Document ID: SEC-2014-0939-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2014-06-09T04:00Z

[Federal Register Volume 79, Number 110 (Monday, June 9, 2014)]
[Notices]
[Pages 33024-33032]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-13310]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72298; File No. SR-NYSEArca-2014-59]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Relating to the Listing and Trading of Shares 
of the AdvisorShares Athena High Dividend ETF Under NYSE Arca Equities 
Rule 8.600

June 3, 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 May 20, 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, II, 
and III below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to list and trade the shares of the following 
under NYSE Arca Equities Rule 8.600 (``Managed Fund Shares''): 
AdvisorShares Athena High Dividend ETF. 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 Exchange proposes to list and trade shares (``Shares'') of the 
following under NYSE Arca Equities Rule 8.600, which governs the 
listing and trading of Managed Fund Shares: \4\ AdvisorShares Athena 
High Dividend ETF (``Fund''). The Shares will be offered by 
AdvisorShares Trust (the ``Trust''),\5\ a statutory trust organized 
under the laws of the State of Delaware and registered with the 
Commission as an open-end management investment company.\6\ The 
investment adviser to the Fund will be AdvisorShares Investments, LLC 
(the ``Adviser''). AthenaInvest Advisors LLC (``Sub-Adviser'') will be 
the Fund's sub-adviser and will provide day-to-day

[[Page 33025]]

portfolio management of the Fund. Foreside Fund Services, LLC (the 
``Distributor'') will be the principal underwriter and distributor of 
the Fund's Shares. The Bank of New York Mellon (the ``Administrator'') 
will serve as the administrator, custodian, transfer agent and 
accounting agent for the Fund.
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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-1) (``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 Trust is registered under the 1940 Act. On February 18, 
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) (``Securities Act''), 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'').
    \6\ The Commission has approved listing and trading on the 
Exchange of shares of a number of actively managed funds under Rule 
8.600. See, e.g., Securities Exchange Act Release Nos. 63076 
(October 12, 2010), 75 FR 63874 (October 18, 2010) (SR-NYSEArca-
2010-79) (order approving Exchange listing and trading of Cambria 
Global Tactical ETF); 63802 (January 31, 2011), 76 FR 6503 (February 
4, 2011) (SR-NYSEArca-2010-118) (order approving Exchange listing 
and trading of the SiM Dynamic Allocation Diversified Income ETF and 
SiM Dynamic Allocation Growth Income ETF); and 65468 (October 3, 
2011), 76 FR 62873 (October 11, 2011) (SR-NYSEArca-2011-51) (order 
approving Exchange listing and trading of TrimTabs Float Shrink 
ETF).
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    Commentary .06 to Rule 8.600 provides that, if the investment 
adviser to the investment company issuing Managed Fund Shares is 
affiliated with a broker-dealer, such investment adviser shall erect a 
``fire wall'' between the investment adviser and the broker-dealer with 
respect to access to information concerning the composition and/or 
changes to such investment company portfolio. In addition, Commentary 
.06 further requires that personnel who make decisions on the open-end 
fund's portfolio composition must be subject to procedures designed to 
prevent the use and dissemination of material nonpublic information 
regarding the open-end fund's portfolio. \7\ Commentary .06 to Rule 
8.600 is similar to Commentary .03(a)(i) and (iii) to NYSE Arca 
Equities Rule 5.2(j)(3); however, Commentary .06 in connection with the 
establishment of a ``fire wall'' between the investment adviser and the 
broker-dealer reflects the applicable open-end fund's portfolio, not an 
underlying benchmark index, as is the case with index-based funds. 
Neither the Adviser nor the Sub-Adviser is registered as a broker-
