Federal Register / Vol. 79, No. 211 / Friday, October 31, 2014 / Notices 64849 

15 17 CFR 200.30–3(a)(12). 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4The Commission originally approved the listing 

and trading of the Shares on the Exchange on May 

16, 2012. See Securities Exchange Act Release No. 

67003 (May 16, 2012), 77 FR 30345 (May 22, 2012) 

(SR–NYSEArca–2012–24) (‘‘Prior Order’’). See also 

Securities Exchange Act Release No. 66696 (March 

30, 2012), 77 FR 20660 (April 5, 2012) (SR– 

NYSEArca–2012–24) (‘‘Prior Notice’’). 

5The Trust is registered under the Investment 

Company Act of 1940 (15 U.S.C. 80a–1) (‘‘1940 

Act’’). On July 15, 2011, the Trust filed with the 

Commission Post-Effective Amendment No. 32 to 

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’’). The description of the 

operation of the Trust and the Fund herein is based, 

in part, on the Registration Statement. In addition, 

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) 

(‘‘Exemptive Order’’). 

of the filing of the proposed rule change, 

the Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. If the 

Commission takes such action, the 

Commission will institute proceedings 

to determine whether the proposed rule 

change should be approved or 

disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

CBOE–2014–082 on the subject line. 

Paper Comments 

• 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–CBOE–2014–082. 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 such 

filing also will be available for 

inspection and copying at the principal 

offices 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–CBOE– 

2014–082, and should be submitted on 

or before November 21, 2014. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–25880 Filed 10–30–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73433; File No. SR– 

NYSEArca–2014–122] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Relating to Use of 

Derivative Instruments by the 

AdvisorShares Global Echo ETF 

October 27, 2014. 

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

Securities Exchange Act of 1934 (the 

‘‘Act’’) 2 and Rule 19b–4 thereunder,3

notice is hereby given that, on October 

23, 2014, NYSE Arca, Inc. (the 

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

the Securities and Exchange 

Commission (the ‘‘Commission’’) the 

proposed rule change as described in 

Items I 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to reflect a 

change to the means of achieving the 

investment objective applicable to the 

AdvisorShares Global Echo ETF (‘‘The 

Fund’’) relating to its use of derivative 

instruments. The text of the proposed 

rule change is available on the 

Exchange’s Web site at www.nyse.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 

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 Commission has approved listing 

and trading on the Exchange of shares 

(‘‘Shares’’) of the Fund under NYSE 

Arca Equities Rule 8.600, which governs 

the listing and trading of Managed Fund 

Shares on the Exchange.4 The Shares are 

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

The investment adviser to the Fund is 

AdvisorShares Investments, LLC 

(‘‘Adviser’’). The Fund’s sub-advisers 

(‘‘Sub-Advisers’’ and each a ‘‘SubAdviser’’), which provide day-to-day 

portfolio management of the Fund, are 

First Affirmative Financial Network 

LLC; Reynders, McVeigh Capital 

Management, LLC; Baldwin Brothers 

Inc.; and Community Capital 

Management Inc. 

In this proposed rule change, the 

Exchange proposes to change the 

description of the Fund’s use of 


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6The Adviser represents that the Adviser and the 

Sub-Advisers have managed and will continue to 

manage the Fund in the manner described in the 

Prior Notice, and will not implement the changes 

described herein until the instant proposed rule 

change is operative. 

7See No-Action Letter dated December 6, 2012 

from Elizabeth G. Osterman, Associate Director, 

Office of Exemptive Applications, Division of 

Investment Management. 

8See supra, note 5. 

9The Adviser acknowledges that for the Fund to 

rely on the No-Action Letter, the Fund must comply 

with the No-Action Letter Representations. In this 

regard, (i) the Board of Trustees of the Trust will 

periodically review and approve the Fund’s use of 

derivatives and how the Adviser assesses and 

manages risk with respect to the Fund’s use of 

derivatives and (ii) the Fund’s disclosure of its use 

of derivatives in its offering documents and 

periodic reports will be consistent with relevant 

Commission and staff guidance. 

