
[Federal Register Volume 76, Number 235 (Wednesday, December 7, 2011)]
[Notices]
[Pages 76457-76463]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-31337]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-65862; File No. SR-NYSEArca-2011-86]


 Self-Regulatory Organizations; NYSE Arca Inc.; Notice of Filing 
of Proposed Rule Change To List and Trade the Accuvest Global 
Opportunities ETF Under NYSE Arca Equities Rule 8.600

December 1, 2011.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that, on November 16, 2011, NYSE Arca, Inc. 
(``Exchange'' or ``NYSE Arca'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been 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 list and trade the following under NYSE 
Arca Equities Rule 8.600 (``Managed Fund Shares''): The Accuvest Global 
Opportunities ETF. The text of the proposed rule change is available at 
the Exchange, the Commission's Public Reference Room, and 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 self-regulatory organization 
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 those 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 parts 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 list and trade the following Managed Fund

[[Page 76458]]

Shares \3\ (``Shares'') under NYSE Arca Equities Rule 8.600: The 
Accuvest Global Opportunities ETF (``Fund'').\4\ The Shares will be 
offered by AdvisorShares Trust (``Trust''), a statutory trust organized 
under the laws of the State of Delaware and registered with the 
Commission as an open-end management investment company.\5\ The 
investment adviser to the Fund is AdvisorShares Investments, LLC 
(``Adviser''). Accuvest Global Advisers is the Fund's sub-adviser 
(``Sub-Adviser'') and provides day-to-day portfolio management of the 
Fund. Foreside Fund Services, LLC (``Distributor'') is the principal 
underwriter and distributor of the Fund's Shares.
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    \3\ A Managed Fund Share is a security that represents an 
interest in an investment company registered under the Investment 
Company Act of 1940 (15 U.S.C. 80a) (``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, 
an open-end investment company that issues Investment Company Units, 
listed and traded on the Exchange under NYSE Arca Equities Rule 
5.2(j)(3), 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.
    \4\ The Commission approved NYSE Arca Equities Rule 8.600 and 
the listing and trading of certain funds of the PowerShares Actively 
Managed Exchange-Traded Funds Trust on the Exchange pursuant to Rule 
8.600 in Securities Exchange Act Release No. 57619 (April 4, 2008) 
73 FR 19544 (April 10, 2008) (SR-NYSEArca-2008-25). The Commission 
also has approved listing and trading on the Exchange of a number of 
actively managed funds under Rule 8.600. See, e.g., Securities 
Exchange Act Release Nos. 57801 (May 8, 2008), 73 FR 27878 (May 14, 
2008) (SR-NYSEArca-2008-31) (order approving Exchange listing and 
trading of twelve actively-managed funds of the WisdomTree Trust); 
60460 (August 7, 2009), 74 FR 41468 (August 17, 2009) (SR-NYSEArca-
2009-55) (order approving listing of Dent Tactical ETF); 63076 
(October 12, 2010), 75 FR 63874 (October 18, 2010) (SR-NYSEArca-
2010-79) (order approving Exchange listing and trading of Cambria 
Global Tactical ETF); 63802 (January 31, 2011), 76 FR 6503 (February 
4, 2011) (SR-NYSEArca-2010-118) (order approving Exchange listing 
and trading of the SiM Dynamic Allocation Diversified Income ETF and 
SiM Dynamic Allocation Growth Income ETF).
    \5\ The Trust is registered under the 1940 Act. On May 9, 2011, 
the Trust filed with the Commission Post-Effective Amendment No. 25 
to Form N-1A under the Securities Act of 1933 (15 U.S.C. 77a), and 
under the 1940 Act relating to the Fund (File Nos. 333-157876 and 
811-22110) (``Registration Statement''). The description of the 
operation of the Trust and the Fund herein is based, in part, on the 
Registration Statement. In addition, the Commission has issued an 
order granting certain exemptive relief to the Trust under the1940 
Act. See Investment Company Act Release No. 29291 (May 28, 2010) 
(File No. 812-13677) (``Exemptive Order'').
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    Commentary .06 to Rule 8.600 provides that, if the investment 
adviser to the investment company issuing Managed Fund Shares is 
affiliated with a broker-dealer, such investment adviser shall erect a 
``fire wall'' between the investment adviser and the broker-dealer with 
respect to access to information concerning the composition and/or 
changes to such investment company portfolio.\6\ In addition, 
Commentary .06 further requires that personnel who make decisions on 
the open-end fund's portfolio composition must be subject to procedures 
designed to prevent the use and dissemination of material nonpublic 
information regarding the open-end fund's portfolio. Commentary .06 to 
Rule 8.600 is similar to Commentary .03(a)(i) and (iii) to NYSE Arca 
Equities Rule 5.2(j)(3); however, Commentary .06 in connection with the 
