81692 Federal Register / Vol. 75, No. 248 / Tuesday, December 28, 2010 / Notices 

8 15 U.S.C. 78f(b)(5). 

9 15 U.S.C. 78s(b)(3)(A). 

10 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6)(iii) requires a self-regulatory organization to 

provide the Commission with written notice of its 

intent to file the proposed rule change, along with 

a brief description and text of the proposed rule 

change, at least five business days prior to the date 

of filing of the proposed rule change, or such 

shorter time as designated by the Commission. The 

Exchange has met this requirement. 

11 17 CFR 240.19b–4(f)(6). 

12 17 CFR 240.19b–4(f)(6)(iii). 

13 Id. 

14For purposes only of waiving the operative 

delay for this proposal, the Commission has 

considered the proposed rule’s impact on 

efficiency, competition, and capital formation. See 

15 U.S.C. 78c(f). 

15See supra note 7. 

16 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

Act,8 which requires the rules of an 

exchange 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 Exchange believes 

that excluding Destination-on-Open 

orders from the application of market 

collars is appropriate in order to avoid 

the potential dislocation between the 

reference price for a market collar on a 

Destination-on-Open order and the 

market at the open of the regular trading 

session. Accordingly, the modifications 

to Exchange Rule 11.5 promote just and 

equitable principles of trade, remove 

impediments to, and perfect the 

mechanism of, a free and open market 

and a national market system. 

The Exchange will issue an 

information circular to all Members 

prior to implementation, which will be 

on or about December 14, 2010. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The proposed rule change does not 

impose any burden on competition that 

is not necessary or appropriate in 

furtherance of the purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments Regarding the 

Proposed Rule Change Received From 

Members, Participants or Others 

The Exchange has not solicited, and 

does not intend to solicit, comments on 

this proposed rule change. The 

Exchange has not received any 

unsolicited written comments from 

members or other interested parties. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Because the foregoing proposed rule 

change: (1) Does not significantly affect 

the protection of investors or the public 

interest; (2) does not impose any 

significant burden on competition; and 

(3) by its terms does not become 

operative for 30 days after the date of 

this filing, or such shorter time as the 

Commission may designate if consistent 

with the protection of investors and the 

public interest, the proposed rule 

change has become effective pursuant to 

Section 19(b)(3)(A) 9 of the Act and Rule 

19b–4(f)(6) thereunder.10

A proposed rule change filed under 

Rule 19b–4(f)(6) 11 normally may not 

become operative prior to 30 days after 

the date of filing. However, Rule 19b– 

4(f)(6)(iii) 12 permits the Commission to 

designate a shorter time if such action 

is consistent with the protection of 

investors and the public interest. The 

Exchange requests that the Commission 

waive the 30-day operative delay, as 

specified in Rule 19b–4(f)(6)(iii),13

which would make the proposed rule 

change effective and operative upon 

filing. The Commission believes that 

waiving the 30-day operative delay is 

consistent with the protection of 

investors and the public interest.14 The 

Commission notes that the proposal is 

based on the rules of another SRO that 

similarly excludes market on open 

orders from its market collar 

functionality.15 Accordingly, the 

Commission designates the proposed 

rule change operative upon filing with 

the Commission. 

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. 

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 (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–EDGX–2010–24 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–EDGX–2010–24. This file 

number should be included on the 

subject line if e-mail 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 

Web site (http://www.sec.gov/rules/ 

sro.shtml). Copies of the submission, all 

subsequent amendments, all written 

statements with respect to the proposed 

rule change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room on official business 

days between the hours of 10 a.m. and 

3 p.m. Copies of such 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 publicly available. All 

submissions should refer to File 

Number SR–EDGX–2010–24 and should 

be submitted on or before January 18, 

2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.16

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–32613 Filed 12–27–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63581; File No. SR– 

NYSEArca–2010–117] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing of Proposed 

Rule Change Relating to Listing and 

Trading Shares of the Grail Western 

Asset Ultra Short Duration ETF Under 

NYSE Arca Equities Rule 8.600 

December 20, 2010. 

