[Federal Register Volume 75, Number 46 (Wednesday, March 10, 2010)]
[Notices]
[Pages 11216-11220]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-5068]



[[Page 11216]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61642; File No. SR-NYSEArca-2010-07]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Relating to Listing of AdvisorShares WCM/BNY 
Mellon Focused Growth ADR ETF

March 3, 2010.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that on February 23, 2010, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') 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 self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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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 under NYSE 
Arca Equities Rule 8.600 (``Managed Fund Shares''): AdvisorShares WCM/
BNY Mellon Focused Growth ADR ETF. The text of the proposed rule change 
is available on the Exchange's Web site at http://www.nyx.com, at the 
Exchange's principal office and at the Commission's Public Reference 
Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to list and trade the following Managed Fund 
Shares \4\ (``Shares'') under NYSE Arca Equities Rule 8.600: 
AdvisorShares WCM/BNY Mellon Focused Growth ADR ETF (``ADR Fund'' or 
``Fund'').\5\ 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.\6\
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    \4\ A Managed Fund Share is a security that represents an 
interest in an investment company registered under the Investment 
Company Act of 1940 (15 U.S.C. 80a) (``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.
    \5\ The Commission previously approved listing and trading on 
the Exchange of the following actively managed funds under Rule 
8.600. See Securities Exchange Act Release Nos. 57619 (April 4, 
2008), 73 FR 19544 (April 10, 2008) (SR-NYSEArca-2008-25) (order 
approving Rule 8.600 and Exchange listing and trading of PowerShares 
Active AlphaQ Fund, PowerShares Active Alpha Multi-Cap Fund, 
PowerShares Active Mega-Cap Portfolio and PowerShares Active Low 
Duration Portfolio); 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); 60975 (November 10, 2009) 
(SR-NYSEArca-2009-83) (order approving listing of Grail American 
Beacon International Equity ETF); 60981 (November 10, 200 [sic]) 
(SR-NYSEArca-2009-79) (order approving listing of five fixed income 
funds of the PIMCO ETF Trust).
    \6\ The Trust is registered under the 1940 Act. On September 8, 
2009, the Trust filed with the Commission 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) (the 
``Registration Statement''). The description of the operation of the 
Trust and the Fund herein is based on the Registration Statement.
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    The investment advisor to the ADR Fund is AdvisorShares 
Investments, LLC (the ``Advisor''). WCM Investment Management (``WCM'') 
is the sub-advisor (``Sub-Advisor'') to the ADR Fund and the portfolio 
manager. The Sub-Advisor selects securities for the Fund in which to 
invest pursuant to an ``active'' management strategy for security 
selection and portfolio construction. The ADR Fund will periodically 
change the composition of its portfolio to best meet its investment 
objective. Neither the Advisor nor the Sub-Advisor is affiliated with a 
broker-dealer.\7\
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    \7\ With respect to the Fund, the Exchange represents that the 
Advisor, as the investment advisor of the Fund, as well as the Sub-
Advisor to the Fund 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 advisor 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 advisor 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 advisor to provide investment advice to clients unless 
such investment advisor has (i) adopted and implemented written 
policies and procedures reasonably designed to prevent violation, by 
the investment advisor and its supervised persons, of the Advisers 
Act and the Commission rules adopted thereunder; (ii) implemented, 
at a minimum, an annual review regarding the adequacy of the 
policies and procedures established pursuant to subparagraph (i) 
above and the effectiveness of their implementation; and (iii) 
designated an individual (who is a supervised person) responsible 
for administering the policies and procedures adopted under 
subparagraph (i) above.
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    According to the Registration Statement, the ADR Fund's investment 
objective is long-term capital appreciation above international 
benchmarks, such as the BNY Mellon Classic ADR Index and the MSCI EAFE 
Index. WCM seeks to achieve the Fund's investment objective by 
primarily investing in other exchange-traded funds (``ETFs''), as well 
as a portfolio of American Depositary Receipts (``ADRs'') included in 
the BNY Mellon Classic ADR Index,\8\ and swap contracts. The ADR Fund's 
portfolio will typically have exposure to fewer than 30 companies 
concentrating on the best ideas developed in WCM's investment process.
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    \8\ According to the Registration Statement, Depositary 
Receipts, which include ADRs, Global Depositary Receipts, Euro 
Depositary Receipts and New York Shares, are negotiable U.S. 
securities that generally represent a non-U.S. company's publicly 
traded equity or debt. Depositary Receipts may be purchased in the 
U.S. secondary trading market. They may trade either on an exchange 
or in the over-the-counter market. Although typically denominated in 
U.S. dollars, Depositary Receipts can also be denominated in Euros. 
Depositary Receipts can trade on all U.S. stock exchanges as well as 
on many European stock exchanges.
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    The Fund currently intends to invest primarily in the securities of 
other ETFs

