Document ID: SEC-2012-0532-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2012-04-05T04:00Z

[Federal Register Volume 77, Number 66 (Thursday, April 5, 2012)]
[Notices]
[Pages 20660-20666]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-8149]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66696; File No. SR-NYSEArca-2012-24]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Relating to Listing and Trading of 
AdvisorShares Global Echo ETF Under NYSE Arca Equities Rule 8.600

March 30, 2012.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Exchange Act'' or ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that, on March 16, 2012, NYSE Arca, Inc. (``Exchange'' 
or ``NYSE Arca'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been substantially 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 (``Managed Fund Shares''): AdvisorShares 
Global Echo ETF. The text of the proposed rule change is available at 
the Exchange, www.nyse.com, and 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to list and trade shares (``Shares'') of the 
following under NYSE Arca Equities Rule 8.600, which governs the 
listing and trading of Managed Fund Shares: \3\ AdvisorShares Global 
Echo ETF (``Fund'').\4\ The Shares

[[Page 20661]]

will be offered by AdvisorShares 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\ The 
investment adviser to the Fund is AdvisorShares Investments, LLC 
(``Adviser''). The Fund's sub-advisers (``Sub-Advisers'' and each a 
``Sub-Adviser''), which provide day-to-day portfolio management of the 
Fund, are First Affirmative Financial Network LLC; Reynders, McVeigh 
Capital Management, LLC; Baldwin Brothers Inc.; and Community Capital 
Management Inc.
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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-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.
    \4\ The Commission has previously approved listing and trading 
on the Exchange of a number of actively managed funds under Rule 
8.600. See, e.g., 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); 60460 (August 7, 2009), 74 FR 41468 
(August 17, 2009) (SR-NYSEArca-2009-55) (order approving listing of 
Dent Tactical ETF); 63076 (October 12, 2010), 75 FR 63874 (October 
18, 2010) (SR-NYSEArca-2010-79) (order approving Exchange listing 
and trading of Cambria Global Tactical ETF); 63802 (January 31, 
2011), 76 FR 6503 (February 4, 2011) (SR-NYSEArca-2010-118) (order 
approving Exchange listing and trading of the SiM Dynamic Allocation 
Diversified Income ETF and SiM Dynamic Allocation Growth Income 
ETF).
    \5\ The Trust is registered under the 1940 Act. On July 15, 
2011, the Trust filed with the Commission Post-Effective Amendment 
No. 32 to Form N-1A under the Securities Act of 1933 (15 U.S.C. 
77a), and under the 1940 Act relating to the Fund (File Nos. 333-
157876 and 811-22110) (``Registration Statement''). The description 
of the operation of the Trust and the Fund herein is based, in part, 
on the Registration Statement. In addition, the Commission has 
issued an order granting certain exemptive relief to the Trust under 
the 1940 Act. See Investment Company Act Release No. 29291 (May 28, 
2010) (File No. 812-13677) (``Exemptive Order'').
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    Foreside Fund Services, LLC (``Distributor'') is the principal 
underwriter and distributor of the Fund's Shares. The Bank of New York 
Mellon Corporation serves as the administrator (``Administrator''), 
custodian, transfer agent, and fund accounting agent for the Fund.
    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 non-public 
information regarding the open-end fund's portfolio. Commentary .06 to 
Rule 8.600 is similar to Commentary .03(a)(i) and (iii) to NYSE Arca 
Equities Rule 5.2(j)(3); however, Commentary .06 in connection with the 
establishment of a ``fire wall'' between the investment adviser and the 
broker-dealer reflects the applicable open-end fund's portfolio, not an 
underlying benchmark index, as is the case with index-based funds. 
Neither the Adviser nor the Sub-Advisers are affiliated with a broker-
dealer. In the event (a) the Adviser or the Sub-Advisers become newly 
affiliated with a broker-dealer, or (b) any new adviser or sub-adviser 
becomes affiliated with a broker-dealer, it will implement a fire wall 
with respect to such broker-dealer regarding access to information 
concerning the composition and/or changes to the portfolio, and will be 
