Document ID: SEC-2009-1153-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2009-08-17T04:00Z

[Federal Register: August 17, 2009 (Volume 74, Number 157)]
[Notices]               
[Page 41468-41470]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr17au09-119]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-60460; File No. SR-NYSEArca-2009-55]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting 
Approval of a Proposed Rule Change To List and Trade Shares of the Dent 
Tactical ETF

August 7, 2009.
    On June 18, 2009, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange''), 
through its wholly owned subsidiary, NYSE Arca Equities, Inc. (``NYSE 
Arca Equities''), filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to list and trade shares (``Shares'') of the Dent 
Tactical ETF (``Fund'') under NYSE Arca Equities Rule 8.600. The 
proposed rule change was published in the Federal Register on July 8, 
2009.\3\ The Commission received no comments on the proposal. This 
order grants approval of the proposed rule change.
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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. 60195 (June 30, 
2009), 74 FR 32678 (``Notice'').
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I. Description of the Proposal

    The Exchange proposes to list and trade the Shares of the Fund 
under NYSE Arca Equities Rule 8.600, which governs the listing of 
Managed Fund Shares.\4\ The Shares will be offered by AdvisorShares 
Trust (``Trust''), a statutory trust organized under the laws of the 
State of Delaware and registered with the Commission as an open-end 
management investment company.\5\ The investment advisor to the Fund is 
AdvisorShares Investments, LLC (``Advisor''), and the day-to-day 
portfolio management of the Fund is provided by the sub-advisor to the 
Fund, HS Dent Investment Management, LLC (``Sub-Advisor'').\6\ The 
Exchange represents that the Shares will conform to the initial and 
continued listing criteria under NYSE Arca Equities Rule 8.600 and that 
the Fund will be in compliance with Rule 10A-3 under the Act,\7\ as 
provided by NYSE Arca Equities Rule 5.3.
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    \4\ See NYSE Arca Equities Rule 8.600.
    \5\ The Trust is registered under the Investment Company Act of 
1940 (``1940 Act''). On June 9, 2009, the Trust filed with the 
Commission a registration statement on Form N-1A (File Nos. 333-
157876 and 811-22110) (``Registration Statement'').
    \6\ The Exchange represents that neither the Advisor nor the 
Sub-Advisor is affiliated with a broker-dealer. See Commentary .07 
to NYSE Arca Equities Rule 8.600.
    \7\ 17 CFR 240.10A-3.
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    The Fund is a ``fund of funds,'' which means that the Fund seeks to 
invest primarily in other exchange-traded funds that are registered 
under the 1940 Act and certain other exchange-traded products that are 
not registered as investment companies under the 1940 Act 
(collectively, ``Underlying ETPs'').\8\ The Fund seeks to achieve its 
investment objective of long-term growth of capital by identifying, 
through

[[Page 41469]]

proprietary economic and demographic analysis, the overall trend of the 
U.S. and global economies, and then implementing investment strategies 
in asset classes that the Sub-Advisor believes will benefit from these 
trends. The Sub-Advisor will follow its model to determine how 
offensive or defensive the Fund portfolio will be, and then will select 
the securities to buy or sell. Except for Underlying ETPs that may hold 
non-U.S. issues, the Fund will not otherwise invest in non-U.S. issues.
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    \8\ Underlying ETPs include Investment Company Units (NYSE Arca 
Equities Rule 5.2(j)(3)); Index-Linked Securities (NYSE Arca 
Equities Rule 5.2(j)(6)); Portfolio Depositary Receipts (NYSE Arca 
Equities Rule 8.100); Trust Issued Receipts (NYSE Arca Equities Rule 
8.200); Commodity-Based Trust Shares (NYSE Arca Equities Rule 
8.201); Currency Trust Shares (NYSE Arca Equities Rule 8.202); 
Commodity Index Trust Shares (NYSE Arca Equities Rule 8.203); Trust 
Units (NYSE Arca Equities Rule 8.500); and Managed Fund Shares (NYSE 
Arca Equities Rule 8.600).
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    Additional information regarding the Fund, the Shares, the Fund's 
investment objective, strategies, methodology, and restrictions, the 
investment Advisor and Sub-Advisor, risks, fees and expenses, creations 
and redemptions of Shares, availability of information, trading rules 
and halts, and surveillance procedures, among other things, can be 
found in the Registration Statement and in the Notice, as applicable.

