Document ID: SEC-2010-0544-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2010-04-12T04:00Z

[Federal Register: April 12, 2010 (Volume 75, Number 69)]
[Notices]               
[Page 18558-18559]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12ap10-110]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61843; File No. SR-NYSEArca-2010-12]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting 
Accelerated Approval of a Proposed Rule Change Relating to Listing of 
the One Fund Under NYSE Arca Equities Rule 8.600

April 5, 2010.
    On March 2, 2010, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange''), 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to 
list and trade shares of One Fund (the ``Fund''), a series of the U.S. 
One Trust (the ``Trust'') under NYSE Arca Equities Rule 8.600 
(``Managed Fund Shares''). The proposed rule change was published in 
the Federal Register on March 18, 2010.\3\ The Commission received no 
comments on the proposal. This order grants approval of the proposed 
rule change on an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 61689 (March 11, 
2010), 75 FR 13181 (``Notice'').
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I. Description of the Proposal

    The Fund seeks to achieve its investment objective by investing 
primarily in the retail shares of other exchange-traded funds that are 
registered under the Investment Company Act of 1940 (``1940 Act'') 
(``Underlying ETFs'').\4\ U.S. One, Inc. (the ``Adviser'') is the 
adviser for the Fund. The Adviser is not affiliated with a broker-
dealer. If the Adviser becomes affiliated with a broker-dealer, the 
Adviser would be required to comply with the ``fire wall'' provisions 
contained in Commentary .07 to NYSE Arca Equities Rule 8.600.\5\ PNC 
Global Investment Servicing, Inc. serves as the custodian, transfer 
agent and administrator for the Fund.
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    \4\ The Trust is registered under the 1940 Act. On February 5, 
2010, the Trust filed with the Commission Amendment No. 2 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. 333-160877 and 811-22320) 
(``Registration Statement'').
    \5\ Commentary .07 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 .07 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. 
Commentary .07 to Rule 8.600 is similar to Commentary .03(a)(i) and 
(iii) to NYSE Arca Equities Rule 5.2(j)(3); however, in connection 
with the establishment of a ``fire wall'' between the investment 
adviser and the broker-dealer, Commentary .07 reflects the 
applicable open-end fund's portfolio, not an underlying benchmark 
index, as is the case with index-based funds.
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    The Exchange states that the Shares will conform to the initial and 
continued listing criteria under NYSE Arca Equities Rule 8.600 and that 
the Fund will be in compliance with Rule 10A-3 under the Act,\6\ as 
provided by NYSE Arca Equities Rule 5.3. The Fund's investment 
objective is to seek long-term capital appreciation. In pursuing its 
investment objective, the Adviser will normally invest at least 80% of 
its total assets in Underlying ETFs. The Adviser invests in Underlying 
ETFs that track various securities indices comprised of large, mid and 
small capitalization companies in the United States, Europe and Asia, 
as well as other developed and emerging markets.
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    \6\ 17 CFR 240.10A-3.
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    Additional information regarding the Fund, the Shares, the Fund's 
investment objective, investment strategies, policies, restrictions, 
risks, fees and expenses, creations and redemptions of Shares, 
availability of information, trading rules and halts, and surveillance 
procedures, among other things, can be found in the Registration 
Statement and in the Notice, as applicable.\7\
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    \7\ See supra notes 3 and 4.
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II. Discussion and Commission's Findings

    The Commission has carefully reviewed the proposed rule change and 
finds that it is consistent with the requirements of Section 6 of the 
Act \8\ and the rules and regulations thereunder applicable to a 
national securities exchange.\9\ In particular, the Commission finds 
that the proposal is consistent with Section 6(b)(5) of the Act,\10\ 
which requires, among other things, that the Exchange's rules be 
designed to promote just and equitable principles of trade, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general, to protect investors and the 
public interest.
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    \8\ 15 U.S.C. 78f.
    \9\ In approving this proposed rule change the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \10\ 17 U.S.C. 78f(b)(5).
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    The Commission finds that the proposal to list and trade the Shares 
on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the 
Act, which sets forth Congress' finding that it is in the public 
interest and appropriate for the protection of investors and the 
maintenance of fair and orderly markets to assure the availability to 
brokers, dealers and investors of information with respect to 
quotations for and transactions in securities. Quotation and last sale 
information for the Shares will be available via the Consolidated Tape 
Association (``CTA'') high-speed line, and the Exchange will 
disseminate the Portfolio Indicative Value (``PIV'') at least every 15 
seconds during the Core Trading Session through the facilities of the 
CTA. In addition, the Fund will make available on its Web site on each 
business day before commencement of trading of the Core Trading Session 
the Disclosed Portfolio as defined in NYSE Arca Equities Rule 
8.600(c)(2) \11\ that will form the basis for its calculation of

