Document ID: SEC-2012-0664-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2012-04-27T04:00Z

[Federal Register Volume 77, Number 82 (Friday, April 27, 2012)]
[Notices]
[Pages 25218-25224]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-10158]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66846; File No. SR-NYSEArca-2012-34]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change To List and Trade the Huntington US Equity 
Rotation Strategy ETF and Huntington EcoLogical Strategy ETF Under NYSE 
Arca Equities Rule 8.600

April 23, 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 April 12, 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''): Huntington US 
Equity Rotation Strategy ETF and Huntington EcoLogical Strategy 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\ Huntington US Equity 
Rotation Strategy ETF and Huntington EcoLogical Strategy ETF (each, a 
``Fund'' and collectively, ``Funds'').\4\ The Funds will be actively 
managed exchange-traded funds (``ETFs''). The Shares of each Fund will 
be offered by Huntington Strategy Shares (``Trust''), a statutory trust 
organized under the laws of the State of Delaware and registered with 
the Commission as an open-end management investment company.\5\
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    \3\ A Managed Fund Share is a security that represents an 
interest in an investment company registered under the Investment 
Company Act of 1940 (15 U.S.C. 80a-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 approved listing and trading on the 
Exchange of a number of actively managed funds under NYSE Arca 
Equities 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); 65468 (October 3, 2011), 76 
FR 62873 (October 11, 2011) (SR-NYSEArca-2011-51) (order approving 
listing and trading of TrimTabs Float Shrink ETF); 63076 (October 
12, 2010), 75 FR 63874 (October 18, 2010) (SR-NYSEArca-2010-79) 
(order approving listing of Cambria Global Tactical ETF).
    \5\ The Trust is registered under the 1940 Act. On April 6, 
2012, the Trust filed with the Commission an amendment to the 
Trust's 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 Funds 
(File Nos. 333-170750 and 811-22497) (``Registration Statement''). 
The description of the operation of the Trust and the Funds herein 
is based, in part, on the Registration Statement. As of the date of 
this filing, the Trust has also filed an Amended and Restated 
Application for an Order under Section 6(c) of the 1940 Act for 
exemptions from various provisions of the 1940 Act and rules 
thereunder (File No. 812-13785), dated April 3, 2012 (``Exemptive 
Application''). See Investment Company Act Release No. 30032 (April 
10, 2012). The Shares will not be listed on the Exchange until an 
order (``Exemptive Order'') under the 1940 Act has been issued by 
the Commission with respect to the Exemptive Application. 
Investments made by the Funds will comply with the conditions set 
forth in the Exemptive Order.
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    Huntington Asset Advisors, Inc. (``Adviser'') is the investment 
adviser of each Fund and manages the investment portfolios of the 
Funds. SEI Investments Distribution Co. (``Distributor'') is the 
principal underwriter and distributor of the Funds' Shares. Citibank, 
N.A. is the custodian (``Custodian'') for the Funds.
    Commentary .06 to Rule 8.600 provides that, if the investment 
adviser to the investment company issuing Managed Fund Shares is 
affiliated with a broker-dealer, such investment adviser shall erect a 
``fire wall'' between the investment adviser and the broker-dealer with 
respect to access to information concerning the composition and/or 
changes to such investment company portfolio. 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.\6\ 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

[[Page 25219]]

