Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To List and Trade Shares of the AdvisorShares Pure US Cannabis ETF Under NYSE Arca Rule 8.600-E, 52394-52396 [2020-18563]

Download as PDF 52394 Federal Register / Vol. 85, No. 165 / Tuesday, August 25, 2020 / Notices C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register, or such longer period up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) By order approve or disapprove the proposed rule change, or (B) institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NYSE–2020–67 on the subject line. khammond on DSKJM1Z7X2PROD with NOTICES 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–NYSE–2020–67. 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 website (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the VerDate Sep<11>2014 19:55 Aug 24, 2020 Jkt 250001 provisions of 5 U.S.C. 552, will be available for website 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. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–NYSE–2020–67, and should be submitted on or before September 15, 2020. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.16 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2020–18559 Filed 8–24–20; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–89608; File No. SR– NYSEArca–2019–77] Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To List and Trade Shares of the AdvisorShares Pure US Cannabis ETF Under NYSE Arca Rule 8.600–E August 19, 2020. I. Introduction On December 13, 2019, NYSE Arca, Inc. (‘‘NYSE Arca’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to list and trade shares (‘‘Shares’’) of the AdvisorShares Pure US Cannabis ETF (‘‘Fund’’) under NYSE Arca Rule 8.600–E (‘‘Managed Fund Shares’’). The proposed rule change was published for comment in the Federal Register on December 26, 2019.3 On January 28, 2020, pursuant to Section 19(b)(2) of the Act,4 the Commission 16 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Securities Exchange Act Release No. 87791 (December 18, 2019), 84 FR 71057. 4 15 U.S.C. 78s(b)(2). 1 15 PO 00000 Frm 00095 Fmt 4703 Sfmt 4703 designated a longer period within which to approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether to approve or disapprove the proposed rule change.5 On March 13, 2020, the Commission instituted proceedings under Section 19(b)(2)(B) of the Act 6 to determine whether to approve or disapprove the proposed rule change.7 On June 12, 2020, pursuant to Section 19(b)(2) of the Act,8 the Commission designated a longer period within which to issue an order approving or disapproving the proposed rule change.9 On July 7, 2020, the Exchange filed Amendment No. 1 to the proposed rule change.10 The Commission has received no comment letters on the proposal. This order approves the proposed rule change, as modified by Amendment No. 1. II. Description of the Proposed Rule Change, as Modified by Amendment No. 1 11 The Exchange proposes to list and trade Shares of the Fund under Commentary .01 to NYSE Arca Rule 8.600–E, which governs the listing and trading of Managed Fund Shares on the Exchange. AdvisorShares Investments, LLC (‘‘Adviser’’) is the investment 5 See Securities Exchange Act Release No. 88066, 85 FR 6009 (February 3, 2020). The Commission designated March 25, 2020, as the date by which it should approve, disapprove, or institute proceedings to determine whether to approve or disapprove the proposed rule change. 6 15 U.S.C. 78s(b)(2)(B). 7 See Securities Exchange Act Release No. 88378, 85 FR 15834 (March 19, 2020). 8 15 U.S.C. 78s(b)(2). 9 See Securities Exchange Act Release No. 89057, 85 FR 36910 (June 18, 2020). The Commission designated August 22, 2020, as the date by which the Commission shall either approve or disapprove the proposed rule change. 10 In Amendment No. 1, the Exchange (i) represented that the Fund has obtained an opinion of counsel that provides that (a) the Fund and its shareholders will not violate the Controlled Substances Act, 21 U.S.C. 801, et seq., (‘‘Controlled Substances Act’’) or the Money Laundering Control Act, 18 U.S.C. 1956, et seq., for the Fund’s purchase of securities issued by Cannabis Companies (as defined herein) which participate in the cannabis industry in full compliance with state law and (b) the Fund’s execution of a cash-settled total return swap, under certain circumstances, would not subject the Fund and its shareholders to regulatory liability should a court hold that the total return swap violates the Act or the Controlled Substances Act; and (ii) made other conforming technical changes. Because Amendment No. 1 to the proposed rule change does not materially alter the substance of the proposed rule change and makes conforming and technical changes, Amendment No. 1 is not subject to notice and comment. Amendment No. 1 is available on the Commission’s website at: https://www.sec.gov/comments/sr-nysearca-201977/srnysearca201977-7394645-218996.pdf. 