Document ID: SEC-2011-0499-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2011-04-12T04:00Z

[Federal Register Volume 76, Number 70 (Tuesday, April 12, 2011)]
[Notices]
[Pages 20401-20406]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-8725]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64224; File No. SR-NYSEArca-2011-11]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Relating to the Listing and Trading of the 
Guggenheim Enhanced Core Bond ETF and Guggenheim Enhanced Ultra-Short 
Bond ETF

April 7, 2011.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on March 24, 2011, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'') 
filed with the Securities and Exchange Commission (``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 list and trade the following under NYSE 
Arca Equities Rule 8.600: Guggenheim Enhanced Core Bond ETF and 
Guggenheim Enhanced Ultra-Short Bond ETF. The text of the proposed rule 
change is available at the Exchange, the Commission's Public Reference 
Room, and http://www.nyse.com.

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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to list and trade the following Managed Fund 
Shares \3\ (``Shares'') under NYSE Arca Equities Rule 8.600: Guggenheim 
Enhanced Core Bond ETF and Guggenheim Enhanced Ultra-Short Bond ETF 
(each a ``Fund,'' and, collectively, ``Funds'').\4\ The Shares will be 
offered by the Claymore Exchange-Traded Fund Trust (``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\
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    \3\ 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) (``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.
    \4\ The Commission previously approved listing and trading on 
the Exchange of the following actively managed funds under Rule 
8.600. See Securities Exchange Act Release Nos. 57801 (May 8, 2008), 
73 FR 27878 (May 14, 2008) (SR-NYSEArca-2008-31) (order approving 
Exchange listing and trading of twelve actively-managed funds of the 
WisdomTree Trust); 61365 (January 15, 2010), 75 FR 4124 (January 26, 
2010) (SR-NYSEArca-2009-114) (order approving listing and trading of 
Grail McDonnell Fixed Income ETFs); and 60981 (November 10, 2009), 
74 FR 59594 (November 18, 2009) (SR-NYSEArca-2009-79) (order 
approving listing of five fixed income funds of the PIMCO ETF 
Trust).
    \5\ The Trust is registered under the 1940 Act. On July 26, 
2010, the Trust filed with the Commission Form N-1A under the 
Securities Act of 1933 (15 U.S.C. 77a) (``Securities Act'') relating 
to the Funds (File Nos. 333-134551 and 811-21906) (``Registration 
Statement''). The description of the operation of the Trust and the 
Funds herein is based on the Registration Statement.
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    The investment adviser for the Funds is Claymore Advisors, LLC 
(``Investment Adviser''). The Bank of New York Mellon is the custodian 
and transfer agent for the Funds. Claymore Securities, Inc. is the 
distributor for the Funds.
    Commentary .06 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.\6\ In addition, 
Commentary .06 further 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. The Investment 
Adviser is affiliated with a broker-dealer and has represented that it 
has implemented a fire wall with respect to its broker-

[[Page 20402]]

