Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a Proposed Rule Change, as Modified by Amendment No. 1, To List and Trade WBI SMID Tactical Growth Shares; WBI SMID Tactical Value Shares; WBI SMID Tactical Yield Shares; WBI SMID Tactical Select Shares; WBI Large Cap Tactical Growth Shares; WBI Large Cap Tactical Value Shares; WBI Large Cap Tactical Yield Shares; WBI Large Cap Tactical Select Shares; WBI Tactical Income Shares; and WBI Tactical High Income Shares Under NYSE Arca Equities Rule 8.600, 51210-51217 [2014-20343]
Download as PDF
<![CDATA[
51210
Federal Register / Vol. 79, No. 166 / Wednesday, August 27, 2014 / Notices
interest. The Exchange has asked the
Commission to waive the 30-day
operative delay so that the proposal may
become operative immediately upon
filing. The Exchange notes that waiving
the 30-day operative delay is consistent
with the protection of investors and the
public interest. The Exchange believes
that waiver will permit the Exchange to
immediately change its Core Trading
Hours to harmonize with effective rule
changes on the NYSE bonds market,
which operates on the same technology
platform. The Commission hereby
waives the 30-day operative delay and
designates the proposal operative upon
filing.12
At any time within 60 days of the
filing of such proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
under Section 19(b)(2)(B) 13 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
mstockstill on DSK4VPTVN1PROD with NOTICES
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSEMKT–2014–69 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSEMKT–2014–69. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
12 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
13 15 U.S.C. 78s(b)(2)(B).
VerDate Mar<15>2010
17:44 Aug 26, 2014
Jkt 232001
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
NYSEMKT–2014–69, and should be
submitted on or before September 17,
2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–20338 Filed 8–26–14; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–72895; File No. SR–
NYSEArca–2014–67]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Order Approving a
Proposed Rule Change, as Modified by
Amendment No. 1, To List and Trade
WBI SMID Tactical Growth Shares; WBI
SMID Tactical Value Shares; WBI SMID
Tactical Yield Shares; WBI SMID
Tactical Select Shares; WBI Large Cap
Tactical Growth Shares; WBI Large
Cap Tactical Value Shares; WBI Large
Cap Tactical Yield Shares; WBI Large
Cap Tactical Select Shares; WBI
Tactical Income Shares; and WBI
Tactical High Income Shares Under
NYSE Arca Equities Rule 8.600
August 21, 2014.
I. Introduction
On June 20, 2014, NYSE Arca, Inc.
(the ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed
with the Securities and Exchange
PO 00000
CFR 200.30–3(a)(12).
Frm 00073
Fmt 4703
II. Description of the Proposal 5
The Exchange proposes to list and
trade the Shares under NYSE Arca
Equities Rule 8.600, which governs the
listing and trading of Managed Fund
Shares.6 The Shares will be offered by
Absolute Shares Trust (‘‘Trust’’),7 a
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
4 See Securities Exchange Act Release No. 72526
(July 2, 2014), 79 FR 39035 (‘‘Notice’’).
5 Additional information regarding the Funds;
Shares; investment objectives; strategies;
methodology and restrictions; risks; fees and
expenses; creations and redemptions of Shares;
availability of information; trading rules and halts;
and surveillance procedures, among other things,
can be found in the Registration Statement and in
the Notice. See Notice, supra note 4, and
Registration Statement, infra note 7, respectively.
6 A Managed Fund Share is a security that
represents an interest in an investment company
registered under the Investment Company Act of
1940 (15 U.S.C. 80a–1), as amended (‘‘1940 Act’’),
organized as an open-end investment company or
similar entity that invests in a portfolio of securities
selected by its investment adviser consistent with
its investment objectives and policies. In contrast,
an open-end investment company that issues
Investment Company Units, listed and traded on
the Exchange under NYSE Arca Equities Rule
5.2(j)(3), seeks to provide investment results that
correspond generally to the price and yield
performance of a specific foreign or domestic stock
index, fixed income securities index or combination
thereof.
7 The Trust is registered under the 1940 Act. On
February 28, 2014, the Trust filed with the
Commission an amended registration statement on
Form N–1A relating to the Funds (File Nos. 333–
192733 and 811–22917) (the ‘‘Registration
Statement’’). The description of the operation of the
Trust and the Funds herein is based, in part, on the
Registration Statement. In addition, the
Commission has issued an order granting certain
2 15
SECURITIES AND EXCHANGE
COMMISSION
14 17
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) 1 of the Securities
Exchange Act of 1934 (‘‘Act’’ or
‘‘Exchange Act’’) 2 and Rule 19b–4
thereunder,3 a proposed rule change to
list and trade the following shares
(collectively, ‘‘Shares’’) of the funds
(each a ‘‘Fund’’ and collectively, the
‘‘Funds’’) under NYSE Arca Equities
Rule 8.600: the WBI SMID Tactical
Growth Shares; WBI SMID Tactical
Value Shares; WBI SMID Tactical Yield
Shares; WBI SMID Tactical Select
Shares; WBI Large Cap Tactical Growth
Shares; WBI Large Cap Tactical Value
Shares; WBI Large Cap Tactical Yield
Shares; WBI Large Cap Tactical Select
Shares; WBI Tactical Income Shares;
and WBI Tactical High Income Shares.
On July 1, 2014, the Exchange filed
Amendment No. 1 to the proposed rule
change. The proposed rule change was
published for comment in the Federal
Register on July 9, 2014.4 The
Commission received no comments on
the proposed rule change. This order
approves the proposed rule change, as
modified by Amendment No. 1.
Sfmt 4703
E:\FR\FM\27AUN1.SGM
27AUN1
Federal Register / Vol. 79, No. 166 / Wednesday, August 27, 2014 / Notices
mstockstill on DSK4VPTVN1PROD with NOTICES
statutory trust organized under the laws
of the State of Delaware and registered
with the Commission as an open-end
management investment company.
Millington Securities, Inc. will be the
investment adviser for each Fund
(‘‘Adviser’’) and WBI Investments, Inc.
will be the sub-adviser to each Fund
(‘‘Sub-Adviser’’).8 The Exchange states
that the Adviser is a registered brokerdealer and is affiliated with a brokerdealer, and that the Sub-Adviser is also
affiliated with a broker-dealer.9 The
Exchange represents that the Adviser
and Sub-Adviser will implement a
firewall with respect to their relevant
personnel and their broker-dealer
affiliates regarding access to information
concerning the composition and/or
changes to a portfolio, and will be
subject to procedures designed to
prevent the use and dissemination of
material non-public information
regarding such portfolio.10 U.S. Bank,
exemptive relief to the Adviser and the actively
managed exchange-traded trusts it advises,
including the Trust, under the 1940 Act. See
Investment Company Act Release No. 30543 (May
29, 2013) (File No. 812–13886) (the ‘‘Exemptive
Order’’).
8 An investment adviser to an open-end fund is
required to be registered under the Investment
Advisers Act of 1940 (the ‘‘Advisers Act’’). The
Adviser is wholly owned by WBI Trading
Company, Inc., and the Sub-Adviser is an affiliate
of WBI Trading Company. See Notice, supra note
4, 79 FR at 39035, n.8. The Adviser and the SubAdviser are each registered as an investment
adviser under the Advisers Act. As a result, the
Adviser, the 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, the Adviser, the Sub-Adviser, and
their related personnel are subject to the provisions
of Rule 206(4)–7 under the Advisers Act, which
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.
9 See id. at 39036.
10 See id. The Exchange also states that, in the
event that (a) the Adviser and/or Sub-Adviser
become newly affiliated with another broker-dealer,
or (b) any new adviser or sub-adviser is a registered
broker-dealer or becomes affiliated with a brokerdealer, it will implement a firewall with respect to
such relevant personnel and/or its broker-dealer
affiliate regarding access to information concerning
the composition and/or changes to a portfolio, and
VerDate Mar<15>2010
17:44 Aug 26, 2014
Jkt 232001
National Association will be the
administrator, custodian, transfer agent
and securities lending agent for each
Fund. Foreside Fund Services, LLC will
be the distributor for the Funds.
A. Common Fund Strategy and
Characteristics
Each Fund will be an activelymanaged exchange-traded fund (‘‘ETF’’)
and will not seek to replicate the
performance of a specified index. Each
Fund will, under normal market
conditions,11 invest at least 80% of its
net assets in securities according to its
individual principal investment
strategies as described below.
Additionally, certain Funds may use
American depositary receipts (‘‘ADR’’),
European depositary receipts (‘‘EDR’’)
and global depositary receipts (‘‘GDR’’)
(collectively, ‘‘Depositary Receipts’’)
when, in the discretion of the SubAdviser, the use of such securities is
warranted for liquidity, pricing, timing
or other reasons. No Fund will invest
more than 10% of its net assets in
unsponsored Depositary Receipts. Each
Fund that invests primarily in equities
as described further below also may
invest up to 20% of its principal
investment assets in high-yield bonds
(also known as ‘‘junk bonds’’).
B. Individual Fund Investments
1. WBI SMID Tactical Growth Shares
According to the Exchange, the WBI
SMID Tactical Growth Shares will seek
long-term capital appreciation and the
potential for current income, while also
will be subject to procedures designed to prevent
the use and dissemination of material non-public
information regarding such portfolio. See id.
11 The term ‘‘under normal market conditions’’ or
‘‘under normal circumstances’’ includes, but is not
limited to, the absence of adverse market,
economic, political or other conditions, including
extreme volatility or trading halts in the fixed
income markets or the financial markets generally;
operational issues causing dissemination of
inaccurate market information; or force majeure
type events such as systems failure, natural or manmade disaster, act of God, armed conflict, act of
terrorism, riot or labor disruption or any similar
intervening circumstance. However, each Fund may
temporarily depart from its principal investment
strategy by making short-term investments in cash,
cash equivalents, high-quality short-term debt
securities, and money market instruments for
temporary defensive purposes in response to
adverse market, economic or political conditions.
According to the Exchange, each Fund may acquire
the following short-term investments: (1)
certificates of deposit issued by commercial banks
as well as savings banks or savings and loan
associations; (2) bankers’ acceptances; (3) time
deposits; and (4) commercial paper and short term
notes rated at the time of purchase ‘‘A–2’’ or higher
by Standard & Poor’s®, ‘‘Prime-1’’ by Moody’s®
Investors Service, Inc., or similarly rated by another
nationally recognized statistical rating organization
or, if unrated, will be determined by the SubAdviser to be of comparable quality, as well as U.S.
Government obligations.
PO 00000
Frm 00074
Fmt 4703
Sfmt 4703
51211
seeking to protect principal during
unfavorable market conditions.
a. Principal Investments
Under normal market conditions, the
Fund will invest at least 80% of its net
assets in the exchange-listed equity
securities of small-capitalization and
mid-capitalization domestic and foreign
companies.12 The types of equity
securities in which the Fund will invest
are common stocks, preferred stocks,
rights, warrants, convertibles, master
limited partnerships (exchange-traded
businesses organized as partnerships
(‘‘MLPs’’)), and exchange-traded real
estate investment trusts (‘‘REITs’’). The
Fund may invest up to 50% of the
Fund’s principal investments in the
securities of issuers in emerging
markets, which could consist of
Depositary Receipts, dollar
denominated foreign securities and
foreign equity securities. The Fund’s
principal investments also may consist
of ETFs 13 that invest predominantly in
small-capitalization and midcapitalization equity securities and will
be considered small-capitalization and
mid-capitalization equity securities for
purposes of the Fund’s equity allocation
target.
b. Non-Principal Investments
While the Fund, under normal
circumstances, will invest at least 80%
of its net assets as described above, the
Fund may directly invest in certain
other investments. According to the
Exchange, to enhance the Fund’s returns
or to mitigate risk and volatility, the
Fund may invest up to 20% of the
Fund’s net assets in large-capitalization
12 Each Fund will generally invest in equity
securities that trade in markets that are members of
the Intermarket Surveillance Group (‘‘ISG’’) or are
parties to a comprehensive surveillance sharing
agreement with the Exchange. For each Fund, not
more than 10% of the net assets invested in
exchange-traded equity securities shall consist of
equity securities whose principal market is not a
member of ISG or is a market with which the
Exchange does not have a comprehensive
surveillance sharing agreement. Furthermore, for
each Fund not more than 10% of the net assets
invested in futures contracts or options contracts
shall consist of futures contracts or options
contracts whose principal market is not a member
of ISG or is a market with which the Exchange does
not have a comprehensive surveillance sharing
agreement. See id. at 39037, n.11.
