
[Federal Register: February 14, 2008 (Volume 73, Number 31)]
[Notices]               
[Page 8723-8728]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14fe08-105]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57297; File No. SR-Amex-2008-02]

 
Self-Regulatory Organizations; American Stock Exchange LLC; 
Notice of Filing of Proposed Rule Change Relating to the Listing and 
Trading of Managed Fund Shares, Fees Applicable to Managed Fund Shares, 
and the Listing and Trading of Shares of the Bear Stearns Current Yield 
Fund

February 8, 2008.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on February 7, 2008, the American Stock Exchange LLC (``Amex'' or 
``Exchange'') 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: (1) Adopt new Amex Rules 1000B, 1001B, 
1002B, and 1003B to permit the listing and trading of securities 
(``Managed Fund Shares'') issued by an actively managed, open-end 
investment management company; (2) list and trade the shares 
(``Shares'') of the Bear Stearns Current Yield Fund (``Fund''), an 
investment portfolio of the Bear Stearns Active ETF Trust (``Trust''), 
pursuant to those rules; and (3) amend its original listing and annual 
listing fees to include Managed Fund Shares and make certain other 
changes. The text of the proposed rule change is available at Amex, the 
Commission's Public Reference Room, and http://www.amex.com.

[[Page 8724]]

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 Exchange 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 these 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 aspects 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 add new Amex Rules 1000B, 1001B, 1002B, 
and 1003B to permit the listing and trading of Managed Fund Shares. 
Pursuant to these new rules, the Exchange proposes to list and trade 
the Shares. Amex states that the Shares will conform to the initial and 
continued listing criteria under proposed Amex Rules 1000B, 1001B, and 
1002B. The Exchange also proposes to amend its original listing and 
annual listing fees in Sections 140 and 141 of the Amex Company Guide 
to include Managed Fund Shares and make certain other conforming 
changes in the Amex rules to incorporate references to the new Amex 
rules proposed herein.
Background--Exchange-Traded Funds
    In 1993, the Exchange listed the first exchange-traded fund 
(``ETF''), the SPDR Trust, Series 1 (``SPDRs''). Amex's rules currently 
permit the listing of ETFs pursuant to Amex Rule 1000-AEMI, Rules 1001 
to 1006, Rule 1000A-AEMI, and Rules 1001A to 1005A. Amex Rule 1000-AEMI 
and Rules 1001 to 1006 allow for the listing and trading on the 
Exchange of portfolio depositary receipts (``PDRs''), which represent 
interests in a unit investment trust (``UIT'') registered under the 
Investment Company Act of 1940 (``1940 Act'') that operates on an open-
end basis and holds securities that comprise an underlying index or 
portfolio. Amex Rule 1000A-AEMI and Rules 1001A to 1005A provide 
standards for the listing and trading of Index Fund Shares (``IFSs,'' 
and together with PDRs, collectively, ``Index ETFs''), which are 
securities issued by an open-end management investment company (``open-
end fund'') based on a portfolio of stocks or fixed income securities 
or a combination thereof, that seeks to provide investment results that 
correspond generally to the price and yield or total return performance 
of a specified foreign or domestic stock index, fixed income securities 
index, or combination thereof.
    To qualify for listing, shares of Index ETFs must be issued in a 
specified aggregate minimum number in return for a deposit of specified 
securities and/or a cash amount, with a value equal to the next 
determined net asset value (``NAV''). When aggregated in the same 
specified minimum number, Index ETF shares must be redeemed by the 
issuer for the specified securities and/or cash, with a value equal to 
the next determined NAV. The NAV is calculated once a day after the 
close of the regular trading day based on the assests held in the Index 
ETF fund at the close of the previous trading day and the value of 
those assets at the close of the current trading day.
    The Exchange notes that Index ETFs are no longer novel products. 
