71760 Federal Register / Vol. 75, No. 226 / Wednesday, November 24, 2010 / Notices 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 63041 

(October 5, 2010), 75 FR 62905 (‘‘Notice’’). 

4A Managed Fund Share is a security that, among 

other things, represents an interest in an investment 

company registered under the Investment Company 

Act of 1940 (‘‘1940 Act’’) organized as an open-end 

investment company or similar entity that invests 

in a portfolio of securities selected by its investment 

advisor consistent with its investment objectives 

and policies. See NYSE Arca Equities Rule 

8.600(c)(1). 

5The Trust is registered under the 1940 Act. On 

May 11, 2010, the Trust filed with the Commission 

Post-Effective Amendment No. 6 to Form N–1A 

relating to the Fund (File Nos. 333–157876 and 

811–22110) (‘‘Registration Statement’’). 

6The Exchange represents that the Advisor and 

Sub-Advisor are not affiliated with a broker-dealer. 

See Commentary .06 to NYSE Arca Equities Rule 

8.600 (requiring that, if the investment adviser is 

affiliated with a broker-dealer, the investment 

adviser erect a ‘‘fire wall’’ between the investment 

adviser and the broker-dealer with respect to access 

to information concerning the composition and/or 

changes to the portfolio). 

periodically, but no less frequently than 

annually, to determine whether the 

purchases were influenced by the 

investment by the Purchasing Fund in 

the Fund. The Board will consider, 

among other things: (i) Whether the 

purchases were consistent with the 

investment objectives and policies of 

the Fund (or its respective Master 

Fund); (ii) how the performance of 

securities purchased in an Affiliated 

Underwriting compares to the 

performance of comparable securities 

purchased during a comparable period 

of time in underwritings other than 

Affiliated Underwritings or to a 

benchmark such as a comparable market 

index; and (iii) whether the amount of 

securities purchased by the Fund (or its 

respective Master Fund) in Affiliated 

Underwritings and the amount 

purchased directly from an 

Underwriting Affiliate have changed 

significantly from prior years. The 

Board will take any appropriate actions 

based on its review, including, if 

appropriate, the institution of 

procedures designed to assure that 

purchases of securities in Affiliated 

Underwritings are in the best interest of 

shareholders. 

14. Each Fund (or its respective 

Master Fund) will maintain and 

preserve permanently in an easily 

accessible place a written copy of the 

procedures described in the preceding 

condition, and any modifications to 

such procedures, and will maintain and 

preserve for a period of not less than six 

years from the end of the fiscal year in 

which any purchase in an Affiliated 

Underwriting occurred, the first two 

years in an easily accessible place, a 

written record of each purchase of 

securities in Affiliated Underwritings, 

once an investment by a Purchasing 

Fund in the securities of the Fund 

exceeds the limit of section 

12(d)(1)(A)(i) of the Act, setting forth 

from whom the securities were 

acquired, the identity of the 

underwriting syndicate’s members, the 

terms of the purchase, and the 

information or materials upon which 

the Board’s determinations were made. 

15. Before investing in a Fund in 

excess of the limit in section 

12(d)(1)(A), a Purchasing Fund will 

execute a FOF Participation Agreement 

with the Fund stating that their 

respective boards of directors or trustees 

and their investment advisers, or trustee 

and Sponsor, as applicable, understand 

the terms and conditions of the order, 

and agree to fulfill their responsibilities 

under the order. At the time of its 

investment in shares of a Fund in excess 

of the limit in section 12(d)(1)(A)(i), a 

Purchasing Fund will notify the Fund of 

the investment. At such time, the 

Purchasing Fund will also transmit to 

the Fund a list of the names of each 

Purchasing Fund Affiliate and 

Underwriting Affiliate. The Purchasing 

Fund will notify the Fund of any 

changes to the list of the names as soon 

as reasonably practicable after a change 

occurs. The Fund and the Purchasing 

Fund will maintain and preserve a copy 

of the order, the FOF Participation 

Agreement, and the list with any 

updated information for the duration of 

the investment and for a period of not 

less than six years thereafter, the first 

two years in an easily accessible place. 

