the Commission to
remain vigilant on this issue. For the reasons
discussed above, the Commission believes that
Nasdaq’s proposed changes are consistent with the
Act.
34 Id. at 1.
35 See Nasdaq Response Letter, supra note 5.
36 Id.
37 Id.
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32 Id.
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notes that the Notice of the proposal,
which clearly sets forth the grandfather
provision, was published in the Federal
Register on June 10, 2014.38
Finally, the Commission believes that
is reasonable, and in fact required by
Section 19(b) of the Exchange Act, that
Nasdaq amend IM–5900–7 to update the
rule text to reflect the actual retail
values of the services offered, which
have changed since the original
adoption of the rule.39 This provides
greater transparency to Nasdaq’s rules
and the fees applicable to companies
listing on the Exchange.
V. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,40 that the
proposed rule change (SR–NASDAQ–
2014–058) be, and it hereby is,
approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.41
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–17882 Filed 7–29–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–72665; File No. SR–
NYSEArca–2014–59]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Order Approving a
Proposed Rule Change, as Modified by
Amendment No. 1, Relating to the
Listing and Trading of Shares of the
AdvisorShares Athena High Dividend
ETF Under NYSE Arca Equities Rule
8.600
July 24, 2014.
I. Introduction
On May 20, 2014, 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
supra note 3.
would expect Nasdaq, consistent with
Section 19(b) of the Act, to periodically update the
retail values of services offered should they change.
This will help to provide transparency to listed
companies on the value of the free services they
receive and the actual costs associated with listing
on Nasdaq.
40 15 U.S.C. 78s(b)(2).
41 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
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38 See
39 We
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AdvisorShares Athena High Dividend
ETF (‘‘Fund’’) under NYSE Arca
Equities Rule 8.600. The proposed rule
change was published for comment in
the Federal Register on June 9, 2014.3
On July 23, 2014, the Exchange filed
Amendment No. 1 to the proposed rule
change.4 The Commission received no
comments on the proposal. This order
approves the proposed rule change, as
modified by Amendment No. 1.
II. Description of the Proposal
The Exchange proposes to list and
trade Shares of the Fund under NYSE
Arca Equities Rule 8.600 (‘‘Managed
Fund Shares’’), which governs the
listing and trading of Managed Fund
Shares on the Exchange. The Shares will
be offered by AdvisorShares Trust
(‘‘Trust’’), a statutory trust organized
under the laws of the State of Delaware
and registered with the Commission as
an open-end management investment
company.5 AdvisorShares Investments,
LLC (‘‘Adviser’’) will be the investment
adviser to the Fund, and AthenaInvest
Advisors LLC (‘‘Sub-Adviser’’) will be
the Fund’s sub-adviser and will provide
day-to-day portfolio management of the
Fund.6 The Bank of New York Mellon
(‘‘Administrator’’) will serve as the
administrator, custodian, transfer agent
and accounting agent for the Fund.
3 See Securities Exchange Act Release No. 72298
(June 3, 2014), 79 FR 33024 (‘‘Notice’’).
4 In Amendment No. 1, the Exchange clarifies that
the Fund’s investments in reverse repurchase
agreements will not be used to enhance leverage.
Amendment No. 1 provides clarification to the
proposed rule change, and because it does not
materially affect the substance of the proposed rule
change, or raise any unique or novel regulatory
issues, Amendment No. 1 does not require notice
and comment.
5 The Trust is registered under the Investment
Company Act of 1940 (‘‘1940 Act’’). The Exchange
states that on February 18, 2014, the Trust filed
with the Commission an amendment to its
registration statement on Form N–1A under the
Securities Act of 1933 (15 U.S.C. 77a) (‘‘Securities
Act’’) and under the 1940 Act relating to the Fund
(File Nos. 333–157876 and 811–22110)
(‘‘Registration Statement’’). In addition, according
to the Exchange, 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 The Exchange represents that neither the
Adviser nor the Sub-Adviser is registered as a
broker-dealer or is affiliated with a broker-dealer.
The Exchange states that in the event (a) the
Adviser or the Sub-Adviser becomes a registered
broker-dealer or becomes newly affiliated with a
broker-dealer or (b) any new adviser or sub-adviser
is a registered broker-dealer or becomes affiliated
with a broker-dealer, such adviser or sub-adviser
will implement a fire wall with respect to its
relevant personnel or its broker-dealer affiliate
regarding access to information concerning the
composition of or changes to the portfolio, and the
adviser or sub-adviser will be subject to procedures
designed to prevent the use and dissemination of
material non-public information regarding the
portfolio.
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Foreside Fund Services, LLC will be the
principal underwriter and distributor of
the Fund’s Shares.
The Exchange has made the following
representations and statements in
describing the Fund and its investment
strategy, including other portfolio
holdings and investment restrictions.7
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A. Principal Investments (Under Normal
Market Conditions) 8
According to the Exchange, the Fund
will seek long-term capital appreciation.
The Fund will invest substantially all of
the Fund’s assets in (1) U.S. and foreign
common stock of issuers of any
capitalization range, and (2) American
Depositary Receipts (‘‘ADRs’’), Global
Depositary Receipts (‘‘GDRs’’), European
Depositary Receipts (‘‘EDRs’’) and
International Depository Receipts
(‘‘IDRs’’, and together with ADRs, GDRs,
and EDRs, ‘‘Depositary Receipts’’) that
provide investment exposure to global
equity markets.9 Other than
7 The Commission notes that additional
information regarding the Fund, the Trust, and the
Shares, including investment strategies, risks,
creation and redemption procedures, fees, portfolio
holdings disclosure policies, distributions, and
taxes, among other things, can be found in the
Notice and the Registration Statement, as
applicable. See Notice, supra note 3, and
Registration Statement, supra note 5, respectively.
8 The Exchange states that the term ‘‘under
normal market conditions’’ means, without
limitation, 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.
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
equity securities 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. ADRs may be purchased with
and sold for U.S. dollars. ADRs may be sponsored
or unsponsored, but unsponsored ADRs will not
exceed 10% of the Fund’s net assets. Not more than
10% of the net assets of the Fund in the aggregate
shall consist of equity securities whose principal
market is not a member of the Intermarket
Surveillance Group (‘‘ISG’’) or is a market with
which the Exchange does not have a comprehensive
surveillance sharing agreement.
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unsponsored ADRs, all U.S. and foreign
common stocks and Depositary Receipts
in which the Fund will invest will be
exchange-traded.
The Exchange states that the SubAdviser will manage the Fund’s
portfolio based on its patented
Behavioral Portfolio Management
methodology. The Sub-Adviser will
start by applying a quantitative
behavioral screen that narrows the
equity universe to securities held in
large part by mutual funds the SubAdviser believes to be most consistently
pursuing their investment strategy. The
Sub-Adviser then will narrow this
universe by a high dividend yield
criteria and select positions for the
portfolio based on the highest combined
ranking of the two dimensions.
B. Other Fund Investments
The Exchange states that, while the
Fund under normal market conditions
will invest substantially all of the
Fund’s assets in exchange-traded U.S.
and foreign common stocks and
Depositary Receipts, the Fund may
invest in other securities and financial
instruments, as described below.