dealer affiliate regarding access to information concerning the 
composition and/or changes to the portfolio. In the event (a) the 
Investment Adviser becomes newly affiliated with a broker-dealer, or 
(b) any new adviser or sub-adviser becomes affiliated with a broker-
dealer, they will implement a fire wall with respect to such broker-
dealer regarding access to information concerning the composition and/
or changes to the portfolio.
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    \6\ An investment adviser to an open-end fund is required to be 
registered under the Investment Advisers Act of 1940 (``Advisers 
Act''). As a result, the investment adviser is subject to the 
provisions of Rule 204A-1 under the Advisers Act relating to codes 
of ethics. This Rule requires investment advisers to adopt a code of 
ethics that reflects the fiduciary nature of the relationship to 
clients as well as compliance with other applicable securities laws. 
Accordingly, procedures designed to prevent the communication and 
misuse of non-public information by an investment adviser must be 
consistent with Rule 204A-1 under the Advisers Act. The Exchange 
represents that the Investment Adviser and related personnel, are 
subject to Advisers Act Rule 204A-1. In addition, Rule 206(4)-7 
under the Advisers Act makes it unlawful for an investment adviser 
to provide investment advice to clients unless such investment 
adviser has (i) Adopted and implemented written policies and 
procedures reasonably designed to prevent violation, by the 
investment adviser and its supervised persons, of the Advisers Act 
and the Commission rules adopted thereunder; (ii) implemented, at a 
minimum, an annual review regarding the adequacy of the policies and 
procedures established pursuant to subparagraph (i) above and the 
effectiveness of their implementation; and (iii) designated an 
individual (who is a supervised person) responsible for 
administering the policies and procedures adopted under subparagraph 
(i) above.
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Guggenheim Enhanced Core Bond ETF
    According to the Registration Statement, the investment objective 
of the Guggenheim Enhanced Core Bond ETF is to seek total return, 
comprised of income and capital appreciation. The Fund will use a 
quantitative strategy to seek total returns, comprised of income and 
capital appreciation, and risk-adjusted returns in excess of the 
Barclays Capital U.S. Aggregate Bond Index (``Benchmark'') while 
maintaining a low risk profile versus the Benchmark. The Fund's 
quantitative strategy attempts to identify relative mispricing among 
the instruments of a given asset class and estimate future returns 
which may arise from the correction of these mispricing levels. The 
quantitative portfolio construction process then attempts to maximize 
expected returns due to issue-specific mispricing while controlling for 
interest rate and credit spread (i.e., differences in yield between 
different debt instruments arising from differences in credit risk) 
risks. The average duration of the Fund's debt holdings is expected to 
be generally similar to the average duration of the Benchmark 
components.
    The Fund primarily will invest in U.S. dollar-denominated 
investment grade debt securities, rated Baa or higher by Moody's 
Investors Service, Inc. (``Moody's''), or equivalently rated by 
Standard & Poor's Rating Group (``S&P'') or Fitch Investor Services 
(``Fitch'') or, if unrated, determined by the Investment Adviser to be 
of comparable quality.\7\ The Fund may invest, without limitation, in 
U.S. dollar-denominated debt securities of foreign issuers. The Fund 
may also invest in debt securities denominated in foreign currencies. 
The Investment Adviser may attempt to reduce foreign currency exchange 
rate risk by entering into contracts with banks, brokers, or dealers to 
purchase or sell securities or foreign currencies at a future date 
(``forward contracts''). The Fund may invest no more than 10% in high 
yield securities (``junk bonds''), which are debt securities that are 
rated below investment grade by nationally recognized statistical 
rating organizations, or are unrated securities that the Investment 
Adviser believes are of comparable quality.
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    \7\ The Investment Adviser's analysis is comprised of multiple 
elements including collateral and counterparty risk, structural 
analysis, quantitative analysis, and relative value/market value at 
risk analysis. Evaluation is also applied to collateral, historical 
market data, and proprietary statistical models to evaluate specific 
transactions. This analysis is applied against the macroeconomic 
outlook, geopolitical issues as well as considerations that more 
directly affect the company's industry to determine an internally 
assigned credit rating.
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    The Fund may invest in a wide range of fixed income instruments 
selected from, but not limited to, the following sectors: U.S. Treasury 
