
[Federal Register: March 5, 2008 (Volume 73, Number 44)]
[Notices]               
[Page 11974-11979]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr05mr08-118]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-57395; File No. SR-NYSEArca-2008-25]

 
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Relating to the Listing and Trading of Managed 
Fund Shares, Trading Hours and Halts, Listing Fees Applicable to 
Managed Fund Shares, and the Listing and Trading of Shares of the 
PowerShares Active AlphaQ Fund, PowerShares Active Alpha Multi-Cap 
Fund, PowerShares Active Mega-Cap Portfolio, and the PowerShares Active 
Low Duration Portfolio

February 28, 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 27, 2008, 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'') 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) Add new NYSE Arca Equities Rule 8.600 
to permit the listing and trading, or trading pursuant to unlisted 
trading privileges (``UTP''), of securities issued by an actively 
managed, open-end investment management company (``Managed Fund 
Shares''); (2) list and trade the shares (``Shares'') of the 
PowerShares Active AlphaQ Fund, PowerShares Active Alpha Multi-Cap 
Fund, PowerShares Active Mega-Cap Portfolio, and the PowerShares Active 
Low Duration Portfolio (collectively, the ``Funds''); (3) amend NYSE 
Arca Equities Rule 7.34 (Trading Sessions) to reference Managed Fund 
Shares; and (4) amend its listing fees to include Managed Fund Shares 
under the term ``Derivative Securities Products.'' The text of the 
proposed rule change is available at the Exchange, the Commission's 
Public Reference Room, and http://www.nyse.com.

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 NYSE Arca Equities Rule 8.600 to 
permit the listing and trading, or trading pursuant to UTP, of Managed 
Fund Shares, which are securities issued by an actively managed, open-
end investment management company. The Exchange also proposes to amend 
NYSE Arca Equities Rule 7.34 (Trading Sessions) to reference Managed 
Fund Shares in paragraph (a)(3)(A), relating to hours of the Exchange's 
Core Trading Session, and paragraph (a)(4)(A), relating to trading 
halts when trading pursuant to UTP during the Exchange's Opening 
Session. In addition, the Exchange proposes to amend its listing fees 
by incorporating Managed Fund Shares in the term ``Derivative 
Securities Products.'' Finally, pursuant to new NYSE Arca Equities Rule 
8.600, the Exchange proposes to list and trade the Shares of the Funds.
Proposed Listing Rules for Managed Fund Shares
    Under proposed NYSE Arca Equities Rule 8.600(c)(1), a ``Managed 
Fund Share'' is a security that: (1) Represents an interest in a 
registered investment company (``Investment Company'') organized as an 
open-end management investment company or similar entity, that invests 
in a portfolio of securities selected by the Investment Company's 
investment adviser consistent with the Investment Company's investment 
objectives and policies; (2) 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 net 
asset value (``NAV''); and (3) when aggregated in the same specified 
minimum number, may be redeemed at a holder's request, which holder 
will be paid a specified portfolio of securities and/or cash with a 
value equal to the next determined NAV.
    Proposed NYSE Arca Equities Rule 8.600(c)(2) defines ``Disclosed 
Portfolio'' as the identities and quantities of the securities and 
other assets held by the Investment Company that will form the basis 
for the Investment Company's calculation of the NAV at the end of the 
business day. Proposed NYSE Arca Equities Rule 8.600(c)(3) defines 
``Portfolio Indicative Value'' as the estimated indicative value of a 
Managed Fund Share based on current information regarding the value of 
the securities and other assets in the Disclosed Portfolio. Finally, 
proposed NYSE Arca Equities Rule 8.600(c)(4) defines ``Reporting 
Authority'' as, in respect of a particular series of Managed Fund 
Shares, the Corporation,\3\ an institution, or a reporting service 
designated by the Corporation or by the exchange that lists a 
particular series of Managed Fund Shares (if the Corporation is trading 
such series pursuant to UTP) as the official source for calculating and 
reporting information relating to such series, including, but not 
limited to, the (i) Portfolio Indicative Value, (ii) the Disclosed 
Portfolio, (iii) the amount of any cash distribution to holders of 
Managed Fund Shares, (iv) NAV, or (v) other information relating to the 
issuance, redemption, or trading of Managed Fund Shares. A series of

