Document ID: SEC-2012-0643-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to the Peritus High Yield ETF
Posted Date: 2012-04-23T04:00Z

[Federal Register Volume 77, Number 78 (Monday, April 23, 2012)]
[Notices]
[Pages 24233-24236]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-9663]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66818; File No. SR-NYSEArca-2012-33]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Relating to the 
Peritus High Yield ETF

April 17, 2012.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that, on April 10, 2012, NYSE Arca, Inc. (``Exchange'' 
or ``NYSE Arca'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 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 reflect a change to the holdings of the 
Peritus High Yield ETF to achieve its investment objective to include 
equity securities. The text of the proposed rule change is available at 
the Exchange, the Commission's Public Reference Room, and www.nyse.com.

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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Commission has approved a proposal to list and trade on the 
Exchange shares (``Shares'') of the Peritus High Yield ETF (``Fund'') 
under

[[Page 24234]]

NYSE Arca Equities Rule 8.600,\3\ which governs the listing and trading 
of Managed Fund Shares.\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 Fund is currently listed and 
traded on the Exchange under NYSE Arca Equities Rule 8.600.
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    \3\ See Securities Exchange Act Release No. 63329 (November 17, 
2010), 75 FR 71760 (November 24, 2010) (SR-NYSEArca-2010-86) 
(``Prior Order''). The notice with respect to the Prior Order was 
published in Securities Exchange Act Release No. 63041 (October 5, 
2010), 75 FR 62905 (October 13, 2010) (``Prior Notice'' and, 
together with the Prior Order, ``Prior Release'').
    \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 October 28, 
2011, the Trust filed with the Commission an amendment to its 
registration statement on Form N-1A under the Securities Act of 1933 
(15 U.S.C. 77a) and 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'').
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    The investment adviser to the Fund is AdvisorShares Investments, 
LLC (``Adviser''). Peritus I Asset Management, LLC is the Fund's sub-
adviser (``Sub-Adviser'').
    According to the Registration Statement and as stated in the Prior 
Release, the Fund's investment objective is to achieve high current 
income with a secondary goal of capital appreciation. The Sub-Adviser 
seeks to achieve the Fund's investment objective by selecting, among 
other investments, a focused portfolio of high yield debt securities, 
which include senior and subordinated corporate debt obligations (such 
as bonds, debentures, notes, and commercial paper). The Fund does not 
have any portfolio maturity limitation and may invest its assets from 
time to time primarily in instruments with short-term, medium-term, or 
long-term maturities. The Adviser represents that the investment 
objective of the Fund is not changing.
    The Exchange proposes to reflect a change to the holdings of the 
Fund to achieve its investment objective to include equity securities. 
Thus, in addition to the investments referenced in the Prior Release, 
the Fund seeks to invest to a lesser extent (generally, no more than 
10% of its net assets) in equity securities that the Sub-Adviser 
believes will yield high dividends.\6\ According to the Registration 
Statement, equity securities in which the Fund may invest will include 
common stock, preferred stock, warrants, convertible securities, 
rights, master limited partnerships, depositary receipts (including 
American Depositary Receipts (``ADRs'') and Global Depositary Receipts 
(``GDRs'')),\7\ and real estate investment trusts. Depositary receipts 
held by the Fund may be sponsored or unsponsored, provided that no more 
than 10% of the Fund's net assets will be invested in unsponsored 
depositary receipts. With the exception of unsponsored depositary 
receipts, all equity securities held by the Fund will be listed and 
traded on U.S. national securities exchanges.
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    \6\ The change to the Fund's holdings to include equity 
securities will be effective upon filing with the Commission of an 
amendment to the Trust's Registration Statement on Form N-1A, and 
shareholders will be notified of such change by means of such 
amendment.
    \7\ According to the Registration Statement, ADRs and GDRs are 
certificates evidencing ownership of shares of a foreign issuer. 
These certificates are issued by depositary banks and generally 
trade on an established market in the United States or elsewhere. 
The underlying shares 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.
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    Pursuant to the terms of the Exemptive Order, the Fund will not 
invest in options contracts, futures contracts, or swap agreements. The 
Fund's investments will be consistent with its investment objective and 
will not be used to enhance leverage.
    As stated in the Prior Release, 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, 
which will include information relating to equity securities, among 
other investments, that will form the basis for the Fund's calculation 
of net asset value (``NAV'') at the end of the business day. The intra-
day, closing, and settlement prices of the portfolio securities, 
including any equity securities held by the Fund, are also readily 
available from the national securities exchanges trading such 
securities, automated quotation systems, published or other public 
sources, or on-line information services. All representations made in 
the Prior Release regarding the availability of information relating to 
the Shares, trading halts, trading rules, the Portfolio Indicative 
Value, and surveillance, among others, will continue to apply to 
trading in the Shares.
    The Adviser represents that the proposed change to permit limited 
investment in equity securities, as described above, is consistent with 
the Fund's investment objective, and will further assist the Adviser 
and Sub-Adviser to achieve such investment objective. Specifically, by 
investing to a limited extent in equity securities, the Fund will have 
additional flexibility to achieve high current income through 
investments in dividend-paying equity securities, and to achieve the 
secondary goal of capital appreciation through possible price 
appreciation of such equity investments. Except for the change noted 
above, all other representations made in the Prior Release remain 
unchanged.\8\ The Fund will continue to comply with all initial and 
continued listing requirements under NYSE Arca Equities Rule 8.600.
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    \8\ See note 3, supra. All terms referenced but not defined 
herein are defined in the Prior Release.
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2. Statutory Basis
    The basis under the Exchange Act for this proposed rule change is 
the requirement under Section 6(b)(5) \9\ 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.
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    \9\ 15 U.S.C. 78f(b)(5).
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    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. The Exchange may obtain information 
via the Intermarket Surveillance Group (``ISG'') from other exchanges 
that are members of ISG or with which the Exchange has entered into a 
comprehensive surveillance sharing agreement. No more than 10% of the 
Fund's net assets will be invested