More than 500 of these products are actively traded on Amex and other 
national securities exchanges.\3\ In 2006, the average daily trading 
volume for ETFs in the U.S. was in excess of 508 million shares, and as 
of December 31, 2006, the 376 ETFs then listed on U.S. markets had 
total assets of $431 billion.
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    \3\ The Exchange states that, as of November 30, 2007, there 
were 629 ETFs listed on U.S. exchanges.
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    The Exchange also notes that, during the past decade, the degree of 
portfolio management used by Index ETFs has progressed from the strict 
replication methods followed by the early UIT products, such as SPDRs 
and DIAMONDS, to the portfolio sampling and optimization methods used 
by investment company products such as certain iShares and Vanguard 
ETFs. The portfolio of an Index ETF that uses a sampling strategy may 
consist of a subset of the component securities in the index rather 
than replicating the index, with a view to tracking the benchmark index 
as effectively as possible.\4\ Further, Amex states that the underlying 
indices have evolved over time, with many of the more recently-listed 
products being based on indices such as the Intellidex indices that are 
designed to incorporate quantitative strategies, and alternatively-
weighted indices, such as the fundamentally-weighted indices of Wisdom 
Tree.
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    \4\ The Exchange states that an Index ETF may also use sampling 
techniques. For example, if one of the securities in the benchmark 
index comprises more than 25% of the index, the Index ETF would be 
restricted from holding the securities in proportion to its 
representation in the index without running afoul of Subchapter M of 
the Internal Revenue Code.
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    While Managed Fund Shares will be structured very similarly to 
Index ETFs, Managed Fund Shares will be managed like traditional 
actively managed, open-end investment companies (``Managed Mutual 
Funds'') and will have specified investment goals and objectives. 
Unlike Index ETFs, those goals and objectives will not involve seeking 
to replicate, or provide investment results that correspond generally 
to, the price and yield or total return performance of a specified 
index.
Proposed Listing Rules
    Proposed new Amex Rules 1000B, 1001B (for initial listing), and 
1002B (for continued listing) define and establish listing standards 
for Managed Fund Shares. Proposed Amex Rule 1000B(b) sets forth the 
relevant definitions. In particular, proposed Amex Rule 1000B(b)(1) 
defines ``Managed Fund Share'' as a security that: (a) Represents an 
interest in a registered open-end fund that invests in a portfolio of 
securities selected by the open-end fund's investment adviser 
consistent with the open-end fund's investment objectives and policies; 
(b) is issued in a specified aggregate minimum number in return for a 
deposit of a specified portfolio of securities and/or a cash amount 
with a value equal to the next determined NAV; and (c) when aggregated 
in the same specified minimum number, may be redeemed at a holder's 
request for a specified portfolio of securities and/or cash with a 
value equal to the next determined NAV.
    Proposed Amex Rule 1000B(b)(2) defines Disclosed Portfolio as the 
securities in the open-end fund's portfolio. The term ``Portfolio 
Indicative Value,'' set forth in proposed Amex Rule 1000B(b)(3), is 
defined as the estimated indicative value of a Managed Fund Share based 
on updated information regarding the value of the securities in the 
Disclosed Portfolio. Lastly, proposed Amex Rule 1000B(b)(4) defines 
``Reporting Authority'' to mean the Exchange, a subsidiary of the 
Exchange, or an institution or service designated by the Exchange or 
its subsidiary as the official source for determining and reporting the 
information relating to a series of Managed Fund Shares, including, but 
not limited to, the Portfolio Indicative Value, the Disclosed 
Portfolio, the amount of any cash distribution to holders of Managed 
Fund Shares, NAV, or other information relating to the issuance, 
redemption, or trading of Managed Fund Shares.