[[Page 11975]]

Managed Fund Shares may have more than one Reporting Authority, each 
having different functions.
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    \3\ The ``Corporation'' means NYSE Arca Equities. See NYSE Arca 
Equities Rule 1.1(k) (defining Corporation).
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    Proposed NYSE Arca Equities Rule 8.600(d) sets forth the initial 
and continued listing criteria applicable to Managed Fund Shares. 
Proposed Rule 8.600(d)(1) provides that, for each series of Managed 
Fund Shares, the Corporation will establish a minimum number of Managed 
Fund Shares required to be outstanding at the time of commencement of 
trading. In addition, the Corporation will 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 NYSE Arca Equities Rule 8.600(d)(2) provides that each 
series of Managed Fund Shares will be listed and traded subject to 
application of the following continued listing criteria: (1) The 
Portfolio Indicative Value for Managed Fund Shares will be widely 
disseminated by one or more major market data vendors at least every 15 
seconds during the time when the Managed Fund Shares trade on the 
Corporation; (2) the Disclosed Portfolio will be disseminated at least 
once daily and will be made available to all market participants at the 
same time; and (3) 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.
    Proposed NYSE Arca Equities Rule 8.600(d)(2)(C) provides that the 
Corporation will consider the suspension of trading in, or removal from 
listing of, a series of Managed Fund Shares under any of the following 
circumstances: (1) 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 
Management Fund Shares for 30 or more consecutive trading days; (2) 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; (3) if the Investment Company 
issuing the Managed Fund Shares has failed to file any filings required 
by the Commission or if the Corporation is aware that the Investment 
Company is not in compliance with the conditions of any exemptive order 
or no-action relief granted by the Commission to the Investment Company 
with respect to the series of Managed Fund Shares; or (4) if such other 
event shall occur or condition exists which, in the opinion of the 
Corporation, makes further dealings on the Corporation inadvisable.
    Proposed NYSE Arca Equities Rule 8.600(d)(2)(D) provides that, if 
the Portfolio Indicative Value of a series of Managed Fund Shares is 
not being disseminated as required, the Corporation 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 Corporation 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 Corporation 
pursuant to UTP, the Corporation will halt trading in that series as 
specified in NYSE Arca Equities Rule 7.34(a), as proposed to be 
amended. In addition, if the Exchange becomes aware that the NAV or the 
Disclosed Portfolio with respect to a series of Managed Fund Shares is 
not disseminated to all market participants at the same time, it will 
halt trading in such series until such time as the NAV or the Disclosed 
Portfolio is available to all market participants.
    Proposed NYSE Arca Equities Rule 8.600(d)(2)(E) provides that, upon 
termination of an Investment Company, the Corporation requires that 
Managed Fund Shares issued in connection with such entity be removed 
from Corporation listing. Proposed NYSE Arca Equities Rule 
8.600(d)(2)(F) provides that voting rights shall be as set forth in the 
applicable Investment Company prospectus. Proposed NYSE Arca Equities 
Rule 8.600(e) relates to the limitation of Corporation liability.
    Proposed Commentary .01 to new NYSE Arca Equities Rule 8.600 
provides that the Corporation will file separate proposals under 
section 19(b) of the Act before the listing and/or trading of Managed 
Fund Shares. Proposed Commentary .02 provides that transactions in 
Managed Fund Shares will occur during the trading hours specified in 
NYSE Arca Equities Rule 7.34(a), as proposed to be amended. Proposed 
Commentary .03 provides that the minimum price variation for quoting 
and entry of orders in Managed Fund Shares is $0.01. Proposed 
Commentary .04 provides that the Exchange will implement written 
surveillance procedures for Managed Fund Shares.
    Proposed Commentary .05 to new NYSE Arca Equities Rule 8.600, which 
is substantially similar to existing Commentary .01(i) to NYSE Arca 
Equities Rule 5.2(j)(3), provides that, for Managed Fund Shares based 
on an international or global portfolio, the statutory prospectus or 
the application for exemption from provisions of the Investment Company 
Act of 1940 (``1940 Act'') for the series of Managed Fund Shares must 
state that such series must 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 (``Securities Act''). Proposed Commentary .06 to 
new NYSE Arca Equities Rule 8.600, which is substantially similar to 
existing Commentary .01(h) to NYSE Arca Equities Rule 5.2(j)(3), sets 
forth certain obligations of ETP Holders \4\ with respect to Managed 
Fund Shares that receive an exemption from certain prospectus delivery 
requirements under section 24(d) of the 1940 Act.
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    \4\ An ``ETP Holder'' is a sole proprietorship, partnership, 
corporation, limited liability company, or other organization in 
good standing that has been issued an Equity Trading Permit or 
``ETP.'' An ETP Holder must be a registered broker or dealer 
pursuant to section 15 of the Act. See NYSE Arca Equities Rule 
1.1(m) and (n) (defining ETP and ETP Holder).
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Amendments to NYSE Arca Equities Rule 7.34
    The Exchange proposes to amend NYSE Arca Equities Rule 
7.34(a)(3)(A) to add Managed Fund Shares to the list of securities for 
which the Core Trading Session on the Exchange concludes at 4:15 p.m. 
Eastern Time or ``ET.'' In addition, the Exchange proposes to amend 
NYSE Arca Equities Rule 7.34(a)(4)(A) to include Managed Fund Shares 
under ``Derivative Securities Products'' in connection with trading 
halts for trading pursuant to UTP on the Exchange.
Amendments to Listing Fees
    The Exchange proposes to add Managed Fund Shares to the securities 
included under the term ``Derivative Securities Products,'' as defined 
in the NYSE Arca Equities Schedule of Fees and Charges for Exchange 
Services.
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

