
[Federal Register Volume 76, Number 190 (Friday, September 30, 2011)]
[Notices]
[Pages 60957-60958]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-25194]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65400; File No. SR-NYSEArca-2011-53]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting 
Approval of a Proposed Rule Change To Reflect a Change to the Benchmark 
Index Applicable to the Russell Equity ETF

September 26, 2011.

I. Introduction

    On August 3, 2011, 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 
reflect a change to the benchmark index applicable to the Russell 
Equity ETF (``Fund,'' formerly known as the ``One Fund''). The proposed 
rule change was published for comment in the Federal Register on August 
24, 2011.\3\ The Commission received no comments on the proposal. This 
order grants approval of the proposed rule change.
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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. 65161 (August 18, 
2011), 76 FR 53004 (``Notice'').
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II. Description of the Proposed Rule Change

    The Commission previously approved the listing and trading on the 
Exchange of shares (``Shares'') of ``One Fund,'' a series of U.S. One 
Trust, under NYSE Arca Equities Rule 8.600, which governs the listing 
and trading of Managed Fund Shares.\4\ On February 23, 2011, Frank 
Russell Company (``Russell'') acquired U.S. One, Inc., the previous 
investment adviser for the Fund, and the Fund's investment adviser 
became Russell Investment Management Company (``Adviser'').\5\ In 
addition, as of April 15, 2011, the name of ``One Fund'' was changed to 
Russell Equity ETF, and the name of U.S. One Trust was changed to 
Russell Exchange Traded Funds Trust (``Trust''). Further, on or about 
May 2, 2011, the custodian, transfer agent, and administrator for the 
Fund changed from The Bank of New York to State Street Bank and Trust 
Company. These administrative changes were implemented as a result of 
the acquisition by Russell of U.S. One, Inc. The Exchange states that 
the shareholders of the Fund were notified of the changes to the Fund's 
name, the Trust's name, the Fund's investment adviser, and the 
custodian, transfer agent, and administrator in the updated Fund 
prospectus, dated April 29, 2011, included in the Fund's annual 
prospectus mailing to shareholders.\6\ In this proposed rule change, 
the Exchange proposes to reflect a change to the benchmark index 
applicable to the Fund.\7\
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    \4\ See Securities Exchange Act Release No. 61843 (April 5, 
2010), 75 FR 18558 (April 12, 2010) (SR-NYSEArca-2010-12) (``One 
Fund Order''). See also Securities Exchange Act Release No. 61689 
(March 11, 2010), 75 FR 13181 (March 18, 2010) (SR-NYSEArca-2010-12) 
(``One Fund Notice,'' and together with the One Fund Order, 
collectively, the ``One Fund Release'').
    \5\ The Exchange represents that the Adviser is affiliated with 
multiple broker-dealers and has implemented a ``fire wall'' with 
respect to such broker-dealers regarding access to information 
concerning the composition and/or changes to the Fund's portfolio, 
and will continue to be in compliance with Commentary .06 to NYSE 
Arca Equities Rule 8.600. In the event (a) the Adviser or any sub-
adviser becomes newly affiliated with a broker-dealer, or (b) any 
new adviser or sub-adviser becomes affiliated with a broker-dealer, 
it will implement a fire wall with respect to such broker-dealer 
regarding access to information concerning the composition and/or 
changes to the portfolio, and will be subject to procedures designed 
to prevent the use and dissemination of material non-public 
information regarding such portfolio.
    \6\ See Post-Effective Amendment No. 5 to Form N-1A for the 
Trust, dated April 29, 2011 (File Nos. 333-160877; 811-22320) 
(``Registration Statement''). In addition, the Commission has issued 
an order granting certain exemptive relief to the Trust under the 
Investment Company Act of 1940 (``1940 Act''). See Investment 
Company Act Release No. 29164 (March 1, 2010) (File No. 812-13815 
and 812-13658-01) (``Exemptive Order'').
    \7\ The Adviser represents that, for one year following 
implementation of the change to the benchmark index, materials 
issued by the Fund relating to Fund performance, including materials 
posted on the Fund's Web site (http://www.russelletfs.com), will 
reference both the current benchmark and the new benchmark index, in 
accordance with Item 27(b)(7) of Form N-1A under the 1940 Act. The 
Adviser represents that the benchmark index change will be 
referenced on Russell's Web site, and that the quarterly fact sheet 
for the Fund, available on the Fund's Web site, will reference the 
current benchmark and the new benchmark index for one year.
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    As a result of the acquisition of U.S. One, Inc. by Russell, the 
Fund seeks to change its underlying benchmark to the Russell Developed 
Large Cap Index (``Index'') from the Fund's current benchmark, the S&P 
500 Index.\8\ The Index offers investors access to the large-cap 
segment of the developed equity universe representing approximately 
75.4% of the global equity market. The Index includes the largest 
securities in the Russell Developed Index. As of May 31, 2010, the 
Index included 2,372 securities in 25 developed countries, with a 
market capitalization ranging from $238 billion to $1.3 billion; the 
weighted average market capitalization of Index components was $54.7 
billion; and the largest three Index securities and associated Index 
weights were Exxon Mobil (1.58%); Apple Inc. (1.17%); and Chevron Corp. 
(0.79%). The current benchmark, the S&P 500 Index, includes 500 leading 
companies in leading industries of the U.S. economy, capturing 75% 
coverage of U.S. equities. It focuses on large capitalization 
securities and represents approximately 75% of the U.S. market 
capitalization. A committee determines the securities included based on 
a set of published guidelines. The Index includes the Russell 
1000[supreg], which represents 90% of U.S. market capitalization. It 
also includes an additional 1,372 securities which, as of May 31, 2010, 
were listed in other developed countries. The Adviser represents that 
the investment objective of the Fund has not changed, the Index more 
accurately represents the investment strategy of the Fund, and the 
change to the Fund's benchmark will not impact the investment objective 
or

