Document ID: SEC-2015-0967-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2015-06-09T04:00Z

[Federal Register Volume 80, Number 110 (Tuesday, June 9, 2015)]
[Notices]
[Pages 32641-32644]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-13986]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75100; File No. SR-NYSEArca-2015-47]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Relating to 
Representation Regarding the AdvisorShares WCM/BNY Mellon Focused 
Growth ADR ETF's Holdings of American Depositary Receipts

June 3, 2015.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that, on May 27, 2015, 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 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 change a representation regarding the 
AdvisorShares WCM/BNY Mellon Focused Growth ADR ETF's holdings of 
American Depositary Receipts. Shares of the WCM/BNY Mellon Focused 
Growth ADR ETF have been approved for listing and trading on the 
Exchange under NYSE Arca Equities Rule 8.600. 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 
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 a proposed rule change relating to 
listing and trading on the Exchange of shares (``Shares'') of the 
AdvisorShares WCM/BNY Mellon Focused Growth ADR ETF (the ``Fund'') 
under NYSE Arca Equities Rule 8.600, \3\ which governs the listing and 
trading of Managed Fund Shares.\4\

[[Page 32642]]

The Fund's Shares are 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. 62502 (July 15, 
2010), 75 FR 42471 (July 21, 2010) (SR-NYSEArca-2010-57) (the 
``Prior Order''). The notice with respect to the Prior Order was 
published in Securities Exchange Act Release No. 62344 (June 21, 
2010), 75 FR 37498 (June 29, 2010) (``Prior Notice'' and, together 
with the Prior Order, the ``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.
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    The Shares are offered by AdvisorShares Trust (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 adviser to the Fund is AdvisorShares 
Investments, LLC (the ``Adviser''). WCM Investment Management (``WCM'') 
is the sub-adviser and portfolio manager to the Fund (``Sub-Adviser'').
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    \5\ The Trust is registered under the 1940 Act. On November 1, 
2014, 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) (the ``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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    According to the Registration Statement, and as stated in the Prior 
Release, the Fund's investment objective is long-term capital 
appreciation above international benchmarks such as the BNY Mellon 
Classic ADR Index and the MSCI EAFE Index. WCM seeks to achieve the 
Fund's investment objective by selecting a portfolio of U.S. traded 
securities of non-U.S. organizations included in the BNY Mellon Classic 
ADR Index. The BNY Mellon Classic ADR Index predominantly includes 
American Depositary Receipts (``ADRs'') and, in addition, includes 
other Depositary Receipts (``DRs''), which include Global Depositary 
Receipts (``GDRs''), Euro Depositary Receipts (``Euro DRs'') and New 
York Shares (``NYSs'').\6\
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    \6\ According to the Registration Statement, DRs, which include 
ADRs, GDRs, Euro DRs and NYSs, are negotiable securities that 
generally represent a non-U.S. company's publicly traded equity or 
debt. Depositary Receipts may be purchased in the U.S. secondary 
trading market. They may trade freely, just like any other security, 
either on an exchange or in the over-the-counter market. Although 
typically denominated in U.S. dollars, Depositary Receipts can also 
be denominated in Euros. Depositary Receipts can trade on all U.S. 
stock exchanges as well as on many European stock exchanges.
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    The Prior Release stated that the Fund, under normal circumstances, 
will have at least 80% of its total assets invested in ADRs (the ``80% 
Representation''). The Fund also may invest in other equity securities, 
including common and preferred stock, warrants, convertible securities 
and master limited partnerships. As stated in the Prior Release, the 
Fund's portfolio consists primarily of ADRs.\7\
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    \7\ The Prior Release further stated that the Fund will not 
invest in non-U.S. equity securities outside of U.S. markets. The 
Exchange recently has filed a proposed rule change pursuant to Rule 
19b-4 under the Act that amended such statement in the Prior Release 
to provide that the Fund may invest in securities outside of U.S. 
markets, and that not more than 10% of the net assets of the Fund in 
the aggregate invested in equity securities (excluding non-exchange-
traded investment company securities) shall consist of equity 