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. The Adviser is affiliated with two broker-
dealers and has implemented a fire wall with respect to each affiliated 
broker-dealer regarding access to information concerning the 
composition and/or changes to a Fund portfolio. In the event (a) the 
Adviser becomes 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 a 
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 its 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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Huntington US Equity Rotation Strategy ETF
    According to the Registration Statement, the Fund's investment 
objective is to seek capital appreciation. Under normal conditions,\7\ 
the Fund will invest at least 80% of its net assets in the exchange-
listed common stocks of select companies organized in the U.S. and 
included in the S&P Composite 1500[supreg] (``Companies''). The 
Registration Statement states that the S&P Composite 1500 is a 
combination of the following indices: the S&P 500[supreg]; the S&P 
MidCap 400[supreg]; and the S&P SmallCap 600[supreg].\8\
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    \7\ The term ``under normal conditions'' includes, but is not 
limited to, 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.
    \8\ The adjusted statistics for the S&P Composite 1500, the S&P 
500, the S&P MidCap 400, and the S&P SmallCap 600 are as follows 
(figures are as of April 4, 2012):
     For the S&P Composite 1500, the adjusted average market 
capitalization of companies in the index was approximately $9.55 
billion, and the adjusted median market capitalization was 
approximately $2.24 billion. The adjusted market capitalization 
range for the companies included in the S&P Composite 1500 was 
approximately $10 million to $582.09 billion.
     For the S&P 500, the adjusted average market 
capitalization of companies in the index was approximately $25.28 
billion, and the adjusted median market capitalization was 
approximately $11.65 billion. The adjusted market capitalization 
range for the companies included in the S&P 500 was approximately 
$1.08 billion to $582.09 billion.
     For the S&P MidCap 400, the adjusted average market 
capitalization of companies in the index was approximately $2.94 
billion, and the adjusted median market capitalization was 
approximately $2.60 billion. The adjusted market capitalization 
range for the companies included in the S&P MidCap 400 was 
approximately $520 million to $9.47 billion.
     For the S&P SmallCap 600, the adjusted average market 
capitalization of companies in the index was approximately $830 
million, and the adjusted median market capitalization was 
approximately $700 million. The adjusted market capitalization range 
for the companies included in the S&P SmallCap 600 was approximately 
$10 million to $3.17 billion.
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    The Fund will invest in Companies within each of the large-cap, 
mid-cap, and small-cap U.S. equity market segments (each a ``Market 
Segment''). The large-cap segment is represented by companies 
comprising the S&P 500, the mid-cap segment is represented by companies 
comprising the S&P MidCap 400, and the small-cap segment is represented 
by the companies comprising the S&P SmallCap 600.
    The Fund will also invest in Companies operating in each of the ten 
(10) sectors represented in the S&P Composite 1500. A sector is a large 
grouping of companies operating within the market that share similar 
characteristics. The ten (10) sectors comprising the S&P Composite 1500 
are: Utilities, consumer staples, information technology, healthcare, 
financials, energy, consumer discretionary, materials, industrials, and 
telecommunication services (``Sectors'').
    As market conditions change, the Fund intends to rotate the 
investment focus of the Fund so as to overweight its portfolio in 
Companies comprising those Market Segments and Sectors that the Adviser 
believes offer the greatest potential for capital appreciation in the 
given market environment and underweight its portfolio in those Market 
Segments and Sectors that the Adviser believes offer the least 
potential for capital appreciation in that same market environment (as 
described in more detail below). If the Fund's portfolio allocation to 
a particular Market Segment or Sector exceeds that Market Segment's or 
Sector's current weighting in the S&P Composite 1500, the Fund will be 
``overweighting'' that Market Segment or Sector. Similarly, if the 
Fund's portfolio allocation to a specific Market Segment or Sector is 
less than that Market Segment's or Sector's current weighting in the 
S&P Composite 1500, then the Fund will be ``underweighting'' that 
Market Segment or Sector. The Adviser believes that these adjustments, 
collectively, will position the Fund for continued capital appreciation 
in the new market environment.
    The Adviser retains a broad mandate and discretion to invest in 
Companies consistent with its evaluation of the capital appreciation 
potential of the Market Segments and Sectors. The strategy of 
overweighting and underweighting Sectors to maximize opportunities for 
capital appreciation may result in the Fund investing greater than 25% 
of its total assets in the equity securities of Companies operating in 
one or more Sectors. Sectors are comprised of multiple individual 
industries, and the Fund will not invest more than 25% of its total 
assets in an individual industry.
    According to the Registration Statement, the Adviser will invest in 
Companies consistent with its assessment of the capital appreciation 
opportunities of each Market Segment and Sector. To determine the 
percentage of the Fund's portfolio to invest in each Market Segment and 
Sector, the Adviser will use ``top-down'' analysis (analyzing the 
impact of economic trends before considering the performance of 
individual stocks) to evaluate broad economic trends. These trends are 
used to anticipate shifts in the business cycle. The Adviser also will 
analyze each Market Segment and Sector to determine which Market 
Segment(s) and Sector(s) may benefit the most from these trends and 
business shifts over the next 12 months. Factors considered in 
assessing each Market Segment and Sector include: (1) The relationship 
between each Market Segment or Sector and the current business cycle; 
(2) valuation levels; (3) earnings growth potential; and (4) analyses 
of the Companies included in the respective Market Segments and 
Sectors.
    The Adviser will monitor the market environment, Market Segments, 
and Sectors and may rotate the Fund's investment focus by adjusting the 
Fund's Market Segments and/or Sector weightings consistent with its 
ongoing assessment of the capital appreciation potential of each Market 
Segment and Sector. The Adviser may also rely, in part, on technical 
analysis (such as analyzing and examining past price movements to 
anticipate or forecast future price movements) to determine the timing 
of any changes to the Market Segment and/or Sector weightings.
    The Fund will invest in those Companies within the Market Segments 
and Sectors that offer the best potential for capital appreciation 
based on the Adviser's evaluation of company fundamentals (including 
historic earnings, revenue, cash flow, and valuation (such as price-
earnings ratio and book value)).
Huntington EcoLogical Strategy ETF
    According to the Registration Statement, the Fund's investment 
objective is to seek capital appreciation.

