Document ID: SEC-2014-1056-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2014-06-25T04:00Z

[Federal Register Volume 79, Number 122 (Wednesday, June 25, 2014)]
[Notices]
[Pages 36114-36116]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-14778]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72433; File No. SR-NYSEArca-2014-69]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change Relating to 
Holdings in Equity Securities by the Peritus High Yield ETF

June 19, 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 10, 2014, 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\ 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 holdings to be 
implemented by the Peritus High Yield ETF to achieve its investment 
objective with respect to holdings in equity securities. 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 a proposal to list and trade on the 
Exchange shares (``Shares'') of the Peritus High Yield ETF (``Fund'') 
under NYSE Arca Equities Rule 8.600,\4\ which governs the listing and 
trading of Managed Fund Shares.\5\
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    \4\ See Securities Exchange Act Release No. 63329 (November 17, 
2010), 75 FR 71760 (November 24, 2010) (SR-NYSEArca-2010-86) (the 
``Prior Order''). The notice with respect to the Prior Order was 
published in Securities Exchange Act Release No. 63041 (October 5, 
2010), 75 FR 62905 (October 13, 2010) (``Prior Notice'' and, 
together with the Prior Order, the ``Prior Release'').
    \5\ A Managed Fund Share is a security that represents an 
interest in an investment company registered under the Investment 
Company Act of 1940 (15 U.S.C. 80a-1) (``1940 Act'') organized as an 
open-end investment company or similar entity that invests in a 
portfolio of securities selected by its investment adviser 
consistent with its investment objectives and policies. In contrast, 
an open-end investment company that issues Investment Company Units, 
listed and traded on the Exchange under NYSE Arca Equities Rule 
5.2(j)(3), seeks to provide investment results that correspond 
generally to the price and yield performance of a specific foreign 
or domestic stock index, fixed income securities index or 
combination thereof.
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    The Shares are offered by AdvisorShares Trust (the ``Trust''), a 
statutory trust organized under the laws of the State of Delaware and 
registered with the Commission as an open-end management investment 
company.\6\ The Fund's Shares are currently listed and traded on the 
Exchange under NYSE Arca Equities Rule 8.600.
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    \6\ The Trust is registered under the 1940 Act. On October 29, 
2012, the Trust filed with the Commission an amendment to its 
registration statement on Form N-1A under the Securities Act of 1933 
(15 U.S.C. 77a) and the 1940 Act relating to the Fund (File Nos. 
333-157876 and 811-22110) (the ``Registration Statement''). The 
description of the operation of the Trust and the Fund herein is 
based, in part, on the Registration Statement. In addition, the 
Commission has issued an order granting certain exemptive relief to 
the Trust under the 1940 Act. See Investment Company Act Release No. 
29291 (May 28, 2010) (File No. 812-13677) (``Exemptive Order'').
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    The investment adviser to the Fund is AdvisorShares Investments, 
LLC (the ``Adviser''). Peritus I Asset Management, LLC is the Fund's 
sub-adviser (``Peritus'' or the ``Sub-Adviser'').
    According to the Registration Statement and as stated in the Prior 
Release, the Fund's investment objective is to achieve high current 
income with a secondary goal of capital appreciation. The Sub-Adviser 
seeks to achieve the Fund's investment objective by selecting, among 
other investments, a focused portfolio of high yield debt securities, 
which include senior and subordinated corporate debt obligations (such 
as bonds, debentures, notes and commercial paper). The Fund does not 
have any portfolio maturity limitation and may invest its assets from 
time to time primarily in instruments with short-term, medium-term or 
long-term maturities. The Adviser represents that the investment 
objective of the Fund is not changing.
    The Fund currently is permitted to invest no more than 10% of the 
Fund's net assets in equity securities that the Sub-Adviser believes 
will yield high dividends.\7\
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    \7\ See Securities Exchange Act Release No. 66818 (April 17, 
20120 [sic], 77 FR 24233 (April 23, 2012) (SR-NYSEArca-2012-33) 
(notice of filing and immediate effectiveness of proposed rule 
change relating to the Fund's investment in equity securities) 
(``Equity Investment Release''). The Exchange also filed a proposed 
rule change to reflect a change in the Fund's holdings to allow 
investment of up to 20% of the Fund's net assets in leveraged loans. 
See Securities Exchange Act Release No. 70284 (August 29, 2013), 78 
FR 54715 (September 5, 2013) (SR-NYSEArca-2013-83) (notice of filing 
and immediate effectiveness of proposed rule change relating to Fund 
investments in leveraged loans) (``Leveraged Loan Release'' and, 
together with the Prior Release and the Equity Investment Release, 
the ``Prior Releases'').
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    The Exchange proposes to reflect a change to be implemented by the 
Fund with respect to the holdings in equity securities to increase the 
percentage of Fund assets that generally may be invested in equity 
securities to no more than 20% of the Fund's net assets. Thus, in 
addition to the investments referenced in the Prior Release and the 
Leveraged Loan Release, the Fund will seek to invest generally no more 
than 20% of its net assets in equity securities that the Sub-Adviser 
believes will yield high dividends.\8\ According to the Registration 
Statement and, as stated in the Equity Investment Release, equity 
securities in which the Fund may invest will include common stock, 
preferred stock, warrants, convertible securities, rights, master 
limited partnerships, depositary receipts (including American 
Depositary Receipts (``ADRs'') and Global Depositary Receipts 
(``GDRs'', together with ADRs, ``Depositary

