
[Federal Register Volume 79, Number 1 (Thursday, January 2, 2014)]
[Notices]
[Pages 154-161]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-31372]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71186; File No. SR-NYSEArca-2013-138]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Relating to Listing and Trading of Shares of 
iShares Enhanced International Large-Cap ETF and iShares Enhanced 
International Small-Cap ETF Under NYSE Arca Equities Rule 8.600

December 26, 2013.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on December 13, 2013, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the self-regulatory 
organization. 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\ 15 U.S.C. 78a.
    \3\ 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 following 
under NYSE Arca Equities Rule 8.600 (``Managed Fund Shares''): iShares 
Enhanced International Large-Cap ETF and iShares Enhanced International 
Small-Cap ETF. 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to list and trade shares (``Shares'') of the 
following under NYSE Arca Equities Rule 8.600, which governs the 
listing and trading of Managed Fund Shares \4\: iShares Enhanced 
International Large-Cap ETF (``Large-Cap Fund'') and iShares Enhanced 
International Small-Cap ETF (``Small-Cap Fund'', each a ``Fund'' and, 
collectively, the ``Funds''). The Shares of the Funds will be offered 
by iShares U.S. ETF Trust (the ``Trust'') [sic] \5\ The Trust is 
registered with the Commission as an open-end management investment 
company.\6\ BlackRock Fund Advisors (``BFA'') will serve as the 
investment adviser to the Funds (the ``Adviser''). BFA is an indirect 
wholly-owned subsidiary of BlackRock, Inc. BlackRock Investments, LLC 
(the ``Distributor'') will be the principal underwriter and distributor 
of the Funds' Shares. State Street Bank and Trust Company (the 
``Administrator'', ``Custodian'' or ``Transfer Agent'') will serve as 
administrator, custodian and transfer agent for the Funds.
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    \4\ 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.
    \5\ The Commission has 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. 57801 (May 8, 
2008), 73 FR 27878 (May 14, 2008) (SR-NYSEArca-2008-31) (order 
approving Exchange listing and trading of twelve actively-managed 
funds of the WisdomTree Trust); 60460 (August 7, 2009), 74 FR 41468 
(August 17, 2009) (SR-NYSEArca-2009-55) (order approving listing and 
trading of Dent Tactical ETF); 63076 (October 12, 2010), 75 FR 63874 
(October 18, 2010) (SR-NYSEArca-2010-79) (order approving listing 
and trading of Cambria Global Tactical ETF).
    \6\ The Trust is registered under the 1940 Act. See Post-
Effective Amendment No. 22 (with respect to the Large-Cap Fund, the 
``Large-Cap Registration Statement'') and Post-Effective Amendment 
No. 23 (with respect to the Small-Cap Fund, the ``Small-Cap 
Registration Statement'') to the Trust's registration statement 
filed with the Commission on Form N-1A under the Securities Act of 
1933 (15 U.S.C. 77a), and under the 1940 Act, each dated October 4, 
2013 (File Nos. 333-179904 and 811-22649) (collectively, the 
``Registration Statements''). The description of the operation of 
the Trust and the Funds herein is based, in part, on the 
Registration Statements. 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. 29571 (File No. 812-
13601) (``Exemptive Order'').
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    Commentary .06 to Rule 8.600 provides that, if the investment 
adviser to the investment company issuing Managed Fund Shares is 
affiliated with a broker-dealer, such investment adviser shall erect a 
``fire wall'' between the investment adviser and the broker-dealer with 
respect to access to information concerning the composition and/or 
changes to such investment company portfolio. 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.\7\ Commentary

[[Page 155]]