16. Before approving any advisory 

contract under section 15 of the Act, the 

board of directors or trustees of each 

Purchasing Management Company, 

including a majority of the disinterested 

directors or trustees, will find that the 

advisory fees charged under such 

contract are based on services provided 

that will be in addition to, rather than 

duplicative of, the services provided 

under the advisory contract(s) of any 

Fund (or its respective Master Fund) in 

which the Purchasing Management 

Company may invest. These findings 

and their basis will be recorded fully in 

the minute books of the appropriate 

Purchasing Management Company. 

17. Any sales charges and/or service 

fees charged with respect to shares of a 

Purchasing Fund will not exceed the 

limits applicable to a fund of funds as 

set forth in NASD Conduct Rule 2830. 

18. No Fund (or its respective Master 

Fund) will acquire securities of any 

investment company or company 

relying on section 3(c)(1) or 3(c)(7) of 

the Act in excess of the limits contained 

in section 12(d)(1)(A) of the Act, except 

to the extent that (i) the Fund (or its 

respective Master Fund) acquires 

securities of another investment 

company pursuant to exemptive relief 

from the Commission permitting the 

Fund (or its respective Master Fund) to 

acquire securities of one or more 

investment companies for short-term 

cash management purposes, or (ii) the 

Fund acquires securities of the Master 

Fund pursuant to the Master-Feeder 

Relief. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–29588 Filed 11–23–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63329; File No. SR– 

NYSEArca–2010–86] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Order Granting Approval of 

Proposed Rule Change Relating to the 

Listing and Trading of Shares of the 

Peritus High Yield ETF 

November 17, 2010. 

I. Introduction 

On September 23, 2010, 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 Peritus High Yield ETF (‘‘Fund’’). 

The proposed rule change was 

published for comment in the Federal 

Register on October 13, 2010.3 The 

Commission received no comments on 

the proposal. This order grants approval 

of the proposed rule change. 

II. Description of the Proposal 

The Exchange proposes to list and 

trade the Shares pursuant to NYSE Arca 

Equities Rule 8.600, which governs the 

listing and trading of Managed Fund 

Shares.4 The Shares will be offered by 

AdvisorShares Trust (‘‘Trust’’), a 

statutory trust organized under the laws 

of the State of Delaware and registered 

with the Commission as an open-end 

management investment company.5 The 

investment advisor to the Fund is 

AdvisorShares Investments, LLC 

(‘‘Advisor’’), and Peritus I Asset 

Management, LLC is the Fund’s subadvisor (‘‘Peritus’’ or ‘‘Sub-Advisor’’).6

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Federal Register / Vol. 75, No. 226 / Wednesday, November 24, 2010 / Notices 71761 

7 17 CFR 240.10A–3. 

8The Fund represents that the portfolio will 

include a minimum of 13 non-affiliated issuers. 

9The Fund has represented that it will invest 

only in U.S.-registered bonds that are listed or 

traded in the United States. However, certain of the 

Fund’s debt holdings may be issued by corporations 

domiciled outside the United States. 

10 Distressed debt is debt that is currently in 

default and is not expected to pay the current 

coupon. 

11See supra notes 3 and 5. 

12 In approving this proposed rule change, the 

Commission notes that it 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. 78f(b)(5). 

14 15 U.S.C. 78k–1(a)(1)(C)(iii). 

15On a daily basis, the Advisor will disclose for 

each portfolio security or other financial instrument 

of the Fund the following information: Ticker 

symbol (if applicable), name of security or financial 

instrument, number of shares or dollar value of 

financial instruments held in the portfolio, and 

percentage weighting of the security or financial 

instrument in the portfolio. 