    Proposed Commentaries .01 through .05 to proposed Amex Rule 1000B 
substantially mirror Commentaries .05,

[[Page 8725]]

.02(j), .06, .08, and .09 to current Amex Rule 1000A-AEMI, 
respectively. Specifically, proposed Commentaries .01(a), (b), (c), and 
(d) are substantively identical to Commentaries .05(d), (f), (e), and 
(c), respectively, to Amex Rule 1000A-AEMI. The proposed Commentary 
provisions relate to minimum price variation, hours of trading, listing 
fees, and surveillance procedures. In addition, the substance of 
Commentary .05(a) to Amex Rule 1000A-AEMI is set forth in proposed Amex 
Rule 1000B(b)(3) in connection with the dissemination of information.
    Proposed Commentary .02 to Amex Rule 1000B is substantively 
identical to existing Commentary .02(j) to Amex Rule 1000A-AEMI, which 
relates to international or global portfolio creations/redemptions. 
With respect to a Managed Fund Share based on an international or 
global portfolio, this provision requires that the statutory prospectus 
or the application for exemption from provisions of the 1940 Act for 
the series of Managed Fund Shares state that such series will comply 
with the federal securities laws in accepting securities for deposits 
and satisfying redemptions with redemption securities, including that 
the securities accepted for deposits and the securities used to satisfy 
redemption requests are sold in transactions that would be exempt from 
registration under the Securities Act of 1933.
    Proposed Commentary .03 to Amex Rule 1000B is substantively 
identical to Commentary .06 to Amex Rule 1000A-AEMI in connection with 
Exchange obligations for those Managed Fund Shares that receive an 
exemption from certain prospectus delivery requirements under Section 
24(d) of the 1940 Act. Proposed Commentary .04 to Amex Rule 1000B, 
relating to the limitation of entering multiple limit orders by members 
and member organizations, is also substantively identical to Commentary 
.09 to Amex Rule 1000A-AEMI. Lastly, proposed Commentary .05 to Amex 
Rule 1000B relating to ``trading ahead'' is substantively identical to 
Commentary .09 to Amex Rule 1000A-AEMI.
    With respect to the initial listing standards for Managed Fund 
Shares, proposed Amex Rule 1001B(i) provides that the Exchange will 
establish a minimum number of shares outstanding at the time of 
commencement of trading. In addition, proposed Amex Rule 1001B(ii) 
requires that the Exchange obtain a representation from the issuer of 
each series of Managed Fund Shares that the NAV per share for the 
series will be calculated daily and that the NAV and the Disclosed 
Portfolio will be made available to all market participants at the same 
time. Proposed Commentary .01 to Amex Rule 1001B specifically provides 
that each series of Managed Fund Shares, prior to listing and/or 
trading, is required to submit for Commission review and approval, a 
proposed rule change pursuant to Section 19(b) of the Act. Accordingly, 
each series of Managed Fund Shares will require Commission review and 
approval prior to listing and trading.
    The proposed continued listing criteria set forth in proposed Amex 
Rule 1002B(iii) provides for the delisting of the Shares under any of 
the following circumstances:
     If, following the initial twelve-month period after 
commencement of trading on the Exchange of a series of Managed Fund 
Shares, there are fewer than 50 beneficial holders of the series of the 
Managed Fund Shares for 30 or more consecutive trading days;
     If the value of the Portfolio Indicative Value is no 
longer calculated or available, or the Disclosed Portfolio is not made 
available to all market participants at the same time;
     If the Trust has not filed, on a timely basis, any 
required filings with the Commission, or if the Exchange becomes aware 
that the Trust is not in compliance with the conditions of any 
exemptive order or no-action relief granted by the Commission to or 
otherwise applicable to the Trust; or
     If such other event shall occur or condition exists which, 
in the opinion of the Exchange, makes further dealings of the Managed 
Fund Shares on the Exchange inadvisable.