10To the extent the Fund invests in futures, 

options on futures or other instruments subject to 

regulation by the CFTC, it will do so in reliance on 

and in compliance with CFTC regulations in effect 

from time to time and in accordance with the 

Fund’s policies. The Trust, on behalf of certain of 

its series, has filed a notice of eligibility for 

exclusion from the definition of the term 

‘‘commodity pool operator’’ in accordance with 

CFTC Regulation 4.5. Therefore, neither the Trust 

nor the Fund is deemed to be a ‘‘commodity pool’’ 

or ‘‘commodity pool operator’’ with respect to the 

Fund under the Commodity Exchange Act (‘‘CEA’’), 

and they are not subject to registration or regulation 

as such under the CEA. In addition, as of the date 

of this filing, the Adviser is not deemed to be a 

‘‘commodity pool operator’’ or ‘‘commodity trading 

adviser’’ with respect to the advisory services it 

provides to the Fund. The CFTC recently adopted 

amendments to CFTC Regulation 4.5 and has 

proposed additional regulatory requirements that 

may affect the extent to which the Fund invests in 

instruments that are subject to regulation by the 

CFTC and impose additional regulatory obligations 

on the Fund and the Adviser. The Fund reserves the 

right to engage in transactions involving futures and 

options thereon to the extent allowed by CFTC 

regulations in effect from time to time and in 

accordance with the Fund’s policies. 

11The Fund will limit its direct investments in 

futures to the extent necessary for the Adviser to 

claim the exclusion from regulation as a 

‘‘commodity pool operator’’ with respect to the 

Fund under Rule 4.5 promulgated by the CFTC, as 

such rule may be amended from time to time. 

Under Rule 4.5 as currently in effect, the Fund will 

limit its trading activity in futures and options on 

futures (excluding activity for ‘‘bona fide hedging 

purposes,’’ as defined by the CFTC) such that it will 

meet one of the following tests: (i) Aggregate initial 

margin and premiums required to establish its 

futures and options on futures will not exceed 5% 

of the liquidation value of the Fund’s portfolio, after 

taking into account unrealized profits and losses on 

such positions; or (ii) aggregate net notional value 

of its futures and options on futures will not exceed 

100% of the liquidation value of the Fund’s 

portfolio, after taking into account unrealized 

profits and losses on such positions. 

12With respect to guidance under the 1940 Act, 

see 15 U.S.C. 80a–18; Investment Company Act 

Release No. 10666 (April 18, 1979), 44 FR 25128 

derivative instruments, as described 

below.6

On December 6, 2012, the staff of the 

Commission’s Division of Investment 

Management (‘‘Division’’) issued a noaction letter (‘‘No-Action Letter’’) 

relating to the use of derivatives by 

actively-managed exchange-traded 

funds (‘‘ETFs’’).7 The No-Action Letter 

noted that, in March of 2010, the 

Commission announced in a press 

release that the staff was conducting a 

review to evaluate the use of derivatives 

by mutual funds, ETFs, and other 

investment companies and that, 

pending completion of this review, the 

staff would defer consideration of 

exemptive requests under the 1940 Act 

relating to, among others, activelymanaged ETFs that would make 

significant investments in derivatives. 

The No-Action Letter stated that the 

Division staff will no longer defer 

consideration of exemptive requests 

under the 1940 Act relating to activelymanaged ETFs that make use of 

derivatives provided that they include 

representations to address some of the 

concerns expressed in the Commission’s 

March 2010 press release. These 

representations are: (i) That the ETF’s 

board periodically will review and 

approve the ETF’s use of derivatives and 

how the ETF’s investment adviser 

assesses and manages risk with respect 

to the ETF’s use of derivatives; and (ii) 

that the ETF’s disclosure of its use of 

derivatives in its offering documents 

and periodic reports is consistent with 

relevant Commission and staff guidance 

(together, the ‘‘No-Action Letter 

Representations’’). The No-Action Letter 

stated that the Division would not 

recommend enforcement action to the 

Commission under sections 2(a)(32), 

5(a)(1), 17(a), 22(d), and 22(e) of the 

1940 Act, or rule 22c–1 under the 1940 

Act if actively-managed ETFs operating 

in reliance on specified orders (which 

include the Trust’s Exemptive Order 8) 

invest in options contracts, futures 

contracts or swap agreements provided 

that they comply with the No-Action 

Letter Representations.9

The Prior Notice included the 

following representation: ‘‘Further, in 

accordance with the Exemptive Order, 

the Fund will not invest in options, 

futures, or swaps.’’ (the ‘‘Derivatives 

Representation’’). In view of the NoAction Letter, the Exchange is proposing 

to delete the Derivatives Representation. 

The Exchange now proposes that, to 

pursue the Fund’s investment objective, 

the Fund be permitted to invest in 

options, futures, and forward contracts 

(‘‘Derivative Instruments’’), as described 

below. 

