[Federal Register Volume 73, Number 166 (Tuesday, August 26, 2008)]
[Notices]
[Pages 50382-50385]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E8-19707]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-58395; File No. SR-NYSEArca-2008-85]


Self-Regulatory Organizations; Notice of Filing of Proposed Rule 
Change by NYSE Arca, Inc. Relating to Listing and Trading of 
PowerShares Active U.S. Real Estate Fund

August 20, 2008.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Exchange Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is 
hereby given that, on August 11, 2008, 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, 
II, and III 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    NYSE Arca, through its wholly-owned subsidiary NYSE Arca Equities, 
Inc. (``NYSE Arca Equities'' or the ``Corporation''), proposes to list 
and trade the following under NYSE Arca Equities Rule 8.600 (``Managed 
Fund Shares''): the PowerShares Active U.S. Real Estate Fund. The text 
of the proposed rule change is available on the Exchange's Web site at 
http://www.nyse.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 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 parts of such 
statements.

[[Page 50383]]

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

1. Purpose
    The Exchange proposes to list and trade the following Managed Fund 
Shares \4\ (``Shares'') under NYSE Arca Equities Rule 8.600: The 
PowerShares Active U.S. Real Estate Fund (``Fund'').\5\ The Shares will 
be offered by PowerShares Actively Managed Exchange-Traded Fund Trust 
(the ``Trust''), a business trust organized under the laws of the State 
of Delaware and registered with the Commission as an open-end 
management investment company.\6\
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    \4\ A Managed Fund Share is a security that represents an 
interest in an investment company registered under the Investment 
Company Act of 1940 (15 U.S.C. 80a) (``1940 Act'') organized as an 
open-end investment company or similar entity that invests in a 
portfolio of securities selected by its investment 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 PowerShares actively managed funds 
under Rule 8.600: PowerShares Active AlphaQ Fund, the PowerShares 
Active Alpha Multi-Cap Fund, the PowerShares Active Mega-Cap 
Portfolio and the PowerShares Active Low Duration Portfolio. See 
Securities Exchange Act Release No. 57619 (April 4, 2008), 73 FR 
19544 (April 10, 2008) (SR-NYSEArca-2008-25).
    \6\ The Trust is registered under the 1940 Act. On June 26, 
2008, the Trust filed with the Commission a Registration Statement 
for the Fund on Form N-1A under the Securities Act of 1933, as 
amended, (15 U.S.C. 77a), and under the 1940 Act relating to the 
Fund (File Nos. 333-147622 and 811-22148) (``Registration 
Statement''). The description of the operation of the Trust herein 
is based on the Registration Statement.
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    The Shares will conform to the initial and continued listing 
criteria under Rule 8.600. The Fund will not purchase or sell 
securities in markets outside the U.S. 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.
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    \7\ 17 CFR 240.10A-3.
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Description of the Fund
    Invesco PowerShares Capital Management LLC (the ``Adviser'') is the 
investment adviser for the Fund and is registered as an ``investment 
adviser'' under the Investment Advisers Act of 1940 (the ``Advisers 
Act'').\8\ Invesco Institutional (N.A.), Inc. (``Invesco 
Institutional'') is the Fund's primary investment sub-adviser and is 
also registered as an ``investment adviser'' under the Advisers Act. 
Invesco Aim Distributors, Inc. (the ``Distributor'') serves as the 
principal underwriter and distributor for the Fund. The Adviser is 
affiliated with the Distributor, a broker-dealer. As required by NYSE 
Arca Equities Rule 8.600, Commentary .07, the Exchange represents that 
the Adviser has implemented a ``fire wall'' with respect to such 
broker-dealer regarding access to information concerning the 
composition and/or changes to the Fund's portfolio.
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    \8\ 15 U.S.C. 80b-1. The Exchange represents that the Adviser 
and its related personnel, are subject to 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.
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    According to the Registration Statement, the Fund has an investment 
objective of high total return through growth of capital and current 
income. It seeks to achieve its investment objective by investing, 
under normal market conditions, at least 80% of its assets in 
securities of companies that are principally engaged in the U.S. real 
estate industry. A company is considered to be principally engaged in 
the U.S. real estate industry if (i) it derives 50% of its revenues or 
profits from the ownership, leasing, construction, financing or sale of 
U.S. real estate; or (ii) it has at least 50% of the value of its 
assets invested in U.S. real estate. The Fund plans to invest 
principally in equity real estate investment trusts (``REITs''). Equity 
REITs pool investors'' funds for investments primarily in real estate 
properties or real estate-related loans (such as mortgages). The Fund 
may also invest in real estate operating companies (``REOCs''), as well 
as securities of other companies principally engaged in the U.S. real 
estate industry. REOCs are similar to REITs, except that REOCs reinvest 
their earnings into the business, rather than distributing them to 
unitholders like REITs. The 80% investment policy is non-fundamental 
and requires 60 days' prior written notice to shareholders before it 
can be changed.
    In constructing the portfolio, the sub-advisers (as described in 
the Registration Statement) analyze quantitative and statistical 
metrics to identify attractively priced securities. The security and 
portfolio evaluation process is generally conducted monthly. The sub-
advisers will consider selling or reducing a security position if (i) 
The relative attractiveness of a security falls below desired levels; 
(ii) a particular security's risk/return profile changes significantly; 
or (iii) a more attractive investment opportunity is identified.
    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 50,000 Shares.
    The NAV of the Fund will normally be determined as of the close of 
the regular trading session on the NYSE (ordinarily 4 p.m. Eastern 
Time) on each business day.
Availability of Information
    The Fund's Web site (http://www.powershares.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 Web 
site will include additional quantitative information updated on a 
daily basis, including, for the Fund, (1) daily trading volume, the 
prior business day's reported closing price, NAV and mid-point of the 
Bid/Ask spread at the time of calculation of such NAV (the ``Bid/Ask 
Price''),\9\ and a calculation of the premium and discount of the Bid/
Ask Price against the NAV, and (2) data in chart format displaying the 
frequency distribution of discounts and premiums of the daily Bid/Ask 
Price against the NAV, within appropriate ranges, for each of the four 
previous calendar quarters. On each business day, before commencement 
of trading in Shares in the Core Trading Session on the Exchange, the 
Fund will disclose on its

