
[Federal Register Volume 77, Number 185 (Monday, September 24, 2012)]
[Notices]
[Pages 58889-58897]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-23459]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67881; File No. SR-NYSEArca-2012-101]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change To List and Trade Shares of the PowerShares S&P 
500 Downside Hedged Portfolio Under NYSE Arca Equities Rule 8.600

September 18, 2012.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Exchange Act'' or ``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice 
is hereby given that, on September 6, 2012, 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 shares of the PowerShares 
S&P

[[Page 58890]]

500 Downside Hedged Portfolio under NYSE Arca Equities Rule 8.600. The 
text of the proposed rule change is available on the Exchange's Web 
site at www.nyse.com, at the principal office of the Exchange, and at 
the Commission's Public Reference Room.

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 shares (``Shares'') of the 
PowerShares S&P 500 Downside Hedged Portfolio (``Fund'') under NYSE 
Arca Equities Rule 8.600, which governs the listing and trading of 
Managed Fund Shares \3\ on the Exchange.\4\ The Shares will be offered 
by PowerShares Actively Managed Exchange-Traded Fund 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\
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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-1) (``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 Fund 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 previously 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. 62502 (July 15, 2010), 75 FR 
42471 (July 21, 2010) (SR-NYSEArca-2010-57) (order approving listing 
of AdvisorShares WCM/BNY Mellon Focused Growth ADR ETF); 63076 
(October 12, 2010), 75 FR 63874 (October 18, 2010) (SR-NYSEArca-
2010-79) (order approving listing of Cambria Global Tactical ETF); 
and 66343 (February 7, 2012), 77 FR 7647 (February 13, 2012) (SR-
NYSEArca-2011-85) (order approving listing of five SPDR SSgA ETFs).
    \5\ The Trust is registered under the 1940 Act. On August 14, 
2012, the Trust filed with the Commission a post-effective amendment 
to Form N-1A under the Securities Act of 1933 (15 U.S.C. 77a) 
(``1933 Act'') and under the 1940 Act relating to the Fund (File 
Nos. 333-147622 and 811-22148) (``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 the 1940 Act. See Investment Company Act Release No. 
28171 (February 27, 2008) (File No. 812-13386) (``Exemptive 
Order'').
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    The investment adviser to the Fund is Invesco PowerShares Capital 
Management LLC (``Adviser''). Invesco Distributors, Inc. 
(``Distributor'') serves as the distributor of the Fund Shares. The 
Bank of New York Mellon Corporation (``Administrator,'' ``Transfer 
Agent,'' or ``Custodian'') serves as administrator, custodian, and 
transfer agent for the Fund.
    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. 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.\6\ 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. The 
Adviser is affiliated with a broker-dealer and has implemented a fire 
wall with respect to its broker-dealer affiliate regarding access to 
information concerning the composition and/or changes to the portfolio. 
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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    \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 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.
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Description of the Fund
    According to the Registration Statement, the Fund will be an 
actively managed exchange-traded fund that will seek to achieve 
positive total returns in rising or falling markets that are not 
directly correlated to broad equity or fixed income market returns.
    According to the Registration Statement, the Fund will seek to 
achieve its investment objective by using a quantitative, rules-based 
strategy designed to provide returns that correspond to the performance 
of the S&P 500 Dynamic VEQTOR Index (``Benchmark'').\7\
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    \7\ The Fund's Benchmark allocates between equity securities and 
CBOE Volatility Index futures. The Commission has previously 
approved listing and trading on the Exchange under Rule 8.200, 
Commentary .02, of exchange traded products with Chicago Board 
Options Exchange (``CBOE'') volatility index futures as benchmarks. 
See, e.g., Securities Exchange Act Release Nos. 65134 (August 15, 
2011), 76 FR 52034 (August 19, 2011) (SR-NYSEArca-2011-23) (order 
approving listing of ProShares Short VIX Short-Term Futures ETF, 
ProShares Short VIX Mid-Term Futures ETF, ProShares Ultra VIX Short-
Term Futures ETF, ProShares Ultra VIX Mid-Term Futures ETF, 
ProShares UltraShort VIX Short-Term Futures ETF, and ProShares 
UltraShort VIX Mid-Term Futures ETF); and 63610 (December 27, 2010), 
76 FR 199 (January 3, 2011) (SR-NYSEArca-2010-101) (order approving 
listing of ProShares VIX Short-Term Futures ETF and ProShares VIX 
Mid-Term Futures ETF).
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    As described below, and according to the Registration Statement, 
the Fund seeks to gain exposure to equity securities contained in the 
S&P 500