[[Page 25220]]

Under normal conditions, the Fund will invest at least 80% of its net 
assets in the exchange-listed equity securities of ecologically-focused 
companies. The Fund will primarily (at least 65% of total assets) 
invest in the U.S. exchange-listed common stock of ecologically-focused 
companies organized in the U.S. (``U.S. Companies''). The Fund, 
however, may also invest up to 35% of total assets in the exchange-
listed common stock (or the equivalent thereof) and sponsored American 
Depositary Receipts (``ADRs'') \9\ of ecologically-focused companies 
organized outside the U.S. (``Foreign Companies'').\10\ The Fund may 
invest in companies of all sizes.
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    \9\ ADRs are securities issued by a U.S. bank or trust company 
evidencing ownership of underlying securities issued by a foreign 
company. ADRs are designed for use in U.S. securities markets.
    \10\ The foreign equity securities, including any depositary 
receipts, in which the Funds may invest will be limited to 
securities that trade in markets that are members of the Intermarket 
Surveillance Group (``ISG''), which includes all U.S. national 
securities exchanges and certain foreign exchanges, or are parties 
to a comprehensive surveillance sharing agreement with the Exchange. 
See notes 16 and 23, infra.
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    The Adviser will apply the following ecologically-focused criteria 
to identify the equity securities of U.S. and Foreign Companies. 
``Ecologically-focused companies'' are companies that have positioned 
their business to respond to increased environmental legislation, 
cultural shifts towards environmentally conscious consumption, and 
capital investments in environmentally oriented projects. These 
companies include, but are not limited to, all U.S. and Foreign 
Companies that are components of one or more well-recognized 
environmentally focused indices (such as the Dow Jones Sustainability 
Indexes and the DB NASDAQ OMX Clean Tech Index).
    The Fund will also invest in ecologically-focused companies which 
are not included in a well-recognized environmentally-focused index, 
but generate at least \1/3\ of their revenues from activities aligned 
with one or more of the following environmental themes (``Environmental 
Themes''):
     Alternative renewable power such as solar, wind, 
geothermal, hydro, or biomass;
     Alternative renewable fuel such as biofuel, biomass, or 
hydrogen;
     Alternative engines such as electric, flywheel, or micro 
turbines;
     Energy efficiency such as energy efficient building 
materials, power, lighting, heating, or fuel;
     Resource conservation/healthier use of resources such as 
recycling or renewable materials; and
     Healthy lifestyle, such as pollution control or organic 
foods.
    A company that is not included in an environmentally-focused index 
or does not generate \1/3\ of its revenue from activities aligned with 
one or more Environmental Themes shall also be considered an 
ecologically-focused company if the Adviser believes that 
environmentally conscious trends such as a stronger demand for 
chemical-free cleaning and farming, recycling, alternative fuel and 
energy, energy efficiency, pollution control, or environmental cleanup/
restoration will positively impact that company's future revenue 
(``Environmentally Conscious Companies''). Ecologically-focused 
companies also include those companies that the Adviser believes 
demonstrate sustainable environmental practices (``Other Environmental 
Companies''). Sustainable environmental practices include, but are not 
limited to, demonstrated progress in:
     Improving energy and resource efficiency;
     Reducing emissions from business operations;
     Financial and operational support of renewable materials 
and less pollutive energy sources; or
     Using or promoting the use of efficient buildings 
(measured by such labels as LEED or Energy Star).
    The Fund's investment in the securities of Environmentally 
Conscious Companies and Other Environmental Companies will be limited 
to 10% of the Fund's total assets.
    The strategy of investing in ecologically-focused companies may 
result in the Fund investing greater than 25% of its total assets in 
one or more market sectors. A sector is a large grouping of companies 
operating within the market that share similar characteristics. The ten 
most commonly recognized market sectors are: Utilities, consumer 
staples, information technology, healthcare, financials, energy, 
consumer discretionary, materials, industrials, and telecommunication 
services. Sectors are comprised of multiple individual industries, and 
the Fund will not invest more than 25% of its total assets in an 
individual industry.
    According to the Registration Statement, the Adviser will review 
company fundamentals and the composition of recognized environmentally-
focused indices to identify a universe of ecologically-focused 
companies. Company fundamentals include factors reflective of a 
company's financial condition, including balance sheets and income 
statements, asset history, product or service development, and 
management productivity. The Adviser also will examine annual 
sustainability reports from companies, as well as supplemental 
disclosures regarding environmental practices within corporate investor 
relations materials.
    The Adviser will focus on ecologically-focused companies that it 
believes have better than average potential for growth in sales and 
profits. Historical financial statements (income, balance sheet, cash 
flow) will serve as quantitative guides in the selection process. 
Qualitative reviews of a company's competitive position and target 
market potential also will influence portfolio decisions. The Fund 
will, under most market conditions, include a blend of growth or 
cyclical stocks held for price appreciation potential and dividend 
growth stocks held for their potential to deliver a growing stream of 
income.\11\ Factors regarding valuation such as price to sales ratios, 
price to earnings ratios, and price to book ratios will influence the 
size of the Fund's position in each company.
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    \11\ Growth stocks are shares in a company whose earnings are 
expected to grow at an above-average rate relative to the market. 
Cyclical stocks are shares in a company that rise quickly when 
economic growth is strong and fall rapidly when growth is slowing 
down.
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Other Permitted Investments, Investment Limitations, and Additional 
Information
    Each Fund, to a lesser extent, may attempt to pursue its investment 
objective by employing other investment strategies and by investing in 
additional types of securities that are not otherwise part of its 
principal investment strategies as described above. To the extent a 
Fund's principal investment policies are satisfied, including but not 
limited to its 80% investment policy, such Fund may also invest up to 
20% of its total assets in the securities described below. However, 
each Fund will also be subject to certain additional investment 
limitations including those set forth below.
    A Fund may only purchase securities of any issuer only when 
consistent with the maintenance of such Fund's status as a diversified 
company under the 1940 Act, the rules or regulations thereunder, as 
such statute, rules, or regulations may be amended from time to time, 
or any applicable exemptive relief.\12\
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    \12\ Under Section 5(b)(1) of the 1940 Act, a 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. For purposes of determining a Fund's compliance with 
Section 5(b)(1), the issuer of the underlying security will be 
deemed to be the issuer of any respective depositary receipt.

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[[Page 25221]]