11 Additional information regarding the Shares and the Fund can be found in Amendment No. 1, supra note 10, and the Registration Statement, infra note 13. E:\FR\FM\25AUN1.SGM 25AUN1 Federal Register / Vol. 85, No. 165 / Tuesday, August 25, 2020 / Notices adviser for the Fund.12 AdvisorShares Trust (‘‘Trust’’) and the Adviser manage the Fund’s investments, subject to the oversight and supervision by the Board of Trustees of the Trust.13 Foreside Fund Services, LLC, a registered brokerdealer, will act as the distributor for the Fund’s Shares. The Bank of New York Mellon will serve as the administrator, custodian, and transfer agent for the Fund. khammond on DSKJM1Z7X2PROD with NOTICES A. Principal Investments of the Fund According to the Exchange, the investment objective of the Fund is to seek long-term capital appreciation. The Fund will seek to achieve its investment objective by investing, under normal market conditions,14 at least 80% of its net assets in securities of companies that derive at least 50% of their net revenue from the marijuana and hemp business in the United States (‘‘Cannabis Companies’’) and in derivatives that have economic characteristics similar to such securities.15 In addition to its investment in securities of companies that derive a significant portion of their revenue from the marijuana and hemp business, and in derivatives providing exposure to such securities, the Fund may invest in securities of companies that, in the opinion of the Advisor, may have current or future revenues from cannabis-related business or that are registered with the United States Drug Enforcement Agency (DEA) specifically for the purpose of handling marijuana for lawful research and development of 12 The Exchange represents that the Adviser is not registered as a broker-dealer, and the Adviser is not affiliated with any broker-dealers. In the event (a) the Adviser becomes registered as a broker-dealer or newly affiliated with a broker-dealer, or (b) any new adviser is a registered broker-dealer or becomes affiliated with a broker-dealer, it will implement and maintain a ‘‘fire wall’’ with respect to its relevant personnel or broker-dealer affiliate regarding access to information concerning the composition of, and/or changes to, the portfolio, and will be subject to procedures, each designed to prevent the use and dissemination of material nonpublic information regarding the portfolio. 13 The Trust is registered under the 1940 Act. On August 19, 2019, the Trust filed with the Commission Post-Effective Amendment No. 145 to the Trust’s registration statement on Form N–1A under the Securities Act of 1933 (15 U.S.C. 77a) and under the 1940 Act relating to the Fund (File Nos. 333–157876 and 811–22110) (‘‘Registration Statement’’). In addition, the Commission has issued an order granting certain exemptive relief to the Trust under the1940 Act. See Investment Company Act Release No. 29291 (May 28, 2010) (File No. 812–13677). 14 The term ‘‘normal market conditions’’ is defined in NYSE Arca Rule 8.600–E(c)(5). 15 The Fund’s investments in derivatives will include investments in both listed derivatives and over-the-counter (‘‘OTC’’) derivatives, as those terms are defined in Commentary .01(d) and (e) to NYSE Arca Rule 8.600–E. VerDate Sep<11>2014 19:55 Aug 24, 2020 Jkt 250001 cannabis or cannabinoid-related products. According to the Exchange, all of the Fund’s investments, including derivatives instruments, would be made in accordance with all applicable laws, including U.S. federal and state laws.16 The Fund will concentrate at least 25% of its investments in the pharmaceuticals, biotechnology and life sciences industry group within the health care sector. The Fund primarily may invest in U.S. and foreign exchange-listed equity securities and in derivative instruments, as further described in this section, intended to provide exposure to such securities. The Fund may invest in the following types of U.S. and foreign exchangelisted equity securities: Common stock; preferred stock; warrants; Real Estate Investment Trusts (REITs); and rights. The Fund may also invest in U.S. exchange-listed exchange-traded funds (‘‘ETFs’’) 17 and in U.S. exchange-listed closed-end funds. The Fund may hold cash and cash equivalents.18 The Fund may hold OTC total return swaps on U.S. and foreign exchangelisted equity securities. B. Other Investments of the Fund In addition to the Fund’s principal investments described above, the Fund may invest in U.S. exchange-listed equity options and equity index options and in Rule 144A securities. C. Investment Restrictions The Fund’s investments, including derivatives, will be consistent with the Fund’s investment objective and will not be used to enhance leverage (although certain derivatives and other investments may result in leverage). That is, the Fund’s investments will not be used to seek performance that is the multiple or inverse multiple (e.g., 2X or –3X) of the Fund’s primary broad-based securities benchmark index (as defined in Form N–1A). The Fund will not invest in securities or other financial instruments that have 16 The Fund filed an opinion of counsel on July 1, 2020 as an exhibit to the Registration Statement. See supra notes 10 and 13. 