subject to procedures designed to prevent the use and dissemination of 
material non-public information regarding such 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 Adviser and Sub-Advisers and their related 
personnel are 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. 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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Description of the Fund
    According to the Registration Statement, the Fund will seek to 
achieve long-term capital appreciation with an emphasis on absolute 
(positive) returns and low sensitivity to traditional financial market 
indices, such as the S&P 500 Index, over a full market cycle. The Fund 
will seek to achieve its investment objective by investing under normal 
market circumstances \7\ at least 80% of its total assets in the 
following securities: U.S. exchange-listed equity securities; \8\ 
American Depository Receipts (``ADRs''); \9\ fixed income securities 
(including municipal bonds); and exchange-traded products (``Underlying 
ETPs'') \10\ that provide diversified exposure to various asset classes 
and market segments.
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    \7\ The term ``under normal market circumstances'' includes, but 
is not limited to, the absence of extreme volatility or trading 
halts in the equities or 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.
    \8\ The Fund may invest in equity securities of domestic and 
foreign companies, including common stocks, preferred stocks, 
warrants to acquire common stock, securities convertible into common 
stock, and investments in master limited partnerships.
    \9\ The Fund generally will invest in sponsored ADRs, but it may 
invest up to 10% of total assets in unsponsored ADRs.
    \10\ Underlying ETPs include Investment Company Units (as 
described in NYSE Arca Equities Rule 5.2(j)(3)); Index-Linked 
Securities (as described in NYSE Arca Equities Rule 5.2(j)(6)); 
Portfolio Depositary Receipts (as described in NYSE Arca Equities 
Rule 8.100); Trust Issued Receipts (as described in NYSE Arca 
Equities Rule 8.200); Commodity-Based Trust Shares (as described in 
NYSE Arca Equities Rule 8.201); Currency Trust Shares (as described 
in NYSE Arca Equities Rule 8.202); Commodity Index Trust Shares (as 
described in NYSE Arca Equities Rule 8.203); Trust Units (as 
described in NYSE Arca Equities Rule 8.500); Managed Fund Shares (as 
described in NYSE Arca Equities Rule 8.600); and closed-end funds. 
The Underlying ETPs all will be listed and traded in the U.S. on 
registered exchanges. The Fund may invest in the securities of 
Underlying ETPs registered under the 1940 Act consistent with the 
requirements of Section 12(d)(1) of the 1940 Act, or any rule, 
regulation, or order of the Commission or interpretation thereof. 
The Fund will only make such investments in conformity with the 
requirements of Section 817 of the Internal Revenue Code of 1986. 
The Underlying ETPs in which the Fund may invest will primarily be 
index-based exchange-traded funds that hold substantially all of 
their assets in securities representing a specific index.
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    The Fund will be a multi-manager, multi-strategy, broadly 
diversified, actively managed exchange-traded fund with a focus on 
``Sustainable Investing.'' Sustainable Investing generally refers to an 
investment methodology that takes into consideration economic, 
environmental, technology, and a variety of social factors when making 
investment decisions. Accordingly, the Fund is designed as a core 
allocation that proactively seeks Sustainable Investment-themed 
investment opportunities that may socially and environmentally benefit 
the earth, with a focus on water, clean energy, community development, 
innovation, and other sustainable themes across asset classes. 
Sustainable Investment themes that the Fund may pursue include, but are 
not limited to, the following: economic themes (corporate governance, 
risk and crisis management, community investment, energy efficiency, 
food, green building); environmental themes (air, water, earth); 
technology themes (mobility, renewable energy, technology, and access); 
and social themes (human health, such as occupational health and 
safety).
    The Fund will seek to achieve its investment objective by 
allocating a portion of the Fund's assets to each of the Fund's Sub-
Advisers who will employ their respective investment

