Federal Register / Vol. 80, No. 16 / Monday, January 26, 2015 / Notices 4015 

20 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3Amendment No. 1 amended the proposed rule 

change in the following ways: (1) Specified that the 

floating rate high yield corporate bonds in which 

the Fund invests generally must have a $100 

million par amount outstanding at the time of 

investment; (2) clarified that senior loans in which 

the Fund may invest includes leveraged loans; and 

(3) specified that the U.S. exchange-traded futures 

contracts, U.S. exchange-traded options on futures 

contracts, and U.S. exchange-traded put and call 

options in which the Fund invests will trade on 

exchanges that are members of the Intermarket 

Surveillance Group (‘‘ISG’’). 

4See Securities Exchange Act Release No. 73717 

(December 2, 2014), 79 FR 72730 (‘‘Notice’’). 

5The Trust is registered under the Investment 

Company Act of 1940 (‘‘1940 Act’’). The Exchange 

states that on June 25, 2014, the Trust filed with the 

Commission an amendment 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 Fund (File Nos. 333–157876 and 

811–22110) (‘‘Registration Statement’’). In addition, 

according to the Exchange, the Commission has 

issued an order granting certain exemptive relief to 

the Trust under the 1940 Act. See Investment 

Company Act Release No. 29291 (May 28, 2010) 

(File No. 812–13677). 

6The Exchange represents that the Adviser is not 

registered as a broker-dealer or affiliated with a 

broker-dealer. The Sub-Adviser is not registered as 

a broker-dealer but is affiliated with Pacific Select 

Disteributors, Inc., a registered broker-dealer. The 

Exchange states that the Sub-Adviser represetnts 

that Pacific Select Distributors, Inc. is a limited 

purpose broker-dealer with a primary business 

purpose of serving as distributor for mutual funds 

and variable annuity products, and that Pacific 

Select Distributors, Inc. does not engage in any 

borkerage or trading activity. The Exchange states 

that in the event (a) the Adviser or the Sub-Adviser 

becomes a registered broker-dealer or becomes 

newly affilitated with a broker-dealer, or (b) any 

new adviser or sub-adviser is a registered brokerdealer or becomes affiliated with a broker-dealer, 

such adviser or sub-adviser will implement a fire 

wall with respect to its relevant personnel or its 

broker-dealer affiliate regarding access to 

information concerning the composition of or 

changes to the portfolio, and the adviser or subadviser will be subject to procedures designed to 

prevent the use and dissemination of material nonpublic information regarding the portfolio. 

7The Commission notes that additional 

information regarding the Fund, the Trust, and the 

Shares, including investment strategies, risks, 

creation and redemption procedures, fees, portfolio 

holdings disclosure policies, distributions, and 

taxes, among other things, can be found in the 

Notice and the Registration Statement, as 

applicable. See Notice, supra note 4, and 

Registration Statement, supra note 5, respectively. 

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 email to rule-comments@

sec.gov. Please include File Number SR– 

MIAX–2015–02 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Brent J. Fields, Secretary, Securities 

and Exchange Commission, 100 F Street 

NE., Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–MIAX–2015–02. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet 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 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change; 

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–MIAX–2015–02 and should 

be submitted on or before February 17, 

2015. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.20

Brent J. Fields, 

Secretary. 

[FR Doc. 2015–01248 Filed 1–23–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74093: File No. SR– 

NYSEArca-2014–126] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Order Approving a 

Proposed Rule Change, as Modified by 

Amendment No. 1, Relating to the 

Listing and Trading of Shares of the 

AdvisorShares Pacific Asset Enhanced 

Floating Rate ETF Under NYSE Arca 

Equities Rule 8.600 

January 20, 2015. 

I. Introduction 

On November 19, 2014, NYSE Arca, 

Inc. (‘‘Exchange’’ or ‘‘NYSE Arca’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

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

Exchange Act of 1934 (‘‘Act’’) 1 and Rule 

19b-4 thereunder,2 a proposed rule 

change to list and trade shares 

(‘‘Shares’’) of the AdvisorShares Pacific 

Asset Enhanced Floating Rate ETF 

(‘‘Fund’’) under NYSE Arca Equities 

Rule 8.600. On November 26, 2014, the 

Exchange filed Amendment No. 1 to the 

proposal.3 The proposed rule change, as 

modified by Amendment No. 1 thereto, 

was published for comment in the 

Federal Register on December 8, 2014.4

The Commission received no comments 

on the proposal. This order approves the 

proposed rule change, as modified by 

Amendment No. 1. 

II. Description of the Proposal 

The Exchange proposes to list and 

trade Shares of the Fund under NYSE 

Arca Equities Rule 8.600 (‘‘Managed 

Fund Shares’’), which governs the 

listing and trading of Managed Fund 

Shares on the Exchange. The Shares will 

be offered by AdvisorShares Trust 

(‘‘Trust’’), a statutory trust organized 

under the laws of the State of Delaware 

and registered with the Commission as 

an open-end management investment 

company.5 AdvisorShares Investments, 

LLC (‘‘Adviser’’) will be the investment 

adviser to the Fund, and Pacific Asset 

Management (‘‘Sub-Adviser’’), will be 

the sub-adviser to the Fund.6 The Bank 

of New York Mellon (‘‘Administrator’’) 

will serve as the administrator, 

custodian, transfer agent and fund 

accounting agent for the Fund. Foreside 

Fund Services, LLC will be the principal 

underwriter and distributor of the 

Fund’s Shares. 

The Exchange has made the following 

representations and statements in 

describing the Fund and its investment 

strategy, including other portfolio 

holdings and investment restrictions.7


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4016 Federal Register / Vol. 80, No. 16 / Monday, January 26, 2015 / Notices 

8The Exchange states that the term ‘‘under 

normal circumstances’’ means, without limitation, 

the absence of adverse market, economic, political 

or other conditions, including extreme volatility or 

trading halts in the fixed income markets or the 

financial markets generally; operational issues 

causing dissemination of inaccurate market 

information; or force majeure type events such as 

systems failure, natural or man-made disaster, act 

of God, armed conflict, act of terrorism, riot or labor 

disruption or any similar intervening circumstance. 

9 Duration is a measure used to determine the 

sensitivity of a security’s price to changes in 

interest rates. The longer a security’s duration, the 

more sensitive it will be to changes in interest rates. 

