Document ID: SEC-2016-0935-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2016-06-01T04:00Z

[Federal Register Volume 81, Number 105 (Wednesday, June 1, 2016)]
[Notices]
[Pages 35086-35090]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-12782]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77920; File No. SR-NYSEArca-2016-46]

Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a 
Proposed Rule Change, as Modified by Amendment No. 2, To List and Trade 
Shares of the AdvisorShares Cornerstone Small Cap ETF Under NYSE Arca 
Equities Rule 8.600

May 25, 2016.

I. Introduction

    On March 28, 2016, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule 
change to list and trade shares (``Shares'') of the AdvisorShares 
Cornerstone Small Cap ETF (``Fund''), which will be offered by the 
AdvisorShares Trust (``Trust''). The proposed rule change was published 
for comment in the Federal Register on April 15, 2016.\3\ On May 4, 
2016, the Exchange filed Amendment No. 1 to the

[[Page 35087]]

proposed rule change.\4\ On May 19, 2016, the Exchange filed Amendment 
No. 2 to the proposed rule change.\5\ The Commission received no 
comments on the proposed rule change. This order approves the proposed 
rule change, as modified by Amendment No. 2.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 77576 (April 11, 
2016), 81 FR 22337.
    \4\ Amendment No. 1 replaced the original filing in its 
entirety.
    \5\ In Amendment No. 2, which replaced Amendment No. 1 in its 
entirety, the Exchange: (1) Clarified the Fund's investment 
objective; (2) clarified how OTC ADRs (as defined herein) will be 
valued for computing the Fund's net asset value (``NAV''); (3) 
clarified where price information can be obtained for OTC ADRs; (4) 
specified the cutoff time for creation and redemption orders; (5) 
amended certain surveillance representations; and (6) made other 
technical amendments. Amendment No. 2 is available at http://www.sec.gov/comments/sr-nysearca-2016-46/nysearca201646-2.pdf. 
Because Amendment No. 2 does not materially alter the substance of 
the proposed rule change or raise unique or novel regulatory issues, 
Amendment No. 2 is not subject to notice and comment.
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II. The Exchange's Description of the Proposal

    The Exchange proposes to list and trade the Shares under NYSE Arca 
Equities Rule 8.600, which governs the listing and trading of Managed 
Fund Shares on the Exchange. The Shares will be offered by the Trust, 
which is registered with the Commission as an open-end investment 
company.\6\ AdvisorShares Investments LLC will be the investment 
adviser (``Adviser'') to the Fund. Cornerstone Investment Partners will 
be the Fund's sub-adviser (``Sub-Adviser'').\7\ Foreside Fund Services, 
LLC will be the principal underwriter and distributor of the Fund's 
Shares. The Bank of New York Mellon will serve as the administrator, 
custodian, and transfer agent for the Fund.\8\
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    \6\ The Exchange represents that the Trust is registered under 
the 1940 Act. According to the Exchange, on January 26, 2016, the 
Trust filed with the Commission amendments to its registration 
statement on Form N-1A under the Securities Act of 1933 and under 
the Investment Company Act of 1940 (``1940 Act'') relating to the 
Fund (File Nos. 333-157876 and 811-22110) (``Registration 
Statement''). In addition, the Exchange states that 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).
    \7\ The Exchange states that neither the Adviser nor the Sub-
Adviser is registered as a broker-dealer, and neither the Adviser 
nor the Sub-Adviser is affiliated with a broker-dealer. In the event 
(a) the Adviser or the Sub-Adviser becomes a registered broker-
dealer or becomes newly affiliated with a broker-dealer, or (b) any 
new adviser or any 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 Fund's portfolio, and will be subject to 
procedures designed to prevent the use and dissemination of material 
non-public information regarding such portfolio.
    \8\ Additional information regarding the Trust, the Fund, and 
the Shares, including investment strategies, risks, creation and 
redemption procedures, fees, portfolio holdings, disclosure 
policies, calculation of the NAV, distributions, and taxes, among 
other things, can be found in Amendment No. 2 and the Registration 
Statement, as applicable. See Amendment No. 2, supra note 5, and 
Registration Statement, supra note 6.
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A. The Fund's Principal Investments