dealer or is affiliated with a broker-dealer. In the event (a) the 
Adviser or the Sub-Adviser becomes a registered broker-dealer or 
becomes newly affiliated with a broker-dealer, or (b) any new adviser 
or sub-adviser is a registered broker-dealer or becomes affiliated with 
a broker-dealer, it will implement a fire wall with respect to its 
relevant personnel or its broker-dealer affiliate regarding access to 
information concerning the composition and/or changes to the portfolio, 
and will be subject to procedures designed to prevent the use and 
dissemination of material non-public information regarding such 
portfolio.
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    \7\ An investment adviser to an open-end fund is required to be 
registered under the Investment Advisers Act of 1940 (the ``Advisers 
Act''). As a result, the 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.
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Principal Investments
    According to the Registration Statement, the Fund will seek long-
term capital appreciation.
    Under normal market conditions,\8\ the Fund will seek to achieve 
its investment objective by investing substantially all of the Fund's 
assets in (1) U.S. and foreign common stock of issuers of any 
capitalization range, and (2) American Depositary Receipts (``ADRs''), 
Global Depositary Receipts (``GDRs''), European Depositary Receipts 
(``EDRs'') and International Depository Receipts (``IDRs'', and 
together with ADRs, GDRs, and EDRs, ``Depositary Receipts'') that 
provide investment exposure to global equity markets.\9\ Other than 
unsponsored ADRs, all U.S. and foreign common stocks and Depositary 
Receipts in which the Fund will invest will be exchange-traded.
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    \8\ The term ``under normal market conditions'' means, without 
limitation, the absence of extreme volatility or trading halts in 
the equity 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\ 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 equity securities designed for use in 
domestic securities markets and are traded on exchanges or over-the-
counter 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. ADRs 
may be purchased with and sold for U.S. dollars. ADRs may be 
sponsored or unsponsored, but unsponsored ADRs will not exceed 10% 
of the Fund's net assets. Not more than 10% of the net assets of the 
Fund in the aggregate shall consist of equity securities whose 
principal market is not a member of the Intermarket Surveillance 
Group (``ISG'') or is a market with which the Exchange does not have 
a comprehensive surveillance sharing agreement. See note 30 [sic], 
infra.
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    The Sub-Adviser will manage the Fund's portfolio based on its 
patented Behavioral Portfolio Management methodology. The Sub-Adviser 
will start by applying a quantitative behavioral screen that narrows 
the equity universe to securities held in large part by mutual funds 
the Sub-Adviser believes to be most consistently pursuing their 
investment strategy. The Sub-Adviser then will narrow this universe by 
a high dividend yield criteria and select positions for the portfolio 
based on the highest combined ranking of the two dimensions.
Other Fund Investments
    While the Fund, under normal market conditions, will invest 
substantially all of the Fund's assets [sic] in exchange-traded U.S. 
and foreign common stocks as well as Depositary Receipts, the Fund may 
invest in other securities and financial instruments, as described 
below.
    The Fund may purchase equity securities (other than U.S. and 
foreign common stocks and Depositary Receipts) traded in the U.S. on 
registered exchanges. Such other equity securities in which the Fund 
may invest include preferred stock, rights, warrants, convertible 
securities,\10\ master limited partnerships (``MLPs''),\11\ real estate 
investment trusts (``REITs''),\12\ and closed-end funds.\13\ The Fund 
may invest in affiliated and unaffiliated exchange-traded funds 
(``ETFs''),\14\, and