10According to the Exchange, Senior Loans and 

floating rate high yield corporate bonds are 

instruments with interest rates which float, adjust, 

or vary periodically based upon a benchmark 

indicator, a specified adjustment schedule, or 

prevailing interest rates. Senior Loans, and some 

floating rate high yield corporate bonds, are debt 

instruments that may have a right to payment that 

is senior to most other debts of the borrowers. 

Borrowers may include corporations, partnerships 

and other entities that operate in a variety of 

industries and geographic regions. 

11According to the Exchange, index credit default 

swaps (CDX) can be used to gain exposure to a 

basket of credit risk by selling protection against 

default or other credit events or by buying 

protection in order to hedge broad market credit 

risk. Single name credit default swaps (CDS) can be 

used to allow the Fund to increase or decrease 

exposure to specific issuers through lower trading 

costs. Total return swaps (TRS) are contracts to 

obtain the total return of a reference asset or index 

in exchange for paying a financing cost. Interest rate 

swaps (IRS) are agreements between two parties to 

exchange one stream of interest payments for 

another. Each of these swaps is a type of derivative 

instrument, a financial contract whose value 

depends upon, or is derived from, the value of an 

underlying asset, reference rate or index, and may 

relate to bonds, loans, interest rates and related 

indexes. CDX, CDS, TRS and IRS are collectively 

referred to as ‘‘swaps.’’ The Exchange states that the 

Fund will typically use exchange-traded and overthe-counter (‘‘OTC’’) swaps as (i) a method to 

enhance returns; (ii) a substitute for taking a 

position in the underlying asset; and, (iii) as a part 

of a strategy designed to reduce exposure to other 

risks. To limit potential risks associated with such 

transactions, the Fund will segregate assets 

determined to be liquid by the Sub-Adviser in 

accordance with the 1940 Act to cover its 

obligations under derivative instruments. The Fund 

will include appropriate risk disclosure in its 

offering documents, including leveraging risk. The 

use of swaps will increase the Fund’s net exposure 

to a particular issue, fixed income markets, or the 

financial markets generally. 

12According to the Exchange, non-investmentgrade securities, also referred to as ‘‘high yield 

securities’’ or ‘‘junk bonds,’’ are debt securities that 

are rated lower than the four highest rating 

categories by a nationally recognized statistical 

rating organization (for example, lower than Baa3 

by Moody’s Investors Service, Inc. (‘‘Moody’s’’) or 

lower than BBB- by Standard & Poor’s (‘‘S&P’’)) or 

are determined to be of comparable quality by the 

Fund’s Sub-Adviser. 

13According to the Exchange, a direct interest in 

a Senior Loan may be acquired directly from the 

agent of the lender or another lender by assignment 

or an indirect interest may be acquired as a 

participation in another lender’s portion of a Senior 

Loan. Generally, secured Senior Loans are secured 

by specific assets of the borrower. 

14The Fund will seek, where possible, to use 

counterparties whose financial status is such that 

the risk of default is reduced; however, the risk of 

losses resulting from default is still possible. The 

Sub-Adviser will evaluate the creditworthiness of 

counterparties on an ongoing basis. In addition to 

information provided by credit agencies, the SubAdviser evaluates each approved counterparty 

using various methods of analysis, including 

earning updates, a broker-dealer’s reputation, the 

Sub-Adviser’s past experience with the brokerdealer, a counterparty’s liquidity and its share of 

market participation. 

15According to the Exchange, ETPs include 

Investment Company Units (as described in NYSE 

Arca Equities Rule 5.2(j)(3)); Index-Linked 

Securities (as described in NYSE Arca Equities Rule 

5.2(j)(6)); Portfolio Depositary Receipts (as 

described in NYSE Arca Equities Rule 8.100); Trust 

Issued Receipts (as described in NYSE Arca 

Equities Rule 8.200); Commodity-Based Trust 

Shares (as described in NYSE Arca Equities Rule 

8.201); Currency Trust Shares (as described in 

NYSE Arca Equities Rule 8.202); Commodity Index 

Trust Shares (as described in NYSE Arca Equities 

Rule 8.203); Trust Units (as described in NYSE Arca 

Equities Rule 8.500); and Managed Fund Shares (as 

described in NYSE Arca Equities Rule 8.600). The 

Exchange states that the ETPs all will be listed and 

traded in the U.S. on registered exchanges and that 

the Fund will invest in the securities of ETFs 

registered under the 1940 Act consistent with the 

requirements of Section 12(d)(1) of the 1940 Act, or 

any rule, regulation or order of the Commission or 

interpretation thereof and the Fund will only make 

such ETF investments in conformity with the 

requirements of Regulation M of the Internal 

Revenue Code of 1986, as amended. While the Fund 

may invest in inverse ETPs, the Fund will not 

invest in leveraged or inverse leveraged ETPs (e.g., 

2X or 3X). 

A. Principal Investments (under normal 

circumstances) 8

According to the Exchange, the 

Fund’s investment objective will seek to 

provide a high level of current income. 

The Fund will invest at least 80% of its 

net assets (plus any borrowings for 

investment purposes) in floating rate 

loans and other floating rate debt 

securities, derivatives or other 

instruments that have economic 

interests similar to such securities (each 

as described further below). The 

Exchange states that the Fund will seek 

to outperform the Credit Suisse 

Institutional Leveraged Loan Index. The 

portfolio will be diversified by industry 

and issuer, with no individual issuer 

representing more than 5% of the 

portfolio. The typical duration 

positioning will be between 0.25 years 

to 0.75 years as determined by the SubAdviser.9

The Fund will attempt to achieve its 

investment objective through 

investments in a focused portfolio 

comprised primarily of senior secured 

floating rate loans (‘‘Senior Loans’’), 

floating rate high yield corporate 

bonds,10 index credit default swaps, 

single name credit default swaps, total 

return swaps,11 interest rate swaps and 

cash. 

According to the Exchange, Senior 

Loans and floating rate high yield 

corporate bonds in which the Fund 

intends to invest are expected to be 

rated below investment grade (i.e., high 

yield/high risk securities, sometimes 

called non-investment grade 

securities)12 or, may not be rated by any 

nationally recognized rating service, and 

if unrated, of comparable quality as 

determined by the Sub-Adviser. 