    Proposed Amex Rule 1002B also sets forth the continued listing 
criteria relating to the Portfolio Indicative Value and the Disclosed 
Portfolio. Specifically, proposed Amex Rule 1002B(i) requires that the 
Portfolio Indicative Value for a Managed Fund Share be widely 
disseminated by one or more major market data vendors at least every 15 
seconds during the time the Managed Fund Shares are traded on the 
Exchange. Proposed Amex Rule 1002B(ii)(a) provides that the Disclosed 
Portfolio be disseminated at least once daily to all market 
participants at the same time. Further, proposed Amex Rule 1002B(ii)(b) 
requires that the Reporting Authority for the Disclosed Portfolio 
implement and maintain, or be subject to, ``firewall'' procedures 
designed to prevent the use and dissemination of material, non-public 
information regarding the actual components of the Disclosed Portfolio.
    Pursuant to proposed Amex Rule 1002B(iv), the Exchange will halt 
trading under the following circumstances:
     If the circuit breaker parameters of Amex Rule 117 have 
been reached, the Exchange will halt trading in a series of Managed 
Fund Shares.
     If the Portfolio Indicative Value of the Managed Fund 
Shares is not being disseminated as required, the Exchange may halt 
trading during the day in which the interruption to the dissemination 
of the Portfolio Indicative Value occurs. If the interruption to the 
dissemination of the Portfolio Indicative Value persists past the 
trading day in which it occurred, the Exchange will halt trading no 
later than the beginning of the trading day following the interruption.
     If a series of Managed Fund Shares is trading on the 
Exchange pursuant to unlisted trading privileges, the Exchange will 
halt trading in that series if the primary listing market halts trading 
in that series of Managed Fund Shares because the Portfolio Indicative 
Value applicable to that series of Managed Fund Shares is not being 
disseminated as required.
     If the Exchange becomes aware that the NAV or Disclosed 
Portfolio related to a series of Managed Fund Shares is not being 
disseminated to all market participants at the same time, the Exchange 
will halt trading in such Managed Fund Shares. The Exchange may resume 
trading in the Managed Fund Shares only when the NAV or Disclosed 
Portfolio is disseminated to all market participants at the same time.
     Finally, in exercising its discretion to halt or suspend 
trading in Managed Fund Shares, the Exchange may consider factors such 
as those set forth in Amex Rule 918C(b), in addition to other factors 
that may be relevant.
    Proposed Amex Rule 1003B would limit Exchange liability in 
connection with potential claims, damages, losses, or expenses 
regarding a Managed Fund Share. The Exchange states that proposed Amex 
Rule 1003B is substantially similar to current Amex Rule 1003A.
Original and Annual Listing Fees
    The Exchange seeks to amend its rules relating to listing fees to 
include Managed Fund Shares. As proposed, Amex's original listing fee 
applicable to the listing of series of Managed Fund Shares will be 
$5,000, but may be deferred, waived, or rebated upon transfer to Amex 
from another marketplace. In addition, the annual listing fee 
applicable under Section 141 of the Amex Company Guide will be based 
upon the year-end aggregate number of Shares outstanding at the end

[[Page 8726]]

of each calendar year. In connection with Section 140 of the Company 
Guide, the Exchange proposes to make a technical revision so that 
``Trust Units'' are also included among the types of securities whose 
initial listing fees may be deferred, waived, or rebated upon transfer 
to Amex from another marketplace.
Key Features of Managed Fund Shares
    Registered Investment Company. A Managed Fund Share means a 
security that represents an interest in an investment company 
registered under 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, the open-end investment company 
that issues IFSs 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.
    1940 Act Exemptive Relief. The 1940 Act contemplates two categories 
of investment companies: those which issue redeemable securities, i.e., 
open-end investment companies; and those which do not, i.e., closed-end 
investment companies. Index ETF shares are redeemable, but only in 
large blocks of shares (not individually), so it is not certain whether 
they are considered redeemable under the 1940 Act. Because Index ETFs 
do not fit neatly into either the open-end category or the closed-end 
category, Index ETFs have had to seek exemptive relief from the 
Commission to be registered as an open-end investment company. Managed 
Fund Shares share key structural features with Index ETFs, such as 
creation and redemption in large blocks of shares being the most 
important one, that result in the need for exemptive relief, and 
therefore, Managed Fund Shares will require relief from the same 
provisions of the 1940 Act.\5\
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    \5\ Bear Stearns Asset Management, Inc. and the Trust have 
requested exemptions from various provisions of the 1940 Act.