The Exchange represents that the Shares 

will conform to the initial and 

continued listing criteria under NYSE 

Arca Equities Rule 8.600 and that, for 

initial and/or continued listing, the 

Fund will be in compliance with Rule 

10A–3 under the Exchange Act,7 as 

provided by NYSE Arca Equities Rule 

5.3. A minimum of 100,000 Shares will 

be outstanding at the commencement of 

trading on the Exchange. 

The Fund’s investment objective is 

high current income with a secondary 

goal of capital appreciation. The Fund, 

under normal circumstances, will invest 

at least 80% of its net assets, plus any 

borrowings for investment purposes, in 

high-yield debt securities, which 

include senior and subordinated 

corporate debt obligations (such as 

bonds, debentures, notes and 

commercial paper). The Fund does not 

have any portfolio maturity limitation 

and may invest its assets from time to 

time primarily in instruments with 

short-term, medium-term or long-term 

maturities. 

In selecting securities for the Fund’s 

portfolio, Peritus will perform its own 

independent investment analysis of 

each issuer to determine its 

creditworthiness. Peritus will focus on 

the secondary market, predominantly 

investing in assets at a discount to par 

($100), allowing for a potential 

opportunity to generate capital gains in 

addition to current yield. Peritus will 

place limited value on credit ratings and 

instead will focus on true cash flow 

while looking to buy credit at prices that 

it feels provide a margin of safety. 

Additional factors will be considered 

when constructing the portfolio 

including, but not limited to, excess 

cash on the balance sheet and/or a 

history of producing real free cash flow, 

as well as a capital structure that can be 

sustained on conservative forecasts. The 

Fund’s portfolio will typically consist of 

40–60 holdings,8 which will be 

disclosed on its Web site (http:// 

www.advisorshares.com) daily after the 

close of trading on the Exchange and 

prior to the opening of trading on the 

Exchange the following day. 

The Fund may seek investments in 

corporate debt securities representative 

of one or more high-yield bond or credit 

derivative indices, which may change 

from time to time. Selection will 

generally be dependent on independent 

credit analysis or fundamental analysis 

performed by the Sub-Advisor. The 

Fund may invest in all grades of 

corporate securities, including those 

below investment grade.9 The Fund will 

only invest in liquid securities and only 

purchase performing securities and not 

distressed debt.10 To a lesser extent, the 

Fund also may invest in unrated 

securities. The Fund may invest in the 

securities of other investment 

companies to the extent that such an 

investment would be consistent with 

the requirements of Section 12(d)(1) of 

the 1940 Act, or any rule, regulation or 

order of the Commission. 

To respond to adverse market, 

economic, political or other conditions, 

the Fund may invest 100% of its total 

assets, without limitation, in highquality short-term debt securities and 

money market instruments. The Fund 

may be invested in these instruments for 

extended periods, depending on the 

Sub-Advisor’s assessment of market 

conditions. These short-term debt 

securities and money market 

instruments include shares of other 

mutual funds, commercial paper, 

certificates of deposit, bankers’ 

acceptances, and U.S. Government 

securities. 

Additional details regarding the 

Shares and the Fund including, among 

other things, the organization and 

structure of the Fund, the investment 

objectives and methodologies, 

investment risks, dissemination and 

availability of key information about the 

Fund, the Shares, and the portfolio, 

creations and redemptions of Shares, 

trading halts, trading rules, surveillance, 

and the Information Bulletin can be 

found in the Notice and the Registration 

Statement, as applicable.11

III. Discussion and Commission’s 

Findings 

After careful consideration, the 

Commission finds that the proposed 

rule change is consistent with the 

requirements of the Act and the rules 

and regulations thereunder applicable to 

a national securities exchange.12 In 

particular, the Commission finds that 

the proposed rule change is consistent 

with the requirements of Section 6(b)(5) 

of the Act,13 which requires, among 

other things, that the Exchange’s rules 

be designed to promote just and 

equitable principles of trade, to foster 

cooperation and coordination with 

persons engaged in facilitating 

transactions in securities, to remove 

impediments to, and perfect the 

mechanism of, a free and open market 

and a national market system, and, in 

general, to protect investors and the 

public interest. 