securities, corporate bonds, emerging market debt, and non-dollar 
denominated sovereign and corporate debt.\8\ The Fund may invest up to 
10% of its assets in mortgage-backed securities (``MBS'') or in other 
asset-backed securities.\9\ This limitation does not apply to 
securities issued or guaranteed by federal agencies and/or U.S. 
government sponsored instrumentalities, such as the Government National 
Mortgage Administration (``GNMA''), the Federal Housing Administration 
(``FHA''), the Federal National Mortgage Association (``FNMA''), and 
the Federal Home Loan Mortgage Corporation (``FHLMC'').
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    \8\ The Fund will invest only in securities that the Investment 
Adviser deems to be sufficiently liquid. While corporate bonds and 
emerging market debt generally must have $200 million or more par 
amount outstanding and significant par value traded to be considered 
as an eligible investment, at least 80% of issues of corporate bonds 
or corporate debt held by the Fund must have $200 million or more 
par amount outstanding. The strategy follows an active quantitative 
investment process that seeks excess returns to the Benchmark. The 
strategy selects securities using a rigorous portfolio construction 
approach to tightly control independent risk exposures such as fixed 
income sector weights, sector specific yield curves, credit spreads, 
prepayment risks, and others. Within those risk constraints, the 
strategy utilizes relative value estimates to select individual 
securities that can provide risk adjusted outperformance relative to 
the Benchmark.
    \9\ The Fund may invest in MBS or other asset-backed securities 
issued or guaranteed by private issuers. The MBS in which the Fund 
may invest may also include residential mortgage-backed securities 
(``RMBS''), collateralized mortgage obligations (``CMOs''), and 
commercial mortgage-backed securities (``CMBS''). The asset-backed 
securities in which the Fund may invest include collateralized debt 
obligations (``CDOs''). CDOs include collateralized bond obligations 
(``CBOs''), collateralized loan obligations (``CLOs'') and other 
similarly structured securities. A CBO is a trust which is backed by 
a diversified pool of high risk, below investment grade fixed income 
securities. A CLO is a trust typically collateralized by a pool of 
loans, which may include, among others, domestic and foreign senior 
secured loans, senior unsecured loans, and subordinate corporate 
loans, including loans that may be rated below investment grade or 
equivalent unrated loans.
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    According to the Registration Statement, the Fund may obtain 
exposure to the securities in which it normally invests by engaging in 
various investment techniques, including, but not limited to, forward 
purchase agreements, mortgage dollar roll, and ``TBA'' mortgage 
trading.\10\ The Fund also may invest directly in exchange-traded funds 
(``ETFs'') and other investment companies that provide exposure to 
fixed income securities similar to those securities in which the Fund 
may invest in directly.
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    \10\ A mortgage dollar roll involves the sale of a MBS by one of 
the Funds and its agreement to repurchase the instrument (or one 
which is substantially similar) at a specified time and price. A TBA 
transaction is a method of trading MBS. In a TBA transaction, the 
buyer and seller agree upon general trade parameters such as agency, 
settlement date, par amount, and price. The actual pools delivered 
generally are determined two days prior to the settlement date.
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    The Fund will normally invest at least 80% of its net assets in 
fixed income securities.
Guggenheim Enhanced Ultra-Short Bond ETF
    According to the Registration Statement, the investment objective 
of the Guggenheim Enhanced Ultra-Short Bond ETF is to seek maximum 
current income, consistent with preservation of capital and daily 
liquidity. The Fund uses a low duration strategy to seek to outperform 
the 1-3 month Treasury Bill Index in addition to providing returns in 
excess of those available in U.S. Treasury bills, government repurchase 
agreements, and money market funds, while providing preservation of 
capital and daily liquidity. The Fund is not a money market fund and 
thus does not seek to maintain a stable net asset value of $1.00 per 
Share.
    The Fund expects, under normal circumstances,\11\ to hold a 
diversified portfolio of fixed income instruments of varying 
maturities, but that have an average duration of less than 1 year. The 
Fund primarily will invest in U.S. dollar-denominated investment grade 
debt securities, rated Baa or higher by Moody's, or equivalently rated 
by S&P or Fitch or, if unrated, determined by the Investment Adviser to 
be of comparable quality.\12\ The Fund may invest, without limitation, 
in U.S. dollar-denominated debt securities of foreign issuers. The Fund 
may also invest in debt securities denominated in