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    Intraday Trading. Like Index ETFs, Managed Fund Shares will be 
listed and traded on a national securities exchange and, therefore, 
will be available for sale and purchase on an intraday basis, like 
other listed securities. In contrast, shares of Managed Mutual Funds 
may only be purchased and sold (issued and redeemed) in direct 
transactions with the fund, once each day.
    Creations and Redemptions of Shares. Managed Fund Shares will be 
issued and redeemed on a daily basis at NAV, as with Index ETFs. And 
like Index ETFs, creations and redemptions for Managed Fund Shares must 
be in large specified blocks of shares called ``Creation Units.'' 
Purchases and sales of shares in amounts smaller than the number of 
shares required for a Creation Unit may be effected only in the 
secondary market and not directly with the fund.
    Managed Fund Shares are only redeemable in Creation Units, and only 
``Authorized Participants'' may purchase or redeem Managed Fund Shares 
directly from the fund.\6\ Retail investors will not qualify to be 
Authorized Participants and typically would not have the resources to 
buy and sell Creation Units. Therefore, they will be unable to purchase 
or redeem Managed Fund Shares directly from the fund. Rather, retail 
investors will purchase Managed Fund Shares in the secondary market 
with the assistance of a broker and will be subject to customary 
brokerage commissions or fees.
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    \6\ ``Authorized Participant'' is a participant in the 
Depository Trust Company, which has signed a ``Participant 
Agreement'' with the distributor for the Fund, ALPS Distributors, 
Inc.
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    Managed Fund Shares may use one or more of the following three 
approaches to creations and redemptions: (1) ``In kind'' creation and 
redemption using a Portfolio Deposit that reflects the composition of 
the fund; (2) cash creation and redemption; or (3) ``in kind'' creation 
and redemption using a Portfolio Deposit consisting of securities that 
do not reflect the composition of the fund, but instead investments in 
other securities including, for example, specified Index ETFs.\7\
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    \7\ For most Index ETFs, the creation and redemption process is 
effected ``in kind.'' Creation ``in kind'' typically means that the 
investor--usually a brokerage house or large institutional 
investor--purchases the Creation Unit with a ``Portfolio Deposit'' 
equal in value to the aggregate NAV of the shares in the Creation 
Unit. The Portfolio Deposit generally consists of a basket of 
securities that reflects the composition of the Index ETF's 
portfolio. Similarly, an investor redeeming shares in the Index ETF 
receives in exchange for shares in the Index ETF the securities in 
the ``Redemption Basket,'' which is usually the same as the 
Portfolio Deposit and consists of securities that reflect the 
composition of the Index ETF's portfolio. The Portfolio Deposit 
often includes a small cash component to make the value of the 
deposit or basket exactly equal to the aggregate NAV. Most Index 
ETFs also permit cash creations and redemptions under specified and 
limited circumstances.
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    Portfolio Disclosure. One common feature of Index ETFs is 
disclosure of the contents of the Portfolio Deposit on a daily basis. 
The components of the Portfolio Deposit reflect, but are not 
necessarily identical to, the components of the underlying benchmark 
index on which the Index ETF is based. Aside from providing the 
information required for daily creations and redemptions, the Portfolio 
Deposit gives market participants a basis for estimating the intraday 
value of the fund, and thus, providing a basis for the arbitrage that 
keeps the market price of Index ETFs generally in line with the NAV of 
the Index ETF. While Managed Fund Shares may use an in-kind or cash 
creation and redemption mechanism, as noted above, each series of 
Managed Fund Shares will disclose daily all of the portfolio securities 
(i.e., Disclosed Portfolio) of the fund.