[[Page 11217]]

consistent with the requirements of Section 12(d)(1) of the 1940 Act, 
or any rule, regulation or order of the SEC or interpretation thereof. 
The Fund will only make such investments in conformity with the 
requirements of Section 817 of the Internal Revenue Code of 1986, as 
amended (``Internal Revenue Code''). The ETFs in which the Fund will 
invest will primarily be index-based ETFs that hold substantially all 
of their assets in securities representing a specific index. Typically 
the components of such indexes will be short-term U.S. government 
securities.
    Although WCM currently seeks to achieve the Fund's investment 
objective by investing primarily in ETFs, WCM could at any point seek 
to achieve the Fund's investment objective by investing primarily in 
ADRs.
The Investment Process
    According to the Registration Statement, WCM employs a team 
approach through Investment Strategy Group, consisting of four senior 
investment professionals (the ``Portfolio Managers''). This team 
establishes portfolio guidelines for sector and industry analysis and 
develops the portfolio of the ADR Fund. The Portfolio Managers analyze 
the major trends in the global economy in order to identify those 
economic sectors and industries that are most likely to benefit. 
According to the Registration Statement, typical themes incorporated in 
the Portfolio Managers' investment process include demographics, global 
commerce, outsourcing, the growing global middle class and the 
proliferation of technology. A portfolio strategy is then implemented 
using a combination of low duration fixed income ETFs, direct 
investment in ADRs selected by WCM, and swap contracts based on the 
ADRs selected by WCM, that will best capitalize on these investment 
themes and subsequent expected growth of the underlying assets. All buy 
and sell decisions are made by the Portfolio Managers.
Portfolio Construction
    According to the Registration Statement, WCM seeks, either directly 
or through swap exposure, non-US domiciled quality growth businesses. 
WCM focuses its attention on conventional growth sectors such as 
technology, consumer discretionary and staples, and healthcare.
    The ADR Fund utilizes quantitative analysis that entails backward-
looking screens to help narrow the non-U.S. universe of companies in 
which the ADR Fund invests. The ADR Fund looks for companies with 
market capitalization of $3.5 billion or greater within traditional 
growth sectors, and that have high returns on invested capital; low or 
no debt; high gross, operating margins; and a history of sustainable 
growth. Typical portfolio construction would entail exposure to 15 or 
more industries with initial positions of approximately 2-5%; maximum 
position size of approximately 10%; maximum sector size of 
approximately 45%; maximum industry exposure of approximately 15%; and 
maximum emerging markets exposure of approximately 35%.
    The Fund will under normal circumstances have at least 80% of its 
total assets invested in ADRs or their synthetic equivalent. Prior to 
any change in this policy, the Fund will provide shareholders with 60 
days written notice. This is a non-fundamental policy of the Fund and 
may be changed with respect to the Fund by the Fund's board of 
director.
    The ADR Fund may invest in equity securities, including common and 
preferred stock, warrants, convertible securities and Master Limited 
Partnerships. The ADR Fund's portfolio will consist primarily of ADRs 
or their synthetic equivalent and the ADR Fund will not invest in non-
U.S. equity securities outside of U.S. markets.
    The Advisor represents that, with respect to Fund assets invested 
in ADRs, the composition of the Fund's portfolio, on a continual basis, 
