Document ID: SEC-2016-0181-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2016-02-03T05:00Z

[Federal Register Volume 81, Number 22 (Wednesday, February 3, 2016)]
[Notices]
[Pages 5798-5800]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-01922]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76981; File No. SR-NYSEArca-2016-20]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Reflect Changes 
to the Investment Strategy for the PowerShares S&P 500[supreg] Downside 
Hedged Portfolio

January 28, 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 January 26, 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 a rule change to reflect changes to the 
investment strategy for the PowerShares S&P 500[supreg] Downside Hedged 
Portfolio (the ``Fund''). 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 previously approved listing and trading on the 
Exchange of shares (``Shares'') of the Fund, a series of the 
PowerShares Actively Managed Exchange-Traded Fund Trust (the 
``Trust''),\4\ under NYSE Arca Equities Rule 8.600, which governs the 
listing and trading of Managed Fund Shares. Shares of the Fund have 
commenced listing and trading on the Exchange.
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    \4\ See Securities Exchange Act Release No. 68158 (Nov. 5, 
2012), 77 FR 67412 (Nov. 9, 2012) (SR-NYSEArca-2012-101) (``Prior 
Order''). See also Securities Exchange Act Release No. 67881 (Sept. 
18, 2012), 77 FR 58889 (Sept. 24, 2012) (SR-NYSEArca-2012-101) 
(``Prior Notice,'' and together with the Prior Order, the ``Prior 
Release'').
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    The Shares are offered by the Trust, a statutory trust organized 
under the laws of the State of Delaware and registered with the 
Commission as an open-end management investment company.\5\ The 
investment advisor to the Fund is Invesco PowerShares Capital 
Management LLC (the ``Adviser'').
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    \5\ The Trust is registered under the Investment Company Act of 
1940 (15 U.S.C. 80a-1) (``1940 Act''). The Trust intends to file a 
prospectus supplement with the Commission or a post-effective 
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. 333-147622 and 
811-22148) (``Registration Statement'') to reflect the changes 
requested in the proposed rule change upon effectiveness of the rule 
change. The description of the operation of the Trust and the Fund 
herein will be reflected in any such filing. In addition, the 
Commission has issued an order granting certain exemptive relief to 
the Trust under the1940 Act. See Investment Company Act Release No. 
28171 (Feb. 27, 2008) (File No. 812-13386) (``Exemptive Order'').
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    In this proposed rule change, the Exchange proposes to reflect 
changes to the investment strategy that the Adviser utilizes in seeking 
to achieve the Fund's investment objective, as described below.\6\
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    \6\ The changes described herein will be effective contingent 
upon filing of a prospectus supplement or upon effectiveness of the 
Trust's most recent post-effective amendment to its Registration 
Statement. See note 5, supra. The Adviser represents that the 
Adviser will not implement the changes described herein until the 
instant proposed rule change is operative.
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    The Prior Release stated that, according to the Registration 
Statement, the Fund is an actively managed exchange-traded fund that 
will seek to achieve positive total returns in rising or falling 
markets that are not directly correlated to broad equity or fixed 
income market returns. According to the Registration Statement, the 
Fund seeks to achieve its investment objective by using a quantitative, 
rules-based investment strategy designed to provide returns that 
correspond to the performance of the S&P 500 Dynamic VEQTOR Index (the 
``Benchmark''). The Registration Statement also stated that the 
allocation among the Fund's investments generally will approximate the 
allocation among the components of the Benchmark.
    The Adviser now represents that, rather than employing a 
quantitative, rules-based strategy designed to provide returns that 
correspond to the performance of the Benchmark, the Fund will use a 
quantitative, rules-based strategy that is designed to outperform the 
Benchmark rather than match it.
    The Adviser will continue to invest the Fund in the same 
instruments as are contained in the Benchmark, as discussed in the 
Prior Release. However, the Adviser now represents that the Fund will 
use portfolio management strategies in seeking to achieve its 
investment objective that allocate the Fund's assets in a manner that 
may not correspond to the Benchmark. The Adviser also now represents 
that, going forward, the Fund will seek to outperform the Benchmark 
rather than match it.
    The Exchange notes that the Prior Release stated that, according to 
the Registration Statement, the Fund may invest a portion of its assets 
in high-quality money market instruments, cash, and cash equivalents to 
provide liquidity, to collateralize its futures contracts investments, 
or to track the Benchmark during times when the Benchmark moves its 
entire allocation to cash. The Exchange also proposes to change this 
representation to state that the Fund may invest a portion of its 
assets in high-quality money market instruments, cash, and cash 
equivalents to provide liquidity, to collateralize its futures 
contracts investments, or during periods of heightened volatility when 
the Adviser believes that it is in the best interest of the Fund to do 
so. Because the Fund, going forward, would seek to outperform rather 
than match the Benchmark, the Fund would no longer utilize high quality 
money market instruments, cash and cash equivalents for the purpose of 
tracking the Benchmark.
    The Adviser represents that there is no change to the Fund's 
investment objective. The Fund will continue to invest in the 
securities and financial instruments identified in the Prior