13 ETFs include Investment Company Units
(NYSE Arca Equities Rule 5.2(j)(3)); Portfolio
Depositary Receipts (NYSE Arca Equities Rule
8.100); and Managed Fund Shares (NYSE Arca
Equities Rule 8.600). The ETFs all will be listed and
traded in the U.S. on registered exchanges. The
ETFs in which a Fund may invest will primarily be
index-based exchange-traded funds that hold
substantially all of their assets in securities
representing a specific index. While each Fund may
invest in inverse ETFs, a Fund will not invest in
leveraged (e.g., 2X, -2X, 3X or -3X) ETFs. See id.
at 39037, n.12.
E:\FR\FM\27AUN1.SGM
27AUN1
51212
Federal Register / Vol. 79, No. 166 / Wednesday, August 27, 2014 / Notices
equities; domestic and foreign debt
securities (including junk bonds); ETFs
(other than ETFs noted in the Principal
Investment section for the Fund, above,
that invest predominantly in smallcapitalization and mid-capitalization
equity securities); and/or exchangetraded or over-the-counter (‘‘OTC’’)
options overlying: exchange listed
equity indices; and futures on debt,
interest rates, and currencies (‘‘Options
Strategies’’).14
The Fund may invest in the following
types of debt securities: Fixed, floating
and variable corporate debt securities,
U.S. Government securities, debt
securities of foreign issuers, sovereign
debt securities, U.S. government agency
securities, and high-yield bonds. The
Fund also may invest in agency and
non-agency residential mortgage-backed
securities (‘‘RMBS’’) and asset-backed
securities.15 The Fund also may invest
in debt-based exchange-traded notes
(‘‘ETNs’’).16 The Fund expects to invest
in debt securities of all maturities, from
less than one year up to thirty years,
depending on the portfolio manager’s
assessment of the risks and
opportunities along the yield curve.
According to the Exchange, the yield
curve refers to the differences in yield
among debt assets of varying maturities.
In addition, the Fund may utilize
equity options for individual securities
including writing (selling) covered calls,
buying puts, using combinations of calls
and puts, using combinations of calls
and combinations of puts, and entering
into cap and floor agreements.17 The
Fund also may use Options Strategies.
The Fund also may enter into the
following types of financial instruments:
futures overlying equity indexes,
interest rates, debt instruments, and
currencies; government debt repurchase
agreements; depository receipt
conversion swaps 18 into and out of the
14 See
id. at 39037.
securities are financial
instruments that have been issued by an entity that
is not a government-sponsored agency, such as the
Federal National Mortgage Association (‘‘Fannie
Mae’’), Federal Home Loan Mortgage Corporation
(‘‘Freddie Mac’’), Federal Home Loan Banks, or the
Government National Mortgage Association
(‘‘Ginnie Mae’’).
16 See id. ETNs are debt obligations of investment
banks which are traded on exchanges and the
returns of which are linked to the performance of
market indexes and include securities listed and
traded on the Exchange under NYSE Arca Equities
Rule 5.2(j)(6) (‘‘Index-Linked Securities’’). In
addition to trading ETNs on exchanges, investors
may redeem ETNs directly with the issuer on a
weekly basis, typically in a minimum amount of
50,000 units, or hold the ETNs until maturity.
17 The Exchange describes cap and floor
agreements in the Notice. See id. at 39037, n.16.
18 The Exchange describes depository receipt
conversion swap in the Notice. See id. at 39037,
n.18.
mstockstill on DSK4VPTVN1PROD with NOTICES
15 ‘‘Non-agency’’
VerDate Mar<15>2010
17:44 Aug 26, 2014
Jkt 232001
underlying stock; and forward contracts
on currencies (collectively, the
‘‘Financial Instruments’’).19 Cash
balances arising from the use of
Financial Instruments typically will be
held in money market instruments.
2. WBI SMID Tactical Value Shares
According to the Exchange, the WBI
SMID Tactical Value Shares will seek
long-term capital appreciation and the
potential for current income, while also
seeking to protect principal during
unfavorable market conditions.
a. Principal Investments
Under normal market conditions, the
Fund will invest at least 80% of its net
assets in the exchange-listed equity
securities of small-capitalization and
mid-capitalization domestic and foreign
companies selected by the Sub-Adviser.
The types of equity securities in which
the Fund will invest are common stocks,
preferred stocks, rights, warrants,
convertibles, MLPs, and REITs. The
Fund may invest up to 50% of the
Fund’s principal investments in the
securities of issuers in emerging
markets, which could consist of
Depositary Receipts, dollar
denominated foreign securities and
foreign equity securities. The Fund’s
principal investments also may consist
of ETFs that invest predominantly in
small-capitalization and midcapitalization equity securities and will
be considered small-capitalization and
mid-capitalization equity securities for
purposes of the Fund’s equity allocation
target.
b. Non-Principal Investments
While the Fund, under normal
circumstances, will invest at least 80%
of its net assets in its investments as
described above, the Fund may directly
invest in certain other investments.
According to the Registration Statement,
the Fund may invest up to 20% of its
net assets in large-capitalization
equities, domestic and foreign debt
securities (including junk bonds), ETFs
(other than ETFs noted in the Principal
Investments section for the Fund, above,
that invest predominantly in smallcapitalization and mid-capitalization
equity securities), and/or in Options
Strategies to enhance the Fund’s returns
or to mitigate risk and volatility. The
Fund also may use Financial
Instruments. Cash balances arising from
the use of Financial Instruments
typically will be held in money market
instruments.
The types of debt securities in which
the Fund will invest are fixed, floating
19 See
PO 00000
id. at 39037.
Frm 00075
Fmt 4703
Sfmt 4703
and variable corporate debt securities,
U.S. Government securities, debt
securities of foreign issuers, sovereign
debt securities, U.S. government agency
securities, and high-yield bonds. The
Fund also may invest in debt-based
ETNs. The Fund expects to invest in
debt securities of all maturities, from
less than one year up to thirty years,
depending on the portfolio manager’s
assessment of the risks and
opportunities along the yield curve.
3. WBI SMID Tactical Yield Shares
According to the Exchange, the WBI
SMID Tactical Yield Share will seek
long-term capital appreciation and the
potential for current income, while also
seeking to protect principal during
unfavorable market conditions.
a. Principal Investments
Under normal market conditions, the
Fund will invest at least 80% of its net
assets in the exchange-listed dividendpaying equity securities of smallcapitalization and mid-capitalization
domestic and foreign companies
selected by the Sub-Adviser. The types
of equity securities in which the Fund
will invest are common stocks,
preferred stocks, rights, warrants,
convertibles, MLPs, and REITs. The
Fund may invest up to 50% of the
Fund’s principal investments in the
securities of issuers in emerging
markets, which could consist of
Depositary Receipts, dollardenominated foreign securities and
foreign equity securities. The Fund’s
principal investments also may consist
of ETFs that invest predominantly in
small-capitalization and midcapitalization equity securities and will
be considered small-capitalization and
mid-capitalization equity securities for
purposes of the Fund’s equity allocation
target.
b. Non-Principal Investments
While the Fund, under normal
circumstances, will invest at least 80%
of its net assets in its investments as
described above, the Fund may directly
invest in certain other investments.
According to the Registration Statement,
the Fund may invest up to 20% of the
Fund’s net assets in large-capitalization
equities, domestic and foreign debt
securities, high-yield bonds and/or in
Options Strategies and Financial
Instruments. Cash balances arising from
the use of Financial Instruments
typically will be held in money market
instruments.
The types of debt securities in which
the Fund will invest are fixed, floating
and variable corporate debt securities,
U.S. Government securities, debt
E:\FR\FM\27AUN1.SGM
27AUN1
Federal Register / Vol. 79, No. 166 / Wednesday, August 27, 2014 / Notices
51213
debt securities, U.S. government agency
securities, and high-yield bonds. The
Fund also may invest in debt-based
ETNs and ETFs. The Fund expects to
invest in debt securities of all
maturities, from less than one year up
to thirty years, depending on the
portfolio manager’s assessment of the
risks and opportunities along the yield
curve.
debt securities, U.S. government agency
securities, and high-yield bonds. The
Fund also may invest in debt-based
ETNs and ETFs. The Fund expects to
invest in debt securities of all
maturities, from less than one year up
to thirty years, depending on the
portfolio manager’s assessment of the
risks and opportunities along the yield
curve.
4. WBI SMID Tactical Select Shares
According to the Exchange, the WBI
SMID Tactical Select Shares will seek
long-term capital appreciation and the
potential for current income, while also
seeking to protect principal during
unfavorable market conditions.
6. WBI Large Cap Tactical Value Shares
According to the Exchange, the WBI
Large Cap Tactical Value Shares
objectives are to seek long-term capital
appreciation and the potential for
current income, while also seeking to
protect principal during unfavorable
market conditions.
a. Principal Investments
Under normal market conditions, the
Fund will invest at least 80% of its net
assets in the exchange-listed equity
securities of small-capitalization and
mid-capitalization domestic and foreign
companies selected by the Sub-Adviser.
The types of equity securities in which
the Fund will invest are common stocks,
preferred stocks, rights, warrants,
convertibles, MLPs, and REITs. The
Fund may invest up to 50% of the
Fund’s principal investments in the
securities of issuers in emerging
markets, which could consist of
Depositary Receipts, dollar
denominated foreign securities and
foreign equity securities. The Fund also
may invest up to 20% of the Fund’s
principal investments in junk bonds.
The Fund’s principal investments also
may consist of ETFs that invest
predominantly in small-capitalization
and mid-capitalization equity securities
and will be considered smallcapitalization and mid-capitalization
equity securities for purposes of the
Fund’s equity allocation target.
5. WBI Large Cap Tactical Growth
Shares
According to the Exchange, the WBI
Large Cap Tactical Growth Shares
objectives are to seek long-term capital
appreciation and the potential for
current income, while also seeking to
protect principal during unfavorable
market conditions.
a. Principal Investments
Under normal market conditions, the
Fund will invest at least 80% of its net
assets in the exchange-listed equity
securities of large capitalization
domestic and foreign companies
selected by the Sub-Adviser. The types
of equity securities in which the Fund
will invest are common stocks,
preferred stocks, rights, warrants,
convertibles, MLPs, and REITs. The
Fund may invest up to 50% of the
Fund’s principal investments in the
securities of issuers in emerging
markets, which could consist of
Depositary Receipts, dollar
denominated foreign securities and
foreign equity securities. The Fund’s
principal investments also may consist
of ETFs that invest predominantly in
small-capitalization and midcapitalization equity securities and will
be considered small-capitalization and
mid-capitalization equity securities for
purposes of the Fund’s equity allocation
target.
b. Non-Principal Investments
While the Fund, under normal
circumstances, will invest at least 80%
of its net assets in its investments as
described above, the Fund may directly
invest in certain other investments.
