Document ID: SEC-2014-1985-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2014-11-26T05:00Z

[Federal Register Volume 79, Number 228 (Wednesday, November 26, 2014)]
[Notices]
[Pages 70597-70600]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-27976]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73658; File No. SR-NYSEArca-2014-125]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Reflecting a Change 
in The Investment Objective of the Treesdale Rising Rates ETF and 
Change in Its Creation and Redemption Procedures

November 20, 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 November 10, 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 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 the 
Substance of the Proposed Rule Change

    The Exchange proposes to reflect a change in the investment 
objective of the Treesdale Rising Rates ETF and changes in its creation 
and redemption procedures. 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 the 
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 listing and trading on the Exchange of 
shares (``Shares'') of the Treesdale Rising Rates ETF (the ``Fund'') 
under NYSE Arca Equities Rule 8.600, which governs the listing and 
trading of Managed Fund Shares.\4\ Shares of the Fund have not 
commenced trading on the Exchange.
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    \4\ See Securities Exchange Act Release No. 73082 (September 11, 
2014), 79 FR 55845 (September 17, 2014) (SR-NYSEArca-2014-71) (order 
approving listing and trading on the Exchange of the Treesdale 
Rising Rates ETF under NYSE Arca Equities Rule 8.600) (``Prior 
Order''). See also Securities Exchange Act Release No. 72679 (July 
28, 2014), 79 FR 44878 (August 1, 2014) (SR-NYSEArca-2014-71) 
(``Prior Notice,'' and together with the Prior Order, the ``Prior 
Release'').
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    The Fund is a series of the AdvisorShares Trust (``Trust''), a 
statutory trust organized under the laws of the State of Delaware and 
registered with the Securities and Exchange Commission (the 
``Commission'') as an open-end management investment company.\5\ The 
investment adviser to the Fund is AdvisorShares Investment, LLC 
(``Adviser''). Foreside Fund Services, LLC (the ``Distributor'') is the 
principal underwriter and distributor of the Fund's Shares. The Bank of 
New York Mellon (the ``Administrator'') serves as the administrator, 
custodian, transfer agent and fund accounting agent for the Fund.
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    \5\ The Trust is registered under the 1940 Act. On September 4, 
2013, 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) and on September 29, 2014, the Trust 
filed with the Commission definitive materials on Form 497 (File No. 
333-157876) (``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 in the investment objective of the Fund and changes in its 
creation and redemption procedures, as described below.\6\
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    \6\ The changes described herein have been filed with the 
Commission in definitive materials on Form 497. See note 5, supra. 
The Adviser represents that it will manage the Fund in the manner 
described in the Prior Release, and will not implement the changes 
described herein until the instant proposed rule change is 
operative. Shares of the Fund have not commenced trading on the 
Exchange.
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Investment Objective
    The Prior Release stated that the Fund would seek to generate 
current income while providing protection for investors against loss of 
principal in a rising interest rate environment. The Adviser wishes to 
revise the description to state that the Fund will seek total return 
while providing protection for investors against loss of principal in a 
rising interest rate environment.
Creation and Redemption of Shares
    As stated in the Prior Release, the Fund will issue and redeem 
Shares on a continuous basis at net asset value (``NAV'') in aggregated 
lots which shall initially be of 25,000 Shares (each, a ``Creation 
Unit'').
    As stated in the Prior Release, all orders to create or redeem 
Creation Units must be received by the Distributor no later than 3:00 
p.m., Eastern Time in order for the creation or redemption of Creation 
Units to be

[[Page 70598]]