[[Page 50384]]

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.\10\ The Web site information will be 
publicly available at no charge.
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    \9\ The Bid/Ask Price of the Fund is determined using the 
highest bid and the lowest offer on the Exchange as of the time of 
calculation of the Fund's NAV. The records relating to Bid/Ask 
Prices will be retained by the Fund and their service providers.
    \10\ Under accounting procedures followed by the Fund, trades 
made on the prior business day (``T'') will be booked and reflected 
in NAV on the current business day (``T+1''). Accordingly, the Fund 
will be able to disclose at the beginning of the business day the 
portfolio that will form the basis for the NAV calculation at the 
end of the business day.
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    Investors can also obtain the Trust's Statement of Additional 
Information (``SAI''), the Fund's Shareholder Reports, and its Form N-
CSR and Form N-SAR, filed twice a year. The Trust's SAI and Shareholder 
Reports are available free upon request from the Trust, and those 
documents and the Form N-CSR and Form N-SAR may be viewed on-screen or 
downloaded from the Commission's Web site at http://www.sec.gov.
    Information regarding market price and trading volume of the Shares 
is and will be continually available on a real-time basis throughout 
the day on brokers' computer screens and other electronic services. 
Information regarding the previous day's closing price and trading 
volume information will be published daily in the financial section of 
newspapers. Quotation and last sale information for the Shares will be 
available via the Consolidated Tape Association (``CTA'') high-speed 
line. In addition, the Portfolio Indicative Value, as defined in NYSE 
Arca Equities Rule 8.600(c)(3), will be disseminated by 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.
    For more information regarding the Shares and the Fund, including 
investment strategies, risks, creation and redemption procedures, fees, 
portfolio holdings disclosure policies, distributions and taxes, see 
the Registration Statement. All terms relating to the Fund that are 
referred to, but not defined in, this proposed rule change are defined 
in the Registration Statement.
Initial and Continued Listing Criteria
    The Fund will be subject to the initial and continued listing 
criteria of NYSE Arca Equities Rule 8.600(d). The Exchange has 
established that a minimum of 100,000 Shares will be required to be 
outstanding at the time of commencement of trading on the Exchange. In 
addition, the Exchange will obtain a representation from the Fund that 
the NAV per Share will be calculated daily and that the NAV and the 
Disclosed Portfolio will be made available to all market participants 
at the same time.
Trading Halts
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares of the Fund.\11\ Trading in Shares of the Fund 
will be halted if the circuit breaker parameters in NYSE Arca Equities 
Rule 7.12 have been reached. Trading also may be halted because of 
market conditions or for reasons that, in the view of the Exchange, 
make trading in the Shares inadvisable. These may include: (1) The 
extent to which trading is not occurring in the securities comprising 
the Disclosed Portfolio and/or the Financial Instruments of the Fund; 
or (2) whether other unusual conditions or circumstances detrimental to 
the maintenance of a fair and orderly market are present. Trading in 
the Shares will be subject to Rule 8.600(d)(2)(D), which sets forth 
circumstances under which Shares of the Fund may be halted.
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    \11\ See NYSE Arca Equities Rule 7.12, Commentary .04.
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Trading Rules
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. Shares will trade on 
the NYSE Arca Marketplace from 4 a.m. to 8 p.m. Eastern Time in 
accordance with NYSE Arca Equities Rule 7.34 (Opening, Core, and Late 
Trading Sessions). The Exchange has appropriate rules to facilitate 