[[Page 58891]]

Index, CBOE Volatility Index (``VIX Index'') related instruments (as 
described in more detail below, ``VIX Index Related Instruments''), 
money market instruments, cash, cash equivalents and futures contracts 
that track the S&P 500 Index (``E-mini S&P 500 Futures'').
The Benchmark, the VIX Index, and the S&P 500 VIX Short Term Futures 
Index
    The Benchmark is comprised of three types of components at any 
given time: an equity component, represented by the S&P 500 Index; a 
volatility component, represented by the S&P 500 VIX Short Term Futures 
Index (``VIX Futures Index''); and cash, represented by the overnight 
London Interbank Offered Rate.\8\ The VIX Futures Index utilizes the 
prices of the first and second month futures contracts based on the VIX 
Index, replicating a position that rolls the nearest month VIX futures 
contracts to the next month VIX futures contracts on a daily basis in 
equal fractional amounts. On any business day, the Benchmark allocates 
between its equity and volatility components based on a combination of 
realized volatility and implied volatility trend decision variables, as 
described further in the table below. While allocations are reviewed 
daily, these allocations may change on a less frequent basis.
    According to the Registration Statement, following the proprietary 
formula of Standard & Poor's, a division of The McGraw-Hill Companies, 
Inc. (``S&P'' or ``Index Provider''), under normal circumstances (i.e., 
times other than when the Benchmark's stop-loss process (as described 
below) is triggered), the allocation to the VIX Futures Index 
constitutes between 2.5% and 40% of the Benchmark, with equity 
securities contained in the S&P 500 Index composing the remainder. The 
allocation to the VIX Futures Index generally increases when realized 
volatility and implied volatility are higher, and decreases when 
realized volatility and implied volatility are lower. In the stop-loss 
process, in the event losses on the Benchmark over the previous five 
business days are greater than 2%, the Benchmark moves its entire 
allocation to cash. Unless the stop-loss is in place, the Benchmark is 
entirely allocated to a combination of the S&P 500 Index and the VIX 
Futures Index.
    The following table provides additional detail on the Benchmark's 
target allocation to the VIX Futures Index (``Target Volatility 
Allocation'') for times other than when the Benchmark's stop-loss 
process is triggered:

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                                                                  Target Volatility Allocation
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                                                                           No implied
          Realized volatility (RVt-1)            Implied volatility     volatility trend     Implied volatility
                                                downtrend (IVT t-1)=-      (IVT t-1)=0      uptrend (IVT t-1)=+1
                                                     1 (percent)            (percent)             (percent)
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Less than 10%.................................                  2.5%                  2.5%                 10.0%
10% <= RVt-1 < 20.............................                   2.5                  10.0                  15.0
20% <=  RVt-1 < 35............................                  10.0                  15.0                  25.0
35% <= RVt-1 45...............................                  15.0                  25.0                  40.0
More than 45..................................                  25.0                  40.0                  40.0
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Source: Benchmark Methodology, at 4.