The Exchange represents that the
Fund may purchase equity securities
(other than U.S. and foreign common
stocks and Depositary Receipts) traded
in the U.S. on registered exchanges,
which would include preferred stock,
rights, warrants, convertible
securities,10 securities of master limited
partnerships (‘‘MLPs’’),11 securities of
real estate investment trusts
(‘‘REITs’’),12 and shares of closed-end
funds.13 The Fund may invest in
affiliated and unaffiliated exchangetraded funds (‘‘ETFs’’) 14 and exchange10 Convertible securities are bonds, debentures,
notes, preferred stocks or other securities that may
be converted or exchanged (by the holder or by the
issuer) into shares of the underlying common stock
(or cash or securities of equivalent value) at a stated
exchange ratio.
11 MLPs are limited partnerships in which the
ownership units are publicly traded.
12 REITs are pooled investment vehicles which
invest primarily in real estate or real estate related
loans. REITs are generally classified as equity
REITs, mortgage REITs or a combination of equity
and mortgage REITs.
13 A closed-end fund is a pooled investment
vehicle that is registered under the 1940 Act and
whose shares are listed and traded on U.S. national
securities exchanges.
14 For purposes of this filing, ETFs include
Investment Company Units (as described in NYSE
Arca Equities Rule 5.2(j)(3)); Portfolio Depositary
Receipts (as described in NYSE Arca Equities Rule
8.100); and Managed Fund Shares (as described in
NYSE Arca Equities Rule 8.600). All the ETFs in
which the Fund will invest will be listed and traded
on national securities exchanges. The Fund will
invest in the securities of ETFs 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
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44237
traded notes (‘‘ETNs’’).15 The Fund also
may invest in the securities of exchangetraded pooled investment vehicles
(together with ETFs and ETNs, ‘‘ETPs’’)
that are not investment companies and
are not required to comply with the
provisions of the 1940 Act. These
pooled vehicles typically hold
commodities, such as gold or oil,
currency, or other property that is itself
not a security.16
The Exchange states that on a day-today basis, the Fund may hold money
market instruments, cash, other cash
equivalents, and ETPs that invest in
these and other highly liquid
instruments. Further, the Exchange
represents that the Fund may invest in
the securities of other investment
companies, including mutual funds and
business development companies
(‘‘BDCs’’),17 to the extent that such an
investment would be 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
Subchapter M of the Internal Revenue
Code.
The Exchange represents that the
Fund may invest in variable and floating
rate instruments, which involve certain
obligations that may carry variable or
floating rates of interest, and may
involve a conditional or unconditional
demand feature.18 The Fund may invest
interpretation thereof. The Fund will only make
such investments in conformity with the
requirements of Regulation M of the Internal
Revenue Code of 1986, as amended (‘‘Internal
Revenue Code’’). While the Fund may invest in
inverse ETFs, the Fund will not invest in leveraged
or inverse leveraged (e.g., 2X, –2X, 3X or –3X) ETFs.
15 ETNs include securities listed and traded on
the Exchange under NYSE Arca Equities Rule
5.2(j)(6) (‘‘Index-Linked Securities’’). 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.
16 Such pooled investment vehicles include 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); and Trust Units (as described in NYSE
Arca Equities Rule 8.500).
17 A BDC is a less common type of exchangetraded 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, financiallytroubled, private companies or other companies
that may have value that can be realized over time
and with management assistance.
18 The Exchange states that such instruments bear
interest at rates which are not fixed, but which vary
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in bank obligations, which would
include certificates of deposit, bankers’
acceptances, and fixed time deposits.19
The Exchange also states that the Fund
may invest in municipal securities.
The Exchange represents that the
Fund may seek to invest in corporate
debt securities,20 including debt issued
by domestic or foreign companies of all
kinds, and including those with
small-, mid-, and large-capitalizations.
The Fund also may invest in corporate
debt securities representative of one or
more high-yield bond or credit
derivative indices. The Exchange
represents that the Fund may invest in
all grades of corporate debt securities,
including below investment grade (such
debt may carry variable or floating rates
of interest) and unrated corporate debt
securities.
The Fund may invest in noninvestment-grade debt securities 21 and
unrated debt securities. The Exchange
represents that the creditworthiness of
the issuer, as well as any financial
institution or other party responsible for
payments on the security, will be
analyzed to determine whether to
purchase unrated bonds.
The Exchange represents that the
Fund may invest up to 10% of net assets
with changes in specified market rates or indices,
and that the interest rates on these securities may
be reset daily, weekly, quarterly, or some other reset
period, and may have a set floor or ceiling on
interest rate changes. The Exchange states that a
demand instrument with a demand notice
exceeding seven days may be considered illiquid if
there is no secondary market for such security.
19 Certificates of deposit are negotiable certificates
issued against funds deposited in a commercial
bank for a definite period of time and earning a
specified return. Bankers’ acceptances are
negotiable drafts or bills of exchange, normally
drawn by an importer or exporter to pay for specific
merchandise, which are ‘‘accepted’’ by a bank,
meaning, in effect, that the bank unconditionally
agrees to pay the face value of the instrument on
maturity. Fixed time deposits are bank obligations
payable at a stated maturity date and bearing
interest at a fixed rate.
20 Corporate debt securities are typically fixedincome securities issued by businesses to finance
their operations. Notes, bonds, debentures and
commercial paper are the most common types of
corporate debt securities. The primary differences
between the different types of corporate debt
securities are their maturities and secured or
unsecured status. Commercial paper has the
shortest term and is usually unsecured. Commercial
paper is a short-term obligation with a maturity
ranging from one to 270 days issued by banks,
corporations and other borrowers. Such
investments are unsecured and usually discounted.
The Fund may invest in commercial paper rated
A–1 or A–2 by Standard and Poor’s Ratings Services
(‘‘S&P’’) or Prime-1 or Prime-2 by Moody’s Investors
Service, Inc. (‘‘Moody’s’’).
21 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 or lower than BBB- by S&P)
or are determined to be of comparable quality by
the Fund’s Sub-Adviser.
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in asset-backed and commercial
mortgaged-backed securities.22
The Fund may also invest in inflationindexed bonds.23 The Fund may invest
in U.S. government securities, including
U.S. Treasury securities. The Fund may
invest in separately traded principal and
interest components of securities
guaranteed or issued by the U.S.
government or its agencies,
instrumentalities, or sponsored
enterprises if such components trade
independently under the Separate
Trading of Registered Interest and
Principal of Securities program
(‘‘STRIPS’’) or any similar program
sponsored by the U.S. government.24
The Fund may invest in U.S. Treasury
zero-coupon bonds.25
The Fund may enter into repurchase
agreements with financial institutions,
which may be deemed to be loans. The
Exchange represents that the Fund will
follow certain procedures designed to
minimize the risks inherent in such
agreements, including 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 Exchange
represents that the value of the
collateral underlying the repurchase
agreements will always be at least equal
to the repurchase price, including any
accrued interest earned on the
repurchase agreement. The Exchange
states that the Fund will not 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, would
amount to more than 15% of the Fund’s
net assets. The Fund may also enter into
reverse repurchase agreements as part of
the Fund’s investment strategy.26 The
22 Asset-backed securities are securities backed by
installment contracts, credit-card receivables or
other assets. Commercial mortgage-backed
securities are securities backed by commercial real
estate properties. Both asset-backed and commercial
mortgage-backed securities represent interests in
‘‘pools’’ of assets in which payments of both
interest and principal on the securities are made on
a regular basis.
23 Inflation-indexed bonds are fixed income
securities whose principal value is periodically
adjusted according to the rate of inflation.
24 The Exchange states that STRIPS may be sold
as zero coupon securities.