Namely, up to 20% of the Fund’s net
assets may be invested in smallcapitalization and mid-capitalization
equities, domestic and foreign debt
securities, and high-yield bonds and/or
in Options Strategies and Financial
Instruments. Cash balances arising from
the use of Financial Instruments
typically will be held in money market
instruments.
The types of debt securities in which
the Fund will invest are fixed, floating
and variable corporate debt securities,
U.S. Government securities, debt
securities of foreign issuers, sovereign
a. Principal Investments
Under normal market conditions, the
Fund will invest at least 80% of its net
assets in the exchange-listed equity
securities of large capitalization
domestic and foreign companies
selected by the Sub-Adviser. The types
of equity securities in which the Fund
will invest are common stocks,
preferred stocks, rights, warrants,
convertibles, MLPs, and REITs. The
Fund may invest up to 50% of the
Fund’s principal investments in the
securities of issuers in emerging
markets, which could consist of
Depositary Receipts, dollar
denominated foreign securities and
foreign equity securities. The Fund also
may invest up to 20% of the Fund’s
principal investments in junk bonds.
The Fund’s principal investments also
may consist of ETFs that invest
predominantly in small-capitalization
and mid-capitalization equity securities
and will be considered smallcapitalization and mid-capitalization
equity securities for purposes of the
Fund’s equity allocation target.
b. Non-Principal Investments
While the Fund, under normal
circumstances, will invest at least 80%
of its net assets in its investments as
described above, the Fund may directly
invest in certain other investments
Specifically, up to 20% of the Fund’s
net assets may be invested in smallcapitalization and mid-capitalization
equities, domestic and foreign debt
securities, and high-yield bonds and/or
in Options Strategies and Financial
Instruments. Cash balances arising from
the use of Financial Instruments
typically will be held in money market
instruments.
The types of debt securities in which
the Fund will invest are fixed, floating
and variable corporate debt securities,
U.S. Government securities, debt
mstockstill on DSK4VPTVN1PROD with NOTICES
securities of foreign issuers, sovereign
debt securities, U.S. government agency
securities, and high-yield bonds. The
Fund also may invest in debt-based
ETNs and ETFs. The Fund expects to
invest in debt securities of all
maturities, from less than one year up
to thirty years, depending on the
portfolio manager’s assessment of the
risks and opportunities along the yield
curve.
b. Non-Principal Investments
While the Fund, under normal
circumstances, will invest at least 80%
of its net assets in its investments as
described above, the Fund may directly
invest in certain other investments. The
Fund may invest up to 20% of the
Fund’s net assets in large-capitalization
equities, domestic and foreign debt
securities, high-yield bonds and/or in
Options Strategies and Financial
Instruments. Cash balances arising from
the use of Financial Instruments
typically will be held in money market
instruments.
The types of debt securities in which
the Fund will invest are fixed, floating
and variable corporate debt securities,
U.S. Government securities, debt
securities of foreign issuers, sovereign
VerDate Mar<15>2010
17:44 Aug 26, 2014
Jkt 232001
PO 00000
Frm 00076
Fmt 4703
Sfmt 4703
E:\FR\FM\27AUN1.SGM
27AUN1
51214
Federal Register / Vol. 79, No. 166 / Wednesday, August 27, 2014 / Notices
securities of foreign issuers, sovereign
debt securities, U.S. government agency
securities, and high-yield bonds. The
Fund also may invest in debt-based
ETNs and ETFs. The Fund expects to
invest in debt securities of all
maturities, from less than one year up
to thirty years, depending on the
portfolio manager’s assessment of the
risks and opportunities along the yield
curve.
7. WBI Large Cap Tactical Yield Shares
According to the Exchange, the WBI
Large Cap Tactical Yield Shares will
seek long-term capital appreciation and
the potential for current income, while
also seeking to protect principal during
unfavorable market conditions.
mstockstill on DSK4VPTVN1PROD with NOTICES
a. Principal Investments
Under normal market conditions, the
Fund will invest at least 80% of its net
assets in the exchange-listed dividendpaying equity securities of large
capitalization domestic and foreign
companies selected by the Sub-Adviser.
The types of equity securities in which
the Fund will invest are common stocks,
preferred stocks, rights, warrants,
convertibles, MLPs, and REITs. The
Fund may invest up to 50% of the
Fund’s principal investments in the
securities of issuers in emerging
markets, which could consist of
Depositary Receipts, dollar
denominated foreign securities and
foreign equity securities. The Fund also
may invest up to 20% of the Fund’s
principal investments in high-yield
bonds. The Fund’s principal
investments also may consist of ETFs
that invest predominantly in smallcapitalization and mid-capitalization
equity securities and will be considered
small-capitalization and midcapitalization equity securities for
purposes of the Fund’s equity allocation
target.
b. Non-Principal Investments
While the Fund, under normal
circumstances, will invest at least 80%
of its net assets in its investments as
described above, the Fund may directly
invest in certain other investments
Namely, up to 20% of the Fund’s net
assets may be invested in smallcapitalization and mid-capitalization
equities, domestic and foreign debt
securities, high-yield bonds and/or in
Options Strategies and Financial
Instruments. Cash balances arising from
the use of Financial Instruments
typically will be held in money market
instruments.
The types of debt securities in which
the Fund will invest are fixed, floating
and variable corporate debt securities,
VerDate Mar<15>2010
17:44 Aug 26, 2014
Jkt 232001
U.S. Government securities, debt
securities of foreign issuers, sovereign
debt securities, U.S. government agency
securities, and high-yield bonds. The
Fund also may invest in debt-based
ETNs and ETFs. The Fund expects to
invest in debt securities of all
maturities, from less than one year up
to thirty years, depending on the
portfolio manager’s assessment of the
risks and opportunities along the yield
curve.
8. WBI Large Cap Tactical Select Shares
According to the Registration
Statement, the WBI Large Cap Tactical
Select Shares objectives are to seek longterm capital appreciation and the
potential for current income, while also
seeking to protect principal during
unfavorable market conditions.
and variable corporate debt securities,
U.S. Government securities, debt
securities of foreign issuers, sovereign
debt securities, U.S. government agency
securities, and high-yield bonds. The
Fund also may invest in debt-based
ETNs and ETFs. The Fund expects to
invest in debt securities of all
maturities, from less than one year up
to thirty years, depending on the
portfolio manager’s assessment of the
risks and opportunities along the yield
curve.
9. WBI Tactical Income Shares
According to the Exchange, the WBI
Tactical Income Shares objectives are to
seek current income with the potential
for long-term capital appreciation, while
also seeking to protect principal during
unfavorable market conditions.
a. Principal Investments
Under normal market conditions, the
Fund will invest at least 80% of its net
assets in the exchange-listed equity
securities of large capitalization
domestic and foreign companies
selected by the Sub-Adviser. The types
of equity securities in which the Fund
will invest are common stocks,
preferred stocks, rights, warrants,
convertibles, MLPs, and REITs. The
Fund may invest up to 50% of the
Fund’s principal investments in the
securities of issuers in emerging
markets, which could consist of
Depositary Receipts, dollar
denominated foreign securities and
foreign equity securities. The Fund also
may invest up to 20% of the Fund’s
principal investments in junk bonds.
The Fund’s principal investments also
may consist of ETFs that invest
predominantly in small-capitalization
and mid-capitalization equity securities
and will be considered smallcapitalization and mid-capitalization
equity securities for purposes of the
Fund’s equity allocation target.
b. Non-Principal Investments
While the Fund, under normal
circumstances, will invest at least 80%
of its net assets in its investments as
described above, the Fund may directly
invest in certain other investments.
Namely, up to 20% of the Fund’s net
assets may be invested in smallcapitalization and mid-capitalization
equities, domestic and foreign debt
securities, and high-yield bonds and/or
in Options Strategies described above
and Financial Instruments. Cash
balances arising from the use of
Financial Instruments typically will be
held in money market instruments.
The types of debt securities in which
the Fund will invest are fixed, floating
PO 00000
Frm 00077
Fmt 4703
Sfmt 4703
a. Principal Investments
Under normal market conditions, the
Fund will invest at least 80% of its net
assets in income producing debt and
exchange listed equity securities of
foreign and domestic issuers, including
the securities of foreign and domestic
corporate and governmental entities
selected by the Sub-Adviser. The types
of debt securities in which the Fund
will invest are corporate debt securities,
U.S. Government securities, debt
securities of foreign issuers, sovereign
debt securities, U.S. government agency
securities, high- yield bonds and
variable and floating rate securities. The
Fund also may invest in debt-based
ETNs. The Fund expects to invest in
debt securities of all maturities, from
less than one year up to thirty years,
depending on the portfolio manager’s
assessment of the risks and
opportunities along the yield curve. The
types of equity securities in which the
Fund will invest are common stocks,
preferred stocks, rights, warrants,
convertibles MLPs, and REITs. The
Fund may invest in companies of any
size market capitalization.
The Fund may invest up to 50% of
the Fund’s principal investments in the
securities of issuers in emerging
markets, which could consist of
Depositary Receipts, dollar
denominated foreign securities and
foreign equity securities. The Fund also
may invest up to 40% of the Fund’s
principal investments in junk bonds.
The Fund’s principal investments also
may consist of ETFs that invest
predominantly in debt securities and
will be considered debt securities for
the purposes of the Fund’s debt target
allocation and investments in other
investment companies that invest
predominantly in dividend-paying
equity securities are considered
E:\FR\FM\27AUN1.SGM
27AUN1
Federal Register / Vol. 79, No. 166 / Wednesday, August 27, 2014 / Notices
dividend-paying equity securities for
the purposes of the fund’s income
producing securities target allocation.
b. Non-Principal Investments
While the Fund, under normal
circumstances, will invest at least 80%
of its net assets in its investments as
described above, the Fund may directly
invest in certain other investments.
Namely, up to 20% of the Fund’s net
assets may be invested in exchange
listed foreign and domestic equities
(other than the foreign and domestic
equities noted in the Principal
Investment section for the Fund, above),
ETFs, ETNs (other than the debt-based
ETFs and ETNs noted in the Principal
Investment section for the Fund, above),
and/or in Options Strategies and
Financial Instruments. Cash balances
arising from the use of Financial
Instruments typically will be held in
money market instruments.
mstockstill on DSK4VPTVN1PROD with NOTICES
10. WBI Tactical High Income Shares
According to the Exchange, the WBI
Tactical High Income Shares investment
objectives are to seek high current
income with the potential for long-term
capital appreciation, while also seeking
to protect principal during unfavorable
market conditions.
a. Principal Investments
Under normal market conditions, the
Fund will invest at least 80% of its net
assets in income producing debt and
exchange listed equity securities of
foreign and domestic issuers, including
the securities of foreign and domestic
corporate and governmental entities
selected by the Sub-Adviser.
The types of debt securities in which
the Fund will invest are corporate debt
securities, U.S. Government securities,
debt securities of foreign issuers,
sovereign debt securities, U.S.
government agency securities, highyield bonds, variable and floating rate
securities, and debt-based ETNs and
ETFs. The Fund expects to invest in
debt securities of all maturities, from
less than one year up to thirty years,
depending on the portfolio manager’s
assessment of the risks and
opportunities along the yield curve.