[[Page 33026]]

exchange-traded notes (``ETNs'').\15\ The Fund also may invest in the 
securities of exchange-traded pooled investment vehicles (together with 
ETFs, and ETNs, ``exchange-traded products'' or ``ETPs) 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.\16\
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    \10\ Convertible securities are bonds, debentures, notes, 
preferred stocks or other securities that may be converted or 
exchanged (by the holder or by the issuer) into shares of the 
underlying common stock (or cash or securities of equivalent value) 
at a stated exchange ratio.
    \11\ MLPs are limited partnerships in which the ownership units 
are publicly traded.
    \12\ REITs are pooled investment vehicles which invest primarily 
in real estate or real estate related loans. REITs are generally 
classified as equity REITs, mortgage REITs or a combination of 
equity and mortgage REITs.
    \13\ A closed-end fund is a pooled investment vehicle that is 
registered under the 1940 Act and whose shares are listed and traded 
on U.S. national securities exchanges.
    \14\ For purposes of this filing, ETFs include Investment 
Company Units (as described in NYSE Arca Equities Rule 5.2(j)(3)); 
Portfolio Depositary Receipts (as described in NYSE Arca Equities 
Rule 8.100); and Managed Fund Shares (as described in NYSE Arca 
Equities Rule 8.600). The ETFs in which the Fund will invest all 
will be listed and traded on national securities exchanges. 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. The Fund will only make such investments in 
conformity with the requirements of Regulation M of the Internal 
Revenue Code of 1986, as amended (the ``Internal Revenue Code''). 
While the Fund may invest in inverse ETFs, the Fund will not invest 
in leveraged or inverse leveraged (e.g., 2X, -2X, 3X or -3X) ETFs.
    \15\ ETNs are securities listed and traded on the Exchange under 
NYSE Arca Equities Rule 5.2(j)(6) (``Index-Linked Securities''). 
ETNs are senior, unsecured unsubordinated debt securities issued by 
an underwriting bank that are designed to provide returns that are 
linked to a particular benchmark less investor fees. ETNs have a 
maturity date and, generally, are backed only by the 
creditworthiness of the issuer.
    \16\ 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).
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    On a day-to-day basis, the Fund may hold money market instruments, 
cash, other cash equivalents, and ETPs that invest in these and other 
highly liquid instruments.
    The Fund may invest in the securities of other investment 
companies, including mutual funds and business development companies 
(``BDCs''),\17\ 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. The Fund will only make such investments in conformity with 
the requirements of Subchapter M of the Internal Revenue Code.\18\
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    \17\ A BDC is a less common type of exchange-traded closed-end 
investment company that more closely resembles an operating company 
than a typical investment company. BDCs generally focus on investing 
in, and providing managerial assistance to, small, developing, 
financially troubled, private companies or other companies that may 
have value that can be realized over time and with management 
assistance.
    \18\ 26 U.S.C. 851.
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    The Fund may invest in variable and floating rate instruments, 
which involve certain obligations that may carry variable or floating 
rates of interest, and may involve a conditional or unconditional 
demand feature. Such instruments bear interest at rates which are not 
fixed, but which vary with changes in specified market rates or 
indices. The interest rates on these securities may be reset daily, 
weekly, quarterly, or some other reset period, and may have a set floor 
or ceiling on interest rate changes. A demand instrument with a demand 
notice exceeding seven days may be considered illiquid if there is no 
secondary market for such security.
    The Fund may invest in bank obligations, which will include 
certificates of deposit, bankers' acceptances, and fixed time deposits. 
Certificates of deposit are negotiable certificates issued against 
funds deposited in a commercial bank for a definite period of time and 
earning a specified return. Bankers' acceptances are negotiable drafts 
or bills of exchange, normally drawn by an importer or exporter to pay 
for specific merchandise, which are ``accepted'' by a bank, meaning, in 
effect, that the bank unconditionally agrees to pay the face value of 
the instrument on maturity. Fixed time deposits are bank obligations 
payable at a stated maturity date and bearing interest at a fixed rate.
    The Fund may invest in municipal securities.
    The Fund may seek to invest in corporate debt securities.\19\ The 
broad category of corporate debt securities in which the Fund may 
invest includes debt issued by domestic or foreign companies of all 
kinds, including those with small-, mid- and large-capitalizations. The 
Fund also may invest in corporate debt securities representative of one 
or more high yield bond or credit derivative indices, which may change 
from time to time. Selection will generally be dependent on independent 
credit analysis or fundamental analysis performed by the Sub-Adviser. 
The Fund may invest in all grades of corporate debt securities 
including below investment grade, and such debt may carry variable or 
floating rates of interest. The Fund also may invest in unrated 
corporate debt securities.
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    \19\ According to the Registration Statement, corporate debt 
securities are typically fixed-income securities issued by 
businesses to finance their operations. Notes, bonds, debentures and 
commercial paper are the most common types of corporate debt 
securities. The primary differences between the different types of 
corporate debt securities are their maturities and secured or 
unsecured status. Commercial paper has the shortest term and is 
usually unsecured. Commercial paper is a short-term obligation with 
a maturity ranging from one to 270 days issued by banks, 
corporations and other borrowers. Such investments are unsecured and 
usually discounted. The Fund may invest in commercial paper rated A-
1 or A-2 by Standard and Poor's Ratings Services (``S&P'') or Prime-
1 or Prime-2 by Moody's Investors Service, Inc. (``Moody's'').
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    The Fund may invest in non-investment-grade debt securities. Non-
investment-grade 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. or lower than BBB-by Standard & 
Poor's) or are determined to be of comparable quality by the Fund's 
Sub-Adviser.
    The Fund may invest in unrated debt securities. The 
creditworthiness of the issuer, as well as any financial institution or 
other party responsible for payments on the security, will be analyzed 
to determine whether to purchase unrated bonds.
    The Fund may invest up to 10% of net assets in asset-backed and 
commercial mortgaged-backed securities. Asset-backed securities are 
securities backed by installment contracts, credit-card receivables or 
other assets. Commercial mortgage-backed securities are securities 
backed by commercial real estate properties. Both asset-backed and 
commercial mortgage-backed securities represent interests in ``pools'' 
of assets in which payments of both interest and principal on the 
securities are made on a regular basis.
    The Fund may invest in inflation-indexed bonds, which are fixed 
income securities whose principal value is periodically adjusted 
according to the rate of inflation.
    The Fund may invest in U.S. government securities. Securities 
issued or guaranteed by the U.S. government or its agencies or 
instrumentalities include U.S. Treasury securities, which are backed by 
the full faith and credit of the U.S. Treasury and which differ only in 
their interest rates, maturities, and times of issuance.
    The Fund may also invest in 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. STRIPS may be 
sold as zero coupon securities.
    The Fund may invest in U.S. Treasury zero-coupon bonds. These 
securities are 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. Interest is not paid in cash during the term of these