[[Page 24235]]

in unsponsored depositary receipts. With the exception of unsponsored 
depositary receipts, all equity securities held by the Fund will be 
listed and traded on U.S. national securities exchanges.
    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 NAV per Share is calculated daily and that the NAV and the 
Disclosed Portfolio is 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. The Portfolio Indicative Value, as defined in NYSE Arca 
Equities Rule 8.600 (c)(3), is disseminated by one or more major market 
data vendors at least every 15 seconds during the Exchange's Core 
Trading Session. 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 that will form the 
basis for the Fund's calculation of NAV at the end of the business day. 
Information regarding market price and trading volume of the Shares is 
and will be continually available on a real-time basis throughout the 
day on brokers' computer screens and other electronic services, and 
quotation and last-sale information is available via the Consolidated 
Tape Association high-speed line. The intra-day, closing, and 
settlement prices of the portfolio securities, including any equity 
securities held by the Fund, are also readily available from the 
national securities exchanges trading such securities, automated 
quotation systems, published or other public sources, or on-line 
information services. 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 is subject to NYSE Arca Equities Rule 
8.600(d)(2)(D), which sets forth circumstances under which Shares of 
the Fund may be halted. The Web site for the Fund includes a form of 
the prospectus for the Fund and additional data relating to NAV and 
other applicable quantitative information. In addition, as stated in 
the Prior Notice, investors 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. As noted above, the Exchange has in place surveillance 
procedures relating to trading in the Shares and may obtain information 
via ISG from other exchanges that are members of ISG or with which the 
Exchange has entered into a comprehensive surveillance sharing 
agreement. In addition, as stated in the Prior Notice, investors 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 purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A) of the Act \10\ and Rule 19b-4(f)(6) thereunder.\11\ 
Because the 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 prior to 
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 and Rule 19b-
4(f)(6) thereunder.
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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 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.
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative prior to 30 days after the date of the filing. 
However, pursuant to Rule 19b-4(f)(6)(iii),\12\ the Commission may 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative immediately upon filing. The Commission notes that 
waiver of the operative delay would permit the Fund to invest 
immediately in equity securities that the Sub-Adviser believes will 
yield high dividends.\13\
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    \12\ 17 CFR 240.19b-4(f)(6)(iii).
    \13\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    With the exception of unsponsored depositary receipts in which the 
Fund may invest up to 10% of its net assets, all equity securities 
proposed to be held by the Fund would be listed and traded on U.S. 
national securities exchanges. In addition, the Fund will generally not 
invest more than 10% of its net assets in such equity securities. The 
Exchange represents that the limited investments in equity securities 
would be consistent with the Fund's investment objective, which is to 
achieve high current income and capital appreciation. Specifically, the 
Exchange represents that, by investing to a limited extent in equity 
securities, the Fund would have additional flexibility to achieve high 
current income through investments in dividend-paying equity securities 
and to achieve capital appreciation through possible price appreciation 
of such equity investments. Further, the Exchange represents that such 
investment objective is not changing, all other representations made in 
the Prior Release remain unchanged, and the Fund will continue to 
comply with all of the listing requirements under NYSE Arca Equities 
Rule 8.600. For the foregoing reasons, the Commission believes that the 
proposed change does not raise novel or unique regulatory issues that 
should delay the implementation of the Fund's proposed investments in 
certain equity securities. Therefore, the Commission waives the 30-day 
operative delay requirement because the rule change is consistent with 
the protection of investors and the public interest.
    At any time within 60 days of the filing of such 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.

[[Page 24236]]

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-2012-33 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2012-33. 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 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSEArca-2012-33 and should 
be submitted on or before May 14, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-9663 Filed 4-20-12; 8:45 am]
BILLING CODE 8011-01-P