According to the Exchange, the Fund 

generally will invest in Senior Loans 

(including leveraged loans) that may be 

in the form of participations and 

assignments.13 Senior Loans in which 

the Fund will invest consist of domestic 

issuers and U.S. dollar denominated 

foreign issuers. The Fund will invest in 

Senior Loans that the Adviser or the 

Sub-Adviser deems to be highly liquid 

with readily available prices. The Fund 

will invest in Senior Loans rated C or 

higher by a credit rating agency 

registered as a nationally recognized 

statistical rating organization 

(‘‘NRSRO’’) with the Commission, or is 

unrated but considered to be of 

comparable quality by the Adviser or 

Sub-Adviser. The Fund will not invest 

in Senior Loans that are in default at the 

time of purchase. In addition, for 

investment purposes, the Senior Loan 

must have a par amount outstanding of 

$150 million or greater at the time the 

loan is originally issued. 

According to the Exchange, floating 

rate high yield corporate bonds in 

which the Fund invests generally must 

have $100 million or more par amount 

outstanding at the time of investment. 

To seek an increase in yield, the Fund 

expects to employ leverage to enhance 

potential return. The Fund may use 

leverage by (i) borrowing money, up to 

the maximum amount permitted under 

the 1940 Act, for investment purposes 

normally on a floating rate basis or (ii) 

through swaps. The Fund’s investments 

in swaps will be made in accordance 

with the 1940 Act and consistent with 

the Fund’s investment objective and 

policies.14

The Fund’s assets that are not 

invested directly in Senior Loans, 

floating rate high yield corporate bonds, 

or swaps will be held in cash or cash 

equivalents, including money market 

instruments and exchange traded 

products (‘‘ETPs’’) 15 that invest in these 

and other highly liquid instruments, in 

order to cover its obligations under 

certain swaps. The larger the value of 

the Fund’s derivative positions, the 

more the Fund will be required to 

maintain cash or cash equivalents as 

collateral for such derivatives. 

B. Other (Non-Principal) Investments 

The Exchange states that the Fund 

may invest up to 20% of its net assets 


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16Unless otherwise indicated, the Fund may 

invest up to 20% of its net assets in the types of 

investments referenced below in this section, 

subject to the limitations imposed by the Fund’s 

investment objective, policies, and restrictions 

described in the Fund’s Registration Statement, as 

well as the federal securities laws. 

17According to the Exchange, commercial paper 

is a short-term obligation with a maturity ranging 

from one to 270 days issued by banks, corporations 

and other borrowers. The Fund may invest in 

commercial paper rated A–1 or A–2 by S&P or 

Prime-1 or Prime-2 by Moody’s. 

18According to the Exchange, the Fund will not 

invest in fixed time deposits which (i) are not 

subject to prepayment; or (ii) provide for 

withdrawal penalties upon prepayment, if in the 

aggregate, more than 15% of its net assets would be 

invested in such deposits, repurchase agreements 

with remaining maturities of more than seven days, 

or other illiquid assets. 

19According to the Exchange, corporate debt are 

debt securities issued by businesses to finance their 

operations and consist of notes, corporate bonds, 

high yield bonds, debentures and commercial 

paper. The Fund may invest in corporate debt 

issued by domestic or foreign companies of all 

kinds, including those with small-, mid-, and largecapitalizations. The Fund may also invest in 

corporate debt securities which are representative 

of one or more high-yield bond or credit derivative 

indices, which may change from time to time. 

20According to the Exchange, ABS are 

instruments created from many types of assets, 

including auto loans, credit card receivables, home 

equity loans, and student loans. ABS are issued 

through special purpose vehicles that are 

bankruptcy remote from the issuer of the collateral. 

The Fund may invest in ABS provided such 

securities are consistent with the Fund’s investment 

objectives and policies. The Fund will not invest 

more than 5% of its net assets in non-agency ABS. 

21According to the Exchange, MBS and mortgagerelated securities are interests in pools of residential 

or commercial mortgage loans, including mortgage 

loans made by savings and loan institutions, 

mortgage bankers, commercial banks, and others. 

Pools of mortgage loans are assembled as securities 

for sale to investors by various governmental, 

government-related and private organizations. The 

Fund also may invest in debt instruments which are 

secured with collateral consisting of mortgagerelated securities. The Fund will not invest, 

however, more than 5% of its net assets in MBS and 

mortgage-related securities. 

22According to the Exchange, inflation-indexed 

bonds are debt securities whose principal value is 

periodically adjusted according to the rate of 

inflation. 

23According to the Exchange, unsecured senior 

loans and Junior Loans are subject to the same 

general risks of Senior Loans; however, due to their 

lower place in the borrower’s capital structure and 

possible unsecured status, unsecured senior loans 

and Junior Loans involve a higher degree of overall 

risk than Senior Loans of the same borrower. The 

Fund will invest in Junior Loans the Adviser or 

Sub-Adviser deems to be highly liquid with readily 

available prices. The Fund will invest in Junior 

Loans rated C or higher by a NRSRO, or unrated but 

considered to be of comparable quality by the 

Adviser or Sub-Adviser. The Fund will not invest 

in Junior Loans that are in default at time of 

purchase. In addition, for investment purposes, 

each Junior Loan must have a par amount 

outstanding of $150 million or greater at the time 

the loan is originally issued. 

24According to the Exchange, U.S. government 

securities are securities issued or guaranteed by the 

U.S. government or its agencies or 

instrumentalities, and consist of U.S. Treasury bills; 

U.S. Treasury notes; U.S. Treasury bonds; 

obligations issued by U.S. government agencies and 

instrumentalities which are supported by (a) the 

full faith and credit of the U.S. Treasury, (b) the 

discretionary authority of the U.S. government, or 

(c) the right of the issuer to borrow from the U.S. 

Treasury; separately traded principal and interest 

components of securities guaranteed or issued by 

the U.S. government or its agencies, 

instrumentalities, or sponsored enterprises if such 

components trade independently under the 

Separate Trading of Registered Interest and 

Principal of Securities program (‘‘STRIPS’’) or any 

similar program sponsored by the U.S. government; 

or U.S. Treasury zero-coupon bonds (which include 

U.S. Treasury bonds which have been stripped of 

their unmatured interest coupons, the coupons 

themselves, and receipts or certificates representing 

interests in such stripped debt obligations and 

coupons). 

25See supra note 15. 

26According to the Exchange, ADRs are U.S. 

dollar denominated receipts typically issued by 

U.S. banks and trust companies that evidence 

ownership of underlying securities issued by a 

foreign issuer. The underlying securities may not 

necessarily be denominated in the same currency as 

the securities into which they may be converted. 