[[Page 20403]]

foreign currencies. The Investment Adviser may attempt to reduce 
foreign currency exchange rate risk by entering into contracts with 
banks, brokers, or dealers to purchase or sell securities or forward 
contracts. The Fund may invest no more than 10% in junk bonds. The Fund 
may also invest in municipal securities.
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    \11\ The term ``under normal market circumstances'' includes, 
but is not limited to, the absence of extreme volatility or trading 
halts in the fixed income markets or the financial markets 
generally; operational issues causing dissemination of inaccurate 
market information; or force majeure type events such as systems 
failure, natural or man-made disaster, act of God, armed conflict, 
act of terrorism, riot or labor disruption, or any similar 
intervening circumstance.
    \12\ See note 7, supra.
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    The Fund may invest a substantial portion of its assets in short-
term instruments such as commercial paper \13\ and/or repurchase 
agreements.\14\ The Fund may also invest in a wide range of fixed 
income instruments selected from, but not limited to, the following 
sectors: U.S. Treasury securities, corporate bonds, emerging market 
debt, and non-dollar denominated sovereign and corporate debt.\15\ The 
Fund may invest up to 10% of its assets in MBS or in other asset-backed 
securities.\16\ This limitation does not apply to securities issued or 
guaranteed by federal agencies and/or U.S. government sponsored 
instrumentalities, such as the GNMA, FHA, FNMA, and FHLMC.
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    \13\ Commercial paper consists of short-term, promissory notes 
issued by banks, corporations and other entities to finance short-
term credit needs. These securities generally are discounted but 
sometimes may be interest bearing. As of year end 2010, $1.058 
trillion commercial paper was outstanding, and, as of February 28, 
2011, $1.123 trillion commercial paper was outstanding. The daily 
average commercial paper market issuance in 2010 was $84.343 
billion, with 65% having a maturity of 1-4 days, 8% having a 
maturity of 5-9 days, 4% having a maturity of 10-20 days, 11% having 
a maturity of 21-40 days, 4% having a maturity of 41-80 days, and 8% 
having a maturity of 81 days or more. As of March 16, 2011, the 
daily average commercial paper market issuance was $78.780 billion, 
with 58% having a maturity of 1-4 days, 9% having a maturity of 5-9 
days, 5% having a maturity of 10-20 days, 12% having a maturity of 
21-40 days, 5% having a maturity of 41-80 days, and 11% having a 
maturity of 81days or more. (Source: Federal Reserve).
    \14\ The Fund may invest a substantial portion of its assets in 
short-term instruments such as repurchase agreements. Repurchase 
agreements are fixed-income securities in the form of agreements 
backed by collateral. These agreements, which may be viewed as a 
type of secured lending by the Fund, typically involve the 
acquisition by the Fund of securities from the selling institution 
(such as a bank or a broker-dealer), coupled with the agreement that 
the selling institution will repurchase the underlying securities at 
a specified price and at a fixed time in the future (or on demand). 
The underlying securities which serve as collateral for the 
repurchase agreements entered into by the Fund may include U.S. 
government securities, corporate obligations, and convertible 
securities, and are marked-to-market daily in order to maintain full 
collateralization (typically purchase price plus accrued interest).
    \15\ The Fund will invest only in securities that the Investment 
Adviser deems to be sufficiently liquid. While corporate bonds and 
emerging market debt generally must have $200 million or more par 
amount outstanding and significant par value traded to be considered 
as an eligible investment, at least 80% of issues of corporate bonds 
or corporate debt held by the Fund must have $200 million or more 
par amount outstanding.
    \16\ The Fund may invest in MBS or other asset-backed securities 
issued or guaranteed by private issuers. The MBS in which the Fund 
may invest may also include RMBS, CMOs and CMBS. The asset-backed 
securities in which the Fund may invest include CDOs.
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    According to the Registration Statement, the Fund may obtain 
exposure to the securities in which it normally invests by engaging in 
various investment techniques, including, but not limited to, forward 
purchase agreements, mortgage dollar roll, and ``TBA'' mortgage 
trading. The Fund also may invest directly in ETFs and other investment 
companies that provide exposure to fixed income securities similar to 