will consist of:
    (1) ADRs that in the aggregate account for at least 90% of the 
weight of the ADRs in the Fund's portfolio each shall have a minimum 
global market value of at least $100 million;
    (2) ADRs that in the aggregate account for at least 70% of the 
weight of the ADRs in the Fund's portfolio each shall have a minimum 
global monthly trading volume of 250,000 shares, or minimum global 
notional volume traded per month of $25,000,000, averaged over the last 
six months; and
    (3) Any portion of the Fund's portfolio consisting of ADRs will 
include a minimum of 20 ADRs of which the most heavily weighted ADR 
shall not exceed 25% of the weight of the ADRs in the Fund's portfolio, 
and the five most heavily weighted ADRs shall not exceed 60% of the 
weight of the ADRs in the Fund's portfolio.
    The ADR Fund may use futures contracts and related options for bona 
fide hedging; attempting to offset changes in the value of securities 
held or expected to be acquired or be disposed of; attempting to gain 
exposure to a particular market, index or instrument; or other risk 
management purposes. As stated in the Registration Statement, the Trust 
is not subject is not subject [sic] to registration or regulation as a 
commodity pool operator under the Commodity Exchange Act.\9\ The ADR 
Fund will reduce the risk that it will be unable to close out a futures 
contract by only entering into futures contracts that are traded on a 
national futures exchange regulated by the Commodity Futures Trading 
Commission (``CFTC'').
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    \9\ 7 U.S.C. 1 et seq.
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    The ADR Fund may purchase and write put and call options on indices 
and enter into related closing transactions; trade put and call options 
on securities, securities indices and currencies, as the Sub-Advisor 
determines is appropriate in seeking the ADR Fund's investment 
objective, except as restricted by the ADR Fund's investment 
limitations (as described in the Registration Statement); enter into 
repurchase agreements with financial institutions; use reverse 
repurchase agreements as part of the ADR Fund's investment strategy; 
and make short-term investments in U.S. Government securities.
    The Fund expects to enter into swap agreements, including, but not 
limited to, equity index swaps and interest rate swap agreements. The 
Fund will utilize swap agreements in an attempt to gain exposure to 
specific securities in a market without actually purchasing those 
securities, or to hedge a position.
    In addition, the ADR Fund may invest up to 15% of its net assets in 
illiquid securities. For this purpose, ``illiquid securities'' are 
securities that the ADR Fund may not sell or dispose of within seven 
days in the ordinary course of business at approximately the amount at 
which the ADR Fund has valued the securities.
    The ADR Fund, from time to time, in the ordinary course of 
business, may purchase securities on a when-issued or delayed-delivery 
basis (i.e., delivery and payment can take place between a month and 
120 days after the date of the transaction). The ADR Fund may invest in 
U.S. Treasury zero-coupon bonds.
    As stated in the Registration Statement, it is a fundamental policy 
of the ADR Fund that it may not, with respect to 75% of its total 
assets, (i) purchase securities of any issuer (except securities issued 
or guaranteed by the U.S. Government, its agencies or 
instrumentalities) if, as a result, more than 5% of its total assets 
would be invested in the securities of such issuer; or (ii) acquire 
more than 10% of the outstanding voting securities of any one

