
[Federal Register Volume 77, Number 113 (Tuesday, June 12, 2012)]
[Notices]
[Pages 35097-35101]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-14192]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67145; File No. SR-NYSEArca-2012-34]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting 
Approval of Proposed Rule Change To List and Trade the Huntington US 
Equity Rotation Strategy ETF and Huntington EcoLogical Strategy ETF 
Under NYSE Arca Equities Rule 8.600

June 6, 2012.

I. Introduction

    On April 12, 2012, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to 
list and trade shares (``Shares'') of the Huntington US Equity Rotation 
Strategy ETF and Huntington EcoLogical Strategy ETF (each, a ``Fund'' 
and collectively, ``Funds'') under NYSE Arca Equities Rule 8.600. The 
proposed rule change was published for comment in the Federal Register 
on April 27, 2012.\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. 66846 (April 23, 
2012), 77 FR 25218 (``Notice'').
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II. Description of the Proposed Rule Change

    The Exchange proposes to list and trade the Shares of the Funds 
pursuant to NYSE Arca Equities Rule 8.600, which governs the listing 
and trading of Managed Fund Shares on the Exchange. The Funds will be 
actively managed exchange-traded funds. The Shares of each Fund will be 
offered by Huntington Strategy Shares (``Trust''), a Delaware statutory 
trust registered with the Commission as an open-end management 
investment company.\4\ Huntington Asset Advisors, Inc. (``Adviser'') is 
the investment adviser of each Fund and will manage the investment 
portfolios of the Funds. SEI Investments Distribution Co. 
(``Distributor'') is the principal underwriter and distributor of the 
Funds' Shares. Citibank, N.A. is the custodian for the Funds. The 
Exchange represents that the Adviser is affiliated with two broker-
dealers and has implemented a fire wall with respect to each affiliated 
broker-dealer regarding access to information concerning the 
composition and/or changes to a Fund portfolio.\5\
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    \4\ The Trust is registered under the Investment Company Act of 
1940 (``1940 Act''). On April 6, 2012, the Trust filed with the 
Commission an amendment to the Trust's Registration Statement on 
Form N-1A under the Securities Act of 1933 and under the 1940 Act 
relating to the Funds (File Nos. 333-170750 and 811-22497) 
(``Registration Statement''). In addition, the Exchange represented 
in the Notice that the Trust had also filed an Amended and Restated 
Application for an Order under Section 6(c) of the 1940 Act for 
exemptions from various provisions of the 1940 Act and rules 
thereunder (File No. 812-13785), dated April 3, 2012 (``Exemptive 
Application''). See Investment Company Act Release No. 30032 (April 
10, 2012). In the Notice, the Exchange stated that the Shares would 
not be listed on the Exchange until an order (``Exemptive Order'') 
under the 1940 Act has been issued by the Commission with respect to 
the Exemptive Application. The Commission notes that it has issued 
an Exemptive Order granting certain exemptive relief to the Trust, 
Adviser, and Distributor under the 1940 Act. See Investment Company 
Act Release No. 30061 (May 8, 2012) (File No. 812-13785). The 
Exchange represents that investments made by the Funds will comply 
with the conditions set forth in the Exemptive Order.
    \5\ See Commentary .06 to NYSE Arca Equities Rule 8.600. The 
Exchange represents that, in the event (a) the 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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Huntington US Equity Rotation Strategy ETF