.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 not registered as a broker-dealer but 
is affiliated with multiple broker-dealers and has implemented a ``fire 
wall'' with respect to such broker-dealers regarding access to 
information concerning the composition and/or changes to a Fund's 
portfolio.
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    \7\ An investment adviser to an open-end fund is required to be 
registered under the Investment Advisers Act of 1940 (the ``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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    In the event (a) the Adviser or any sub-adviser registers as a 
broker-dealer or becomes newly affiliated with a broker-dealer, or (b) 
any new adviser or sub-adviser is a registered broker-dealer, or 
becomes affiliated with a broker-dealer, it will implement a fire wall 
with respect to its relevant personnel or its broker-dealer affiliate 
regarding access to information concerning the composition and/or 
changes to a portfolio, and will be subject to procedures designed to 
prevent the use and dissemination of material non-public information 
regarding such portfolio.
iShares Enhanced International Large-Cap Fund
    According to the Large-Cap Registration Statement, the Fund will 
seek long-term capital appreciation. The Fund will seek to achieve its 
investment objective by investing, under normal circumstances \8\, at 
least 80% of its net assets in equity securities of international 
large-capitalization issuers. The Fund will seek to maintain strategic 
exposure to international large-capitalization stocks with targeted 
investment characteristics. BFA will utilize a proprietary investment 
process to assemble an investment portfolio from a defined group of 
international large-capitalization stocks based on certain quantitative 
investment characteristics.
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    \8\ The term ``under normal circumstances'' 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's proprietary investment process will begin with 
securities representing a defined investable universe of stocks of 
international large-capitalization issuers. The universe will then be 
subjected to rules-based screens designed to exclude securities with 
very low trading volume or very low prices. The stocks will then be 
scored based on quantitative metrics, including, but not limited to, 
cash earnings, earnings variability, leverage, price-to-book ratio and 
market capitalization. BFA will assemble a portfolio emphasizing those 
stocks with higher cash earnings, lower earnings variability, lower 
leverage, lower price-to-book ratio, and smaller market capitalization 
relative to other stocks in the investable universe. BFA will seek to 
ensure that the Fund avoids unnecessary turnover and minimizes sources 
of risk by taking into account volatilities of certain factors and by 
placing constraints on the weighting of sectors, industries, and 
issuers.
    The Fund will purchase publicly-traded exchange-listed common 
stocks of non-U.S. issuers. The Fund's investment in such stocks may be 
in the form of American Depositary Receipts (``ADRs''), Global 
Depositary Receipts (``GDRs'') and European Depositary Receipts 
(``EDRs'') (collectively, ``Depositary Receipts'').\9\ With respect to 
its investments in exchange-listed common stocks and Depositary 
Receipts of non-U.S. issuers, the Fund will invest at least 90% of its 
assets invested in such securities in exchange-listed common stocks and 
Depositary Receipts that trade in markets that are members of the 
Intermarket Surveillance Group (``ISG'') or are parties to a 
comprehensive surveillance sharing agreement with the Exchange.\10\
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    \9\ Depositary Receipts are receipts, typically issued by a bank 
or trust issuer, which evidence ownership of underlying securities 
issued by a non-U.S. issuer. For ADRs, the depository is typically a 
U.S. financial institution and the underlying securities are issued 
by a non-U.S. issuer. For other forms of Depositary Receipts, the 
depository may be a non-U.S. or a U.S. entity, and the underlying 
securities may be issued by a non-U.S. or a U.S. issuer. Depositary 
Receipts are not necessarily denominated in the same currency as 
their underlying securities. Generally, ADRs, issued in registered 
form, are designed for use in the U.S. securities markets, and EDRs, 
issued in bearer form, are designed for use in European securities 
markets. GDRs are tradable both in the United States and in Europe 
and are designed for use throughout the world.
    \10\ See note 32 and accompanying text, infra.
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    The Fund will generally invest in sponsored Depositary Receipts 
that are listed on ISG member exchanges and that BFA deems as liquid at 
time of purchase. In certain limited circumstances, the Fund may invest 
in unlisted or unsponsored Depositary Receipts, Depositary Receipts 
listed on non-ISG member exchanges, or Depositary Receipts that BFA 
deems illiquid at the time of purchase or for which pricing information 
is not readily available.\11\ The issuers of unlisted or unsponsored 
Depositary Receipts are not obligated to disclose material information 
in the United States. Therefore, there may be less information 
available regarding such issuers and there may be no correlation 
between available information and the market value of the Depositary 
Receipts.
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    \11\ Not more than 10% of the net assets of each Fund, in the 
aggregate, will be invested in (1) unlisted or unsponsored 
Depositary Receipts; (2) Depositary Receipts not listed on an 
exchange that is a member of the ISG or a party to a comprehensive 
surveillance sharing agreement with the Exchange; or (3) unlisted 
common stocks or common stocks not listed on an exchange that is a 
member of the ISG or a party to a comprehensive surveillance sharing 
agreement with the Exchange.
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iShares Enhanced International Small-Cap Fund
    According to the Small-Cap Registration Statement, the Fund will 
seek long-term capital appreciation. The Fund will seek to achieve its 
investment objective by investing, under normal circumstances,\12\ at 
least 80% of its net assets in equity securities of international 
small-capitalization issuers. The Fund will seek to maintain strategic 
exposure to international small-capitalization stocks with targeted 
investment characteristics. BFA will utilize a proprietary investment 
process to assemble an investment portfolio from a defined group of 
international small-capitalization stocks based on certain quantitative 
investment characteristics.
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    \12\ See note 8, supra.
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    The Fund's proprietary investment process will begin with 
securities representing a defined investable universe of stocks of 
international small-capitalization issuers. The universe will then be 
subjected to rules-based screens designed to exclude securities with 
very low trading volume or very low prices. The stocks will then be 
scored based on quantitative metrics, including, but not limited to, 
cash earnings, earnings variability, leverage, price-to-book ratio and 
market capitalization. BFA will assemble a