    A Fund may not concentrate investments in a particular industry or 
group of industries as concentration is defined under the 1940 Act, the 
rules or regulations thereunder, as such statute, rules, or regulations 
may be amended from time to time, or any applicable exemptive 
relief.\13\
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    \13\ 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). The Commission has also taken the 
position that concentration of investment in an industry or group of 
industries is not applicable to investments in tax-exempt securities 
issued by governments or political subdivisions of governments since 
such issuers are not members of any industry. See, e.g., Investment 
Company Act Release No. 9785 (May 31, 1977). For purposes of 
determining a Fund's compliance with its concentration policy, the 
issuer of the underlying security will be deemed to be the issuer of 
any respective depositary receipt.
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    A Fund may not hold in the aggregate more than 15% of its net 
assets in illiquid investments, including Rule 144A securities and loan 
participations.\14\ Further, in accordance with the Exemptive 
Application, the Funds will not invest in options, futures, or swaps. 
The Funds' investments will be consistent with the Funds' investment 
objective and will not be used to enhance leverage.
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    \14\ The Commission has stated that long-standing Commission 
guidelines have required open-end funds to hold no more than 15% of 
their net assets in illiquid securities and other illiquid assets. 
See Investment Company Act Release No. 28193 (March 11, 2008), 73 FR 
14617 (March 18, 2008), footnote 34. See also Investment Company Act 
Release No. 5847 (October 21, 1969), 35 FR 19989 (December 31, 1970) 
(Statement Regarding ``Restricted Securities''); Investment Company 
Act Release No. 18612 (March 12, 1992), 57 FR 9828 (March 20, 1992) 
(Revisions of Guidelines to Form N-1A). 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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    According to the Registration Statement, each Fund will elect to be 
treated, and intends to qualify each year, as a regulated investment 
company (``RIC'') under Subchapter M of the Internal Revenue Code.\15\
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    \15\ 26 U.S.C. 851. Qualification as a RIC requires, among other 
things, that a Fund: (i) Derive in each taxable year at least 90% of 
its gross income from: (a) Dividends, interest, payments with 
respect to certain securities loans, and gains from the sales or 
other disposition of stock, securities or foreign currencies, or 
other income (including but not limited to gain from options, 
futures and forward contracts) derived with respect to its business 
of investing in such stock, securities or foreign currencies; and 
(b) net income derived from interests in certain publicly traded 
partnerships that are treated as partnerships for U.S. federal 
income tax purposes and that derive less than 90% of their gross 
income from the items described in (a) above (each a ``Qualified 
Publicly Traded Partnership''); and (ii) diversify its holdings so 
that, at the end of each quarter of each taxable year: (a) At least 
50% of the value of a Fund's total assets is represented by (I) cash 
and cash items, U.S. government securities, the securities of other 
regulated investment companies and (II) other securities, with such 
other securities limited, in respect of any one issuer, to an amount 
not greater than 5% of the value of a Fund's total assets and not 
more than 10% of the outstanding voting securities of such issuer 
and (b) not more than 25% of the value of a Fund's total assets is 
invested in the securities (other than U.S. government securities 
and the securities of other regulated investment companies) of (I) 
any one issuer, (II) any two or more issuers that a Fund controls 
and that are determined to be engaged in the same or similar trades 
or businesses or related trades or businesses or (III) any one or 
more Qualified Publicly Traded Partnerships.
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    Finally, each Fund may also invest up to 20% of total assets in 