    According to the Exchange, the investment objective of the Fund 
will be to seek to provide total return through long-term capital 
appreciation and current income. Under normal circumstances,\9\ the 
Fund will invest at least 80% of its net assets (plus any borrowings 
for investment purposes) in common stocks of small cap companies traded 
on a U.S. or foreign exchange or over-the-counter (``OTC''). \10\
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    \9\ The term ``under normal circumstances'' means, without 
limitation, the absence of extreme volatility or trading halts in 
the equity 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.
    \10\ The Exchange states that the Sub-Adviser generally defines 
a small cap company as one having a market capitalization less than 
the market cap of the largest company in the Russell 2000 Index 
(``Index'') at the time of acquisition. The Exchange states that the 
Sub-Adviser will create an investable universe of 1,800 companies 
for the Fund similar to the components of the Index, but excluding 
the smallest 200 market capitalization securities in the Index. The 
Sub-Adviser generally intends to select stocks that satisfy three 
basic criteria: (1) Analysts have positively revised their forward 
looking estimates of the company's profitability and the company has 
generated earnings in excess of analyst expectations; (2) balance 
sheet strength; and (3) financial flexibility, as determined by 
measuring a company's ability to meet debt and capital expenditure 
requirements. Sector weights will be constrained relative to Index 
sector weights and will be determined by the relative attractiveness 
of the specific sector. Securities will be targeted to be equally 
weighted within the sectors, but may shift with price movements.
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B. The Fund's Other Investments

    According to the Exchange, while the Fund, under normal 
circumstances, will invest at least 80% of its assets in the securities 
described in the Principal Investments section above, the Fund may 
invest its remaining assets in the securities and financial instruments 
described below.
    In addition to the common stocks of small cap companies referenced 
in the Principal Investments section above, the Fund may invest in the 
following equity securities traded on a U.S. or foreign exchange or 
OTC: Common stocks, preferred stocks, rights, warrants, convertible 
securities, and master limited partnerships (``MLPs''). The Fund may 
invest in issuers located outside the United States directly, or in 
exchange-traded funds (``ETFs'') \11\ or exchange-traded notes 
(``ETNs'') \12\ that are indirectly linked to the performance of 
foreign issuers; or in ``Depositary Receipts,'' which are the 
following: American Depositary Receipts (``ADRs''),\13\ Global 
Depositary Receipts, European Depositary Receipts, International 
Depository Receipts, ``ordinary shares,'' and ``New York shares.'' \14\
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    \11\ For purposes of this filing, ETFs are Investment Company 
Units (as described in NYSE Arca Equities Rule 5.2(j)(3)); Portfolio 
Depositary Receipts (as described in NYSE Arca Equities Rule 8.100); 
and Managed Fund Shares (as described in NYSE Arca Equities Rule 
8.600). The ETFs all will be listed and traded in the U.S. on 
registered exchanges. The Fund will invest in the securities of ETFs 
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 ETF investments in conformity with the requirements of 
Regulation M of the Internal Revenue Code of 1986, as amended. While 
the Fund may invest in inverse ETFs, the Fund will not invest in 
leveraged or inverse leveraged ETFs.
    \12\ For purposes of this filing, ETNs include Index-Linked 
Securities (as described in NYSE Arca Equities Rule 5.2(j)(6)). 
While the Fund may invest in inverse ETNs, the Fund will not invest 
in leveraged or inverse leveraged ETNs.
    \13\ According to the Exchange, no more than 10% of the Fund's 
net assets will be invested in non-exchange-listed ADRs.
    \14\ With respect to the Fund's investments in the equity 
securities of foreign issuers, the Fund may invest in the equity 
securities of foreign issuers in emerging countries.
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    The Fund may invest in the securities of other investment companies 
to the extent that such an investment would be 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. 
Consistent with such restrictions discussed above, the Fund may invest 
in U.S. exchange-listed closed-end funds and business development 
companies (``BDCs''). Except with respect to ETFs, as described 
above,\15\ the Fund will not invest in inverse, leveraged, or inverse 
leveraged investment company securities.
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    \15\ See supra note 11.
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    The Fund may invest in the securities of exchange-traded pooled 
vehicles that are not investment companies and, thus, not required to 
comply with the provisions of the 1940 Act.\16\ These