[[Page 156]]

portfolio emphasizing those stocks with higher cash earnings, lower 
earnings variability, lower leverage, lower price-to-book ratio, and 
smaller market capitalization relative to other stocks in the 
investable universe. BFA will seek to ensure that the Fund avoids 
unnecessary turnover and minimizes sources of risk by taking into 
account volatilities of certain factors and by placing constraints on 
the weighting of sectors, industries, and issuers.
    The Fund will purchase publicly-traded exchange-listed common 
stocks of non-U.S. issuers. To the extent the Fund invests in stocks of 
non-U.S. issuers, the Fund's investment in such stocks may be in the 
form of Depositary Receipts.\13\ With respect to its investments in 
exchange-listed common stocks and Depositary Receipts of non-U.S. 
issuers, the Fund will invest at least 90% of its assets invested in 
such securities in exchange-listed common stocks and Depositary 
Receipts that trade in markets that are members of the ISG or are 
parties to a comprehensive surveillance sharing agreement with the 
Exchange.\14\
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    \13\ See note 9, supra.
    \14\ See note 32 and accompanying text, infra.
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    The Fund will generally invest in sponsored Depositary Receipts 
that are listed on ISG member exchanges and that BFA deems as liquid at 
time of purchase. In certain limited circumstances, the Fund may invest 
in unlisted or unsponsored Depositary Receipts, Depositary Receipts 
listed on non-ISG member exchanges, or Depositary Receipts that BFA 
deems illiquid at the time of purchase or for which pricing information 
is not readily available.\15\ The issuers of unlisted or unsponsored 
Depositary Receipts are not obligated to disclose material information 
in the United States. Therefore, there may be less information 
available regarding such issuers and there may be no correlation 
between available information and the market value of the Depositary 
Receipts.
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    \15\ See note 11, supra.
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Other Investments
    While each Fund, under normal circumstances, will invest at least 
80% of its net assets in its investments as described above, a Fund may 
directly invest in certain other investments, as described below. A 
Fund may temporarily depart from its normal investment process,\16\ 
provided that the alternative, in the opinion of BFA, is consistent 
with a Fund's investment objective and is in the best interest of a 
Fund. However, BFA will not seek to actively time market movements.
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    \16\ Circumstances under which a Fund may temporarily depart 
from their normal investment process include, but are not limited 
to, 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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    A Fund may hold up to an aggregate amount of 15% of its net assets 
in illiquid securities (calculated at the time of investment), 
including Rule 144A securities deemed illiquid by the Adviser, 
consistent with Commission guidance.\17\ Each 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 a Fund's net assets are held 
in illiquid securities. Illiquid securities include securities subject 
to contractual or other restrictions on resale and other instruments 
that lack readily available markets as determined in accordance with 
Commission staff guidance.\18\
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    \17\ In reaching liquidity decisions, the Adviser may consider 
the following factors: The frequency of trades and quotes for the 
security; the number of dealers wishing to purchase or sell the 
security and the number of other potential purchasers; dealer 
undertakings to make a market in the security; and the nature of the 
security and the nature of the marketplace in which it trades (e.g., 
the time needed to dispose of the security, the method of soliciting 
offers and the mechanics of transfer).
    \18\ 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 fund. See Investment Company Act Release No. 
14983 (March 12, 1986), 51 FR 9773 (March 21, 1986) (adopting 
amendments to Rule 2a-7 under the 1940 Act); Investment Company Act 
Release No. 17452 (April 23, 1990), 55 FR 17933 (April 30, 1990) 
(adopting Rule 144A under the Securities Act of 1933).
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    Each Fund may invest in repurchase and reverse repurchase 
agreements. A repurchase agreement is an instrument under which the 
purchaser (i.e., a Fund) acquires the security and the seller agrees, 
at the time of the sale, to repurchase the security at a mutually 
agreed upon time and price, thereby determining the yield during the 
purchaser's holding period. Reverse repurchase agreements 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.
    Each Fund may invest in other short-term instruments, including 
money market instruments, on an ongoing basis to provide liquidity or 
for other reasons. Money market instruments are generally short-term 
investments that may include but are not limited to: (i) Shares of 
money market funds (including those advised by BFA or otherwise 
affiliated with BFA); (ii) obligations issued or guaranteed by the U.S. 
government, its agencies or instrumentalities (including government-
sponsored enterprises); (iii) negotiable certificates of deposit 
(``CDs''), bankers' acceptances, fixed-time deposits and other 
obligations of U.S. and non-U.S. banks (including non-U.S. branches) 
and similar institutions; (iv) commercial paper rated, at the date of 
purchase, ``Prime-1'' by Moody's Investors Service, Inc., ``F-1'' by 
Fitch Inc., or ``A-1'' by Standard & Poor's (``S&P''), or if unrated, 
of comparable quality as determined by BFA; (v) non-convertible 
corporate debt securities (e.g., bonds and debentures) with remaining 
maturities at the date of purchase of not more than 397 days and that 
satisfy the rating requirements set forth in Rule 2a-7 under the 1940 
Act; and (vi) short-term U.S. dollar-denominated obligations of non-
U.S. banks (including U.S. branches) that, in the opinion of BFA, are 
of comparable quality to obligations of U.S. banks which may be 
purchased by a Fund. Any of these instruments may be purchased on a 
current or forward-settled basis. Time deposits are non-negotiable 
deposits maintained in banking institutions for specified periods of 
time at stated interest rates.
    Each Fund may enter into currency forward contracts for hedging and 
trade settlement purposes.\19\ Each Fund may invest in total return 
swaps on single securities in limited circumstances, including as a 
means to gain exposure to securities that trade on exchanges that are 
not members of ISG. The credit risk of counterparties to swaps and 
forward contracts will be assessed and monitored in accordance with 
policies and procedures adopted by the Adviser and such contracts will 
be collateralized.\20\ Each Fund also may