    For example, if the realized volatility of the previous business 
day (RVt-1) were 12%, and there were no implied volatility 
trend (IVTt-1), the target allocation to the VIX Futures 
Index would be 10.0%. If there were an implied volatility uptrend, the 
target allocation to the VIX Futures Index would be 15.0%.
    As of June 30, 2012, the Benchmark allocation was as follows: 97.5% 
to the equity component, represented by the S&P 500 Index, and 2.5% to 
the VIX Futures Index, with 0% allocated to cash.
    According to the Registration Statement, the Benchmark's allocation 
to the VIX Futures Index serves as an implied volatility hedge as 
volatility historically tends to correlate negatively to the 
performance of the U.S. equity markets (i.e., rapid declines in the 
performance of the U.S. equity markets generally are associated with 
particularly high volatility in such markets). ``Implied volatility'' 
is a measure of the expected volatility of the S&P 500 Index that is 
reflected by the value of the VIX Index. Although the Fund seeks 
returns comparable to the returns of the Benchmark, the Fund can have a 
higher or lower exposure to any component within the Benchmark at any 
time.
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    \8\ See ``Standard & Poor's: S&P 500 Dynamic VEQTOR Index Series 
Methodology,'' S&P Indices, March 2011, available at http://www.standardandpoors.com/indices/articles/en/us/?articleType=PDF&assetID=1245195033915 (``Benchmark Methodology''), 
at 4. The description of the Benchmark herein is based, in part, on 
the Benchmark Methodology.
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    The U.S. Index Committee of the Index Provider maintains the 
Benchmark.\9\ That Committee meets monthly. At each meeting, the 
Committee reviews pending corporate actions that may affect Benchmark 
constituents, statistics comparing the composition of the Benchmark to 
the market, companies that are being considered as candidates for 
addition to the Benchmark, and any significant market events. In 
addition, the Committee may revise the Benchmark's policy covering 
rules for selecting companies, treatment of dividends, share counts, or 
other matters.
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    \9\ The Index Provider is not a broker-dealer and has 
implemented procedures designed to prevent the use and dissemination 
of material, non-public information regarding the Index.
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    According to the Registration Statement, the VIX Index is a 
theoretical calculation and cannot be traded. The VIX Index is a 
benchmark index designed to measure the market price of volatility in 
large cap U.S. stocks over 30 days in the future, and is calculated 
based on the prices of certain put and call options on the S&P 500 
Index. The VIX Index measures the premium paid by investors for certain 
options linked to the S&P 500 Index. During periods of market 
instability, the implied level of volatility of the S&P 500 Index 
typically increases and, consequently, the prices of options linked to 
the S&P 500 Index typically increase (assuming all other relevant 
factors remain constant or have negligible changes). This, in turn, 
causes the level of the VIX Index to increase. The VIX Index 
historically has had negative correlations to the S&P 500 Index. 
Because the level of the VIX Index may increase in times of 
uncertainty, the VIX Index is known as the ``fear gauge'' of the broad 
U.S. equities market.

[[Page 58892]]