establishment of a ``fire wall'' between the investment adviser and the 
broker-dealer reflects the applicable open-end fund's portfolio, not an 
underlying benchmark index, as is the case with index-based funds. 
Neither the Adviser nor the Sub-Adviser is affiliated with a broker-
dealer. In the event (a) The Adviser or the 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.
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    \6\ An investment adviser to an open-end fund is required to be 
registered under the Investment Advisers Act of 1940 (``Advisers 
Act''). As a result, the Adviser and Sub-Adviser and their related 
personnel are subject to the provisions of Rule 204A-1 under the 
Advisers Act relating to codes of ethics. This Rule requires 
investment advisers to adopt a code of ethics that reflects the 
fiduciary nature of the relationship to clients as well as 
compliance with other applicable securities laws. Accordingly, 
procedures designed to prevent the communication and misuse of non-
public information by an investment adviser must be consistent with 
Rule 204A-1 under the Advisers Act. In addition, Rule 206(4)-7 under 
the Advisers Act makes it unlawful for an investment adviser to 
provide investment advice to clients unless such investment adviser 
has (i) Adopted and implemented written policies and procedures 
reasonably designed to prevent violation, by the investment adviser 
and its supervised persons, of the Advisers Act and the Commission 
rules adopted thereunder; (ii) implemented, at a minimum, an annual 
review regarding the adequacy of the policies and procedures 
established pursuant to subparagraph (i) Above and the effectiveness 
of their implementation; and (iii) designated an individual (who is 
a supervised person) responsible for administering the policies and 
procedures adopted under subparagraph (i) above.
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Description of the Fund
    According to the Registration Statement, the Fund will seek long-
term capital appreciation in excess of global equity benchmarks such as 
the MSCI All Country World Index. The Fund will be a ``fund-of-funds'' 
that seeks to achieve its investment objective by investing primarily 
in other U.S.-listed exchange-traded products (``Underlying ETPs'').\7\ 
The Sub-Adviser will seek to achieve the Fund's investment objective by 
investing in Underlying ETPs that provide diversified exposure to 
select economies around the world. The Sub-Adviser will rank countries 
on a monthly basis using its proprietary country ranking model in order 
to determine their relative attractiveness. The Sub-Adviser then will 
endeavor to invest in Underlying ETPs that individually or in 
combination correspond generally to the price and yield performance of 
the specific countries (or regions) identified as most attractive by 
the model. The Fund's portfolio will be invested only in countries with 
the highest ranking as identified by the Sub-Adviser's proprietary 
country ranking process.
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    \7\ Underlying ETPs include Investment Company Units (as 
described in NYSE Arca Equities Rule 5.2(j)(3)); Portfolio 
Depositary Receipts (as described in NYSE Arca Equities Rule 8.100); 
Trust Issued Receipts (as described in NYSE Arca Equities Rule 
8.200); Commodity-Based Trust Shares (as described in NYSE Arca 
Equities Rule 8.201); Currency Trust Shares (as described in NYSE 
Arca Equities Rule 8.202); Commodity Index Trust Shares (as 
described in NYSE Arca Equities Rule 8.203); Trust Units (as 
described in NYSE Arca Equities Rule 8.500); Managed Fund Shares (as 
described in NYSE Arca Equities Rule 8.600), and closed-end funds. 
The Underlying ETPs all will be listed and traded in the U.S. on 
registered exchanges. The Underlying ETPs in which the Fund may 
invest will primarily be index-based exchange-traded funds that hold 
substantially all of their assets in securities representing a 
specific index.
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    The Fund intends to invest primarily in the securities of 
Underlying ETPs consistent with the requirements of Section 12(d)(1) of 
the 1940 Act, or any rule, regulation or order of the Commission or 
interpretation thereof. The Fund will only make such investments in 
conformity with the requirements of Section 817 of the Internal Revenue 
Code of 1986, as amended (``Code'').\8\
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    \8\ 26 CFR 1.817-5.
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    The Fund, through its investment in Underlying ETPs, may invest in 
equity securities, which represent ownership interests in a company or 
partnership and consist of common stocks, preferred stocks, warrants to 
acquire common stock, securities convertible into common stock, 
investments in master limited partnerships and American Depositary 
Receipts (``ADRs''), as well as Global Depositary Receipts (``GDRs'', 
together with ADRs, ``Depositary Receipts'').\9\ The Fund, through its