17 For purposes of this filing, the term ‘‘ETFs’’ includes Investment Company Units (as described in NYSE Arca Rule 5.2–E(j)(3)); Portfolio Depositary Receipts (as described in NYSE Arca Rule 8.100– E); and Managed Fund Shares (as described in NYSE Arca Rule 8.600–E). All ETFs will be listed and traded in the U.S. on a national securities exchange. While the Fund may invest in inverse ETFs, the Fund will not invest in leveraged (e.g., 2X, –2X, 3X or –3X) ETFs. 18 For purposes of this filing, ‘‘cash equivalents’’ are the short-term instruments enumerated in Commentary .01(c) to NYSE Arca Rule 8.600–E. PO 00000 Frm 00096 Fmt 4703 Sfmt 4703 52395 not been described in the proposed rule change. D. Application of Generic Listing Requirements The Exchange is submitting the proposed rule change because the portfolio for the Fund will not meet all of the ‘‘generic’’ listing requirements of Commentary .01 to NYSE Arca Rule 8.600–E applicable to the listing of Managed Fund Shares. The Fund’s portfolio will meet all such requirements except for those set forth in Commentary .01(e).19 Specifically, the Exchange proposes that the Fund’s investments in OTC total return swaps on U.S. and foreign exchange-listed equity securities may exceed the 20% limit on investments in OTC derivatives set forth in in Commentary .01(e). The Exchange proposes that up to 60% of the Fund’s assets (calculated as the aggregate gross notional value) may be invested in OTC total return swaps on U.S. and foreign exchange-listed equity securities.20 The only OTC derivatives that the Fund may invest in are OTC total return swaps on U.S. and foreign exchange-listed equity securities. Price information relating to OTC swaps will be available from major market data vendors. Other than Commentary .01(e), the Shares of the Fund will conform to the initial and continued listing criteria under NYSE Arca Rule 8.600–E and will meet all other requirements of NYSE Arca Rule 8.600–E and Commentary .01 thereto. III. Discussion and Commission’s Findings After careful review, the Commission finds that the proposed rule change, as modified by Amendment No. 1, is consistent with the Act and the rules and regulations thereunder applicable to a national securities exchange.21 In particular, the Commission finds that the proposed rule change, as modified by Amendment No. 1, is consistent with 19 Commentary .01(e) to NYSE Arca Rule 8.600– E provides that a portfolio may hold OTC derivatives, including forwards, options and swaps on commodities, currencies and financial instruments (e.g., stocks, fixed income, interest rates, and volatility) or a basket or index of any of the foregoing; however, on both an initial and continuing basis, no more than 20% of the assets in the portfolio may be invested in OTC derivatives. For purposes of calculating this limitation, a portfolio’s investment in OTC derivatives will be calculated as the aggregate gross notional value of the OTC derivatives. 20 The Exchange represents that the Adviser monitors counterparty credit risk exposure (including for OTC derivatives) and evaluates counterparty credit quality on a continuous basis. 21 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\25AUN1.SGM 25AUN1 khammond on DSKJM1Z7X2PROD with NOTICES 52396 Federal Register / Vol. 85, No. 165 / Tuesday, August 25, 2020 / Notices Section 6(b)(5) of the Act,22 which requires, among other things, that the Exchange’s rules be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to 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. As discussed above, the Exchange proposes that the Fund may invest up to 60% of its assets (calculated as the aggregate gross notional value) in OTC derivatives. The only OTC derivatives that the Fund may invest in are OTC total return swaps on U.S. and foreign exchange-listed equity securities, so the underlying securities are trading on transparent and regulated markets. In addition, the Fund will disclose on its website information regarding the Disclosed Portfolio required under NYSE Arca Rule 8.600–E(c)(2) to the extent applicable and such website information will be publicly available at no charge.23 Other than Commentary .01(e), the Shares of the Fund will conform to the initial and continued listing criteria under NYSE Arca Rule 8.600–E and will meet all other requirements of NYSE Arca Rule 8.600– E and Commentary .01 thereto. All Fund investments, including derivative instruments (i.e., OTC total return swaps on U.S. and foreign exchangelisted equity securities), will be made in accordance