The underlying securities are held in trust by a 

custodian bank or similar financial institution in 

the issuer’s home country. The depositary bank may 

not have physical custody of the underlying 

securities at all times and may charge fees for 

various services, including forwarding dividends 

and interest and corporate actions. Generally, ADRs 

in registered form are designed for use in domestic 

securities markets and are traded on exchanges or 

OTC in the U.S. GDRs, EDRs, and IDRs are similar 

to ADRs in that they are certificates evidencing 

ownership of shares of a foreign issuer; however, 

GDRs, EDRs, and IDRs may be issued in bearer form 

and denominated in other currencies, and are 

generally designed for use in specific or multiple 

securities markets outside the U.S. EDRs, for 

example, are designed for use in European 

securities markets while GDRs are designed for use 

throughout the world. Ordinary shares are shares of 

foreign issuers that are traded abroad and on a U.S. 

exchange. New York shares are shares that a foreign 

issuer has allocated for trading in the U.S. ADRs, 

ordinary shares, and New York shares all may be 

purchased with and sold for U.S. dollars. ADRs may 

be sponsored or unsponsored, but the Exchange 

states that unsponsored ADRs will not exceed 10% 

of the Fund’s net assets. In addition, the Exchange 

states that not more than 10% of the net assets of 

the Fund in the aggregate invested in equity 

securities (other than non-exchange-traded 

investment company securities) shall consist of 

equity securities whose principal market is not a 

member of the ISG or is a market with which the 

Exchange does not have a comprehensive 

surveillance sharing agreement. 

27According to the Exchange, structured notes 

are debt obligations that also contain an embedded 

derivative component with characteristics that 

adjust the obligation’s risk/return profile. Generally, 

the performance of a structured note will track that 

of the underlying debt obligation and the derivative 

embedded within it. The Fund has the right to 

receive periodic interest payments from the issuer 

of the structured notes at an agreed-upon interest 

rate and a return of the principal at the maturity 

date. 

in the securities and financial 

instruments described below.16

The Fund may invest in debt 

securities (other than those described in 

the Principal Investments section), 

including investment-grade, noninvestment-grade, and unrated 

securities. Debt securities in which the 

Fund may invest consist of the 

following: (i) Bank obligations of 

domestic and foreign banks, which may 

include certificates of deposit, 

commercial paper,17 bankers’ 

acceptances, and fixed time deposits;18

(ii) corporate debt; 19 (ii) asset-backed 

securities (‘‘ABS’’); 20 mortgage-backed 

securities (‘‘MBS’’) and mortgage-related 

securities; 21 inflation-indexed bonds;22

floating rate loans (other than those 

described in the Principal Investments 

section) consisting of (a) unsecured 

senior loans and (b) secured and 

unsecured subordinated loans, second 

lien loans, and subordinated bridge 

loans (‘‘Junior Loans’’); 23 and U.S. 

government securities.24

The Fund may invest in issuers 

located outside the United States 

directly, or in financial instruments, 

ETFs, or other ETPs25 that are indirectly 

linked to the performance of foreign 

issuers. Such financial instruments 

consist of American Depositary Receipts 

(‘‘ADRs’’), Global Depositary Receipts 

(‘‘GDRs’’), European Depositary Receipts 

(‘‘EDRs’’), International Depository 

Receipts (‘‘IDRs’’), ‘‘ordinary shares,’’ 

and ‘‘New York shares’’ issued and 

traded in the U.S.26

The Fund may trade U.S. exchangetraded futures contracts, U.S. exchangetraded or OTC options on futures 

contracts, and U.S. exchange-traded or 

OTC put and call options on securities 

and securities indices, as the SubAdviser determines is appropriate in 

seeking the Fund’s investment objective, 

and except as restricted by the Fund’s 

investment limitations. U.S. exchangetraded futures contracts, U.S. exchangetraded options on futures contracts, and 

U.S. exchange-traded put and call 

options in which the Fund invests will 

trade on exchanges that are members of 

ISG. 

The Fund may invest in structured 

notes.27

The Fund may invest in exchangetraded equity securities that represent 

ownership interests in a company or 

partnership and that consist of common 

stocks, preferred stocks, warrants to 

acquire common stock, securities 

convertible into common stock, 

investments in master limited 

partnerships, and rights. 

The Fund may invest in the securities 

of other investment companies 

(including index-based and actively 

managed) to the extent that such an 

investment would be consistent with 

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

the 1940 Act, or any rule, regulation or 

order of the Commission or 

interpretation thereof. Consistent with 

the restrictions discussed above, the 

Fund may invest in several different 

types of investment companies from 


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28According to the Exchange, a BDC is a less 

common type of closed-end investment company 

that more closely resembles an operating company 

than a typical investment company. 29According to the Exchange, exchange-traded 

pooled investment vehicles include Trust Issued 

Receipts (as described in NYSE Arca Equities Rule 

8.200); Commodity-Based Trust Shares (as 

described in NYSE Arca Equities Rule 8.201); 

Currency Trust Shares (as described in NYSE Arca 

Equities Rule 8.202); Commodity Index Trust 

Shares (as described in NYSE Arca Equities Rule 

8.203); and Trust Units (as described in NYSE Arca 

Equities Rule 8.500). 

30According to the Exchange, it is the current 

policy of the Fund not to invest in repurchase 

agreements that do not mature within seven days 

if any such investment, together with any other 

illiquid assets held by the Fund, amounts to more 

than 15% of the Fund’s net assets. The investments 

of the Fund in repurchase agreements, at times, may 

be substantial when, in the view of the SubAdviser, liquidity or other considerations so 

warrant. 

31See supra note 15. 

32 In reaching liquidity decisions, the Adviser or 

Sub-Adviser may consider the following factors: the 

frequency of trades and quotes for the security; The 

number of dealers wishing to purchase or sell the 

security and the number of other potential 

purchasers; dealer undertakings to make a market 

in the security; and the nature of the security and 

the nature of the marketplace in which it trades 

(e.g., the time needed to dispose of the security, the 

method of soliciting offers and the mechanics of 

transfer). 

33The Exchange represents that the Fund’s broadbased securities benchmark index will be identified 

in a future amendment to the Registration 

Statement following the Fund’s first full calendar 

year of performance. 