    Indicative Value Disclosure. In order to provide updated 
information relating to each Index ETF listed on the Exchange for use 
by investors, professionals and persons wishing to create or redeem 
shares in Index ETFs, the Exchange disseminates at least every 15 
seconds throughout the trading day a calculation of the estimated NAV 
of a share of an Index ETF, commonly known as the Intraday Indicative 
Value or ``IIV,'' as calculated by a third party calculator. Similarly, 
for each series of Managed Fund Shares, an estimated value, defined in 
the proposed rules as the ``Portfolio Indicative Value,'' that reflects 
an estimated intraday value of the fund portfolio will be disseminated 
at least every 15 seconds. This Portfolio Indicative Value will be 
based upon the current value for the components of the Disclosed 
Portfolio. The dissemination of the Portfolio Indicative Value, 
together with the Disclosed Portfolio, will allow investors to 
determine the value of the underlying portfolio of a series of Managed 
Fund Shares on a daily basis and provide a close estimate of that value 
throughout the trading day.
Description of the Fund
    The Fund, an exchange-traded fund, is the sole investment portfolio 
of the Trust. The Trust is organized as a Delaware statutory trust and 
is an open-end fund registered under the 1940 Act.\8\ The investment 
objective of the Fund is to seek as high a level of current income as 
is consistent with the preservation of capital and liquidity. The Fund 
will be actively managed by its portfolio manager, who will have 
discretion to choose securities for the Fund's portfolio consistent 
with the Fund's investment objective.\9\ The

[[Page 8727]]

Fund's portfolio manager seeks to attain the Fund's objective by 
investing primarily in short-term debt obligations, including U.S. 
government securities, bank obligations, corporate debt obligations, 
mortgage-backed and asset-backed securities, municipal obligations, 
foreign bank obligations (U.S. dollar denominated), foreign corporate 
debt obligations (U.S. dollar denominated), repurchase agreements, and 
reverse repurchase agreements.
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    \8\ The Exchange states that the Fund is not a ``money market 
fund'' and is not subject to certain rules and regulations under the 
1940 Act governing money market funds.
    \9\ The Exchange states that the Fund's investment objective may 
be changed without shareholder approval upon 30 days' written notice 
to shareholders.
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    The Exchange proposes to list and trade the Fund Shares pursuant to 
proposed Amex Rules 1000B, 1001B, and 1002B. Amex represents that the 
Shares will conform to the initial and continued listing criteria under 
such proposed rules.\10\
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    \10\ The Exchange represents that, for initial and/or continued 
listing, the Shares must also be in compliance with Section 803 of 
the Amex Company Guide and Rule 10A-3 under the Act (17 CFR 240.10A-
3).
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    The Registration Statement, including the Prospectus and Statement 
of Additional Information (``SAI''), provides a detailed description of 
the Fund including, but not limited to, the structure of the Fund, 
cash-only creation and redemption processes, investment objective and 
policies, characteristics, tax status, and distributions.\11\
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    \11\ See the Trust's Form N-1A/A filed with the Commission on 
August 6, 2007 (File Nos. 333-141421 and 811-22038).
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Availability of Information Regarding the Fund and the Shares
    The daily NAV for the Fund will be calculated and disseminated 
publicly each Business Day \12\ to all market participants at the same 
time. In addition, prior to the opening each Business Day, the Fund 
will make publicly available on its Web site the Disclosed Portfolio, 
which is the file of all the portfolio securities held by the Fund and 
the quantities thereof, including, as applicable, the specific types 
and amounts of short-term debt securities and the amount of cash held 
in the portfolio of the Fund, as of the close of business on the prior 
Business Day, reflecting all securities bought and sold on such prior 
Business Day.\13\ This information will be available to all investors 
and market participants at the same time and will form the basis for 
the Fund's calculation of NAV as of the close of regular trading on the 
Exchange (ordinarily 4 p.m. Eastern Time).