[[Page 20662]]

strategies to generate absolute returns over a full market cycle. 
Generally, a full market cycle consists of a bull market followed by a 
bear market and a return to a bull market, or vice versa. Initially, an 
equal proportion of the Fund's assets will be allocated to each Sub-
Adviser to obtain the desired exposure to the strategies described 
below. The allocation among Sub-Advisers will vary over time in 
response to a variety of factors including prevailing market 
conditions. The Adviser has designated First Affirmative Financial 
Network, LLC to allocate and monitor the allocation of the Fund's 
assets to each Sub-Adviser to ensure that the Fund's portfolio 
maintains the proper investment exposure to seek to achieve its 
investment objective. Each Sub-Adviser will seek to identify and invest 
either directly or indirectly through other Underlying ETPs in 
securities of companies that are making a positive impact in the world 
and reflect Sustainable Investment themes, including corporate 
sustainability. The Fund's investments in companies that practice 
corporate sustainability will provide an additional layer of 
diversification because such investments are designed to increase long-
term shareholder value. Companies focused on corporate sustainability 
also can provide more attractive risk return profiles for investors, 
and can leverage various other Sustainable Investment themes.
    The Fund may take both long and short positions in any of these 
investments. The Fund may invest up to 65% (and intends to always 
invest at least 15%) of its net assets in domestic and foreign fixed 
income securities. The Fund may invest in securities of any 
capitalization range and may employ one or more investment styles (from 
growth to value) at any time as necessary to seek to achieve the Fund's 
investment objective.
    Each Sub-Adviser will determine whether to buy or sell an 
investment for the Fund's portfolio by applying one or more of the 
following strategies:
Core Strategies
    [cir] Fixed Income Strategies. Fixed income strategies consist of 
investment strategies that invest primarily in debt securities of 
domestic and foreign governments, agencies, instrumentalities, 
municipalities and companies of all maturities and qualities (including 
``junk bonds'' and up to 15% of total assets in defaulted debt 
securities), TIPS (Treasury Inflation Protected Securities), and 
Underlying ETPs that provide exposure to fixed income securities or 
strategies. 85% or more of the Fund's investments in fixed income 
strategies will be in investment grade debt securities. Debt securities 
of foreign governments are sometimes referred to as sovereign debt 
obligations and may be issued or guaranteed by foreign governments or 
their agencies. The Fund may invest up to 10% of total assets in 
mortgage-backed securities or other asset-backed securities.\11\ Fixed 
income strategies also may involve hedging through the use of 
investments in other Underlying ETPs to enhance risk-adjusted return.
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    \11\ 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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    [cir] Equity Strategies. Equity strategies will consist of both 
domestic and international/emerging markets strategies. The domestic 
equity strategies will seek to invest in securities of companies that 
the Sub-Advisers believe will outperform other equity securities over 
the long term.\12\ The international/emerging markets equity strategies 
will seek to invest in securities of undervalued international 
companies through ADRs that provide the Fund with exposure to 
businesses outside of the U.S. and that are attractively priced 
relative to their economic fundamentals. Both U.S. and international 