25 The Exchange states that these securities are
U.S. Treasury bonds which have been stripped of
their unmatured interest coupons, the coupons
themselves, and receipts or certificates representing
interests in such stripped debt obligations and
coupons, and that interest is not paid in cash during
the term of these securities, but is accrued and paid
at maturity.
26 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.
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Exchange represents that the Fund’s
investments in reverse repurchase
agreements will not be used to enhance
leverage.27
C. Fund Investment Restrictions
The Fund will seek to qualify for
treatment as a Regulated Investment
Company under the Internal Revenue
Code.
The Fund may hold up to an aggregate
amount of 15% of its net assets in
illiquid assets (calculated at the time of
investment), including Rule 144A
securities deemed illiquid by the
Adviser or Sub-Adviser,28 in accordance
with Commission guidance. 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
assets. Illiquid assets 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 may not, 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 acquire more than 10% of the
outstanding voting securities of any one
issuer. For purposes of this policy, the
issuer of the underlying security will be
deemed to be the issuer of any
respective depositary receipt.
The Fund may not invest 25% or
more of its total assets in the securities
of one or more issuers conducting their
principal business activities in the same
industry or group of industries. This
limitation does not apply to investments
in securities issued or guaranteed by the
U.S. government, its agencies or
instrumentalities, or shares of
investment companies. The Fund will
27 See
supra note 4.
reaching liquidity decisions, the Adviser or
Sub-Adviser may consider the following factors:
The frequency of trades and quotes for the security;
the number of dealers wishing to purchase or sell
the security and the number of other potential
purchasers; dealer undertakings to make a market
in the security; and the nature of the security and
the nature of the marketplace in which it trades
(e.g., the time needed to dispose of the security, the
method of soliciting offers and the mechanics of
transfer).
28 In
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not invest 25% or more of its total assets
in any investment company that so
concentrates.
The Exchange represents that the
Fund will not invest in options, futures,
swaps or other derivatives. It further
represents that the Fund’s investments
will be consistent with the Fund’s
investment objective and will not be
used to enhance leverage.
mstockstill on DSK4VPTVN1PROD with NOTICES
III. Discussion and Commission
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.29 In
particular, the Commission finds that
the proposed rule change, as modified
by Amendment No. 1, is consistent with
Section 6(b)(5) of the Exchange Act,30
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.
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,31
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
of the Fund,32 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
29 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).
30 15 U.S.C. 78f(b)(5).
31 15 U.S.C. 78k–1(a)(1)(C)(iii).
32 According to the Exchange, the Portfolio
Indicative Value is based on current information
regarding the value of the securities and other assets
in the Disclosed Portfolio. The Portfolio Indicative
Value should not be viewed as a ‘‘real-time’’ update
of the NAV per Share of the Fund, which will be
calculated once per day.
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seconds during the Core Trading
Session.33 On each business day, before
commencement of trading in Shares in
the Core Trading Session on the
Exchange, the Fund will disclose on its
Web site the Disclosed Portfolio (as
defined in NYSE Arca Equities Rule
8.600(c)(2)) that will form the basis for
the Fund’s calculation of NAV at the
end of the business day.34 In addition,
a basket composition file, which
includes the security names and share
quantities (as applicable) required to be
delivered in exchange for the Fund’s
Shares, together with estimates and
actual cash components, will be
publicly disseminated daily prior to the
opening of the New York Stock
Exchange, LLC (‘‘NYSE’’) via the
National Securities Clearing
Corporation. The Administrator will
calculate the NAV and NAV per Share
of the Fund once each business day as
of the regularly scheduled close of
normal trading on the NYSE (normally,
4:00 p.m., Eastern Time).35 Information
33 The Exchange states that several major market
data vendors display or make widely available
Portfolio Indicative Values taken from the CTA or
other data feeds.
34 On a daily basis, the Adviser will disclose on
behalf of the Fund on the Fund’s Web site 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, if applicable; 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.
35 The NAV per Share of the Fund will be
computed by dividing the value of the net assets of
the Fund (the value of its total assets less total
liabilities) by the total number of Shares of the
Fund outstanding. Expenses and fees will be
accrued daily and taken into account for purposes
of determining NAV per Share. According to the
Exchange, price information for exchange-listed
securities, including common stocks, ETFs, ETNs,
closed-end funds, exchange-traded pooled
investment vehicles, Depositary Receipts, MLPs,
REITs, warrants, rights, preferred stocks, BDCs and
convertible securities will be valued at market
value, which will generally be determined using the
last reported official closing or last trading price on
the exchange or market on which the security is
primarily traded at the time of valuation or, if no
sale has occurred, at the last quoted bid price on
the primary market or exchange on which they are
traded. Other portfolio securities and assets for
which market quotations are not readily available
or determined to not represent the current fair value
will be valued based on fair value as determined in
good faith in accordance with procedures adopted
by the Trust’s Board of Trustees and in accordance
with the 1940 Act. Unsponsored ADRs will be
valued on the basis of the market closing price on
the exchange where the stock of the foreign issuer
that underlies the ADR is listed. Investment
company securities, other than ETFs and BDCs,
(including mutual funds), will be valued at NAV.
Domestic and foreign fixed income securities,
including U.S. government securities, repurchase
agreements, reverse repurchase agreement, variable
and floating rate securities, bank obligations,
corporate debt securities, zero-coupon bonds,
commercial paper, inflation-indexes bonds,
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44239
regarding market price and trading
volume of the Shares will be continually
available on a real-time basis throughout
the day on brokers’ computer screens
and other electronic services.
Information regarding the previous
day’s closing price and trading volume
information for the Shares will be
published daily in the financial section
of newspapers. Quotation and last sale
information for the U.S. exchange-listed
equity securities, including common
stocks, ETPs, closed-end funds,
exchange-traded pooled investment
vehicles, Depositary Receipts, MLPs,
REITs, warrants, rights, preferred stocks,
BDCs and convertible securities will be
available via the CTA high-speed line,
and will be available from the national
securities exchange on which they are
listed. Information regarding
unsponsored ADRs will be available
from major market data vendors. Intraday and closing price information
relating to the fixed income investments
of the Fund will be available from major
market data vendors. Price information
regarding investment company
securities will be available from on-line
sources and from the Web site for the
applicable investment company
securities. The Fund’s Web site will
include a form of the prospectus for the
Fund and additional data relating to
NAV and other applicable quantitative
information.
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 and the Disclosed Portfolio will be
made available to all market
participants at the same time. Trading in
the Shares of the Fund will be halted if
the circuit breaker parameters in NYSE
Arca Equities Rule 7.12 have been
reached. Trading in the Shares of the
Fund may be halted because of other
mortgage-backed securities and asset-backed
securities generally trade in the over-the-counter
market rather than on a securities exchange, and the
Fund will generally value these portfolio securities
by relying on independent pricing services. The
Fund’s pricing services will use valuation models
or matrix pricing to determine current value. In
general, pricing services use information with
respect to comparable bond and note transactions,
quotations from bond dealers or by reference to
other securities that are considered comparable in
such characteristics as rating, interest rate, maturity
date, option adjusted spread models, prepayment
projections, interest rate spreads and yield curves.
Matrix price is an estimated price or value for a
fixed-income security. Matrix pricing is considered
a form of fair value pricing.