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    \12\ ``Business Day'' is defined as a day in which the Trust 
will sell and redeem Creation Units of the Fund.
    \13\ The Exchange states that the Trust will comply with its 
obligations to disclose in its SAI its policies and procedures with 
respect to the Disclosed Portfolio and state in its Prospectus that 
a description of the Fund's policies and procedures is available in 
the SAI. See Investment Company Act Release No. 26418 (April 16, 
2004), 69 FR 22300 (April 23, 2004).
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    Amex will disseminate at least every 15 seconds during regular Amex 
trading hours, through the facilities of the Consolidated Tape 
Association (``CTA''), the Portfolio Indicative Value. An independent 
pricing service will calculate the Portfolio Indicative Value during 
the hours of trading on the Exchange by dividing the ``Estimated Fund 
Value'' as of the time of the calculation by the total Shares 
outstanding. ``Estimated Fund Value'' is the sum of the estimated 
amount of cash held in the Fund's portfolio, the estimated value of the 
securities held in the Fund's portfolio, and the estimated amount of 
accrued interest, minus the estimated amount of liabilities.\14\
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    \14\ The Exchange states that the methodology used to calculate 
the Portfolio Indicative Value for the Fund is similar to those used 
by some existing ETFs listed on the Exchange that track fixed-income 
securities indices, as well as numerous fixed-income mutual funds.
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    The Web site for the Fund will display the Prospectus, the SAI, and 
additional quantitative information that is updated on a daily basis, 
including, among other things, the following information, on a per-
Share basis: (a) The prior Business Day's NAV, the reported mid-point 
of the bid-ask spread at the time of NAV calculation (``Bid-Ask 
Price''), and a calculation of the premium or discount of the Bid-Ask 
Price against such NAV; and (b) data in chart format displaying the 
frequency distribution of discounts and premiums of the Bid-Ask Price 
against the NAV, within appropriate ranges, for each of the four 
previous calendar quarters. Amex also intends to disseminate a variety 
of data with respect to the Shares on a daily basis, by means of CTA 
and Consolidated Quotation High Speed Lines, including quotation and 
last sale data, information of the previous day's close with respect to 
NAV, and the number of Shares outstanding. In addition, as with other 
ETFs, information regarding secondary market prices and volume of the 
Shares will be broadly available in real-time throughout the trading 
day.
Arbitrage
    The Exchange believes that the Shares will not trade at a material 
discount or premium to the value of the assets held by the Trust based 
on potential arbitrage opportunities. Due to the fact that the Shares 
can be created and redeemed only in Creation Units at NAV,\15\ the 
Exchange submits that arbitrage opportunities should provide a 
mechanism to mitigate the effect of any premiums or discounts that may 
exist from time to time. Given that the creation and redemption process 
of the Trust and its Fund is substantially similar to that of Index 
ETFs, the Exchange believes that market professionals will have the 
ability to arbitrage Shares of the Fund in a manner similar to Index 
ETFs. The availability of the Disclosed Portfolio and the Portfolio 
Indicative Value and other pricing information about portfolio holdings 
will permit arbitrageurs to identify when the market price of the 
Shares is higher or lower than the value of the portfolio. As a result, 
these market professionals will buy Shares when they are priced lower 
than the portfolio and sell Shares when they are priced higher than the 
portfolio, thereby moving prices back in line with the value of the 
portfolio. Actual and potential arbitrage of this nature should help 
the secondary market prices of the Shares to remain close to NAV.
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    \15\ The Exchange states that creations and redemptions of the 
Shares will be in cash only.