Going forward, the Fund may buy and 

sell futures contracts and options on 

futures contracts. The Fund will only 

enter into futures contracts and options 

on futures contracts that are traded on 

a national futures exchange that is 

regulated by the Commodities Futures 

Trading Commission (‘‘CFTC’’) and that 

is a member of the Intermarket 

Surveillance Group (‘‘ISG’’).10 With 

respect to the Fund’s investments in 

futures contracts and options on futures 

contracts, the Fund may buy and sell 

only index futures contracts and options 

on futures contracts with respect to any 

index on which futures or options on 

futures are traded on a U.S. futures 

exchange. The Fund may use such 

index futures contracts and related 

options on futures contracts for bona 

fide hedging; attempting to offset 

changes in the value of securities held 

or expected to be acquired or be 

disposed of; attempting to gain exposure 

to a particular market, index or 

instrument; or other risk management 

purposes. 

The Fund may invest in exchangetraded put and call options on securities 

indices and currencies. The Fund may 

purchase and write options only if such 

options are traded on a U.S. national 

securities exchange. 

The Fund may invest in currency 

forwards. 

Under normal market conditions, no 

more than 20% of the value of the 

Fund’s net assets will be invested in 

Derivative Instruments.11

The Prior Notice stated that the 

Fund’s investments would be consistent 

with the Fund’s investment objective 

and would not be used to enhance 

leverage. In view of the Exchange’s 

proposal to permit the Fund to use 

Derivative Instruments, the Fund’s 

investments in Derivative Instruments 

could potentially be used to enhance 

leverage. However, the Fund’s 

investments in Derivative Instruments 

will be consistent with the Fund’s 

investment objective and will not be 

used to seek to achieve a multiple or 

inverse multiple of an index. 

Investments in Derivative Instruments 

will be made in accordance with the 

1940 Act and consistent with the Fund’s 

investment objective and policies. The 

Fund will comply with the regulatory 

requirements of the Commission to 

maintain assets as ‘‘cover,’’ maintain 

segregated accounts, and/or make 

margin payments when it takes 

positions in Derivative Instruments 

involving obligations to third parties 

(i.e., instruments other than purchase 

options). If the applicable guidelines 

prescribed under the 1940 Act so 

require, the Fund will earmark or set 

aside cash, U.S. government securities, 

high grade liquid debt securities and/or 

other liquid assets permitted by the 

Commission in a segregated custodial 

account in the amount prescribed.12


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(April 27, 1979); Dreyfus Strategic Investing, 

Commission No-Action Letter (June 22, 1987); 

Merrill Lynch Asset Management, L.P., Commission 

No-Action Letter (July 2, 1996). 

13To mitigate leveraging risk, the Fund will 

segregate or ‘‘earmark’’ liquid assets or otherwise 

cover the transactions that may give rise to such 

risk. 

14FINRA surveils trading on the Exchange 

pursuant to a regulatory services agreement. The 

Exchange is responsible for FINRA’s performance 

under this regulatory services agreement. 

The Fund will include appropriate 

risk disclosure in its offering 

documents, including leveraging risk. 

Leveraging risk is the risk that certain 

transactions of the Fund, including the 

Fund’s use of Derivative Instruments, 

may give rise to leverage, causing the 

Fund to be more volatile than if it had 

not been leveraged.13

Based on the above, the Exchange 

seeks this modification regarding the 

Fund’s use of Derivative Instruments. 

The Adviser represents that there is no 

change to the Fund’s investment 

objective. The Adviser and the SubAdvisers believe that the ability to 

invest in Derivative Instruments will 

provide the Adviser and Sub-Advisers 

with additional flexibility to meet the 

Fund’s investment objective. 

The Fund will continue to comply 

with all initial and continued listing 

requirements under NYSE Arca Equities 

Rule 8.600. 

Except for the changes noted herein, 

all other facts presented and 

representations made in the Rule 19b– 

4 filing underlying the Prior Order 

remain unchanged. 

The changes described herein will be 

effective upon (i) the effectiveness of an 

amendment to the Trust’s Registration 

Statement disclosing the Fund’s 

intended use of Derivative Instruments 

and (ii) when this proposed rule change 

has become operative. The Adviser 

represents that the Adviser and SubAdvisers have managed and will 

continue to manage the Fund in the 

manner described in the Prior Notice, 

and will not implement the changes 

described herein until this proposed 

rule change is operative. 