Investments
    According to the Registration Statement, the Fund, in accordance 
with strategy allocation rules provided by the Index Provider, will 
invest in a combination of equity securities contained in the S&P 500 
Index and that are listed on a U.S. securities exchange; VIX Index 
Related Instruments; money market instruments; cash; cash equivalents; 
and E-mini S&P 500 Futures that are listed on the Chicago Mercantile 
Exchange (``CME'').\10\
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    \10\ The Fund will be ``non-diversified'' under the 1940 Act and 
may invest more of its assets in fewer issuers than ``diversified'' 
funds. The diversification standard is set forth in Section 5(b)(1) 
of the 1940 Act (15 U.S.C. 80a-5).
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    The allocation among the Fund's investments will approximate the 
allocation among the components of the Benchmark. Accordingly, during 
periods of low volatility, a greater portion of the Fund's assets will 
be invested in equity securities, and during periods of increased 
volatility, a greater portion of the Fund's assets will be invested in 
VIX Index Related Instruments. However, the Fund will be actively 
managed, and, although the Fund will seek performance comparable to the 
Benchmark, the Fund may have a higher or lower exposure to any 
component within the Benchmark at any time.
    According to the Registration Statement, VIX Index Related 
Instruments that the Fund will invest in include listed VIX futures 
contracts contained in the VIX Futures Index or exchange-traded funds 
(``ETFs'') \11\ and exchange-traded notes (``ETNs'') \12\ that are 
listed on a U.S. securities exchange and provide exposure to the VIX 
Index. All of the VIX Index Related Instruments will be listed on a 
U.S. exchange.
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    \11\ For purposes of this proposed rule change, ETFs are 
securities registered under the 1940 Act such as those listed and 
traded on the Exchange under NYSE Arca Equities Rules 5.2(j)(3), 
8.100, and 8.600.
    \12\ For purposes of this proposed rule change, ETNs are 
securities registered under the 1933 Act such as those listed and 
traded on the Exchange under NYSE Arca Equities Rule 5.2(j)(6).
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    According to the Registration Statement, futures contracts on the 
VIX Index have expirations ranging from the near month consecutively 
out to the tenth month. Futures on the VIX Index provide investors the 
ability to invest in forward market volatility based on their view of 
the future direction or movement of the VIX Index. Because the VIX 
Index is not a tangible item that can be purchased and sold directly, a 
futures contract on the VIX Index provides for the payment and receipt 
of cash based on the level of the VIX Index at settlement or 
liquidation of the contract.
    According to the Registration Statement, the Fund may invest a 
portion of its assets in high-quality money market instruments, cash, 
and cash equivalents to provide liquidity, to collateralize its futures 
contracts investments, or to track the Benchmark during times when the 
Benchmark moves its entire allocation to cash. The instruments in which 
the Fund may invest include: (i) Short-term obligations issued by the 
U.S. Government; \13\ (ii) short-term negotiable obligations of 
commercial banks, fixed time deposits, and bankers' acceptances of U.S. 
and foreign banks and similar institutions; (iii) commercial paper 
rated at the date of purchase ``Prime-1'' by Moody's Investors Service, 
Inc., or ``A-1+'' or ``A-1'' by S&P or has a similar rating from a 
comparable rating agency, or, if unrated, of comparable quality as 
determined by the Adviser; and (iv) money market mutual funds.
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    \13\ According to the Registration Statement, the Fund may 
invest in short-term obligations issued or guaranteed by the U.S. 
Government, its agencies and instrumentalities, including bills, 
notes, and bonds issued by the U.S. Treasury, as well as 
``stripped'' or ``zero coupon'' U.S. Treasury obligations 
representing future interest or principal payments on U.S. Treasury 
notes or bonds.
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    According to the Registration Statement, the Fund also may invest 
in E-mini S&P 500 Futures that are listed on the CME. E-mini S&P 500 
Futures are futures contracts that track the S&P 500 Index. They are 
substantially similar to traditional futures contracts on the S&P 500 
Index, except that the notional value of E-mini S&P 500 Futures are 
one-fifth the size of their larger counterpart futures contracts.
The Subsidiary
    According to the Registration Statement, the Fund may gain exposure 
to the VIX Index futures markets through investments in a subsidiary 
organized in the Cayman Islands (``Subsidiary''). Should the Fund 
invest in the Subsidiary, that investment may not exceed 25% of the 
Fund's total assets at the end of each tax year quarter. The Subsidiary 
would be wholly-owned and controlled by the Fund, and its investments 
would be consolidated into the Fund's financial statements. The Fund's 
and Subsidiary's investments would be disclosed on the Fund's Web site 
on a daily basis. Should the Fund invest in the Subsidiary, it would be 
expected to provide the Fund with exposure to investment returns from 
VIX Index futures contracts within the limits of the federal tax 
requirements applicable to investment companies, such as the Fund.
    The Subsidiary would be able to invest in VIX Index futures, as 
well as other investments that would serve as margin or collateral or 
otherwise support the Subsidiary's VIX Index futures positions. The 
Subsidiary would be subject to the same general investment policies and 
restrictions as the Fund, except that, unlike the Fund (which is 
subject to Rule 4.5 of the Commodity Exchange Act (``CEA'')), the 
Subsidiary would be able to invest without limitation in VIX Index 
futures and may use leveraged investment techniques. Otherwise, 
references to the investment strategies of the Fund for non-equity 
investments include the investment strategies of the Subsidiary.
    According to the Registration Statement, the Fund may utilize the 
Subsidiary, but is not required to do so. If it is utilized, the 
Subsidiary will not be registered under the 1940 Act. The Fund, as the 
sole shareholder of the Subsidiary, will not have the protections 
offered to investors in registered investment companies. However, 
according to the Registration Statement, because the Fund wholly owns 
and controls the Subsidiary, and the Fund and the Subsidiary will be 
managed by the Adviser, it is unlikely that the Subsidiary will take 
action contrary to the interests of the Fund or the Fund's 
shareholders. The Board of Trustees of the Trust (``Board'') will have 
oversight responsibility for the investment activities of the Fund, 
including its investment in the Subsidiary, and the Fund's role as the 
sole shareholder of the Subsidiary. Also, in managing the Subsidiary's 
portfolio, the Adviser will be subject to the same investment 
restrictions and operational guidelines that apply to the management of 
the Fund.
Other Investments
    According to the Registration Statement, in addition to the VIX 
Index futures contracts and E-mini S&P 500 Futures that are part of its 
primary investments, the Fund may enter into other U.S. listed futures 
contracts on the S&P 500 Index. The Fund will not use futures for 
speculative purposes. The Fund will only enter into futures contracts 
that are traded on U.S. exchanges.
    According to the Registration Statement, the Fund may invest in 
stock index contracts, in addition to the E-mini S&P 500 Futures. Stock 
index contracts are futures based on indices that reflect the market 
value of common stock of the firms included in the indices. The Fund 
may enter into U.S.