[[Page 157]]

invest in futures contracts based on currencies, stock indexes and 
single stocks. The Funds will not invest in options.
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    \19\ A forward currency contract is an obligation to purchase or 
sell a specific currency at a future date, which may be any fixed 
number of days from the date of the contract agreed upon by the 
parties, at a price set at the time of the contract.
    \20\ The Adviser has implemented policies and procedures to 
assess the creditworthiness of prospective and existing derivatives 
counterparties. Derivatives transactions are conducted only with 
approved counterparties with whom appropriate documentation is 
executed. Exposure to counterparties is independently and actively 
monitored. Where appropriate, collateral is posted and actively 
managed to reduce counterparty credit exposure.
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    Each Fund may invest a small portion of its assets in exchange-
listed tracking stocks. A tracking stock is a separate class of common 
stock whose value is linked to a specific business unit or operating 
division within a larger company and is designed to ``track'' the 
performance of such business unit or division. The tracking stock may 
pay dividends to shareholders independent of the parent company. The 
parent company, rather than the business unit or division, generally is 
the issuer of tracking stock. However, holders of the tracking stock 
may not have the same rights as holders of the company's common stock.
    Each Fund will be classified as a ``diversified'' investment 
company under the 1940 Act.\21\
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    \21\ The diversification standard is set forth in Section 
5(b)(1) of the 1940 Act.
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    Each Fund will not purchase the securities of issuers conducting 
their principal business activity in the same industry if, immediately 
after the purchase and as a result thereof, the value of a Fund's 
investments in that industry would equal or exceed 25% of the current 
value of a Fund's total assets, provided that this restriction does not 
limit a Fund's: (i) Investments in securities of other investment 
companies, (ii) investments in securities issued or guaranteed by the 
U.S. government, its agencies or instrumentalities, or (iii) 
investments in repurchase agreements collateralized by U.S. government 
securities.\22\
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    \22\ 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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    Each Fund intends to qualify for and to elect treatment as a 
separate regulated investment company (``RIC'') under Subchapter M of 
the Internal Revenue Code.\23\
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    \23\ 26 U.S.C. 851 et seq.
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    Each Fund's investments will be consistent with its investment 
objective and will not be used to enhance leverage.
Creation and Redemption of Shares
    According to the Registration Statements, each Fund will issue and 
redeem Shares on a continuous basis at net asset value (``NAV'') only 
in large specified numbers of Shares called a ``Creation Unit.''
    The consideration for purchase of Creation Units of each Fund 
generally will consist of the in-kind deposit of a designated portfolio 
of securities (including any portion of such securities for which cash 
may be substituted) (i.e., the Deposit Securities) and the Cash 
Component computed as described below. Together, the Deposit Securities 
and the Cash Component constitute the ``Fund Deposit,'' which will be 
applicable (subject to possible amendment or correction) to creation 
requests received in proper form. The Fund Deposit represents the 
minimum initial and subsequent investment amount for a Creation Unit of 
a Fund.
    The Cash Component will be an amount equal to the difference 
between the NAV of the Shares (per Creation Unit) and the ``Deposit 
Amount,'' which is an amount equal to the market value of the Deposit 
Securities, and serve to compensate for any differences between the NAV 
per Creation Unit and the Deposit Amount.
    BFA will make available through the National Securities Clearing 
Corporation (``NSCC'') on each business day, prior to the opening of 
business on the Exchange, the list of names and the required number or 
par value of each Deposit Security and the amount of the Cash Component 
to be included in the current Fund Deposit (based on information as of 
the end of the previous business day) for the applicable Fund. Such 
Fund Deposit will be applicable, subject to any adjustments as 
described below, in order to effect purchases of Creation Units of 
Shares of a Fund until such time as the next-announced Fund Deposit is 
made available.
    The identity and number or par value of the Deposit Securities may 
change pursuant to changes in the composition of a Fund's portfolio and 
as rebalancing adjustments and corporate action events occur from time 
to time. The composition of the Deposit Securities may also change in 
response to adjustments to the weighting or composition of the 
component securities constituting a Fund's portfolio.
    The portfolio of securities required for purchase of a Creation 
Unit may not be identical to the portfolio of securities a Fund will 
deliver upon redemption of Fund Shares. The Deposit Securities and Fund 
Securities (as defined below), as the case may be, in connection with a 
purchase or redemption of a Creation Unit, generally will correspond 
pro rata to the securities held by such Fund.
    Each Fund reserves the right to permit or require the substitution 
of 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 that may not be eligible for transfer through 
the Depository Trust Company (``DTC''). Each Fund also reserves the 
right to permit or require a ``cash in lieu'' amount in certain other 
circumstances, including circumstances in which (i) the delivery of the 
Deposit Security by the authorized participant would be restricted 
under applicable securities laws or (ii) the delivery of the Deposit 
Security to the authorized participant would result in the disposition 
of the Deposit Security by the authorized participant becoming 
restricted under applicable securities laws, or in certain other 
situations.
    Creation Units may be purchased only by or through a DTC 
participant that has entered into an authorized participant agreement 
(as described in the Registration Statements) with the Distributor. 
Except as noted below, all creation orders must be placed for one or 
more Creation Units and must be received by the Distributor in proper 
form no later than the closing time of the regular trading session of 
the Exchange (normally 4:00 p.m., Eastern time) 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 a Fund as next determined on 
such date after receipt of the order in proper form. Orders requesting 
substitution of a ``cash in lieu'' amount generally must be received by 
the Distributor no later than 2:00 p.m., Eastern time. On days when the 
Exchange or other markets close earlier than normal, a Fund may require 
orders to create Creation Units to be placed earlier in the day. A 
standard creation transaction fee will be imposed to offset the 
transfer and other transaction costs associated with the issuance of 
Creation Units.
    Shares of a Fund may be redeemed only in Creation Units at their 
NAV next determined after receipt of a redemption request in proper 
form by the Distributor and only on a business day. BFA will make 
available through the NSCC, prior to the opening of business on the 
Exchange on each business day, the designated portfolio of securities 
(including any portion of such securities for which cash may be 
substituted) that will be applicable (subject to possible amendment or 
correction) to redemption requests received in proper form on that day 
(``Fund Securities''). Fund Securities received on redemption may not 
be identical to Deposit