those securities in which the Fund may invest in directly.
    The Fund will normally invest at least 80% of its net assets in 
fixed income securities.
Other Investments
    Each Fund may invest up to an aggregate amount of 15% of its net 
assets in: (1) Illiquid securities; and (2) Rule 144A securities. 
Illiquid securities include securities subject to contractual or other 
restrictions on resale and other instruments that lack readily 
available markets. With respect to investment in illiquid securities, 
if changes in the values of a Fund's securities cause the Fund's 
holdings of illiquid securities to exceed the 15% limitation (as if 
liquid securities have become illiquid), the Fund will take such 
actions as it deems appropriate and practicable to attempt to reduce 
its holdings of illiquid securities.
    The Funds may invest in Rule 144A securities. Rule 144A securities 
are securities which, while privately placed, are eligible for purchase 
and resale pursuant to Rule 144A under the Securities Act. According to 
the Registration Statement, this rule permits certain qualified 
institutional buyers, such as the Funds, to trade in privately placed 
securities even though such securities are not registered under the 
Securities Act.
    The Funds' portfolio holdings will be disclosed on their Web site 
(http://www.guggenheimfunds.com) daily after the close of trading on 
the Exchange and prior to the opening of trading on the Exchange the 
following day.
    The Funds are considered non-diversified under the 1940 Act and can 
invest a greater portion of assets in securities of individual issuers 
than a diversified fund. The Funds intend to maintain the level of 
diversification necessary to qualify as a regulated investment company 
(``RIC'') under Subchapter M of the Internal Revenue Code of 1986, as 
amended.\17\
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    \17\ 26 U.S.C. 851. As a RIC, each Fund will not be subject to 
U.S. federal income tax on the portion of its taxable investment 
income and capital gains that it distributes to its shareholders. To 
qualify for treatment as a RIC, a company must annually distribute 
at least 90% of its net investment company taxable income (which 
includes dividends, interest, and net short-term capital gains) and 
meet several other requirements relating to the nature of its income 
and the diversification of its assets. If a Fund fails to qualify 
for any taxable year as a RIC, all of its taxable income will be 
subject to tax at regular corporate income tax rates without any 
deduction for distributions to shareholders, and such distributions 
generally will be taxable to shareholders as ordinary dividends to 
the extent of a Fund's current and accumulated earnings and profits. 
In addition, in order to requalify for taxation as a RIC, a Fund may 
be required to recognize unrealized gains, pay substantial taxes and 
interest, and make certain distributions.
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    The Shares will conform to the initial and continued listing 
criteria under NYSE Arca Equities Rule 8.600. The Exchange represents 
that, for initial and/or continued listing, the Funds will be in 
compliance with Rule 10A-3 under the Exchange Act,\18\ as provided by 
NYSE Arca Equities Rule 5.3. A minimum of 100,000 Shares of each Fund 
will be outstanding at the commencement of trading on the Exchange. The 
Exchange will obtain a representation from the issuer of the Shares 
that the net asset value (``NAV'') will be calculated daily, and the 
NAV and the Disclosed Portfolio will be made available to all market 
participants at the same time.
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    \18\ 17 CFR 240.10A-3.
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    The Funds will not invest in non-U.S. equity securities. In 
addition, the Funds will not invest in options contracts, futures 
contracts, or swap agreements.
Creations and Redemptions of Shares
    Investors may create or redeem in Creation Unit size of 100,000 
Shares or aggregations thereof (``Creation Unit Aggregation'') through 
an Authorized Participant, as described in the Registration Statement. 
In order to purchase Creation Units of a Fund, an investor must 
generally deposit a designated portfolio of securities (``Deposit 
Securities'') and/or an amount in cash in lieu of some or all of the 
Deposit Securities per each Creation Unit Aggregation constituting a 
substantial replication, or representation, of the securities included 
in the Fund's portfolio as selected by the Investment Adviser (``Fund 
Securities'') and generally make a cash payment referred to as the 
``Cash Component.'' The list of the names and the amounts of the 
Deposit Securities will be made available by the Funds' custodian 
through the facilities of the