[[Page 58893]]

listed futures contracts to purchase security indices when the Adviser 
anticipates purchasing the underlying securities and believes prices 
will rise before the purchase will be made.
    According to the Registration Statement, to the extent the Fund 
uses futures it will do so only in accordance with Rule 4.5 of the 
CEA.\14\ Under recently adopted amendments to Rule 4.5, an investment 
adviser of a registered investment company may claim exclusion from 
registration as a commodity pool operator (``CPO'') only if the 
registered investment company it advises uses futures contracts solely 
for ``bona fide hedging purposes'' or limits its use of futures 
contracts for non-bona fide hedging purposes in specified ways. Because 
the Fund does not expect to use futures contracts solely for ``bona 
fide hedging purposes,'' effective December 31, 2012, the Fund will be 
subject to rules that will require it to limit its use of positions in 
futures contracts in accordance with the requirements of amended Rule 
4.5, unless it otherwise complies with CPO regulation.
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    \14\ 7 U.S.C. 1 et seq. The Trust, on behalf of the Fund, has 
filed a notice of eligibility for exclusion from the definition of 
the term ``commodity pool operator'' or ``CPO'' in accordance with 
Rule 4.5 of the CEA so that the Fund is not subject to registration 
or regulation as a CPO under the CEA.
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    According to the Registration Statement, the Fund may enter into 
repurchase agreements, which are agreements pursuant to which 
securities are acquired by the Fund from a third party with the 
understanding that they will be repurchased by the seller at a fixed 
price on an agreed date. These agreements may be made with respect to 
any of the portfolio securities in which the Fund is authorized to 
invest. Repurchase agreements may be characterized as loans secured by 
the underlying securities. The Fund may enter into repurchase 
agreements with (i) member banks of the Federal Reserve System having 
total assets in excess of $500 million and (ii) securities dealers 
(``Qualified Institutions''). The Adviser will monitor the continued 
creditworthiness of Qualified Institutions.
    According to the Registration Statement, the Fund may enter into 
reverse repurchase agreements, which involve the sale of securities 
with an agreement to repurchase the securities at an agreed-upon price, 
date, and interest payment and have the characteristics of borrowing. 
The securities purchased with the funds obtained from the agreement and 
securities collateralizing the agreement will have maturity dates no 
later than the repayment date.
    In addition to the ETFs and ETNs that are listed on U.S. exchanges 
and provide exposure to the VIX Index, the Fund may invest in the 
securities of other investment companies (including money market funds) 
to the extent permitted under the 1940 Act.
    According to the Registration Statement, the Fund also may purchase 
warrants.
    The Fund does not expect to invest in options or enter into swap 
agreements, including credit default swaps, but may do so if such 
investments are in the best interests of the Fund's shareholders.
Investment Restrictions
    The Fund's investments will be consistent with the Fund's 
investment objective and will not be used to enhance leverage.
    According to the Registration Statement, the Fund will not invest 
in equities that are traded over-the-counter (``OTC'') or equities 
listed on a non-U.S. exchange, or enter into futures that are not 
traded on a U.S. exchange.
    The Fund may hold up to an aggregate amount of 15% of its net 
assets in illiquid securities (calculated at the time of investment), 
including 144A Securities.\15\ The Fund will monitor its portfolio 
liquidity on an ongoing basis to determine whether, in light of current 
circumstances, an adequate level of liquidity is being maintained, and 
will consider taking appropriate steps in order to maintain adequate 
liquidity if, through a change in values, net assets, or other 
circumstances, more than 15% of the Fund's net assets are held in 
illiquid securities and other illiquid assets.
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    \15\ The Commission has stated that long-standing Commission 
guidelines have required open-end funds to hold no more than 15% of 
their net assets in illiquid securities and other illiquid assets. 
See Investment Company Act Release No. 28193 (March 11, 2008), 73 FR 
14618 (March 18, 2008), footnote 34. See also Investment Company Act 
Release No. 5847 (October 21, 1969), 35 FR 19989 (December 31, 1970) 
(Statement Regarding ``Restricted Securities''); Investment Company 
Act Release No. 18612 (March 12, 1992), 57 FR 9828 (March 20, 1992) 
(Revisions of Guidelines to Form N-1A). 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 ETF. 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 1933 Act).
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    According to the Registration Statement, the Fund may not 
concentrate its investments (i.e., invest more than 25% of the value of 
its total assets in securities of issuers in any one industry or group 
of industries). This restriction does not apply to obligations issued 
or guaranteed by the U.S. Government, its agencies or 
instrumentalities.\16\
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    \16\ 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 intends to qualify for and to elect to be treated as a 
separate regulated investment company (``RIC'') under Subchapter M of 
the Internal Revenue Code.\17\
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    \17\ 26 U.S.C. 851. To qualify for treatment as a RIC, the Fund 
must meet three tests each year. First, at least 90% of the Fund's 
gross income for each taxable year must be derived from qualifying 
income, i.e., dividends, interest, income derived from loans of 
securities, gains from the sale of securities or of foreign 
currencies or other income derived with respect to the Fund's 
business of investing in securities (including net income derived 
from an interest in certain ``qualified publicly traded 
partnerships''). Second, generally, at the close of each quarter of 
the Fund's taxable year, at least 50% of the value of the Fund's 
assets must consist of cash and cash items, U.S. government 
securities, securities of other regulated investment companies, and 
securities of other issuers as to which (a) the Fund has not 
invested more than 5% of the value of its total assets in securities 
of the issuer, and (b) the Fund does not hold more than 10% of the 
outstanding voting securities of the issuer, and no more than 25% of 
the value of the Fund's total assets may be invested in the 
securities of (1) any one issuer (other than U.S. government 
securities and securities of other regulated investment companies), 
(2) two or more issuers that the Fund controls and which are engaged 
in the same or similar trades or businesses, or (3) one or more 
qualified publicly traded partnerships. Third, the Fund must 
distribute an amount equal to at least the sum of 90% of its 
investment company taxable income (net investment income and the 
excess of net short-term capital gain over net long-term capital 
loss), before taking into account any deduction for dividends paid, 
and 90% of its tax-exempt income, if any, for the year.
---------------------------------------------------------------------------