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Federal Register / Vol. 79, No. 146 / Wednesday, July 30, 2014 / Notices
mstockstill on DSK4VPTVN1PROD with NOTICES
market conditions or for reasons that, in
the view of the Exchange, make trading
in the Shares inadvisable,36 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 trading in Shares of the
Fund may be halted. The Exchange
represents 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
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. In
addition, the Exchange represents that
neither the Adviser nor the Sub-Adviser
is registered as a broker-dealer or is
affiliated with a broker-dealer.37 Prior to
the commencement of trading, the
Exchange states that it will inform its
Equity Trading Permit Holders in an
Information Bulletin of the special
characteristics and risks associated with
trading the Shares.
The Exchange represents that trading
in the Shares will be subject to the
existing trading surveillances,
administered by the Financial Industry
Regulatory Authority (‘‘FINRA’’) on
behalf of the Exchange, which are
36 These reasons may include: (1) The extent to
which trading is not occurring in the securities and/
or the financial instruments comprising the
Disclosed Portfolio of the Fund; or (2) whether
other unusual conditions or circumstances
detrimental to the maintenance of a fair and orderly
market are present. 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.
37 See supra note 6. The Exchange states 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 Sub-Adviser and their related personnel are
subject to the provisions of Rule 204A–1 under the
Advisers Act relating to codes of ethics. This Rule
requires investment advisers to adopt a code of
ethics that reflects the fiduciary nature of the
relationship to clients, as well as compliance with
other applicable securities laws. Accordingly,
procedures designed to prevent the communication
and misuse of non-public information by an
investment adviser must be consistent with Rule
204A–1 under the Advisers Act. In addition, Rule
206(4)–7 under the Advisers Act makes it unlawful
for an investment adviser to provide investment
advice to clients unless such investment adviser has
(i) adopted and implemented written policies and
procedures reasonably designed to prevent
violation, by the investment adviser and its
supervised persons, of the Advisers Act and the
Commission rules adopted thereunder; (ii)
implemented, at a minimum, an annual review
regarding the adequacy of the policies and
procedures established pursuant to subparagraph (i)
above and the effectiveness of their
implementation; and (iii) designated an individual
(who is a supervised person) responsible for
administering the policies and procedures adopted
under subparagraph (i) above.
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16:48 Jul 29, 2014
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designed to detect violations of
Exchange rules and applicable federal
securities laws.38 The Exchange further
represents that these procedures are
adequate to properly monitor Exchangetrading of the Shares in all trading
sessions and to deter and detect
violations of Exchange rules and federal
securities laws applicable to trading on
the Exchange. The Exchange states that
the FINRA, on behalf of the Exchange,
will communicate as needed regarding
trading in the Shares and underlying
exchange-traded assets, as applicable,
with other markets and other entities
that are members of the ISG, and that
FINRA, on behalf of the Exchange, may
obtain trading information regarding
trading in the Shares and underlying
exchange-traded assets from such
markets and other entities. In addition,
the Exchange may obtain information
regarding trading in the Shares and
underlying exchange-traded assets from
markets and other entities that are
members of ISG or with which the
Exchange has in place a comprehensive
surveillance sharing agreement. The
Exchange states that FINRA, on behalf
of the Exchange, is able to access, as
needed, trade information for certain
fixed income securities held by the
Fund that is reported to FINRA’s Trade
Reporting and Compliance Engine.
The Exchange represents that the
Exchange deems the Shares to be equity
securities, thus 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) 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
federal securities laws applicable to
trading on the Exchange.
(4) Prior to the commencement of
trading, the Exchange will inform its
Equity Trading Permit Holders in an
Information Bulletin of the special
38 The Exchange states that FINRA surveils
trading on the Exchange pursuant to a regulatory
services agreement and that the Exchange is
responsible for FINRA’s performance under this
regulatory services agreement.
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Frm 00089
Fmt 4703
Sfmt 4703
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 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 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.
(5) For initial and continued listing,
the Fund will be in compliance with
Rule 10A–3 under the Exchange Act,39
as provided by NYSE Arca Equities Rule
5.3.
(6) The Fund’s investments will be
consistent with its respective
investment objective and will not be
used to enhance leverage. While the
Fund may invest in inverse ETFs, the
Fund will not invest in leveraged or
inverse leveraged (e.g., 2X, –2X, 3X or
–3X) ETFs.
(7) The Fund may hold up to an
aggregate amount of 15% of its net
assets in illiquid assets (calculated at
the time of investment), including Rule
144A Securities deemed illiquid by the
Advisor or Sub-Advisor, in accordance
with Commission guidance.
(8) Other than unsponsored ADRs, all
U.S. and foreign common stocks and
Depositary Receipts in which the Fund
will invest will be exchange-traded.
Unsponsored ADRs will not exceed
10% of the Fund’s net assets.
(9) Not more than 10% of the net
assets of the Fund in the aggregate shall
consist of equity securities whose
principal market is not a member of the
ISG or is a market with which the
Exchange does not have a
comprehensive surveillance sharing
agreement.
(10) The Fund may invest up to 10%
of net assets in asset-backed and
commercial mortgaged-backed
securities.
(11) The Fund will not invest in
options, futures, swaps or other
derivatives.
39 17
E:\FR\FM\30JYN1.SGM
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30JYN1
Federal Register / Vol. 79, No. 146 / Wednesday, July 30, 2014 / Notices
(12) A minimum of 100,000 Shares
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, is consistent with Section 6(b)(5)
of the Act 40 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,41
that the proposed rule change (SR–
NYSEArca–2014–59), as modified by
Amendment No. 1, be, and it hereby is
approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.42
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–17879 Filed 7–29–14; 8:45 am]
BILLING CODE 8011–01–P
DEPARTMENT OF TRANSPORTATION
Federal Transit Administration
[Docket No. FTA–2014–0018]
Bus and Bus Facilities Formula
Program: Proposed Circular
Federal Transit Administration
(FTA), DOT.
ACTION: Notice of availability of
proposed circular and request for
comments.
AGENCY:
The Federal Transit
Administration (FTA) has placed in the
docket and on its Web site, proposed
guidance, in the form of a circular, to
assist recipients in their implementation
of the Section 5339 Bus and Bus
Facilities Formula Program (Bus
Program). The purpose of this proposed
circular is to provide recipients of FTA
financial assistance with instructions
and guidance on program
administration and the grant application
process. This proposed circular is a
result of the new Bus Program enacted
through the Moving Ahead for Progress
in the 21st Century Act (MAP–21). By
this notice, FTA invites public comment
on the proposed circular.
mstockstill on DSK4VPTVN1PROD with NOTICES
SUMMARY:
40 15
U.S.C. 78f(b)(5).
U.S.C. 78s(b)(2).
42 17 CFR 200.30–3(a)(12).
41 15
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16:48 Jul 29, 2014
Jkt 232001
Comments must be submitted by
September 29, 2014. Late-filed
comments will be considered to the
extent practicable.
ADDRESSES: You may submit comments
identified by the docket number FTA–
2014–0018 by any of the following
methods:
• Federal eRulemaking Portal:
Submit electronic comments and other
data to https://www.regulations.gov.
• U.S. Mail: Send comments to
Docket Operations; U.S. Department of
Transportation, 1200 New Jersey
Avenue SE., West Building Room W12–
140, Washington, DC 20590–0001.
• Hand Delivery or Courier: Take
comments to Docket Operations in
Room W12–140 of the West Building,
Ground Floor, at 1200 New Jersey
Avenue SE., Washington, DC, between
9:00 a.m. and 5:00 p.m., Monday
through Friday, except Federal holidays.
• Fax: Fax comments to Docket
Operations, U.S. Department of
Transportation, at (202) 493–2251.