with all applicable laws, including U.S. federal and state laws. In evaluating these aspects of the proposal, the Commission believes that the proposal is reasonably designed to mitigate the Shares’ susceptibility to manipulation because (i) the investments of the Fund will be transparent in that they are required to be disclosed daily and specifically will include information regarding the Fund’s investments in OTC derivatives; (ii) the instruments underlying the Fund’s OTC derivative investments will be traded on transparent and regulated markets, as the only OTC derivatives that the Fund may invest in are total return swaps on U.S. and foreign exchange-listed equity securities; and (iii) the Fund’s investments otherwise are consistent with the Exchange’s generic listing standards. In addition, the Commission believes that the proposal is consistent with the listing of other series of Managed Fund Shares 22 15 U.S.C. 78f(b)(5). 23 See Amendment No. 1, supra note 10, at 12. VerDate Sep<11>2014 19:55 Aug 24, 2020 Jkt 250001 that have been approved by the Commission.24 Pursuant to Commentary .01 to NYSE Arca Rule 8.600–E, all statements or representations made in the filing regarding (a) the description of the portfolio or reference asset, (b) limitations on portfolio holdings or reference assets, or (c) the applicability of Exchange listing rules specified in the filing shall constitute continued listing requirements for listing the Shares on the Exchange. In addition, the issuer must notify the Exchange of any failure by the Fund to comply with the continued listing requirements. Pursuant to its obligations under Section 19(g)(1) of the Act, the Exchange will monitor 25 for compliance with the continued listing requirements. If the Fund is not in compliance with the applicable listing requirements, the Exchange will commence delisting procedures under NYSE Arca Rule 5.5– E(m). Accordingly, for the foregoing reasons, the Commission finds that the proposed rule change, as modified by Amendment No. 1, is consistent with Section 6(b)(5) of the Act 26 and the rules and regulations thereunder applicable to a national securities exchange. IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,27 that the proposed rule change (SR–NYSEArca– 2019–77), as modified by Amendment No. 1, be, and it hereby is, approved. 24 See, e.g., Securities Exchange Act Release No. 82080 (November 15, 2017), 82 FR 55449 (November 21, 2017) (NYSEArca–2017–86) (Order Granting Approval of a Proposed Rule Change, as Modified by Amendment Nos. 1 and 2, To List and Trade Shares of the JPMorgan Managed Futures ETF Under NYSE Arca Rule 8.600–E); Securities Exchange Act Release No. 82492 (January 12, 2018), 83 FR 2850 (January 19, 2018) (SR–NYSEArca– 2017–87) (Order Granting Approval of a Proposed Rule Change, as Modified by Amendment No. 6, To List and Trade Shares of the JPMorgan Long/Short ETF Under NYSE Arca Rule 8.600–E). 25 The Commission notes that certain proposals for the listing and trading of exchange-traded products include a representation that the exchange will ‘‘surveil’’ for compliance with the continued listing requirements. See, e.g., Securities Exchange Act Release No. 77499 (April 1, 2016), 81 FR 20428, 20432 (April 7, 2016) (SR–BATS–2016–04). In the context of this representation, it is the Commission’s view that ‘‘monitor’’ and ‘‘surveil’’ both mean ongoing oversight of compliance with the continued listing requirements. Therefore, the Commission does not view ‘‘monitor’’ as a more or less stringent obligation than ‘‘surveil’’ with respect to the continued listing requirements. 26 15 U.S.C. 78f(b)(5). 27 Id. PO 00000 Frm 00097 Fmt 4703 Sfmt 4703 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.28 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2020–18563 Filed 8–24–20; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–89614; File No. SR–BX– 2020–022] Self-Regulatory Organizations; Nasdaq BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend BX Pricing Schedule at Options 7, Section 2, and Options 7, Section 3 August 19, 2020. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on August 12, 2020, Nasdaq BX, Inc. (‘‘BX’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend BX’s Pricing Schedule at Options 7, Section 2, ‘‘BX Options Market Fees and Rebates’’ and Options 7, Section 3, ‘‘BX Options Market—Ports and other Services.’’ The Exchange originally filed the proposed pricing changes on August 6, 2020 (SR–BX–2020–021). On August 12, 2020, the Exchange withdrew that filing and submitted this filing. The text of the proposed rule change is available on the Exchange’s website at https://listingcenter.nasdaq.com/ rulebook/bx/rules, 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 Exchange included statements concerning the purpose of and basis for 28 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 E:\FR\FM\25AUN1.SGM 25AUN1