    The Fund's investment objective is to seek capital appreciation. 
Under normal conditions,\6\ the Fund will invest at least 80% of its 
net assets in the exchange-listed common stocks of select companies 
organized in the U.S. and included in the S&P Composite 1500[supreg] 
(``Companies''). The S&P Composite 1500 is a combination of the 
following indices: the S&P 500[supreg]; the S&P MidCap 400[supreg]; and 
the S&P SmallCap 600[supreg]. The Fund will invest in Companies within 
each of the large-cap, mid-cap, and small-cap U.S. equity market 
segments (each a ``Market Segment''). The large-cap segment is 
represented by companies comprising the S&P 500, the mid-cap segment is 
represented by companies comprising the S&P MidCap 400, and the small-
cap segment is represented by the companies comprising the S&P SmallCap 
600.
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    \6\ The term ``under normal conditions'' includes, but is not 
limited to, the absence of extreme volatility or trading halts in 
the equity markets or the financial markets generally; operational 
issues causing dissemination of inaccurate market information; or 
force majeure type events such as systems failure, natural or man-
made disaster, act of God, armed conflict, act of terrorism, riot or 
labor disruption, or any similar intervening circumstance.
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    The Fund will also invest in Companies operating in each of the ten 
sectors represented in the S&P Composite 1500. A sector is a large 
grouping of companies operating within the market that share similar 
characteristics. The ten sectors comprising the S&P Composite 1500 are: 
utilities, consumer staples, information technology, healthcare, 
financials, energy, consumer discretionary, materials, industrials, and 
telecommunication services (``Sectors'').
    As market conditions change, the Fund intends to rotate the 
investment focus of the Fund so as to overweight its portfolio in 
Companies comprising those Market Segments and Sectors that the Adviser 
believes offer the greatest potential for capital appreciation in the 
given market environment and underweight its portfolio in those Market 
Segments and Sectors that the Adviser believes offer the least 
potential for capital appreciation in that same market environment (as 
described in more detail below). If the Fund's portfolio allocation to 
a particular Market Segment or Sector exceeds that Market Segment's or 
Sector's current weighting in the S&P Composite 1500, the Fund will be 
``overweighting'' that Market Segment or Sector. Similarly, if the 
Fund's portfolio allocation to a specific Market Segment or Sector is 
less than that Market Segment's or Sector's current weighting in the 
S&P Composite 1500, then the Fund will be ``underweighting'' that 
Market Segment or Sector. The Adviser believes that

[[Page 35098]]

these adjustments, collectively, will position the Fund for continued 
capital appreciation in the new market environment.
    The Adviser retains a broad mandate and discretion to invest in 
Companies consistent with its evaluation of the capital appreciation 
potential of the Market Segments and Sectors. The strategy of 
overweighting and underweighting Sectors to maximize opportunities for 
capital appreciation may result in the Fund investing greater than 25% 
of its total assets in the equity securities of Companies operating in 
one or more Sectors. Sectors are comprised of multiple individual 
industries, and the Fund will not invest more than 25% of its total 
assets in an individual industry.
    The Adviser will invest in Companies consistent with its assessment 
of the capital appreciation opportunities of each Market Segment and 
Sector. To determine the percentage of the Fund's portfolio to invest 
in each Market Segment and Sector, the Adviser will use ``top-down'' 
analysis (analyzing the impact of economic trends before considering 
the performance of individual stocks) to evaluate broad economic 
trends. These trends are used to anticipate shifts in the business 
cycle. The Adviser also will analyze each Market Segment and Sector to 
determine which Market Segment(s) and Sector(s) may benefit the most 
from these trends and business shifts over the next 12 months. Factors 
considered in assessing each Market Segment and Sector include: (1) The 
relationship between each Market Segment or Sector and the current 
business cycle; (2) valuation levels; (3) earnings growth potential; 
and (4) analyses of the Companies included in the respective Market 
Segments and Sectors.
    The Adviser will monitor the market environment, Market Segments, 
and Sectors and may rotate the Fund's investment focus by adjusting the 
Fund's Market Segments and/or Sector weightings consistent with its 
ongoing assessment of the capital appreciation potential of each Market 
Segment and Sector. The Adviser may also rely, in part, on technical 
analysis (such as analyzing and examining past price movements to 
anticipate or forecast future price movements) to determine the timing 
of any changes to the Market Segment and/or Sector weightings.
    The Fund will invest in those Companies within the Market Segments 
and Sectors that offer the best potential for capital appreciation 
based on the Adviser's evaluation of company fundamentals (including 
historic earnings, revenue, cash flow, and valuation (such as price-
earnings ratio and book value)).