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

Securities Exchange Act of 1934 

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


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Federal Register / Vol. 75, No. 248 / Tuesday, December 28, 2010 / Notices 81693 

3The Commission previously approved listing 

and trading on the Exchange of actively managed 

funds under Rule 8.600. See, e.g., Securities 

Exchange Act Release Nos. 57801 (May 8, 2008), 73 

FR 27878 (May 14, 2008) (SR–NYSEArca–2008–31) 

(order approving Exchange listing and trading of 

twelve actively-managed funds of the WisdomTree 

Trust); 60981 (November 10, 2009), 74 FR 59594 

(November 18, 2009) (SR–NYSEArca–2009–79) 

(order approving listing of five fixed income funds 

of the PIMCO ETF Trust); 61365 (January 15, 2010), 

75 FR 4124 (January 26, 2010) (SR–NYSEArca– 

2009–114) (order approving listing of Grail 

McDonnell Fixed Income ETFs). 

4See Preliminary Prospectus on Form N–1A for 

the Trust, dated August 31, 2010 (File Nos. 333– 

148082 and 811–22154) (the ‘‘Registration 

Statement’’). The descriptions of the ETF and the 

Shares contained herein are based on information 

in the Registration Statement. 

notice is hereby given that, on December 

13, 2010, NYSE Arca, Inc. (‘‘Exchange’’ 

or ‘‘NYSE Arca’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I and II 

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 list and 

trade the shares of the following under 

NYSE Arca Equities Rule 8.600: Grail 

Western Asset Ultra Short Duration ETF 

(‘‘ETF’’ or ‘‘Fund’’). The text of the 

proposed rule change is available at the 

Exchange, the Commission’s Public 

Reference Room, and http:// 

www.nyse.com. 

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. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to list and 

trade the shares (‘‘Shares’’) of the Grail 

Western Asset Ultra Short Duration ETF 

under NYSE Arca Equities Rule 8.600, 

which governs the listing and trading of 

Managed Fund Shares on the 

Exchange.3 The ETF will be an actively 

managed exchange traded fund and is a 

series of Grail Advisors ETF Trust 

(‘‘Trust’’). The Trust is registered with 

the Commission as an investment 

company.4

Description of the Shares and the Fund 

Grail Advisors, LLC is the Fund’s 

investment manager (‘‘Manager’’). 

Western Asset Management Company is 

the sub-adviser (‘‘Western Asset’’ or 

‘‘Sub-Adviser’’) of the ETF. The Bank of 

New York Mellon Corporation is the 

administrator, Fund accountant, transfer 

agent and custodian for the ETF. ALPS 

Distributors, Inc. serves as the 

distributor of Creation Units for the 

Fund on an agency basis. 

Grail Western Asset Ultra Short 

Duration ETF 

According to the Registration 

Statement, the ETF’s investment 

objective is maximum current income, 

consistent with preservation of capital 

and daily liquidity. The ETF invests, 

under normal circumstances, primarily 

in short-term, investment grade fixed 

income securities. The ETF will 

typically invest in money market 

securities and short-term debt securities, 

including U.S. treasuries and agencies, 

corporate and bank obligations, asset 

backed and mortgage backed 

instruments, commercial paper and 

other highly rated, short maturity 

securities. While the ETF may invest in 

securities of any maturity, under normal 

circumstances, the average duration of 

the portfolio is typically expected to be 

one year or less. Duration is a measure 

of the underlying portfolio’s price 

sensitivity to changes in interest rates. 

Western Asset employs an active, 

team-managed strategy and utilizes a 

top-down economic and interest rate 

outlook, combined with a bottom-up 

security selection process. When using 

a ‘‘top-down’’ approach, Western Asset 

looks first at broad economic factors and 

market conditions, such as prevailing 

and anticipated interest rates. On the 

basis of those factors and conditions, 

Western Asset selects what it views as 

optimal interest rates and maturities and 

chooses certain sectors or industries 

within the overall market. Western 

Asset then looks at individual issuers 

within those sectors or industries to 

select securities for the investment 

portfolio. While many of the ETF’s 

investments are expected to be held 

until maturity, they may be sold 

depending on market conditions, 

opportunities and valuations. Western 

Asset may sell a security before maturity 

when it is necessary to do so to meet 

redemption requests. A security may 

also be sold if Western Asset believes 

the issuer is no longer as creditworthy, 

or in order to adjust the average 

duration of the ETF’s investment 

portfolio (for example, to reflect changes 

in Western Asset’s expectations 

concerning interest rates), or when 

Western Asset believes there is superior 

value in other market sectors or 

industries. 