[[Page 11218]]

issuer.\10\ In addition, the ADR Fund may not purchase any securities 
which would cause 25% or more of its total assets to be invested in the 
securities of one or more issuers conducting their principal business 
activities in the same industry or group of industries, provided that 
this limitation does not apply to investments in securities issued or 
guaranteed by the U.S. Government, its agencies or instrumentalities, 
or shares of investment companies.\11\
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    \10\ This diversification standard is contained in section 
5(b)(1) of the 1940 Act.
    \11\ Such fundamental policies may not be changed without the 
vote of a majority of the outstanding voting securities of the ADR 
Fund.
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    According to the Registration Statement, the ADR Fund will seek to 
qualify for treatment as a Regulated Investment Company (``RIC'') under 
the Internal Revenue Code.\12\
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    \12\ According to the Registration Statement, one of several 
requirements for RIC qualification is that a Fund must receive at 
least 90% of the Fund's gross income each year from dividends, 
interest, payments with respect to securities loans, gains from the 
sale or other disposition of stock, securities or foreign 
currencies, or other income derived with respect to the Fund's 
investments in stock, securities, foreign currencies and net income 
from an interest in a qualified publicly traded partnership (the 
``90% Test''). A second requirement for qualification as a RIC is 
that a Fund must diversify its holdings so that, at the end of each 
fiscal quarter of the Fund's taxable year: (a) At least 50% of the 
market value of the Fund's total assets is represented by cash and 
cash items, U.S. Government securities, securities of other RICs, 
and other securities, with these other securities limited, in 
respect to any one issuer, to an amount not greater than 5% of the 
value of the Fund's total assets or 10% of the outstanding voting 
securities of such issuer; and (b) not more than 25% of the value of 
its total assets are invested in the securities (other than U.S. 
Government securities or securities of other RICs) of any one issuer 
or two or more issuers which the Fund controls and which are engaged 
in the same, similar, or related trades or businesses, or the 
securities of one or more qualified publicly traded partnership (the 
``Asset Test'').
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    To respond to adverse market, economic, political or other 
conditions, the ADR Fund may invest 100% of its total assets, without 
limitation, in high-quality short-term debt securities and money market 
instruments. The ADR Fund may be invested in these instruments for 
extended periods, depending on the Sub-Advisor's assessment of market 
conditions. These debt securities and money market instruments include 
shares of other mutual funds, commercial paper, certificates of 
deposit, bankers' acceptances, U.S. Government securities and 
repurchase agreements.
    Creations and redemptions of Shares occur in large specified blocks 
of Shares, referred to as ``Creation Units''. According to the 
Registration Statement, the shares of the Fund are ``created'' at their 
net asset value (``NAV'') by market makers, large investors and 
institutions only in block-size Creation Units of 25,000 shares or 
more. A ``creator'' enters into an authorized participant agreement (a 
``Participant Agreement'') with the ADR Fund's distributor (the 
``Distributor'') or a DTC participant that has executed a Participant 
Agreement with the Distributor (an ``Authorized Participant''), and 
deposits into the ADR Fund a portfolio of securities closely 
approximating the holdings of the ADR Fund and a specified amount of 
cash, together totaling the NAV of the Creation Unit(s), in exchange 
for 25,000 shares of the ADR Fund (or multiples thereof). Similarly, 
Shares can only be redeemed in Creation Units, generally 25,000 shares 
or more, principally in-kind for a portfolio of securities held by the 
ADR Fund and a specified amount of cash together totaling the NAV of 
the Creation Unit(s). Shares are not redeemable from the ADR Fund 
except when aggregated in Creation Units. The prices at which creations 
and redemptions occur are based on the next calculation of NAV after an 
order is received in a form prescribed in the Participant Agreement.
    According to the Registration Statement, the Trust reserves the 
right to offer an ``all cash'' option for creations and redemptions of 
Creation Units for the ADR Fund. In addition, Creation Units may be 
issued in advance of receipt of Deposit Securities subject to various 
conditions, including a requirement to maintain a cash deposit with the 
Trust at least equal to a specified percentage of the market value of 
the missing Deposit Securities. In each instance, transaction fees may 
be imposed that will be higher than the transaction fees associated 
with traditional in-kind creations or redemptions. In all cases, such 
fees will be limited in accordance with SEC requirements applicable to 
management investment companies offering redeemable securities.
    The Shares will conform to the initial and continued listing 
criteria under NYSE Arca Equities Rule 8.600. The Exchange represents 
that, for initial and/or continued listing, the Fund will be in 
compliance with Rule 10A-3 \13\ 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 and the Disclosed Portfolio will be made 
available to all market participants at the same time.
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    \13\ 17 CFR 240.10A-3.
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Availability of Information
    The Fund's Web site (http://www.advisorshares.com), which will be 
publicly available prior to the public offering of Shares, will include 
a form of the Prospectus for the Fund that may be downloaded. The 
Fund's Web site will include additional quantitative information 
updated on a daily basis, including, for the Fund, (1) daily trading 
volume, the prior business day's reported closing price, NAV and mid-
point of the bid/ask spread at the time of calculation of such NAV (the 
``Bid/Ask Price''),\14\ 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 on 
the Exchange, the Fund will disclose on its Web site the Disclosed 
Portfolio as defined in NYSE Arca Equities Rule 8.600(c)(2) that will 
form the basis for the Fund's calculation of NAV at the end of the 
business day.\15\
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    \14\ The Bid/Ask Price of the Fund is determined using the 
highest bid and the lowest offer on the Exchange as of the time of 
calculation of the Fund's NAV. The records relating to Bid/Ask 
Prices will be retained by the Fund and its service providers.
    \15\ Under accounting procedures followed by the Fund, trades 
made on the prior business day (``T'') will be booked and reflected 
in NAV on the current business day (``T + 1''). Accordingly, the 
Fund will be able to disclose at the beginning of the business day 
the portfolio that will form the basis for the NAV calculation at 
the end of the business day.
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    On a daily basis, for each portfolio security of the Fund, the Fund 
will disclose on its Web site the following information: Ticker symbol, 
name of security, number of shares held in the portfolio, and 
percentage weighting of the security in the portfolio. On 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 Web site information will be publicly 
available at no charge.
    In addition, 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

