Document ID: SEC-2018-0830-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2018-05-31T04:00Z

[Federal Register Volume 83, Number 105 (Thursday, May 31, 2018)]
[Notices]
[Pages 25093-25095]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-11610]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83320; File No. SR-NYSEArca-2018-35]

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

May 24, 2018
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on May 14, 2018, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been prepared by the self-regulatory organization. The Commission 
is publishing this notice to solicit comments on the proposed rule 
change from interested persons.
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    \1\ 15 U.S.C.78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to change certain representations made in the 
respective proposed rule changes previously filed with the Commission 
pursuant to Rule 19b-4 relating to the Peritus High Yield ETF (the 
``Fund''). Shares of the Fund are currently listed and traded on the 
Exchange under NYSE Arca Rule 8.600-E. The proposed rule change is 
available on the Exchange's website at www.nyse.com, at the principal 
office of the Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Commission has approved the listing and trading on the Exchange 
of shares (``Shares'') of the Fund, under NYSE Arca Rule 8.600-E(j)(3) 
(formerly NYSE Arca Equities Rule 8.600), which governs the listing and 
trading of Managed Fund Shares.\4\ The Fund's Shares are currently 
listed and traded on the Exchange under NYSE Arca Rule 8.600-E.\5\ The 
Shares are offered by AdvisorShares Trust (``Trust'').\6\
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    \4\ 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) (the ``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 Rule 5.2-E(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.
    \5\ The Commission previously approved the listing and trading 
of the Shares of the Fund. See Securities Exchange Act Release Nos. 
63329 (November 17, 2010), 75 FR 71260 (November 24, 2010) (SR-
NYSEArca-2010-86) (Order Granting Approval of Proposed Rule Change 
Relating to the Listing and Trading of Shares of the Peritus High 
Yield ETF) (``Approval Order''); 63041 (October 5, 2010), 75 FR 
62905 (October 13, 2010) (SR-NYSEArca-2010-86) (Notice of Filing of 
Proposed Rule Change Relating to the Listing and Trading of Shares 
of the Peritus High Yield ETF) (``Notice''). The Exchange 
subsequently filed with the Commission several proposed rule changes 
relating to changes in the Fund's holdings. See Securities Exchange 
Act Release Nos. 66818 (April 17, 2012), 77 FR 24233 (April 23, 
2012) (SR-NYSEArca-2012-33) (Notice of Filing and Immediate 
Effectiveness of Proposed Rule Change relating to the Peritus High 
Yield ETF); 70284 (August 29, 2013), 78 FR 54715 (September 5, 2013) 
(SR-NYSEArca-2013-83) (Notice of Filing and Immediate Effectiveness 
of Proposed Rule Change Relating to Investments in Leveraged Loans 
by the Peritus High Yield ETF); 72433 (June 19, 2014), 79 FR 36114 
(June 25, 2014) (SR-NYSEArca-2014-69) (Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change Relating to Holdings 
in Equity Securities by the Peritus High Yield ETF); 73181 
(September 23, 2014), 79 FR 58001 (September 26, 2014) (SR-NYSEArca-
2014-103) (Notice of Filing and Immediate Effectiveness of Proposed 
Rule Change Relating to an Increase in the Number of Securities Held 
by the Peritus High Yield ETF). (The Approval Order, Notice and 
other proposed rule changes referenced above are referred to 
collectively herein as the ``Releases'').
    \6\ The Trust is registered under the 1940 Act. On November 1, 
2017, the Trust filed with the Commission an amendment to its 
registration statement on Form N-1A under the Securities Act of 1933 
(15 U.S.C. 77a) (``1933 Act'') and the 1940 Act relating to the Fund 
(File Nos. 333-157876 and 811-22110). In addition, the Commission 
has issued an order granting certain exemptive relief to the Trust 
under the1940 Act. See Investment Company Act Release No. 29291(May 
28, 2010) (File No. 812-13677) (``Exemptive Order'').

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[[Page 25094]]

