[Federal Register Volume 74, Number 166 (Friday, August 28, 2009)]
[Notices]
[Pages 44417-44421]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-20787]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60552; File No. SR-NYSEArca-2009-74]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Relating to Listing Four Grail Advisors RP 
Exchange-Traded Funds

August 20, 2009.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'' or ``Exchange Act'') \2\ and Rule 19b-4 thereunder,\3\ 
notice is hereby given that, on August 12, 2009, NYSE Arca, Inc. 
(``NYSE Arca'' or the ``Exchange'') filed with the Securities and 
Exchange Commission (the ``Commission'') the proposed rule change as 
described in Items I and II below, which Items have been prepared by 
the self-regulatory organization. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Pursuant to the provisions of Section 19(b)(1) of the Act, NYSE 
Arca, through its wholly-owned subsidiary NYSE Arca Equities, Inc. 
(``NYSE Arca Equities'' or the ``Corporation''), proposes to list and 
trade the following Grail Advisors actively managed exchange-traded 
funds, or ``ETFs'', under NYSE Arca Equities Rule 8.600 (``Managed Fund 
Shares''): RP Growth ETF, RP Focused Large Cap Growth ETF, RP 
Technology ETF and the RP Financials ETF (each an ``ETF'' or ``Fund'' 
and collectively the ``ETFs or ``Funds''), each of which is a series of 
Grail Advisors ETF Trust (``Trust'').
    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 the 
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: RP Growth 
ETF, RP Focused Large Cap Growth ETF, RP Technology ETF and the RP 
Financials ETF.\5\ The Shares will be offered by Grail Advisors ETF 
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\ Grail Advisors, LLC (the

[[Page 44418]]

``Manager''), a majority owned subsidiary of Grail Partners, LLC, acts 
as the Fund's investment manager. RiverPark Advisors, LLC (``RP'') 
serves as the primary sub-adviser and Wedgewood Partners, Inc. 
(``Wedgewood'') serves as sub-adviser to RP Focused Large Cap Growth 
ETF. RP serves as the exclusive sub-adviser of the RP Growth, RP 
Technology and RP Financials ETFs.
---------------------------------------------------------------------------

    \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 adviser 
consistent with its investment objectives and policies. In contrast, 
an open-end investment company that issues Investment Company Units, 
listed and traded on the Exchange under NYSE Arca Equities Rule 
5.2(j)(3), seeks to provide investment results that correspond 
generally to the price and yield performance of a specific foreign 
or domestic stock index, fixed income securities index or 
combination thereof.
    \5\ The Commission previously approved listing and trading on 
the Exchange of the following actively managed funds under NYSE Arca 
Equities Rule 8.600. See Securities Exchange Act Release No. 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); Securities Exchange Act Release No. 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); Securities Exchange Act 
Release No. 59826 (April 28, 2009), 74 FR 20512 (May 4, 2009) (SR-
NYSEArca-2009-22) (order approving listing and trading of Grail 
American Beacon Large Cap Value ETF).
    \6\ The Trust is registered under the 1940 Act. On June 8, 2009, 
the Trust filed with the Commission post-effective Amendment No. 1 
to its registration statement on Form N-1A under the Securities Act 
of 1933 (15 U.S.C. 77a), and under the 1940 Act relating to the 
Funds (File Nos. 333-148082 and 811-22154) (``Registration 
Statement''). The description of the operation of the Trust and the 
Funds herein is based on the Registration Statement.
---------------------------------------------------------------------------