34 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

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

35 15 U.S.C. 78f(b)(5). 

36 15 U.S.C. 78k–1(a)(1)(C)(iii). 

time to time, including mutual funds, 

ETFs, exchange- and OTC-traded 

closed-end funds, and exchange- and 

OTC-traded business development 

companies (‘‘BDCs’’).28

The Fund may invest in the securities 

of exchange and OTC-traded pooled 

investment vehicles that are not 

investment companies and, thus, not 

required to comply with the provisions 

of the 1940 Act. These pooled vehicles 

typically hold commodities, such as 

gold or oil, currency, or other property 

that is itself not a security.29

The Fund may enter into repurchase 

agreements with financial institutions, 

which may be deemed to be loans.30

The Fund may engage in short sales 

transactions in which the Fund sells a 

security it does not own. 

The Fund may utilize swaps (other 

than those referenced in the Principal 

Investments section) in an attempt to 

gain exposure to the securities in a 

market without actually purchasing 

those securities, or to hedge a position. 

Such swaps consist of interest rate caps 

(under which, in return for a premium, 

one party agrees to make payments to 

the other to the extent that interest rates 

exceed a specified rate or ‘‘cap’’), 

interest rate floors (under which, in 

return for a premium, one party agrees 

to make payments to the other to the 

extent that interest rates fall below a 

specified level or ‘‘floor’’), and interest 

rate collars (under which a party sells a 

cap and purchases a floor or vice versa 

in an attempt to protect itself against 

interest rate movements exceeding given 

minimum or maximum levels). 

To respond to adverse market, 

economic, political, or other conditions, 

the Fund may invest up to 100% of its 

total assets, without limitation, in debt 

securities and money market 

instruments, either directly or through 

ETPs.31 The Fund may be invested in 

this manner for extended periods, 

depending on the Sub-Adviser’s 

assessment of market conditions. For 

purposes of this paragraph, debt 

securities and money market 

instruments include shares of mutual 

funds, commercial paper, certificates of 

deposit, bankers’ acceptances, U.S. 

government securities, repurchase 

agreements, and bonds that are rated 

BBB or higher. 

C. Fund Investment Restrictions 

The Fund may hold up to an aggregate 

amount of 15% of its net assets in 

illiquid assets (calculated at the time of 

investment), including Rule 144A 

securities deemed illiquid by the 

Adviser or Sub-Adviser,32 in accordance 

with Commission guidance. The Fund 

will monitor its portfolio liquidity on an 

ongoing basis to determine whether, in 

light of current circumstances, an 

adequate level of liquidity is being 

maintained, and will consider taking 

appropriate steps in order to maintain 

adequate liquidity if, through a change 

in values, net assets, or other 

circumstances, more than 15% of the 

Fund’s net assets are held in illiquid 

assets. Illiquid assets include securities 

subject to contractual or other 

restrictions on resale and other 

instruments that lack readily available 

markets as determined in accordance 

with Commission staff guidance. 

The Fund may not, with respect to 

75% of its total assets, purchase 

securities of any issuer (except 

securities issued or guaranteed by the 

U.S. government, its agencies or 

instrumentalities or shares of 

investment companies) if, as a result, 

more than 5% of its total assets would 

be invested in the securities of such 

issuer; or acquire more than 10% of the 

outstanding voting securities of any one 

issuer. For purposes of this policy, the 

issuer of the underlying security will be 

deemed to be the issuer of any 

respective depositary receipt. 

The Fund may not invest 25% or 

more of its total assets in the securities 

of one or more issuers conducting their 

principal business activities in the same 

industry or group of industries. 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. The Fund will 

not invest 25% or more of its total assets 

in any investment company that so 

concentrates. 

The Fund’s investments will be 

consistent with its investment objective 

and will not be used to provide multiple 

returns of a benchmark or to produce 

leveraged returns. The Fund’s 

investments will not be used to seek 

performance that is the multiple or 

inverse multiple (i.e., 2Xs and 3Xs) of 

the Fund’s primary broad-based 

securities benchmark index (as defined 

in Form N–1A).33

III. Discussion and Commission 

Findings 

After careful review, the Commission 

finds that the Exchange’s proposal to list 

and trade the Shares is consistent with 

the Act and the rules and regulations 

thereunder applicable to a national 

securities exchange.34 In particular, the 

Commission finds that the proposed 

rule change, as modified by Amendment 

No. 1, is consistent with Section 6(b)(5) 

of the Act,35 which requires, among 

other things, that the Exchange’s rules 

be designed 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 Commission notes 

that the Fund and the Shares must 

comply with the requirements of NYSE 

Arca Equities Rule 8.600 to be listed and 

traded on the Exchange. 

The Commission finds that the 

proposal to list and trade the Shares on 

the Exchange is consistent with Section 

11A(a)(1)(C)(iii) of the Act,36 which sets 

forth Congress’ finding that it is in the 

public interest and appropriate for the 

protection of investors and the 

maintenance of fair and orderly markets 

to assure the availability to brokers, 

dealers, and investors of information 

with respect to quotations for, and 

transactions in, securities. Quotation 

and last sale information for the Shares 

will be available via the Consolidated 

Tape Association (‘‘CTA’’) high-speed 

line. In addition, the Portfolio Indicative 


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37According to the Exchange, the Portfolio 

Indicative Value calculation will be an estimate of 

the value of the Fund’s Net Asset Value (‘‘NAV’’) 

per Share using market data converted into U.S. 

dollars at the current currency rates. The Portfolio 

Indicative Value will be based on quotes and 

closing prices from the securities’ local market and 

may not reflect events that occur subsequent to the 

local market’s close. Premiums and discounts 

between the Portfolio Indicative Value and the 

market price of the Shares may occur, and the 

Portfolio Indicative Value should not be viewed as 

a ‘‘real-time’’ update of the NAV per Share of the 

Fund, which will be calculated only once per day. 

38The Exchange states that several major market 

data vendors display or make widely available 

Portfolio Indicative Values taken from the CTA or 

other data feeds. 

39The Fund will disclose on the Fund’s Web site 

the following information regarding each portfolio 

holding, as applicable to the type of holding: Ticker 

symbol; CUSIP number or other identifier, if any; 

a description of the holding (including the type of 

holding, such as the type of swap); the identity of 

the security, commodity, index, or other asset or 

instrument underlying the holding, if any; for 

options, the option strike price; quantity held (as 

measured by, for example, par value, notional value 

or number of shares, contracts, or units); maturity 

date, if any; coupon rate, if any; effective date, if 

any; market value of the holding; and the 

percentage weighting of the holding in the Fund’s 

portfolio. The Web site information will be publicly 

available at no charge. 