[[Page 11976]]

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 shares of an index-based exchange-traded 
fund (``Index ETF'') 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\ The Exchange states that the PowerShares Actively Managed 
Exchange-Traded Fund Trust (``Trust'') is registered under the 1940 
Act. On November 26, 2007 the Trust filed with the Commission a 
Registration Statement for the Funds on Form N-1A under the 
Securities Act and under the 1940 Act (File Nos. 333-147622 and 811-
22148) (``Registration Statement''). On November 16, 2007 the Trust 
filed with the Commission on Form 40-6C/A an Amended and Restated 
Application (``Application'') for an Amended Order under sections 
6(c) and 17(b) of the 1940 Act (File No. 812-13386-04). See 
Investment Company Act Release No. 28140 (February 1, 2008), 73 FR 
7328 (February 7, 2008) (File No. 812-13386) (providing notice of 
application for an exemptive order under section 6 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.
    Creation and Redemption 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.
    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, 
limited, circumstances.
    Managed Fund Shares may use one or more of the following three 
approaches to creation and redemption: (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.
    Portfolio Disclosure. One common feature of Index ETFs is 
disclosure of the contents of the Portfolio Deposit on a daily basis. 
Aside from providing the information required for daily creation and 
redemption, 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 the identities and quantities of the 
portfolio of securities and other assets (i.e., the Disclosed 
Portfolio) held by the applicable fund that will form the basis for the 
fund's calculation of NAV at the end of the business day.
    Portfolio Indicative Value.\6\ 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. The Portfolio 
Indicative Value will be based on the current value of the components 
of the Disclosed Portfolio and will be disseminated by the Exchange at 
least every 15 seconds during the Core Trading Session through the 
facilities of the Consolidated Tape Association (``CTA''). 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 to provide a close estimate of that value throughout the 
trading day.
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    \6\ The Portfolio Indicative Value is comparable to the Intraday 
Indicative Value for Index ETFs. This value of the estimated NAV of 
a share of an Index ETF is for investors, professionals, and persons 
wishing to create or redeem shares in Index ETFs.
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Description of the Funds and the Trust
    The Shares will be offered by the Trust, a business trust organized 
under the laws of the State of Delaware and registered with the 
Commission as an open-end management investment company.\7\ The Trust 
currently consists of the four Funds, each a separate, actively managed 
exchange-traded fund. The Funds will not purchase or sell securities in 
markets outside the United States.
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    \7 \ See supra note 5.
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    The Exchange represents that the Shares will conform to the initial 
and continued listing criteria under proposed NYSE Arca Equities Rule 
8.600.\8\ PowerShares Capital Management LLC is the investment adviser 
to the Funds and is registered as an investment adviser under the 
Investment Advisers Act of 1940 (the ``Advisers Act''). AER Advisors, 
Inc. (``AER'') is the subadviser to the PowerShares Active AlphaQ Fund 
and the PowerShares Active Alpha Multi-Cap Fund (the ``Initial AER 
Funds'') and is registered as an investment adviser under the Advisers 
Act. Invesco Institutional (N.A.) Inc. (``Invesco'') is the subadviser 
to the PowerShares Active Mega-Cap Portfolio and the PowerShares Active 
Low Duration Portfolio (the ``Initial Invesco Funds'') and is also 
registered as an investment