[[Page 35088]]

pooled vehicles typically hold commodities, such as gold or oil, 
currency, or other property that is itself not a security.
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    \16\ For purposes of this filing, ``exchange-traded pooled 
vehicles'' consist of Equity Gold Shares (as described in NYSE Arca 
Equities Rule 5.2(j)(5)); 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); and 
Commodity Futures Trust Shares (as described in NYSE Arca Equities 
Rule 8.204). The exchange-traded pooled vehicles all will be listed 
and traded in the U.S. on registered exchanges. While the Fund may 
invest in inverse exchange-traded pooled vehicles, the Fund will not 
invest in leveraged or inverse leveraged exchange-traded pooled 
vehicles.
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    The Fund may invest in shares of real estate investment trusts 
(``REITs'') that are U.S. exchange-listed.
    The Fund may enter into repurchase agreements and reverse 
repurchase agreements.
    The Fund may invest in U.S. government securities, which include 
U.S. Treasury securities, U.S. Treasury bills, U.S. Treasury notes, and 
U.S. Treasury bonds. The Fund may also invest in certain U.S. 
government securities that are issued or guaranteed by agencies or 
instrumentalities of the U.S. government including, but not limited to, 
obligations of U.S. government agencies or instrumentalities such as 
the Federal National Mortgage Association, the Federal Home Loan 
Mortgage Corporation, and the Government National Mortgage Association.
    The Fund may invest in U.S. exchange-traded equity options, U.S. 
exchange-traded index options, and U.S. exchange-traded stock index 
futures contracts, all of which are traded in markets that are members 
of the Intermarket Surveillance Group (``ISG'') or with which the 
Exchange has in place a comprehensive surveillance sharing agreement.
    The Fund may invest in U.S. exchange-traded ``passive foreign 
investment companies'' (``PFICs'').
    The Fund, from time to time, in the ordinary course of business, 
may purchase securities on a when-issued, delayed-delivery, or forward 
commitment basis.
    According to the Exchange, to respond to adverse market, economic, 
political, or other conditions, the Fund may invest up to 100% of its 
total assets, without limitation, in high-quality, short-term debt 
securities and money market instruments either directly or through 
ETFs. The Fund may be invested in this manner for extended periods, 
depending on the Sub-Adviser's assessment of market conditions. Debt 
securities and money market instruments are the following: Shares of 
mutual funds, commercial paper, certificates of deposit, bankers' 
acceptances, U.S. government securities, repurchase agreements, and 
bonds that are rated BBB or higher.

C. The Fund's Investment Restrictions

    The Fund may hold up to an aggregate amount of 15% of its net 
assets in illiquid assets.\17\ The Fund will monitor its portfolio 
liquidity on an ongoing basis to determine whether, in light of current 
circumstances, an adequate level of liquidity is being maintained, and 
will consider taking appropriate steps in order to maintain adequate 
liquidity if, through a change in values, net assets, or other 
circumstances, more than 15% of the Fund's net assets are invested in 
illiquid assets.
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    \17\ In determining the liquidity of the Fund's investments, the 
Adviser may consider various factors, including: The frequency and 
volume of trades and quotations; the number of dealers and 
prospective purchasers in the marketplace; dealer undertakings to 
make a market; and the nature of the security and the market in 
which it trades.
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    The Fund will be classified as a diversified investment company 
under the 1940 Act.
    The Fund intends to qualify as a ``regulated investment company'' 
for purposes of the Internal Revenue Code of 1986.
    The Fund will not:
    (a) With respect to 75% of its total assets, (i) 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;
    (b) 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 in any 
investment company that so concentrates.
    The Fund's investments will be consistent with its investment 
objective and will not be used to provide multiple returns of a 
benchmark or to produce leveraged returns. The Fund's investments will 
not be used to seek performance that is the multiple or inverse 
multiple of the Fund's primary broad-based securities benchmark index 
(as defined in Form N-1A).

