Document ID: SEC-2010-0547-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2010-04-12T04:00Z

[Federal Register: April 12, 2010 (Volume 75, Number 69)]
[Notices]               
[Page 18554-18556]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr12ap10-108]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61842; File No. SR-NYSEArca-2010-10]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Amendment No. 1 and Order Granting Accelerated Approval of a 
Proposed Rule Change, as Modified by Amendment No. 1 Thereto, Relating 
to the Listing of Mars Hill Global Relative Value ETF (f/k/a HTE Global 
Relative Value ETF)

April 5, 2010.

I. Introduction

    On Februrary 25, 2010, 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 Mars Hill Global Relative Value ETF (f/k/a HTE 
Global Relative Value ETF) (the ``Fund'') under NYSE Arca Equities Rule 
8.600 (Managed Fund Shares). The proposed rule change was published in 
the Federal Register on March 18, 2010.\3\ The Commission received no 
comments on the proposal. On March 29, 2010, the Exchange filed 
Amendment No. 1 to the proposed rule change.\4\ This order approves the 
proposed rule change, as modified by Amendment No. 1, on an accelerated 
basis.
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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. 61683 (March 10, 
2010), 75 FR 13194 (``Notice'').
    \4\ Amendment No. 1 reflects that all references in the filing 
to ``HTE Global Relative Value ETF'' are replaced with ``Mars Hill 
Global Relative Value ETF'' and that all references in the filing to 
``HTE Asset Management LLC'' are replaced with ``Mars Hill Partners, 
LLC.'' In addition, Amendment No. 1 reflects that all other 
representations in the filing remain as stated therein, except that 
representations referring to ``HTE Global Relative Value ETF'' and 
``HTE Asset Management LLC'' are understood to mean and apply to 
``Mars Hill Global Relative Value ETF'' and ``Mars Hill Partners, 
LLC,'' respectively.
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II. Description of the Proposal

    The Exchange proposes to list and trade the Shares pursuant to NYSE 
Arca Equities Rule 8.600, which governs the listing of Managed Fund 
Shares. The Shares will be offered by AdvisorShares Trust (the 
``Trust''), a statutory trust organized under the laws of the State of 
Delaware and registered with the Commission as an open-end management 
investment company.\5\ AdvisorShares Investments, LLC is the Fund's 
investment advisor (the ``Advisor'') and Mars Hill Partners, LLC 
(``Mars Hill'') is the Fund's sub-advisor. Foreside Fund Services, LLC 
is the principal underwriter and distributor of the Fund's shares, and 
the Bank of New York Mellon is the administrator, transfer agent, and 
custodian for the Fund.
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    \5\ The Exchange states that the Trust is registered under the 
Investment Company Act of 1940 (``1940 Act'') and that on December 
29, 2009, the Trust filed with the Commission Post-Effective 
Amendment No. 2 to Form N-1A under the Securities Act of 1933 (15 
U.S.C. 77a) and under the 1940 Act relating to the Fund. (File Nos. 
333-157876 and 811-22110) (``Registration Statement'').
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    The investment goal of the Fund is average annual returns in excess 
of the total return of the MSCI World Index (the ``Index''), with 
comparable volatility and little to no correlation with the Index. The 
Fund is considered a ``fund-of-funds'' that seeks to achieve its 
investment objective by primarily investing in both long and short 
positions in other exchange-traded funds (the ``Underlying ETFs'') that 
offer diversified exposure to global regions, countries, styles (market 
capitalization, value, growth, etc.) or sectors, and other exchange-
traded products, including but not limited to exchange-traded notes 
(``ETNs''), exchange-traded currency trusts and closed-end funds. In 
addition, the Fund may use liquid futures contracts tied to broad 
market indices (e.g., futures contracts based on the S&P 500 Index, the 
MSCI EAFE Index and/or the MSCI Emerging Markets Index) when 
establishing net long or net short exposure on top of the core long/
short portfolio.\6\ The Underlying ETFs in which the Fund will invest 
will primarily be index-based ETFs that hold substantially all of their 
assets in securities representing a specific index and will be traded 
on a U.S. national securities exchange. Except for Underlying ETFs that 
may hold non-US issues, the Fund will not otherwise invest in non-US 
issues.
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    \6\ The Fund may use futures contracts and related options for 
bona fide hedging; attempting to offset changes in the value of 
securities held or expected to be acquired or be disposed of; 
attempting to gain exposure to a particular market, index or 
instrument; or other risk management purposes.
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    The Exchange states that the Shares will be subject to the initial 
and continued listing criteria under NYSE Arca Equities Rule 8.600(d) 
applicable to Managed Fund Shares \7\ and that the

[[Page 18555]]

Shares will comply with Rule 10A-3 under the Act,\8\ as provided by 
NYSE Arca Equities Rule 5.3. Additional information regarding the Fund, 
the Shares, the Fund's investment objectives, strategies, policies, and 
restrictions, risks, fees and expenses, creation and redemption 
procedures, portfolio holdings and policies, distributions and taxes, 
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.\9\
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    \7\ The Exchange states that a minimum of 100,000 Shares will be 
outstanding at the commencement of trading on the Exchange, and the 
Exchange will obtain a representation from the issuer of the Shares 
that the net asset value (``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. See Notice, 
supra note 3.
    \8\ 17 CFR 240.10A-3.
    \9\ See supra notes 3 and 5.
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III. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning whether Amendment No. 1 to 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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2010-10 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-2010-10. This 
file number should be included on the subject line if e-mail 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 on 
official business days between the hours of 10 a.m. and 3 p.m. Copies 
of such filing also will be available for inspection and copying at the 
principal office of the Exchange. All comments received will be posted 
without change; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-NYSEArca-2010-10 and should be submitted on or before 
May 3, 2010.