The ETF invests primarily in 

investment grade securities (Baa or 

higher by Moody’s; BBB or higher by 

Standard & Poor’s) that are rated by at 

least one nationally recognized 

statistical rating organization rating that 

security, or if unrated, determined by 

Western Asset to be of comparable 

quality. 

The ETF may invest in securities 

issued by the U.S. Government, its 

agencies and instrumentalities and 

repurchase agreements for these 

obligations, mortgage-backed and other 

asset-backed securities, and obligations 

of U.S. and non-U.S. banks and other 

foreign private issuers. In addition, the 

ETF may invest in obligations issued or 

guaranteed by the governments of 

Western Europe, Australia, Japan and 

Canada, and commercial paper, 

including asset-backed commercial 

paper. The ETF may only invest in U.S. 

dollar-denominated securities. It may 

also invest in securities of other 

investment companies. Under adverse 

market conditions, the ETF may, for 

temporary defensive purposes, invest up 

to 100% of its assets in cash or cash 

equivalents. Due to the short-term 

nature of many of the ETF’s 

investments, the ETF may have an 

annual portfolio turnover rate over 

100%. 

As discussed below, the ETF may 

invest in derivative instruments, such as 

futures and interest rate, total return and 

credit default swaps. Investments in 

derivatives must be consistent with the 

ETF’s investment objective and may 

only be used to manage risk and not to 

enhance leverage. 

The ETF will not invest in non-U.S. 

equity securities. 

Investment Policies of the ETF 

The ETF (1) may not invest more than 

5% of its total assets (taken at market 

value) in securities of any one issuer, 

other than obligations issued or 

guaranteed by the U.S. Government, its 

agencies and instrumentalities, or 

purchase more than 10% of the voting 

securities of any one issuer, with respect 

to 75% of the ETF’s total assets; and (2) 

regarding concentration, may not invest 


emcdonald on DSK2BSOYB1PROD with NOTICES
81694 Federal Register / Vol. 75, No. 248 / Tuesday, December 28, 2010 / Notices 

5An investment adviser to an open-end fund is 

required to be registered under the Investment 

Advisers Act of 1940 (the ‘‘Advisers Act’’). As a 

result, the Manager and Sub-adviser 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 nonpublic information by an investment adviser must 

be consistent with Rule 204A–1 under the Advisers 

Act. 

6The Exchange represents that Grail Advisors, 

LLC, as the investment adviser of the Fund, and 

Western Asset, the Sub-Adviser, and their related 

personnel, are subject to Investment Advisers Act 

Rule 204A–1. This Rule specifically requires the 

adoption of a code of ethics by an investment 

adviser to include, at a minimum: (i) Standards of 

business conduct that reflect the firm’s/personnel 

fiduciary obligations; (ii) provisions requiring 

supervised persons to comply with applicable 

federal securities laws; (iii) provisions that require 

all access persons to report, and the firm to review, 

their personal securities transactions and holdings 

periodically as specifically set forth in Rule 204A– 

1; (iv) provisions requiring supervised persons to 

report any violations of the code of ethics promptly 

to the chief compliance officer (‘‘CCO’’) or, provided 

the CCO also receives reports of all violations, to 

other persons designated in the code of ethics; and 

(v) provisions requiring the investment adviser to 

provide each of the supervised persons with a copy 

of the code of ethics with an acknowledgement by 

said supervised persons. In addition, Rule 206(4)– 

7 under the Advisers Act makes it unlawful for an 

investment adviser to provide investment advice to 

clients unless such investment adviser has (i) 

adopted and implemented written policies and 

procedures reasonably designed to prevent 

violation, by the investment adviser and its 

supervised persons, of the Advisers Act and the 

Commission rules adopted thereunder; (ii) 

implemented, at a minimum, an annual review 

regarding the adequacy of the policies and 

procedures established pursuant to subparagraph (i) 

above and the effectiveness of their 

implementation; and (iii) designated an individual 

(who is a supervised person) responsible for 

administering the policies and procedures adopted 

under subparagraph (i) above. 

7For an order involving a Creation Unit to be 

effectuated at the ETF’s NAV on a particular day, 

it must be received by the Distributor by or before 

the deadline for such order (‘‘Order Cut-Off Time’’). 