[[Page 60958]]

the principal investment strategies for the Fund.
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    \8\ The change to the Fund's benchmark Index will be effective 
upon filing with the Commission of an amendment to the Trust's 
Registration Statement.
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    The Adviser has represented that it believes the Index is an 
appropriate broad-based benchmark index for the Fund and the Fund's 
investment objective. As represented in the One Fund Release, the 
Fund's investment objective is to seek long-term capital appreciation 
by investing at least 80% of its total assets in exchange-traded funds 
(``Underlying ETFs'') that track various securities indices comprised 
of large, mid, and small capitalization companies in the United States, 
Europe, and Asia, as well as other developed and emerging markets. As 
stated in the One Fund Release, the Adviser intends to hold Underlying 
ETFs that hold equity securities of large, mid, and small 
capitalization companies in the United States, as well as other 
developed countries and developing countries, and that give the Fund 
exposure to most major developed and developing markets around the 
world.\9\ Thus, whereas the S&P 500 Index mostly reflects U.S.-based 
companies, the Index includes a broader range of issuers from both the 
domestic and international markets, and such range is consistent with, 
and should better reflect, the Fund's investment objective. The 
Exchange further states that, except for the changes noted above, all 
other representations made in the One Fund Release remain unchanged.
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    \9\ The Adviser employs an asset allocation strategy focused on 
increasing shareholder return and reducing risk through exposure to 
a variety of domestic and foreign market segments. The Adviser's 
asset allocation strategy pre-determines a target mix of investment 
types for the Fund to achieve its investment objective and then 
implements the strategy by selecting securities that best represent 
each of the desired investment types. The strategy also calls for 
periodic review of the Fund's holdings as markets rise and fall to 
ensure that the portfolio adheres to the target mix and indicates 
purchases and sales necessary to return to the target mix. The 
Adviser selects Underlying ETFs based on their ability to accurately 
represent the underlying stock market to which the Adviser seeks 
exposure for the Fund, and seeks to construct a portfolio that will 
outperform its benchmark. Additionally, the Adviser seeks to 
maintain a low after-tax cost structure for the Fund and, therefore, 
also evaluates ETFs based on their underlying costs. The Adviser 
employs a buy and hold strategy, meaning that it buys and holds 
securities for a long period of time, with minimal portfolio 
turnover. The Fund, using a buy and hold strategy, seeks to achieve 
its investment objective through investment in Underlying ETFs that 
track certain securities indices. While the Fund intends to 
primarily invest in Underlying ETFs that hold equity securities, the 
Adviser may also invest in Underlying ETFs that may hold U.S. and 
foreign government debt and investment grade corporate bonds. 
According to the Registration Statement, the Fund does not invest in 
derivatives. See One Fund Release, supra note 4.
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III. 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 and the rules and regulations thereunder applicable to a national 
securities exchange.\10\ In particular, the Commission finds that the 
proposal is consistent with Section 6(b)(5) of the Act,\11\ 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 foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities, 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.
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    \10\ 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).
    \11\ 17 U.S.C. 78f(b)(5).
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    The Commission notes that the Fund's benchmark Index will continue 
to be a broad-based index of large capitalization companies. The Index 
represents approximately 75.4% of the global equity market and includes 
the largest securities in the Russell Developed Large Cap Index. The 
Fund's investment objective continues to seek long-term capital 
appreciation by investing at least 80% of its total assets in 
Underlying ETFs that are listed and traded on a national securities 
exchange and that track various securities indices comprised of large, 
mid, and small capitalization companies in the United States, Europe, 
and Asia, as well as other developed and emerging markets. The Index 
includes a broad range of issuers from both the domestic and 
international markets, and the Commission believes that such range is 
consistent with the Fund's existing investment objective. In addition, 
the Adviser represents that the investment objective of the Fund has 
not changed, and the change to the Fund's benchmark will not impact the 
investment objective or the principal investment strategies for the 
Fund. Further, the Adviser has represented that the change to the 
Fund's benchmark will not impact shareholders of the Fund. Importantly, 
the Exchange states that, except for the changes noted above, all other 
representations made in the One Fund Release remain unchanged and that 
the Fund will continue to comply with all initial and continued listing 
requirements under NYSE Arca Equities Rule 8.600. The Commission notes 
that the value of the new benchmark Index will continue to be 
calculated and disseminated in a manner consistent with the 
representations in the One Fund Release relating to the previous 
benchmark index.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\12\ that the proposed rule change (SR-NYSEArca-2010-53) be, and it 
hereby is, approved.

    \12\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-25194 Filed 9-29-11; 8:45 am]
BILLING CODE 8011-01-P