Instructions: The agency name
(Federal Transit Administration) and
Docket Number (FTA–2014–0018) must
be included at the beginning of each
submission. If sent by mail, please
submit two copies. Due to security
procedures in effect since October 2001,
mail received through the U.S. Postal
Service may be subject to delays. Parties
mailing comments should consider
using an express mail firm to ensure
their prompt filing. If you wish to
receive confirmation that FTA received
your comments, you must include a
self-addressed stamped postcard. All
comments received will be posted
without change to https://
www.regulations.gov, including any
personal information provided. You
may review USDOT’s complete Privacy
Act Statement published in the Federal
Register on April 11, 2000, at 65 FR
19477–8 or https://DocketsInfo.dot.gov.
FOR FURTHER INFORMATION CONTACT: For
program matters, Sam Snead, Office of
Transit Programs, (202) 366–1089 or
samuel.snead@dot.gov. For legal
matters, Michelle Hershman, Office of
Chief Counsel, (202–493–0197) or
michelle.hershman@dot.gov. Office
hours are from 8:30 a.m. to 5:00 p.m.,
Monday through Friday, except Federal
holidays.
SUPPLEMENTARY INFORMATION:
DATES:
I. Overview
The Moving Ahead for Progress in the
21st Century Act (MAP–21, Pub. L. 112–
141), signed into law on July 6, 2012,
establishes the Section 5339 Bus and
Bus Facilities Formula program (Section
5339 or Bus Program), replacing some of
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44241
the elements of the Bus and Bus
Facilities discretionary program
(formerly 49 U.S.C. 5309(b)(3) under the
Safe, Accountable, Flexible, Efficient
Transportation Equity Act: A Legacy for
Users Act of 2005 (SAFETEA–LU)). The
Section 5309 Bus and Bus Facilities
Program under SAFETEA–LU provided
funds for capital bus and bus facility
grants in support of the U.S. Department
of Transportation’s (U.S. DOT) State of
Good Repair, Bus Livability, Veterans
Transportation and Community Living,
and Clean Fuels initiatives. In addition,
SAFETEA–LU allocated funds under
this program for Ferry Boat Systems,
Fuel Cell Bus, and the Bus Testing
program. The new Section 5339 Bus
Program, which now includes only
capital projects, provides funding to
replace, rehabilitate, and purchase buses
and related equipment as well as
construct bus-related facilities.
Therefore, FTA is proposing new
circular 5100.1, ‘‘Bus and Bus Facilities
Program: Guidance and Application
Instructions,’’ in order to provide
grantees with guidance for applying for
funding under the Bus Program. In
addition, the proposed circular
addresses the requirements that must be
met in the application for Section 5339
program assistance.
In addition to implementing the new
Section 5339 program, MAP–21 made
several significant changes to Federal
transit laws that are applicable across all
of FTA’s financial assistance programs
and reflected in this proposed circular.
These changes further several important
goals of the U.S. DOT. Most notably,
MAP–21 grants FTA significant new
authority to oversee and regulate the
safety of public transportation systems
throughout the United States. MAP–21
also puts new emphasis on restoring
and replacing the Nation’s aging public
transportation infrastructure by
establishing a new State of Good Repair
formula program and new asset
management requirements.
Furthermore, it aligns Federal funding
with key performance goals and tracks
recipients’ progress towards these goals.
Finally, MAP–21 improves the
efficiency of program administration
through program consolidation and
streamlining. FTA encourages
commenters to review and provide
comments on this document as well as
the other proposed circulars FTA has
drafted in response to the MAP–21
changes.
This notice provides a summary of the
proposed circular. The circular contains
new policies including, but not limited
to, policies regarding funding transfer
provisions, ineligibility of preventive
maintenance and designated recipient
E:\FR\FM\30JYN1.SGM
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]]>Agencies
[Federal Register Volume 79, Number 146 (Wednesday, July 30, 2014)]
[Notices]
[Pages 44236-44241]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-17879]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72665; File No. SR-NYSEArca-2014-59]
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a
Proposed Rule Change, as Modified by Amendment No. 1, Relating to the
Listing and Trading of Shares of the AdvisorShares Athena High Dividend
ETF Under NYSE Arca Equities Rule 8.600
July 24, 2014.
I. Introduction
On May 20, 2014, 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
AdvisorShares Athena High Dividend ETF (``Fund'') under NYSE Arca
Equities Rule 8.600. The proposed rule change was published for comment
in the Federal Register on June 9, 2014.\3\ On July 23, 2014, the
Exchange filed Amendment No. 1 to the proposed rule change.\4\ The
Commission received no comments on the proposal. This order approves
the proposed rule change, as modified by Amendment No. 1.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 72298 (June 3,
2014), 79 FR 33024 (``Notice'').
\4\ In Amendment No. 1, the Exchange clarifies that the Fund's
investments in reverse repurchase agreements will not be used to
enhance leverage. Amendment No. 1 provides clarification to the
proposed rule change, and because it does not materially affect the
substance of the proposed rule change, or raise any unique or novel
regulatory issues, Amendment No. 1 does not require notice and
comment.
---------------------------------------------------------------------------
II. Description of the Proposal
The Exchange proposes to list and trade Shares of the Fund under
NYSE Arca Equities Rule 8.600 (``Managed Fund Shares''), which governs
the listing and trading of Managed Fund Shares on the Exchange. The
Shares will be offered by AdvisorShares Trust (``Trust''), a statutory
trust organized under the laws of the State of Delaware and registered
with the Commission as an open-end management investment company.\5\
AdvisorShares Investments, LLC (``Adviser'') will be the investment
adviser to the Fund, and AthenaInvest Advisors LLC (``Sub-Adviser'')
will be the Fund's sub-adviser and will provide day-to-day portfolio
management of the Fund.\6\ The Bank of New York Mellon
(``Administrator'') will serve as the administrator, custodian,
transfer agent and accounting agent for the Fund.
[[Page 44237]]
Foreside Fund Services, LLC will be the principal underwriter and
distributor of the Fund's Shares.
---------------------------------------------------------------------------
\5\ The Trust is registered under the Investment Company Act of
1940 (``1940 Act''). The Exchange states that on February 18, 2014,
the Trust filed with the Commission an amendment to its registration
statement on Form N-1A under the Securities Act of 1933 (15 U.S.C.
77a) (``Securities Act'') and under the 1940 Act relating to the
Fund (File Nos. 333-157876 and 811-22110) (``Registration
Statement''). In addition, according to the Exchange, 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\ The Exchange represents that neither the Adviser nor the
Sub-Adviser is registered as a broker-dealer or is affiliated with a
broker-dealer. The Exchange states that in the event (a) the Adviser
or the Sub-Adviser becomes a registered broker-dealer or becomes
newly affiliated with a broker-dealer or (b) any new adviser or sub-
adviser is a registered broker-dealer or becomes affiliated with a
broker-dealer, such adviser or sub-adviser will implement a fire
wall with respect to its relevant personnel or its broker-dealer
affiliate regarding access to information concerning the composition
of or changes to the portfolio, and the adviser or sub-adviser will
be subject to procedures designed to prevent the use and
dissemination of material non-public information regarding the
portfolio.
---------------------------------------------------------------------------
The Exchange has made the following representations and statements
in describing the Fund and its investment strategy, including other
portfolio holdings and investment restrictions.\7\
---------------------------------------------------------------------------
\7\ The Commission notes that additional information regarding
the Fund, the Trust, and the Shares, including investment
strategies, risks, creation and redemption procedures, fees,
portfolio holdings disclosure policies, distributions, and taxes,
among other things, can be found in the Notice and the Registration
Statement, as applicable. See Notice, supra note 3, and Registration
Statement, supra note 5, respectively.