[[Page 11977]]

adviser under the Advisers Act.\9\ AIM Distributors, Inc. serves as the 
principal underwriter and distributor for each of the Funds.
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    \8\ The Exchange further represents that, for initial and/or 
continued listing, Managed Fund Shares must also be in compliance 
with Rule 10A-3 under the Act, as provided by NYSE Arca Equities 
Rule 5.3. See 17 CFR 240.10A-3.
    \9\ The Exchange states that the information provided herein is 
based on information included in the Application. While PowerShares 
Capital Management LLC will manage the Funds, the Funds' board of 
trustees will have overall responsibility for the Funds' operations. 
The Exchange represents that the composition of the board is, and 
will be, in compliance with the requirements of Section 10 of the 
1940 Act.
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    AER will employ its stock screening methodology in the management 
of the Initial AER Funds. In employing its methodology, AER will track 
and rate all U.S. stocks of companies with over a $400 million market 
capitalization and listed on a national securities exchange. It is 
anticipated by AER that less than 3% of all securities in the Master 
List (as defined in the Application) will be American Depositary 
Receipts (``ADRs'') and that ADRs will not represent more than 3% of 
any one Fund. Each Initial AER Fund's investment objective will be to 
provide long-term capital appreciation by investing, under normal 
conditions, at least 95% of its total assets in stocks represented in 
its appropriate universe as determined by AER. The balance of the 
Initial AER Fund's assets may be invested in cash and money market 
instruments. Each Initial AER Fund's benchmark index will be a broad-
based index relevant to its investment objective, strategy, and market 
capitalization. AER anticipates that the benchmark indexes for the 
Initial AER Funds will be as follows: (1) NASDAQ 100 Index for the 
PowerShares Active AlphaQ Fund; and (2) S&P 500 Index for the 
PowerShares Active Alpha Multi-Cap Fund.
    The PowerShares Active Mega-Cap Portfolio's investment objective, 
which is long-term growth of capital, seeks to invest, normally, at 
least 80% of its assets in a diversified portfolio of equity securities 
of mega-capitalization companies. The principal type of equity 
securities purchased by the Fund is common stock. The PowerShares 
Active Mega-Cap Portfolio may also invest in derivative instruments 
such as futures contracts and equity linked derivatives.
    The PowerShares Active Low Duration Portfolio's investment 
objective, which is to provide total return, seeks to exceed the total 
return of the Lehman Brothers 1-3 Year U.S. Treasury Index by 
investing, normally, at least 80% of its assets in a diversified 
portfolio of U.S. government and corporate debt securities. The 
PowerShares Active Low Duration Portfolio may invest in structured 
securitized debt securities, such as asset-backed securities and both 
residential and commercial mortgage-backed securities, and the Fund's 
investments may include investments in derivative instruments. 
Derivative instruments that the Fund may invest in include, but are not 
limited to, swaps, including interest rate, total return, and credit 
default swaps, put options, call options, and futures contracts and 
options on futures contracts. The Fund may also utilize other 
strategies such as dollar rolls and reverse repurchase agreements. The 
Fund may also invest up to 25% of its total assets in non-investment 
grade securities (junk bonds).
    The Creation Unit size for each of the Funds will be 50,000 Shares.
Availability of Information
    The Funds' Web site (http://www.powershares.com), which will be 
publicly available prior to the public offering of the Shares, will 