Huntington EcoLogical Strategy ETF

    The Fund's investment objective is to seek capital appreciation. 
Under normal conditions, the Fund will invest at least 80% of its net 
assets in the exchange-listed equity securities of ecologically-focused 
companies. The Fund will primarily (at least 65% of total assets) 
invest in the U.S. exchange-listed common stock of ecologically-focused 
companies organized in the U.S. (``U.S. Companies''). The Fund, 
however, may also invest up to 35% of total assets in the exchange-
listed common stock (or the equivalent thereof) and sponsored American 
Depositary Receipts (``ADRs'') \7\ of ecologically-focused companies 
organized outside the U.S. (``Foreign Companies'').\8\ The Fund may 
invest in companies of all sizes.
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    \7\ ADRs are securities issued by a U.S. bank or trust company 
evidencing ownership of underlying securities issued by a foreign 
company. ADRs are designed for use in U.S. securities markets.
    \8\ The foreign equity securities, including any depositary 
receipts, in which the Funds may invest will be limited to 
securities that trade in markets that are members of the Intermarket 
Surveillance Group (``ISG''), which includes all U.S. national 
securities exchanges and certain foreign exchanges, or are parties 
to a comprehensive surveillance sharing agreement with the Exchange. 
See infra note 12.
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    The Adviser will apply the following ecologically-focused criteria 
to identify the equity securities of U.S. and Foreign Companies. 
``Ecologically-focused companies'' are companies that have positioned 
their business to respond to increased environmental legislation, 
cultural shifts towards environmentally conscious consumption, and 
capital investments in environmentally oriented projects. These 
companies include, but are not limited to, all U.S. and Foreign 
Companies that are components of one or more well-recognized 
environmentally focused indices (such as the Dow Jones Sustainability 
Indexes and the DB NASDAQ OMX Clean Tech Index).
    The Fund will also invest in ecologically-focused companies which 
are not included in a well-recognized environmentally-focused index, 
but generate at least \1/3\ of their revenues from activities aligned 
with one or more of the following environmental themes (``Environmental 
Themes''):
     Alternative renewable power, such as solar, wind, 
geothermal, hydro, or biomass;
     Alternative renewable fuel, such as biofuel, biomass, or 
hydrogen;
     Alternative engines, such as electric, flywheel, or micro 
turbines;
     Energy efficiency such as energy efficient building 
materials, power, lighting, heating, or fuel;
     Resource conservation/healthier use of resources, such as 
recycling or renewable materials; and
     Healthy lifestyle, such as pollution control or organic 
foods.
    A company that is not included in an environmentally-focused index 
or does not generate \1/3\ of its revenue from activities aligned with 
one or more Environmental Themes shall also be considered an 
ecologically-focused company if the Adviser believes that 
environmentally conscious trends such as a stronger demand for 
chemical-free cleaning and farming, recycling, alternative fuel and 
energy, energy efficiency, pollution control, or environmental cleanup/
restoration will positively impact that company's future revenue 
(``Environmentally Conscious Companies''). Ecologically-focused 
companies also include those companies that the Adviser believes 
demonstrate sustainable environmental practices (``Other Environmental 
Companies''). Sustainable environmental practices include, but are not 
limited to, demonstrated progress in:
     Improving energy and resource efficiency;
     Reducing emissions from business operations;
     Financial and operational support of renewable materials 
and less pollutive energy sources; or
     Using or promoting the use of efficient buildings 
(measured by such labels as LEED or Energy Star).
    The Fund's investment in the securities of Environmentally 
Conscious Companies and Other Environmental Companies will be limited 
to 10% of the Fund's total assets.
    The strategy of investing in ecologically-focused companies may 
result in the Fund investing greater than 25% of its total assets in 
one or more market sectors. A sector is a large grouping of companies 
operating within the market that share similar characteristics. The ten 
most commonly recognized market sectors are: utilities, consumer 
staples, information technology, healthcare, financials, energy, 
consumer discretionary, materials, industrials, and telecommunication 
services. Sectors are comprised of multiple individual industries, and 
the Fund will not invest more than 25% of its total assets in an 
individual industry.
    The Adviser will review company fundamentals and the composition of 
recognized environmentally-focused indices to identify a universe of

[[Page 35099]]

ecologically-focused companies. Company fundamentals include factors 
reflective of a company's financial condition, including balance sheets 
and income statements, asset history, product or service development, 
and management productivity. The Adviser also will examine annual 
sustainability reports from companies, as well as supplemental 
disclosures regarding environmental practices within corporate investor 
relations materials.
    The Adviser will focus on ecologically-focused companies that it 
believes have better than average potential for growth in sales and 
profits. Historical financial statements (income, balance sheet, cash 
flow) will serve as quantitative guides in the selection process. 
Qualitative reviews of a company's competitive position and target 
market potential also will influence portfolio decisions. The Fund 
will, under most market conditions, include a blend of growth or 
cyclical stocks held for price appreciation potential and dividend 
growth stocks held for their potential to deliver a growing stream of 
income.\9\ Factors regarding valuation such as price to sales ratios, 
price to earnings ratios, and price to book ratios will influence the 
size of the Fund's position in each company.
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    \9\ Growth stocks are shares in a company whose earnings are 
expected to grow at an above-average rate relative to the market. 
Cyclical stocks are shares in a company that rise quickly when 
economic growth is strong and fall rapidly when growth is slowing 
down.
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Other Permitted Investments, Investment Limitations, and Additional 
Information Applicable to Both Funds

