Document ID: SEC-2014-0991-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2014-06-13T04:00Z

[Federal Register Volume 79, Number 114 (Friday, June 13, 2014)]
[Notices]
[Pages 33973-33976]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-13821]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72349; File No. SR-NYSEArca-2014-66]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change to Reflect a Change 
to the Reference Index Relating to the Columbia Select Large Cap Value 
ETF

June 9, 2014.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on June 2, 2014, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule

[[Page 33974]]

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\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to reflect a change to the reference index 
relating to the Columbia Select Large Cap Value ETF (formerly, Grail 
American Beacon Large Cap Value ETF). Shares of the Fund are currently 
listed and traded on the Exchange. 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Commission has approved listing and trading on the Exchange of 
shares (``Shares'') of the Columbia Select Large Cap Value ETF 
(formerly, Grail American Beacon Large Cap Value ETF) (``Fund''), a 
series of Columbia ETF Trust (``Trust'') (formerly, the Grail Advisors 
ETF Trust) \4\ under NYSE Arca Equities Rule 8.600, which governs the 
listing and trading of Managed Fund Shares. Shares of the Fund are 
currently listed and traded on the Exchange.
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    \4\ See Securities Exchange Act Release No. 59826 (April 28, 
2009), 74 FR 20512 (May 4, 2009) (SR-NYSEArca-2009-22) (``Prior 
Order''). See also Securities Exchange Act Release No. 59651 (March 
30, 2009), 74 FR 15548 (April 6, 2009) (SR-NYSEArca-2009-22) 
(``Prior Notice,'' and together with the Prior Order, the ``Prior 
Release'').
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    The Shares are offered by the Trust, which is registered with the 
Commission as an open-end management investment company.\5\ The 
investment advisor to the Fund is Columbia Management Investment 
Advisers, LLC (the ``Investment Manager'').\6\
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    \5\ The Trust is registered under the Investment Company Act of 
1940 (15 U.S.C. 80a-1) (``1940 Act''). On April 14, 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 
under the 1940 Act relating to the Fund (File Nos. 333-148082 and 
811-22154) (``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. 28604 (January 16, 2009) 
(File No. 812-13440) (``Exemptive Order'').
    \6\ The previous investment manager for the Fund was Grail 
Advisors LLC, a majority-owned subsidiary of Grail Partners LLC. The 
Fund previously was sub-advised by American Beacon Advisors, Inc.
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    In this proposed rule change, the Exchange proposes to reflect a 
change to the index that the Investment Manager will utilize to 
implement the Fund's investment objective, as described below.\7\
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    \7\ The changes described herein will be effective upon filing 
with the Commission of another amendment to the Fund's Registration 
Statement. See note 5, supra. The Investment Manager represents that 
it will manage the Fund in the manner described in the Prior 
Release, and will not implement the changes described herein until 
the instant proposed rule change is operative.
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    The Prior Release stated that the Fund's investment objective is 
long-term capital appreciation and current income; that, ordinarily, at 
least 80% of the Fund's net assets (plus the amount of any borrowings 
for investment purposes) would be invested in equity securities of 
large market capitalization U.S. companies; and that these companies 
generally have market capitalizations similar to the market 
capitalizations of the companies in the Russell 1000[supreg] Index at 
the time of investment.\8\ The Prior Release further stated that the 
Fund's investment sub-advisers will select stocks that, in their 
opinion, have most or all of the following characteristics (relative to 
the Russell 1000[supreg] Index): Above-average earnings growth 
potential; below-average price to earnings ratio; below-average price 
to book value ratio; and above-average dividend yields.\9\
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    \8\ The Russell 1000 Index measures the performance of the 1,000 
largest U.S. companies based on total market capitalization. The 
Prior Release stated that the Fund's investments may include common 
stocks, preferred stocks, securities convertible into U.S. common 
stocks, U.S. dollar-denominated American Depositary Receipts, and 
U.S. dollar-denominated foreign stocks traded on U.S. exchanges, and 
that the Fund will not purchase or sell securities in markets 
outside the U.S.
    \9\ The Fund currently does not have a sub-adviser. The 
activities of the sub-advisers described in the Prior Release have 
been assumed by the Investment Manager, but the Investment Manager 
may, in the future, employ for the Fund the services of an 
investment sub-adviser or sub-advisers. The Investment Manager is 
not registered as a broker-dealer, but is affiliated with a broker-
dealer, and has implemented a ``fire wall'' with respect to such 
broker-dealer regarding access to information concerning the 
composition and/or changes to the Fund's portfolio. If the 
Investment Manager elects to hire a sub-adviser for the Fund that is 
registered as a broker-dealer or is affiliated with a broker-dealer, 
such sub-adviser will implement a fire wall with respect to its 
relevant personnel or broker-dealer affiliate 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.
    In the event (a) the Investment Manager becomes registered as a 
broker-dealer or newly affiliated with a broker-dealer, or (b) any 
new adviser or sub-adviser is a registered broker-dealer, or becomes 
affiliated with a broker-dealer, it will implement a fire wall with 
respect to its relevant personnel or its broker-dealer affiliate 
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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    Going forward, whether day-to-day portfolio management of the Fund 
is provided by the Investment Manager or a sub-adviser selected by the 
Investment Manager, the Investment Manager wishes to revise the 
description of what constitutes equity securities of ``large market 
capitalization U.S. companies'' from the market capitalization range of 
the Russell 1000[supreg] Index to companies with market capitalizations 
similar to the market capitalizations of the companies in the Russell 
1000[supreg] Value Index at the time of investment.\10\ The Investment 
Manager represents that it has managed the Fund consistent with the 
range of the Russell 1000[supreg] Index; however, the Investment 
Manager believes that the Russell 1000 Value[supreg] Index will better 
reflect the Fund's ``value'' style of investing.\11\
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    \10\ The Russell 1000 Value[supreg] Index, which is a subset of 
the Russell[supreg] 1000 Index, measures the performance of the 
large-cap value segment of the U.S. equity universe. It includes 
those Russell 1000 companies with lower price-to-book ratios and 
lower expected growth values. The Russell 1000 Value Index is 
reconstituted annually. The Fund's current performance benchmark is 
the Russell 1000 Value[supreg] Index, as reflected in the 
Registration Statement.
    \11\ According to the Registration Statement, the Investment 
Manager considers a variety of factors in identifying opportunities 
and constructing the Fund's portfolio which may include, among 
others, a low price-to-earnings ratio; positive change in senior 
management; positive corporate restructuring; temporary setback in 
price due to factors that no longer exist or are ending; a positive 
shift in the company's business cycle; and/or a catalyst for 
increase in the rate of the company's earnings growth. These factors 
may change over time.
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    The Investment Manager represents that there is no change to the 
Fund's investment objective. The Fund will