Agencies

[Federal Register Volume 85, Number 165 (Tuesday, August 25, 2020)]
[Notices]
[Pages 52394-52396]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-18563]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89608; File No. SR-NYSEArca-2019-77]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting 
Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To 
List and Trade Shares of the AdvisorShares Pure US Cannabis ETF Under 
NYSE Arca Rule 8.600-E

August 19, 2020.

I. Introduction

    On December 13, 2019, NYSE Arca, Inc. (``NYSE Arca'' or 
``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to list and trade shares (``Shares'') of the 
AdvisorShares Pure US Cannabis ETF (``Fund'') under NYSE Arca Rule 
8.600-E (``Managed Fund Shares''). The proposed rule change was 
published for comment in the Federal Register on December 26, 2019.\3\ 
On January 28, 2020, pursuant to Section 19(b)(2) of the Act,\4\ the 
Commission designated a longer period within which to approve the 
proposed rule change, disapprove the proposed rule change, or institute 
proceedings to determine whether to approve or disapprove the proposed 
rule change.\5\ On March 13, 2020, the Commission instituted 
proceedings under Section 19(b)(2)(B) of the Act \6\ to determine 
whether to approve or disapprove the proposed rule change.\7\ On June 
12, 2020, pursuant to Section 19(b)(2) of the Act,\8\ the Commission 
designated a longer period within which to issue an order approving or 
disapproving the proposed rule change.\9\ On July 7, 2020, the Exchange 
filed Amendment No. 1 to the proposed rule change.\10\ The Commission 
has received no comment letters on the proposal. This order approves 
the proposed rule change, as modified by Amendment No. 1.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 87791 (December 18, 
2019), 84 FR 71057.
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 88066, 85 FR 6009 
(February 3, 2020). The Commission designated March 25, 2020, as the 
date by which it should approve, disapprove, or institute 
proceedings to determine whether to approve or disapprove the 
proposed rule change.
    \6\ 15 U.S.C. 78s(b)(2)(B).
    \7\ See Securities Exchange Act Release No. 88378, 85 FR 15834 
(March 19, 2020).
    \8\ 15 U.S.C. 78s(b)(2).
    \9\ See Securities Exchange Act Release No. 89057, 85 FR 36910 
(June 18, 2020). The Commission designated August 22, 2020, as the 
date by which the Commission shall either approve or disapprove the 
proposed rule change.
    \10\ In Amendment No. 1, the Exchange (i) represented that the 
Fund has obtained an opinion of counsel that provides that (a) the 
Fund and its shareholders will not violate the Controlled Substances 
Act, 21 U.S.C. 801, et seq., (``Controlled Substances Act'') or the 
Money Laundering Control Act, 18 U.S.C. 1956, et seq., for the 
Fund's purchase of securities issued by Cannabis Companies (as 
defined herein) which participate in the cannabis industry in full 
compliance with state law and (b) the Fund's execution of a cash-
settled total return swap, under certain circumstances, would not 
subject the Fund and its shareholders to regulatory liability should 
a court hold that the total return swap violates the Act or the 
Controlled Substances Act; and (ii) made other conforming technical 
changes. Because Amendment No. 1 to the proposed rule change does 
not materially alter the substance of the proposed rule change and 
makes conforming and technical changes, Amendment No. 1 is not 
subject to notice and comment. Amendment No. 1 is available on the 
Commission's website at: https://www.sec.gov/comments/sr-nysearca-2019-77/srnysearca201977-7394645-218996.pdf.
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II. Description of the Proposed Rule Change, as Modified by Amendment 
No. 1 11
---------------------------------------------------------------------------

    \11\ Additional information regarding the Shares and the Fund 
can be found in Amendment No. 1, supra note 10, and the Registration 
Statement, infra note 13.
---------------------------------------------------------------------------