investments will be selected using fundamental analysis of factors such 
as earnings, cash flows, and valuations based upon them, and will be 
diversified among the economic and industry sectors in the S&P 
500[supreg] Index, the Morgan Stanley Capital International (``MSCI'') 
All Country World Index, MSCI Europe, Australasia and Far East Index, 
and MSCI Emerging Markets Index.
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    \12\ Telephone conference between Michael Cavalier, Chief 
Counsel, NYSE Euronext and Kristie Diemer, Special Counsel, Division 
of Trading and Markets, Commission, on March 28, 2012, confirmed 
domestic equities strategies will apply to all Sub-Advisers.
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Alternative Strategies
    [cir] Long/Short and Hedging Strategies. Alternative strategies 
will consist of strategies that combine short sales of equities 
(including shares of Underlying ETPs) or purchase of shares of inverse 
Underlying ETPs. As such, long/short strategies may utilize securities 
that seek to track indexes on markets, sectors, strategies, and/or 
industries to hedge against potential adverse movements in security 
prices. The Fund may implement multiple variations of long/short and 
hedging strategies. The basic long/short equity strategies generally 
will seek to increase net long exposure in a bull market and decrease 
net long exposure, by holding high concentrations in cash or investing 
100% short in a bear market.
Other Investments
    The Fund may enter into repurchase agreements with financial 
institutions, which may be deemed to be loans. The Fund will follow 
certain procedures designed to minimize the risks inherent in such 
agreements. These procedures will include effecting repurchase 
transactions only with large, well-capitalized, and well-established 
financial institutions whose condition will be continually monitored by 
the Sub-Advisers. In addition, the value of the collateral underlying 
the repurchase agreement will always be at least equal to the 
repurchase price, including any accrued interest earned on the 
repurchase agreement. The Fund may enter into reverse repurchase 
agreements without limit as part of the Fund's investment strategy. 
Reverse repurchase agreements involve sales by the Fund of portfolio 
assets concurrently with an agreement by the Fund to repurchase the 
same assets at a later date at a fixed price.
    The Fund, or Underlying ETPs in which it invests, may invest in 
U.S. government securities and U.S. Treasury zero-coupon bonds. The 
Fund, or Underlying ETPs in which it invests, may invest in shares of 
real estate investment trusts (``REITs'').
    Diversification. The Fund may not (i) with respect to 75% of its 
total assets, purchase securities of any issuer (except securities 
issued or guaranteed by the U.S. Government, its agencies or 
instrumentalities or shares of investment companies) if, as a result, 
more than 5% of its total assets would be invested in the securities of 
such issuer; or (ii) acquire more than 10% of the outstanding voting 
securities of any one issuer.\13\
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    \13\ The diversification standard is set forth in Section 
5(b)(1) of the 1940 Act.
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    Concentration. The Fund may not invest 25% or more of its total 
assets in the securities of one or more issuers conducting their 
principal business activities in the same industry or group of 
industries. This limitation does not apply to investments in securities 
issued or guaranteed by the U.S. Government, its agencies or 
instrumentalities, or shares of investment companies. The Fund will not 
invest 25% or more of its total assets