fixed income securities issued by companies organized in the U.S., 
including convertible securities that may be exchanged for or converted 
into common stock, corporate debt securities, U.S. Government 
securities, money market instruments, and zero coupon bonds. Each Fund 
may invest in other investment company securities, including mutual 
funds, consistent with the 1940 Act, the rules thereunder or relief 
from the Commission, as well as repurchase and reverse repurchase 
agreements. The Funds may also participate in foreign currency 
transactions and purchase securities on a when-issued or delayed 
delivery basis.
Permitted Investments and Investment Limitations Applicable to 
Huntington US Equity Rotation Strategy ETF
    The Fund may invest up to 20% of total assets in equity securities, 
other than common stock of Companies, including preferred stocks, 
exchange-traded funds, interests in other business organizations, real 
estate investment trusts, and other domestic equity securities which 
the Adviser believes have equity characteristics (``Other Domestic 
Equities'').
    The Fund may invest up to 20% of its total assets in the following 
foreign securities which are issued by companies located outside of the 
U.S. and principally traded in foreign markets: (i) Equity securities 
and fixed income securities of foreign entities; (ii) obligations of 
foreign branches of U.S. banks and foreign or domestic branches of 
foreign banks including European Certificates of Deposit, European Time 
Deposits, Canadian Time Deposits, Canadian Yankee Bonds, Canadian 
Certificates of Deposit, and investments in Canadian commercial paper 
and europaper; (iii) depositary receipts including ADRs, European 
Depositary Receipts (``EDRs''), which are also known as Continental 
Depositary Receipts (``CDRs''), and Global Depositary Receipts 
(``GDRs'');\16\ (iv) securities issued or guaranteed by foreign 
corporations or foreign governments, their political subdivisions, 
agencies, and instrumentalities (e.g., fixed income securities 
supported by national, state, or provincial governments, or similar 
political subdivisions); (v) debt obligations of supranational 
entities, including international organizations designed or supported 
by governmental entities to promote economic reconstruction or 
development, international banking institutions, and related government 
agencies such as the International Bank for Reconstruction and 
Development (World Bank), the Asian Development Bank, the European 
Investment Bank, and the Inter-American Development Bank; and (vi) 
fixed income securities of quasi-governmental agencies that are either 
issued by entities owned by a national, state, or equivalent 
government, or are obligations of a political unit that are not backed 
by the national government's full faith and credit (collectively, 
``Foreign Securities'').\17\
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    \16\ According to the Registration Statement, EDRs/CDRs are 
securities typically issued by a non-U.S. financial institution and 
evidence ownership interests in a security or a pool of securities 
issued by either a U.S. or foreign issuer. GDRs are issued globally 
and evidence a similar ownership arrangement. EDRs are designed for 
trading in European securities markets, and GDRs are designed for 
trading in non-U.S. securities markets.
    \17\ See note 10, supra, and note 23, infra.
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Permitted Investments and Investment Limitations Specific to Huntington 
EcoLogical Strategy ETF
    The Fund may invest up to 20% of its total assets in Other Domestic 
Equities and Foreign Securities other than those issued by Foreign 
Companies permitted as part of the Fund's principal investment 
strategies.\18\
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    \18\ See id.
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Creations and Redemptions
    Creations and redemptions of Shares will occur in large specified 
blocks of Shares, referred to as ``Creation Units.'' A Creation Unit of 
a Fund is currently comprised of 25,000 Shares of that Fund. The number 
of Shares comprising a Creation Unit may change over time. According to 
the Registration Statement, to purchase or redeem Creation Units 
directly from a Fund, an investor must