include a form of the prospectus for each Fund that may be downloaded. 
The Web site will include for each Fund additional quantitative 
information updated on a daily basis, including: (1) Daily trading 
volume, the prior business day's reported closing price, NAV and mid-
point of the bid/ask spread at the time of calculation of such NAV (the 
``Bid/Ask Price''),\10\ and a calculation of the premium and discount 
of the Bid/Ask Price against the NAV; and (2) 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. On each business day, 
before commencement of the Core Trading Session, each Fund will 
disclose on its Web site the Disclosed Portfolio that will form the 
basis for the Fund's calculation of NAV at the end of the business 
day.\11\
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    \10\ The Bid/Ask Price of a Fund is determined using the highest 
bid and the lowest offer on the Exchange as of the time of 
calculation of such Fund's NAV. The records relating to Bid/Ask 
Prices will be retained by the Funds and their service providers.
    \11\ Under accounting procedures followed by the Funds, trades 
made on the prior business day (``T'') will be booked and reflected 
in the NAV on the current business day (``T+1''). Accordingly, the 
Funds will be able to disclose at the beginning of the business day 
the portfolio that will form the basis for the NAV calculation at 
the end of the business day.
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    Investors interested in a particular Fund can also obtain the 
Trust's Statement of Additional Information (``SAI''), each Fund's 
Shareholder Reports, and its Form N-CSR and Form N-SAR, filed twice a 
year. The Trust's SAI and Shareholder Reports are available free upon 
request from the Trust, and those documents and the Form N-CSR and Form 
N-SAR may be viewed on-screen or downloaded from the Commission's Web 
site (http://www.sec.gov).
    Information regarding market price and volume is and will be 
continually available on a real-time basis throughout the day on 
brokers' computer screens and other electronic services. The previous 
day's closing price and trading volume information will be published 
daily in the financial section of newspapers. Quotation and last sale 
information for the Shares will be available via the facilities of the 
CTA. In addition, the Portfolio Indicative Value will be disseminated 
by the Exchange at least every 15 seconds during the Core Trading 
Session through the facilities of CTA. The NAV of each Fund will 
normally be determined as of the close of the regular trading session 
on the New York Stock Exchange LLC (ordinarily 4:00 p.m. ET) on each 
business day.

Trading Halts

    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares of a Fund.\12\ Trading in the Shares of the Funds 
will be halted if the circuit breaker parameters under NYSE Arca 
Equities Rule 7.12 are reached. Trading also may 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 a Fund; or 
(2) whether other unusual conditions or circumstances detrimental to 
the maintenance of a fair and orderly market are present. Trading in 
the Shares will be subject to proposed NYSE Arca Equities Rule 
8.600(d)(2)(D), which sets forth circumstances under which trading in 
the Shares of a Fund may be halted.
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    \12\ See Commentary .04 to NYSE Arca Equities Rule 7.12.
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Trading Rules

    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. The Shares will trade 
on the NYSE Arca Marketplace from 4 a.m. to 8 p.m. ET, in accordance 
with NYSE Arca Equities Rule 7.34 (Opening, Core, and Late Trading 
Sessions). The Exchange states that it has appropriate

[[Page 11978]]

rules to facilitate transactions in the Shares during all trading 
sessions.