    The Exchange proposes to list and trade Shares of the Fund under 
Commentary .01 to NYSE Arca Rule 8.600-E, which governs the listing and 
trading of Managed Fund Shares on the Exchange. AdvisorShares 
Investments, LLC (``Adviser'') is the investment

[[Page 52395]]

adviser for the Fund.\12\ AdvisorShares Trust (``Trust'') and the 
Adviser manage the Fund's investments, subject to the oversight and 
supervision by the Board of Trustees of the Trust.\13\ Foreside Fund 
Services, LLC, a registered broker-dealer, will act as the distributor 
for the Fund's Shares. The Bank of New York Mellon will serve as the 
administrator, custodian, and transfer agent for the Fund.
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    \12\ The Exchange represents that the Adviser is not registered 
as a broker-dealer, and the Adviser is not affiliated with any 
broker-dealers. In the event (a) the Adviser becomes registered as a 
broker-dealer or newly affiliated with a broker-dealer, or (b) any 
new adviser is a registered broker-dealer or becomes affiliated with 
a broker-dealer, it will implement and maintain a ``fire wall'' with 
respect to its relevant personnel or broker-dealer affiliate 
regarding access to information concerning the composition of, and/
or changes to, the portfolio, and will be subject to procedures, 
each designed to prevent the use and dissemination of material non-
public information regarding the portfolio.
    \13\ The Trust is registered under the 1940 Act. On August 19, 
2019, the Trust filed with the Commission Post-Effective Amendment 
No. 145 to the Trust's registration statement on Form N-1A under the 
Securities Act of 1933 (15 U.S.C. 77a) and under the 1940 Act 
relating to the Fund (File Nos. 333-157876 and 811-22110) 
(``Registration Statement''). In addition, the Commission has issued 
an order granting certain exemptive relief to the Trust under 
the1940 Act. See Investment Company Act Release No. 29291 (May 28, 
2010) (File No. 812-13677).
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A. Principal Investments of the Fund

    According to the Exchange, the investment objective of the Fund is 
to seek long-term capital appreciation. The Fund will seek to achieve 
its investment objective by investing, under normal market 
conditions,\14\ at least 80% of its net assets in securities of 
companies that derive at least 50% of their net revenue from the 
marijuana and hemp business in the United States (``Cannabis 
Companies'') and in derivatives that have economic characteristics 
similar to such securities.\15\
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    \14\ The term ``normal market conditions'' is defined in NYSE 
Arca Rule 8.600-E(c)(5).
    \15\ The Fund's investments in derivatives will include 
investments in both listed derivatives and over-the-counter 
(``OTC'') derivatives, as those terms are defined in Commentary 
.01(d) and (e) to NYSE Arca Rule 8.600-E.
---------------------------------------------------------------------------

    In addition to its investment in securities of companies that 
derive a significant portion of their revenue from the marijuana and 
hemp business, and in derivatives providing exposure to such 
securities, the Fund may invest in securities of companies that, in the 
opinion of the Advisor, may have current or future revenues from 
cannabis-related business or that are registered with the United States 
Drug Enforcement Agency (DEA) specifically for the purpose of handling 
marijuana for lawful research and development of cannabis or 
cannabinoid-related products.
    According to the Exchange, all of the Fund's investments, including 
derivatives instruments, would be made in accordance with all 
applicable laws, including U.S. federal and state laws.\16\ The Fund 
will concentrate at least 25% of its investments in the 
pharmaceuticals, biotechnology and life sciences industry group within 
the health care sector.
---------------------------------------------------------------------------

    \16\ The Fund filed an opinion of counsel on July 1, 2020 as an 
exhibit to the Registration Statement. See supra notes 10 and 13.
---------------------------------------------------------------------------