[[Page 25222]]

be an Authorized Participant, or an investor must purchase the Shares 
through a financial institution that is an Authorized Participant. An 
``Authorized Participant'' is a participant in the Continuous Net 
Settlement System of the National Securities Clearing Corporation 
(``NSCC'') or the Depository Trust Company that has executed a 
participant agreement with the Distributor that has been accepted by 
the Trust's Custodian. Authorized Participants may purchase Creation 
Units of a Fund and sell individual Shares on the NYSE Arca. Similarly, 
Shares can only be redeemed in Creation Units. The prices at which 
creations and redemptions occur are based on the next calculation of 
net asset value (``NAV'') after an order in proper form is received by 
the Distributor on any day that a Fund is open for business.
    Generally, a Creation Unit will be purchased or redeemed from a 
Fund for a designated portfolio of securities along with a cash payment 
(``Deposit Securities,'' in the case of purchases, and ``Redemption 
Securities,'' in the case of redemptions). Generally, the Deposit 
Securities and the Redemption Securities will correspond pro rata to 
the portfolio securities of the applicable Fund. Purchases and 
redemptions of Creation Units may be made in whole or in part on a cash 
basis, rather than in-kind, under circumstances set forth in the 
Registration Statement.
    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, each Fund will be in 
compliance with Rule 10A-3 under the Exchange Act,\19\ as provided by 
NYSE Arca Equities Rule 5.3. A minimum of 100,000 Shares for each Fund 
will be outstanding at the commencement of trading on the Exchange. The 
Exchange will obtain a representation from the issuer of the Shares 
that the NAV will be calculated daily and that the NAV and the 
Disclosed Portfolio, as defined in NYSE Arca Equities Rule 8.600(c)(2), 
will be made available to all market participants at the same time.
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    \19\ 17 CFR 240.10A-3.
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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 Funds that are referred to, but not defined in, 
this proposed rule change are defined in the Registration Statement.
Net Asset Value
    According to the Registration Statement, the NAV per Share of a 
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. The NAV per Share 
for a Fund will be calculated by the Trust's fund accountant and 
determined as of the close of the regular trading session on the NYSE 
Arca (ordinarily 4 p.m., Eastern Time) on each day that the Exchange is 
open.
Availability of Information
    The Funds' Web site (www.huntingtonstrategyshares.com), which will 
be publicly available prior to the public offering of Shares, will 
include a form of the prospectus for the Funds that may be downloaded. 
The Funds' Web site will include additional quantitative information 
updated on a daily basis, including, for each Fund, (1) daily trading 
volume, the prior business day's reported closing price, NAV, and a 
calculation of the premium and discount of the closing price against 
the NAV, and (2) data in chart format displaying the frequency 
distribution of discounts and premiums of the daily closing price 
against the NAV, within appropriate ranges, for each of the four 
previous calendar quarters.
    On each business day, before commencement of trading in Shares in 
the Core Trading Session on the Exchange, the Funds will disclose on 
their Web site the Disclosed Portfolio that will form the basis for the 
Funds' calculation of NAV at the end of the business day.\20\ On a 
daily basis, the Adviser will disclose on the Funds' Web site for each 
portfolio security or other financial instrument of the Funds the 
following information: ticker symbol (if applicable) and name of 
security and financial instrument, the number of shares or dollar value 
of each security and financial instrument held in the portfolio, and 
percentage weighting of the security and financial instrument in the 
portfolio. The Web site information will be publicly available at no 
charge.
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    \20\ Under accounting procedures followed by the Funds, trades 
made on the prior business day (``T'') will be booked and reflected 
in NAV on the current business day (``T+1''). Accordingly, the Funds 
will be able to disclose at the beginning of the business day the 
portfolio that will form the basis for the NAV calculation at the 
end of the business day.
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    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 estimated cash components, will be publicly 
disseminated daily prior to the opening of the Core Trading Session of 
the Exchange via the NSCC. The basket represents one Creation Unit of a 
Fund. Investors can also obtain the Trust's Statement of Additional 
Information (``SAI''), each 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. 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.\21\ 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 Funds on a daily basis and to provide a close estimate of that 
value throughout the trading day. The intra-day, closing, and 
settlement prices of the portfolio securities are also readily 
available from the national securities exchanges trading such 
securities, automated quotation systems, published or other public 
sources, or on-line information services such as Bloomberg or Reuters.
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    \21\ 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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Trading Halts
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares of the Funds.\22\ Trading in Shares of the Funds 
will be halted if the circuit breaker parameters in NYSE Arca Equities 
Rule 7.12 have been reached. Trading also may be halted because of 
market conditions or for reasons that, in