The Order Cut-Off Time for creation and 

redemption orders for the ETF are 2 p.m. Eastern 

Time for In-Kind/Cash Basket for Cash Value, 2 

p.m. Eastern Time for Partial Cash Value and InKind/Cash Basket, and 4 p.m. Eastern Time for InKind Creation Basket. 

more than 25% of its total assets in the 

securities of companies primarily 

engaged in any one industry or group of 

industries provided that: (i) This 

limitation does not apply to obligations 

issued or guaranteed by the U.S. 

Government, its agencies and 

instrumentalities; and (ii) municipalities 

and their agencies and authorities are 

not deemed to be industries. 

The ETF may not invest more than 

15% of its net assets in: (1) Illiquid 

securities; and (2) Rule 144A securities, 

including time deposits and repurchase 

agreements that mature in more than 

seven days. For this purpose, ‘‘illiquid 

securities’’ are securities that the ETF 

may not sell or dispose of within seven 

days in the ordinary course of business 

at approximately the amount at which 

the ETF has valued the securities. 

The ETF may invest in mortgage- or 

other asset-backed securities. Mortgage 

backed securities in which the Fund 

invests will be investment grade. 

Mortgage-related securities include 

mortgage pass-through securities, 

collateralized mortgage obligations 

(‘‘CMOs’’), commercial mortgage-backed 

securities, mortgage dollar rolls, CMO 

residuals, stripped mortgage-backed 

securities (‘‘SMBSs’’) and other 

securities that directly or indirectly 

represent a participation in, or are 

secured by and payable from, mortgage 

loans on real property. The ETF will not 

purchase mortgage-related securities or 

any other assets which in the SubAdviser’s opinion are illiquid if, as a 

result, more than 15% of the value of 

the ETF’s net assets will be illiquid. 

The ETF may invest in unregistered 

securities, including Rule 144A 

securities, that are purchased directly 

from the issuer or in the secondary 

market and are subject to limitations on 

resale. 

The ETF may hold preferred stocks. 

The ETF may purchase or otherwise 

receive warrants or rights. The ETF may 

enter into repurchase agreements with 

banks and broker-dealers. The ETF may 

engage in reverse repurchase agreements 

as a means of raising cash to satisfy 

redemption requests or for other 

temporary emergency purposes. The 

ETF may hold zero coupon securities 

and bank obligations, which include 

certificates of deposit, bankers’ 

acceptances, and fixed time deposits. 

The ETF may invest in the securities of 

other investment companies to the 

extent permitted by law. The ETF may 

hold corporate and other debt and fixed 

income securities; U.S. Government 

securities; municipal securities; and real 

estate investment trusts. 

Detailed descriptions of the ETF and 

the Shares; procedures for creating and 

redeeming Shares; transaction fees and 

expenses; ETF investments; dividends 

and distributions; taxes; risks; and 

reports to be distributed to beneficial 

owners of the Shares can be found in 

the Registration Statement or on the 

Web site for the Fund (http:// 

www.grailadvisors.com. 

Commentary .06 to Rule 8.600 

provides that, if the investment adviser 

to the Investment Company issuing 

Managed Fund Shares is affiliated with 

a broker-dealer, such investment adviser 

shall erect a ‘‘fire wall’’ between the 

investment adviser and the brokerdealer with respect to access to 

information concerning the composition 

and/or changes to such Investment 

Company portfolio.5 In addition, 

Commentary .06 further requires that 

personnel who make decisions on the 

open-end fund’s portfolio composition 

must be subject to procedures designed 

to prevent the use and dissemination of 

material nonpublic information 

regarding the open-end fund’s portfolio. 

Commentary .06 to Rule 8.600 is similar 

to Commentary .03(a)(i) and (iii) to 

NYSE Arca Equities Rule 5.2(j)(3); 

however, Commentary .06 in connection 

with the establishment of a ‘‘fire wall’’ 

between the investment adviser and the 

broker-dealer reflects the applicable 

open-end fund’s portfolio, not an 

underlying benchmark index, as is the 

case with index-based funds. The 

Fund’s Manager and Sub-Adviser each 

is affiliated with a broker-dealer and has 

implemented a fire wall with respect to 

the affiliated broker-dealer regarding 

access to information concerning the 

composition and/or changes to a 

portfolio.6 Any additional Fund subadvisers that are affiliated with a brokerdealer will be required to implement a 

fire wall with respect to such brokerdealer regarding access to information 

concerning the composition and/or 

changes to a portfolio. The Manager and 

Sub-Adviser, each as a Reporting 

Authority under NYSE Arca Equities 

Rule 8.600(c)(4), have implemented and 

will maintain, or are subject to, 

procedures designed to prevent the use 

and dissemination of material nonpublic information regarding the actual 

components of the Fund’s portfolio. 