III. Discussion and Commission Findings

    After careful review, the Commission finds that the Exchange's 
proposal to list and trade the Shares is consistent with the Exchange 
Act and the rules and regulations thereunder applicable to a national 
securities exchange.\18\ In particular, the Commission finds that the 
proposed rule change, as modified by Amendment No. 2, is consistent 
with Section 6(b)(5) of the Exchange Act,\19\ which requires, among 
other things, that the Exchange's rules be 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 a national market system, and, 
in general, to protect investors and the public interest.
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    \18\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \19\ 15 U.S.C. 78f(b)(5).
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    The Commission also finds that the proposal to list and trade the 
Shares on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of 
the Exchange Act,\20\ which sets forth Congress's finding that it is in 
the public interest and appropriate for the protection of investors and 
the maintenance of fair and orderly markets to assure the availability 
to brokers, dealers, and investors of information with respect to 
quotations for, and transactions in, securities.
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    \20\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    According to the Exchange, quotation and last-sale information for 
the Shares will be available via the Consolidated Tape Association 
(``CTA'') high-speed line, and 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. 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.
    In addition, the Portfolio Indicative Value (as defined in NYSE 
Arca Equities Rule 8.600(c)(3)), based on current information regarding 
the value of the securities and other assets in the Disclosed 
Portfolio,\21\ will be widely disseminated at least every 15 seconds 
during the Core Trading Session \22\ by one or more major market data 
vendors.\23\ On each business day, before commencement of trading in 
Shares in the Core Trading Session on the

[[Page 35089]]