[[Page 76459]]

investment in Underlying ETPs, may invest in closed-end funds, pooled 
investment vehicles that are registered under the 1940 Act and whose 
shares are listed and traded on U.S. national securities exchanges. The 
Fund, through its investment in Underlying ETPs, may invest in shares 
of real estate investment trusts (``REITs''), which are pooled 
investment vehicles that invest primarily in real estate or real estate 
related loans.
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    \9\ ADRs and GDRs are certificates evidencing ownership of 
shares of a foreign issuer. Depositary Receipts may be sponsored or 
unsponsored. These certificates are issued by depositary banks and 
generally trade on an established market in the United States or 
elsewhere. The underlying shares are held in trust by a custodian 
bank or similar financial institution in the issuer's home country. 
The depositary bank may not have physical custody of the underlying 
securities at all times and may charge fees for various services, 
including forwarding dividends and interest and corporate actions.
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    The Sub-Adviser has developed its country ranking model around the 
premise that in the long run, country-specific effects are the most 
important drivers of global equity returns.
Investment Process and Portfolio Construction
    According to the Registration Statement, through its proprietary 
country ranking model, the Sub-Adviser ranks countries on a monthly 
basis in order to determine their relative merit.
    The Sub-Adviser will use a four step process to create its 
portfolio allocations:
    1. Qualify Countries: In order to determine which countries are to 
be included in the country ranking model, the Sub-Adviser will apply 
two consistent criteria. All qualified countries (a) must be part of 
the MSCI All Country World Index and (b) have a liquid Underlying ETP 
that tracks the performance of its equity market.
    2. Analyze Factor Data: The Sub-Adviser will collect and analyze 
monthly factor data on every qualified country in the model. Currently, 
the Sub-Adviser uses nearly 40 factors that are classified within 
fundamental (e.g., short-term earnings growth), momentum (e.g., 3 month 
local price momentum), risk (e.g., change in 30-day standard 
deviation), and valuation (e.g., earnings growth) factor groups.
    3. Rank Countries: Each month the Sub-Adviser will use the weighted 
individual factor scores for each country in the model to assign each 
country a relative attractiveness score. This monthly score will be 
used to rank countries from most attractive to least attractive.
    4. Create Portfolio: The Sub-Adviser will create the portfolio 
based on the underlying attractiveness score of each country in the 
model. The most attractive 5-6 countries will receive allocations in 
the portfolio, and the Sub-Adviser will purchase single country 
Underlying ETPs that represent investments in those countries' equity 
markets. No single country Underlying ETP may receive more than a 25% 
allocation at purchase price.
    The Underlying ETPs in which the Fund will invest will primarily 
hold substantially all of their assets in securities representing a 
country (or region) specific index.
    The Underlying ETPs may invest in complex securities such as equity 
options, index options, repurchase agreements, foreign currency 
contracts, swaps, and futures contracts.
Other Investments
    To respond to adverse market, economic, political or other 
conditions,\10\ the Fund may invest 100% of its total assets, without 
limitation, in high-quality short-term debt securities and money market 
instruments. The Fund may be invested in these instruments for extended 
periods, depending on the Sub-Adviser's assessment of market 
conditions. These short-term debt securities and money market 
instruments include shares of other mutual funds, commercial paper, 
certificates of deposit, bankers' acceptances, U.S. Government 
securities,\11\ repurchase agreements \12\ and bonds that are BBB or 
higher. The Fund may also invest a substantial portion of its assets in 
such instruments at any time to maintain liquidity or pending selection 
of investments in accordance with its policies.
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    \10\ Adverse market conditions would include large downturns in 