effected based on the NAV of Shares of the Fund as next determined on 
such date.
    The Prior Release stated that the consideration for purchase of a 
Creation Unit generally would 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.'' Together, the Deposit 
Securities and the Cash Component would constitute the ``Fund 
Deposit,'' which would represent the minimum initial and subsequent 
investment amount for a Creation Unit of the Fund. The Prior Release 
stated that the Cash Component would be an amount equal to the 
difference between the NAV of the Shares of the Fund (per Creation 
Unit) and the market value of the Deposit Securities. The Prior Release 
also stated that the Trust reserved 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 through the clearing process, or which may 
not be eligible for trading by an authorized participant or the 
investor for which it is acting. Finally, the Prior Release stated that 
the Trust reserves the right to offer an ``all cash'' option for 
creations and redemptions of Creation Units for the Fund.\7\
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    \7\ 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.
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    The Advisor wishes to revise the description of the consideration 
for purchase of a Creation Unit to state that Creation Units of the 
Fund generally will be sold for cash (``Cash Purchase Amount''). The 
Advisor wishes to revise the description to state that Creation Units 
will be sold at the NAV next computed, plus a transaction fee, and all 
purchases of the Fund will be effected through a transfer of cash 
directly through the Depository Trust Company (``DTC''). The Advisor 
further wishes to revise the description to state that the Trust 
reserves the right to offer an in-kind option for creations of Creation 
Units for the Fund \8\ and that the Trust reserves the absolute right 
to reject a creation order if (a) the order is not in proper form; (b) 
the investor(s), upon obtaining the shares ordered, would own 80% or 
more of the currently outstanding shares of the Fund; (c) acceptance of 
the Cash Purchase Amount would, in the opinion of counsel, be unlawful; 
or (d) in the event that circumstances outside the control of the 
Trust, the Distributor and the Advisor make it for all practical 
purposes impossible to process creation orders.
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    \8\ The Adviser represents that, to the extent the Trust effects 
the creation of Shares in kind, such transactions will be effected 
in the same manner for all authorized participants.
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    As stated in the Prior Release, Shares generally may be redeemed 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 of the 
Fund in amounts less than Creation Units.
    The Prior Release stated that unless cash redemptions are available 
or specified, the redemption proceeds for a Creation Unit generally 
would consist of ``the 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 
a receipt of a request in proper form, and the value of the Fund 
Securities, less a redemption transaction fee. The Prior Release stated 
that the Administrator, through the National Securities Clearing 
Corporation (``NSCC''), would 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 to 
redemption requests received in proper form on that day as well as the 
estimated Cash Component.
    The Prior Release stated that if it is not possible to effect 
deliveries of the Fund Securities, for example if the investor is not 
able to accept delivery, the Trust could in its discretion exercise its 
option to redeem Shares of the Fund in cash, and the redeeming 
beneficial owner would be required to receive its redemption proceeds 
in cash. In addition, the Prior Release stated that an investor could 
request a redemption in cash which the Fund could, in its sole 
discretion, permit.\9\ The Prior Release stated that in either case, 
the investor would 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, 
as described in the Registration Statement). The Prior Release stated 
the Fund could 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 applicable Fund Securities 
but does not differ in NAV.
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    \9\ 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.
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    The Prior Release stated that the Fund (whether or not it otherwise 
permits cash redemptions) reserves the right to redeem Creation Units 
for cash to the extent that the Fund could not lawfully deliver 
specific Fund Securities upon redemptions or could not do so without 
first registering the Fund Securities under such laws. The Prior 
Release stated that an authorized participant or an investor for which 
it is acting subject to a legal restriction with respect to a 
particular stock included in the Fund Securities applicable to the 
redemption of a Creation Unit may be paid an equivalent amount of cash.
    The Advisor wishes to revise the description of redemption to state 
that redemption proceeds for a Creation Unit of the Fund generally will 
consist of cash in an amount equal to the NAV of the shares being 
redeemed, as next determined after receipt of a request in proper form, 
less a redemption transaction fee. The Trust reserves the right to 
offer an in-kind option for redemptions of Creation Units for the 
Fund.\10\
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    \10\ The Adviser represents that, to the extent the Trust 
effects the redemption of Shares in kind, such transactions will be 
effected in the same manner for all authorized participants.
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    The Shares will conform to the initial and continued listing 
criteria under NYSE Arca Equities Rule 8.600.
    Except for the changes noted above, all other facts presented and 
representations made in the Prior Release remain unchanged.
    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) \11\ 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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    \11\ 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

[[Page 70599]]

promote just and equitable principles of trade and to protect investors 
and the public interest, in that the change in the statement of 
investment objective will specify that the Fund will seek to generate 
total return while providing protection for investors against loss of 
principal in a rising interest rate environment, thereby providing 
notice to investors regarding the change in the investment objective of 
the Fund before Shares of the Fund commence trading on the Exchange. 
The Adviser believes such change will enable investors to better 
understand the Fund's expected investment activities and determine if 
and/or to what extent an investment in the Fund is appropriate for 
their portfolios. The Adviser represents that there are no changes to 
the Fund's statements regarding how at least 80% of its net assets will 
be invested in normal circumstances, how it may invest remaining 
assets, how it will calculate NAV, or what information will be publicly 
available regarding the Shares and the portfolio holdings of the Fund.
    The Exchange also 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 proposed rule 
change would provide notice to investors of the proposed changes in the 
creation and redemption procedures of the Fund, including notice that 
Creation Units of the Fund generally will be sold for the Cash Purchase 
Amount, that Creation Units will be sold at the NAV next computed, plus 
a transaction fee, and purchases of the Fund generally will be effected 
through a transfer of cash directly through the DTC. In addition, the 
proposed rule change would provide notice that the redemption proceeds 
for a Creation Unit of the Fund generally will consist of cash in an 
amount equal to the NAV of the shares being redeemed, as next 
determined after receipt of a request in proper form, less a redemption 
transaction fee. The proposed rule change would also provide notice 
that the Trust reserves the right to offer in-kind options for 
creations and redemptions of Creation Units for the Fund, and that to 
the extent such in-kind creations and/or redemptions are effected, such 
transactions will be effected in the same manner for all authorized 
participants.
    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 Shares will be listed and traded on the 
Exchange pursuant to the initial and continued listing requirements in 
NYSE Arca Equities Rule 8.600. Except for the changes noted above, all 
other representations made in the 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 Exchange notes that the 
proposed rule change 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.

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 \12\ and Rule 19b-4(f)(6) thereunder.\13\ 
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 is filed, or such shorter time as the 
Commission may designate, it has become effective pursuant to Section 
19(b)(3)(A) of the Act and Rule 19b-4(f)(6) thereunder.\14\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6).
    \14\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change, along with a 
brief description and the text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \15\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \16\ permits the 
Commission to 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. In support 
of its request, the Exchange states that waiver of the 30-day operative 
delay is consistent with the protection of investors and the public 
interest in that the proposed changes 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. The Commission believes that 
waiving the 30-day operative delay is consistent with the protection of 
investors and the public interest. Therefore, the Commission hereby 
waives the operative delay and designates the proposed rule change 
operative upon filing.\17\
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    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ 17 CFR 240.19b-4(f)(6)(iii).
    \17\ 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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    At any time within 60 days of the filing of the 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. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule change 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-2014-125 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-2014-125. 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

[[Page 70600]]

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 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-2014-125, and should be submitted on or before 
December 17, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-27976 Filed 11-25-14; 8:45 am]
BILLING CODE 8011-01-P