    The Bank of New York Mellon Corporation is the administrator, Fund 
accountant, transfer agent and custodian for the Funds. ALPS 
Distributors, Inc. (``Distributor''), serves as the distributor of 
Creation Units for each ETF on an agency basis. The investment 
objective of each of the Funds is long-term capital appreciation. The 
ETFs expect to invest primarily in the securities of US companies, and 
may also invest in US securities tied economically to foreign 
investments, such as American Depositary Receipts.
RP Growth ETF
    According to the Registration Statement, the RP Growth ETF seeks 
long-term capital appreciation by investing at least 80% of its net 
assets (plus the amount of any borrowings for investment purposes) in 
equity securities of companies that RP, the ETF's sub-adviser, believes 
have above-average growth prospects. RP uses a fundamental research 
driven approach to identifying those industries and companies with the 
strongest growth prospects for revenue, earnings and/or cash flow over 
the medium and long term and seeks to buy stock in those companies at 
attractive valuations. The ETF may invest in companies of any market 
capitalization and in any industry.
    The ETF invests in industries that RP believes are the 
beneficiaries of long-term secular changes in the global economy and 
companies within those industries that are gaining market share and 
have, what RP believes to be, long-term sustainable competitive 
advantages and positions protected by strong barriers to entry. RP 
seeks companies with latent pricing power, expanding free cash flow and 
a high return on invested capital. RP also looks for companies with 
strong and experienced management teams with clear business objectives. 
RP believes it can gain an investment advantage not only through its 
primary research and by developing conviction in business models, but 
also because it invests with a long-term time horizon.
RP Focused Large Cap Growth ETF
    According to the Registration Statement, the RP Focused Large Cap 
Growth ETF seeks long-term capital appreciation by investing at least 
80% of its net assets (plus the amount of any borrowings for investment 
purposes) in equity securities of large capitalization companies that 
Wedgewood, the ETF's sub-adviser, believes have above-average growth 
prospects. The ETF considers companies with market capitalizations in 
excess of $5 billion to be large capitalization companies. The ETF is 
non-diversified and expects to invest in a limited number of companies, 
generally holding securities of between 20 and 30 companies.
RP Technology ETF
    According to the Registration Statement, the RP Technology ETF 
seeks long-term capital appreciation by investing at least 80% of its 
net assets (plus the amount of any borrowings for investment purposes) 
in equity securities of companies that develop, produce or distribute 
technology-related products and services. These companies participate 
in many industries within the economy including industrial and business 
machines; communications; computer hardware and software; computer 
services and peripheral products; electronics; electronic media; 
internet; television and video equipment and services; satellite 
technology and equipment; and semiconductors.
    RP, the ETF's sub-adviser, uses a fundamental research driven 
approach to identify technology-oriented companies that are suitable 
for the portfolio, and seeks to buy stock in those companies at 
attractive valuations. The ETF will primarily invest in companies with 
mid- to large- market capitalizations, but may invest in companies of 
any market capitalization. The ETF considers companies with market 
capitalizations of between $2 billion and $150 billion to be mid- to 
large-capitalization companies.

RP Financials ETF

    According to the Registration Statement, the RP Financials ETF 
seeks long-term capital appreciation by investing at least 80% of its 
net assets (plus the amount of any borrowings for investment purposes) 
in equity securities of financial services companies. The ETF considers 
financial services companies to be those companies that participate in 
any aspect of the financial services industry, including, but not 
limited to, banking, lending, brokerage, exchanges, insurance, and 
money management, as well as real estate investment trusts (``REITs'').
    RP, the ETF's sub-adviser, uses a fundamental research driven 
approach to identify financial services companies that are suitable for 
the portfolio, and seeks to buy stock in those companies at attractive 
valuations. The ETF will primarily invest in companies with mid- to 
large- market capitalizations. The ETF considers companies with market 
capitalizations of between $2 billion and $150 billion to be mid- to 
large-capitalization companies.
    With respect to each of the Funds, under adverse market conditions, 
the ETF may, for temporary defensive purposes, invest up to 100% of its 
assets in cash or cash equivalents, including investment grade short-
term obligations. Investment grade obligations include securities 
issued or guaranteed by the U.S. Government, its agencies and 
instrumentalities, as well as securities rated in one of the four 
highest rating categories by at least two nationally recognized 
statistical rating organizations rating that security. To the extent 
the ETF invokes this strategy, its ability to achieve its investment 
objective may be affected adversely.
    None of the Funds will invest in non-U.S. equity securities.
    In addition to the investment strategies described in the 
prospectus for the Funds, each ETF may invest up to 20% of its total 
assets in debt securities that are investment grade at the time of 
purchase (as described in the Registration Statement), including 
obligations of the U.S. Government, its agencies and instrumentalities, 
corporate debt securities, mortgage-backed securities, asset-backed 
securities, master-demand notes, Yankee dollar and Eurodollar bank 
certificates of deposit, time deposits, bankers' acceptances, 
commercial paper and other notes, inflation-indexed securities, and 
other debt securities. Investment grade securities include securities 
issued or guaranteed by the U.S. Government, its agencies and 
instrumentalities, as well as securities rated in one of the four 
highest rating categories by at least two nationally recognized 
statistical rating organizations (``Rating Organizations'') rating that 
security, such as Standard & Poor's Ratings Services or Moody's 
Investors Service, Inc., or rated in one of the four highest rating 
categories by one Rating Organization if it is the only Rating 
Organization rating that security

