Document ID: SEC-2016-0897-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2016-05-25T04:00Z

[Federal Register Volume 81, Number 101 (Wednesday, May 25, 2016)]
[Notices]
[Pages 33299-33301]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-12239]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77858; File No. SR-NYSEArca-2016-66]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Reflecting a Change 
to the Means of Achieving the Investment Objective With Respect to the 
AdvisorShares EquityPro ETF

May 19, 2016.
    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 5, 2016, NYSE Arca, Inc. (the ``Exchange'' or ``NYSE 
Arca'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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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 reflect a change to the means of achieving 
the investment objective with respect to the AdvisorShares EquityPro 
ETF. Shares of the AdvisorShares EquityPro ETF are currently listed and 
traded on the Exchange. The proposed rule change is available on the 
Exchange's Web site at www.nyse.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

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

1. Purpose
    The Commission has approved listing and trading on the Exchange of 
shares (``Shares'') of the AdvisorShares EquityPro ETF (formerly, the 
Global Alpha & Beta ETF) (``Fund''), a series of AdvisorShares Trust 
(``Trust'') \4\ under NYSE Arca Equities Rule 8.600, which governs the 
listing and trading of Managed Fund Shares. Shares of the Fund are 
currently listed and traded on the Exchange.
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    \4\ See Securities Exchange Act Release Nos. 67277 (June 27, 
2012), 77 FR 39554 (July 3, 2012) (SR-NYSEArca-2012-39) (``Prior 
Order''); 66973 (May 11, 2012), 77 FR 29429 (May 17, 2012) (SR-
NYSEArca-2012-39) (``Prior Notice,'' and together with the Prior 
Order, the ``First Prior Release''). See also Securities Exchange 
Act Release No. 72436 (June 19, 2014), 79 FR 36118 (June 25, 2014) 
(SR-NYSEArca-2014-70) (``Second Prior Release'') (notice of 
effectiveness of proposed rule change regarding the Fund's use of 
certain U.S. exchange-listed options).
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    The Shares are offered by the Trust, which is registered with the 
Commission as an open-end management investment company.\5\ The 
investment advisor to the Fund is AdvisorShares Investments, LLC (the 
``Adviser''). The sub-adviser for the Fund is Elements Financial, PLC 
(the ``Sub-Adviser''). Neither the Adviser nor the Sub-Adviser is a 
registered broker-dealer or is affiliated with a broker-dealer.
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    \5\ The Trust is registered under the Investment Company Act of 
1940 (15 U.S.C. 80a-1). On November 1, 2015, 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 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'').
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    In this proposed rule change, the Exchange proposes to reflect a 
change to the means the Adviser will utilize to implement the Fund's 
investment objective to permit investments in U.S. exchange-traded 
futures contracts, as described below.
    The First Prior Release stated that the Fund's investment objective 
is long-term capital growth. The First Prior Release further stated 
that the Fund will not invest in options contracts, futures contracts, 
or swap agreements. The Second Prior Release stated that the Fund may 
invest up to 10% of the Fund's net assets in the following types of 
options: U.S. exchange-listed index

[[Page 33300]]