securities whose principal market is not a member of the Intermarket 
Surveillance Group (``ISG'') or is a market with which the Exchange 
does not have a comprehensive surveillance sharing agreement. See 
Securities Exchange Act Release No. 74271 (February 13, 2015), 80 FR 
9301 (February 20, 2015) (SR-NYSEArca-2015-06) (``Second Prior 
Release'').
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    The Exchange has notified the Fund that it currently is not in 
compliance with the 80% Representation.\8\ In order to permit the 
continued listing and trading of Shares of the Fund, the Exchange 
proposes to amend such statement in the Prior Release to provide that 
the Fund will invest at least 80% of its total assets in ADRs and other 
equity securities, including common and preferred stock, warrants, 
convertible securities and master limited partnerships. However, the 
Fund's portfolio will consist primarily of ADRs.
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    \8\ The Trust issued a press release, dated March 24, 2015, 
relating to the non-compliance. The Exchange also has added a 
``below compliance'' (``.BC'') indicator to the Fund's trading 
symbol.
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    As stated in the Second Prior Release, the Fund now may invest in 
non-U.S. equity securities, subject to a limitation on net assets 
invested in equity securities whose principal market is not a member of 
the ISG.\9\ Therefore, the Fund, in certain cases, could choose to 
acquire exposure to non-U.S. equity markets by investing in non-U.S. 
equities directly rather than by investing in ADRs. Therefore, it is 
appropriate to reduce the percentage of Fund assets required to be in 
ADRs. In addition, a reduced threshold for ADR investment would allow 
the Fund to take advantage of opportunities in the equities markets 
without being subject to the 80% Representation, in furtherance of the 
Fund's investment objective. Nevertheless, the Fund's portfolio would 
continue to consist primarily of ADRs (i.e., more than 50% of the 
Fund's total assets would be invested in ADRs).
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    \9\ See note 7, supra.
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    The Exchange notes that the Commission has previously approved 
similar percentage limitations for other funds listed on the Exchange 
under NYSE Arca Equities Rule 8.600.\10\
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    \10\ See, e.g., Securities Exchange Act Release No. 71540 
(February 12, 2014) (SR-NYSEArca-2013-138) (order approving listing 
and trading of shares of iShares Enhanced International Large-Cap 
ETF and iShares Enhanced International Small-Cap ETF Under NYSE Arca 
Equities Rule 8.600).
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    Except for the change described above, all other representations 
made in the Prior Release and the Second Prior Release remain 
unchanged.\11\ The Fund will continue to comply with all initial and 
continued listing requirements under NYSE Arca Equities Rule 8.600.
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    \11\ See notes 3 and 7, supra. All terms referenced but not 
defined herein are defined in the Prior Release.
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    The Exchange represents that the trading in the Shares will be 
subject to the existing trading surveillances, administered by 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.\12\ 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. FINRA, on behalf of the Exchange, will communicate as 
needed regarding trading in the Shares and exchange-listed equity 
securities (including ADRs) with other markets and other entities that 
are members of the ISG, and FINRA, on behalf of the Exchange, may 
obtain trading information regarding trading in the Shares and 
exchange-listed equity securities (including ADRs) from such markets 
and other entities. The Exchange may obtain information regarding 
trading in the Shares and exchange-listed equity securities (including 
ADRs) from markets and other entities that are members of ISG or with 
which the Exchange has in place a comprehensive surveillance sharing 
agreement.\13\ In addition, as stated in the Prior Release, 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.
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    \12\ FINRA surveils trading on the Exchange pursuant to a 
regulatory services agreement. The Exchange is responsible for 
FINRA's performance under this regulatory services agreement.
    \13\ For a list of the current members of ISG, see 
www.isgportal.org. The Exchange notes that not all of the components 
of the portfolio for the Fund may trade on exchanges that are 
members of the ISG or with which the Exchange has in place a 
comprehensive surveillance sharing agreement.