    Each Fund, to a lesser extent, may attempt to pursue its investment 
objective by employing other investment strategies and by investing in 
additional types of securities that are not otherwise part of its 
principal investment strategies as described above. To the extent a 
Fund's principal investment policies are satisfied, including but not 
limited to its 80% investment policy, such Fund may also invest up to 
20% of its total assets in the securities described below. Each Fund, 
however, will also be subject to certain additional investment 
limitations, including those set forth below:
     A Fund may only purchase securities of any issuer only 
when consistent with the maintenance of such Fund's status as a 
diversified company under the 1940 Act, the rules or regulations 
thereunder, as such statute, rules, or regulations may be amended from 
time to time, or any applicable exemptive relief.\10\
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    \10\ Under Section 5(b)(1) of the 1940 Act, the Exchange states 
that a 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 determining a Fund's compliance 
with Section 5(b)(1), the issuer of the underlying security will be 
deemed to be the issuer of any respective depositary receipt.
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     A Fund may not concentrate investments in a particular 
industry or group of industries as concentration is defined under the 
1940 Act, the rules or regulations thereunder, as such statute, rules, 
or regulations may be amended from time to time, or any applicable 
exemptive relief.
     A Fund may not hold in the aggregate more than 15% of its 
net assets in illiquid investments, including Rule 144A securities and 
loan participations.
     In accordance with the Exemptive Order, the Funds will not 
invest in options, futures, or swaps.
     The Funds' investments will be consistent with the Funds' 
investment objectives and will not be used to enhance leverage.
     Each Fund will elect to be treated, and intends to qualify 
each year, as a regulated investment company under Subchapter M of the 
Internal Revenue Code.
    Finally, each Fund may also invest up to 20% of total assets in 
fixed income securities issued by companies organized in the U.S., 
including convertible securities that may be exchanged for or converted 
into common stock, corporate debt securities, U.S. Government 
securities, money market instruments, and zero coupon bonds. Each Fund 
may invest in other investment company securities, including mutual 
funds, consistent with the 1940 Act, the rules thereunder or relief 
from the Commission, as well as repurchase and reverse repurchase 
agreements. The Funds may also participate in foreign currency 
transactions and purchase securities on a when-issued or delayed 
delivery basis.

Permitted Investments and Investment Limitations Applicable to 
Huntington US Equity Rotation Strategy ETF

    The Fund may invest up to 20% of total assets in equity securities, 
other than common stock of Companies, including preferred stocks, 
exchange-traded funds, interests in other business organizations, real 
estate investment trusts, and other domestic equity securities which 
the Adviser believes have equity characteristics (``Other Domestic 
Equities'').
    The Fund may invest up to 20% of its total assets in the following 
foreign securities which are issued by companies located outside of the 
U.S. and principally traded in foreign markets: (i) Equity securities 
and fixed income securities of foreign entities; (ii) obligations of 
foreign branches of U.S. banks and foreign or domestic branches of 
foreign banks including European Certificates of Deposit, European Time 
Deposits, Canadian Time Deposits, Canadian Yankee Bonds, Canadian 
Certificates of Deposit, and investments in Canadian commercial paper 
and europaper; (iii) depositary receipts including ADRs, European 
Depositary Receipts (``EDRs''), which are also known as Continental 
Depositary Receipts (``CDRs''), and Global Depositary Receipts 
(``GDRs'');\11\ (iv) securities issued or guaranteed by foreign 
corporations or foreign governments, their political subdivisions, 
agencies, and instrumentalities (e.g., fixed income securities 
supported by national, state, or provincial governments, or similar 
political subdivisions); (v) debt obligations of supranational 
entities, including international organizations designed or supported 
by governmental entities to promote economic reconstruction or 
development, international banking institutions, and related government 
agencies such as the International Bank for Reconstruction and 
Development (World Bank), the Asian Development Bank, the European 
Investment Bank, and the Inter-American Development Bank; and (vi) 
fixed income securities of quasi-governmental agencies that are either 
issued by entities owned by a national, state, or equivalent 
government, or are obligations of a political unit that are not backed 
by the national government's full faith and credit (collectively, 
``Foreign Securities'').\12\
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    \11\ EDRs/CDRs are securities typically issued by a non-U.S. 
financial institution and evidence ownership interests in a security 
or a pool of securities issued by either a U.S. or foreign issuer. 
GDRs are issued globally and evidence a similar ownership 
arrangement. EDRs are designed for trading in European securities 
markets, and GDRs are designed for trading in non-U.S. securities 
markets.
    \12\ See supra note 8.
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Permitted Investments and Investment Limitations Specific to Huntington 
EcoLogical Strategy ETF