40The NAV per Share of the Fund will be 

computed by dividing the value of the net assets of 

the Fund (i.e., the value of its total assets less total 

liabilities) by the total number of Shares of the 

Fund outstanding, rounded to the nearest cent. 

Expenses and fees are accrued daily and taken into 

account for purposes of determining NAV per 

Share. According to the Exchange, in computing the 

Fund’s NAV, the Fund’s securities holdings will be 

valued based on their last readily available market 

price. Price information on listed securities, 

including ETPs in which the Fund invests, will be 

taken from the exchange where the security is 

primarily traded. Other portfolio securities and 

assets for which market quotations are not readily 

available or determined to not represent the current 

fair value will be valued based on fair value as 

determined in good faith by the Fund’s Sub-Adviser 

in accordance with procedures adopted by the 

Trust’s Board of Directors (‘‘Board’’). U.S. exchangetraded options, exchange-traded swaps, and 

exchange-traded closed end funds will be valued at 

the closing settlement price determined by the 

applicable exchange. Exchange-traded equity 

securities, including common stocks, preferred 

stocks, warrants, convertible securities, rights, 

pooled investment vehicles, exchange-traded 

BDC’s, master limited partnerships, ETPs, 

sponsored ADRs, GDRs, EDRs, IDRs, ordinary 

shares, and New York shares (collectively, 

‘‘Exchange-traded Equity’’) will be valued at market 

value, which will generally be determined using the 

last reported official closing or last trading price on 

the exchange or market on which the security is 

primarily traded at the time of valuation or, if no 

sale has occurred, at the last quoted bid price on 

the primary market or exchange on which they are 

traded. If market prices are unavailable or the Fund 

believes that they are unreliable, or when the value 

of a security has been materially affected by events 

occurring after the relevant market closes, the Fund 

will price those securities at fair value as 

determined in good faith using methods approved 

by the Trust’s Board. Unsponsored ADRs, which are 

traded OTC, will be valued on the basis of the 

market closing price on the exchange where the 

stock of the foreign issuer that underlies the ADR 

is listed. Investment company securities (other than 

ETFs, exchange-traded closed-end funds and 

exchange-traded BDCs), including mutual funds, 

OTC-traded closed-end funds, and OTC-traded 

BDCs, will be valued at net asset value. Nonexchange-traded derivatives, including swaps, 

options traded OTC, options on futures traded OTC, 

and certain structured notes, will normally be 

valued on the basis of quotes obtained from brokers 

and dealers or pricing services using data reflecting 

the earlier closing of the principal markets for those 

assets. Futures contracts will be valued at the 

settlement or closing price determined by the 

applicable exchange. Debt securities, floating rate 

loans, other floating rate debt securities, Senior 

Loans, Junior Loans, U.S. Treasury securities, OTCtraded pooled investment vehicles, other 

obligations issued or guaranteed by U.S. 

government agencies and instrumentalities, STRIPs, 

zero-coupon bonds, bank obligations, corporate 

debt securities, ABS, MBS, mortgage-related 

securities, commercial paper, repurchase 

agreements, inflation-indexed bonds, certificates of 

deposits, bankers’ acceptances, and certain 

structured notes (collectively, ‘‘OTC-traded 

Securities’’) generally trade in the OTC market 

rather than on a securities exchange, and the Fund 

will generally value OTC-traded Securities by 

relying on independent pricing services. The 

Fund’s debt securities will generally be valued at 

bid prices. In certain cases, some of the Fund’s debt 

securities may be valued at the mean between the 

last available bid and ask prices. Foreign exchange 

rates will be priced using 4:00 p.m. (Eastern Time) 

mean prices from major market data vendors. 

41These reasons may include: (1) The extent to 

which trading is not occurring in the securities and/ 

or the financial instruments comprising the 

Disclosed Portfolio of the Fund; or (2) whether 

other unusual conditions or circumstances 

detrimental to the maintenance of a fair and orderly 

market are present. With respect to trading halts, 

Continued 

Value of the Fund,37 as defined in NYSE 

Arca Equities Rule 8.600(c)(3), will be 

widely disseminated by one or more 

major market data vendors at least every 

15 seconds during the Core Trading 

Session.38 On each business day, before 

commencement of trading in Shares in 

the Core Trading Session on the 

Exchange, the Fund’s Web site will 

disclose 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.39 In addition, 

a basket composition file, which 

includes the security names and share 

quantities (as applicable) required to be 

delivered in exchange for the Fund’s 

Shares, together with estimates and 

actual cash components, will be 

publicly disseminated daily prior to the 

opening of the Exchange via the 

National Securities Clearing 

Corporation. The Administrator will 

calculate the NAV per Share of the Fund 

as of the close of the regular trading 

session on the NYSE (ordinarily 4:00 

p.m., Eastern Time) on each day such 

exchange is open.40 Information 

regarding market price and trading 

volume of the Shares 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 for the Shares will be 

published daily in the financial section 

of newspapers. Quotation and last sale 

information for the underlying U.S. 

Exchange-traded Equity will be 

available via the CTA high-speed line 

and from the national securities 

exchange on which they are listed. 

Quotation and last sale information for 

exchange-listed options cleared via the 

Options Clearing Corporation will be 

available via the Options Price 

Reporting Authority. Price information 

regarding exchange-traded options, 

exchange-traded swaps, exchangetraded closed end funds, futures, and 

Exchange-traded Equity held by the 

Fund will be available from the U.S. and 

non-U.S. exchanges trading such assets. 

Quotation information from brokers and 

dealers or pricing services will be 

available for unsponsored ADRs, nonexchange-traded derivatives (including 

swaps, options traded OTC, options on 

futures traded OTC, and certain 

structured notes), and OTC-traded 

Securities. Price information for 

investment company securities (other 

than ETFs, exchange-traded closed end 

funds, and exchange-traded BDCs) is 

available from the applicable 

investment company’s Web site and 

from market data vendors. Pricing 

information regarding each asset class in 

which the Fund will invest will 

generally be available through 

nationally recognized data service 

providers through subscription 

agreements. Foreign exchange prices are 

available from major market data 

vendors. The Fund’s Web site will 

include a form of the prospectus for the 

Fund that may be downloaded and 

additional data relating to NAV and 

other applicable quantitative 

information. 