[[Page 158]]

Securities that are applicable to creations of Creation Units.
    Unless cash redemptions are available or specified for a Fund, the 
redemption proceeds for a Creation Unit generally will consist of a 
specified amount of cash, Fund Securities, plus additional cash in an 
amount equal to the difference between the NAV of the Shares being 
redeemed, as next determined after the receipt of a request in proper 
form, and the value of the specified amount of cash and Fund 
Securities, less a redemption transaction fee. Each Fund currently will 
redeem Shares for Fund Securities, but each Fund reserves the right to 
utilize a ``cash'' option for redemption of Shares.
    A standard redemption transaction fee will be imposed to offset 
transfer and other transaction costs that may be incurred by a Fund.
    Redemption requests for Creation Units of a Fund must be submitted 
to the Distributor by or through an authorized participant no later 
than 4:00 p.m. Eastern time on any business day, in order to receive 
that day's NAV. The authorized participant must transmit the request 
for redemption in the form required by a Fund to the Distributor in 
accordance with procedures set forth in the authorized participant 
agreement.
Determination of Net Asset Value
    According to the Registration Statements, the NAV of each Fund 
normally will be determined once each business day, generally as of the 
regularly scheduled close of business of the New York Stock Exchange 
(``NYSE'') (normally 4:00 p.m., Eastern time) on each day that the NYSE 
is open for trading, based on prices at the time of closing provided 
that (a) any Fund assets or liabilities denominated in currencies other 
than the U.S. dollar will be translated into U.S. dollars at the 
prevailing market rates on the date of valuation as quoted by one or 
more data service providers, and (b) U.S. fixed-income assets may be 
valued as of the announced closing time for trading in fixed-income 
assets in a particular market or exchange. The NAV per Share of each 
Fund will be calculated by dividing the value of the net assets of each 
Fund (i.e., the value of its total assets less total liabilities) by 
the total number of outstanding Shares of a Fund, generally rounded to 
the nearest cent.
    The value of the securities and other assets held by each Fund, and 
its liabilities, will be determined pursuant to valuation policies and 
procedures approved by the Trust's Board of Directors/Trustees 
(``Board''). Each Fund's assets and liabilities will be valued 
primarily on the basis of market quotations.
    Equity investments, including common stocks, tracking stocks, and 
sponsored and unsponsored Depositary Receipts, and investments in 
futures, including currency, stock index and single stock futures, will 
be valued at market value, which is generally determined using the last 
reported official closing price or last trading price on the exchange 
or other market on which the security or futures contract is primarily 
traded at the time of valuation. Swaps and currency forward contracts 
generally will be valued based on quotations from market makers or by a 
pricing service in accordance with valuation procedures approved by the 
Board. Repurchase agreements and reverse repurchase agreements are 
generally valued at par. Other short-term instruments will generally be 
valued at the last available bid price received from independent 
pricing services. In determining the value of a fixed income 
investment, pricing services may use certain information with respect 
to transactions in such investments, quotations from dealers, pricing 
matrixes, market transactions in comparable investments, various 
relationships observed in the market between investments, and 
calculated yield measures. In certain circumstances, short-term 
instruments may be valued on the basis of amortized cost.
    Generally, trading in non-U.S. securities, U.S. government 
securities, money market instruments, certain fixed-income securities 
and certain derivatives will be substantially completed each day at 
various times prior to the close of business on the NYSE. The values of 
such securities used in computing the NAV of a Fund will be determined 
as of such times.
    When market quotations are not readily available or are believed by 
BFA to be unreliable, a Fund's investments will be valued at fair 
value. Fair value determinations are made by BFA in accordance with 
policies and procedures approved by the Trust's Board and in accordance 
with the 1940 Act. BFA may conclude that a market quotation is not 
readily available or is unreliable if a security or other asset or 
liability does not have a price source due to its lack of liquidity, if 
a market quotation differs significantly from recent price quotations 
or otherwise no longer appears to reflect fair value, where the 
security or other asset or liability is thinly traded, or where there 
is a significant event subsequent to the most recent market quotation. 
A ``significant event'' is an event that, in the judgment of BFA, is 
likely to cause a material change to the closing market price of the 
asset or liability held by a Fund. Non-U.S. securities whose values are 
affected by volatility that occurs in U.S. markets on a trading day 
after the close of foreign securities markets may be fair valued.\24\
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    \24\ According to the Registration Statements, fair value 
represents a good faith approximation of the value of an asset or 
liability. The fair value of an asset or liability held by a Fund is 
the amount a Fund might reasonably expect to receive from the 
current sale of that asset or the cost to extinguish that liability 
in an arm's-length transaction. Valuing a Fund's investments using 
fair value pricing will result in prices that may differ from 
current market valuations and that may not be the price at which 
those investments could have been sold during the period in which 
the particular fair values were used.
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Availability of Information
    The Funds' Web site (www.ishares.com), which will be publicly 
available prior to the public offering of Shares, will include a form 
of the prospectus for a Fund that may be downloaded. The Funds' Web 
site will include additional quantitative information updated on a 
daily basis, including, for the Funds, (1) the prior business day's 
reported closing price, NAV and mid-point of the bid/ask spread at the 
time of calculation of such NAV (the ``Bid/Ask Price''),\25\ 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, each 
Fund will disclose on its Web site the Disclosed Portfolio that will 
form the basis for such Fund's calculation of NAV at the end of the 
business day.\26\
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    \25\ The Bid/Ask Price of each Fund will be determined using the 
mid-point of the highest bid and the lowest offer on the Exchange as 
of the time of calculation of a Fund's NAV. The records relating to 
Bid/Ask Prices will be retained by the Funds and their service 
providers.
    \26\ Under accounting procedures followed by the Funds, trades 
made on the prior business day (``T'') will be booked and reflected 
in NAV on the current business day (``T+1''). Accordingly, the Funds 
will be able to disclose at the beginning of the business day the 
portfolio that will form the basis for the NAV calculation at the 
end of the business day.
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    On a daily basis, each Fund will disclose for each portfolio 
security and other financial instrument of each Fund the following 
information on the Funds' Web site: Ticker symbol (if applicable), name 
of security and financial instrument, number of shares and dollar value 
of securities and financial instruments held in the portfolio, and