Creations and Redemptions of Shares 

As described in the Registration 

Statement, Shares can be purchased by 

or through an Authorized Participant 

directly from the ETF only in Creation 

Units, currently 50,000 Shares, or 

multiples thereof. Creation Units may be 

purchased in exchange for a Fund 

Deposit, which consists of (i) all cash 

(the ‘‘Cash Value’’), (ii) a basket of 

certain in-kind securities and cash 

(‘‘Partial Cash Value,’’ and together with 

the in-kind securities (‘‘In-Kind/Cash 

Basket’’) or (iii) a basket of securities 

(the ‘‘In-Kind Creation Basket’’) and a 

Balancing Amount. In all instances the 

value of the Fund Deposit will be equal 

to the value of the Creation Unit.7

Shares may be redeemed only in 

Creation Units at their NAV next 

determined after receipt of a redemption 

request in proper form by the ETF 

through the Transfer Agent and only on 

a Business Day. Creation Units generally 

may be redeemed in exchange for a 

‘‘Fund Redemption’’, which consists of 


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Federal Register / Vol. 75, No. 248 / Tuesday, December 28, 2010 / Notices 81695 

8The Bid/Ask Price of the ETF is determined 

using the midpoint of the highest bid and the 

lowest offer on the Exchange as of the time of 

calculation of the NAV. The records relating to Bid/ 

Ask Prices will be retained by the ETF and its 

service providers. 

9The Core Trading Session is 9:30 a.m. to 4 p.m. 

Eastern time. 

10Under accounting procedures followed by the 

ETF, trades made on the prior business day (‘‘T’’) 

will be booked and reflected in NAV on the current 

business day (‘‘T+1’’). Notwithstanding the 

foregoing, portfolio trades that are executed prior to 

the opening of the Exchange on any business day 

may be booked and reflected in NAV on such 

business day. Accordingly, each ETF 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. 11See 17 CFR 240.10A–3. 

(i) A Cash Value (ii) a basket of in-kind 

securities and Partial Cash Value or (iii) 

a basket of securities (‘‘In-Kind 

Redemption Basket’’) and a Balancing 

Amount, in all instances equal to the 

value of a Creation Unit. 

The ETF imposes a ‘‘Transaction Fee’’ 

on purchases or redemptions of Creation 

Units to be paid by the purchaser or 

redeemer in cash. 

Availability of Information 

The ETF’s Web site (http:// 

www.grailadvisors.com), which will be 

publicly available prior to the public 

offering of Shares, will include a form 

of the prospectus for the ETF that may 

be downloaded. The Web site will 

include additional quantitative 

information updated on a daily basis, 

including, for the ETF: (1) the prior 

business day’s reported NAV, mid-point 

of the bid/ask spread at the time of 

calculation of such NAV (the ‘‘Bid/Ask 

Price’’),8 and a calculation of the 

premium and discount of the Bid/Ask 

Price against the NAV; and (2) data in 

chart format displaying the frequency 

distribution of discounts and premiums 

of the daily Bid/Ask Price against the 

NAV, within appropriate ranges, for 

each of the four previous calendar 

quarters. On each business day, before 

commencement of trading in Shares in 

the Core Trading Session 9 on the 

Exchange, the Trust will disclose on its 

Web site the identities and quantities of 

the portfolio of securities and other 

assets (the ‘‘Disclosed Portfolio’’) held by 

the ETF that will form the basis for the 

ETF’s calculation of NAV at the end of 

the business day 10 as of the close of 

regular trading on the New York Stock 

Exchange, generally 4 p.m., Eastern 

Time. The Web site and information 

will be publicly available at no charge. 