II. Discussion and Commission's Findings

    The Commission has carefully reviewed the proposed rule change and 
finds that it is consistent with the requirements of Section 6 of the 
Act \9\ and the rules and regulations thereunder applicable to a 
national securities exchange.\10\ In particular, the Commission finds 
that the proposal is consistent with Section 6(b)(5) of the Act,\11\ 
which requires, among other things, that the Exchange's rules be 
designed 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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    \9\ 15 U.S.C. 78f.
    \10\ 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).
    \11\ 17 U.S.C. 78f(b)(5).
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    The Commission finds that the proposal to list and trade the Shares 
on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the 
Act, which sets forth Congress' 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. Quotation and last-sale 
information for the Shares will be available via the Consolidated Tape 
Association (``CTA'') high-speed line, and the Exchange will 
disseminate the Portfolio Indicative Value (``PIV'') at least every 15 
seconds during the Core Trading Session through the facilities of the 
CTA. In addition, the Fund will make available on its Web site on each 
business day before commencement of the Core Trading Session the 
Disclosed Portfolio that will form the basis for the Fund's calculation 
of the net asset value (``NAV'').\12\ A basket composition file, which 
includes the security names and share quantities required to be 
delivered in exchange for Fund shares, together with estimates and 
actual cash components, will be publicly disseminated daily prior to 
the opening of the New York Stock Exchange via the National Securities 
Clearing Corporation. The Fund's Web site will also include additional 
quantitative information updated on a daily basis relating to trading 
volume, prices, and NAV. Information regarding the market price and 
volume of the Shares will be continually available on a real-time basis 
throughout the day via electronic services, and the previous day's 
closing price and trading volume information for the Shares will be 
published daily in the financial sections of newspapers.
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    \12\ The Advisor will disclose for each portfolio security or 
other financial instrument of the Fund the following information: 
Ticker symbol (if applicable), name of security or financial 
instrument, number of shares or dollar value of financial 
instruments held in the portfolio, and percentage weighting of the 
security or financial instrument in the portfolio. The NAV of the 
Fund will normally be determined as of the close of the regular 
trading session on the New York Stock Exchange (ordinarily 4 p.m. 
Eastern Time) on each business day.
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    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 Commission notes that the Advisor and Sub-Advisor to the 
Fund are not affiliated with a broker-dealer.\13\ The Commission also 
notes that the Exchange will obtain a representation from the Fund 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.\14\ Additionally, if it becomes aware that the NAV or 
the Disclosed Portfolio is not disseminated to all market participants 
at the same time, the Exchange will halt trading in the Shares until 
such information is available to all market participants. Further, if 
the PIV is not being disseminated as required, the Exchange may halt 
trading during the day in which the interruption occurs; if the 
interruption persists past the day in which it occurred, the Exchange 
will halt trading no later than the beginning of the trading day 
following the interruption.\15\ Finally, the Commission notes that the 
Reporting Authority that provides the Disclosed Portfolio must 
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 portfolio.\16\
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    \13\ See Commentary .07 to NYSE Arca Equities Rule 8.600. The 
Commission notes that any additional sub-advisers to the Fund that 
are affiliated with a broker-dealer will be required to implement a 
fire-wall with respect to such broker-dealer regarding access to 
information concerning the composition of the portfolio. Commentary 
.07 to NYSE Arca Equities Rule 8.600 also requires that any 
personnel who make decisions on the Fund's portfolio composition 
must be subject to procedures designed to prevent the use and 
dissemination of material non-public information regarding the 
portfolio.
    \14\ See NYSE Arca Equities Rule 8.600(d)(1)(B).
    \15\ See NYSE Arca Equities Rule 8.600(d)(2)(D). Trading in the 
Shares may also be halted because of market conditions or for 
reasons that, in the view of the Exchange, make trading in the 
Shares inadvisable. These may include: (1) The extent to which 
trading is not occurring in the securities comprising the Disclosed 
Portfolio and/or the financial instruments of the Fund; or (2) 
whether other unusual conditions or circumstances detrimental to the 
maintenance of a fair and orderly market are present.
    \16\ See NYSE Arca Equities Rule 8.600(d)(2)(B)(ii).
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    The Exchange has represented that the Shares are equity securities 
subject to the Exchange's rules governing the trading of equity 
securities. In support of this proposal, the Exchange has made 
representations, including:
    (1) The Shares will conform to the initial and continued listing 
criteria under NYSE Arca Equities Rule 8.600.
    (2) The Exchange's surveillance 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.
    (3) 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. 
Specifically, the Information Bulletin will discuss the following: (a) 
The procedures for purchases and redemptions of Shares and that Shares 
are not individually redeemable; (b) 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; 
(c) the risks involved in trading the Shares during the Opening and 
Late Trading Sessions when an updated PIV will not be calculated or 
publicly disseminated; (d) how information regarding the PIV is 
disseminated; (e) the requirement that

[[Page 41470]]

ETP Holders deliver a prospectus to investors purchasing newly issued 
Shares prior to or concurrently with the confirmation of a transaction; 
and (f) trading information.
    (4) The Fund will be in compliance with Rule 10A-3 under the 
Act.\17\
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    \17\ See supra note 7.
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    (5) Except for Underlying ETPs that may hold non-U.S. issues, the 
Fund will not otherwise invest in non-U.S. issues.
    This approval order is based on the Exchange's representations.
    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act \18\ and the 
rules and regulations thereunder applicable to a national securities 
exchange.
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    \18\ 15 U.S.C. 78f(b)(5).
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III. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\19\ that the proposed rule change (SR-NYSEArca-2009-55) be, and it 
hereby is, approved.
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    \19\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
Florence E. Harmon,
Deputy Secretary.
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    \20\ 17 CFR 200.30-3(a)(12).
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[FR Doc. E9-19570 Filed 8-14-09; 8:45 am]

BILLING CODE 8010-01-P