[[Page 5799]]

Release and will remain subject to the allocation limitations 
identified in the Prior Release.
    Except for the changes noted above, all other facts presented and 
representations made in the Prior Release are unchanged.
    The Fund will continue to comply with all initial and continued 
listing requirements under NYSE Arca Equities Rule 8.600.
    All terms referenced but not defined herein are defined in the 
Prior Release.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \7\ 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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    \7\ 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. The proposed 
changes to the representations contained in the Prior Release are 
limited in scope. The Adviser is changing the representation in the 
Prior Release that the Fund will employ a quantitative, rules-based 
strategy designed to provide returns that correspond to the performance 
of the Benchmark, to a representation that the Fund will use a 
quantitative, rules-based strategy that is designed to outperform the 
Benchmark rather than seek returns comparable to it.
    The Adviser represents that there is no change to the Fund's 
investment objective or to the securities and financial instruments 
identified in the Prior Release that the Fund utilizes in seeking to 
achieve its investment objective. The Fund's use of such securities and 
financial instruments will remain subject to the applicable allocation 
limitations identified in the Prior Release. The Fund will continue to 
comply with all initial and continued listing requirements under NYSE 
Arca Equities Rule 8.600.
    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 Adviser represents that there is no change to the Fund's 
investment objective. The Adviser represents that the allocation of the 
Fund's portfolio will remain consistent with the allocation limitations 
discussed in the Prior Release, and that the Fund may invest in the 
same instruments as are contained in the Benchmark, as discussed in the 
Prior Release. However, the Adviser now represents that the Fund will 
use portfolio management strategies in seeking to achieve its 
investment objective that allocate the Fund's assets in a manner that 
may not correspond to the Benchmark. The Adviser also now represents 
that, going forward, the Fund will seek to outperform the Benchmark 
rather than match it.
    As noted above, the Prior Release stated that, according to the 
Registration Statement, the Fund may invest a portion of its assets in 
high-quality money market instruments, cash, and cash equivalents to 
provide liquidity, to collateralize its futures contracts investments, 
or to track the Benchmark during times when the Benchmark moves its 
entire allocation to cash. The Exchange also proposes to change this 
representation to state that the Fund may invest a portion of its 
assets in high-quality money market instruments, cash, and cash 
equivalents to provide liquidity, to collateralize its futures 
contracts investments, or during periods of heightened volatility when 
the Adviser believes that it is in the best interest of the Fund to do 
so.
    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 proposed rule change will permit the Fund to operate in 
a manner similar to other issues of Managed Fund Shares that seek to 
outperform an index and will permit continued listing on the Exchange 
of the Fund after it begins to utilize the quantitative, rules-based 
strategy designed to outperform the Benchmark, which will enhance 
competition among issues of Managed Fund Shares currently trading on 
the Exchange. Except for the changes noted above, all other 
representations made in the Prior Release are 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 change will 
permit the Fund to operate in a manner similar to other issues of 
Managed Fund Shares that seek to outperform an index and will permit 
continued listing on the Exchange of the Fund after it begins to 
utilize the quantitative, rules-based strategy designed to outperform 
the Benchmark, which will enhance competition among issues of Managed 
Fund Shares.

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 
\8\ and Rule 19b-4(f)(6) thereunder.\9\
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 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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    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

[[Page 5800]]

     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2016-20 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-2016-20. 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-2016-20 and should 
be submitted on or before February 24, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-01922 Filed 2-2-16; 8:45 am]
 BILLING CODE 8011-01-P