The types of equity securities in
which the Fund will invest are common
stocks, preferred stocks, rights,
warrants, convertibles, MLPs, and
REITs. The Fund may invest in
companies of any size market
capitalization.
The Fund may invest up to 50% of
the Fund’s principal investments in the
securities of issuers in emerging
markets, which could consist of
Depositary Receipts, dollar
VerDate Mar<15>2010
17:44 Aug 26, 2014
Jkt 232001
denominated foreign securities and
foreign equity securities. The Fund also
may invest up to 80% of the Fund’s
principal investments in junk bonds.
The Fund’s principal investments also
may consist of ETFs that invest
predominantly in debt securities and
will be considered debt securities for
the purposes of the Fund’s debt target
allocation and investments in other
investment companies that invest
predominantly in dividend-paying
equity securities are considered
dividend-paying equity securities for
the purposes of the fund’s income
producing securities target allocation.
b. Non-Principal Investments
While the Fund, under normal
circumstances, will invest at least 80%
of its net assets in its investments as
described above, the Fund may directly
invest in certain other investments.
According to the Exchange, up to 20%
of the Fund’s net assets may be invested
in exchange listed foreign and domestic
equities (other than the foreign and
domestic equities noted in the Principal
Investment section for the Fund, above),
ETFs, ETNs (other than the debt-based
ETFs and ETNs noted in the Principal
Investment section for the Fund, above),
and/or in Options Strategies and
Financial Instruments. Cash balances
arising from the use of Financial
Instruments typically will be held in
money market instruments.
C. Investment Restrictions
Each Fund will seek to qualify for
treatment as a regulated investment
company (‘‘RIC’’) under Subchapter M
of the Internal Revenue Code of 1986, as
amended.20
A 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. The Funds will monitor their
portfolio liquidity on an ongoing basis
to determine whether, in the 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 a Fund’s net assets are held
in illiquid securities and other illiquid
assets.
A Fund will not invest more than
25% of its total assets, directly or
indirectly, through underlying ETFs, in
an individual industry, as defined by
the Standard Industrial Classification
Codes utilized by the Division of
20 26
PO 00000
U.S.C. 851.
Frm 00078
Fmt 4703
Sfmt 4703
51215
Corporate Finance of the Commission.21
This limitation does not apply to
investments in securities issued or
guaranteed by the U.S. Government, its
agencies or instrumentalities, or
investments in shares of investment
companies.
According to the Exchange, a Fund
may not purchase or sell physical
commodities or physical commodity
contracts unless acquired as a result of
ownership of securities or other
instruments issued by persons that
purchase or sell commodities or
commodities contracts, but this shall
not prevent a Fund from purchasing,
selling and entering into financial
futures contracts (including futures
contracts on indices of securities,
interest rates and currencies), options
on financial futures contracts (including
futures contracts on indices of
securities, interest rates and currencies),
warrants, swaps, forward contracts, or
other derivative instruments that are not
related to physical commodities.
No Fund will invest more than 10%
of its net assets in unsponsored
Depositary Receipts. For each Fund, not
more than 10% of the net assets
invested in exchange-traded equity
securities 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. Further, for each Fund, not
more than 10% of the net assets
invested in futures contracts or options
contracts shall consist of futures
contracts or options contracts whose
principal market is not a member of ISG
or is a market with which the Exchange
does not have a comprehensive
surveillance sharing agreement.
No Fund will invest in leveraged or
inverse leveraged (e.g., 2X, ¥2X, 3X, or
¥3X) ETFs.
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.22 In
particular, the Commission finds that
the proposed rule change is consistent
with Section 6(b)(5) of the Exchange
21 See Form N–1A, Item 5. The Commission has
taken the position that a fund is concentrated if it
invests more than 25% of the value of its total
assets in any one industry. See, e.g., Investment
Company Act Release No. 9011 (October 30, 1975),
40 FR 54241 (November 21, 1975).
22 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).
E:\FR\FM\27AUN1.SGM
27AUN1
mstockstill on DSK4VPTVN1PROD with NOTICES
51216
Federal Register / Vol. 79, No. 166 / Wednesday, August 27, 2014 / Notices
Act,23 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 Funds and the Shares must
comply with the requirements of NYSE
Arca Equities Rule 8.600 to be listed and
traded on the Exchange.
The Commission finds that the
proposal to list and trade the Shares on
the Exchange is consistent with Section
11A(a)(1)(C)(iii) of the Exchange Act,24
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 and
underlying domestic exchange listed
equities securities, including common
stocks, preferred stocks, rights,
warrants, convertibles, Depositary
Receipts, ETFs, ETNs, MLPs and REITS,
will be available via the Consolidated
Tape Association high-speed line and
from the national securities exchange on
which they are listed. Quotation and
last-sale information for domestic
exchange-listed options contracts will
be available via the Options Price
Reporting Authority.
Quotation information for
unsponsored Depositary Receipts will
be available from major market data
vendors. Quotation information for nonexchange-traded derivatives, including
OTC options, forwards, and swaps may
be obtained from brokers and dealers
who make markets in such securities or
major market data vendors. Price
information on futures and options on
futures will be available from major
market data vendors and from securities
and futures exchanges, as applicable.
Quotation information for debt
securities, including fixed, floating and
variable corporate debt securities, U.S.
Government securities, debt securities
of foreign issuers, sovereign debt
securities, U.S. government agency
securities and high-yield bonds, will be
available from major market data
vendors. In addition, quotation
information from brokers and dealers or
major market data vendors will be
available for mortgage-backed; assetbacked securities; money market
23 15
24 15
U.S.C. 78f(b)(5).
U.S.C. 78k–1(a)(1)(C)(iii).
VerDate Mar<15>2010
17:44 Aug 26, 2014
Jkt 232001
instruments; short-term debt securities;
and Financial Instruments. Information
regarding market price and trading
volume of the Shares will be continually
available on a real-time basis throughout
the day on brokers’ computer screens
and other electronic services.
Information regarding the previous
day’s closing price and trading volume
information for the Shares will be
published daily in the financial section
of newspapers. Price information
regarding equity securities and options
traded on non-U.S. securities exchanges
will be available from the exchanges
trading such securities, automated
quotation systems, published or other
public sources, or on-line information
services such as Bloomberg or Reuters.
The Commission also 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. On
each business day, before
commencement of trading in Shares in
the Core Trading Session (9:30 a.m. E.T.
to 4:00 p.m. E.T.) on the Exchange, each
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 a Fund’s calculation
of NAV at the end of the business day.25
The Web site information will be
publicly available at no charge. The
NAV of a Fund will be determined once
each Business Day, normally as of the
close of trading on the NYSE (normally,
4:00 p.m. E.T.). The Exchange will
obtain a representation from the issuer
of the Shares that the NAV per Share
will be calculated daily and that the
NAV and the Disclosed Portfolio as
defined in NYSE Arca Equities Rule
8.600(c)(2) will be made available to all
market participants at the same time.26
The Intraday Indicative Value (‘‘IIV’’)
will be widely disseminated by one or
more major market data vendors at least
every 15 seconds during the Core
Trading Session.27 The Web site for
each Fund will include a form of the
prospectus for each Fund and additional
data relating to NAV and other
applicable quantitative information.28
25 Under accounting procedures followed by each
Funds, trades made on the prior business day (‘‘T’’)
will be booked and reflected in NAV on the current
business day (‘‘T+1’’). Accordingly, each Fund will
be able to disclose at the beginning of the business
day the portfolio that will form the basis for the
NAV calculation at the end of the business day.
26 See Notice, supra note 4, 79 FR at 39044.
27 The IIV is the same as the Portfolio Indicative
Value as defined in NYSE Arca Equities Rule
8.600(c)(3). See id. at 39042.
28 See id. at 39043.
PO 00000
Frm 00079
Fmt 4703
Sfmt 4703
The Exchange represents that trading
in Shares of a Fund will be halted if the
circuit breaker parameters in NYSE Arca
Equities Rule 7.12 have been reached.29
Trading also may be halted because of
market conditions or for reasons that, in
the view of the Exchange, make trading
in the Shares inadvisable,30 and trading
in the Shares will be subject to NYSE
Arca Equities Rule 8.600(d)(2)(D), which
sets forth circumstances under which
Shares may be halted.
The Exchange states that it has a
general policy prohibiting the
distribution of material, non-public
information by its employees.
Consistent with NYSE Arca Equities
Rule 8.600(d)(2)(B)(ii), each Fund’s
Reporting Authority will 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 each Fund’s portfolio.31
The Exchange states that the Adviser
is a registered broker-dealer and is
affiliated with a broker-dealer, and that
the Sub-Adviser is also affiliated with a
broker-dealer. The Exchange represents
that the Adviser and Sub-Adviser will
implement a firewall with respect to
their relevant personnel and their
broker-dealer affiliates regarding access
to information concerning the
composition and/or changes to a
portfolio, and will be subject to
procedures designed to prevent the use
and dissemination of material nonpublic information regarding such
portfolio.
The Financial Industry Regulatory
Authority (‘‘FINRA’’), on behalf of the
Exchange, will communicate as needed
regarding trading in the Shares,
underlying exchange-traded equity
securities (including, without
limitation, domestic and foreign
common stocks, preferred stocks, rights,
warrants, convertibles, Depositary
Receipts, ETFs, ETNs, MLPs and
REITS), exchange-traded options,
futures, options on futures contracts and
options on securities indices with
markets and entities that are members of
ISG, and FINRA may obtain, on behalf
of the Exchange, trading information
regarding trading in the Shares,
underlying exchange-traded equity
securities, exchange-traded options,
futures, options on futures contracts and
29 See
id. at 39044.
may include: (1) The extent to which
trading is not occurring in the securities and/or the
Financial Instruments comprising the Disclosed
Portfolio of a Fund; or (2) whether other unusual
conditions or circumstances detrimental to the
maintenance of a fair and orderly market are
present. See id.
31 See NYSE Arca Equities Rule 8.600(d)(2)(B)(ii).
30 These
E:\FR\FM\27AUN1.SGM
27AUN1
mstockstill on DSK4VPTVN1PROD with NOTICES
Federal Register / Vol. 79, No. 166 / Wednesday, August 27, 2014 / Notices
options on securities indices from such
markets or entities. In addition, the
Exchange may obtain information
regarding trading in the Shares,
underlying exchange-traded equity
securities (including, without
limitation, domestic and foreign
common stocks, preferred stocks, rights,
warrants, convertibles, Depositary
Receipts, ETFs, ETNs, MLPs and
REITS), exchange-traded options,
futures, options on futures contracts and
options on securities indices from
markets and entities that are members of
ISG or with which the Exchange has in
place a comprehensive surveillance
sharing agreement.32
The Exchange deems the Shares to be
equity securities, thus rendering trading
in the Shares subject to the Exchange’s
existing rules governing the trading of
equity securities. In support of this
proposal, the Exchange represented that:
(1) The Shares will conform to the
initial and continuing listing criteria
under NYSE Arca Equities Rule 8.600.
(2) 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 these procedures
are adequate to properly monitor
Exchange trading of the Shares in all
trading sessions and to detect and help
deter violations of Exchange rules and
applicable federal securities laws.
(3) The Exchange has appropriate
rules to facilitate transactions in the
Shares during all trading sessions.