the broad market value of two or more times current average 
volatility, where the Sub-Adviser views such downturns as likely to 
continue for an extended period of time. Adverse economic conditions 
would include significant negative results in factors deemed 
critical at the time by the Sub-Adviser, including significant 
negative results regarding unemployment, Gross Domestic Product, 
consumer spending or housing numbers. Adverse political conditions 
would include events such as government overthrows or instability, 
where the Sub-Adviser expects that such events may potentially 
create a negative market or economic condition for an extended 
period of time.
    \11\ Securities issued or guaranteed by the U.S. government or 
its agencies or instrumentalities include U.S. Treasury securities, 
which are backed by the full faith and credit of the U.S. Treasury 
and which differ only in their interest rates, maturities, and times 
of issuance.
    \12\ The Fund may enter into repurchase agreements with 
financial institutions, which may be deemed to be loans. The Fund 
follows certain procedures designed to minimize the risks inherent 
in such agreements. These procedures include effecting repurchase 
transactions only with large, well-capitalized and well-established 
financial institutions whose condition will be continually monitored 
by the Sub-Adviser. In addition, the value of the collateral 
underlying the repurchase agreement will always be at least equal to 
the repurchase price, including any accrued interest earned on the 
repurchase agreement. In the event of a default or bankruptcy by a 
selling financial institution, the Fund will seek to liquidate such 
collateral. In addition, the Fund may enter into reverse repurchase 
agreements without limit as part of the Fund's investment strategy. 
Reverse repurchase agreements involve sales by the Fund of portfolio 
assets concurrently with an agreement by the Fund to repurchase the 
same assets at a later date at a fixed price.
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    Under normal market conditions, while the Fund will primarily 
invest in Underlying ETPs, the Fund may, to a limited extent, invest 
directly in other investments, as described below.
    The Fund, or the Underlying ETPs in which it invests, may invest in 
U.S. government securities.
    The Fund may invest in exchange-traded notes (``ETNs''). ETNs are 
debt obligations of investment banks which are traded on exchanges and 
the returns of which are linked to the performance of market indexes.
    The Fund, or the Underlying ETPs in which it invests, may invest in 
U.S. Treasury zero-coupon bonds. These securities are U.S. Treasury 
bonds which have been stripped of their unmatured interest coupons, the 
coupons themselves, and receipts or certificates representing interests 
in such stripped debt obligations and coupons. Interest is not paid in 
cash during the term of these securities, but is accrued and paid at 
maturity.
    Diversification. The Fund may not (i) With respect to 75% of its 
total assets, purchase securities of any issuer (except securities 
issued or guaranteed by the U.S. Government, its agencies or 
instrumentalities or shares of investment companies) if, as a result, 
more than 5% of its total assets would be invested in the securities of 
such issuer; or (ii) acquire more than 10% of the outstanding voting 
securities of any one issuer. For purposes of this policy, the issuer 
of the underlying security will be deemed to be the issuer of any 
respective Depositary Receipt.\13\
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    \13\ The diversification standard is set forth in Section 
5(b)(1) of the 1940 Act.
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    Concentration. The Fund may not invest 25% or more of its total 
assets in the securities of one or more issuers conducting their 
principal business activities in the same industry or group of 
industries. This limitation does not apply to investments in securities 
issued or guaranteed by the U.S. Government, its agencies or 
instrumentalities, or shares of investment companies. The Fund will not 
invest 25% or more of its total assets in any investment company that 
so concentrates. For purposes of this policy, the issuer of the 
underlying