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.\24\ The Fund's Web site will also include 
a form of the prospectus for the Fund that may be downloaded, as well 
as additional quantitative information updated on a daily basis.
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    \21\ The term ``Disclosed Portfolio'' is defined in NYSE Arca 
Equities Rule 8.600(c)(2).
    \22\ The term ``Core Trading Session'' is defined in NYSE Arca 
Equities Rule 7.34(a)(2).
    \23\ According to the Exchange, several major market data 
vendors display and/or make widely available Portfolio Indicative 
Values taken from CTA or other data feeds.
    \24\ On a daily basis, the Adviser will disclose on the Fund's 
Web site the following information regarding each portfolio holding, 
as applicable to the type of holding: Ticker symbol, CUSIP number or 
other identifier, if any; a description of the holding (including 
the type of holding); the identity of the security, index, or other 
asset or instrument underlying the holding, if any; for options, the 
option strike price; quantity held; maturity date, if any; coupon 
rate, if any; effective date, if any; market value of the holding; 
and the percentage weighting of the holding in the Fund's portfolio. 
The Web site information will be publicly available at no charge.
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    Quotation and last-sale information for U.S. exchange-listed equity 
securities, including common stocks, ETFs, ETNs, exchange-traded pooled 
vehicles, preferred stocks, rights, warrants, convertible securities, 
closed-end funds, MLPs, REITs, BDCs, PFICs, and certain Depositary 
Receipts will be available via the CTA high-speed line, and will be 
available from the national securities exchange on which they are 
listed. Prices related to foreign exchange-traded common stocks, 
preferred stocks, rights, warrants, convertible securities, and MLPs 
will be available from the applicable exchange or from major market 
data vendors. Intra-day and closing price information relating to OTC-
traded common stocks, ADRs, preferred stocks, rights, warrants, 
convertible securities, and MLPs will be available from major market 
data vendors. Quotation and last-sale information for futures will be 
available from the exchange on which they are listed. Quotation and 
last-sale information for exchange-listed options cleared via the 
Options Clearing Corporation will be available via the Options Price 
Reporting Authority. Price information regarding investment company 
securities (other than exchange-traded investment company securities) 
will be available from the applicable fund. Price information regarding 
U.S. government securities, repurchase agreements, and reverse 
repurchase agreements may be obtained from brokers and dealers who make 
markets in such securities or through nationally recognized pricing 
services through subscription agreements.
    The Commission further believes that the proposal to list and trade 
the Shares is reasonably designed to promote fair disclosure of 
information that may be necessary to price the Shares appropriately and 
to prevent trading when a reasonable degree of transparency cannot be 
assured. 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. Further, trading in the Shares will be 
subject to NYSE Arca Equities Rule 8.600(d)(2)(D), which sets forth 
circumstances under which trading in the Shares may be halted. In 
addition, trading in the Shares 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.\25\ The Adviser, as the 
Reporting Authority, will implement and maintain, or be subject to, 
procedures designed to prevent the use and dissemination of material 
non-public information regarding the actual components of the Fund's 
portfolio. In addition, the Exchange also has a general policy 
prohibiting the distribution of material, non-public information by its 
employees. The Exchange states that neither the Adviser nor the Sub-
Adviser is a registered broker-dealer or affiliated with a broker-
dealer, and that in the event (a) the Adviser or the Sub-Adviser 
becomes a registered broker-dealer or becomes 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 Fund's 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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    \25\ 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.
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    The Exchange represents that it 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. 
To support this proposal, the Exchange has made the following 
representations:
    (1) The Shares will be subject to NYSE Arca Equities Rule 8.600, 
which sets forth the initial and continued listing criteria applicable 
to Managed Fund Shares.
    (2) The Exchange has appropriate rules to facilitate transactions 
in the Shares during all trading sessions.
    (3) Trading in the Shares will be subject to the existing trading 
surveillances administered by the Exchange, as well as cross-market 
surveillances administered by the Financial Industry Regulatory 
Authority (``FINRA'') on behalf of the Exchange, which 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.\26\
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    \26\ See Amendment No. 2, supra note 5, at 17. The Exchange 
states that FINRA conducts cross-market surveillances on behalf of 
the Exchange pursuant to a regulatory services agreement, and that 
the Exchange is responsible for FINRA's performance under this 
regulatory services agreement.
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    (4) The Exchange, or FINRA on behalf of the Exchange, or both, will 
communicate as needed regarding trading in the Shares and certain 
underlying securities and financial instruments with other markets and 
other entities that are members of the ISG, and the Exchange, or FINRA 
on behalf of the Exchange, or both, may obtain trading information 
regarding trading in such securities and financial instruments from 
such markets and other entities.\27\ In addition, the Exchange may 
obtain information regarding trading in such securities and financial 
instruments from markets and other entities that are members of ISG or 
with which the Exchange has in place a comprehensive surveillance 
sharing agreement.
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    \27\ See id.
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    (5) Not more than 10% of the net assets of the Fund in the 
aggregate invested in equity securities (other than non-exchange-traded 
investment company securities) shall consist of equity securities whose 
principal market is not a member of the ISG or is a market with which 
the Exchange does not have a comprehensive surveillance sharing 
agreement.
    (6) While the Fund may invest in inverse ETFs, ETNs, and exchange-
traded pooled vehicles, the Fund will not invest in leveraged or 
inverse leveraged ETFs, ETNs, and exchange-traded pooled vehicles.
    (7) The Fund may invest in U.S. exchange-traded equity options, 
U.S. exchange-traded index options, and U.S. exchange-traded stock 
index futures contracts, all of which are traded in markets that are 
members of the ISG or with which the Exchange has in place a 
comprehensive surveillance sharing agreement.