options; U.S. exchange-listed individual stock options; or U.S. 
exchange-listed exchange-traded fund (``ETF'') options.
    Going forward, the Adviser wishes to revise the representations in 
the First Prior Release and the Second Prior Release to state that the 
Fund, in addition to investments in U.S. exchange-listed options, as 
described above, may invest up to 10% of the Fund's net assets in U.S. 
exchange-traded stock index futures on broad based indexes, such as 
futures on the S&P 500 Index. All futures contracts in which the Fund 
may invest will be traded on U.S. futures exchanges. Such futures 
contracts will be traded only on futures exchanges that are members of 
the Intermarket Surveillance Group (``ISG''). The Fund may seek to 
invest in futures contracts in order to gain market exposure and/or to 
hedge against a market decline.\6\
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    \6\ The changes described herein will be effective contingent 
upon effectiveness of an amendment to the Trust's Registration 
Statement. See supra, note 5. The Adviser represents that the 
Adviser and the Sub-Adviser have managed and will continue to manage 
the Fund in the manner described in the First Prior Release and the 
Second Prior Release, and the Fund will not implement the proposed 
amendment described herein until the instant proposed rule change is 
operative.
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    The Exchange represents that trading in the Shares will be subject 
to the existing trading surveillances, administered by the Exchange or 
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.\7\ The Exchange represents that 
these procedures are adequate to properly monitor Exchange trading of 
the Shares in all trading sessions and to deter and detect violations 
of Exchange rules and federal securities laws applicable to trading on 
the Exchange. The Fund's investment in futures will not be used to 
enhance leverage.
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    \7\ FINRA conducts cross-market surveillances on behalf of the 
Exchange pursuant to a regulatory services agreement. The Exchange 
is responsible for FINRA's performance under this regulatory 
services agreement.
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    The Exchange or FINRA, on behalf of the Exchange, will communicate 
as needed regarding trading in futures (in addition to the exchange-
traded assets referenced in the First Prior Release and Second Prior 
Release) with other markets and other entities that are members of the 
ISG,\8\ and the Exchange and FINRA, on behalf of the Exchange, may 
obtain trading information regarding trading in futures (in addition to 
the exchange-traded assets referenced in the First Prior Release and 
Second Prior Release) from such markets and other entities. In 
addition, the Exchange may obtain information regarding trading in 
futures (in addition to the exchange-traded assets referenced in the 
First Prior Release and Second Prior Release) from markets and other 
entities that are members of ISG or with which the Exchange has in 
place a comprehensive surveillance sharing agreement.
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    \8\ For a list of the current members of ISG, see 
www.isgportal.org.
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    For purposes of calculating net asset value (``NAV'') of Shares of 
the Fund, futures contracts will generally be valued at the settlement 
price of the relevant exchange on the day of valuation. Quotation and 
last sale information for futures contracts will be available from the 
exchanges on which they trade or from major market data vendors.
    The Adviser represents that there is no change to the Fund's 
investment objective. The Fund will continue to comply with all initial 
and continued listing requirements under NYSE Arca Equities Rule 8.600.
    Except for the changes noted above, all other facts presented and 
representations made in the First Prior Release and Second Prior 
Release remain unchanged.
    All terms referenced but not defined herein are defined in the 
First Prior Release and Second Prior Release.
    The Exchange notes that the Commission has previously approved for 
listing other actively-managed exchange-traded funds that invest in 
U.S. exchange-traded futures.\9\
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    \9\ See, e.g., Securities Exchange Act Release No. 67552 (August 
1, 2012), 77 FR 47131 (August 7, 2012) (SR-NYSEArca-2012-55) (order 
approving listing and trading on the Exchange of the STAR Global 
Buy-Write ETF under NYSE Arca Equities Rule 8.600).
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2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \10\ that an exchange have rules that 
are designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to remove 
impediments to, and perfect the mechanism of a free and open market 
and, in general, to protect investors and the public interest. The 
Adviser represents that there is no change to the Fund's investment 
objective. The Fund will continue to comply with all initial and 
continued listing requirements under NYSE Arca Equities Rule 8.600. All 
futures in which the Fund will invest will be traded on U.S. futures 
exchanges, all of which are members of ISG.
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    \10\ 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, and is designed 
to promote just and equitable principles of trade and to protect 
investors and the public interest, in that the Adviser represents that 
there is no change to the Fund's investment objective. All futures in 
which the Fund will invest will be traded on a U.S futures exchange. 
The Fund's investment in futures will not be used to enhance leverage. 
The Exchange or FINRA, on behalf of the Exchange, will communicate as 
needed regarding trading in futures (in addition to the exchange-traded 
assets referenced in the First Prior Release and Second Prior Release) 
with other markets and other entities that are members of the ISG, and 
the Exchange or FINRA, on behalf of the Exchange, may obtain trading 
information regarding trading in futures (in addition to the exchange-
traded assets referenced in the First Prior Release and Second Prior 
Release) from such markets and other entities. In addition, the 
Exchange may obtain information regarding trading in futures (in 
addition to the exchange-traded assets referenced in the First Prior 
Release and Second Prior Release) from markets and other entities that 
are members of ISG or with which the Exchange has in place a 
comprehensive surveillance sharing agreement.
    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 the Fund will continue to comply with all 
initial and continued listing requirements under NYSE Arca Equities 
Rule 8.600. The Adviser represents that there is no change to the 
Fund's investment objective. Except for the changes noted above, all 
other representations made in the First Prior Release and Second Prior 
Release remain unchanged.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed changes will 
accommodate continued listing and trading of an issue of Managed Fund 
Shares that, under normal conditions, principally holds large-
capitalization, U.S. exchange-listed equities.

[[Page 33301]]

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

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

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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, if consistent with 
the protection of investors and the public interest, the proposed rule 
change has become effective pursuant to Section 19(b)(3)(A) of the Act 
\11\ and Rule 19b-4(f)(6) thereunder.\12\
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 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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    The Exchange has asked the Commission to waive the 30-day operative 
delay so that the proposal may become operative immediately upon 
filing. The Exchange argues that waiver of this requirement is 
consistent with the protection of investors and the public interest 
because the proposed change will permit the Fund to more efficiently 
implement its risk strategy, and, depending on market conditions, to 
hedge market risk or to provide an opportunity for enhanced returns, 
which may be to the benefit of investors. The Commission notes that, 
other than the change proposed herein, no other changes are being made 
with respect to the Fund, and all other representations made in the 
First Prior Release and Second Prior Release remain unchanged. The 
proposal would: (1) Permit the Fund to invest in U.S. exchange-traded 
stock index futures on broad based indexes, such as futures on the S&P 
500 Index; (2) confine all futures contracts in which the Fund may 
invest to be traded only on U.S. futures exchanges that are members of 
the ISG; and (3) limit the Fund's investments in futures contracts to 
10% of the Fund's net assets. The Commission believes that the proposed 
change raises no new or novel regulatory issues and would allow the 
Fund to employ an additional strategy that would be consistent with the 
strategy of other Managed Fund Shares without undue delay.\13\ Thus, 
the Commission believes that waiver of the 30-day operative delay with 
respect to the proposed change to the Fund is consistent with the 
protection of investors and the public interest. The Commission hereby 
waives the 30-day operative delay and designates the proposed rule 
change to be operative upon filing.\14\
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    \13\ See, e.g., Securities Exchange Act Release No. 77620 (April 
14, 2016), 81 FR 23339 (April 20, 2016) (SR-BATS-2015-124) (order 
approving listing and trading of the REX VolMAXX Long VIX Weekly 
Futures Strategy ETF and the REX VolMAXX Inverse VIX Weekly Futures 
Strategy ETF of the Exchange Traded Concepts Trust) and supra, note 
9.
    \14\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission may temporarily suspend such rule change if it 
appears to the Commission that such action is necessary or appropriate 
in the public interest, for the protection of investors, or otherwise 
in furtherance of the purposes of the Act. If the Commission takes such 
action, the Commission shall institute proceedings to determine whether 
the proposed rule should be approved or disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2016-66 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-2016-66. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing will also be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSEArca-2016-66 and should 
be submitted on or before June 15, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-12239 Filed 5-24-16; 8:45 am]
BILLING CODE 8011-01-P