    The Fund primarily may invest in U.S. and foreign exchange-listed 
equity securities and in derivative instruments, as further described 
in this section, intended to provide exposure to such securities.
    The Fund may invest in the following types of U.S. and foreign 
exchange-listed equity securities: Common stock; preferred stock; 
warrants; Real Estate Investment Trusts (REITs); and rights. The Fund 
may also invest in U.S. exchange-listed exchange-traded funds 
(``ETFs'') \17\ and in U.S. exchange-listed closed-end funds.
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    \17\ For purposes of this filing, the term ``ETFs'' includes 
Investment Company Units (as described in NYSE Arca Rule 5.2-
E(j)(3)); Portfolio Depositary Receipts (as described in NYSE Arca 
Rule 8.100-E); and Managed Fund Shares (as described in NYSE Arca 
Rule 8.600-E). All ETFs will be listed and traded in the U.S. on a 
national securities exchange. While the Fund may invest in inverse 
ETFs, the Fund will not invest in leveraged (e.g., 2X, -2X, 3X or -
3X) ETFs.
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    The Fund may hold cash and cash equivalents.\18\
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    \18\ For purposes of this filing, ``cash equivalents'' are the 
short-term instruments enumerated in Commentary .01(c) to NYSE Arca 
Rule 8.600-E.
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    The Fund may hold OTC total return swaps on U.S. and foreign 
exchange-listed equity securities.

B. Other Investments of the Fund

    In addition to the Fund's principal investments described above, 
the Fund may invest in U.S. exchange-listed equity options and equity 
index options and in Rule 144A securities.

C. Investment Restrictions

    The Fund's investments, including derivatives, will be consistent 
with the Fund's investment objective and will not be used to enhance 
leverage (although certain derivatives and other investments may result 
in leverage). That is, the Fund's investments will not be used to seek 
performance that is the multiple or inverse multiple (e.g., 2X or -3X) 
of the Fund's primary broad-based securities benchmark index (as 
defined in Form N-1A).
    The Fund will not invest in securities or other financial 
instruments that have not been described in the proposed rule change.

D. Application of Generic Listing Requirements

    The Exchange is submitting the proposed rule change because the 
portfolio for the Fund will not meet all of the ``generic'' listing 
requirements of Commentary .01 to NYSE Arca Rule 8.600-E applicable to 
the listing of Managed Fund Shares. The Fund's portfolio will meet all 
such requirements except for those set forth in Commentary .01(e).\19\ 
Specifically, the Exchange proposes that the Fund's investments in OTC 
total return swaps on U.S. and foreign exchange-listed equity 
securities may exceed the 20% limit on investments in OTC derivatives 
set forth in in Commentary .01(e). The Exchange proposes that up to 60% 
of the Fund's assets (calculated as the aggregate gross notional value) 
may be invested in OTC total return swaps on U.S. and foreign exchange-
listed equity securities.\20\ The only OTC derivatives that the Fund 
may invest in are OTC total return swaps on U.S. and foreign exchange-
listed equity securities. Price information relating to OTC swaps will 
be available from major market data vendors. Other than Commentary 
.01(e), the Shares of the Fund will conform to the initial and 
continued listing criteria under NYSE Arca Rule 8.600-E and will meet 
all other requirements of NYSE Arca Rule 8.600-E and Commentary .01 
thereto.
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    \19\ Commentary .01(e) to NYSE Arca Rule 8.600-E provides that a 
portfolio may hold OTC derivatives, including forwards, options and 
swaps on commodities, currencies and financial instruments (e.g., 
stocks, fixed income, interest rates, and volatility) or a basket or 
index of any of the foregoing; however, on both an initial and 
continuing basis, no more than 20% of the assets in the portfolio 
may be invested in OTC derivatives. For purposes of calculating this 
limitation, a portfolio's investment in OTC derivatives will be 
calculated as the aggregate gross notional value of the OTC 
derivatives.
    \20\ The Exchange represents that the Adviser monitors 
counterparty credit risk exposure (including for OTC derivatives) 
and evaluates counterparty credit quality on a continuous basis.
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III. Discussion and Commission's Findings

    After careful review, the Commission finds that the proposed rule 
change, as modified by Amendment No. 1, is consistent with the Act and 
the rules and regulations thereunder applicable to a national 
securities exchange.\21\ In particular, the Commission finds that the 
proposed rule change, as modified by Amendment No. 1, is consistent 
with

[[Page 52396]]