[[Page 159]]

percentage weighting of the security and financial instrument in the 
portfolio. The Web site information will be publicly available at no 
charge.
    In addition, a basket composition file, which includes the security 
names and share quantities required to be delivered in exchange for 
each Fund's Shares, together with estimates and actual cash components, 
will be publicly disseminated daily prior to the opening of the NYSE 
via NSCC. The basket represents one Creation Unit of a Fund.
    Investors can also obtain the Trust's Statement of Additional 
Information (``SAI''), each 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 are available free upon request from the Trust, and 
those documents and the Form N-CSR and Form N-SAR may be viewed on-
screen or downloaded from the Commission's Web site at www.sec.gov. 
Information regarding market price and trading volume of the Shares 
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 of each Fund will be available via the Consolidated Tape 
Association (``CTA'') high-speed line. In addition, the Indicative 
Optimized Portfolio Value (``IOPV''),\27\ which is 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.\28\ The 
dissemination of the IOPV, together with the Disclosed Portfolio, will 
allow investors to determine the value of the underlying portfolio of 
each Fund on a daily basis and to provide a close estimate of that 
value throughout the trading day. The intra-day, closing and settlement 
prices of equity securities, including common stocks, tracking stocks, 
and sponsored and unsponsored Depositary Receipts, will be readily 
available from the securities exchanges trading such securities, 
automated quotation systems, published or other public sources, or on-
line information services such as Bloomberg or Reuters. Price 
information regarding currency, stock index and single stock futures is 
available from the exchange on which such futures trade as well as from 
major market data vendors. Price information regarding unsponsored 
Depositary Receipts; swaps; currency forward contracts; and short-term 
instruments will be available from major market data vendors.
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    \27\ According to the Registration Statements, the IOPV will be 
based on the current value of the securities and/or cash required to 
be deposited in exchange for a Creation Unit using market data 
converted into U.S. dollars at the current currency rates. The IOPV 
price will be based on quotes and closing prices from the 
securities' local market and may not reflect events that occur 
subsequent to the local market's close. Premiums and discounts 
between the IOPV and the market price may occur. The IOPV will not 
necessarily reflect the precise composition of the current portfolio 
of securities held by a Fund at a particular point in time or the 
best possible valuation of the current portfolio. Therefore, the 
IOPV should not be viewed as a ``real-time'' update of a Fund's NAV, 
which will be calculated only once a day. The quotations of certain 
Fund holdings may not be updated during U.S. trading hours if such 
holdings do not trade in the United States.
    \28\ Currently, it is the Exchange's understanding that several 
major market data vendors display and/or make widely available IOPVs 
taken from CTA or other data feeds.
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    Additional information regarding the Trust and the Shares, 
including investment strategies, risks, creation and redemption 
procedures, fees, portfolio holdings disclosure policies, distributions 
and taxes is included in the Registration Statements. All terms 
relating to the Funds that are referred to, but not defined in, this 
proposed rule change are defined in the Registration Statements.
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 Funds.\29\ Trading in Shares of a 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 a Fund; or 
(2) whether other unusual conditions or circumstances detrimental to 
the maintenance of a fair and orderly market are present. Trading in 
the Shares will be subject to NYSE Arca Equities Rule 8.600(d)(2)(D), 
which sets forth circumstances under which Shares of a Fund may be 
halted.
---------------------------------------------------------------------------