---------------------------------------------------------------------------
A. Principal Investments (Under Normal Market Conditions) \8\
---------------------------------------------------------------------------
\8\ The Exchange states that the term ``under normal market
conditions'' means, without limitation, 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.
---------------------------------------------------------------------------
According to the Exchange, the Fund will seek long-term capital
appreciation. The Fund will invest substantially all of the Fund's
assets in (1) U.S. and foreign common stock of issuers of any
capitalization range, and (2) American Depositary Receipts (``ADRs''),
Global Depositary Receipts (``GDRs''), European Depositary Receipts
(``EDRs'') and International Depository Receipts (``IDRs'', and
together with ADRs, GDRs, and EDRs, ``Depositary Receipts'') that
provide investment exposure to global equity markets.\9\ Other than
unsponsored ADRs, all U.S. and foreign common stocks and Depositary
Receipts in which the Fund will invest will be exchange-traded.
---------------------------------------------------------------------------
\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 equity securities 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. ADRs
may be purchased with and sold for U.S. dollars. ADRs may be
sponsored or unsponsored, but unsponsored ADRs will not exceed 10%
of the Fund's net assets. Not more than 10% of the net assets of the
Fund in the aggregate shall consist of equity securities whose
principal market is not a member of the Intermarket Surveillance
Group (``ISG'') or is a market with which the Exchange does not have
a comprehensive surveillance sharing agreement.
---------------------------------------------------------------------------
The Exchange states that the Sub-Adviser will manage the Fund's
portfolio based on its patented Behavioral Portfolio Management
methodology. The Sub-Adviser will start by applying a quantitative
behavioral screen that narrows the equity universe to securities held
in large part by mutual funds the Sub-Adviser believes to be most
consistently pursuing their investment strategy. The Sub-Adviser then
will narrow this universe by a high dividend yield criteria and select
positions for the portfolio based on the highest combined ranking of
the two dimensions.
B. Other Fund Investments
The Exchange states that, while the Fund under normal market
conditions will invest substantially all of the Fund's assets in
exchange-traded U.S. and foreign common stocks and Depositary Receipts,
the Fund may invest in other securities and financial instruments, as
described below.
The Exchange represents that the Fund may purchase equity
securities (other than U.S. and foreign common stocks and Depositary
Receipts) traded in the U.S. on registered exchanges, which would
include preferred stock, rights, warrants, convertible securities,\10\
securities of master limited partnerships (``MLPs''),\11\ securities of
real estate investment trusts (``REITs''),\12\ and shares of closed-end
funds.\13\ The Fund may invest in affiliated and unaffiliated exchange-
traded funds (``ETFs'') \14\ and exchange-traded notes (``ETNs'').\15\
The Fund also may invest in the securities of exchange-traded pooled
investment vehicles (together with ETFs and ETNs, ``ETPs'') that are
not investment companies and are not required to comply with the
provisions of the 1940 Act. These pooled vehicles typically hold
commodities, such as gold or oil, currency, or other property that is
itself not a security.\16\
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\10\ Convertible securities are bonds, debentures, notes,
preferred stocks or other securities that may be converted or
exchanged (by the holder or by the issuer) into shares of the
underlying common stock (or cash or securities of equivalent value)
at a stated exchange ratio.
\11\ MLPs are limited partnerships in which the ownership units
are publicly traded.
\12\ REITs are pooled investment vehicles which invest primarily
in real estate or real estate related loans. REITs are generally
classified as equity REITs, mortgage REITs or a combination of
equity and mortgage REITs.
\13\ A closed-end fund is a pooled investment vehicle that is
registered under the 1940 Act and whose shares are listed and traded
on U.S. national securities exchanges.
\14\ For purposes of this filing, ETFs include Investment
Company Units (as described in NYSE Arca Equities Rule 5.2(j)(3));
Portfolio Depositary Receipts (as described in NYSE Arca Equities
Rule 8.100); and Managed Fund Shares (as described in NYSE Arca
Equities Rule 8.600). All the ETFs in which the Fund will invest
will be listed and traded on national securities exchanges. The Fund
will invest in the securities of ETFs 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 Regulation M of the Internal
Revenue Code of 1986, as amended (``Internal Revenue Code''). While
the Fund may invest in inverse ETFs, the Fund will not invest in
leveraged or inverse leveraged (e.g., 2X, -2X, 3X or -3X) ETFs.
\15\ ETNs include securities listed and traded on the Exchange
under NYSE Arca Equities Rule 5.2(j)(6) (``Index-Linked
Securities''). 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.
\16\ Such pooled investment vehicles include 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); and Trust Units (as described in NYSE Arca
Equities Rule 8.500).
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The Exchange states that on a day-to-day basis, the Fund may hold
money market instruments, cash, other cash equivalents, and ETPs that
invest in these and other highly liquid instruments. Further, the
Exchange represents that the Fund may invest in the securities of other
investment companies, including mutual funds and business development
companies (``BDCs''),\17\ to the extent that such an investment would
be 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 Subchapter M of the Internal
Revenue Code.
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\17\ A BDC is a less common type of exchange-traded 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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The Exchange represents that the Fund may invest in variable and
floating rate instruments, which involve certain obligations that may
carry variable or floating rates of interest, and may involve a
conditional or unconditional demand feature.\18\ The Fund may invest
[[Page 44238]]
in bank obligations, which would include certificates of deposit,
bankers' acceptances, and fixed time deposits.\19\ The Exchange also
states that the Fund may invest in municipal securities.
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\18\ The Exchange states that such instruments bear interest at
rates which are not fixed, but which vary with changes in specified
market rates or indices, and that the interest rates on these
securities may be reset daily, weekly, quarterly, or some other
reset period, and may have a set floor or ceiling on interest rate
changes. The Exchange states that a demand instrument with a demand
notice exceeding seven days may be considered illiquid if there is
no secondary market for such security.
\19\ Certificates of deposit are negotiable certificates issued
against funds deposited in a commercial bank for a definite period
of time and earning a specified return. Bankers' acceptances are
negotiable drafts or bills of exchange, normally drawn by an
importer or exporter to pay for specific merchandise, which are
``accepted'' by a bank, meaning, in effect, that the bank
unconditionally agrees to pay the face value of the instrument on
maturity. Fixed time deposits are bank obligations payable at a
stated maturity date and bearing interest at a fixed rate.
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The Exchange represents that the Fund may seek to invest in
corporate debt securities,\20\ including debt issued by domestic or
foreign companies of all kinds, and including those with small-, mid-,
and large-capitalizations. The Fund also may invest in corporate debt
securities representative of one or more high-yield bond or credit
derivative indices. The Exchange represents that the Fund may invest in
all grades of corporate debt securities, including below investment
grade (such debt may carry variable or floating rates of interest) and
unrated corporate debt securities.
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\20\ Corporate debt securities are typically fixed-income
securities issued by businesses to finance their operations. Notes,
bonds, debentures and commercial paper are the most common types of
corporate debt securities. The primary differences between the
different types of corporate debt securities are their maturities
and secured or unsecured status. Commercial paper has the shortest
term and is usually unsecured. Commercial paper is a short-term
obligation with a maturity ranging from one to 270 days issued by
banks, corporations and other borrowers. Such investments are
unsecured and usually discounted. The Fund may invest in commercial
paper rated A-1 or A-2 by Standard and Poor's Ratings Services
(``S&P'') or Prime-1 or Prime-2 by Moody's Investors Service, Inc.