[[Page 18559]]

the net asset value (``NAV''), which will be determined as of the close 
of the regular trading session on the New York Stock Exchange 
(ordinarily 4:00 p.m. Eastern Time) on each business day. In addition, 
a basket composition file, which includes the security names and share 
quantities 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 New York Stock Exchange 
via the National Securities Clearing Corporation. The Fund's Web site 
will also include additional quantitative information updated on a 
daily basis relating to trading volume, prices, and NAV. Information 
regarding the market price and trading volume of the Shares will be 
continually available on a real-time basis throughout the day via 
electronic services, and the previous day's closing price and trading 
volume information for the Shares will be published daily in the 
financial sections of newspapers.
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    \11\ The Exchange represents that the Fund will disclose on the 
Fund's Web site for each portfolio security or other financial 
instrument of the Fund the following information: Ticker symbol (if 
applicable), name of security or financial instrument, number of 
shares or dollar value of financial instruments held in the 
portfolio, and percentage weighting of the security or financial 
instrument in the portfolio.
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    The Commission further believes that the proposal to list and trade 
the Shares is reasonably designed to promote fair disclosure of 
information that may be necessary to price the Shares appropriately and 
to prevent trading when a reasonable degree of transparency cannot be 
assured. The Commission notes 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.\12\ 
Additionally, if it becomes aware that the NAV or the Disclosed 
Portfolio is not disseminated daily to all market participants at the 
same time, the Exchange will halt trading in the Shares until such 
information is available to all market participants. Further, if the 
PIV is not being disseminated as required, the Exchange may halt 
trading during the day in which the disruption occurs; if the 
interruption persists past the day in which it occurred, the Exchange 
will halt trading no later than the beginning of the trading day 
following the interruption.\13\ Finally, the Commission notes that the 
Reporting Authority that provides the Disclosed Portfolio must 
implement and maintain, or be subject to, procedures designed to 
prevent the use and dissemination of material non-public information 
regarding the actual components of the portfolio.\14\
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    \12\ See NYSE Arca Equities Rule 8.600(d)(1)(B).
    \13\ See NYSE Arca Equities Rule 8.600(d)(2)(D). The Exchange 
states that trading in the Shares may also be halted because of 
market conditions or for reasons that, in the view of the Exchange, 
make trading in the Shares inadvisable. These may include: (1) The 
extent to which trading is not occurring in the securities 
comprising the Disclosed Portfolio and/or the financial instruments 
of the Fund; or (2) whether other unusual conditions or 
circumstances detrimental to the maintenance of a fair and orderly 
market are present.
    \14\ See NYSE Arca Equities Rule 8.600(d)(2)(B)(ii).
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    The Exchange has represented that the Shares are equity securities 
subject to the Exchange's rules governing the trading of equity 
securities and 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). In support of this 
proposal, the Exchange has made representations, including:
    (1) The Shares will conform to the initial and continued listing 
criteria under NYSE Arca Equities Rule 8.600.
    (2) The Exchange's surveillance procedures are adequate to properly 
monitor Exchange trading of the Shares in all trading sessions and to 
deter and detect violations of Exchange rules and applicable Federal 
securities laws.
    (3) Prior to the commencement of trading, the Exchange will inform 
its ETP Holders in an Information Bulletin of the special 
characteristics and risks associated with trading the Shares. 
Specifically, the Information Bulletin will discuss the following: (a) 
The procedures for purchases and redemptions of Shares and that Shares 
are not individually redeemable; (b) NYSE Arca Equities Rule 9.2(a), 
which imposes a duty of due diligence on its ETP Holders to learn the 
essential facts relating to every customer prior to trading the Shares; 
(c) the risks involved in trading the Shares during the Opening and 
Late Trading Sessions when an updated PIV will not be calculated or 
publicly disseminated; (d) how information regarding the PIV is 
disseminated; (e) the requirement that ETP Holders deliver a prospectus 
to investors purchasing newly issued Shares prior to or concurrently 
with the confirmation of a transaction; and (f) trading information.
    (4) The Fund will be in compliance with Rule 10A-3 under the 
Act.\15\
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    \15\ See supra note 6.
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    (5) Underlying ETFs will be listed and traded in the U.S. on a 
national securities exchange. While the Underlying ETFs may hold non-
U.S. equity securities, the Fund will not invest in non-U.S. equity 
securities.
    This approval order is based on the Exchange's representations. For 
the foregoing reasons, the Commission finds that the proposed rule 
change is consistent with Section 6(b)(5) of the Act\16\ and the rules 
and regulations thereunder applicable to a national securities 
exchange.
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    \16\ 15 U.S.C. 78f(b)(5).
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 III. Accelerated Approval

    The Commission finds good cause, pursuant to Section 19(b)(2) of 
the Act,\17\ for approving the proposal prior to the thirtieth day 
after the date of publication of the Notice in the Federal Register. 
The Commission notes that it has approved the listing and trading on 
the Exchange of shares of other actively managed exchange-traded funds 
based on a portfolio of securities, the characteristics of which are 
similar to those to be invested by the Fund.\18\ The Commission also 
notes that it has received no comments regarding the proposed rule 
change. Further, the Commission believes that proposed rule change does 
not raise any novel regulatory concerns. The Commission believes that 
accelerating approval of this proposal should benefit investors by 
creating, without undue delay, additional competition in the market for 
Managed Fund Shares.
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    \17\ 15 U.S.C. 78s(b)(2).
    \18\ See, e.g., Securities Exchange Act Release No. 60460 
(August 7, 2009), 74 FR 41468 (August 17, 2009) (SR-NYSEArca-2009-
55) (approving the listing and trading of shares of the Dent 
Tactical ETF).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\19\ that the proposed rule change (SR-NYSEArca-2010-12) be, and it 
hereby is, approved on an accelerated basis.
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    \19\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-8222 Filed 4-9-10; 8:45 am]
BILLING CODE 8011-01-P