[[Page 20663]]

in any investment company that so concentrates.\14\
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    \14\ See Form N-1A, Item 9. The Commission has taken the 
position that a fund is concentrated if it invests more than 25% of 
the value of its total assets in any one industry. See, e.g., 
Investment Company Act Release No. 9011 (October 30, 1975), 40 FR 
54241 (November 21, 1975).
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    The Fund will not purchase illiquid securities.\15\ Further, in 
accordance with the Exemptive Order, the Fund will not invest in 
options, futures, or swaps. The Fund's investments will be consistent 
with the Fund's investment objective and will not be used to enhance 
leverage.
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    \15\ A fund's portfolio security is illiquid if it cannot be 
disposed of in the ordinary course of business within seven days at 
approximately the value ascribed to it by the fund. See Investment 
Company Act Release No. 14983 (March 12, 1986), 51 FR 9773 (March 
21, 1986) (adopting amendments to Rule 2a-7 under the 1940 Act); 
Investment Company Act Release No. 17452 (April 23, 1990), 55 FR 
17933 (April 30, 1990) (adopting Rule 144A under the Securities Act 
of 1933).
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    Except for Underlying ETPs that may hold non-U.S. issues, the Fund 
will not otherwise invest in non-U.S. issues.
    To respond to adverse market, economic, political, or other 
conditions, the Fund may invest 100% of its total assets, without 
limitation, in high-quality debt securities and money market 
instruments either directly or through Underlying ETPs. The Fund may be 
invested in these instruments for extended periods, depending on the 
Sub-Advisers' assessment of market conditions. These debt securities 
and money market instruments include shares of other mutual funds, 
commercial paper, certificates of deposit, bankers' acceptances, U.S. 
Government securities, repurchase agreements, and bonds that are BBB or 
higher. While the Fund is in a defensive position, the opportunity to 
achieve its investment objective will be limited.
Creations and Redemptions
    The Fund will issue and redeem Shares on a continuous basis at the 
net asset value (``NAV'') only in a large specified number of shares 
called a ``Creation Unit.'' The Shares are ``created'' at their NAV by 
market makers, large investors, and institutions only in block-size 
Creation Units of at least 50,000 Shares. A ``creator'' will enter into 
an authorized participant agreement (``Participant Agreement'') with 
the Distributor or use a Depository Trust Company (``DTC'') participant 
who has executed a Participant Agreement (``Authorized Participant''), 
and deposit into the Fund a portfolio of securities closely 
approximating the holdings of the Fund and a specified amount of cash, 
together totaling the NAV of the Creation Unit(s), in exchange for 
50,000 Shares of the Fund (or multiples thereof).
    Shares may be redeemed only in Creation Units at their NAV next 
determined after receipt of a redemption request in proper form by a 
Fund through the Administrator and only on a business day. The 
redemption proceeds for a Creation Unit generally will consist of a 
portfolio of securities closely approximating the holdings of the Fund 
and a specified amount of cash, 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 such portfolio of securities. Orders 
to create and redeem Shares must be placed with the Administrator by 3 
p.m., Eastern Time (``E.T.'').
Net Asset Value
    The NAV per Share of the Fund will be computed by dividing the 
value of the net assets of the Fund (i.e., the value of its total 
assets less total liabilities) by the total number of Shares of the 
Fund outstanding, rounded to the nearest cent. Expenses and fees, 
including without limitation, the management, administration, and 
distribution fees, will be accrued daily and taken into account for 
purposes of determining NAV. The NAV per Share for the Fund will be 
calculated by the Administrator and determined as of the close of the 
regular trading session on the New York Stock Exchange (``NYSE'') 
(ordinarily 4 p.m., E.T.) on each day that the NYSE is open.
    In computing the Fund's NAV, the Fund's securities holdings will be 
valued based on their last readily available market price. Price 
information on listed securities, including Underlying ETPs, will be 
taken from the exchange where the security is primarily traded. 
Securities regularly traded in an over-the-counter market will be 
valued at the latest quoted sales price on the primary exchange or 
national securities market on which such securities are traded. 
Securities not listed on an exchange or national securities market, or 
securities in which there was no last reported sales price, will be 
valued at the most recent bid price. Other portfolio securities and 
assets for which market quotations are not readily available will be 
valued based on fair value as determined in good faith by the Sub-
Advisers in accordance with procedures adopted by the Fund's Board of 
Trustees.
    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 Fund will be in 
compliance with Rule 10A-3 under the Exchange Act,\16\ as provided by 
NYSE Arca Equities Rule 5.3. A minimum of 100,000 Shares 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 NAV per Share will be calculated daily and that the NAV and 
the Disclosed Portfolio will be made available to all market 
participants at the same time.
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    \16\ 17 CFR 240.10A-3.
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Availability of Information
    The Fund's Web site (www.advisorshares.com), which will be publicly 
available prior to the public offering of Shares, will include a form 
of the prospectus for the Fund that may be downloaded. The Fund's Web 
site will include additional quantitative information updated on a 
daily basis, including, for the Fund, (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''),\17\ 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 
Fund will disclose on its Web site the Disclosed Portfolio as defined 
in NYSE Arca Equities Rule 8.600(c)(2) that will form the basis for the 
Fund's calculation of NAV at the end of the business day.\18\
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    \17\ The Bid/Ask Price of the Fund is determined using the mid-
point of the highest bid and the lowest offer on the Exchange as of 
the time of calculation of the Fund's NAV. The records relating to 
Bid/Ask Prices will be retained by the Fund and its service 
providers.
    \18\ Under accounting procedures followed by the Fund, trades 
made on the prior business day (``T'') will be booked and reflected 
in NAV on the current business day (``T+1''). Accordingly, the Fund 
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 Adviser will disclose on the Fund's Web site 
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

[[Page 20664]]