(4) Prior to the commencement of
trading, the Exchange will inform its
Equity Trading Permit Holders (‘‘ETP
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
ETP Holders to learn the essential facts
relating to every customer prior to
trading the Shares; (c) the risks involved
in trading the Shares during the
Opening and Late Trading Sessions
when an updated IIV will not be
calculated or publicly disseminated; (d)
how information regarding the IIV is
disseminated; (e) the requirement that
ETP Holders deliver a prospectus to
investors purchasing newly issued
Shares prior to or concurrently with the
confirmation of a transaction; and (f)
trading information.
(5) For initial and/or continued
listing, each Fund will be in compliance
with Rule 10A–3 under the Act,33 as
provided by NYSE Arca Equities Rule
5.3.
(6) Each Fund may hold up to an
aggregate amount of 15% of its net
assets in illiquid securities, including
Rule 144A securities.
(7) Unsponsored Depository Receipts
will not exceed 10% of a Fund’s net
assets.
(8) For each Fund, not more than 10%
of the net assets invested in exchangetraded equity securities 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.
(9) For each Fund, not more than 10%
of the net assets invested in futures
contracts or options contracts shall
consist of futures contracts or options
contracts whose principal market is not
a member of ISG or is a market with
which the Exchange does not have a
comprehensive surveillance sharing
agreement.
(10) No Fund will invest in leveraged
or inverse leveraged (e.g., 2X, -2X, 3X,
or -3X) ETFs.
(11) 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
descriptions of the Funds. For the
foregoing reasons, the Commission finds
that the proposed rule change is
consistent with Section 6(b)(5) of the
Act 34 and the rules and regulations
thereunder applicable to a national
securities exchange.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Exchange Act,35
that the proposed rule change (SR–
NYSEArca-2014–67), as modified by
Amendment No. 1, is hereby approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.36
Kevin O’Neill,
Deputy Secretary.
[FR Doc. 2014–20343 Filed 8–26–14; 8:45 am]
BILLING CODE 8011–01–P
CFR 240.10A–3.
U.S.C. 78f(b)(5).
35 15 U.S.C. 78s(b)(2).
36 17 CFR 200.30–3(a)(12).
32 For
a list of the current members of ISG, see
www.isgportal.org.
VerDate Mar<15>2010
17:44 Aug 26, 2014
Jkt 232001
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–72891; File No. SR–
NYSEMKT–2014–70]
Self-Regulatory Organizations; NYSE
MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Amending Its Rules
Governing the Short-Term Option
Series Program To Introduce Finer
Strike Price Intervals for Related NonShort Term Options
August 21, 2014.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on August
18, 2014, NYSE MKT LLC (the
‘‘Exchange’’ or ‘‘NYSE MKT’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to [sic] its
rules governing the Short-Term Option
Series program to introduce finer strike
price intervals for Related non-Short
Term Options. The text of the proposed
rule change is available on the
Exchange’s Web site at www.nyse.com,
at the principal office of the Exchange,
and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
33 17
34 15
PO 00000
Frm 00080
Fmt 4703
Sfmt 4703
51217
1 15
U.S.C.78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
E:\FR\FM\27AUN1.SGM
27AUN1
]]>Agencies
[Federal Register Volume 79, Number 166 (Wednesday, August 27, 2014)]
[Notices]
[Pages 51210-51217]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-20343]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72895; File No. SR-NYSEArca-2014-67]
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a
Proposed Rule Change, as Modified by Amendment No. 1, To List and Trade
WBI SMID Tactical Growth Shares; WBI SMID Tactical Value Shares; WBI
SMID Tactical Yield Shares; WBI SMID Tactical Select Shares; WBI Large
Cap Tactical Growth Shares; WBI Large Cap Tactical Value Shares; WBI
Large Cap Tactical Yield Shares; WBI Large Cap Tactical Select Shares;
WBI Tactical Income Shares; and WBI Tactical High Income Shares Under
NYSE Arca Equities Rule 8.600
August 21, 2014.
I. Introduction
On June 20, 2014, NYSE Arca, Inc. (the ``Exchange'' or ``NYSE
Arca'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) \1\ of the Securities
Exchange Act of 1934 (``Act'' or ``Exchange Act'') \2\ and Rule 19b-4
thereunder,\3\ a proposed rule change to list and trade the following
shares (collectively, ``Shares'') of the funds (each a ``Fund'' and
collectively, the ``Funds'') under NYSE Arca Equities Rule 8.600: the
WBI SMID Tactical Growth Shares; WBI SMID Tactical Value Shares; WBI
SMID Tactical Yield Shares; WBI SMID Tactical Select Shares; WBI Large
Cap Tactical Growth Shares; WBI Large Cap Tactical Value Shares; WBI
Large Cap Tactical Yield Shares; WBI Large Cap Tactical Select Shares;
WBI Tactical Income Shares; and WBI Tactical High Income Shares. On
July 1, 2014, the Exchange filed Amendment No. 1 to the proposed rule
change. The proposed rule change was published for comment in the
Federal Register on July 9, 2014.\4\ The Commission received no
comments on the proposed rule change. This order approves the proposed
rule change, as modified by Amendment No. 1.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
\4\ See Securities Exchange Act Release No. 72526 (July 2,
2014), 79 FR 39035 (``Notice'').
---------------------------------------------------------------------------
II. Description of the Proposal \5\
---------------------------------------------------------------------------
\5\ Additional information regarding the Funds; Shares;
investment objectives; strategies; methodology and restrictions;
risks; fees and expenses; creations and redemptions of Shares;
availability of information; trading rules and halts; and
surveillance procedures, among other things, can be found in the
Registration Statement and in the Notice. See Notice, supra note 4,
and Registration Statement, infra note 7, respectively.
---------------------------------------------------------------------------
The Exchange proposes to list and trade the Shares under NYSE Arca
Equities Rule 8.600, which governs the listing and trading of Managed
Fund Shares.\6\ The Shares will be offered by Absolute Shares Trust
(``Trust''),\7\ a
[[Page 51211]]
statutory trust organized under the laws of the State of Delaware and
registered with the Commission as an open-end management investment
company. Millington Securities, Inc. will be the investment adviser for
each Fund (``Adviser'') and WBI Investments, Inc. will be the sub-
adviser to each Fund (``Sub-Adviser'').\8\ The Exchange states that the
Adviser is a registered broker-dealer and is affiliated with a broker-
dealer, and that the Sub-Adviser is also affiliated with a broker-
dealer.\9\ The Exchange represents that the Adviser and Sub-Adviser
will implement a firewall with respect to their relevant personnel and
their broker-dealer affiliates regarding access to information
concerning the composition and/or changes to a portfolio, and will be
subject to procedures designed to prevent the use and dissemination of
material non-public information regarding such portfolio.\10\ U.S.
Bank, National Association will be the administrator, custodian,
transfer agent and securities lending agent for each Fund. Foreside
Fund Services, LLC will be the distributor for the Funds.
---------------------------------------------------------------------------
\6\ A Managed Fund Share is a security that represents an
interest in an investment company registered under the Investment
Company Act of 1940 (15 U.S.C. 80a-1), as amended (``1940 Act''),
organized as an open-end investment company or similar entity that
invests in a portfolio of securities selected by its investment
adviser consistent with its investment objectives and policies. In
contrast, an open-end investment company that issues Investment
Company Units, listed and traded on the Exchange under NYSE Arca
Equities Rule 5.2(j)(3), seeks to provide investment results that
correspond generally to the price and yield performance of a
specific foreign or domestic stock index, fixed income securities
index or combination thereof.
\7\ The Trust is registered under the 1940 Act. On February 28,
2014, the Trust filed with the Commission an amended registration
statement on Form N-1A relating to the Funds (File Nos. 333-192733
and 811-22917) (the ``Registration Statement''). The description of
the operation of the Trust and the Funds herein is based, in part,
on the Registration Statement. In addition, the Commission has
issued an order granting certain exemptive relief to the Adviser and
the actively managed exchange-traded trusts it advises, including
the Trust, under the 1940 Act. See Investment Company Act Release
No. 30543 (May 29, 2013) (File No. 812-13886) (the ``Exemptive
Order'').
\8\ An investment adviser to an open-end fund is required to be
registered under the Investment Advisers Act of 1940 (the ``Advisers
Act''). The Adviser is wholly owned by WBI Trading Company, Inc.,
and the Sub-Adviser is an affiliate of WBI Trading Company. See
Notice, supra note 4, 79 FR at 39035, n.8. The Adviser and the Sub-
Adviser are each registered as an investment adviser under the
Advisers Act. As a result, the Adviser, the 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, the Adviser, the
Sub-Adviser, and their related personnel are subject to the
provisions of Rule 206(4)-7 under the Advisers Act, which 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.
\9\ See id. at 39036.
\10\ See id. The Exchange also states that, in the event that
(a) the Adviser and/or Sub-Adviser become newly affiliated with
another broker-dealer, or (b) any new adviser or sub-adviser is a
registered broker-dealer or becomes affiliated with a broker-dealer,
it will implement a firewall with respect to such relevant personnel
and/or its broker-dealer affiliate regarding access to information
concerning the composition and/or changes to a portfolio, and will
be subject to procedures designed to prevent the use and
dissemination of material non-public information regarding such
portfolio. See id.
---------------------------------------------------------------------------
A. Common Fund Strategy and Characteristics
Each Fund will be an actively-managed exchange-traded fund
(``ETF'') and will not seek to replicate the performance of a specified
index. Each Fund will, under normal market conditions,\11\ invest at
least 80% of its net assets in securities according to its individual
principal investment strategies as described below. Additionally,
certain Funds may use American depositary receipts (``ADR''), European
depositary receipts (``EDR'') and global depositary receipts (``GDR'')
(collectively, ``Depositary Receipts'') when, in the discretion of the
Sub-Adviser, the use of such securities is warranted for liquidity,
pricing, timing or other reasons. No Fund will invest more than 10% of
its net assets in unsponsored Depositary Receipts. Each Fund that
invests primarily in equities as described further below also may
invest up to 20% of its principal investment assets in high-yield bonds
(also known as ``junk bonds'').
---------------------------------------------------------------------------
\11\ The term ``under normal market conditions'' or ``under
normal circumstances'' includes, but is not limited to, the absence
of adverse market, economic, political or other conditions,
including extreme volatility or trading halts in the fixed income
markets or the financial markets generally; operational issues
causing dissemination of inaccurate market information; or force
majeure type events such as systems failure, natural or man-made
disaster, act of God, armed conflict, act of terrorism, riot or
labor disruption or any similar intervening circumstance. However,
each Fund may temporarily depart from its principal investment
strategy by making short-term investments in cash, cash equivalents,
high-quality short-term debt securities, and money market
instruments for temporary defensive purposes in response to adverse
market, economic or political conditions. According to the Exchange,
each Fund may acquire the following short-term investments: (1)
certificates of deposit issued by commercial banks as well as
savings banks or savings and loan associations; (2) bankers'
acceptances; (3) time deposits; and (4) commercial paper and short
term notes rated at the time of purchase ``A-2'' or higher by
Standard & Poor's[supreg], ``Prime-1'' by Moody's[supreg] Investors
Service, Inc., or similarly rated by another nationally recognized
statistical rating organization or, if unrated, will be determined
by the Sub-Adviser to be of comparable quality, as well as U.S.
Government obligations.