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Trading Rules
    The Shares are equity securities subject to Amex rules governing 
the trading of equity securities, including, among others, rules 
governing priority, parity, and precedence of orders, specialist 
responsibilities, account opening, and customer suitability (Amex Rule 
411). Trading rules pertaining to odd-lot trading in Amex equities 
(Amex Rule 205-AEMI) will also apply. Specialist transactions of the 
Shares made in connection with the creation and redemption of Shares 
will not be subject to the prohibitions of Rule 190.\16\
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    \16\ Commentary .04 to Amex rule 190 states that nothing in Rule 
190(a) should be construed to restrcit a specialist registered in a 
security issued by an investment company from purchasing and 
redeeming the listed security, or securities that can be subdivided 
or converted into the listed security, from the issuer as 
appropriate to facilitate the maintenance of a fair and orderly 
market. See Commentary .04 to Amex Rule 190.
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    Amex notes that the Amex Rule 154-AEMI(c)(ii) (``Election by 
Quotation of Stop and Stop Limit Orders'') and Amex Rule 126A-AEMI 
(``Protected Bids and Offers of Away Markets'') will apply to the 
trading of the Shares. In addition, Exchange members and member 
organizations will be subject to proposed Commentary .04 to Amex Rule 
1000B prohibiting such member or member organizations from entering 
into the Exchange's order routing

[[Page 8728]]

system multiple limit orders as agent (i.e., customer agency orders). 
Further, proposed Commentary .05 to Rule 1000B provides that it may be 
considered inconsistent with just and equitable principles of trade for 
a member or person associated with a member to ``trade ahead'' of a 
related customer order in Managed Fund Shares based on material, non-
public information obtained from such customer order.
Information Circular
    The Exchange will distribute an Information Circular to Exchange 
members and member organizations prior to the commencement of trading 
of the Shares that describes the prospectus delivery requirements and, 
as relevant, the application of proposed Commentary .03 to Amex Rule 
1000B. The Exchange notes that investors purchasing Shares directly 
from the Fund by delivery of a Creation Unit will receive a Prospectus.
    In addition, the Information Circular will inform Exchange members 
and member organizations that procedures for purchases and redemptions 
of Shares in Creation Units are described in the Fund's Prospectus and 
SAI, and that Shares are not individually redeemable, but are 
redeemable only in Creation Units or multiples thereof. The Exchange 
will also inform members and member organizations of the 
characteristics of the Fund and the Shares and of applicable Exchange 
rules, as well as of the suitability requirements of Amex Rule 411 
(Duty to Know and Approve Customers).\17\
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    \17\ The Exchange notes that pursuant to Amex Rule 411, members 
and member organizations are required in connection with 
recommending transactions in the Shares to have a reasonable basis 
to believe that a customer is suitable for the particular investment 
given reasonable inquiry concerning the customer's investment 
objectives, financial situation, needs, and any other information 
known by such member. See Amex Rule 411.
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Surveillance
    The Exchange represents that its surveillance procedures are 
adequate to properly monitor the trading of the Shares. Specifically, 
Amex will rely on its existing surveillance procedures governing IFSs. 
In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\18\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\19\ in particular, in that it 
is designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, and to remove impediments to and perfect 
the mechanism of a free and open market and a national market system. 
Specifically, the Exchange believes that the ability to list and trade 
an actively managed ETF pursuant to the rules proposed herein is 
consistent with Section 6(b) of the Act, and furthers the objectives of 
Section 6(b)(5) of the Act by promoting and facilitating transactions 
in securities while at the same time protecting investors and the 
public interest. The Exchange further believes that offering investors 
additional investment alternatives helps to promote competition between 
similar product classes, thereby benefiting the markets and investors.
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    \18\ 15 U.S.C. 78f(b).
    \19\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes the proposed rule change will impose no 
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

    The Exchange states that 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 35 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 Amex consents, the Commission will:
    A. By order approve such 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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-Amex-2008-02 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-Amex-2008-02. 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 inspection and 
copying in the Commission's Public Reference Room, 100 F Street, NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 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; 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-Amex-2008-02 and should be 
submitted on or before March 6, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E8-2734 Filed 2-13-08; 8:45 am]

BILLING CODE 8011-01-P