Surveillance

    The Exchange intends to utilize its existing surveillance 
procedures applicable to derivative products (which will include 
Managed Fund Shares) to monitor trading in the Shares. The Exchange 
represents that these procedures are adequate to properly monitor 
Exchange trading of the Shares in all trading sessions and to deter and 
detect violations of Exchange rules. The Exchange's current trading 
surveillance focuses on detecting securities trading outside their 
normal patterns. When such situations are detected, surveillance 
analysis follows and, where appropriate, investigations are opened to 
review the behavior of all relevant parties for all relevant trading 
violations. The Exchange may obtain information via the Intermarket 
Surveillance Group (``ISG'') from other exchanges who are members or 
affiliate members of ISG.\13\ In addition, the Exchange also has a 
general policy prohibiting the distribution of material, non-public 
information by its employees.
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    \13\ A list of the current members and affiliate members of ISG 
can be found at http://www.isgportal.com.
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Information Bulletin

    Prior to the commencement of trading, the Exchange will inform its 
ETP Holders in an Information Bulletin (``Bulletin'') of the special 
characteristics and risks associated with trading the Shares. 
Specifically, the Bulletin will discuss the following: (1) The 
procedures for purchases and redemptions of Shares in Creation Unit 
aggregations (and that Shares are not individually redeemable); (2) 
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; \14\ (3) the risks involved in 
trading the Shares during the Opening and Late Trading Sessions when an 
updated Portfolio Indicative Value will not be calculated or publicly 
disseminated; (4) how information regarding the Portfolio Indicative 
Value is disseminated; (5) 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 (6) trading 
information.
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    \14\ NYSE Arca Equities Rule 9.2(a) provides that an ETP Holder, 
before recommending a transaction, must have reasonable grounds to 
believe that the recommendation is suitable for the customer based 
on any facts disclosed by the customer as to his other security 
holdings and as to his financial situation and needs. Further, the 
rule provides, with a limited exception, that prior to the execution 
of a transaction recommended to a non-institutional customer, the 
ETP Holder shall make reasonable efforts to obtain information 
concerning the customer's financial status, tax status, investment 
objectives, and any other information that the ETP Holder believes 
would be useful to make a recommendation.
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    In addition, the Bulletin will reference that the Fund is subject 
to various fees and expenses described in the Registration Statement 
and will discuss any exemptive, no-action, and interpretive relief 
granted by the Commission from any rules under the Act. The Bulletin 
will also disclose that the NAV for the Shares will be calculated after 
4 p.m. ET each trading day.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under section 6(b)(5) of the Act,\15\ which states 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. The Exchange believes that the proposed rule 
change will facilitate the listing and trading of additional types of 
exchange-traded products that will enhance competition among market 
participants, to the benefit of investors and the marketplace. In 
addition, the listing and trading criteria set forth in the proposal 
are intended to protect investors and the public interest.
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    \15\ 15 U.S.C. 78f(b)(5).
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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.

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

    The Exchange states that it has neither solicited nor received 
comments on 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 the Exchange 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-NYSEArca-2008-25 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-NYSEArca-2008-25. 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

[[Page 11979]]

submissions should refer to File Number SR-NYSEArca-2008-25 and should 
be submitted on or before March 26, 2008.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
Florence E. Harmon,
Deputy Secretary.
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    \16\ 17 CFR 200.30-3(a)(12).
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 [FR Doc. E8-4227 Filed 3-4-08; 8:45 am]

BILLING CODE 8011-01-P