[[Page 33027]]

securities, but is accrued and paid at maturity.
    The Fund may enter into repurchase agreements with financial 
institutions, which may be deemed to be loans. The Fund will follow 
certain procedures designed to minimize the risks inherent in such 
agreements. These procedures include effecting repurchase transactions 
only with large, well-capitalized and well-established financial 
institutions whose condition will be continually monitored by the Sub-
Adviser. In addition, the value of the collateral underlying the 
repurchase agreement will always be at least equal to the repurchase 
price, including any accrued interest earned on the repurchase 
agreement. 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, 
amount to more than 15% of the Fund's net assets.
    The Fund may enter into reverse repurchase agreements as part of 
the Fund's investment strategy. Reverse repurchase agreements involve 
sales by the Fund of portfolio assets concurrently with an agreement by 
the Fund to repurchase the same assets at a later date at a fixed 
price.
Investment Restrictions
    According to the Registration Statement, the Fund may not
    (i) 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 (ii) 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; \20\ or
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    \20\ The diversification standard is set forth in Section 
5(b)(1) of the 1940 Act. See note 8 [sic], supra, regarding 
Depositary Receipts that the Fund may hold.
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    (ii) 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.\21\
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    \21\ See Form N-1A, Item 9. The Commission has taken the 
position that a fund is concentrated if it invests more than 25% of 
the value of its total assets in any one industry. See, e.g., 
Investment Company Act Release No. 9011 (October 30, 1975), 40 FR 
54241 (November 21, 1975).
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    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,\22\ 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.\23\
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    \22\ 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).
    \23\ The Commission has stated that long-standing Commission 
guidelines have required open-end funds to hold no more than 15% of 
their net assets in illiquid securities and other illiquid assets. 
See Investment Company Act Release No. 28193 (March 11, 2008), 73 FR 
14618 (March 18, 2008), footnote 34. See also, Investment Company 
Act Release No. 5847 (October 21, 1969), 35 FR 19989 (December 31, 
1970) (Statement Regarding ``Restricted Securities''); Investment 
Company Act Release No. 18612 (March 12, 1992), 57 FR 9828 (March 
20, 1992) (Revisions of Guidelines to Form N-1A). A fund's portfolio 
security is illiquid if it cannot be disposed of in the ordinary 
course of business within seven days at approximately the value 
ascribed to it by the fund. See Investment Company Act Release No. 
14983 (March 12, 1986), 51 FR 9773 (March 21, 1986) (adopting 
amendments to Rule 2a-7 under the 1940 Act); Investment Company Act 
Release No. 17452 (April 23, 1990), 55 FR 17933 (April 30, 1990) 
(adopting Rule 144A under the Securities Act).
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    According to the Registration Statement, the Fund will seek to 
qualify for treatment as a Regulated Investment Company (``RIC'') under 
the Internal Revenue Code.\24\
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    \24\ 26 U.S.C. 851.
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    The Fund will not invest in options, futures, swaps or other 
derivatives.
    The Fund's investments will be consistent with the Fund's 
investment objective and will not be used to enhance leverage.
Creation and Redemption of Shares
    The Trust will issue and sell Shares of the Fund in aggregations of 
25,000 Shares or more (``Creation Units'') on a continuous basis 
through the Distributor, at their net asset value (``NAV'') next 
determined after receipt, on any business day. The consideration for 
purchase of a Creation Unit of the Fund generally will consist of an 
in-kind deposit of a designated portfolio of securities--the ``Deposit 
Securities''--per each Creation Unit constituting a substantial 
replication, or a representation, of the securities included in the 
Fund's portfolio and an amount of cash--the ``Cash Component''--
computed as described below. Together, the Deposit Securities and the 
Cash Component constitute the ``Fund Deposit,'' which represents the 
minimum initial and subsequent investment amount for a Creation Unit of 
the Fund. The Cash Component is an amount equal to the difference 
between the NAV of the Shares (per Creation Unit) and the market value 
of the Deposit Securities. If the Cash Component is a positive number 
(i.e., the NAV per Creation Unit exceeds the market value of the 
Deposit Securities), the Cash Component shall be such positive amount. 
If the Cash Component is a negative number (i.e., the NAV per Creation 
Unit is less than the market value of the Deposit Securities), the Cash 
Component shall be such negative amount and the creator will be 
entitled to receive cash from the Fund in an amount equal to the Cash 
Component. The Cash Component serves the function of compensating for 
any differences between the NAV per Creation Unit and the market value 
of the Deposit Securities.
    The Administrator, through the National Securities Clearing 
Corporation (``NSCC''), will make available on each business day, 
immediately prior to the opening of business on the Exchange (currently 
9:30 a.m., Eastern Time), the list of the names and the required 
quantity or number of shares of each Deposit Security to be included in 
the current Fund Deposit (based on information at the end of the 
previous business day) for the Fund. Such Fund Deposit will be 
applicable, subject to any adjustments as described below, in order to 
effect creations of Creation Units of the Fund until such time as the 
next-announced composition of the Deposit Securities is made available.
    The identity and number of shares or quantity of the Deposit 
Securities required for a Fund Deposit for the Fund may change as 
rebalancing adjustments and corporate action events