Net Asset Value
    According to the Registration Statement, the Administrator will 
calculate the Fund's net asset value (``NAV'') at the close of regular 
trading (normally 4 p.m., Eastern time (``E.T.'')) every day the New 
York Stock Exchange (``NYSE'') is open. NAV will be calculated by 
deducting all of the Fund's liabilities from the total value of its 
assets and dividing the result by the number of Shares outstanding, 
rounding to the nearest cent. All valuations are subject to review by 
the Board or its delegate.
    According to the Registration Statement, in determining NAV, 
expenses will be accrued and applied daily and securities and other 
assets for which market quotations are readily available will be valued 
at market value. Securities listed or traded on an exchange generally 
are valued at the last

[[Page 58894]]

sales price or official closing price that day as of the close of the 
exchange where the security is primarily traded. Money market 
securities maturing in 60 days or less will be valued at amortized 
cost. If a security's market price is not readily available, the 
security will be valued using pricing provided from independent pricing 
services or by another method that the Adviser, in its judgment, 
believes will better reflect the security's fair value in accordance 
with the Trust's valuation policies and procedures approved by the 
Board.
    According to the Registration Statement, where market quotations 
are not readily available, including where the Adviser determines that 
the closing price of the security is unreliable, the Adviser will value 
the security at fair value in good faith using procedures approved by 
the Board. Fair value pricing involves subjective judgments and it is 
possible that a fair value determination for a security is materially 
different than the value that could be realized upon the sale of the 
security.
Initial and Continued Listing
    The Shares will be subject to NYSE Arca Equities Rule 8.600, which 
sets forth the initial and continued listing criteria applicable to 
Managed Fund Shares. The Exchange represents that, for initial and/or 
continued listing, the Fund must be in compliance with Rule 10A-3 under 
the Exchange Act,\18\ 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 for the Fund will be 
calculated daily and that the NAV and the Disclosed Portfolio will be 
made available to all market participants at the same time.
---------------------------------------------------------------------------

    \18\ See 17 CFR 240.10A-3.
---------------------------------------------------------------------------