Section 6(b)(5) of the Act,\22\ which requires, among other things, 
that the Exchange's rules be designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, to 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.
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    \21\ 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).
    \22\ 15 U.S.C. 78f(b)(5).
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    As discussed above, the Exchange proposes that the Fund may invest 
up to 60% of its assets (calculated as the aggregate gross notional 
value) in OTC derivatives. The only OTC derivatives that the Fund may 
invest in are OTC total return swaps on U.S. and foreign exchange-
listed equity securities, so the underlying securities are trading on 
transparent and regulated markets. In addition, the Fund will disclose 
on its website information regarding the Disclosed Portfolio required 
under NYSE Arca Rule 8.600-E(c)(2) to the extent applicable and such 
website information will be publicly available at no charge.\23\ Other 
than Commentary .01(e), the Shares of the Fund will conform to the 
initial and continued listing criteria under NYSE Arca Rule 8.600-E and 
will meet all other requirements of NYSE Arca Rule 8.600-E and 
Commentary .01 thereto. All Fund investments, including derivative 
instruments (i.e., OTC total return swaps on U.S. and foreign exchange-
listed equity securities), will be made in accordance with all 
applicable laws, including U.S. federal and state laws.
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    \23\ See Amendment No. 1, supra note 10, at 12.
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    In evaluating these aspects of the proposal, the Commission 
believes that the proposal is reasonably designed to mitigate the 
Shares' susceptibility to manipulation because (i) the investments of 
the Fund will be transparent in that they are required to be disclosed 
daily and specifically will include information regarding the Fund's 
investments in OTC derivatives; (ii) the instruments underlying the 
Fund's OTC derivative investments will be traded on transparent and 
regulated markets, as the only OTC derivatives that the Fund may invest 
in are total return swaps on U.S. and foreign exchange-listed equity 
securities; and (iii) the Fund's investments otherwise are consistent 
with the Exchange's generic listing standards. In addition, the 
Commission believes that the proposal is consistent with the listing of 
other series of Managed Fund Shares that have been approved by the 
Commission.\24\
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    \24\ See, e.g., Securities Exchange Act Release No. 82080 
(November 15, 2017), 82 FR 55449 (November 21, 2017) (NYSEArca-2017-
86) (Order Granting Approval of a Proposed Rule Change, as Modified 
by Amendment Nos. 1 and 2, To List and Trade Shares of the JPMorgan 
Managed Futures ETF Under NYSE Arca Rule 8.600-E); Securities 
Exchange Act Release No. 82492 (January 12, 2018), 83 FR 2850 
(January 19, 2018) (SR-NYSEArca-2017-87) (Order Granting Approval of 
a Proposed Rule Change, as Modified by Amendment No. 6, To List and 
Trade Shares of the JPMorgan Long/Short ETF Under NYSE Arca Rule 
8.600-E).
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    Pursuant to Commentary .01 to NYSE Arca Rule 8.600-E, all 
statements or representations made in the filing regarding (a) the 
description of the portfolio or reference asset, (b) limitations on 
portfolio holdings or reference assets, or (c) the applicability of 
Exchange listing rules specified in the filing shall constitute 
continued listing requirements for listing the Shares on the Exchange. 
In addition, the issuer must notify the Exchange of any failure by the 
Fund to comply with the continued listing requirements. Pursuant to its 
obligations under Section 19(g)(1) of the Act, the Exchange will 
monitor \25\ for compliance with the continued listing requirements. If 
the Fund is not in compliance with the applicable listing requirements, 
the Exchange will commence delisting procedures under NYSE Arca Rule 
5.5-E(m).
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    \25\ The Commission notes that certain proposals for the listing 
and trading of exchange-traded products include a representation 
that the exchange will ``surveil'' for compliance with the continued 
listing requirements. See, e.g., Securities Exchange Act Release No. 
77499 (April 1, 2016), 81 FR 20428, 20432 (April 7, 2016) (SR-BATS-
2016-04). In the context of this representation, it is the 
Commission's view that ``monitor'' and ``surveil'' both mean ongoing 
oversight of compliance with the continued listing requirements. 
Therefore, the Commission does not view ``monitor'' as a more or 
less stringent obligation than ``surveil'' with respect to the 
continued listing requirements.
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    Accordingly, for the foregoing reasons, the Commission finds that 
the proposed rule change, as modified by Amendment No. 1, is consistent 
with Section 6(b)(5) of the Act \26\ and the rules and regulations 
thereunder applicable to a national securities exchange.
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    \26\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\27\ that the proposed rule change (SR-NYSEArca-2019-77), as 
modified by Amendment No. 1, be, and it hereby is, approved.
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    \27\ Id.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
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    \28\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-18563 Filed 8-24-20; 8:45 am]
BILLING CODE 8011-01-P
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