(``Moody's'').
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The Fund may invest in non-investment-grade debt securities \21\
and unrated debt securities. The Exchange represents that the
creditworthiness of the issuer, as well as any financial institution or
other party responsible for payments on the security, will be analyzed
to determine whether to purchase unrated bonds.
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\21\ 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 or lower than BBB- by S&P) or are determined to be
of comparable quality by the Fund's Sub-Adviser.
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The Exchange represents that the Fund may invest up to 10% of net
assets in asset-backed and commercial mortgaged-backed securities.\22\
---------------------------------------------------------------------------
\22\ Asset-backed securities are securities backed by
installment contracts, credit-card receivables or other assets.
Commercial mortgage-backed securities are securities backed by
commercial real estate properties. Both asset-backed and commercial
mortgage-backed securities represent interests in ``pools'' of
assets in which payments of both interest and principal on the
securities are made on a regular basis.
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The Fund may also invest in inflation-indexed bonds.\23\ The Fund
may invest in U.S. government securities, including U.S. Treasury
securities. The Fund may invest in separately traded principal and
interest components of securities guaranteed or issued by the U.S.
government or its agencies, instrumentalities, or sponsored enterprises
if such components trade independently under the Separate Trading of
Registered Interest and Principal of Securities program (``STRIPS'') or
any similar program sponsored by the U.S. government.\24\ The Fund may
invest in U.S. Treasury zero-coupon bonds.\25\
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\23\ Inflation-indexed bonds are fixed income securities whose
principal value is periodically adjusted according to the rate of
inflation.
\24\ The Exchange states that STRIPS may be sold as zero coupon
securities.
\25\ The Exchange states that these securities are U.S. Treasury
bonds which have been stripped of their unmatured interest coupons,
the coupons themselves, and receipts or certificates representing
interests in such stripped debt obligations and coupons, and that
interest is not paid in cash during the term of these securities,
but is accrued and paid at maturity.
---------------------------------------------------------------------------
The Fund may enter into repurchase agreements with financial
institutions, which may be deemed to be loans. The Exchange represents
that the Fund will follow certain procedures designed to minimize the
risks inherent in such agreements, including 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 Exchange represents that the value of
the collateral underlying the repurchase agreements will always be at
least equal to the repurchase price, including any accrued interest
earned on the repurchase agreement. The Exchange states that the Fund
will not 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, would amount to more than 15% of the Fund's
net assets. The Fund may also enter into reverse repurchase agreements
as part of the Fund's investment strategy.\26\ The Exchange represents
that the Fund's investments in reverse repurchase agreements will not
be used to enhance leverage.\27\
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\26\ 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.
\27\ See supra note 4.
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C. Fund Investment Restrictions
The Fund will seek to qualify for treatment as a Regulated
Investment Company under the Internal Revenue Code.
The Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid assets (calculated at the time of investment),
including Rule 144A securities deemed illiquid by the Adviser or Sub-
Adviser,\28\ in accordance with Commission guidance. 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 assets. Illiquid assets 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.
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\28\ In reaching liquidity decisions, the Adviser or Sub-Adviser
may consider the following factors: The frequency of trades and
quotes for the security; the number of dealers wishing to purchase
or sell the security and the number of other potential purchasers;
dealer undertakings to make a market in the security; and the nature
of the security and the nature of the marketplace in which it trades
(e.g., the time needed to dispose of the security, the method of
soliciting offers and the mechanics of transfer).
---------------------------------------------------------------------------
The Fund may not, 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 acquire more
than 10% of the outstanding voting securities of any one issuer. For
purposes of this policy, the issuer of the underlying security will be
deemed to be the issuer of any respective depositary receipt.
The Fund may not invest 25% or more of its total assets in the
securities of one or more issuers conducting their principal business
activities in the same industry or group of industries. This limitation
does not apply to investments in securities issued or guaranteed by the
U.S. government, its agencies or instrumentalities, or shares of
investment companies. The Fund will
[[Page 44239]]
not invest 25% or more of its total assets in any investment company
that so concentrates.
The Exchange represents that the Fund will not invest in options,
futures, swaps or other derivatives. It further represents that the
Fund's investments will be consistent with the Fund's investment
objective and will not be used to enhance leverage.
III. Discussion and Commission 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.\29\ In particular, the Commission finds that the
proposed rule change, as modified by Amendment No. 1, is consistent
with Section 6(b)(5) of the Exchange Act,\30\ 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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\29\ 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).
\30\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
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,\31\ 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 of the Fund,\32\ as defined in NYSE Arca Equities Rule
8.600(c)(3), will be widely disseminated by one or more major market
data vendors at least every 15 seconds during the Core Trading
Session.\33\ On each business day, before commencement of trading in
Shares in the Core Trading Session on the Exchange, the Fund will
disclose on its Web site the Disclosed Portfolio (as defined in NYSE
Arca Equities Rule 8.600(c)(2)) that will form the basis for the Fund's
calculation of NAV at the end of the business day.\34\ In addition, a
basket composition file, which includes the security names and share
quantities (as applicable) required to be delivered in exchange for the
Fund's Shares, together with estimates and actual cash components, will
be publicly disseminated daily prior to the opening of the New York
Stock Exchange, LLC (``NYSE'') via the National Securities Clearing
Corporation. The Administrator will calculate the NAV and NAV per Share
of the Fund once each business day as of the regularly scheduled close
of normal trading on the NYSE (normally, 4:00 p.m., Eastern Time).\35\
Information regarding market price and trading volume of the Shares
will be continually available on a real-time basis throughout the day
on brokers' computer screens and other electronic services. Information
regarding the previous day's closing price and trading volume
information for the Shares will be published daily in the financial
section of newspapers. Quotation and last sale information for the U.S.
exchange-listed equity securities, including common stocks, ETPs,
closed-end funds, exchange-traded pooled investment vehicles,
Depositary Receipts, MLPs, REITs, warrants, rights, preferred stocks,
BDCs and convertible securities will be available via the CTA high-
speed line, and will be available from the national securities exchange
on which they are listed. Information regarding unsponsored ADRs will
be available from major market data vendors. Intra-day and closing
price information relating to the fixed income investments of the Fund
will be available from major market data vendors. Price information
regarding investment company securities will be available from on-line
sources and from the Web site for the applicable investment company
securities. The Fund's Web site will include a form of the prospectus
for the Fund and additional data relating to NAV and other applicable
quantitative information.
---------------------------------------------------------------------------
\31\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
\32\ According to the Exchange, the Portfolio Indicative Value
is based on current information regarding the value of the
securities and other assets in the Disclosed Portfolio. The
Portfolio Indicative Value should not be viewed as a ``real-time''
update of the NAV per Share of the Fund, which will be calculated
once per day.
\33\ The Exchange states that several major market data vendors
display or make widely available Portfolio Indicative Values taken
from the CTA or other data feeds.
\34\ On a daily basis, the Adviser will disclose on behalf of
the Fund on the Fund's Web site 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, if applicable; 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.