Creation and Redemption of Shares
    The Fund will issue and redeem Shares at NAV only with authorized 
participants (``APs'') and only in large blocks of 50,000 Shares (each 
block of Shares is called a ``Creation Unit'') or multiples thereof. 
The Fund will issue and redeem Creation Units for cash calculated based 
on the NAV per Share, multiplied by the number of Shares representing a 
Creation Unit (``Deposit Cash''), plus fixed and variable transaction 
fees; however, the Fund also reserves the right to permit or require 
Creation Units to be issued in exchange for a designated portfolio of 
securities (``Deposit Securities''), as discussed below, together with 
the deposit of an amount of cash (``Cash Component'') computed as 
discussed below.
    The Trust will issue Shares of the Fund only in Creation Units on a 
continuous basis through the Distributor, without a sales load, at the 
NAV next determined after receipt, on any day on which NYSE is open for 
business (``Business Day''), of an order in proper form.
    If in-kind creations are permitted or required, to the extent 
practicable (as described below), an investor must deposit the Deposit 
Securities per each Creation Unit constituting a substantial 
replication of the securities included in the Benchmark (``Fund 
Securities'') and a Cash Component, computed as discussed below. 
Together, the Deposit Securities and the Cash Component constitute the 
``Fund Deposit,'' which represents the minimum initial and subsequent 
investment amount for a Creation Unit of the Fund. If in-kind creations 
are permitted or required, the Adviser expects that the Deposit 
Securities should correspond pro rata, to the extent practicable, to 
the securities held by the Fund. The Cash Component is sometimes also 
referred to as the ``Balancing Amount.'' The Cash Component serves the 
function of compensating for any differences between the NAV per 
Creation Unit and an amount equal to the market value of the Deposit 
Securities (``Deposit Amount''). The Cash Component is an amount equal 
to the difference between the NAV of the Shares (per Creation Unit) and 
the Deposit Amount. If the Cash Component is a positive number (i.e., 
the NAV per Creation Unit exceeds the Deposit Amount), the AP will 
deliver the Cash Component. If the Cash Component is a negative number 
(i.e., the NAV per Creation Unit is less than the Deposit Amount), the 
AP will receive the Cash Component.
    To the extent that the Fund permits Creation Units to be issued in-
kind, the Custodian, through the National Securities Clearing 
Corporation (``NSCC''), will make available on each Business Day, prior 
to the opening of business on the Exchange (currently 9:30 a.m., E.T.), 
the list of the names and the required number of shares of each Deposit 
Security to be included in the current Fund Deposit (based on 
information at the end of the previous Business Day) for the Fund. Such 
Fund Deposit is applicable, subject to any adjustments as described 
below, to effect creations of Creation Units of the Fund until such 
time as the next-announced composition of the Deposit Securities is 
made available.
    If applicable, the identity and number of shares of the Deposit 
Securities required for a Fund Deposit for the Fund will change as 
rebalancing adjustments and corporate action events occur. In addition, 
the Trust reserves the right to permit or require the substitution of 
an amount of cash--i.e., a ``cash in lieu'' amount--to be added to the 
Cash Component to replace any Deposit Security that may not be 
available in sufficient quantity for delivery or which might not be 
eligible for trading by an AP or the investor for which it is acting or 
any other relevant reason.
    In addition to the list of names and numbers of securities 
constituting the current Deposit Securities of a Fund Deposit, the 
Custodian, through the NSCC, also will make available on each Business 
Day, the estimated Cash Component, effective through and including the 
previous Business Day, per Creation Unit of the Fund.
    The Distributor must receive all orders to create Creation Units no 
later than the closing time of the regular trading session on the NYSE, 
as applicable (``Closing Time'') (ordinarily 4 p.m., E.T.) in each case 
on the date such order is placed in order for creation of Creation 
Units to be effected based on the NAV of Shares of the Fund as next 
determined on such date after receipt of the order in proper form.
    Creation Units of the Fund will be redeemed principally for cash 
(``Redemption Cash''). Shares may be redeemed only in Creation Units at 
their NAV next determined after receipt of a redemption request in 
proper form by the Fund through the Transfer Agent and only on a 
Business Day.
    If the Fund permits Creation Units to be redeemed in-kind, the 
Custodian, through the NSCC, will make available prior to the opening 
of business on the Exchange (currently 9:30 a.m., E.T.) on each 
Business Day, the identity of the Fund Securities that will be 
applicable (subject to possible amendment or correction) to redemption 
requests received in proper form (as described below) on that day. Fund 
Securities received on redemption may not be identical to Deposit 
Securities that will be applicable to creations of Creation Units.
    For redemptions in-kind, the redemption proceeds for a Creation 
Unit generally will consist of Fund Securities plus or minus cash in an 
amount equal to the difference between the NAV of the Shares being 
redeemed, as next determined after a receipt of a request in proper 
form, and the value of the Fund Securities, less a redemption 
transaction fee as noted below. In the

[[Page 58895]]

event that the Fund Securities have a value greater than the NAV of the 
Shares, a compensating cash payment equal to the difference is required 
to be made by or through an AP by the redeeming shareholder.
    A redemption transaction fee is imposed to offset transfer and 
other transaction costs that may be incurred by a Fund.
    An order to redeem Creation Units must be made in proper form and 
received by the Trust by 4 p.m., E.T. Orders received after 4 p.m., 
E.T. will be deemed received on the next business day and will be 
effected at the NAV next determined on such next business day.
Availability of Information
    The Fund's Web site (www.invescopowershares.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''),\19\ 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)) held by 
the Fund and the Subsidiary that will form the basis for the Fund's 
calculation of NAV at the end of the business day.\20\
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    \19\ The Bid/Ask Price of the Fund will be determined using mid-
point 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.
    \20\ 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.
---------------------------------------------------------------------------