---------------------------------------------------------------------------
B. Individual Fund Investments
1. WBI SMID Tactical Growth Shares
According to the Exchange, the WBI SMID Tactical Growth Shares will
seek long-term capital appreciation and the potential for current
income, while also seeking to protect principal during unfavorable
market conditions.
a. Principal Investments
Under normal market conditions, the Fund will invest at least 80%
of its net assets in the exchange-listed equity securities of small-
capitalization and mid-capitalization domestic and foreign
companies.\12\ The types of equity securities in which the Fund will
invest are common stocks, preferred stocks, rights, warrants,
convertibles, master limited partnerships (exchange-traded businesses
organized as partnerships (``MLPs'')), and exchange-traded real estate
investment trusts (``REITs''). The Fund may invest up to 50% of the
Fund's principal investments in the securities of issuers in emerging
markets, which could consist of Depositary Receipts, dollar denominated
foreign securities and foreign equity securities. The Fund's principal
investments also may consist of ETFs \13\ that invest predominantly in
small-capitalization and mid-capitalization equity securities and will
be considered small-capitalization and mid-capitalization equity
securities for purposes of the Fund's equity allocation target.
---------------------------------------------------------------------------
\12\ Each Fund will generally invest in equity securities that
trade in markets that are members of the Intermarket Surveillance
Group (``ISG'') or are parties to a comprehensive surveillance
sharing agreement with the Exchange. For each Fund, not more than
10% of the net assets invested in exchange-traded equity securities
shall consist of equity securities whose principal market is not a
member of ISG or is a market with which the Exchange does not have a
comprehensive surveillance sharing agreement. Furthermore, for each
Fund not more than 10% of the net assets invested in futures
contracts or options contracts shall consist of futures contracts or
options contracts whose principal market is not a member of ISG or
is a market with which the Exchange does not have a comprehensive
surveillance sharing agreement. See id. at 39037, n.11.
\13\ ETFs include Investment Company Units (NYSE Arca Equities
Rule 5.2(j)(3)); Portfolio Depositary Receipts (NYSE Arca Equities
Rule 8.100); and Managed Fund Shares (NYSE Arca Equities Rule
8.600). The ETFs all will be listed and traded in the U.S. on
registered exchanges. The ETFs in which a Fund may invest will
primarily be index-based exchange-traded funds that hold
substantially all of their assets in securities representing a
specific index. While each Fund may invest in inverse ETFs, a Fund
will not invest in leveraged (e.g., 2X, -2X, 3X or -3X) ETFs. See
id. at 39037, n.12.
---------------------------------------------------------------------------
b. Non-Principal Investments
While the Fund, under normal circumstances, will invest at least
80% of its net assets as described above, the Fund may directly invest
in certain other investments. According to the Exchange, to enhance the
Fund's returns or to mitigate risk and volatility, the Fund may invest
up to 20% of the Fund's net assets in large-capitalization
[[Page 51212]]
equities; domestic and foreign debt securities (including junk bonds);
ETFs (other than ETFs noted in the Principal Investment section for the
Fund, above, that invest predominantly in small-capitalization and mid-
capitalization equity securities); and/or exchange-traded or over-the-
counter (``OTC'') options overlying: exchange listed equity indices;
and futures on debt, interest rates, and currencies (``Options
Strategies'').\14\
---------------------------------------------------------------------------
\14\ See id. at 39037.
---------------------------------------------------------------------------
The Fund may invest in the following types of debt securities:
Fixed, floating and variable corporate debt securities, U.S. Government
securities, debt securities of foreign issuers, sovereign debt
securities, U.S. government agency securities, and high-yield bonds.
The Fund also may invest in agency and non-agency residential mortgage-
backed securities (``RMBS'') and asset-backed securities.\15\ The Fund
also may invest in debt-based exchange-traded notes (``ETNs'').\16\ The
Fund expects to invest in debt securities of all maturities, from less
than one year up to thirty years, depending on the portfolio manager's
assessment of the risks and opportunities along the yield curve.
According to the Exchange, the yield curve refers to the differences in
yield among debt assets of varying maturities.
---------------------------------------------------------------------------
\15\ ``Non-agency'' securities are financial instruments that
have been issued by an entity that is not a government-sponsored
agency, such as the Federal National Mortgage Association (``Fannie
Mae''), Federal Home Loan Mortgage Corporation (``Freddie Mac''),
Federal Home Loan Banks, or the Government National Mortgage
Association (``Ginnie Mae'').
\16\ See id. ETNs are debt obligations of investment banks which
are traded on exchanges and the returns of which are linked to the
performance of market indexes and include securities listed and
traded on the Exchange under NYSE Arca Equities Rule 5.2(j)(6)
(``Index-Linked Securities''). In addition to trading ETNs on
exchanges, investors may redeem ETNs directly with the issuer on a
weekly basis, typically in a minimum amount of 50,000 units, or hold
the ETNs until maturity.
---------------------------------------------------------------------------
In addition, the Fund may utilize equity options for individual
securities including writing (selling) covered calls, buying puts,
using combinations of calls and puts, using combinations of calls and
combinations of puts, and entering into cap and floor agreements.\17\
The Fund also may use Options Strategies.
---------------------------------------------------------------------------
\17\ The Exchange describes cap and floor agreements in the
Notice. See id. at 39037, n.16.
---------------------------------------------------------------------------
The Fund also may enter into the following types of financial
instruments: futures overlying equity indexes, interest rates, debt
instruments, and currencies; government debt repurchase agreements;
depository receipt conversion swaps \18\ into and out of the underlying
stock; and forward contracts on currencies (collectively, the
``Financial Instruments'').\19\ Cash balances arising from the use of
Financial Instruments typically will be held in money market
instruments.
---------------------------------------------------------------------------
\18\ The Exchange describes depository receipt conversion swap
in the Notice. See id. at 39037, n.18.
\19\ See id. at 39037.
---------------------------------------------------------------------------
2. WBI SMID Tactical Value Shares
According to the Exchange, the WBI SMID Tactical Value Shares will
seek long-term capital appreciation and the potential for current
income, while also seeking to protect principal during unfavorable
market conditions.
a. Principal Investments
Under normal market conditions, the Fund will invest at least 80%
of its net assets in the exchange-listed equity securities of small-
capitalization and mid-capitalization domestic and foreign companies
selected by the Sub-Adviser. The types of equity securities in which
the Fund will invest are common stocks, preferred stocks, rights,
warrants, convertibles, MLPs, and REITs. The Fund may invest up to 50%
of the Fund's principal investments in the securities of issuers in
emerging markets, which could consist of Depositary Receipts, dollar
denominated foreign securities and foreign equity securities. The
Fund's principal investments also may consist of ETFs that invest
predominantly in small-capitalization and mid-capitalization equity
securities and will be considered small-capitalization and mid-
capitalization equity securities for purposes of the Fund's equity
allocation target.
b. Non-Principal Investments
While the Fund, under normal circumstances, will invest at least
80% of its net assets in its investments as described above, the Fund
may directly invest in certain other investments. According to the
Registration Statement, the Fund may invest up to 20% of its net assets
in large-capitalization equities, domestic and foreign debt securities
(including junk bonds), ETFs (other than ETFs noted in the Principal
Investments section for the Fund, above, that invest predominantly in
small-capitalization and mid-capitalization equity securities), and/or
in Options Strategies to enhance the Fund's returns or to mitigate risk
and volatility. The Fund also may use Financial Instruments. Cash
balances arising from the use of Financial Instruments typically will
be held in money market instruments.
The types of debt securities in which the Fund will invest are
fixed, floating and variable corporate debt securities, U.S. Government
securities, debt securities of foreign issuers, sovereign debt
securities, U.S. government agency securities, and high-yield bonds.
The Fund also may invest in debt-based ETNs. The Fund expects to invest
in debt securities of all maturities, from less than one year up to
thirty years, depending on the portfolio manager's assessment of the
risks and opportunities along the yield curve.
3. WBI SMID Tactical Yield Shares
According to the Exchange, the WBI SMID Tactical Yield Share will
seek long-term capital appreciation and the potential for current
income, while also seeking to protect principal during unfavorable
market conditions.
a. Principal Investments
Under normal market conditions, the Fund will invest at least 80%
of its net assets in the exchange-listed dividend-paying equity
securities of small-capitalization and mid-capitalization domestic and
foreign companies selected by the Sub-Adviser. The types of equity
securities in which the Fund will invest are common stocks, preferred
stocks, rights, warrants, convertibles, MLPs, and REITs. The Fund may
invest up to 50% of the Fund's principal investments in the securities
of issuers in emerging markets, which could consist of Depositary
Receipts, dollar-denominated foreign securities and foreign equity
securities. The Fund's principal investments also may consist of ETFs
that invest predominantly in small-capitalization and mid-
capitalization equity securities and will be considered small-
capitalization and mid-capitalization equity securities for purposes of
the Fund's equity allocation target.
b. Non-Principal Investments
While the Fund, under normal circumstances, will invest at least
80% of its net assets in its investments as described above, the Fund
may directly invest in certain other investments. According to the
Registration Statement, the Fund may invest up to 20% of the Fund's net
assets in large-capitalization equities, domestic and foreign debt
securities, high-yield bonds and/or in Options Strategies and Financial
Instruments. Cash balances arising from the use of Financial
Instruments typically will be held in money market instruments.
The types of debt securities in which the Fund will invest are
fixed, floating and variable corporate debt securities, U.S. Government
securities, debt
[[Page 51213]]
securities of foreign issuers, sovereign debt securities, U.S.
government agency securities, and high-yield bonds. The Fund also may
invest in debt-based ETNs and ETFs. The Fund expects to invest in debt
securities of all maturities, from less than one year up to thirty
years, depending on the portfolio manager's assessment of the risks and
opportunities along the yield curve.
4. WBI SMID Tactical Select Shares
According to the Exchange, the WBI SMID Tactical Select Shares will
seek long-term capital appreciation and the potential for current
income, while also seeking to protect principal during unfavorable
market conditions.
a. Principal Investments
Under normal market conditions, the Fund will invest at least 80%
of its net assets in the exchange-listed equity securities of small-
capitalization and mid-capitalization domestic and foreign companies
selected by the Sub-Adviser. The types of equity securities in which
the Fund will invest are common stocks, preferred stocks, rights,
warrants, convertibles, MLPs, and REITs. The Fund may invest up to 50%
of the Fund's principal investments in the securities of issuers in
emerging markets, which could consist of Depositary Receipts, dollar
denominated foreign securities and foreign equity securities. The Fund
also may invest up to 20% of the Fund's principal investments in junk
bonds. The Fund's principal investments also may consist of ETFs that
invest predominantly in small-capitalization and mid-capitalization
equity securities and will be considered small-capitalization and mid-
capitalization equity securities for purposes of the Fund's equity
allocation target.
b. Non-Principal Investments
While the Fund, under normal circumstances, will invest at least
80% of its net assets in its investments as described above, the Fund
may directly invest in certain other investments. The Fund may invest
up to 20% of the Fund's net assets in large-capitalization equities,
domestic and foreign debt securities, high-yield bonds and/or in
Options Strategies and Financial Instruments. Cash balances arising
from the use of Financial Instruments typically will be held in money
market instruments.
The types of debt securities in which the Fund will invest are
fixed, floating and variable corporate debt securities, U.S. Government
securities, debt securities of foreign issuers, sovereign debt
securities, U.S. government agency securities, and high-yield bonds.
The Fund also may invest in debt-based ETNs and ETFs. The Fund expects
to invest in debt securities of all maturities, from less than one year
up to thirty years, depending on the portfolio manager's assessment of
the risks and opportunities along the yield curve.