The Commission finds that the 

proposal to list and trade the Shares on 

the Exchange is consistent with Section 

11A(a)(1)(C)(iii) of the Act,14 which sets 

forth Congress’ finding that it is in the 

public interest and appropriate for the 

protection of investors and the 

maintenance of fair and orderly markets 

to assure the availability to brokers, 

dealers, and investors of information 

with respect to quotations for and 

transactions in securities. Quotation and 

last-sale information for the Shares will 

be disseminated through the facilities of 

the Consolidated Tape Association. In 

addition, the Portfolio Indicative Value 

(‘‘PIV’’) will be disseminated at least 

every 15 seconds during the Core 

Trading Session by one or more major 

market data vendors. On each business 

day before commencement of trading in 

Shares in the Core Trading Session on 

the Exchange, the Fund will disclose on 

its Web site the Disclosed Portfolio, as 

defined in NYSE Arca Equities Rule 

8.600(c)(2), that will form the basis for 

the Fund’s calculation of net asset value 

(‘‘NAV’’) at the end of the business 

day.15 In addition, information 

regarding market price and trading 

volume of the Shares is and will be 

continually available on a real-time 

basis throughout the day on brokers’ 

computer screens and other electronic 

services, and the previous day’s closing 

price and trading volume information 

will be published daily in the financial 

section of newspapers. The Fund will 

also make available on its Web site daily 

trading volume of the Shares, closing 

prices of the Shares, NAV, and other 

related quantitative and trading 

information. A basket composition file, 

which includes the security names and 

share quantities required to be delivered 

in exchange for Fund shares, together 

with estimates and actual cash 

components, will be publicly 

disseminated daily prior to the opening 

of the New York Stock Exchange 

(‘‘NYSE’’) via the National Securities 

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71762 Federal Register / Vol. 75, No. 226 / Wednesday, November 24, 2010 / Notices 

16See NYSE Arca Equities Rule 8.600(d)(1)(B) 

(also requiring that the Exchange obtain a 

representation from the issuer that the NAV per 

Share will be calculated daily). 

17See NYSE Arca Equities Rule 8.600(d)(2)(C)(ii). 

With respect to trading halts, the Exchange may 

consider other relevant factors in exercising its 

discretion to halt or suspend trading in the Shares. 

Trading on the Exchange in the Shares may be 

halted because of market conditions or for reasons 

that, in the view of the Exchange, make trading in 

the Shares inadvisable. These may include: (1) The 

extent to which trading is not occurring in the 

securities comprising the Disclosed Portfolio 

and/or the financial instruments of the Fund; or (2) 

whether other unusual conditions or circumstances 

detrimental to the maintenance of a fair and orderly 

market are present. 

18The Commission notes that the Exchange has 

represented that neither the Fund’s Advisor nor 

Sub-Advisor is affiliated with a broker-dealer. See 

supra note 6. 

19 17 CFR 240.10A–3. 

20 15 U.S.C. 78f(b)(5). 

21 15 U.S.C. 78s(b)(2). 

22 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

Clearing Corporation. The basket 

represents one Creation Unit of the 

Fund. The NAV of the Fund will 

normally be determined as of the close 

of the regular trading session on the 

NYSE (ordinarily 4 p.m. Eastern Time) 

on each business day. 