    \29\ See NYSE Arca Equities Rule 7.12.
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Trading Rules
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. Shares will trade on 
the NYSE Arca Marketplace from 4:00 a.m. to 8:00 p.m. Eastern time in 
accordance with NYSE Arca Equities Rule 7.34 (Opening, Core, and Late 
Trading Sessions). The Exchange has appropriate rules to facilitate 
transactions in the Shares during all trading sessions. As provided in 
NYSE Arca Equities Rule 7.6, Commentary .03, the minimum price 
variation (``MPV'') for quoting and entry of orders in equity 
securities traded on the NYSE Arca Marketplace is $0.01, with the 
exception of securities that are priced less than $1.00 for which the 
MPV for order entry is $0.0001.
    The Shares will conform to the initial and continued listing 
criteria under NYSE Arca Equities Rule 8.600. The Exchange represents 
that, for initial and/or continued listing, the Trust will be in 
compliance with Rule 10A-3 \30\ under the Act, as provided by NYSE Arca 
Equities Rule 5.3. A minimum of 100,000 Shares for each Fund 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 of each Fund will be calculated daily and that 
the NAV and the Disclosed Portfolio as defined in NYSE Arca Equities 
Rule 8.600(c)(2) will be made available to all market participants at 
the same time.
---------------------------------------------------------------------------

    \30\ 17 CFR 240.10A-3.
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Surveillance
    The Exchange represents that trading in the Shares will be subject 
to the existing surveillance procedures administered by the Financial 
Industry Regulatory Authority (``FINRA'') on behalf of the Exchange, 
which are designed to detect violations of Exchange rules and 
applicable federal securities laws.\31\ 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.
---------------------------------------------------------------------------

    \31\ FINRA surveils trading on the Exchange pursuant to a 
regulatory services agreement. The Exchange is responsible for 
FINRA's performance under this regulatory services agreement.
---------------------------------------------------------------------------

    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.
    FINRA, on behalf of the Exchange, will communicate as needed 
regarding

[[Page 160]]