[[Page 76460]]

security will be deemed to be the issuer of any respective Depositary 
Receipt.\14\
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    \14\ See Form N-1A, Item 9. The Commission has taken the 
position that a fund is concentrated if it invests more than 25% of 
the value of its total assets in any one industry. See, e.g., 
Investment Company Act Release No. 9011 (October 30, 1975), 40 FR 
54241 (November 21, 1975).
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    The Fund will seek to qualify for treatment as a regulated 
investment company (``RIC'') under Subchapter M of the Code.\15\
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    \15\ 26 U.S.C. 851. One of several requirements for RIC 
qualification is that the Fund must receive at least 90% of the 
Fund's gross income each year from dividends, interest, payments 
with respect to securities loans, gains from the sale or other 
disposition of stock, securities or foreign currencies, or other 
income derived with respect to the Fund's investments in stock, 
securities, foreign currencies and net income from an interest in a 
qualified publicly traded partnership (``90% Test''). A second 
requirement for qualification as a RIC is that the Fund must 
diversify its holdings so that, at the end of each fiscal quarter of 
the Fund's taxable year: (a) At least 50% of the market value of the 
Fund's total assets is represented by cash and cash items, U.S. 
Government securities, securities of other RICs, and other 
securities, with these other securities limited, in respect to any 
one issuer, to an amount not greater than 5% of the value of the 
Fund's total assets or 10% of the outstanding voting securities of 
such issuer; and (b) not more than 25% of the value of its total 
assets are invested in the securities (other than U.S. Government 
securities or securities of other RICs) of any one issuer or two or 
more issuers which the Fund controls and which are engaged in the 
same, similar, or related trades or businesses, or the securities of 
one or more qualified publicly traded partnership (``Asset Test'').
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    The Fund will not purchase illiquid securities, including Rule 144A 
securities, and loan participation interests.\16\ Further, in 
accordance with the Exemptive Order, the Fund will not invest in 
options, futures or swaps. The Fund's investments will be consistent 
with the Fund's investment objective and will not be used to enhance 
leverage.
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    \16\ A fund's portfolio security is illiquid if it cannot be 
disposed of in the ordinary course of business within seven days at 
approximately the value ascribed to it by the fund. See Investment 
Company Act Release No. 14983 (March 12, 1986), 51 FR 9773 (March 
21, 1986) (adopting amendments to Rule 2a-7 under the 1940 Act); 
Investment Company Act Release No. 17452 (April 23, 1990), 55 FR 
17933 (April 30, 1990) (adopting Rule 144A under the Securities Act 
of 1933).
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    Except for Underlying ETPs that may hold non-U.S. issues, the Fund 
will not otherwise invest in non-U.S. issues.
Net Asset Value (``NAV'')
    The Fund will calculate NAV by: (i) Taking the current market value 
of its total assets; (ii) subtracting any liabilities; and (iii) 
dividing that amount by the total number of Shares owned by 
shareholders. The Fund will calculate NAV once each business day as of 
the regularly scheduled close of trading on the New York Stock Exchange 
(``NYSE'') (normally, 4 p.m., Eastern Time).
    In calculating NAV, the Fund generally will value investment 
portfolios at market price. If market prices are unavailable or the 
Adviser believes that they are unreliable, or when the value of a 
security has been materially affected by events occurring after the 
relevant market closes, the Fund will price those securities at fair 
value as determined in good faith using methods approved by the Fund's 
Board of Trustees.
Creations and Redemptions
    Creations and redemptions of Shares will occur in large specified 
blocks of Shares, referred to as ``Creation Units.'' According to the 