    The Fund may invest up to 20% of its total assets in Other Domestic 
Equities and Foreign Securities other than those issued by Foreign 
Companies permitted

[[Page 35100]]

as part of the Fund's principal investment strategies.\13\
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    \13\ See id.
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    Additional information regarding the Funds, the Trust, and the 
Shares, including investment strategies, risks, creation and redemption 
procedures, fees, portfolio holdings, disclosure policies, 
distributions, and taxes can be found in the Notice and Registration 
Statement, as applicable.\14\
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    \14\ See supra notes 3 and 4, respectively.
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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 \15\ and the rules and regulations thereunder applicable to a 
national securities exchange.\16\ In particular, the Commission finds 
that the proposal is consistent with Section 6(b)(5) of the Act,\17\ 
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. The Commission notes that 
the Funds and the Shares must comply with the requirements of NYSE Arca 
Equities Rule 8.600 to be listed and traded on the Exchange.
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    \15\ 15 U.S.C. 78f.
    \16\ 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).
    \17\ 15 U.S.C. 78f(b)(5).
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    The Commission finds that the proposal to list and trade the Shares 
on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the 
Act,\18\ which sets forth Congress' finding that it is in the public 
interest and appropriate for the protection of investors and the 
maintenance of fair and orderly markets to assure the availability to 
brokers, dealers, and investors of information with respect to 
quotations for, and transactions in, securities. Quotation and last-
sale information for the Shares will be available via the Consolidated 
Tape Association (``CTA'') high-speed line. In addition, the Portfolio 
Indicative Value (``PIV''), 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 Exchange's Core 
Trading Session.\19\ On each business day, before commencement of 
trading in Shares in the Core Trading Session on the Exchange, the 
Funds will disclose on their Web site the Disclosed Portfolio, as 
defined in NYSE Arca Equities Rule 8.600(c)(2), that will form the 
basis for the respective Fund's calculation of the net asset value 
(``NAV'') at the end of the business day.\20\ The NAV per Share for 
each Fund will be calculated by the Trust's fund accountant and 
determined as of the close of the regular trading session on the NYSE 
Arca (ordinarily 4:00 p.m., Eastern Time) on each day that the Exchange 
is open. In addition, information regarding market price and trading 
volume of the Shares will be continually available on a real-time basis 
throughout the day on brokers' computer screens and other electronic 
services, and 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. The Web site for the Funds will 
include a form of the prospectus for the Funds, additional data 
relating to NAV, and other applicable quantitative information. The 
intra-day, closing, and settlement prices of the portfolio securities 
will be readily available from the national securities exchanges 
trading such securities, automated quotation systems, published or 
other public sources, or on-line information services such as Bloomberg 
or Reuters.
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    \18\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \19\ According to the Exchange, several major market data 
vendors display and/or make widely available PIVs published on the 
CTA or other data feeds.
    \20\ The Disclosed Portfolio will include, as applicable, for 
each portfolio security or other financial instrument of the Funds 
the following: Ticker symbol; name of security and financial 
instrument; the number of shares or dollar value of each security 
and financial instrument held in the portfolio; and percentage 
weighting of the security and financial instrument in the portfolio. 
The Web site information will be publicly available at no charge.
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    The Commission further believes that the proposal to list and trade 
the Shares is reasonably designed to promote fair disclosure of 
information that may be necessary to price the Shares appropriately and 
to prevent trading when a reasonable degree of transparency cannot be 
assured. The Commission notes that the Exchange will obtain a 
representation from the issuer of the Shares that the NAV will be 
calculated daily and that the NAV and the Disclosed Portfolio will be 
made available to all market participants at the same time.\21\ In 
addition, the Exchange will halt trading in the Shares under the 
specific circumstances set forth in NYSE Arca Equities Rule 
8.600(d)(2)(D), and may halt trading in the Shares if trading is not 
occurring in the securities and/or the financial instruments comprising 
the Disclosed Portfolio of the Fund, or if other unusual conditions or 
circumstances detrimental to the maintenance of a fair and orderly 
market are present.\22\ The Exchange will consider the suspension of 
trading in or removal from listing of the Shares if the PIV is no 
longer calculated or available or the Disclosed Portfolio is not made 
available to all market participants at the same time.\23\ The Adviser 
is affiliated with two 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 each Fund's 
portfolio.\24\ The Commission notes that Adviser personnel who make 
decisions on a Fund's portfolio composition must be subject to 
procedures designed to prevent the use and dissemination of material 
non-public information regarding that Fund's portfolio.\25\ Further, 
the Commission notes that the Reporting Authority that provides the 
Disclosed Portfolio must implement and maintain, or be subject to, 
procedures