transactions in the Shares during all trading sessions. The minimum 
trading increment for Shares on the Exchange will be $0.01.
Surveillance
    The Exchange intends to utilize its existing surveillance 
procedures applicable to derivative products (which include Managed 
Fund Shares) to monitor trading in the Shares. The Exchange represents 
that these procedures are adequate to properly monitor Exchange trading 
of the Shares in all trading sessions and to deter and detect 
violations of Exchange rules and applicable federal securities laws.
    The Exchange's current trading surveillance focuses on detecting 
securities trading outside their normal patterns. When such situations 
are detected, surveillance analysis follows and investigations are 
opened, where appropriate, to review the behavior of all relevant 
parties for all relevant trading violations.
    The Exchange may obtain information via the Intermarket 
Surveillance Group (``ISG'') from other exchanges who are members of 
the ISG.\12\ In addition, the Exchange also has a general policy 
prohibiting the distribution of material, non-public information by its 
employees.
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    \12\ For a list of the current members of ISG, see http://www.isgportal.org.
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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),\13\ 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.
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    \13\ NYSE Arca Equities Rule 9.2(a) provides that an ETP Holder, 
before recommending a transaction, must have reasonable grounds to 
believe that the recommendation is suitable for the customer based 
on any facts disclosed by the customer as to his other security 
holdings and as to his financial situation and needs. Further, the 
rule provides, with a limited exception, that prior to the execution 
of a transaction recommended to a non-institutional customer, the 
ETP Holder shall make reasonable efforts to obtain information 
concerning the customer's financial status, tax status, investment 
objectives, and any other information that the ETP Holder believes 
would be useful to make a recommendation. See Securities Exchange 
Act Release No. 54026 (June 21, 2006), 71 FR 36850 (June 28, 2006) 
(SR-PCX-2005-115).
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    In addition, the Bulletin will reference that the Fund is subject 
to various fees and expenses described in the Registration Statement. 
The Bulletin will discuss any exemptive, no-action,

[[Page 50385]]

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 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.
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    \14\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Exchange 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.\15\ The Commission is considering 
granting accelerated approval of the proposed rule change at the end of 
a 15-day comment period.
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    \15\ E-mail from Michael Cavalier, Associate General Counsel, 
NYSE Euronext, to Edward Cho and Christopher Chow, Special Counsels, 
Commission, dated August 13, 2008.
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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 Exchange 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#6715120b024a04080a0a020913142714020449000811"><span class="__cf_email__" data-cfemail="f486819891d9979b9999919a8087b4879197da939b82">[email protected]</span></a>. Please include 
File Number SR-NYSEArca-2008-85 on the subject line.

Paper Comments

    <bullet> Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.
    All submissions should refer to File Number SR-NYSEArca-2008-85. 
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-2008-85 and should 
be submitted on or before September 10, 2008.
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    \16\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-19707 Filed 8-25-08; 8:45 am]
BILLING CODE 8010-01-P


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