Registration Statement, the Shares of the Fund will be ``created'' at 
their NAV by authorized participants only in block-size Creation Units 
of 25,000 Shares or more. An authorized participant enters into an 
agreement (``Participant Agreement'') with the Fund's Distributor or a 
Depository Trust Company participant that has executed a Participant 
Agreement with the Distributor, and deposits into the Fund a portfolio 
of securities closely approximating the holdings of the Fund and a 
specified amount of cash, together totaling the NAV of the Creation 
Unit(s), in exchange for 25,000 Shares of the Fund (or multiples 
thereof). Similarly, Shares can only be redeemed in Creation Units, 
generally 25,000 Shares or more, principally in-kind for a portfolio of 
securities held by the Fund and a specified amount of cash together 
totaling the NAV of the Creation Unit(s). Shares will not be redeemable 
from the Fund except when aggregated in Creation Units. The prices at 
which creations and redemptions occur will be based on the next 
calculation of NAV after an order is received in a form prescribed in 
the Participant Agreement.
    The Shares will conform to the initial and continued listing 
criteria under NYSE Arca Equities Rule 8.600. The Exchange represents 
that, for initial and/or continued listing, the Fund will be in 
compliance with Rule 10A-3 under the Exchange Act,\17\ as provided by 
NYSE Arca Equities Rule 5.3. A minimum of 100,000 Shares will be 
outstanding at the commencement of trading on the Exchange. The 
Exchange will obtain a representation from the issuer of the Shares 
that the NAV per Share will be calculated daily and that the NAV and 
the Disclosed Portfolio will be made available to all market 
participants at the same time.
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    \17\ 17 CFR 240.10A-3.
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Availability of Information
    The Fund's Web site (www.advisorshares.com), which will be publicly 
available prior to the public offering of Shares, will include a form 
of the prospectus for the Fund that may be downloaded. The Fund's Web 
site will include additional quantitative information updated on a 
daily basis, including, for the Fund, (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 (``Bid/Ask 
Price''),\18\ 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 trading in Shares in the Core Trading Session on the Exchange, the 
Fund will disclose on its Web site the Disclosed Portfolio as defined 
in NYSE Arca Equities Rule 8.600(c)(2) that will form the basis for the 
Fund's calculation of NAV at the end of the business day.\19\
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    \18\ The Bid/Ask Price of the Fund will be determined using the 
midpoint of the highest bid and the lowest offer on the Exchange as 
of the time of calculation of the Fund's NAV. The records relating 
to Bid/Ask Prices will be retained by the Fund and its service 
providers.
    \19\ Under accounting procedures followed by the Fund, trades 
made on the prior business day (``T'') will be booked and reflected 
in NAV on the current business day (``T+1''). Accordingly, the Fund 
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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    On a daily basis, the Adviser will disclose on the Fund's Web site 
for each portfolio security or other financial instrument of the Fund 
the following information: Ticker symbol (if applicable), name of 
security or financial instrument, number of shares or dollar value of 
financial instruments held in the portfolio, and percentage weighting 
of the security or financial instrument in the portfolio. The Web site 
information will be publicly available at no charge.
    In addition, a basket composition file, which includes the security 
names and share quantities required to be delivered in exchange for 
Fund Shares, together with estimates and actual cash components, will 
be publicly disseminated daily prior to the opening of the NYSE via the 
National Securities Clearing Corporation. The basket represents one 
Creation Unit of the Fund.
    Investors can also obtain the Trust's Statement of Additional 
Information

[[Page 76461]]