[[Page 36115]]

Receipts''),\9\ and real estate investment trusts. Depositary Receipts 
held by the Fund may be sponsored or unsponsored, provided that no more 
than 10% of the Fund's net assets will be invested in unsponsored 
Depositary Receipts. With the exception of unsponsored Depositary 
Receipts, all equity securities held by the Fund will be listed and 
traded on U.S national securities exchanges, all of which are members 
of the Intermarket Surveillance Group (``ISG'').
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    \8\ The change to the Fund's holdings to include equity 
securities will be effective upon filing with the Commission of an 
amendment to the Trust's Registration Statement on Form N-1A, and 
shareholders will be notified of such change by means of such 
amendment.
    \9\ According to the Registration Statement, ADRs and GDRs are 
certificates evidencing ownership of shares of a foreign issuer. 
These certificates are issued by depositary banks and generally 
trade on an established market in the United States or elsewhere. 
The underlying shares are held in trust by a custodian bank or 
similar financial institution in the issuer's home country. The 
depositary bank may not have physical custody of the underlying 
securities at all times and may charge fees for various services, 
including forwarding dividends and interest and corporate actions.
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    Pursuant to the terms of the Exemptive Order, the Fund will not 
invest in options contracts, futures contracts or swap agreements. The 
Fund's investments will be consistent with its investment objective and 
will not be used to enhance leverage.
    As stated in the Prior Release, on each business day, before 
commencement of trading in Shares in the Core Trading Session on the 
Exchange, the Fund discloses on its Web site the Disclosed Portfolio, 
which will include information relating to equity securities, among 
other investments, that will form the basis for the Fund's calculation 
of net asset value (``NAV'') at the end of the business day. For 
purposes of calculating NAV, unsponsored Depositary Receipts are valued 
on the basis of the market closing price on the exchange where the 
stock of the foreign issuer that underlies such unsponsored Depositary 
Receipts is listed. The intra-day, closing and settlement prices for 
exchange-listed equity securities held by the Fund, including exchange-
listed Depositary Receipts are also readily available from the national 
securities exchanges trading such securities. Pricing information for 
unsponsored Depositary Receipts is available from automated quotation 
systems, published or other public sources, or on-line information 
services. All representations made in the Prior Release regarding the 
availability of information relating to the Shares, trading halts, 
trading rules, the Portfolio Indicative Value and surveillance, among 
others, will continue to apply to trading in the Shares.
    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 federal securities 
laws applicable to trading on the Exchange. The Exchange may obtain 
information via the ISG from other exchanges that are members of ISG or 
with which the Exchange has entered into a comprehensive surveillance 
sharing agreement. No more than 10% of the Fund's net assets will be 
invested in unsponsored Depositary Receipts. With the exception of 
unsponsored Depositary Receipts, all equity securities held by the Fund 
will be listed and traded on U.S national securities exchanges.
    The Adviser represents that the proposed change to permit an 
increased investment in equity securities, as described above, is 
consistent with the Fund's investment objective, and will further 
assist the Adviser and Sub-Adviser to achieve such investment 
objective. Specifically, by investing an increased portion of the 
Fund's net assets in equity securities, the Fund will have additional 
flexibility to achieve high current income through investments in 
dividend-paying equity securities, and to achieve the secondary goal of 
capital appreciation through possible price appreciation of such equity 
investments. Except for the change noted above, all other 
representations made in the Prior Releases remain unchanged.\10\ The 
Fund will continue to comply with all initial and continued listing 
requirements under NYSE Arca Equities Rule 8.600.
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    \10\ See notes 4 and 7, supra. All terms referenced but not 
defined herein are defined in the Prior Release.
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2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \11\ that an exchange have rules that 
are designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to remove 
impediments to, and perfect the mechanism of a free and open market 
and, in general, to protect investors and the public interest.
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    \11\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices 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 the ISG from other exchanges that are members of ISG or with which 
the Exchange has entered into a comprehensive surveillance sharing 
agreement. No more than 10% of the Fund's net assets will be invested 
in unsponsored Depositary Receipts. With the exception of unsponsored 
Depositary Receipts, all equity securities held by the Fund will be 
listed and traded on U.S national securities exchanges.
    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 NAV per Share is calculated daily and that the NAV and the 
Disclosed Portfolio is made available to all market participants at the 
same time. In addition, a large amount of information is publicly 
available regarding the Fund and the Shares, thereby promoting market 
transparency. The Portfolio Indicative Value, as defined in NYSE Arca 
Equities Rule 8.600(c)(3), is disseminated by one or more major market 
data vendors at least every 15 seconds during the Exchange's Core 
Trading Session. On each business day, before commencement of trading 
in Shares in the Core Trading Session on the Exchange, the Fund 
discloses 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. 
Information regarding market price and trading volume of the Shares is 
and will be continually available on a real-time basis throughout the 
day on brokers' computer screens and other electronic services, and 
quotation and last sale information is available via the Consolidated 
Tape Association high-speed line. The intra-day, closing and settlement 
prices for exchange-listed equity securities held by the Fund, 
including exchange-listed Depositary Receipts are also readily 
available from the national securities exchanges trading such 
securities. Pricing information for unsponsored Depositary Receipts is 
available from automated quotation systems, published or other public 
sources, or on-line information services. Trading in Shares of the Fund 
will be halted if the circuit breaker parameters in NYSE Arca Equities 
Rule 7.12 have been reached or because of market conditions or for 
reasons that, in the view of the Exchange, make trading in the Shares 
inadvisable. Trading in the Shares is subject to NYSE Arca Equities 
Rule 8.600(d)(2)(D), which sets forth

[[Page 36116]]

circumstances under which Shares of the Fund may be halted. The Web 
site for the Fund includes a form of the prospectus for the Fund and 
additional data relating to NAV and other applicable quantitative 
information. In addition, as stated in the Prior Notice, investors have 
ready access to information regarding the Fund's holdings, the 
Portfolio Indicative Value, the Disclosed Portfolio, and quotation and 
last sale information for the Shares.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest. As noted above, the Exchange 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 stated in the Prior Release, investors have 
ready access to information regarding the Fund's holdings, the 
Portfolio Indicative Value, the Disclosed Portfolio, and quotation and 
last sale information for the Shares.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purpose of the Act. The Exchange believes the 
proposed rule change, in permitting the Fund utilize a higher 
percentage of U.S. exchange-listed equity securities as part of its 
portfolio to achieve its investment objective, will enhance competition 
among issues of Managed Fund Shares that invest in fixed income and 
equity securities.

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

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

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

    Because the 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 
\12\ and Rule 19b-4(f)(6)(iii) thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 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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    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-2014-69 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-2014-69. 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 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-2014-69 and should 
be submitted on or before July 16, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-14778 Filed 6-24-14; 8:45 am]
BILLING CODE 8011-01-P