In addition, for the ETF, an estimated 

value, defined in NYSE Arca Equities 

Rule 8.600 as the ‘‘Portfolio Indicative 

Value,’’ that reflects an estimated 

intraday value of the ETF’s portfolio, 

will be disseminated through one or 

more major market data vendors. The 

Portfolio Indicative Value will be based 

upon the current value for the 

components of the Disclosed Portfolio, 

provided that illiquid securities, 

mortgage-related securities and other 

asset-backed securities will be valued 

based on the prior business day’s 

closing value, which is the most current 

value available for such securities. The 

Portfolio Indicative Value will be 

updated and disseminated by one or 

more major market data vendors at least 

every 15 seconds during the Core 

Trading Session. According to the 

Registration Statement, this 

approximate value should not be 

viewed as a ‘‘real-time’’ update of the 

NAV of the ETF because the 

approximate value may not be 

calculated in the same manner as the 

NAV, which is computed once a day. 

According to the Registration Statement, 

the Portfolio Indicative Value is an 

approximate per-Share value of the 

ETF’s portfolio holdings and does not 

necessarily reflect the precise 

composition of the current portfolio of 

securities held by the ETF at a particular 

point in time. The quotations for certain 

investments may not be updated during 

U.S. trading hours if such holdings do 

not trade in the U.S., except such 

quotations may be updated to reflect 

currency fluctuations. 

Information regarding market price 

and 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. The previous day’s closing 

price and trading volume information 

will be published daily in the financial 

section of newspapers. Quotation and 

last sale information for the Shares will 

be available via the Consolidated Tape 

Association high-speed line. 

On a daily basis, the ETF will disclose 

on the ETF’s Web site for each portfolio 

security or other financial instrument of 

the ETF 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. 

Investors can also obtain the Trust’s 

Statement of Additional Information 

(‘‘SAI’’), the ETF’s Shareholder Reports, 

and its Form N–CSR and Form N–SAR, 

filed twice a year. The Trust’s SAI and 

Shareholder Reports are available free 

upon request from the Trust, and those 

documents and the Form N–CSR and 

Form N–SAR may be viewed on-screen 

or downloaded from the Commission’s 

Web site at http://www.sec.gov. 

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. Information regarding the 

previous day’s closing price and trading 

volume information will be published 

daily in the financial section of 

newspapers. Additional information 

regarding the Shares and the ETF, 

including investment strategies, risks, 

creation and redemption procedures, 

fees, portfolio holdings disclosure 

policies, distributions and taxes is 

included in the Registration Statement. 

All terms relating to the ETF that are 

referred to, but not defined in, this 

proposed rule change are defined in the 

Registration Statement. 

Initial and Continued Listing 

The Shares will be subject to NYSE 

Arca Equities Rule 8.600(d), which sets 

forth the initial and continued listing 

criteria applicable to Managed Fund 

Shares. The Exchange represents that, 

for initial and/or continued listing, the 

Shares must be in compliance with Rule 

10A–3 11 under the Exchange Act, 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 Exchange 

will obtain a representation from the 

issuer of the Shares that the net asset 

value per Share will be calculated daily 

and that the net asset value and the 

Disclosed Portfolio will be made 

available to all market participants at 

the same time. 

Trading Halts 

With respect to trading halts, the 

Exchange may consider all relevant 

factors in exercising its discretion to 

halt or suspend trading in the Shares of 

the ETF. Shares of the ETF will be 

halted if the ‘‘circuit breaker’’ parameters 

in NYSE Arca Equities Rule 7.12 are 

reached. Trading 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 ETF; 

or (2) whether other unusual conditions 

or circumstances detrimental to the 

maintenance of a fair and orderly 

market are present. Trading in the 

Shares will be subject to NYSE Arca 

Equities Rule 8.600(d)(2)(D), which sets 

forth circumstances under which Shares 

of the ETF may be halted. 


emcdonald on DSK2BSOYB1PROD with NOTICES
81696 Federal Register / Vol. 75, No. 248 / Tuesday, December 28, 2010 / Notices 

12For a list of the current members of ISG, see 

http://www.isgportal.org. The Exchange notes that 

many of the components of the Disclosed Portfolio 

for the ETF may not trade on exchanges that are 

members of ISG or with which the Exchange has in 

place a comprehensive surveillance sharing 

agreement. 13 15 U.S.C. 78f(b)(5). 