or dollar value of other securities and financial instruments held in 
the portfolio, and percentage weighting of the security or financial 
instrument in the portfolio. The Web site information will be publicly 
available at no charge.
    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 NYSE via the 
National Securities Clearing Corporation. The basket represents one 
Creation Unit of the Fund.
    Investors can also obtain the Trust's Statement of Additional 
Information (``SAI''), the Fund's Shareholder Reports, and its 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 www.sec.gov. Information 
regarding market price and trading volume of the Shares 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 for the Shares will be published daily in the financial 
section of newspapers. Price information for the ADRs, debt and equity 
securities held by the Fund, including foreign equity securities, and 
Underlying ETPs will be available through major market data vendors or 
securities exchanges listing and trading such securities. 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 widely disseminated by one or more major market 
data vendors at least every 15 seconds during the Core Trading 
Session.\19\ The dissemination of the Portfolio Indicative Value, 
together with the Disclosed Portfolio, will allow investors to 
determine the value of the underlying portfolio of the Fund on a daily 
basis and will provide a close estimate of that value throughout the 
trading day.
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    \19\ Currently, it is the Exchange's understanding that several 
major market data vendors display and/or make widely available 
Portfolio Indicative Values published on CTA or other data feeds.
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    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. All 
terms relating to the Fund that are referred to, but not defined in, 
this proposed rule change are defined 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 Fund.\20\ Trading in Shares of the Fund 
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 Fund; 
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 Fund may be 
halted.
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    \20\ 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., E.T. 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 
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 comprehensive 
surveillance sharing agreement.\21\ All equity securities, Underlying 
ETPs, and sponsored ADRs held by the Fund will be listed on securities 
exchanges, all of which are members of ISG.
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    \21\ For a list of the current members of ISG, see 
www.isgportal.org. The Exchange notes that not all components of the 
Disclosed Portfolio for the Fund 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 Fund is 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

[[Page 20665]]

Commission from any rules under the Exchange Act. The Bulletin will 
also disclose that the NAV for the Shares will be calculated after 4 
p.m., E.T. 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) \22\ 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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    \22\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares will be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria in NYSE Arca Equities Rule 
8.600. 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 ISG from other exchanges that are members of ISG or with which the 
Exchange has entered into a comprehensive surveillance sharing 
agreement. Price information for the ADRs, debt and equity securities 
held by the Fund, including foreign equity securities, and Underlying 
ETPs will be available through major market data vendors or securities 
exchanges listing and trading such securities. All equity securities, 
Underlying ETPs, and sponsored ADRs held by the Fund are listed on 
securities exchanges, all of which are members of ISG. The listing and 
trading of such securities is subject to rules of the exchanges on 
which they are listed and traded, as approved by the Commission. The 
Fund will not purchase illiquid securities. Further, the Fund will not 
invest in options, futures, or swaps. The Fund's investments will be 
consistent with the Fund's investment objective and will not be used to 
enhance leverage. Except for Underlying ETPs that may hold non-U.S. 
issues and for ADRs, the Fund will not otherwise invest in non-U.S. 
issues.
    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 Exchange will obtain a representation from the issuer of the 
Shares that the NAV per Share will be calculated daily and that the NAV 
and the Disclosed Portfolio will be 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. Quotation and last-sale 
information for the Shares will be available via the CTA high-speed 
line. In addition, the Portfolio Indicative Value will be widely 
disseminated at least every 15 seconds during the Core Trading Session 
by one or more major market data vendors. On each business day, before 
commencement of trading in Shares in the Core Trading Session on the 
Exchange, the Fund will disclose on its Web site the Disclosed 
Portfolio that will form the basis for the Fund's calculation of NAV at 
the end of the business day. On a daily basis, the Adviser will 
disclose 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 other securities and financial instruments held in the portfolio, 
and percentage weighting of the security or financial instrument in the 
portfolio. The Web site for the Fund will include a form of the 
prospectus for the Fund that may be downloaded, and additional data 
relating to NAV and other applicable quantitative information, updated 
on a daily basis. Moreover, 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. 
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 will be 
subject to NYSE Arca Equities Rule 8.600(d)(2)(D), which sets forth 
circumstances under which Shares of the Fund may be halted. In 
addition, as noted above, investors will 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 in that it 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. As noted above, the Exchange has in 
place surveillance procedures relating to trading in the Shares and may 
obtain information via ISG from other exchanges that are members of ISG 
or with which the Exchange has entered into a comprehensive 
surveillance sharing agreement. In addition, as noted above, investors 
will 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.

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 will:
    (A) By order approve or disapprove the 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 email to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2012-24 on the subject line.

[[Page 20666]]

Paper Comments

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

    All submissions should refer to File Number SR-NYSEArca-2012-24. 
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 a.m. and 3 p.m. Copies of the filing will also be available for 
inspection and copying at the NYSE's principal office and on its 
Internet Web site at www.nyse.com. 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-2012-24 and should be submitted on or before 
April 26, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-8149 Filed 4-4-12; 8:45 am]
BILLING CODE 8011-01-P