(``SAI''), the 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 at www.sec.gov. Information regarding market 
price and trading volume of the Shares is and will be continually 
available on a real-time basis throughout the day on brokers' computer 
screens and other electronic services. Information regarding the 
previous day's closing price and trading volume information for the 
Shares will be published daily in the financial section of newspapers. 
Quotation and last sale information for the Shares will be available 
via the Consolidated Tape Association (``CTA'') high-speed line, and, 
for the Underlying ETPs, will be available from the national securities 
exchanges on which they are listed. In addition, the Portfolio 
Indicative Value, as defined in NYSE Arca Equities Rule 8.600 (c)(3), 
will be widely disseminated by one or more major market data vendors at 
least every 15 seconds during the Core Trading Session.\20\ The 
dissemination of the Portfolio Indicative Value, together with the 
Disclosed Portfolio, will allow investors to determine the value of the 
underlying portfolio of the Fund on a daily basis and will provide a 
close estimate of that value throughout the trading day.
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    \20\ Currently, it is the Exchange's understanding that several 
major market data vendors display and/or make widely available 
Portfolio Indicative Values published on CTA or other data feeds.
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    Additional information regarding the Trust and the Shares, 
including investment strategies, risks, creation and redemption 
procedures, fees, portfolio holdings disclosure policies, distributions 
and taxes is included in the Registration Statement. All terms relating 
to the Fund that are referred to, but not defined in, this proposed 
rule change are defined in the Registration Statement.
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 the Fund.\21\ Trading in Shares of the Fund 
will be halted if the circuit breaker parameters in NYSE Arca Equities 
Rule 7.12 have been 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 and/or the 
financial instruments comprising the Disclosed Portfolio of the 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 NYSE Arca Equities Rule 8.600(d)(2)(D), 
which sets forth circumstances under which Shares of the Fund may be 
halted.
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    \21\ See NYSE Arca Equities Rule 7.12, Commentary .04.
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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. Shares will trade on 
the NYSE Arca Marketplace from 4 a.m. to 8 p.m. Eastern Time in 
accordance with NYSE Arca Equities Rule 7.34 (Opening, Core, and Late 
Trading Sessions). The Exchange has appropriate rules to facilitate 
transactions in the Shares during all trading sessions. As provided in 
NYSE Arca Equities Rule 7.6, Commentary .03, the minimum price 
variation (``MPV'') for quoting and entry of orders in equity 
securities traded on the NYSE Arca Marketplace is $0.01, with the 
exception of securities that are priced less than $1.00 for which the 
MPV for order entry is $0.0001.
Surveillance
    The Exchange intends to utilize its existing surveillance 
procedures applicable to derivative products (which 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 and applicable federal securities laws.
    The Exchange's current trading surveillance focuses on detecting 
securities trading outside their normal patterns. When such situations 
are detected, surveillance analysis follows and investigations are 
opened, where appropriate, 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 that are members of 
ISG or with which the Exchange has entered into a comprehensive 
surveillance sharing agreement.\22\ All Underlying ETPs are listed on 
national securities exchanges, all of which are members of ISG.
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    \22\ For a list of the current members of ISG, see 
www.isgportal.org. The Exchange notes that not all components of the 
Disclosed Portfolio for the Fund may trade on markets that are 
members of ISG or with which the Exchange has in place a 
comprehensive surveillance sharing agreement.
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    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its 
Equity Trading Permit (``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; (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.
    In addition, the Bulletin will reference that the Fund is subject 
to various fees and expenses described in the Registration Statement. 
The Bulletin will discuss any exemptive, no-action, and interpretive 
relief granted by the Commission from any rules under the Exchange Act. 
The Bulletin will also disclose that the NAV for the Shares will be 
calculated after 4 p.m. Eastern Time each trading day.
2. Statutory Basis
    The basis under the Exchange Act for this proposed rule change is 
the requirement under Section 6(b)(5) \23\ 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.
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    \23\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares will

