Document ID: SEC-2009-1789-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2009-12-21T05:00Z

[Federal Register: December 21, 2009 (Volume 74, Number 243)]
[Notices]               
[Page 67944-67945]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr21de09-103]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-61163; File No. SR-NYSEArca-2009-103]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting 
Accelerated Approval of a Proposed Rule Change Regarding Listing and 
Trading of RP Short Duration ETF

December 14, 2009.

    On November 6, 2009, NYSE Arca, Inc. (``NYSE Arca'' or 
``Exchange'') 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 RP 
Short Duration ETF (``Fund''). The proposed rule change was published 
for comment in the Federal Register on November 24, 2009.\3\ The 
Commission received no comments regarding the proposal. This order 
approves the proposed rule change 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. 61021 (November 17, 
2009), 74 FR 61383 (``Notice'').
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I. 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 Fund will be an actively managed exchange traded fund, 
which is a series of Grail Advisors ETF Trust (``Trust'').\4\ The 
investment objective of the Fund is current income with potential 
capital appreciation consistent with the preservation of capital. The 
Fund will invest, under normal circumstances, at least 80% of its net 
assets (plus the amount of any borrowings for investment purposes) in 
debt securities. These securities include short- and intermediate-term 
securities issued by the U.S. Government, its agencies and 
instrumentalities, or corporate bonds or notes that the ETF's sub-
adviser believes are consistent with the ETF's investment objective. 
Under normal circumstances, the ETF invests at least 65% of its assets 
in investment grade obligations, including securities issued or 
guaranteed by the U.S. Government, its agencies and instrumentalities. 
The Fund will not invest in non-U.S. equity securities.\5\
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    \4\ The Trust is registered with the Commission as an investment 
company. On October 7, 2009, the Trust filed with the Commission a 
Registration Statement on Form N-1A (File Nos. 333-148082 and 811-
22154) (``Registration Statement'').
    \5\ Additional information regarding the Fund's investments can 
be found in the Notice and Registration Statement. See supra notes 3 
and 4.
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    The Shares will be subject to the initial and continued listing 
criteria applicable to Managed Fund Shares under NYSE Arca Equities 
Rule 8.600(d), and the Exchange represents that the Fund will comply 
with Rule 10A-3 under the Act,\6\ as provided by NYSE Arca Equities 
Rule 5.3.
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    \6\ 17 CFR 240.10A-3.
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    Additional information regarding the Fund, the Shares, the Fund's 
investment objectives, strategies, policies, and restrictions, 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.\7\
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    \7\ See supra notes 3 and 4.
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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 \8\ and the rules and regulations thereunder applicable to a 
national securities exchange.\9\ In particular, the Commission finds 
that the proposal is consistent with Section 6(b)(5) of the Act,\10\ 
which requires, among other things, that the Exchange's rules be 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general, to protect investors and the public 
interest. 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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    \8\ 15 U.S.C. 78f.
    \9\ 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).
    \10\ 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,\11\ 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

[[Page 67945]]

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 Portfolio Indicative Value (``PIV'') 
will be disseminated at least every 15 seconds during the Core Trading 
Session by one or more major market data vendors. In addition, the 
Trust will disclose on its Web site on each business day the identities 
and quantities of the portfolio of securities and other assets 
(``Disclosed Portfolio'') held by the Fund that will form the basis for 
its calculation of the net asset value (``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 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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    \11\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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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 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.\12\ 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.\13\ 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.\14\ The Exchange 
represents that the Fund's investment manager has implemented a ``fire 
wall'' between it and its broker-dealer affiliate with respect to 
access to information concerning the composition and/or changes to the 
Fund's portfolio.\15\ 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.\16\
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    \12\ See NYSE Arca Equities Rule 8.600(d)(1)(B).
    \13\ See NYSE Arca Equities Rule 8.600(d)(2)(D).
    \14\ 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.
    \15\ The Exchange also represents that neither RiverPark 
Advisors, LLC nor Cohanzick Management, LLC, the Fund's sub-
advisers, have broker-dealer affiliates, and that any additional 
Fund sub-advisers 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 the portfolio.
    \16\ See NYSE Arca Equities Rule 8.600(d)(2)(B)(ii).
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    The Exchange has deemed the Shares to be 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 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 Funds will be in compliance with Rule 10A-3 under the Act.
    (5) The Funds will not invest in non-U.S. equity securities.
    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.
    The Commission finds good cause, pursuant to Section 19(b)(2) of 
the Act,\17\ 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,\18\ including other series of the 
Grail Advisors ETF Trust,\19\ and that the proposed rule change does 
not raise any novel regulatory issues. The Commission also notes that 
it has received no comments regarding the proposed rule change, and 
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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    \17\ 15 U.S.C. 78s(b)(2).
    \18\ 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 of five fixed income funds of the 
PIMCO ETF Trust).
    \19\ See, e.g., Securities Exchange Act Release No. 60717 
(September 24, 2009), 74 FR 50853 (October 1, 2009) (NYSEArca-2009-
74) (approving the listing and trading of shares of RP Growth ETF, 
RP Focused Large Cap Growth ETF, RP Technology ETF and the RP 
Financials ETF).
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III. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\20\ that the proposed rule change (SR-NYSEArca-2009-103) be, and 
it hereby is, approved on an accelerated basis.
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    \20\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-30243 Filed 12-18-09; 8:45 am]

BILLING CODE 8011-01-P