Impact on Arbitrage Mechanism 

The Adviser believes there will be 

minimal, if any, impact to the arbitrage 

mechanism as a result of the use of 

derivatives. Market makers and 

participants should be able to value 

derivatives as long as the positions are 

disclosed with relevant information. 

The Adviser believes that the price at 

which Shares trade will continue to be 

disciplined by arbitrage opportunities 

created by the ability to purchase or 

redeem Creation Units (as defined in the 

Prior Notice) at their net asset value 

(‘‘NAV’’), which should ensure that 

Shares will not trade at a material 

discount or premium in relation to their 

NAV. 

The Adviser does not believe there 

will be any significant impacts to the 

settlement or operational aspects of the 

Fund’s arbitrage mechanism due to the 

use of derivatives. Certain derivatives 

may not be eligible for in-kind transfer, 

and such derivatives will be substituted 

with a ‘‘cash in lieu’’ amount when the 

Fund processes purchases or 

redemptions of Creation Units (as 

defined in the Prior Notice) in-kind. 

Valuation for Purposes of Calculating 

Net Asset Value 

As stated in the Prior Notice, the NAV 

per Share of the Fund is 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, including 

without limitation, the management, 

administration, and distribution fees, 

are accrued daily and taken into account 

for purposes of determining NAV. The 

NAV per Share for the Fund is 

calculated by the Administrator (The 

Bank of New York Mellon Corporation) 

and determined as of the close of the 

regular trading session on the New York 

Stock Exchange (‘‘NYSE’’) (ordinarily 

4:00 p.m., E.T.) on each day that the 

NYSE is open. 

U.S. exchange-traded options will be 

valued at the closing price determined 

by the applicable exchange. The Fund 

will generally value exchange-traded 

futures at the settlement price 

determined by the applicable exchange. 

Currency forward contracts will 

normally be valued on the basis of 

quotes obtained from a third party 

broker-dealer who makes markets in 

such securities or on the basis of quotes 

obtained from an independent thirdparty pricing service. 

Availability of Information 

As described in the Prior Notice, on 

each business day, before 

commencement of trading in Shares in 

the Core Trading Session on the 

Exchange, the Fund discloses on its 

Web site the Disclosed Portfolio as 

defined in NYSE Arca Equities Rule 

8.600(c)(2) that will form the basis for 

the Fund’s calculation of NAV at the 

end of the business day. See ‘‘Disclosed 

Portfolio’’ below. 

Pricing information for Derivative 

Instruments will be available from major 

broker-dealer firms, subscription 

services, and/or pricing services and, in 

addition, for exchange-traded Derivative 

Instruments, from the exchanges on 

which they are traded. 

Intra-day and closing price 

information regarding exchange traded 

options (including options on futures) 

and futures will be available from the 

exchange on which such instruments 

are traded. Quotation and last sale 

information for exchange-traded options 

cleared via the Options Clearing 

Corporation is available from the 

Options Price Reporting Authority. 

Disclosed Portfolio 

The Fund’s disclosure of derivative 

positions in the Disclosed Portfolio will 

include information that market 

participants can use to value these 

positions intraday. On a daily basis, the 

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); the 

identity of the security 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. 

Surveillance 

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.14 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 federal 

securities laws applicable to trading on 

the Exchange. 

The surveillances referred to above 

generally focus on detecting securities 

trading outside their normal patterns, 

which could be indicative of 

manipulative or other violative activity. 

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. 


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64852 Federal Register / Vol. 79, No. 211 / Friday, October 31, 2014 / Notices 

15For a list of the current members of ISG, see 

www.isgportal.org. The Exchange notes that not all 

components of the Disclosed Portfolio for the Fund 

may trade on markets that are members of ISG or 

with which the Exchange has in place a 

comprehensive surveillance sharing agreement. 

16 15 U.S.C. 78f(b)(5). 

17See, e.g., Securities Exchange Act Release Nos. 

73081 (September 11, 2014), 79 FR 55859 

(September 17, 2014) (SR–NYSEArca–2014–20) 

(order approving listing and trading on the 

Exchange of shares of the Reality Shares DIVS ETF 

under NYSE Arca Equities Rule 8.600); 72882 

(August 20, 2014), 79 FR 50964 (August 26, 2014) 

(SR–NYSEArca–2014–58) (order approving listing 

and trading on the Exchange of shares of the PIMCO 

Short-Term Exchange-Traded Fund and the PIMCO 

Municipal Bond Exchange-Traded Fund under 

NYSE Arca Equities Rule 8.600). 