[[Page 76462]]

be listed and traded on the Exchange pursuant to the initial and 
continued listing criteria in NYSE Arca Equities Rule 8.600. The 
Exchange has in place surveillance procedures that are adequate to 
properly monitor trading in the Shares in all trading sessions and to 
deter and detect violations of Exchange rules and applicable federal 
securities laws. The Exchange may obtain information via ISG from other 
exchanges that are members of ISG or with which the Exchange has 
entered into a comprehensive surveillance sharing agreement. All 
Underlying ETPs will be listed on national securities exchanges, all of 
which are members of ISG, and the listing and trading of such 
securities is subject to rules of the exchanges on which they are 
listed and traded, as approved by the Commission. The Fund will not 
purchase illiquid securities, including Rule 144A securities, and loan 
participation interests. Further, the Fund will not invest in options, 
futures or swaps. The Fund's investments will be consistent with the 
Fund's investment objective and will not be used to enhance leverage. 
Except for Underlying ETPs that may hold non-U.S. issues, the Fund will 
not otherwise invest in non-U.S. issues.
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest in 
that the Exchange will obtain a representation from the issuer of the 
Shares that the NAV per Share will be calculated daily and that the NAV 
and the Disclosed Portfolio will be made available to all market 
participants at the same time. In addition, a large amount of 
information is publicly available regarding the Fund and the Shares, 
thereby promoting market transparency. Quotation and last sale 
information for the Shares will be available via the CTA high-speed 
line and, for the Underlying ETPs, will be available from the national 
securities exchange on which they are listed. In addition, the 
Portfolio Indicative Value will be widely disseminated at least every 
15 seconds during the Core Trading Session by one or more major market 
data vendors. On each business day, before commencement of trading in 
Shares in the Core Trading Session on the Exchange, the 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. 
On a daily basis, the Adviser will disclose for each portfolio security 
or other financial instrument of the Fund the following information: 
Ticker symbol (if applicable), name of security or financial 
instrument, number of Shares or dollar value of financial instruments 
held in the portfolio, and percentage weighting of the security or 
financial instrument in the portfolio. The Web site for the Fund will 
include a form of the prospectus for the Fund and additional data 
relating to NAV and other applicable quantitative information. 
Moreover, prior to the commencement of trading, the Exchange will 
inform its ETP Holders in an Information Bulletin of the special 
characteristics and risks associated with trading the Shares. Trading 
in Shares of the Fund will be halted if the circuit breaker parameters 
in NYSE Arca Equities Rule 7.12 have been reached or because of market 
conditions or for reasons that, in the view of the Exchange, make 
trading in the Shares inadvisable. Trading in the Shares will be 
subject to NYSE Arca Equities Rule 8.600(d)(2)(D), which sets forth 
circumstances under which Shares of the Fund may be halted. In 
addition, as noted above, investors will have ready access to 
information regarding the Fund's holdings, the Portfolio Indicative 
Value, the Disclosed Portfolio, and quotation and last sale information 
for the Shares.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
additional types of actively-managed exchange-traded products that will 
enhance competition among market participants, to the benefit of 
investors and the marketplace. As noted above, the Exchange has in 
place surveillance procedures relating to trading in the Shares and may 
obtain information via ISG from other exchanges that are members of ISG 
or with which the Exchange has entered into a comprehensive 
surveillance sharing agreement. In addition, as noted above, investors 
will have ready access to information regarding the Fund's holdings, 
the Portfolio Indicative Value, the Disclosed Portfolio, and quotation 
and last sale information for the Shares.

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

    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 45 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 self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the 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 email to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2011-86 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEArca-2011-86. This 
file number should be included on the subject line if email 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

[[Page 76463]]

Commission and any person, other than those that may be withheld from 
the public in accordance with the provisions of 5 U.S.C. 552, will be 
available for Web site viewing and printing in the Commission's Public 
Reference Section, 100 F Street NE., Washington, DC 20549-1090, on 
official business days between 10 a.m. and 3 p.m. Copies of the filing 
will also be available for inspection and copying at the NYSE's 
principal office and on its Internet Web site at www.nyse.com. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSEArca-2011-86 and should 
be submitted on or before December 28, 2011.
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    \24\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-31337 Filed 12-6-11; 8:45 am]
BILLING CODE 8011-01-P