5. WBI Large Cap Tactical Growth Shares
According to the Exchange, the WBI Large Cap Tactical Growth Shares
objectives are to seek long-term capital appreciation and the potential
for current income, while also seeking to protect principal during
unfavorable market conditions.
a. Principal Investments
Under normal market conditions, the Fund will invest at least 80%
of its net assets in the exchange-listed equity securities of large
capitalization domestic and foreign companies selected by the Sub-
Adviser. The types of equity securities in which the Fund will invest
are common stocks, preferred stocks, rights, warrants, convertibles,
MLPs, and REITs. The Fund may invest up to 50% of the Fund's principal
investments in the securities of issuers in emerging markets, which
could consist of Depositary Receipts, dollar denominated foreign
securities and foreign equity securities. The Fund's principal
investments also may consist of ETFs that invest predominantly in
small-capitalization and mid-capitalization equity securities and will
be considered small-capitalization and mid-capitalization equity
securities for purposes of the Fund's equity allocation target.
b. Non-Principal Investments
While the Fund, under normal circumstances, will invest at least
80% of its net assets in its investments as described above, the Fund
may directly invest in certain other investments. Namely, up to 20% of
the Fund's net assets may be invested in small-capitalization and mid-
capitalization equities, domestic and foreign debt securities, and
high-yield bonds and/or in Options Strategies and Financial
Instruments. Cash balances arising from the use of Financial
Instruments typically will be held in money market instruments.
The types of debt securities in which the Fund will invest are
fixed, floating and variable corporate debt securities, U.S. Government
securities, debt securities of foreign issuers, sovereign debt
securities, U.S. government agency securities, and high-yield bonds.
The Fund also may invest in debt-based ETNs and ETFs. The Fund expects
to invest in debt securities of all maturities, from less than one year
up to thirty years, depending on the portfolio manager's assessment of
the risks and opportunities along the yield curve.
6. WBI Large Cap Tactical Value Shares
According to the Exchange, the WBI Large Cap Tactical Value Shares
objectives are to seek long-term capital appreciation and the potential
for current income, while also seeking to protect principal during
unfavorable market conditions.
a. Principal Investments
Under normal market conditions, the Fund will invest at least 80%
of its net assets in the exchange-listed equity securities of large
capitalization domestic and foreign companies selected by the Sub-
Adviser. The types of equity securities in which the Fund will invest
are common stocks, preferred stocks, rights, warrants, convertibles,
MLPs, and REITs. The Fund may invest up to 50% of the Fund's principal
investments in the securities of issuers in emerging markets, which
could consist of Depositary Receipts, dollar denominated foreign
securities and foreign equity securities. The Fund also may invest up
to 20% of the Fund's principal investments in junk bonds. The Fund's
principal investments also may consist of ETFs that invest
predominantly in small-capitalization and mid-capitalization equity
securities and will be considered small-capitalization and mid-
capitalization equity securities for purposes of the Fund's equity
allocation target.
b. Non-Principal Investments
While the Fund, under normal circumstances, will invest at least
80% of its net assets in its investments as described above, the Fund
may directly invest in certain other investments Specifically, up to
20% of the Fund's net assets may be invested in small-capitalization
and mid-capitalization equities, domestic and foreign debt securities,
and high-yield bonds and/or in Options Strategies and Financial
Instruments. Cash balances arising from the use of Financial
Instruments typically will be held in money market instruments.
The types of debt securities in which the Fund will invest are
fixed, floating and variable corporate debt securities, U.S. Government
securities, debt
[[Page 51214]]
securities of foreign issuers, sovereign debt securities, U.S.
government agency securities, and high-yield bonds. The Fund also may
invest in debt-based ETNs and ETFs. The Fund expects to invest in debt
securities of all maturities, from less than one year up to thirty
years, depending on the portfolio manager's assessment of the risks and
opportunities along the yield curve.
7. WBI Large Cap Tactical Yield Shares
According to the Exchange, the WBI Large Cap Tactical Yield Shares
will seek long-term capital appreciation and the potential for current
income, while also seeking to protect principal during unfavorable
market conditions.
a. Principal Investments
Under normal market conditions, the Fund will invest at least 80%
of its net assets in the exchange-listed dividend-paying equity
securities of large capitalization domestic and foreign companies
selected by the Sub-Adviser. The types of equity securities in which
the Fund will invest are common stocks, preferred stocks, rights,
warrants, convertibles, MLPs, and REITs. The Fund may invest up to 50%
of the Fund's principal investments in the securities of issuers in
emerging markets, which could consist of Depositary Receipts, dollar
denominated foreign securities and foreign equity securities. The Fund
also may invest up to 20% of the Fund's principal investments in high-
yield bonds. The Fund's principal investments also may consist of ETFs
that invest predominantly in small-capitalization and mid-
capitalization equity securities and will be considered small-
capitalization and mid-capitalization equity securities for purposes of
the Fund's equity allocation target.
b. Non-Principal Investments
While the Fund, under normal circumstances, will invest at least
80% of its net assets in its investments as described above, the Fund
may directly invest in certain other investments Namely, up to 20% of
the Fund's net assets may be invested in small-capitalization and mid-
capitalization equities, domestic and foreign debt securities, high-
yield bonds and/or in Options Strategies and Financial Instruments.
Cash balances arising from the use of Financial Instruments typically
will be held in money market instruments.
The types of debt securities in which the Fund will invest are
fixed, floating and variable corporate debt securities, U.S. Government
securities, debt securities of foreign issuers, sovereign debt
securities, U.S. government agency securities, and high-yield bonds.
The Fund also may invest in debt-based ETNs and ETFs. The Fund expects
to invest in debt securities of all maturities, from less than one year
up to thirty years, depending on the portfolio manager's assessment of
the risks and opportunities along the yield curve.
8. WBI Large Cap Tactical Select Shares
According to the Registration Statement, the WBI Large Cap Tactical
Select Shares objectives are to seek long-term capital appreciation and
the potential for current income, while also seeking to protect
principal during unfavorable market conditions.
a. Principal Investments
Under normal market conditions, the Fund will invest at least 80%
of its net assets in the exchange-listed equity securities of large
capitalization domestic and foreign companies selected by the Sub-
Adviser. The types of equity securities in which the Fund will invest
are common stocks, preferred stocks, rights, warrants, convertibles,
MLPs, and REITs. The Fund may invest up to 50% of the Fund's principal
investments in the securities of issuers in emerging markets, which
could consist of Depositary Receipts, dollar denominated foreign
securities and foreign equity securities. The Fund also may invest up
to 20% of the Fund's principal investments in junk bonds. The Fund's
principal investments also may consist of ETFs that invest
predominantly in small-capitalization and mid-capitalization equity
securities and will be considered small-capitalization and mid-
capitalization equity securities for purposes of the Fund's equity
allocation target.
b. Non-Principal Investments
While the Fund, under normal circumstances, will invest at least
80% of its net assets in its investments as described above, the Fund
may directly invest in certain other investments. Namely, up to 20% of
the Fund's net assets may be invested in small-capitalization and mid-
capitalization equities, domestic and foreign debt securities, and
high-yield bonds and/or in Options Strategies described above and
Financial Instruments. Cash balances arising from the use of Financial
Instruments typically will be held in money market instruments.
The types of debt securities in which the Fund will invest are
fixed, floating and variable corporate debt securities, U.S. Government
securities, debt securities of foreign issuers, sovereign debt
securities, U.S. government agency securities, and high-yield bonds.
The Fund also may invest in debt-based ETNs and ETFs. The Fund expects
to invest in debt securities of all maturities, from less than one year
up to thirty years, depending on the portfolio manager's assessment of
the risks and opportunities along the yield curve.
9. WBI Tactical Income Shares
According to the Exchange, the WBI Tactical Income Shares
objectives are to seek current income with the potential for long-term
capital appreciation, while also seeking to protect principal during
unfavorable market conditions.
a. Principal Investments
Under normal market conditions, the Fund will invest at least 80%
of its net assets in income producing debt and exchange listed equity
securities of foreign and domestic issuers, including the securities of
foreign and domestic corporate and governmental entities selected by
the Sub-Adviser. The types of debt securities in which the Fund will
invest are corporate debt securities, U.S. Government securities, debt
securities of foreign issuers, sovereign debt securities, U.S.
government agency securities, high- yield bonds and variable and
floating rate securities. The Fund also may invest in debt-based ETNs.
The Fund expects to invest in debt securities of all maturities, from
less than one year up to thirty years, depending on the portfolio
manager's assessment of the risks and opportunities along the yield
curve. The types of equity securities in which the Fund will invest are
common stocks, preferred stocks, rights, warrants, convertibles MLPs,
and REITs. The Fund may invest in companies of any size market
capitalization.
The Fund may invest up to 50% of the Fund's principal investments
in the securities of issuers in emerging markets, which could consist
of Depositary Receipts, dollar denominated foreign securities and
foreign equity securities. The Fund also may invest up to 40% of the
Fund's principal investments in junk bonds. The Fund's principal
investments also may consist of ETFs that invest predominantly in debt
securities and will be considered debt securities for the purposes of
the Fund's debt target allocation and investments in other investment
companies that invest predominantly in dividend-paying equity
securities are considered
[[Page 51215]]
dividend-paying equity securities for the purposes of the fund's income
producing securities target allocation.
b. Non-Principal Investments
While the Fund, under normal circumstances, will invest at least
80% of its net assets in its investments as described above, the Fund
may directly invest in certain other investments. Namely, up to 20% of
the Fund's net assets may be invested in exchange listed foreign and
domestic equities (other than the foreign and domestic equities noted
in the Principal Investment section for the Fund, above), ETFs, ETNs
(other than the debt-based ETFs and ETNs noted in the Principal
Investment section for the Fund, above), and/or in Options Strategies
and Financial Instruments. Cash balances arising from the use of
Financial Instruments typically will be held in money market
instruments.
10. WBI Tactical High Income Shares
According to the Exchange, the WBI Tactical High Income Shares
investment objectives are to seek high current income with the
potential for long-term capital appreciation, while also seeking to
protect principal during unfavorable market conditions.
a. Principal Investments
Under normal market conditions, the Fund will invest at least 80%
of its net assets in income producing debt and exchange listed equity
securities of foreign and domestic issuers, including the securities of
foreign and domestic corporate and governmental entities selected by
the Sub-Adviser.
The types of debt securities in which the Fund will invest are
corporate debt securities, U.S. Government securities, debt securities
of foreign issuers, sovereign debt securities, U.S. government agency
securities, high-yield bonds, variable and floating rate securities,
and debt-based ETNs and ETFs. The Fund expects to invest in debt
securities of all maturities, from less than one year up to thirty
years, depending on the portfolio manager's assessment of the risks and
opportunities along the yield curve.
The types of equity securities in which the Fund will invest are
common stocks, preferred stocks, rights, warrants, convertibles, MLPs,
and REITs. The Fund may invest in companies of any size market
capitalization.
The Fund may invest up to 50% of the Fund's principal investments
in the securities of issuers in emerging markets, which could consist
of Depositary Receipts, dollar denominated foreign securities and
foreign equity securities. The Fund also may invest up to 80% of the
Fund's principal investments in junk bonds. The Fund's principal
investments also may consist of ETFs that invest predominantly in debt
securities and will be considered debt securities for the purposes of
the Fund's debt target allocation and investments in other investment
companies that invest predominantly in dividend-paying equity
securities are considered dividend-paying equity securities for the
purposes of the fund's income producing securities target allocation.
b. Non-Principal Investments
While the Fund, under normal circumstances, will invest at least
80% of its net assets in its investments as described above, the Fund
may directly invest in certain other investments. According to the
Exchange, up to 20% of the Fund's net assets may be invested in
exchange listed foreign and domestic equities (other than the foreign
and domestic equities noted in the Principal Investment section for the
Fund, above), ETFs, ETNs (other than the debt-based ETFs and ETNs noted
in the Principal Investment section for the Fund, above), and/or in
Options Strategies and Financial Instruments. Cash balances arising
from the use of Financial Instruments typically will be held in money
market instruments.