[[Page 33028]]

occur from time to time. In addition, the Trust reserves the right to 
permit or require the substitution of an amount of cash--i.e., a ``cash 
in lieu'' amount--to be added to the Cash Component to replace any 
Deposit Security which may not be available in sufficient quantity for 
delivery or which may not be eligible for transfer (as discussed in the 
Registration Statement), or which may not be eligible for trading by an 
Authorized Participant or the investor for which it is acting. The 
Trust also reserves the right to offer an ``all cash'' option for 
creations of Creation Units for the Fund. The Adviser represents that, 
to the extent the Trust effects the creation of Shares in cash, such 
transactions will be effected in the same manner for all Authorized 
Participants.
    In addition to the list of names and numbers of securities 
constituting the current Deposit Securities of a Fund Deposit, the 
Administrator, through the NSCC, also will make available on each 
business day, the estimated Cash Component, effective through and 
including the previous business day, per outstanding Creation Unit of 
the Fund.
    Shares may be redeemed only in Creation Units at their NAV next 
determined after receipt of a redemption request in proper form by the 
Fund through the Administrator and only on a business day. The Trust 
will not redeem Shares in amounts less than Creation Units. Beneficial 
owners must accumulate enough Shares in the secondary market to 
constitute a Creation Unit in order to have such Shares redeemed by the 
Trust.
    With respect to the Fund, the Administrator, through the NSCC, will 
make available immediately prior to the opening of business on the 
Exchange (currently 9:30 a.m., Eastern Time) on each business day, the 
``Fund Securities'' that will be applicable (subject to possible 
amendment or correction) to redemption requests received in proper form 
on that day. Fund Securities received on redemption may not be 
identical to Deposit Securities which are applicable to creations of 
Creation Units.
    For the Fund, unless cash redemptions are available or specified 
for the Fund, the redemption proceeds for a Creation Unit generally 
will consist of Fund Securities--as announced by the Administrator on 
the business day of the request for redemption received in proper 
form--plus cash in an amount equal to the difference between the NAV of 
the Shares being redeemed, as next determined after receipt of a 
request in proper form, and the value of the Fund Securities (the 
``Cash Redemption Amount''), less a redemption transaction fee 
described in the Registration Statement. In the event that the Fund 
Securities have a value greater than the NAV of the Shares, a 
compensating cash payment equal to the differential is required to be 
made by or through an Authorized Participant by the redeeming 
shareholder.
    If it is not possible to effect deliveries of the Fund Securities, 
the Trust may in its discretion exercise its option to redeem such 
Shares in cash, and the redeeming beneficial owner will be required to 
receive its redemption proceeds in cash. In addition, an investor may 
request a redemption in cash which the Fund may, in its sole 
discretion, permit. In either case, the investor will receive a cash 
payment equal to the NAV of its Shares based on the NAV of Shares of 
the Fund next determined after the redemption request is received in 
proper form (minus a redemption transaction fee and additional charge 
for requested cash redemptions specified above, to offset the Trust's 
brokerage and other transaction costs associated with the disposition 
of Fund Securities). The Fund may also, in its sole discretion, upon 
request of a shareholder, provide such redeemer a portfolio of 
securities which differs from the exact composition of the Fund 
Securities but does not differ in NAV.
    The Trust also reserves the right to offer an ``all cash'' option 
for redemptions of Creation Units for the Fund. The Adviser represents 
that, to the extent the Trust effects the redemption of Shares in cash, 
such transactions will be effected in the same manner for all 
Authorized Participants.
Net Asset Value
    The 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, 
including without limitation, the management, administration and 
distribution fees, will be accrued daily and taken into account for 
purposes of determining NAV per Share.
    In calculating NAV, the Fund will generally value its portfolio 
investments at market prices. 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 exchange-listed 
securities, including common stocks, ETFs, ETNs, closed-end funds, 
exchange-traded pooled investment vehicles, Depositary Receipts, MLPs, 
REITs, warrants, rights, preferred stocks, BDCs and convertible 
securities 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. 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 in accordance with procedures adopted by the Trust's Board 
of Trustees and in accordance with the 1940 Act.
    The Fund will have an approved pricing matrix at the time of 
launch. The matrix will be based on pre-determined rules for pricing 
logic (such as mean) and valuation point (such as market close). Third 
party pricing sources will be used.
    Unsponsored ADRs 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 and BDCs, (including mutual funds), will be valued at NAV.
    Domestic and foreign fixed income securities, including U.S. 
government securities, repurchase agreements, reverse repurchase 
agreement, variable and floating rate securities, bank obligations, 
corporate debt securities, zero-coupon bonds, commercial paper, 
inflation-indexes bonds, mortgage-backed securities and asset-backed 
securities generally trade in the over-the-counter market rather than 
on a securities exchange. The Fund will generally value these portfolio 
securities by relying on independent pricing services. The Fund's 
pricing services will use valuation models or matrix pricing to 
determine current value. In general, pricing services use information 
with respect to comparable bond and note transactions, quotations from 
bond dealers or by reference to other securities that are considered 
comparable in such characteristics as rating, interest rate, maturity 
date, option adjusted spread models, prepayment projections, interest 
rate spreads and yield curves. Matrix price is an estimated price or 
value for a fixed-income security. Matrix pricing is considered a form 
of fair value pricing.
    The Administrator will calculate NAV and NAV per Share once each 
business day as of the regularly scheduled close of normal trading on 
the New York Stock Exchange, LLC (the ``NYSE'') (normally, 4:00 p.m., 
Eastern Time).