FINRA, on behalf of the Exchange, 

will communicate as needed regarding 

trading in the Shares, exchange-traded 

options, exchange-traded futures and 

exchange-traded options on futures 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, exchange-traded options, 

exchange-traded futures and exchangetraded options on futures from such 

markets and other entities. In addition, 

the Exchange may obtain information 

regarding trading in the Shares, 

exchange-traded options, exchangetraded futures and exchange-traded 

options on futures, from markets and 

other entities that are members of ISG or 

with which the Exchange has in place 

a comprehensive surveillance sharing 

agreement.15

In addition, the Exchange also has a 

general policy prohibiting the 

distribution of material, non-public 

information by its employees. 

2. Statutory Basis 

The basis under the Act for this 

proposed rule change is the requirement 

under Section 6(b)(5) 16 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 is designed to 

prevent fraudulent and manipulative 

acts and practices in that, under normal 

market conditions, no more than 20% of 

the value of the Fund’s net assets will 

be invested in Derivative Instruments. 

The Fund’s investments in Derivative 

Instruments will be consistent with the 

Fund’s investment objective and will 

not be used to seek to achieve a multiple 

or inverse multiple of an index. 

Investments in Derivative Instruments 

will be made in accordance with the 

1940 Act and consistent with the Fund’s 

investment objective and policies. The 

Fund will comply with the regulatory 

requirements of the Commission to 

maintain assets as ‘‘cover,’’ maintain 

segregated accounts, and/or make 

margin payments when it takes 

positions in Derivative Instruments 

involving obligations to third parties 

(i.e., instruments other than purchase 

options). If the applicable guidelines 

prescribed under the 1940 Act so 

require, the Fund will earmark or set 

aside cash, U.S. government securities, 

high grade liquid debt securities and/or 

other liquid assets permitted by the 

Commission in a segregated custodial 

account in the amount prescribed. 

Moreover, the Fund will include 

appropriate risk disclosure in its 

offering documents, including 

leveraging risk. 

The proposed rule change is designed 

to promote just and equitable principles 

of trade and to protect investors and the 

public interest in that the Fund’s 

disclosure of derivative positions in the 

Disclosed Portfolio will include 

information that market participants can 

use to value these positions intraday. 

On a daily basis, the Fund will disclose 

on the Fund’s Web site specific 

information regarding each portfolio 

holding, as applicable to the type of 

holding. The Fund may use futures 

contracts and related options for bona 

fide hedging; attempting to offset 

changes in the value of securities held 

or expected to be acquired or be 

disposed of; attempting to gain exposure 

to a particular market, index or 

instrument; or other risk management 

purposes. In addition, such proposed 

change will provide the Adviser and 

Sub-Advisers with additional flexibility 

in meeting the Fund’s investment 

objective. The Adviser does not believe 

there will be any significant impacts to 

the settlement or operational aspects of 

the Fund’s arbitrage mechanism due to 

the use of derivatives. In addition, the 

Commission has previously approved 

the use of derivatives similar to those 

proposed herein by issues of Managed 

Fund Shares traded on the Exchange.17

Consistent with the Prior Notice, NAV 

will continue to be calculated daily and 

the NAV and Disclosed Portfolio (as 

defined in NYSE Arca Equities Rule 

8.600(c)(2)) will be made available to all 

market participants at the same time. 

The proposed rule change is designed 

to perfect the mechanism of a free and 

open market and, in general, to protect 

investors and the public interest in that 

it will facilitate the listing and trading 

of an actively-managed exchange-traded 

product that will enhance competition 

among market participants, to the 

benefit of investors and the marketplace. 

As noted, the additional flexibility to be 

afforded to the Adviser and SubAdvisers by permitting the Fund to 

invest in Derivative Instruments under 

the proposed rule change is intended to 

enhance the Adviser’s and SubAdvisers’ ability to meet the Fund’s 

investment objective. FINRA, on behalf 

of the Exchange, will communicate as 

needed regarding trading in the Shares, 

exchange-traded options, exchangetraded futures and exchange-traded 

options on futures 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, exchange-traded options, 

exchange-traded futures and exchangetraded options on futures from such 

markets and other entities. In addition, 

the Exchange may obtain information 

regarding trading in the Shares, 

exchange-traded options, exchangetraded futures and exchange-traded 

options on futures from markets and 

other entities that are members of ISG or 

with which the Exchange has in place 

a comprehensive surveillance sharing 

agreement. In addition, as indicated in 

the Prior Notice, investors will have 

ready access to information regarding 

the Fund’s holdings, the Portfolio 

Indicative Value (as defined in NYSE 

Arca Equities Rule 8.600(d)(2)(A)), the 

Disclosed Portfolio, and quotation and 

last sale information for the Shares. 