[[Page 25223]]

the view of the Exchange, make trading in the Shares inadvisable. These 
may include: (1) The extent to which trading is not occurring in the 
securities and/or the financial instruments comprising the Disclosed 
Portfolio of the Funds; or (2) whether other unusual conditions or 
circumstances detrimental to the maintenance of a fair and orderly 
market are present. Trading in the Shares will be subject to NYSE Arca 
Equities Rule 8.600(d)(2)(D), which sets forth circumstances under 
which Shares of the Funds may be halted.
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    \22\ 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 4:00 a.m. to 8:00 p.m. Eastern Time in 
accordance with NYSE Arca Equities Rule 7.34 (Opening, Core, and Late 
Trading Sessions). The Exchange has appropriate rules to facilitate 
transactions in the Shares during all trading sessions. As provided in 
NYSE Arca Equities Rule 7.6, Commentary .03, the minimum price 
variation (``MPV'') for quoting and entry of orders in equity 
securities traded on the NYSE Arca Marketplace is $0.01, with the 
exception of securities that are priced less than $1.00 for which the 
MPV for order entry is $0.0001.
Surveillance
    The Exchange intends to utilize its existing surveillance 
procedures applicable to derivative products (which include Managed 
Fund Shares) to monitor trading in the Shares. The Exchange represents 
that these procedures are adequate to properly monitor Exchange trading 
of the Shares in all trading sessions and to deter and detect 
violations of Exchange rules and applicable federal securities laws.
    The Exchange's current trading surveillance focuses on detecting 
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 ISG from other 
exchanges that are members of ISG or with which the Exchange has in 
place a comprehensive surveillance sharing agreement.\23\ All of the 
primary equity investments to be held by each Fund, as well as the non-
U.S.-listed equity securities, including any depositary receipts, held 
by each Fund will trade in markets that are ISG members or are parties 
to a comprehensive surveillance sharing agreement with the Exchange.
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    \23\ For a list of the current members of ISG, see http://www.isgportal.org. The Exchange notes that not all components of the 
Disclosed Portfolio for the Funds may trade on markets that are 
members of ISG or with which the Exchange has in place a 
comprehensive surveillance sharing agreement.
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    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its 
Equity Trading Permit (``ETP'') Holders in an Information Bulletin 
(``Bulletin'') of the special characteristics and risks associated with 
trading the Shares. Specifically, the Bulletin will discuss the 
following: (1) The procedures for purchases and redemptions of Shares 
in Creation Unit aggregations (and that Shares are not individually 
redeemable); (2) NYSE Arca Equities Rule 9.2(a), which imposes a duty 
of due diligence on its ETP Holders to learn the essential facts 
relating to every customer prior to trading the Shares; (3) the risks 
involved in trading the Shares during the Opening and Late Trading 
Sessions when an updated Portfolio Indicative Value will not be 
calculated or publicly disseminated; (4) how information regarding the 
Portfolio Indicative Value is disseminated; (5) the requirement that 
ETP Holders deliver a prospectus to investors purchasing newly issued 
Shares prior to or concurrently with the confirmation of a transaction; 
and (6) trading information.
    In addition, the Bulletin will reference that the Funds are subject 
to various fees and expenses described in the Registration Statement. 
The Bulletin will discuss any exemptive, no-action, and interpretive 
relief granted by the Commission from any rules under the Exchange Act. 
The Bulletin will also disclose that the NAV for the Shares will be 
calculated after 4:00 p.m. Eastern Time each trading day.
2. Statutory Basis
    The basis under the Exchange Act for this proposed rule change is 
the requirement under Section 6(b)(5) \24\ 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.
---------------------------------------------------------------------------