[[Page 35090]]

    (8) The Fund may hold up to an aggregate amount of 15% of its net 
assets in illiquid assets. The Fund will monitor its portfolio 
liquidity on an ongoing basis to determine whether, in light of current 
circumstances, an adequate level of liquidity is being maintained, and 
will consider taking appropriate steps in order to maintain adequate 
liquidity if, through a change in values, net assets, or other 
circumstances, more than 15% of the Fund's net assets are held in 
illiquid assets.
    (9) For initial and continued listing, the Fund must be in 
compliance with Rule 10A-3 under the Exchange Act.\28\
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    \28\ See 17 CFR 240.10A-3.
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    (10) The Fund's investments will be consistent with its investment 
objective and will not be used to provide multiple returns of a 
benchmark or to produce leveraged returns. The Fund's investments will 
not be used to seek performance that is the multiple or inverse 
multiple of the Fund's primary broad-based securities benchmark index 
(as defined in Form N-1A).
    (11) A minimum of 100,000 Shares will be outstanding at the 
commencement of trading on the Exchange.
    (12) Prior to the commencement of trading, the Exchange will inform 
its Equity Trading Permit Holders in an Information Bulletin of the 
special characteristics and risks associated with trading the Shares. 
Specifically, the Information 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 Equity Trading Permit 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 and the Disclosed Portfolio is disseminated; 
(5) the requirement that Equity Trading Permit Holders deliver a 
prospectus to investors purchasing newly issued Shares prior to or 
concurrently with the confirmation of a transaction; and (6) trading 
information.
    The Exchange represents that all statements and representations 
made in this filing regarding (a) the description of the portfolio, (b) 
limitations on portfolio holdings or reference assets, or (c) the 
applicability of Exchange rules and surveillance procedures shall 
constitute continued listing requirements for listing the Shares on the 
Exchange. The issuer has represented to the Exchange that it will 
advise the Exchange of any failure by the Fund to comply with the 
continued listing requirements, and, pursuant to its obligations under 
Section 19(g)(1) of the Act, the Exchange will monitor \29\ for 
compliance with the continued listing requirements. If the Fund is not 
in compliance with the applicable listing requirements, the Exchange 
will commence delisting procedures under NYSE Arca Equities Rule 
5.5(m). This approval order is based on all of the Exchange's 
representations, including those set forth above and in Amendment No. 
2. The Commission notes that the Fund and the Shares must comply with 
the requirements of NYSE Arca Equities Rule 8.600 to be initially and 
continuously listed and traded on the Exchange.
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    \29\ The Commission notes that certain other proposals for the 
listing and trading of managed fund shares include a representation 
that the exchange will ``surveil'' for compliance with the continued 
listing requirements. See, e.g., Amendment No. 2 to SR-BATS-2016-04, 
available at: http://www.sec.gov/comments/sr-bats-2016-04/bats201604-2.pdf. In the context of this representation, it is the 
Commission's view that ``monitor'' and ``surveil'' both mean ongoing 
oversight of the Fund's compliance with the continued listing 
requirements. Therefore, the Commission does not view ``monitor'' as 
a more or less stringent obligation than ``surveil'' with respect to 
the continued listing requirements.
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    For the foregoing reasons, the Commission finds that the proposed 
rule change, as modified by Amendment No. 2, is consistent with Section 
6(b)(5) of the Exchange Act \30\ and Section 11A(a)(1)(C)(iii) of the 
Exchange Act \31\ and the rules and regulations thereunder applicable 
to a national securities exchange.
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    \30\ 15 U.S.C. 78f(b)(5).
    \31\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Exchange Act,\32\ that the proposed rule change (SR-NYSEArca-2016-46), 
as modified by Amendment No. 2, be, and it hereby is, approved.
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    \32\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\33\
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    \33\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2016-12782 Filed 5-31-16; 8:45 am]
 BILLING CODE 8011-01-P