[[Page 44419]]

or unrated, if deemed to be of comparable quality by an ETF's sub-
adviser and traded publicly on the world market. Obligations rated in 
the fourth highest rating category are limited to 25% of each ETF's 
debt allocations. An ETF, at the discretion of its sub-adviser, may 
retain a debt security that has been downgraded below the initial 
investment criteria.
    The Registration Statement enumerates investment policies which may 
be changed with respect to an ETF only by a vote of the holders of a 
majority of the ETF's outstanding voting securities. Among these 
policies are the following: (1) Regarding diversification, an ETF, with 
the exception of the RP Focused Large Cap Growth ETF, may not invest 
more than 5% of its total assets (taken at market value) in securities 
of any one issuer, other than obligations issued 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 
an ETF's total assets; and (2) regarding concentration, an ETF, with 
the exception of the RP Technology ETF or RP Financials ETF, may not 
invest 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.
    According to the Registration Statement, the ETFs may invest in US 
securities tied economically to foreign investments, such as American 
Depositary Receipts. Although not currently anticipated, the ETFs may 
use options and futures for various purposes, including for hedging and 
investment purposes. The ETFs' ability to write and purchase call and 
put options is limited by the requirements for qualifying as a 
regulated investment company under the Internal Revenue Code. An ETF 
may also invest in over-the-counter (``OTC'') options. To the extent 
consistent with applicable law, the ETFs may invest in futures 
contracts on, among other things, financial instruments (such as a U.S. 
government security or other fixed income security), individual equity 
securities (``single stock futures''), securities indices, interest 
rates, currencies, inflation indices, and commodities or commodities 
indices. An ETF's purchase and sale of index futures is limited to 
contracts and exchanges approved by the Commodity Futures Trading 
Commission.
    An ETF may engage in transactions involving the use of futures on 
interest rates. These transactions may be in connection with 
investments in U.S. government securities and other fixed income 
securities. An ETF may use options on futures contracts in lieu of 
writing or buying options directly on the underlying securities or 
purchasing and selling the underlying futures contracts. An ETF may 
directly or indirectly use various different types of swaps, such as 
swaps on securities and securities indices, interest rate swaps, 
currency swaps, credit default swaps, commodity swaps, inflation swaps, 
and other types of available swap agreements, depending on the ETF's 
investment objective and policies. An ETF may use interest rate caps, 
floors, and collars for the same or similar purposes as they use 
interest rate futures contracts and related options and, as a result, 
will be subject to similar risks.
    The ETFs may invest in convertible securities, equity-linked 
securities, preferred stocks, mortgage-related and other asset-backed 
securities, warrants, rights, repurchase agreements, debt and other 
fixed income securities, zero coupon securities, high yield securities, 
municipal securities, real estate investment trusts and other real 
estate-related investments. An ETF may invest up to 15% of its net 
assets in illiquid securities. For this purpose, ``illiquid 
securities'' are securities that an 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. Each ETF may 
invest in the securities of other investment companies to the extent 
permitted by law. Subject to applicable regulatory requirements, an ETF 
may invest in shares of both open- and closed-end investment companies 
(including money market funds and ETFs). According to the Registration 
Statement, the ETFs have claimed an exclusion from the definition of 
``commodity pool operator'' under the Commodity Exchange Act and, 
therefore, are not subject to registration or regulation as a pool 
operator under that Act.
    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 \7\ 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.
---------------------------------------------------------------------------