    \24\ 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. Under normal conditions, the Huntington US Equity Rotation 
Strategy ETF will invest at least 80% of its net assets in the 
exchange-listed common stocks of select companies organized in the U.S. 
and included in the S&P Composite 1500, and the Huntington EcoLogical 
Strategy ETF will invest at least 80% of its net assets in the 
exchange-listed equity securities of ecologically-focused companies. 
While each Fund may hold non-U.S. equity securities, the foreign equity 
securities, including any depositary receipts, in which the Funds may 
invest will be limited to securities that trade in markets that are 
members of the ISG or are parties to a comprehensive surveillance 
sharing agreement with the Exchange. The Funds will not hold more than 
15% of net assets in illiquid investments, including Rule 144A 
securities and loan participations. Each Fund's investments will be 
consistent with its Fund's investment objective and will not be used to 
enhance leverage. The Funds will not invest in options contracts, 
futures contracts, or swap agreements. The Adviser is affiliated with 
two broker-dealers and has implemented a fire wall with respect to each 
affiliated broker-dealer regarding access to information concerning the 
composition and/or changes to a Fund portfolio.
    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 Funds and the Shares, 
thereby promoting market transparency.

[[Page 25224]]

Moreover, the Portfolio Indicative Value will be widely disseminated by 
one or more major market data vendors at least every 15 seconds during 
the Core Trading Session. On each business day, before commencement of 
trading in Shares in the Core Trading Session on the Exchange, the 
Funds will disclose on their Web site the Disclosed Portfolio that will 
form the basis for the Funds' calculation of NAV at the end of the 
business day. 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, and quotation and last-sale information will be available via 
the CTA high-speed line. The Web site for the Funds will include a form 
of the prospectus for the Funds and additional data relating to NAV and 
other applicable quantitative information. 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 Funds will 
be halted if the circuit breaker parameters in NYSE Arca Equities Rule 
7.12 have been reached or because of market conditions or for reasons 
that, in the view of the Exchange, make trading in the Shares 
inadvisable, and trading in the Shares will be subject to NYSE Arca 
Equities Rule 8.600(d)(2)(D), which sets forth circumstances under 
which Shares of the Funds may be halted. In addition, as noted above, 
investors will have ready access to information regarding the Funds' 
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 
additional types of actively managed exchange-traded products 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 Funds' 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-2012-34 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEArca-2012-34. 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 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-
34 and should be submitted on or before May 18, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-10158 Filed 4-26-12; 8:45 am]
BILLING CODE 8011-01-P