IV. 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 \10\ and the rules and regulations thereunder applicable to a 
national securities exchange.\11\ In particular, the Commission finds 
that the proposal is consistent with Section 6(b)(5) of the Act,\12\ 
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. The Commission notes that the Shares must comply with 
the requirements of NYSE Arca Equities Rule 8.600 to be listed and 
traded on the Exchange.
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    \10\ 15 U.S.C. 78f.
    \11\ 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).
    \12\ 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,\13\ 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 high-speed line, and the Portfolio Indicative Value 
(``PIV'') will be updated and disseminated by one or more major market 
data vendors at least every 15 seconds during the Core Trading Session. 
In addition, the Fund will make available on its Web site on each 
business day, before the commencement of trading in Shares in the Core 
Trading Session, the Disclosed Portfolio that will form the basis for 
the calculation of the NAV, which will be determined at the end of the 
business day. The Fund's Web site will also include additional 
quantitative information updated on a daily basis relating to the prior 
business day's reported NAV, mid-point of the bid/ask spread at the 
time of calculation of such NAV (the ``Bid/Ask Price''),\14\ and a 
calculation of the premium and discount of the Bid/Ask Price against 
the NAV and data in chart format displaying the frequency distribution 
of discounts and premiums of the daily Bid/Ask Price against the NAV, 
within appropriate ranges, for each of the four previous calendar 
quarters. Information regarding the market price and 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 
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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    \13\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \14\ The Bid/Ask Price of the Fund is determined using the 
midpoint of the highest bid and the lowest offer on the Exchange as 
of the time of calculation of the NAV. The records relating to Bid/
Ask Prices will be retained by each ETF and its service providers.
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    The Commission further believes that the proposal 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 Exchange will obtain a representation from the issuer 
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.\15\ Additionally, if it becomes aware 
that the NAV or the Disclosed Portfolio is not disseminated daily 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.\16\ Further, if the PIV is not being disseminated as 
required, the Exchange may halt trading during the day in which the 
disruption 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.\17\ The Exchange 
represents

[[Page 18556]]

that the Advisor is not affiliated with a broker-dealer and that any 
additional Fund sub-advisors 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 and/
or changes to a portfolio. Further, 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.\18\
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    \15\ See NYSE Arca Equities Rule 8.600(d)(1)(B).
    \16\ See NYSE Arca Equities Rule 8.600(d)(2)(D).
    \17\ Id. 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.
    \18\ 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 in Creation Unit 
aggregations 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 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.
    (5) The Underlying ETFs will be traded on a U.S. national 
securities exchange and, except for Underlying ETFs 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 the Act and the rules and regulations 
thereunder applicable to a national securities exchange.

V. Accelerated Approval

    The Commission finds good cause, pursuant to Section 19(b)(2) of 
the Act,\19\ for approving the proposal prior to the thirtieth day 
after the date of publication of the Notice in the Federal Register. 
The Commission notes that it has approved the listing and trading on 
the Exchange of shares of other actively managed exchange-traded funds 
based on a portfolio of securities, the characteristics of which are 
similar to those to be invested by the Funds.\20\ The Commission also 
notes that it has received no comments regarding the proposed rule 
change. Further, the Commission believes that the changes in Amendment 
No. 1 to the name of the Fund and the Sub-Adviser do not raise any 
novel regulatory concerns, particularly because Amendment No. 1 makes 
clear that all other representations in the Notice remain as stated 
therein, except that representations in the Notice to HTE Global 
Relative Value ETF and HTE Asset Management LLC are understood to mean 
and to apply to Mars Hill Global Relative Value ETF and Mars Hill 
Partners, LLC, respectively. The Commission believes that accelerating 
approval of this proposal should benefit investors by creating, without 
undue delay, additional competition in the market for Managed Fund 
Shares.
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    \19\ 15 U.S.C. 78s(b)(2).
    \20\ See, e.g., Securities Exchange Act Release No. 60981 
(November 10, 2009), 74 FR 59594 (November 18, 2009) (SR-NYSEArca-
2009-79) (approving the listing and trading of shares of five 
actively-managed fixed income funds of the PIMCO ETF Trust).
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VI. Conclusion

    It is therfore ordered, pursuant to Section 19(b)(2) of the 
Act,\21\ that the proposed rule change (SR-NYSEArca-2010-10), as 
modified by Amendment No. 1 thereto, be, and it hereby is, approved on 
an accelerated basis.
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    \21\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-8221 Filed 4-9-10; 8:45 am]
BILLING CODE 8011-01-P