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[[Page 32643]]

2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under section 6(b)(5) \14\ 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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    \14\ 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 are listed and traded on the Exchange pursuant to the initial 
and continued listing criteria in NYSE Arca Equities Rule 8.600. As 
noted above, the Fund now may invest in non-U.S. equity securities, 
subject to a limitation on net assets invested in equity securities 
whose principal market is not a member of the ISG. Therefore, the Fund, 
in certain cases, could choose to acquire exposure to non-U.S. equity 
markets by investing in non-U.S. equities directly rather than by 
investing in ADRs. Therefore, it is appropriate to reduce the 
percentage of Fund assets required to be in ADRs. In addition, a 
reduced threshold for ADR investment would allow the Fund to take 
advantage of opportunities in the equities markets without being 
subject to the 80% Representation, in furtherance of the Fund's 
investment objective. The Fund's portfolio would continue to consist 
primarily of ADRs (i.e., more than 50% of the Fund's total assets would 
be invested in ADRs). The Commission has previously approved similar 
percentage limitations for other funds listed on the Exchange under 
NYSE Arca Equities Rule 8.600.\15\ The Exchange notes that that not 
more than 10% of the net assets of the Fund in the aggregate invested 
in equity securities (excluding non-exchange-traded investment company 
securities) shall consist of equity securities whose principal market 
is not a member of the ISG or is a market with which the Exchange does 
not have a comprehensive surveillance sharing agreement. Such a 
representation assures that most applicable exchange-traded assets of 
the Fund will be assets whose principal market is an ISG member or a 
market with which the Exchange has a comprehensive surveillance sharing 
agreement.
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    \15\ See note 10, supra.
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    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 ISG from 
other exchanges that are members of ISG or with which the Exchange has 
entered into a comprehensive surveillance sharing agreement.
    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 net asset value (``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 a daily basis, the Adviser 
discloses 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. The 
Fund's holdings are disclosed on its Web site daily after the close of 
trading on the Exchange and prior to the opening of trading on the 
Exchange the following 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. Price 
information regarding the Fund's equity investments is available from 
major market data vendors. The intra-day, closing and settlement prices 
for exchange-listed equity securities held by the Fund are also readily 
available from the national securities exchanges trading such 
securities. 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 represents that the 
trading in the Shares is subject to the existing trading surveillances, 
administered by FINRA on behalf of the Exchange, which are designed to 
detect violations of Exchange rules and applicable federal securities 
laws. 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. FINRA, on behalf 
of the Exchange, will communicate as needed regarding trading in the 
Shares and exchange-listed equity securities (including ADRs) with 
other markets and other entities that are members of the ISG, and 
FINRA, on behalf of the Exchange, may obtain trading information 
regarding trading in the Shares and exchange-listed equity securities 
(including ADRs) from such markets and other entities. In addition, the 
Exchange may obtain information regarding trading in the Shares and 
exchange-listed equity securities (including ADRs) from markets and 
other entities that are members of ISG or with which the Exchange has 
in place a comprehensive surveillance sharing agreement. The Adviser 
represents that the proposed change, 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. Such an 
increase may further the public interest by providing the Fund with 
additional flexibility to achieve long-term capital appreciation above 
international benchmarks.

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 purpose of the Act. The Exchange believes the 
proposed rule change is designed to allow the Fund to invest in a 
broader range of non-U.S. equity

[[Page 32644]]

securities thereby helping the Fund to achieve its investment 
objective, and will enhance competition among issues of Managed Fund 
Shares that invest in non-U.S. equity securities.

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 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 \16\ and Rule 19b-
4(f)(6) thereunder.\17\
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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 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, or such shorter time as designated by the Commission.
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    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. If the Commission 
takes such action, the Commission shall institute proceedings under 
section 19(b)(2)(B) of the Act \18\ to determine whether the proposed 
rule change should be approved or disapproved.
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    \18\ 15 U.S.C. 78s(b)(2)(B).
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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-2015-47 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2015-47. 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 Section, 100 F Street 
NE., Washington, DC 20549 on official business days between 10:00 a.m. 
and 3:00 p.m. Copies of the 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-2015-47 and should 
be submitted on or before June 30, 2015.
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    \19\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-13986 Filed 6-8-15; 8:45 am]
 BILLING CODE 8011-01-P