[[Page 20404]]

National Securities Clearing Corporation (``NSCC'') immediately prior 
to the opening of business each day of the NYSE Arca. The Cash 
Component represents the difference between the NAV of a Creation Unit 
and the market value of the Deposit Securities.
    Shares may be redeemed only in Creation Unit size at their NAV on a 
day the NYSE Arca is open for business. The Funds' custodian will make 
available immediately prior to the opening of business each day of the 
NYSE Arca, through the facilities of NSCC, the list of the names and 
the amounts of the Funds' portfolio securities that will be applicable 
that day to redemption requests in proper form (``Fund Securities''). 
Fund Securities received on redemption may not be identical to Deposit 
Securities which are applicable to purchases of Creation Units.
Availability of Information
    The Funds' Web site, which will be publicly available prior to the 
public offering of Shares, will include a form of the Prospectus for 
the Funds that may be downloaded. The Funds' website will include 
additional quantitative information updated on a daily basis, 
including, for the Funds, (1) daily trading volume, the prior business 
day's reported closing price, NAV and mid-point of the bid/ask spread 
at the time of calculation of such NAV (``Bid/Ask Price''),\19\ and a 
calculation of the premium and discount of the Bid/Ask Price against 
the NAV, and (2) data in chart format displaying the frequency 
distribution of discounts and premiums of the daily Bid/Ask Price 
against the NAV, within appropriate ranges, for each of the four 
previous calendar quarters. On each business day, before commencement 
of trading in Shares in the Core Trading Session on the Exchange, the 
Funds will disclose on their website the Disclosed Portfolio as defined 
in NYSE Arca Equities Rule 8.600(c)(2) that will form the basis for 
each Fund's calculation of NAV at the end of the business day.\20\
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    \19\ The Bid/Ask Price of the Funds will be determined using the 
highest bid and the lowest offer on the Exchange as of the time of 
calculation of each Fund's NAV. The records relating to Bid/Ask 
Prices will be retained by the Funds and its service providers.
    \20\ Under accounting procedures followed by the Funds, trades 
made on the prior business day (``T'') will be booked and reflected 
in NAV on the current business day (``T+1''). Accordingly, the Funds 
will be able to disclose at the beginning of the business day the 
portfolio that will form the basis for the NAV calculation at the 
end of the business day.
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    On a daily basis, the Investment Adviser will disclose for each 
portfolio security or other financial instrument of the Funds 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 website 
information will be publicly available at no charge. In addition, price 
information for the debt securities held by the Funds will be available 
through major market data vendors.
    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 (``NYSE'') via NSCC. The basket represents one Creation 
Unit of each of the Funds. The NAV of each of the Funds will normally 
be determined as of the close of the regular trading session on the 
NYSE (ordinarily 4 p.m. Eastern Time) on each business day.
    Investors can also obtain the Trust's Statement of Additional 
Information (``SAI''), the Funds' Shareholder Reports, and Form N-CSR, 
and Form N-SAR, filed twice a year. The Trust's SAI and Shareholder 
Reports are available free upon request from the Trust, and those 
documents and the Form N-CSR and Form N-SAR may be viewed on-screen or 
downloaded from the Commission's Web site at http://www.sec.gov. 
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. 
Information regarding the previous day's closing price and trading 
volume information will be published daily in the financial section of 
newspapers. Quotation and last-sale information for the Shares will be 
available via the Consolidated Tape Association (``CTA'') high-speed 
line. In addition, the Portfolio Indicative Value, as defined in NYSE 
Arca Equities Rule 8.600(c)(3), will be disseminated by one or more 
major market data vendors at least every 15 seconds during the Core 
Trading Session. The dissemination of the Portfolio Indicative Value, 
together with the Disclosed Portfolio, will allow investors to 
determine the value of the underlying portfolio of each Fund on a daily 
basis and to provide a close estimate of that value throughout the 
trading day.
    Additional information regarding the Trust and the Shares, 
including investment strategies, risks, creation and redemption 
procedures, fees, portfolio holdings disclosure policies, 
distributions, and taxes is included in the Registration Statement.
Trading Halts
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares of the Funds.\21\ Trading in Shares of the Funds 
will be halted if the circuit breaker parameters in NYSE Arca Equities 
Rule 7.12 have been reached. Trading also may 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 and/or the 
financial instruments comprising the Disclosed Portfolio of the Funds; 
or (2) whether other unusual conditions or circumstances detrimental to 
the maintenance of a fair and orderly market are present. Trading in 
the Shares will be subject to NYSE Arca Equities Rule 8.600(d)(2)(D), 
which sets forth circumstances under which Shares of the Funds may be 
halted.
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    \21\ See NYSE Arca Equities Rule 7.12, Commentary .04.
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Trading Rules
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. Shares 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). The Exchange has appropriate rules to facilitate 
transactions in the Shares during all trading sessions. As provided in 
NYSE Arca Equities Rule 7.6, Commentary .03, the minimum price 
variation (``MPV'') for quoting and entry of orders in equity 
securities traded on the NYSE Arca Marketplace is $0.01, with the 
exception of securities that are priced less than $1.00 for which the 
MPV for order entry is $0.0001.
Surveillance
    The Exchange intends to utilize its existing surveillance 
procedures applicable to derivative products (which include Managed 
Fund Shares) to monitor trading in the Shares. 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 applicable federal securities laws.
    The Exchange's current trading surveillance focuses on detecting