Consistent with the No-Action Letter, (i) 

the Board of Trustees of the Trust will 

periodically review and approve the 

Fund’s use of derivatives and how the 

Adviser assesses and manages risk with 

respect to the Fund’s use of derivatives 

and (ii) the Fund’s disclosure of its use 

of derivatives in its offering documents 

and periodic reports will be consistent 

with relevant Commission and staff 

guidance. 

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. The 

Exchange believes the proposed rule 

change will permit the Adviser and SubAdvisers additional flexibility in 

achieving the Fund’s investment 

objective, thereby offering investors 

additional investment options. 


asabaliauskas on DSK5VPTVN1PROD with NOTICES
Federal Register / Vol. 79, No. 211 / Friday, October 31, 2014 / Notices 64853 

18 15 U.S.C. 78s(b)(3)(A). 

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

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

the Commission written notice of its intent to file 

the proposed rule change at least five business days 

prior to the date of filing of the proposed rule 

change, or such shorter time as designated by the 

Commission. The Exchange has satisfied this 

requirement. 

20 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

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 

Because the foregoing proposed rule 

change does not: (i) Significantly affect 

the protection of investors or the public 

interest; (ii) impose any significant 

burden on competition; and (iii) become 

operative for 30 days from the date on 

which it was filed, or such shorter time 

as the Commission may designate, if 

consistent with the protection of 

investors and the public interest, the 

proposed rule change has become 

effective pursuant to Section 19(b)(3)(A) 

of the Act 18 and Rule 19b–4(f)(6) 

thereunder.19

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission may summarily abrogate 

such rule change if it appears to the 

Commission that such action is 

necessary or appropriate in the public 

interest, for the protection of investors, 

or otherwise in furtherance of the 

purposes of the Act. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

NYSEArca–2014–122 on the subject 

line. 

Paper Comments 

• 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–2014–122. 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 such 

filing will also 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–2014–122 and should be 

submitted on or before November 21, 

2014. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.20

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–25888 Filed 10–30–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73436; File No. SR–C2– 

2014–024] 

Self-Regulatory Organizations; C2 

Options Exchange, Incorporated; 

Notice of Filing and Immediate 

Effectiveness of a Proposed Rule 

Change Relating to the Complex Order 

Book 

October 27, 2014. 

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 October 

15, 2014, C2 Options Exchange, 

Incorporated (the ‘‘Exchange’’ or ‘‘C2’’) 

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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend its 

rules related to the complex order book 

(‘‘COB’’). The text of the proposed rule 

change is provided below. 

(additions are italicized; deletions are 

[bracketed]) 

* * * * * 

C2 Options Exchange, Incorporated 

Rules 

* * * * * 

Rule 6.13. Complex Order Execution 

(a)–(c) No change. 

. . . Interpretations and Policies: 

.01–.06 No change. 

.07 Execution of Complex Orders on 

the COB Open: 

(a) Complex orders, including stockoption orders, do not participate in 

opening rotations for individual 

component option series legs conducted 

pursuant to Rule 6.11. When the last of 

the individual component option series 

legs that make up a complex order 

strategy has opened (and, in the case of 

a stock-option order, the underlying 

stock has opened), the COB for that 

strategy will open. The COB will open 

with no trade, except as follows: 

([a]i) The COB will open with a trade 

against the individual component 

option series legs if there are complex 

orders on only one side of the COB that 

are marketable against the opposite side 

of the derived net market. The resulting 

execution will occur at the derived net 

market price to the extent marketable 

pursuant to the rules of trading priority 

otherwise applicable to incoming 

electronic orders in the individual 

component legs. To the extent there is 

any remaining balance, the complex 

orders will trade pursuant to 

subparagraph (ii) below or, if unable to 

trade, be processed as they would on an 

intra-day basis under Rule 6.13. [(]This 

subparagraph ([a]i) is not applicable to 

stock-option orders because stockoption orders do not trade against the 

individual component option series legs 

when the COB opens.[)] 

([b]ii) The COB will open (or continue 

to open with another trade if a trade 

occurred pursuant to subparagraph (i) 


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