[[Page 11219]]

components, will be publicly disseminated daily prior to the opening of 
the New York Stock Exchange (``NYSE'') via the National Securities 
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.
    Investors can also obtain the Trust's Statement of Additional 
Information (``SAI''), the Fund'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. Quotation and last sale information for the Shares will be 
available via the Consolidated Tape Association (``CTA'') high-speed 
line. In addition, the Portfolio Indicative Value, as defined in NYSE 
Arca Equities Rule 8.600 (c)(3), will be disseminated by one or more 
major market data vendors at least every 15 seconds during the Core 
Trading Session. The dissemination of the Portfolio Indicative Value, 
together with the Disclosed Portfolio, will allow investors to 
determine the value of the underlying portfolio of the Fund on a daily 
basis and to provide a close estimate of that value throughout the 
trading day.
    Additional information regarding the Trust and the Shares, 
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 Fund that are referred to, but not defined in, this proposed 
rule change are defined in the Registration Statement.
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 Fund.\16\ Trading in Shares of the Fund 
will be halted if the circuit breaker parameters in NYSE Arca Equities 
Rule 7.12 have been reached. Trading also may be halted because of 
market conditions or for reasons that, in the view of the Exchange, 
make trading in the Shares inadvisable. 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. 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 Fund may be 
halted.
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    \16\ See NYSE Arca Equities Rule 7.12, Commentary .04.
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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. The minimum 
trading increment for Shares on the Exchange will be $0.01.

Surveillance

    The Exchange intends to utilize its existing surveillance 
procedures applicable to derivative products (which include 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 that are members of 
ISG.\17\
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    \17\ For a list of the current members of ISG, see http://www.isgportal.org. The Exchange may obtain information from futures 
exchanges with which the Exchange has entered into a surveillance 
sharing agreement or that are ISG members. The Exchange notes that 
not all components of the Disclosed Portfolio for the Fund may trade 
on markets that are members of ISG or with which the Exchange has in 
place a comprehensive surveillance sharing agreement.
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    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 
Equity Trading Permit (``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 Fund 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) \18\ 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 actively-managed exchange-
traded products that will enhance competition among market

[[Page 11220]]

participants, to the benefit of investors and the marketplace.
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    \18\ 15 U.S.C. 78f(b)(5).
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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 35 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date 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 the proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.
    The Exchange has requested accelerated approval of this proposed 
rule change prior to the 30th day after the date of publication of 
notice in the Federal Register. The Commission is considering granting 
accelerated approval of the proposed rule change at the end of a 15-day 
comment period.

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

    <bullet> Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an e-mail to <a href="/cdn-cgi/l/email-protection#becccbd2db93ddd1d3d3dbd0cacdfecddbdd90d9d1c8"><span class="__cf_email__" data-cfemail="88fafde4eda5ebe7e5e5ede6fcfbc8fbedeba6efe7fe">[email protected]</span></a>. Please include 
File Number SR-NYSEArca-2010-07 on the subject line.

Paper Comments

    <bullet> 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-2010-07. 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 those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for Web site 
viewing and printing in the Commission's Public Reference Room, 100 F 
Street, NE., Washington, DC 20549, on official business days between 
the hours of 10 a.m. and 3 p.m. Copies of the filing also will be 
available for inspection and copying at the principal office of the 
Exchange. All comments received will be posted without change; the 
Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
NYSEArca-2010-07 and should be submitted on or before March 25, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-5068 Filed 3-9-10; 8:45 am]
BILLING CODE 8011-01-P


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