\35\ The NAV per Share of the Fund will be computed by dividing
the value of the net assets of the Fund (the value of its total
assets less total liabilities) by the total number of Shares of the
Fund outstanding. Expenses and fees will be accrued daily and taken
into account for purposes of determining NAV per Share. According to
the Exchange, price information for exchange-listed securities,
including common stocks, ETFs, ETNs, closed-end funds, exchange-
traded pooled investment vehicles, Depositary Receipts, MLPs, REITs,
warrants, rights, preferred stocks, BDCs and convertible securities
will be valued at market value, which will generally be determined
using the last reported official closing or last trading price on
the exchange or market on which the security is primarily traded at
the time of valuation or, if no sale has occurred, at the last
quoted bid price on the primary market or exchange on which they are
traded. Other portfolio securities and assets for which market
quotations are not readily available or determined to not represent
the current fair value will be valued based on fair value as
determined in good faith in accordance with procedures adopted by
the Trust's Board of Trustees and in accordance with the 1940 Act.
Unsponsored ADRs will be valued on the basis of the market closing
price on the exchange where the stock of the foreign issuer that
underlies the ADR is listed. Investment company securities, other
than ETFs and BDCs, (including mutual funds), will be valued at NAV.
Domestic and foreign fixed income securities, including U.S.
government securities, repurchase agreements, reverse repurchase
agreement, variable and floating rate securities, bank obligations,
corporate debt securities, zero-coupon bonds, commercial paper,
inflation-indexes bonds, mortgage-backed securities and asset-backed
securities generally trade in the over-the-counter market rather
than on a securities exchange, and the Fund will generally value
these portfolio securities by relying on independent pricing
services. The Fund's pricing services will use valuation models or
matrix pricing to determine current value. In general, pricing
services use information with respect to comparable bond and note
transactions, quotations from bond dealers or by reference to other
securities that are considered comparable in such characteristics as
rating, interest rate, maturity date, option adjusted spread models,
prepayment projections, interest rate spreads and yield curves.
Matrix price is an estimated price or value for a fixed-income
security. Matrix pricing is considered a form of fair value pricing.
---------------------------------------------------------------------------
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 and the Disclosed Portfolio will be made
available to all market participants at the same time. Trading in the
Shares of the Fund will be halted if the circuit breaker parameters in
NYSE Arca Equities Rule 7.12 have been reached. Trading in the Shares
of the Fund may be halted because of other
[[Page 44240]]
market conditions or for reasons that, in the view of the Exchange,
make trading in the Shares inadvisable,\36\ 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 trading in Shares of the
Fund may be halted. The Exchange represents 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 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. In addition, the Exchange
represents that neither the Adviser nor the Sub-Adviser is registered
as a broker-dealer or is affiliated with a broker-dealer.\37\ Prior to
the commencement of trading, the Exchange states that it will inform
its Equity Trading Permit Holders in an Information Bulletin of the
special characteristics and risks associated with trading the Shares.
---------------------------------------------------------------------------
\36\ These reasons may include: (1) The extent to which trading
is not occurring in the securities and/or the financial instruments
comprising the Disclosed Portfolio of the Fund; or (2) whether other
unusual conditions or circumstances detrimental to the maintenance
of a fair and orderly market are present. 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.
\37\ See supra note 6. The Exchange states 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 Sub-Adviser and their related personnel are subject to
the provisions of Rule 204A-1 under the Advisers Act relating to
codes of ethics. This Rule requires investment advisers to adopt a
code of ethics that reflects the fiduciary nature of the
relationship to clients, as well as compliance with other applicable
securities laws. Accordingly, procedures designed to prevent the
communication and misuse of non-public information by an investment
adviser must be consistent with Rule 204A-1 under the Advisers Act.
In addition, Rule 206(4)-7 under the Advisers Act makes it unlawful
for an investment adviser to provide investment advice to clients
unless such investment adviser has (i) adopted and implemented
written policies and procedures reasonably designed to prevent
violation, by the investment adviser and its supervised persons, of
the Advisers Act and the Commission rules adopted thereunder; (ii)
implemented, at a minimum, an annual review regarding the adequacy
of the policies and procedures established pursuant to subparagraph
(i) above and the effectiveness of their implementation; and (iii)
designated an individual (who is a supervised person) responsible
for administering the policies and procedures adopted under
subparagraph (i) above.
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The Exchange represents that trading in the Shares will be subject
to the existing trading surveillances, administered by the Financial
Industry Regulatory Authority (``FINRA'') on behalf of the Exchange,
which are designed to detect violations of Exchange rules and
applicable federal securities laws.\38\ The Exchange further represents
that these procedures are adequate to properly monitor Exchange-trading
of the Shares in all trading sessions and to deter and detect
violations of Exchange rules and federal securities laws applicable to
trading on the Exchange. The Exchange states that the FINRA, on behalf
of the Exchange, will communicate as needed regarding trading in the
Shares and underlying exchange-traded assets, as applicable, with other
markets and other entities that are members of the ISG, and that FINRA,
on behalf of the Exchange, may obtain trading information regarding
trading in the Shares and underlying exchange-traded assets from such
markets and other entities. In addition, the Exchange may obtain
information regarding trading in the Shares and underlying exchange-
traded assets from markets and other entities that are members of ISG
or with which the Exchange has in place a comprehensive surveillance
sharing agreement. The Exchange states that FINRA, on behalf of the
Exchange, is able to access, as needed, trade information for certain
fixed income securities held by the Fund that is reported to FINRA's
Trade Reporting and Compliance Engine.
---------------------------------------------------------------------------
\38\ The Exchange states that FINRA surveils trading on the
Exchange pursuant to a regulatory services agreement and that the
Exchange is responsible for FINRA's performance under this
regulatory services agreement.
---------------------------------------------------------------------------
The Exchange represents that the Exchange deems the Shares to be
equity securities, thus 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) 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 federal
securities laws applicable to trading on the Exchange.
(4) 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 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 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.
(5) For initial and continued listing, the Fund will be in
compliance with Rule 10A-3 under the Exchange Act,\39\ as provided by
NYSE Arca Equities Rule 5.3.
---------------------------------------------------------------------------
\39\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------
(6) The Fund's investments will be consistent with its respective
investment objective and will not be used to enhance leverage. While
the Fund may invest in inverse ETFs, the Fund will not invest in
leveraged or inverse leveraged (e.g., 2X, -2X, 3X or -3X) ETFs.
(7) The Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid assets (calculated at the time of investment),
including Rule 144A Securities deemed illiquid by the Advisor or Sub-
Advisor, in accordance with Commission guidance.
(8) Other than unsponsored ADRs, all U.S. and foreign common stocks
and Depositary Receipts in which the Fund will invest will be exchange-
traded. Unsponsored ADRs will not exceed 10% of the Fund's net assets.
(9) Not more than 10% of the net assets of the Fund in the
aggregate shall consist of equity securities whose principal market is
not a member of the ISG or is a market with which the Exchange does not
have a comprehensive surveillance sharing agreement.
(10) The Fund may invest up to 10% of net assets in asset-backed
and commercial mortgaged-backed securities.
(11) The Fund will not invest in options, futures, swaps or other
derivatives.
[[Page 44241]]
(12) A minimum of 100,000 Shares 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, is consistent with Section
6(b)(5) of the Act \40\ and the rules and regulations thereunder
applicable to a national securities exchange.
---------------------------------------------------------------------------
\40\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Exchange Act,\41\ that the proposed rule change (SR-NYSEArca-2014-59),
as modified by Amendment No. 1, be, and it hereby is approved.
---------------------------------------------------------------------------
\41\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\42\
---------------------------------------------------------------------------
\42\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-17879 Filed 7-29-14; 8:45 am]
BILLING CODE 8011-01-P