The Commission further believes that 

the proposal to list and trade the Shares 

is reasonably designed to promote fair 

disclosure of information that may be 

necessary to price the Shares 

appropriately and to prevent trading 

when a reasonable degree of 

transparency cannot be assured. The 

Exchange will obtain a representation 

from the issuer of the Shares that the 

NAV and the Disclosed Portfolio will be 

made available to all market 

participants at the same time. Trading in 

the Shares of the Fund will be halted if 

the circuit breaker parameters in NYSE 

Arca Equities Rule 7.12 have been 

reached. Trading in the Shares of the 

Fund also may be halted because of 

other market conditions or for reasons 

that, in the view of the Exchange, make 

trading in the Shares inadvisable,41 and 


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the Exchange may consider all relevant factors in 

exercising its discretion to halt or suspend trading 

in the Shares of the Fund. 

42See supra note 6. The Exchange states that an 

investment adviser to an open-end fund is required 

to be registered under the Investment Advisers Act 

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

and Sub-Adviser and their related personnel 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 non-public information by an 

investment adviser must be consistent with Rule 

204A–1 under the Advisers Act. 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. 

43The Exchange states that FINRA surveils 

trading on the Exchange pursuant to a regulatory 

services agreement and that the Exchange is 

responsible for FINRA’s performance under this 

regulatory services agreement. 44 17 CFR 240.10A–3. 

trading in the Shares will be subject to 

NYSE Arca Equities Rule 8.600(d)(2)(D), 

which sets forth additional 

circumstances under which trading in 

Shares of the Fund may be halted. The 

Exchange represents that it has a general 

policy prohibiting the distribution of 

material, non-public information by its 

employees. Consistent with NYSE Arca 

Equities Rule 8.600(d)(2)(B)(ii), the 

Reporting Authority must implement 

and maintain, or be subject to, 

procedures designed to prevent the use 

and dissemination of material, nonpublic information regarding the actual 

components of the Fund’s portfolio. In 

addition, the Exchange represents that 

the Adviser is not registered as a brokerdealer or affiliated with a broker-dealer, 

and that the Sub-Adviser is not 

registered as a broker-dealer but is 

affiliated with Pacific Select 

Distributors, Inc., a limited purpose 

registered broker-dealer that does not 

engage in any brokerage or trading 

activity.42

The Exchange represents that trading 

in the Shares will be subject to the 

existing trading surveillances, 

administered by the Financial Industry 

Regulatory Authority (‘‘FINRA’’) on 

behalf of the Exchange, which are 

designed to detect violations of 

Exchange rules and applicable federal 

securities laws. The Exchange further 

represents that these procedures are 

adequate to properly monitor Exchangetrading of the Shares in all trading 

sessions and to deter and detect 

violations of Exchange rules and federal 

securities laws applicable to trading on 

the Exchange.43

The Exchange represents that 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. In support of this 

proposal, the Exchange has made 

representations, including: 

(1) The Shares will conform to the 

initial and continued listing criteria 

under NYSE Arca Equities Rule 8.600. 

(2) The Exchange has appropriate 

rules to facilitate transactions in the 

Shares during all trading sessions. 

(3) FINRA, on behalf of the Exchange, 

will communicate as needed regarding 

trading in the Shares and underlying 

exchange-traded equity securities, 

futures contracts, and exchange-traded 

options contracts with other markets 

and other entities that are members of 

the ISG, and FINRA, on behalf of the 

Exchange, may obtain trading 

information regarding trading in the 

Shares and underlying exchange-traded 

equity securities, futures contracts, and 

exchange-traded options contracts from 

such markets and other entities. In 

addition, the Exchange may obtain 

information regarding trading in the 

Shares and underlying exchange-traded 

equity securities, futures contracts, and 

exchange-traded options contracts from 

markets and other entities that are 

members of ISG or with which the 

Exchange has in place a comprehensive 

surveillance sharing agreement. FINRA, 

on behalf of the Exchange, is able to 

access, as needed, trade information for 

certain fixed income securities held by 

the Fund that is reported to FINRA’s 

Trade Reporting and Compliance 

Engine. 

(4) Prior to the commencement of 

trading, the Exchange will inform its 

Equity Trading Permit Holders in an 

Information Bulletin of the special 

characteristics and risks associated with 

trading the Shares. Specifically, the 

Information Bulletin will discuss the 

following: (a) The procedures for 

purchases and redemptions of Shares in 

creation unit aggregations (and that 

Shares are not individually redeemable); 

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

which imposes a duty of due diligence 

on its Equity Trading Permit Holders to 

learn the essential facts relating to every 

customer prior to trading the Shares; (c) 

the risks involved in trading the Shares 

during the Opening and Late Trading 

Sessions when an updated Portfolio 

Indicative Value will not be calculated 

or publicly disseminated; (d) how 

information regarding the Portfolio 

Indicative Value and the Disclosed 

Portfolio is disseminated; (e) the 

requirement that Equity Trading Permit 

Holders deliver a prospectus to 

investors purchasing newly issued 

Shares prior to or concurrently with the 

confirmation of a transaction; and (f) 

trading information. 

(5) For initial and continued listing, 

the Fund will be in compliance with 

Rule 10A–3 under the Act,44 as 

provided by NYSE Arca Equities Rule 

5.3. 

(6) The Fund’s investments will be 

consistent with its investment objective 

and will not be used to provide multiple 

returns of a benchmark or to produce 

leveraged returns. The Fund’s 

investments will not be used to seek 

performance that is the multiple or 

inverse multiple (i.e., 2Xs and 3Xs) of 

the Fund’s primary broad-based 

securities benchmark index (as defined 

in Form N–1A). 

(7) The Fund may hold up to an 

aggregate amount of 15% of its net 

assets in illiquid assets (calculated at 

the time of investment), including Rule 

144A securities deemed illiquid by the 

Adviser or Sub-Adviser, in accordance 

with Commission guidance. The Fund 

will monitor its portfolio liquidity on an 

ongoing basis to determine whether, in 

light of current circumstances, an 

adequate level of liquidity is being 

maintained, and will consider taking 

appropriate steps in order to maintain 

adequate liquidity if, through a change 

in values, net assets, or other 

circumstances, more than 15% of the 

Fund’s net assets are held in illiquid 

assets. 