[[Page 20405]]

securities trading outside their normal patterns. When such situations 
are detected, surveillance analysis follows and investigations are 
opened, where appropriate, to review the behavior of all relevant 
parties for all relevant trading violations.
    The Exchange may obtain information via the Intermarket 
Surveillance Group (``ISG'') from other exchanges that are members of 
ISG or with which the Exchange has entered into a surveillance sharing 
agreement.\22\
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    \22\ For a list of the current members of ISG, see http://www.isgportal.org. The Exchange notes that not all components of the 
Disclosed Portfolio for the Funds may trade on markets that are 
members of ISG or with which the Exchange has in place a 
comprehensive surveillance sharing agreement.
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    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its 
Equity Trading Permit (``ETP'') Holders in an Information Bulletin 
(``Bulletin'') of the special characteristics and risks associated with 
trading the Shares. Specifically, the Bulletin will discuss the 
following: (1) The procedures for purchases and redemptions of Shares 
in Creation Unit Aggregations (and that Shares are not individually 
redeemable); (2) 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; (3) the risks 
involved in trading the Shares during the Opening and Late Trading 
Sessions when an updated Portfolio Indicative Value will not be 
calculated or publicly disseminated; (4) how information regarding the 
Portfolio Indicative Value is disseminated; (5) 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 (6) trading information.
    In addition, the Bulletin will reference that the Funds are subject 
to various fees and expenses described in the Registration Statement. 
The Bulletin will discuss any exemptive, no-action, and interpretive 
relief granted by the Commission from any rules under the Exchange Act. 
The Bulletin will also disclose that the NAV for the Shares will be 
calculated after 4:00 p.m. Eastern Time each trading day.
2. Statutory Basis
    The basis under the Exchange Act for this proposed rule change is 
the requirement under Section 6(b)(5) \23\ 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 
Exchange believes 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. The Funds primarily 
will invest in U.S. dollar-denominated investment grade debt 
securities, rated Baa or higher by Moody's, or equivalently rated by 
S&P or Fitch or, if unrated, determined by the Investment Adviser to be 
of comparable quality. At least 80% of issues of corporate bonds or 
corporate debt held by each Fund must have $200 million or more par 
amount outstanding. The Funds will not invest in non-U.S. equity 
securities.
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    \23\ 15 U.S.C. 78f(b)(5).
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    In addition, the Funds will not invest in options contracts, 
futures contracts, or swap agreements. The Funds' portfolio holdings 
will be disclosed on their website daily after the close of trading on 
the Exchange and prior to the opening of trading on the Exchange the 
following day. The Portfolio Indicative Value, as defined in NYSE Arca 
Equities Rule 8.600(c)(3), will be disseminated by one or more major 
market data vendors at least every 15 seconds during the Core Trading 
Session. 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 will be available via 
the CTA high-speed line. Trading in Shares of the Funds 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 will be subject to NYSE Arca Equities Rule 
8.600(d)(2)(D), which sets forth circumstances under which Shares of 
the Funds may be halted. The Exchange will obtain a representation from 
the issuer of the Shares that the NAV will be calculated daily, and the 
NAV and the Disclosed Portfolio will be made available to all market 
participants at the same time.
    In addition, the Exchange has in place surveillance procedures that 
are adequate to properly monitor trading in the Shares. 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.

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.

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission shall:
    (A) By order approve or disapprove such proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be 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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2011-11 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street, NE., 
Washington, DC 20549-1090.

[[Page 20406]]

All submissions should refer to File Number SR-NYSEArca-2011-11. This 
file number should be included on the subject line if e-mail 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 a.m. and 3 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 No. SR-
NYSEArca-2011-11 and should be submitted on or before May 3, 2011.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
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    \24\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-8725 Filed 4-11-11; 8:45 am]
BILLING CODE 8011-01-P