[[Page 33029]]

Availability of Information
    The Fund's Web site (www.advisorshares.com), which will be publicly 
available prior to the public offering of Shares, will include a form 
of the prospectus for the Fund that may be downloaded. The Fund's Web 
site will include additional quantitative information updated on a 
daily basis, including, for the Fund, (1) daily trading volume, the 
prior business day's reported closing price, NAV and mid-point of the 
bid/ask spread at the time of calculation of such NAV (the ``Bid/Ask 
Price''),\25\ and a calculation of the premium and discount of the Bid/
Ask Price against the NAV, and (2) data in chart format displaying the 
frequency distribution of discounts and premiums of the daily Bid/Ask 
Price against the NAV, within appropriate ranges, for each of the four 
previous calendar quarters. On each business day, before commencement 
of trading in Shares in the Core Trading Session on the Exchange, the 
Fund will disclose on its Web site the Disclosed Portfolio that will 
form the basis for the Fund's calculation of NAV at the end of the 
business day.\26\
---------------------------------------------------------------------------

    \25\ The Bid/Ask Price of Shares of the Fund will be determined 
using the mid-point of the highest bid and the lowest offer on the 
Exchange as of the time of calculation of the Fund's NAV. The 
records relating to Bid/Ask Prices will be retained by the Fund and 
its service providers.
    \26\ 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.
---------------------------------------------------------------------------

    On a daily basis, the Adviser will disclose on behalf of the Fund 
on the Fund's Web site each portfolio security and other financial 
instrument of the Fund the following information: Ticker symbol (if 
applicable), name of security and financial instrument, number of 
shares, if applicable, and dollar value of securities and financial 
instruments held in the portfolio, and percentage weighting of the 
security and financial instrument in the portfolio. The Web site 
information will be publicly available at no charge.
    In addition, a basket composition file, which includes the security 
names and share quantities (as applicable) required to be delivered in 
exchange for Fund Shares, together with estimates and actual cash 
components, will be publicly disseminated daily prior to the opening of 
the NYSE via the NSCC. The basket will represent one Creation Unit of 
the Fund.
    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 will be 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 www.sec.gov. 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 
Shares and U.S. exchange-listed equity securities, including common 
stocks, ETPs, closed-end funds, exchange-traded pooled investment 
vehicles, Depositary Receipts, MLPs, REITs, warrants, rights, preferred 
stocks, BDCs and convertible securities will be available via the 
Consolidated Tape Association (``CTA'') high-speed line, and will be 
available from the national securities exchange on which they are 
listed. Information regarding unsponsored ADRs will be available from 
major market data vendors. Intra-day and closing price information 
relating to the fixed income investments of the Fund will be available 
from major market data vendors. Price information regarding investment 
company securities will be available from on-line sources and from the 
Web site for the applicable investment company securities. In addition, 
the Portfolio Indicative Value, as defined in NYSE Arca Equities Rule 
8.600(c)(3), based on current information regarding the value of the 
securities and other assets in the Disclosed Portfolio, will be widely 
disseminated at least every 15 seconds during the Core Trading Session 
by one or more major market data vendors.\27\ The dissemination of the 
Portfolio Indicative Value, together with the Disclosed Portfolio, will 
allow investors to determine the value of the underlying portfolio of 
the Fund on a daily basis and will provide a close estimate of that 
value throughout the trading day. 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 once per day.
---------------------------------------------------------------------------