    On a daily basis, the Adviser will disclose for each portfolio 
security and other financial instrument of the Fund and the Subsidiary, 
if applicable, the following information on the Fund's Web site: ticker 
symbol (if applicable), name of security and financial instrument, 
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.
    In addition, for in-kind creations, a basket composition file, 
which will include the security names and share quantities to deliver 
in exchange for Shares, together with estimates and actual cash 
components, will be publicly disseminated daily prior to the opening of 
the Exchange via the NSCC. The basket will represent one Creation Unit 
of the Fund.
    Investors can also obtain the Trust's Statement of Additional 
Information (``SAI''), the Fund's Shareholder Reports, and the Trust's 
Form N-CSR and Form N-SAR, filed twice a year. The Trust's SAI and 
Shareholder Reports will be 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 
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. In addition, the Portfolio Indicative Value, 
as defined in NYSE Arca Equities Rule 8.600(c)(3), will be widely 
disseminated at least every 15 seconds during the Core Trading Session 
by one or more major market data vendors.\21\ 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. The intra-day, closing and settlement 
prices of the portfolio investments (e.g., futures contracts, equity 
securities, ETFs and ETNs) are also 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.
---------------------------------------------------------------------------

    \21\ Currently, it is the Exchange's understanding that several 
major market data vendors widely disseminate Portfolio Indicative 
Values taken from CTA or other data feeds.
---------------------------------------------------------------------------

    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.\22\ 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.
---------------------------------------------------------------------------

    \22\ See NYSE Arca Equities Rule 7.12, Commentary .04.
---------------------------------------------------------------------------

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., E.T. 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

[[Page 58896]]

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.
    All equity securities, ETFs, and ETNs in which the Fund invests 
will be listed on a U.S. securities exchange. 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 in 
place a comprehensive surveillance sharing agreement.\23\ In addition, 
the Exchange could obtain information from the U.S. futures exchanges, 
all of which are ISG members, on which futures held by the Fund are 
listed and traded.
---------------------------------------------------------------------------

    \23\ 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.
---------------------------------------------------------------------------

    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 Units (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 will be 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., E.T. 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)\24\ 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.
---------------------------------------------------------------------------

    \24\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares will 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 Adviser is affiliated with a 
broker-dealer, and has implemented a fire wall with respect to its 
broker-dealer affiliate regarding access to information concerning the 
composition and/or changes to the portfolio. 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. The holdings of the fund will be comprised primarily 
of U.S. equity securities listed on a U.S. securities exchange, VIX 
Index Related Instruments, money market instruments, cash, cash 
equivalents and E-mini S&P 500 Futures that are listed on CME. All 
equity securities, ETFs and ETNs in which the Fund invests will be 
listed on a U.S. securities exchange. The Fund will not invest in OTC 
equities or non-U.S. listed equities or enter into futures that are not 
traded on a U.S. exchange. The Fund will not use futures for 
speculative purposes. The Fund will limit its investments in illiquid 
securities to 15% of its net assets. The Fund's investments will be 
consistent with the Fund's investment objective and will not be used to 
enhance leverage. The Fund does not expect to invest in options or 
enter into swap agreements, including credit default swaps, but may do 
so if such investments are in the best interests of the Fund's 
shareholders.
    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 every day the 
NYSE is open, 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 will be publicly available regarding the 
Fund and the Shares, thereby promoting market transparency. Moreover, 
the Portfolio Indicative Value will be widely disseminated through the 
facilities of the CTA or by one or more major market data vendors at 
least every 15 seconds during the Exchange's Core Trading Session. 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. 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 quotation 
and last-sale information will be available via the CTA high-speed 
line. 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, and 
trading in the Shares will be subject to NYSE Arca Equities Rule 
8.600(d)(2)(D), which sets forth circumstances under which trading in 
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

[[Page 58897]]

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 
an additional type of actively-managed exchange-traded product 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 such proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2012-101 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-2012-101. 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 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 Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSEArca-2012-101 and should 
be submitted on or before October 15, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
---------------------------------------------------------------------------

    \25\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-23459 Filed 9-21-12; 8:45 am]
BILLING CODE 8011-01-P