Trading Rules 

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. Shares will trade on 

the NYSE Arca Marketplace from 4 a.m. 

to 8 p.m. Eastern Time in accordance 

with NYSE Arca Equities Rule 7.34 

(Opening, Core, and Late Trading 

Sessions). The Exchange has 

appropriate rules to facilitate 

transactions in the Shares during all 

trading sessions. As provided in NYSE 

Arca Equities Rule 7.6, Commentary .03, 

the minimum price variation (‘‘MPV’’) 

for quoting and entry of orders in equity 

securities traded on the NYSE Arca 

Marketplace is $0.01, with the exception 

of securities that are priced less than 

$1.00 for which the MPV for order entry 

is $0.0001. 

Surveillance 

The Exchange intends to utilize its 

existing surveillance procedures 

applicable to derivative products (which 

includes Managed Fund Shares) to 

monitor trading in the Shares. The 

Exchange represents that these 

procedures are adequate to properly 

monitor Exchange trading of the Shares 

in all trading sessions and to deter and 

detect violations of Exchange rules and 

applicable federal securities laws. 

The Exchange’s current trading 

surveillance focuses on detecting 

securities trading outside their normal 

patterns. When such situations are 

detected, surveillance analysis follows 

and investigations are opened, where 

appropriate, to review the behavior of 

all relevant parties for all relevant 

trading violations. 

The Exchange may obtain information 

via the Intermarket Surveillance Group 

(‘‘ISG’’) from other exchanges who are 

members of ISG.12

In addition, the Exchange also has a 

general policy prohibiting the 

distribution of material, non-public 

information by its employees. 

Information Bulletin 

Prior to the commencement of 

trading, the Exchange will inform its 

ETP Holders in an Information Bulletin 

(‘‘Bulletin’’) of the special characteristics 

and risks associated with trading the 

Shares. Specifically, the Bulletin will 

discuss the following: (1) The 

procedures for purchases and 

redemptions of Shares in Creation Unit 

aggregations (and that Shares are not 

individually redeemable); (2) 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; (3) the risks involved 

in trading the Shares during the 

Opening and Late Trading Sessions 

when an updated Portfolio Indicative 

Value will not be calculated or publicly 

disseminated; (4) how information 

regarding the Portfolio Indicative Value 

is disseminated; (5) 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 (6) 

trading information. 

In addition, the Bulletin will 

reference that the ETF is subject to 

various fees and expenses described in 

the Registration Statement. The Bulletin 

will discuss any exemptive, no-action, 

and interpretive relief granted by the 

Commission from any rules under the 

Exchange Act. The Bulletin will also 

disclose that the NAV for the Shares 

will be calculated after 4:00 p.m. 

Eastern Time each trading day. 

2. Statutory Basis 

The basis under the Exchange Act for 

this proposed rule change is the 

requirement under Section 6(b)(5) 13

that an exchange have rules that are 

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, in general, to protect 

investors and the public interest. The 

Exchange believes that the proposed 

rule change will facilitate the listing and 

trading of additional types of exchangetraded products that will enhance 

competition among market participants, 

to the benefit of investors and the 

marketplace. In addition, the listing and 

trading criteria set forth in NYSE Arca 

Equities Rule 8.600 are intended to 

protect investors and the public interest. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

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 within 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 (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–NYSEArca-2010–117 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR- NYSEArca-2010–117. This 

file number should be included on the 

subject line if e-mail 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 (http://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 


emcdonald on DSK2BSOYB1PROD with NOTICES
Federal Register / Vol. 75, No. 248 / Tuesday, December 28, 2010 / Notices 81697 

14 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3A 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) (‘‘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. 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. 

4The Commission previously approved listing 

and trading on the Exchange of actively-managed 

funds under Rule 8.600. See, e.g., Securities 

Exchange Act Release Nos. 57801 (May 8, 2008), 73 

FR 27878 (May 14, 2008) (SR–NYSEArca–2008–31) 

(order approving Exchange listing and trading of 

twelve actively-managed funds of the WisdomTree 

Trust); 59826 (April 28, 2009), 74 FR 20512 (May 

4, 2009) (SR–NYSEArca–2009–22) (order approving 

Exchange listing and trading of Grail American 

Beacon Large Cap Value ETF); 60460 (August 7, 

2009), 74 FR 41468 (August 17, 2009) (SR– 

NYSEArca–2009–55) (order approving Exchange 

listing and trading of Dent Tactical ETF). 