[[Page 35101]]

designed to prevent the use and dissemination of material non-public 
information regarding the actual components of the portfolio.\26\ The 
Exchange states that it has a general policy prohibiting the 
distribution of material, non-public information by its employees. The 
Commission also notes that all of the primary equity investments to be 
held by each Fund, as well as the non-U.S.-listed equity securities, 
including any depositary receipts, held by each Fund will trade in 
markets that are ISG members or are parties to a comprehensive 
surveillance sharing agreement with the Exchange.\27\
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    \21\ See NYSE Arca Equities Rule 8.600(d)(1)(B).
    \22\ 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. 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.
    \23\ See NYSE Arca Equities Rule 8.600(d)(2)(C)(ii).
    \24\ See supra note 5 and accompanying text. The Commission 
notes that 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 its 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.
    \25\ See Commentary .06 to NYSE Arca Equities Rule 8.600.
    \26\ See NYSE Arca Equities Rule 8.600(d)(2)(B)(ii).
    \27\ See Notice, supra note 3.
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    The Exchange further represents that the Shares are deemed to be 
equity securities, thus rendering trading in the Shares subject to the 
Exchange's existing rules governing the trading of equity securities. 
In support of this proposal, the Exchange has made representations, 
including:
    (1) The Shares will conform to the initial and continued listing 
criteria under NYSE Arca Equities Rule 8.600.
    (2) The Exchange has appropriate rules to facilitate transactions 
in the Shares during all trading sessions.
    (3) The Exchange's surveillance procedures applicable to derivative 
products, which include Managed Fund Shares, 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.
    (4) 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: (a) The procedures for purchases and redemptions of Shares 
in Creation Unit aggregations (and that Shares are not individually 
redeemable); (b) NYSE Arca Equities Rule 9.2(a), which imposes a duty 
of due diligence on its ETP Holders to learn the essential facts 
relating to every customer prior to trading the Shares; (c) the risks 
involved in trading the Shares during the Opening and Late Trading 
Sessions when an updated PIV will not be calculated or publicly 
disseminated; (d) how information regarding the PIV is disseminated; 
(e) the requirement that ETP Holders deliver a prospectus to investors 
purchasing newly issued Shares prior to or concurrently with the 
confirmation of a transaction; and (f) trading information.
    (5) For initial and/or continued listing, each Fund will be in 
compliance with Rule 10A-3 under the Act,\28\ as provided by NYSE Arca 
Equities Rule 5.3.
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    \28\ See 17 CFR 240.10A-3.
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    (6) Each Fund may not hold more than 15% of net assets in illiquid 
investments, including Rule 144A securities and loan participations.
    (7) The Funds will not invest in options, futures, or swaps, and 
the Funds' investments will be consistent with each Fund's investment 
objective and will not be used to enhance leverage.
    (8) All of the primary equity investments to be held by each Fund, 
as well as the non-U.S.-listed equity securities, including any 
depositary receipts, held by each Fund will trade in markets that are 
ISG members or are parties to a comprehensive surveillance sharing 
agreement with the Exchange.
    (9) A minimum of 100,000 Shares of each Fund will be outstanding at 
the commencement of trading on the Exchange.

This approval order is based on all of the Exchange's representations 
and description of the Funds, including those set forth above and in 
the Notice.
    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act \29\ and the 
rules and regulations thereunder applicable to a national securities 
exchange.
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    \29\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\30\ that the proposed rule change (SR-NYSEArca-2012-34) be, and it 
hereby is, approved.
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    \30\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\31\
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    \31\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-14192 Filed 6-11-12; 8:45 am]
BILLING CODE 8011-01-P