    \27\ Currently, it is the Exchange's understanding that several 
major market data vendors display and/or make widely available 
Portfolio Indicative Values taken from CTA or other data feeds.
---------------------------------------------------------------------------

    Additional information regarding the Trust and the Shares, 
including investment strategies, risks, creation and redemption 
procedures, fees, portfolio holdings disclosure policies, distributions 
and taxes is included in the Registration Statement. All terms relating 
to the Fund that are referred to, but not defined in, this proposed 
rule change are defined in the Registration Statement.
Trading Halts
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares of the Fund.\28\ 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 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. Trading in 
the Shares will be subject to NYSE Arca Equities Rule 8.600(d)(2)(D), 
which sets forth circumstances under which Shares of the Fund may be 
halted.
---------------------------------------------------------------------------

    \28\ See NYSE Arca Equities Rule 7.12.
---------------------------------------------------------------------------

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. As provided in 
NYSE Arca Equities Rule 7.6, Commentary .03, the minimum price 
variation (``MPV'') for quoting and entry of orders in equity 
securities traded on the NYSE Arca Marketplace is $0.01, with the 
exception of securities that are priced less than $1.00 for which the 
MPV for order entry is $0.0001.
    The Shares will conform to the initial and continued listing 
criteria under NYSE Arca Equities Rule 8.600. The Exchange represents 
that, for initial and/or continued listing, the Fund will be in 
compliance with Rule 10A-3 \29\ under the Act, as provided by NYSE Arca 
Equities Rule 5.3. A minimum of 100,000 Shares will be outstanding at

[[Page 33030]]

the commencement of trading on the Exchange. The Exchange will obtain a 
representation from the issuer of the Shares that the NAV and the 
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.
---------------------------------------------------------------------------

    \29\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------

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.\30\ 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.
---------------------------------------------------------------------------

    \30\ FINRA 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 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.
    FINRA, on behalf of the Exchange, will communicate as needed 
regarding trading in the Shares, and underlying exchange-traded equity 
securities (including, without limitation, common stocks, ETPs, closed-
end funds, exchange-traded pooled investment vehicles, Depositary 
Receipts, MLPs, REITs, warrants, rights, preferred stocks, BDCs and 
convertible securities 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 from such markets and other entities. 
In addition, the Exchange may obtain information regarding trading in 
the Shares and underlying exchange-traded equity securities (including, 
without limitation, common stocks, ETPs, closed-end funds, exchange-
traded pooled investment vehicles, Depositary Receipts, MLPs, REITs, 
warrants, rights, preferred stocks, BDCs and convertible securities) 
from markets and other entities that are members of ISG or with which 
the Exchange has in place a comprehensive surveillance sharing 
agreement.\31\ In addition, FINRA, on behalf of the Exchange, is able 
to access, as needed, trade information for certain fixed income 
securities held by the Fund reported to FINRA's Trade Reporting and 
Compliance Engine (``TRACE'').
---------------------------------------------------------------------------

    \31\ For 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.
---------------------------------------------------------------------------

    Not more than 10% of the net assets of the Fund in the aggregate 
shall consist of equity securities whose principal market is not a 
member of ISG or is a market with which the Exchange does not have a 
comprehensive surveillance sharing agreement.
    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its 
Equity Trading Permit Holders in an Information Bulletin (``Bulletin'') 
of the special characteristics and risks associated with trading the 
Shares. Specifically, the Bulletin will discuss the following: (1) The 
procedures for purchases and redemptions of Shares in Creation Unit 
aggregations (and that Shares are not individually redeemable); (2) 
NYSE Arca Equities Rule 9.2(a), which imposes a duty of due diligence 
on its Equity Trading Permit 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 
Equity Trading Permit Holders deliver a prospectus to investors 
purchasing newly issued Shares prior to or concurrently with the 
confirmation of a transaction; and (6) trading information.
    In addition, the Bulletin will reference that the Fund is subject 
to various fees and expenses described in the Registration Statement. 
The Bulletin will discuss any exemptive, no-action, and interpretive 
relief granted by the Commission from any rules under the Act. The 
Bulletin will also disclose that the NAV for the Shares will be 
calculated after 4:00 p.m. Eastern Time each trading day.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \32\ 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.
---------------------------------------------------------------------------