    The Trust has filed a combined prospectus and proxy statement (the 
``Proxy Statement'') with the Commission on Form N-14 describing a 
``Plan of Reorganization'' pursuant to which, following approval of the 
Fund's shareholders, all or substantially all of the assets and all of 
the stated liabilities included in the financial statements of the Fund 
would be transferred to a new series of Exchange Listed Funds Trust, 
described below. According to the Proxy Statement, the investment 
objective of the Fund will be the same following implementation of the 
Plan of Reorganization (``Reorganization'').\7\ Following shareholder 
approval and closing of the Reorganization, investors will receive 
shares of beneficial interest of such new series of Exchange Listed 
Funds Trust (and cash with respect to any fractional shares held, if 
any) with an aggregate net asset value equal to the aggregate net asset 
value of the Shares of the Fund of the Trust calculated as of the close 
of business on the business day before the closing of the 
Reorganization. The name of the Fund will remain unchanged.
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    \7\ See registration statement on Form N-14 under the 1933 Act, 
dated April 13, 2018 (File No. 333-223505) (``Proxy Statement'').
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    In this proposed rule change, the Exchange proposes to change 
certain representations made in the proposed rule changes previously 
filed with the Commission pursuant to Rule 19b-4 relating to the Fund, 
as described above,\8\ which changes would be implemented as a result 
of the Plan of Reorganization.\9\
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    \8\ See note 4 [sic], supra.
    \9\ The Fund's investment adviser, AdvisorShares Investments, 
LLC, represents that it will manage the Fund in the manner described 
in the proposed rule changes for the Fund as referenced in note 4, 
supra, and the changes described herein will not be implemented 
until this proposed rule change is operative.
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Peritus High Yield ETF
    The Notice stated that the Fund is offered by AdvisorShares Trust. 
Following the Reorganization, the Fund's trust will be Exchange Listed 
Funds Trust. The Fund's investment adviser is AdvisorShares 
Investments, LLC. Following the Reorganization, the Fund's investment 
adviser will be Exchange Traded Concepts, LLC.\10\ The Fund's sub-
adviser, Peritus I Asset Management, LLC, will remain the sub-adviser 
for the Fund following the Reorganization.
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    \10\ Exchange Traded Concepts, LLC and Peritus I Asset 
Management, LLC are not registered as a broker-dealer or affiliated 
with a broker-dealer. In the event (a) Exchange Traded Concepts, LLC 
or Peritus I Asset Management, LLC becomes registered as a broker-
dealer or newly affiliated with a broker-dealer, or (b) any new 
adviser or sub-adviser becomes registered as a broker-dealer or 
newly affiliated with a broker-dealer, it will implement and 
maintain a fire wall with respect to its relevant personnel or such 
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. In 
addition, personnel who make decisions on the Fund's portfolio 
composition must be subject to procedures designed to prevent the 
use and dissemination of material nonpublic information regarding 
the Fund's portfolio.
     An investment adviser to an open-end fund is required to be 
registered under the Investment Advisers Act of 1940 (the ``Advisers 
Act''). As a result, with respect to the Fund, Exchange Traded 
Concepts, LLC and Peritus I Asset Management, LLC, as adviser and 
sub-adviser, respectively, and their 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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    The investment objective of the Fund will remain unchanged. In 
addition, the Fund's portfolio meets and will continue to meet the 
representations regarding the Fund's investments as described in the 
Releases.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \11\ that an exchange have rules that 
are designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to remove 
impediments to, and perfect the mechanism of a free and open market 
and, in general, to protect investors and the public interest.
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    \11\ 15 U.S.C. 78f (b)(5).
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    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices, and is designed 
to promote just and equitable principles of trade and to protect 
investors and the public interest.
    Exchange Listed Funds Trust has filed the Proxy Statement 
describing the Reorganization pursuant to which, following approval of 
the Fund's shareholders, all assets of the Fund would be transferred to 
a corresponding fund of the Exchange Listed Funds Trust, which will 
have the name Peritus High Yield ETF. This filing proposes to reflect 
organizational and administrative changes that would be implemented as 
a result of the Reorganization, including changes to the trust entity 
issuing shares of the Fund and the adviser to the Fund. As noted above, 
Exchange Traded Concepts, LLC and Peritus I Asset Management, LLC are 
not registered as a broker-dealer or affiliated with a broker-dealer. 
In the event (a) Exchange Listed Funds Trust or Peritus I Asset 
Management, LLC becomes registered as a broker-dealer or newly 
affiliated with a broker-dealer, or (b) any new adviser or sub-adviser 
becomes registered as a broker-dealer or newly affiliated with a 
broker-dealer, it will implement and maintain a fire wall with respect 
to its relevant personnel or such broker-dealer affiliate regarding 
access to information concerning the composition and/or changes to the 
portfolio, and will be subject to procedures designed to prevent the 
use and dissemination of material non-public information regarding such 
portfolio. According to the Proxy Statement, the investment objective 
of the Fund will be the same following implementation of the 
Reorganization. The Exchange believes these changes will not adversely 
impact investors or Exchange trading. In addition, the Fund's portfolio 
meets and will continue to meet the representations regarding the 
Fund's investments as described in the Releases.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The Exchange believes the 
proposed rule change will enhance competition and benefit of investors 
and the marketplace by permitting continued listing and trading of 
Shares of the Fund following implementation of the changes described 
above that would follow the Reorganization, which changes would not 
impact the investment objective of the Fund.

[[Page 25095]]

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

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

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

    Because the proposed rule change does not: (i) Significantly affect 
the protection of investors or the public interest; (ii) impose any 
significant burden on competition; or (iii) become operative prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, it has become effective pursuant to 
Section 19(b)(3)(A) of the Act \12\ and Rule 19b-4(f)(6) 
thereunder.\13\
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    The Exchange has asked the Commission to waive the 30-day operative 
delay so that the proposal may become operative immediately upon 
filing. Because the vote on the Reorganization will occur before the 
end of the operative delay, waiver of the operative delay would allow 
the Exchange to begin implementing the two organizational and 
administrative changes described above to immediately upon shareholder 
approval of the Reorganization. The Commission believes that waiver of 
the 30-day operative delay is consistent with the protection of 
investors and the public interest and hereby waives the 30-day 
operative delay and designates the proposed rule change to be operative 
upon filing.\14\
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    \14\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSEArca-2018-35 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEArca-2018-35. 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 website (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 website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSEArca-2018-35 and should be submitted 
on or before June 21, 2018.
    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-11610 Filed 5-30-18; 8:45 am]
 BILLING CODE 8011-01-P