[[Page 33975]]

continue to comply with all initial and continued listing requirements 
under NYSE Arca Equities Rule 8.600.
    Except for the changes noted above, all other facts presented and 
representations made in the Prior Release remain unchanged.
    All terms referenced but not defined herein are defined in the 
Prior Release.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \12\ 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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    \12\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices, and is designed 
to promote just and equitable principles of trade and to protect 
investors and the public interest, in that the Investment Manager 
represents that there is no change to the Fund's investment objective 
and the Investment Manager believes that the Russell 1000 Value[supreg] 
Index better reflects the Fund portfolio managers' value style of 
investing. In addition, the Investment Manager notes that the Fund's 
current performance benchmark is the Russell 1000 Value[supreg] Index.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that the Fund will continue to comply with all 
initial and continued listing requirements under NYSE Arca Equities 
Rule 8.600. The Investment Manager represents that there is no change 
to the Fund's investment objective. Except for the changes noted above, 
all other representations made in the Prior Release remain unchanged.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed changes will 
accommodate continued listing and trading of an issue of Managed Fund 
Shares that, ordinarily, principally holds large-capitalization, U.S. 
exchange-listed equities.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, if consistent with 
the protection of investors and the public interest, the proposed rule 
change has become effective pursuant to Section 19(b)(3)(A) of the Act 
\13\ and Rule 19b-4(f)(6)(iii) thereunder.\14\
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) \15\ normally 
does not become operative for 30 days after the date of the filing. 
However, Rule 19b-4(f)(6)(iii) \16\ permits the Commission to designate 
a shorter time if such action is consistent with the protection of 
investors and the public interest. The Exchange requests that the 
Commission waive the 30-day operative delay to accommodate the proposed 
change without delay. The Exchange states that the Shares of the Fund 
are currently listed and trading.
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    \15\ 17 CFR 240.19b-4(f)(6).
    \16\ 17 CFR 240.19b-4(f)(6)(iii).
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    The Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public 
interest.\17\ As stated in this proposal, the proposed change does not 
alter the Fund's investment objective. Under the proposal, the Exchange 
seeks to change the description of what constitutes equity securities 
of ``large market capitalization U.S. companies'' from the market 
capitalization range of the Russell 1000[supreg] Index to companies 
with market capitalizations similar to the market capitalizations of 
the companies in the Russell 1000[supreg] Value Index at the time of 
investment. The Commission notes that the Russell 1000 Value[supreg] 
Index, which measures the performance of the large-cap value segment of 
the U.S. equity universe, is a subset of the Russell[supreg] 1000 
Index. The Commission further notes that the Fund's current performance 
benchmark is the Russell 1000 Value[supreg] Index, as reflected in the 
Registration Statement. The Exchange represents that, except for this 
change, all other facts and representations made in the Prior Release 
remain unchanged, and the Fund will continue to comply with all initial 
and continued listing requirements under NYSE Arca Equities Rule 8.600. 
Because the proposed change does not alter the Fund's investment 
objective and does not raise any novel or unique regulatory issues, the 
Commission designates the proposed rule change as operative upon 
filing.
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    \17\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2014-66 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEArca-2014-66. 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

[[Page 33976]]

change that are filed with the Commission, and all written 
communications relating to the proposed rule change between the 
Commission and any person, other than those that may be withheld from 
the public in accordance with the provisions of 5 U.S.C. 552, will be 
available for Web site viewing and printing in the Commission's Public 
Reference Room, 100 F Street NE., Washington, DC 20549, on official 
business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of 
such filing will also be available for inspection and copying at the 
principal office of the Exchange. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-NYSEArca-2014-66 and should be submitted on or before 
July 7, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-13821 Filed 6-12-14; 8:45 am]
BILLING CODE 8011-01-P