C. Investment Restrictions
Each Fund will seek to qualify for treatment as a regulated
investment company (``RIC'') under Subchapter M of the Internal Revenue
Code of 1986, as amended.\20\
---------------------------------------------------------------------------
\20\ 26 U.S.C. 851.
---------------------------------------------------------------------------
A 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. The Funds will monitor their portfolio liquidity
on an ongoing basis to determine whether, in the 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 a Fund's net assets are held in
illiquid securities and other illiquid assets.
A Fund will not invest more than 25% of its total assets, directly
or indirectly, through underlying ETFs, in an individual industry, as
defined by the Standard Industrial Classification Codes utilized by the
Division of Corporate Finance of the Commission.\21\ This limitation
does not apply to investments in securities issued or guaranteed by the
U.S. Government, its agencies or instrumentalities, or investments in
shares of investment companies.
---------------------------------------------------------------------------
\21\ See Form N-1A, Item 5. The Commission has taken the
position that a fund is concentrated if it invests more than 25% of
the value of its total assets in any one industry. See, e.g.,
Investment Company Act Release No. 9011 (October 30, 1975), 40 FR
54241 (November 21, 1975).
---------------------------------------------------------------------------
According to the Exchange, a Fund may not purchase or sell physical
commodities or physical commodity contracts unless acquired as a result
of ownership of securities or other instruments issued by persons that
purchase or sell commodities or commodities contracts, but this shall
not prevent a Fund from purchasing, selling and entering into financial
futures contracts (including futures contracts on indices of
securities, interest rates and currencies), options on financial
futures contracts (including futures contracts on indices of
securities, interest rates and currencies), warrants, swaps, forward
contracts, or other derivative instruments that are not related to
physical commodities.
No Fund will invest more than 10% of its net assets in unsponsored
Depositary Receipts. For each Fund, not more than 10% of the net assets
invested in exchange-traded equity securities 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. Further, for each Fund, not more than
10% of the net assets invested in futures contracts or options
contracts shall consist of futures contracts or options contracts whose
principal market is not a member of ISG or is a market with which the
Exchange does not have a comprehensive surveillance sharing agreement.
No Fund will invest in leveraged or inverse leveraged (e.g., 2X, -
2X, 3X, or -3X) ETFs.
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.\22\ In particular, the Commission finds that the
proposed rule change is consistent with Section 6(b)(5) of the Exchange
[[Page 51216]]
Act,\23\ 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 Funds
and the Shares must comply with the requirements of NYSE Arca Equities
Rule 8.600 to be listed and traded on the Exchange.
---------------------------------------------------------------------------
\22\ 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).
\23\ 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,\24\ 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 and underlying domestic exchange listed
equities securities, including common stocks, preferred stocks, rights,
warrants, convertibles, Depositary Receipts, ETFs, ETNs, MLPs and
REITS, will be available via the Consolidated Tape Association high-
speed line and from the national securities exchange on which they are
listed. Quotation and last-sale information for domestic exchange-
listed options contracts will be available via the Options Price
Reporting Authority.
---------------------------------------------------------------------------
\24\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
---------------------------------------------------------------------------
Quotation information for unsponsored Depositary Receipts will be
available from major market data vendors. Quotation information for
non-exchange-traded derivatives, including OTC options, forwards, and
swaps may be obtained from brokers and dealers who make markets in such
securities or major market data vendors. Price information on futures
and options on futures will be available from major market data vendors
and from securities and futures exchanges, as applicable.
Quotation information for debt securities, including fixed,
floating and variable corporate debt securities, U.S. Government
securities, debt securities of foreign issuers, sovereign debt
securities, U.S. government agency securities and high-yield bonds,
will be available from major market data vendors. In addition,
quotation information from brokers and dealers or major market data
vendors will be available for mortgage-backed; asset-backed securities;
money market instruments; short-term debt securities; and Financial
Instruments. Information regarding market price and trading volume of
the Shares will be continually available on a real-time basis
throughout the day on brokers' computer screens and other electronic
services. Information regarding the previous day's closing price and
trading volume information for the Shares will be published daily in
the financial section of newspapers. Price information regarding equity
securities and options traded on non-U.S. securities exchanges will be
available from the exchanges trading such securities, automated
quotation systems, published or other public sources, or on-line
information services such as Bloomberg or Reuters.
The Commission also 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. On each business day, before commencement of trading in Shares
in the Core Trading Session (9:30 a.m. E.T. to 4:00 p.m. E.T.) on the
Exchange, each 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 a Fund's calculation of NAV at the end of the
business day.\25\ The Web site information will be publicly available
at no charge. The NAV of a Fund will be determined once each Business
Day, normally as of the close of trading on the NYSE (normally, 4:00
p.m. E.T.). The Exchange will obtain a representation from the issuer
of the Shares that the NAV per Share will be calculated daily and that
the NAV and the Disclosed Portfolio as defined in NYSE Arca Equities
Rule 8.600(c)(2) will be made available to all market participants at
the same time.\26\ The Intraday Indicative Value (``IIV'') will be
widely disseminated by one or more major market data vendors at least
every 15 seconds during the Core Trading Session.\27\ The Web site for
each Fund will include a form of the prospectus for each Fund and
additional data relating to NAV and other applicable quantitative
information.\28\
---------------------------------------------------------------------------
\25\ Under accounting procedures followed by each Funds, trades
made on the prior business day (``T'') will be booked and reflected
in NAV on the current business day (``T+1''). Accordingly, each Fund
will be able to disclose at the beginning of the business day the
portfolio that will form the basis for the NAV calculation at the
end of the business day.
\26\ See Notice, supra note 4, 79 FR at 39044.
\27\ The IIV is the same as the Portfolio Indicative Value as
defined in NYSE Arca Equities Rule 8.600(c)(3). See id. at 39042.
\28\ See id. at 39043.
---------------------------------------------------------------------------
The Exchange represents that trading in Shares of a Fund will be
halted if the circuit breaker parameters in NYSE Arca Equities Rule
7.12 have been reached.\29\ Trading also may be halted because of
market conditions or for reasons that, in the view of the Exchange,
make trading in the Shares inadvisable,\30\ and trading in the Shares
will be subject to NYSE Arca Equities Rule 8.600(d)(2)(D), which sets
forth circumstances under which Shares may be halted.
---------------------------------------------------------------------------
\29\ See id. at 39044.
\30\ These may include: (1) The extent to which trading is not
occurring in the securities and/or the Financial Instruments
comprising the Disclosed Portfolio of a Fund; or (2) whether other
unusual conditions or circumstances detrimental to the maintenance
of a fair and orderly market are present. See id.
---------------------------------------------------------------------------
The Exchange states that it has a general policy prohibiting the
distribution of material, non-public information by its employees.
Consistent with NYSE Arca Equities Rule 8.600(d)(2)(B)(ii), each Fund's
Reporting Authority will 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 each Fund's
portfolio.\31\
---------------------------------------------------------------------------
\31\ See NYSE Arca Equities Rule 8.600(d)(2)(B)(ii).
---------------------------------------------------------------------------
The Exchange states that the Adviser is a registered broker-dealer
and is affiliated with a broker-dealer, and that the Sub-Adviser is
also affiliated with a broker-dealer. The Exchange represents that the
Adviser and Sub-Adviser will implement a firewall with respect to their
relevant personnel and their broker-dealer affiliates regarding access
to information concerning the composition and/or changes to a
portfolio, and will be subject to procedures designed to prevent the
use and dissemination of material non-public information regarding such
portfolio.
The Financial Industry Regulatory Authority (``FINRA''), on behalf
of the Exchange, will communicate as needed regarding trading in the
Shares, underlying exchange-traded equity securities (including,
without limitation, domestic and foreign common stocks, preferred
stocks, rights, warrants, convertibles, Depositary Receipts, ETFs,
ETNs, MLPs and REITS), exchange-traded options, futures, options on
futures contracts and options on securities indices with markets and
entities that are members of ISG, and FINRA may obtain, on behalf of
the Exchange, trading information regarding trading in the Shares,
underlying exchange-traded equity securities, exchange-traded options,
futures, options on futures contracts and
[[Page 51217]]
options on securities indices from such markets or entities. In
addition, the Exchange may obtain information regarding trading in the
Shares, underlying exchange-traded equity securities (including,
without limitation, domestic and foreign common stocks, preferred
stocks, rights, warrants, convertibles, Depositary Receipts, ETFs,
ETNs, MLPs and REITS), exchange-traded options, futures, options on
futures contracts and options on securities indices from markets and
entities that are members of ISG or with which the Exchange has in
place a comprehensive surveillance sharing agreement.\32\
---------------------------------------------------------------------------
\32\ For a list of the current members of ISG, see
www.isgportal.org.
---------------------------------------------------------------------------
The Exchange deems the Shares to be equity securities, thus
rendering trading in the Shares subject to the Exchange's existing
rules governing the trading of equity securities. In support of this
proposal, the Exchange represented that:
(1) The Shares will conform to the initial and continuing listing
criteria under NYSE Arca Equities Rule 8.600.
(2) 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 these procedures are adequate to properly
monitor Exchange trading of the Shares in all trading sessions and to
detect and help deter violations of Exchange rules and applicable
federal securities laws.
(3) The Exchange has appropriate rules to facilitate transactions
in the Shares during all trading sessions.
(4) Prior to the commencement of trading, the Exchange will inform
its Equity Trading Permit Holders (``ETP 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 ETP Holders to learn the
essential facts relating to every customer prior to trading the Shares;
(c) the risks involved in trading the Shares during the Opening and
Late Trading Sessions when an updated IIV will not be calculated or
publicly disseminated; (d) how information regarding the IIV is
disseminated; (e) the requirement that ETP Holders deliver a prospectus
to investors purchasing newly issued Shares prior to or concurrently
with the confirmation of a transaction; and (f) trading information.
(5) For initial and/or continued listing, each Fund will be in
compliance with Rule 10A-3 under the Act,\33\ as provided by NYSE Arca
Equities Rule 5.3.
---------------------------------------------------------------------------
\33\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------
(6) Each Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid securities, including Rule 144A securities.
(7) Unsponsored Depository Receipts will not exceed 10% of a Fund's
net assets.
(8) For each Fund, not more than 10% of the net assets invested in
exchange-traded equity securities 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.
(9) For each Fund, not more than 10% of the net assets invested in
futures contracts or options contracts shall consist of futures
contracts or options contracts whose principal market is not a member
of ISG or is a market with which the Exchange does not have a
comprehensive surveillance sharing agreement.
(10) No Fund will invest in leveraged or inverse leveraged (e.g.,
2X, -2X, 3X, or -3X) ETFs.
(11) 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 descriptions of the Funds. For the foregoing reasons,
the Commission finds that the proposed rule change is consistent with
Section 6(b)(5) of the Act \34\ and the rules and regulations
thereunder applicable to a national securities exchange.
---------------------------------------------------------------------------
\34\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Exchange Act,\35\ that the proposed rule change (SR-NYSEArca-2014-67),
as modified by Amendment No. 1, is hereby approved.
---------------------------------------------------------------------------
\35\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\36\
---------------------------------------------------------------------------
\36\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Kevin O'Neill,
Deputy Secretary.
[FR Doc. 2014-20343 Filed 8-26-14; 8:45 am]
BILLING CODE 8011-01-P