(8) Floating rate high yield corporate 

bonds in which the Fund invests 

generally must have $100 million or 

more par amount outstanding at the 

time of investment. 

(9) The Fund will invest in Senior 

Loans that the Adviser or the SubAdviser deems to be highly liquid with 

readily available prices. The Fund will 

not invest in Senior Loans that are in 

default at the time of purchase. In 

addition, for investment purposes, the 

Senior Loan must have a par amount 

outstanding of $150 million or greater at 

the time the loan is originally issued. 

(10) The Fund’s investments in swaps 

will be made in accordance with the 

1940 Act and consistent with the Fund’s 

investment objective and policies. The 

Fund will seek, where possible, to use 

counterparties whose financial status is 

such that the risk of default is reduced. 


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Federal Register / Vol. 80, No. 16 / Monday, January 26, 2015 / Notices 4021 

45 15 U.S.C. 78f(b)(5). 

46 15 U.S.C. 78s(b)(2). 

47 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 ‘‘SPDR®,’’ ‘‘Standard & Poor’s®,’’ ‘‘S&P®,’’ ‘‘S&P 

500®,’’ and ‘‘Standard & Poor’s 500’’ are registered 

trademarks of Standard & Poor’s Financial Services 

LLC. The SPY ETF represents ownership in the 

SPDR S&P 500 Trust, a unit investment trust that 

generally corresponds to the price and yield 

performance of the SPDR S&P 500 Index. 

4The report is attached as Exhibit 3. 

5See Securities Exchange Act Release No. 70879 

(November 14, 2013), 78 FR 69731 (November 20, 

2013) (SR–Phlx–2013–108). 

The Sub-Adviser will evaluate the 

creditworthiness of counterparties on an 

ongoing basis. The Fund will segregate 

assets determined to be liquid by the 

Sub-Adviser in accordance with the 

1940 Act to cover its obligations under 

derivative instruments. The Fund will 

include appropriate risk disclosure in 

its offering documents, including 

leveraging risk. 

(11) The Fund’s portfolio will be 

diversified by industry and issuer, with 

no individual issuer representing more 

than 5% of the portfolio. 

(12) Not more than 10% of the net 

assets of the Fund in the aggregate 

invested in equity securities (other than 

non-exchange-traded investment 

company securities) shall consist of 

equity securities whose principal 

market is not a member of the ISG or is 

a market with which the Exchange does 

not have a comprehensive surveillance 

sharing agreement. Not more than 10% 

of the net assets of the Fund in the 

aggregate invested in exchange-traded 

options contracts shall consist of 

options contracts whose principal 

market is not a member of the ISG or is 

a market with which the Exchange does 

not have a comprehensive surveillance 

sharing agreement. U.S. exchangetraded futures contracts, U.S. exchangetraded options on futures contracts, and 

U.S. exchange-traded put and call 

options in which the Fund invests will 

trade on exchanges that are members of 

ISG. 

(13) Unsponsored ADRs will not 

exceed 10% of the Fund’s net assets. 

(14) The Fund may invest up to 5% 

of its net assets in non-agency ABS. 

(15) The Fund may invest up to 5% 

of its net assets in MBS and mortgagerelated securities. 

(16) A minimum of 100,000 Shares 

will be outstanding at the 

commencement of trading on the 

Exchange. 

This approval order is based on all of 

the Exchange’s representations, 

including those set forth above and in 

the Notice, and the Exchange’s 

description of the Fund. 

For the foregoing reasons, the 

Commission finds that the proposed 

rule change, as modified by Amendment 

No. 1, is consistent with Section 6(b)(5) 

of the Act 45 and the rules and 

regulations thereunder applicable to a 

national securities exchange. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,46 that the 

proposed rule change (SR–NYSEArca– 

2014–126), as modified by Amendment 

No. 1, be, and it hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.47

Brent J. Fields, 

Secretary. 

[FR Doc. 2015–01246 Filed 1–23–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74099; File No. SR–Phlx– 

2015–07] 

Self-Regulatory Organizations; 

NASDAQ OMX PHLX LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change Relating to 

SPY Pilot Program 

January 20, 2015. 

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

Securities Exchange Act of 1934 (the 

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

notice is hereby given that on January 

13, 2015, NASDAQ OMX PHLX LLC 

(‘‘Phlx’’ or ‘‘Exchange’’) 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 the Substance 

of the Proposed Rule Change 

The Exchange proposes to extend the 

pilot program that eliminates position 

limits for options on the SPDR® S&P 

500® exchange-traded fund (‘‘SPY ETF’’ 

or ‘‘SPY’’),3 which list and trade under 

the symbol SPY (‘‘SPY Pilot Program’’). 

The text of the proposed rule change 

is available on the Exchange’s Web site 

at http://

nasdaqomxphlx.cchwallstreet.com/, at 

the principal office of the Exchange, and 

at the Commission’s Public Reference 

Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

Exchange included statements 

concerning the purpose of and basis for 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

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 aspects of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of the proposed rule 

change is to amend Rule 1001, entitled 

‘‘Position Limits,’’ to extend the current 

pilot, which expires on February 4, 

2015, to July 12, 2015 (‘‘Extended 

Pilot’’). This filing does not propose any 

substantive changes to the SPY Pilot 

Program. In proposing to extend the 

SPY Pilot Program, the Exchange 

reaffirms its consideration of several 

factors that supported the original 

proposal of the SPY Pilot Program, 

including (1) the availability of 

economically equivalent products and 

their respective position limits; (2) the 

liquidity of the option and the 

underlying security; (3) the market 

capitalization of the underlying security 

and the related index; (4) the reporting 

of large positions and requirements 

surrounding margin; and (5) the 

potential for market on close volatility. 

The Exchange submitted a report to 

the Commission on January 2, 2015, 

which report reflected, during the time 

period from December 1, 2013 through 

November 30, 2014, the trading of 

standardized SPY options with no 

position limits consistent with option 

exchange provisions.4 The report was 

prepared in the manner specified in 

Phlx’s filing extending the SPY Pilot 

Program.5 The Exchange notes that it is 

unaware of any problems created by the 

SPY Pilot Program and does not foresee 

any as a result of the proposed 

extension. 

As with the original proposal, related 

to the SPY Pilot Program, the Exchange 

represents that a Pilot Report will be 

submitted at least thirty (30) days before 


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