    \7\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------

    Commentary .07 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 broker-dealer with 
respect to access to information concerning the composition and/or 
changes to such Investment Company portfolio.\8\ In addition, 
Commentary .07 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 .07 to 
Rule 8.600 is similar to Commentary .03(a)(i) and (iii) to NYSE Arca 
Equities Rule 5.2(j)(3); however, Commentary .07 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. 
Grail Advisors, LLC is affiliated with a broker-dealer, Grail 
Securities, LLC, and has implemented a fire wall with respect to such 
broker-dealer regarding access to information concerning the 
composition and/or changes to a portfolio. RP, the Fund's primary sub-
adviser, is not affiliated with a broker-dealer. Wedgewood Partners, 
Inc. is registered as an investment adviser and as a broker-dealer, and 
has implemented a fire wall with respect to such broker-dealer 
regarding access to information concerning the composition and/or 
changes to a portfolio.\9\ Any additional

[[Page 44420]]

Fund sub-advisers that are affiliated with a broker-dealer will be 
required to implement a fire wall with respect to such broker-dealer 
regarding access to information concerning the composition and/or 
changes to a portfolio.
---------------------------------------------------------------------------

    \8\ An 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 investment adviser is 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, ``firewall'' procedures as well as procedures designed 
to prevent the misuse of non-public information by an investment 
adviser must be consistent with Rule 204A-1 under the Advisers Act.
    \9\ The Exchange represents that Grail Advisors, LLC, as the 
investment adviser of the Funds, and its related personnel, and 
Wedgewood Partners, Inc., the sub-adviser to RP Focused Large Cap 
Growth ETF, 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.
---------------------------------------------------------------------------

Description of the Funds
    Creations and redemptions of Shares occur in large specified blocks 
of Shares, referred to as ``Creation Units''. The Creation Unit size 
for the Fund is 25,000 Shares.
Availability of Information
    The Funds' 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 Fund that may be downloaded. The 
Funds' Web site will include additional quantitative information 
updated on a daily basis, including, for each 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''),\10\ 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 Funds will disclose on its Web site the Disclosed 
Portfolio as defined in proposed Rule 8.600(c)(2) that will form the 
basis for the Fund's calculation of NAV at the end of the business 
day.\11\ 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 
components, is publicly disseminated daily prior to the opening of the 
NYSE via the National Securities Clearing Corporation (``NSCC''). The 
basket represents one ``Creation Unit of the Fund.'' The Web site 
information will be publicly available at no charge.
---------------------------------------------------------------------------

    \10\ The Bid/Ask Price of each 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 Funds and its service providers.
    \11\ Under accounting procedures followed by the Funds, trades 
made on the prior business day (``T'') will be booked and reflected 
in NAV on the current business day (``T+1''). Accordingly, the Funds 
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.
---------------------------------------------------------------------------

    The NAV of the Fund will normally be determined as of the close of 
the regular trading session on the New York Stock Exchange (ordinarily 
4 p.m. Eastern time) on each business day.
    Investors can also obtain the Trust's Statement of Additional 
Information (``SAI''), the Funds' 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 the Exchange at 
least every 15 seconds during the Core Trading Session through the 
facilities of CTA. The dissemination of the Portfolio Indicative Value, 
together with the Disclosed Portfolio, will allow investors to 
determine the value of the underlying portfolio of a Fund on a daily 
basis and to provide a close estimate of that value throughout the 
trading day.
    Additional information regarding the Shares and the Funds, 
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 Funds 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 Funds. 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 Funds; 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 Rule 8.600(d)(2)(D), which sets forth 
circumstances under which Shares of the Funds may be halted.
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.\12\ 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.
---------------------------------------------------------------------------

    \12\ See NYSE Arca Equities Rule 7.12, Commentary .04.
---------------------------------------------------------------------------

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

[[Page 44421]]

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.\13\
---------------------------------------------------------------------------

    \13\ For a list of the current members of ISG, see http://www.isgportal.org.
---------------------------------------------------------------------------

    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 Funds are 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) \14\ 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 an additional type of actively-managed exchange-
traded product that will enhance competition among market participants, 
to the benefit of investors and the marketplace.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

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 the 
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#a4d6d1c8c189c7cbc9c9c1cad0d7e4d7c1c78ac3cbd2"><span class="__cf_email__" data-cfemail="057770696028666a6868606b7176457660662b626a73">[email protected]</span></a>. Please include 
File Number SR-NYSEArca-2009-74 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-2009-74. 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 inspection 
and copying 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-2009-74 and should 
be submitted on or before September 14, 2009.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
---------------------------------------------------------------------------

    \15\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-20787 Filed 8-27-09; 8:45 am]
BILLING CODE 8010-01-P


</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>