5The Trust is registered under the 1940 Act. On 

October 14, 2010, the Trust filed with the 

Commission Post-Effective Amendment No. 13 to 

Form N–1A under the Securities Act of 1933 (15 

U.S.C. 77a), and under the 1940 Act relating to the 

Funds (File Nos. 333–157876 and 811–22110) 

(‘‘Registration Statement’’). The description of the 

operation of the Trust and the Funds herein is 

based on the Registration Statement. 

6An investment adviser to an open-end fund is 

required to be registered under the Investment 

Advisers Act of 1940 (the ‘‘Advisers Act’’). As a 

result, the Advisor and Sub-Advisor 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 nonpublic information by an investment adviser must 

be consistent with Rule 204A–1 under the Advisers 

Act. 

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 20549–1090 on official 

business days between 10 a.m. and 3 

p.m. Copies of the filing will also be 

available for inspection and copying at 

the Exchange’s principal office. 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-NYSEArca-2010–117 and 

should be submitted on or before 

January 18, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.14

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–32513 Filed 12–27–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63587; File No. SR– 

NYSEArca–2010–118] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing of Proposed 

Rule Change Relating to the Listing 

and Trading of the SiM Dynamic 

Allocation Diversified Income ETF and 

SiM Dynamic Allocation Growth 

Income ETF 

December 21, 2010. 

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

Securities Exchange Act of 1934 (‘‘Act’’ 

or ‘‘Exchange Act’’) 1 and Rule 19b–4 

thereunder,2 notice is hereby given that, 

on December 15, 2010, NYSE Arca, Inc. 

(‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with 

the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I and II 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 list and 

trade the following Managed Fund 

Shares under NYSE Arca Equities Rule 

8.600: SiM Dynamic Allocation 

Diversified Income ETF and SiM 

Dynamic Allocation Growth Income 

ETF. The text of the proposed rule 

change is available at the Exchange, the 

Commission’s Public Reference Room, 

and http://www.nyse.com. 

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. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to list and 

trade the following Managed Fund 

Shares 3 (‘‘Shares’’) under NYSE Arca 

Equities Rule 8.600: SiM Dynamic 

Allocation Diversified Income ETF and 

SiM Dynamic Allocation Growth 

Income ETF (each a ‘‘Fund’’ and, 

collectively, the ‘‘Funds’’).4 The Shares 

will be offered by AdvisorShares Trust 

(the ‘‘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 Funds is AdvisorShares 

Investments, LLC (the ‘‘Advisor’’). 

Strategic Income Management, LLC 

(‘‘Sub-Advisor’’ or ‘‘SiM’’) serves as 

investment sub-advisor to the Funds. 

The Sub-Advisor is responsible for 

selecting the Funds’ investments 

according to the Funds’ investment 

objectives, policies and restrictions. 

Each of the Funds will periodically 

change the composition of its portfolio 

to best meet its investment objective. 

Foreside Fund Services, LLC (the 

‘‘Distributor’’) is the principal 

underwriter and distributor of the 

Funds’ shares. The Bank of New York 

Mellon Corporation serves as the 

administrator (‘‘Administrator’’), 

custodian, transfer agent and fund 

accounting agent for the Funds. 

Each Fund is an actively-managed 

exchange-traded fund and thus does not 

seek to replicate the performance of a 

specified index, but uses an active 

investment strategy to meet its 

investment objective. Accordingly, the 

Sub-Advisor manages each Fund’s 

portfolio in accordance with each 

Fund’s investment objective. 

Commentary .06 to Rule 8.600 

provides that, if the investment adviser 

to the Investment Company issuing 

Managed Fund Shares is affiliated with 

a broker-dealer, such investment adviser 

shall erect a ‘‘fire wall’’ between the 

investment adviser and the brokerdealer with respect to access to 

information concerning the composition 

and/or changes to such Investment 

Company portfolio.6 In addition, 

Commentary .06 further requires that 

personnel who make decisions on the 

open-end fund’s portfolio composition 

must be subject to procedures designed 

to prevent the use and dissemination of 

material nonpublic information 

regarding the open-end fund’s portfolio. 

Commentary .06 to Rule 8.600 is similar 


emcdonald on DSK2BSOYB1PROD with NOTICES