The Commission further believes that 

the proposal to list and trade the Shares 

is reasonably designed to promote fair 

disclosure of information that may be 

necessary to price the Shares 

appropriately and to prevent trading 

when a reasonable degree of 

transparency cannot be assured. The 

Commission notes that the Exchange 

will obtain a representation from the 

issuer of the Shares that the NAV and 

the Disclosed Portfolio will be made 

available to all market participants at 

the same time.16 The Exchange may halt 

trading in the Shares if the value of the 

Portfolio Indicative Value is no longer 

calculated or available or the Disclosed 

Portfolio is not made available to all 

market participants at the same time.17

In addition, NYSE Arca Equities Rule 

8.600(d)(2)(B)(ii) requires that the 

Reporting Authority that provides the 

Disclosed Portfolio implement and 

maintain, or be subject to, procedures 

designed to prevent the use and 

dissemination of material non-public 

information regarding the actual 

components of the portfolio. Lastly, the 

Commission notes that the Exchange 

will halt trading in the Shares under the 

specific circumstances set forth in NYSE 

Arca Equities Rule 8.600(d)(2)(D) and 

that, if there is an additional Fund subadvisor that is affiliated with a brokerdealer, that sub-advisor must erect a fire 

wall between it and such broker-dealer 

with respect to access to information 

concerning the composition and/or 

changes to the investment portfolio of 

the Fund.18

The Exchange has represented that 

the Shares are deemed to be equity 

securities, thus rendering trading in the 

Shares subject to the Exchange’s 

existing rules governing the trading of 

equity securities. In support of this 

proposal, the Exchange has made 

representations, including: 

(1) The Shares will conform to the 

initial and continued listing criteria 

under NYSE Arca Equities Rule 8.600. 

(2) The Exchange has appropriate 

rules to facilitate transactions in the 

Shares during all trading sessions. 

(3) The Exchange’s surveillance 

procedures are adequate to properly 

monitor Exchange trading of the Shares 

in all trading sessions and to deter and 

detect violations of Exchange rules and 

applicable federal securities laws. 

(4) Prior to the commencement of 

trading, the Exchange will inform its 

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 (including noting that 

Shares are not individually redeemable); 

(b) NYSE Arca Equities Rule 9.2(a), 

which imposes a duty of due diligence 

on its ETP Holders to learn the essential 

facts relating to every customer prior to 

trading the Shares; (c) the risks involved 

in trading the Shares during the 

Opening and Late Trading Sessions 

when an updated PIV will not be 

calculated or publicly disseminated; (d) 

how information regarding the PIV is 

disseminated; (e) the requirement that 

ETP Holders deliver a prospectus to 

investors purchasing newly issued 

Shares prior to or concurrently with the 

confirmation of a transaction; and (f) 

trading information. 

(5) A minimum of 100,000 Shares will 

be outstanding at the commencement of 

trading on the Exchange. 

(6) For initial and continued listing, 

the Shares must comply with Rule 

10A–3 under the Act.19

This approval order is based on the 

Exchange’s representations. 

For the foregoing reasons, the 

Commission finds that the proposed 

rule change is consistent with Section 

6(b)(5) of the Act 20 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,21 that the 

proposed rule change (SR–NYSEArca– 

2010–86), be, and it hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.22

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–29560 Filed 11–23–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63333; File No. SR– 

NASDAQ–2010–148] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Relating to 

Exchange-Traded Notes 

November 17, 2010. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’) 1, and Rule 19b–4 2 thereunder, 

notice is hereby given that on November 

15, 2010 The NASDAQ Stock Market 

LLC (‘‘NASDAQ’’ or ‘‘Exchange’’) filed 

with the Securities and Exchange 

Commission (‘‘SEC’’ or ‘‘Commission’’) 

the proposed rule change as described 

in Items I and II below, which Items 

have been prepared by the NASDAQ. 

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 NASDAQ Stock Market LLC 

proposes to amend Chapter IV, Section 

3, titled Criteria for Underlying 

Securities, to: (a) Permit trading options 

on leveraged (multiple or inverse) 

exchange-traded notes, and (b) broaden 

the definition of ‘‘Futures-Linked 

Securities.’’ 

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http:// 

www.nasdaq.cchwallstreet.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 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change. The text of 

these statements may be examined at 

WReier-Aviles on DSKGBLS3C1PROD with NOTICES