    \32\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares will be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria in NYSE Arca Equities Rule 
8.600. The Exchange has in place surveillance procedures that are 
adequate to properly monitor trading in the Shares in all trading 
sessions and to deter and detect violations of Exchange rules and 
applicable federal securities laws. FINRA, on behalf of the Exchange, 
will communicate as needed regarding trading in the Shares and 
underlying exchange-traded equity securities (including, without 
limitation, common stocks, ETPs, closed-end funds, exchange-traded 
pooled investment vehicles, Depositary Receipts, MLPs, REITs, warrants, 
rights, preferred stocks, BDCs and convertible securities) 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 
from such markets and other entities. In addition, the Exchange may 
obtain information regarding trading in the Shares and underlying 
exchange-traded equity securities (including, without limitation, 
common stocks, ETPs, closed-end funds, exchange-traded pooled 
investment vehicles, Depositary Receipts, MLPs, REITs, warrants, 
rights, preferred stocks, BDCs and convertible securities) from other 
markets and other entities that are members of the ISG or with which 
the Exchange has in place a comprehensive surveillance sharing 
agreement. In addition, FINRA, on behalf of the Exchange, is able to 
access, as needed, trade information for certain fixed income 
securities held by the Fund reported to FINRA's TRACE. Not more than 
10% of the net assets of the Fund in the aggregate shall consist of 
equity securities whose principal market is not a member of ISG or is a 
market with which the Exchange does not have a comprehensive 
surveillance

[[Page 33031]]

sharing agreement. Neither the Adviser nor the Sub-Adviser is 
registered as a broker-dealer or is affiliated with a broker-dealer. 
The Fund may invest up to 10% of net assets in asset-backed and 
commercial mortgaged-backed securities. The Fund may hold up to an 
aggregate amount of 15% of its net assets in illiquid securities, 
including Rule 144A securities deemed illiquid by the Adviser. The Fund 
will not invest in leveraged or inverse leveraged (e.g., 2X, -2X, 3X or 
-3X) ETFs. The Fund will not invest in options, futures, swaps or other 
derivatives. The Fund's investments will be consistent with the Fund's 
investment objective and will not be used to enhance leverage.
    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 Exchange will obtain a representation from the issuer of the 
Shares 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. In addition, a large amount of 
information is publicly available regarding the Fund and the Shares, 
thereby promoting market transparency. Quotation and last sale 
information for the Shares will be available via the CTA high-speed 
line. In addition, the Portfolio Indicative Value will be widely 
disseminated by the Exchange at least every 15 seconds during the Core 
Trading Session. The Fund's Web site will include a form of the 
prospectus for the Fund that may be downloaded, as well as additional 
quantitative information updated on a daily basis. On a daily basis, 
the Adviser will disclose on behalf of the Fund each portfolio security 
and other financial instrument of the Fund the following information: 
Ticker symbol (if applicable), name of security and financial 
instrument, number of shares, if applicable, and dollar value of 
securities and financial instruments held in the portfolio, and 
percentage weighting of the security and financial instrument in the 
portfolio. The Web site information will be publicly available at no 
charge [sic] Moreover, 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. Trading in Shares of the Fund will 
be halted if the circuit breaker parameters in NYSE Arca Equities Rule 
7.12 have been reached or because of market conditions or for reasons 
that, in the view of the Exchange, make trading in the Shares 
inadvisable. Trading in the Shares will be subject to NYSE Arca 
Equities Rule 8.600(d)(2)(D), which sets forth circumstances under 
which Shares of the Fund may be halted. In addition, as noted above, 
investors will have ready access to information regarding the Fund's 
holdings, the Portfolio Indicative Value, the Disclosed Portfolio, and 
quotation and last sale information for the Shares.
    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 additional type of actively-managed exchange-traded product that 
will enhance competition among market participants, to the benefit of 
investors and the marketplace. As noted above, the Exchange has in 
place surveillance procedures that are adequate to properly monitor 
trading in the Shares in all trading sessions and to deter and detect 
violations of Exchange rules and applicable federal securities laws. In 
addition, as noted above, investors will have ready access to 
information regarding the Fund's holdings, the Portfolio Indicative 
Value, the Disclosed Portfolio, and quotation and last sale information 
for the Shares.

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 purpose of the Act. The Exchange notes that the 
proposed rule change will facilitate the listing and trading of an 
additional type of actively-managed exchange-traded product that 
primarily holds equity securities and that will enhance competition 
among market participants, to the benefit of investors and the 
marketplace.

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 45 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 or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be 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-NYSEArca-2014-59 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-2014-59. 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-NYSEArca-2014-59 and should 
be submitted on or before June 30, 2014.

[[Page 33032]]

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\33\
---------------------------------------------------------------------------

    \33\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-13310 Filed 6-6-14; 8:45 am]
BILLING CODE 8011-01-P