trading in the Shares of the Funds, as well as underlying equity 
securities (including exchange-listed Depositary Receipts and tracking 
stocks) and futures with other markets and other entities that are 
members of the ISG, and FINRA, on behalf of the Exchange, may obtain 
trading information regarding trading in the Shares of the Funds as 
well as underlying equity securities and futures from such markets and 
other entities. The Exchange may obtain information regarding trading 
in the Shares of the Funds as well as underlying equity securities 
(including exchange-listed Depositary Receipts and tracking stocks) and 
futures from ISG member markets or markets with which the Exchange has 
in place a comprehensive surveillance sharing agreement.\32\
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    \32\ 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 a Fund may trade on markets that are members 
of ISG or with which the Exchange has in place a comprehensive 
surveillance sharing agreement.
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    To the extent that a Fund invests in futures, not more than 10% of 
the weight of such futures contracts held by a Fund in the aggregate 
would consist of components whose principal trading market is not a 
member of ISG or is a market with which the Exchange does not have a 
comprehensive surveillance sharing agreement.
    Not more than 10% of the net assets of each Fund, in the aggregate, 
will be invested in (1) unlisted or unsponsored Depositary Receipts; 
(2) Depositary Receipts not listed on an exchange that is a member of 
the ISG or a party to a comprehensive surveillance sharing agreement 
with the Exchange; or (3) unlisted common stocks or common stocks not 
listed on an exchange that is a member of the ISG or a party to a 
comprehensive surveillance sharing agreement with the Exchange.
    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its 
Equity Trading Permit (``ETP'') Holders in an Information Bulletin 
(``Bulletin'') of the special characteristics and risks associated with 
trading the Shares. Specifically, the Bulletin will discuss the 
following: (1) The procedures for purchases and redemptions of Shares 
in Creation Unit aggregations (and that Shares are not individually 
redeemable); (2) NYSE Arca Equities Rule 9.2(a), which imposes a duty 
of due diligence on its ETP Holders to learn the essential facts 
relating to every customer prior to trading the Shares; (3) the risks 
involved in trading the Shares during the Opening and Late Trading 
Sessions when an updated IOPV will not be calculated or publicly 
disseminated; (4) how information regarding the IOPV is disseminated; 
(5) the requirement that ETP Holders deliver a prospectus to investors 
purchasing newly issued Shares prior to or concurrently with the 
confirmation of a transaction; and (6) trading information.
    In addition, the Bulletin will reference that each Fund is subject 
to various fees and expenses described in the Registration Statements. 
The Bulletin will discuss any exemptive, no-action, and interpretive 
relief granted by the Commission from any rules under the Act. The 
Bulletin will also disclose that the NAV for the Shares will be 
calculated after 4:00 p.m. Eastern time each trading day.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \33\ that an exchange have rules that 
are designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to remove 
impediments to, and perfect the mechanism of a free and open market 
and, in general, to protect investors and the public interest.
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    \33\ 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 has implemented a 
``fire wall'' with respect to its affiliated broker-dealers regarding 
access to information concerning the composition and/or changes to a 
Fund's portfolios. FINRA, on behalf of the Exchange, will communicate 
as needed regarding trading in the Shares of the Funds, as well as 
underlying equity securities (including exchange-listed Depositary 
Receipts and tracking stocks) and futures with other markets and other 
entities that are members of the ISG, and FINRA, on behalf of the 
Exchange, may obtain trading information regarding trading in the 
Shares of the Funds as well as underlying equity securities and futures 
from such markets and other entities. The Exchange may obtain 
information regarding trading in the Shares of the Funds as well as 
underlying equity securities (including exchange-listed Depositary 
Receipts and tracking stocks) and futures from ISG member markets or 
markets with which the Exchange has in place a comprehensive 
surveillance sharing agreement. The Funds will not invest in options. 
To the extent that a Fund invests in futures, not more than 10% of the 
weight of such futures contracts held by a Fund in the aggregate would 
consist of components whose principal trading market is not a member of 
ISG or is a market with which the Exchange does not have a 
comprehensive surveillance sharing agreement. Not more than 10% of the 
net assets of each Fund, in the aggregate, will be invested in (1) 
unlisted or unsponsored Depositary Receipts; (2) Depositary Receipts 
not listed on an exchange that is a member of the ISG or a party to a 
comprehensive surveillance sharing agreement with the Exchange; or (3) 
unlisted common stocks or common stocks not listed on an exchange that 
is a member of the ISG or a party to a comprehensive surveillance 
sharing agreement with the Exchange.
    The Adviser has implemented policies and procedures to assess the 
creditworthiness of prospective and existing derivatives 
counterparties. Derivatives transactions are conducted only with 
approved counterparties with whom appropriate documentation is 
executed. Exposure to counterparties is independently and actively 
monitored. Where appropriate, collateral is posted and actively managed 
to reduce counterparty credit exposure. A Fund may hold up to an 
aggregate amount of 15% of its net assets in illiquid securities 
(calculated at the time of investment), including Rule 144A securities 
deemed illiquid by the Adviser, consistent with Commission guidance.
    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 of each Fund will be calculated daily and 
that the NAV and the Disclosed Portfolio for each Fund will be made 
available to all market participants at the same time. In addition, a 
large amount of information is publicly available regarding the Funds 
and the Shares, thereby promoting market transparency. Moreover, the 
IOPV will be widely disseminated by one or more major market data 
vendors at least every

[[Page 161]]

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 Funds will disclose on their Web site the 
Disclosed Portfolio that will form the basis for a 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 Funds 
will include a form of the prospectus for the Funds 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 a 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 Shares of a Fund may be halted. In addition, 
as noted above, investors will have ready access to information 
regarding a Fund's holdings, the IOPV, the Disclosed Portfolio, and 
quotation and last sale information for the Shares.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
additional types of actively-managed exchange-traded products that will 
enhance competition among market participants, to the benefit of 
investors and the marketplace. As noted above, FINRA, on behalf of the 
Exchange, will communicate as needed regarding trading in the Shares of 
the Funds, as well as underlying equity securities (including exchange-
listed Depositary Receipts and tracking stocks) and futures with other 
markets and other entities that are members of the ISG, and FINRA, on 
behalf of the Exchange, may obtain trading information regarding 
trading in the Shares of the Funds as well as underlying equity 
securities and futures from such markets and other entities. The 
Exchange may obtain information regarding trading in the Shares of the 
Funds as well as underlying equity securities (including exchange-
listed Depositary Receipts and tracking stocks) and futures from ISG 
member markets or markets with which the Exchange has in place a 
comprehensive surveillance sharing agreement. In addition, as noted 
above, investors will have ready access to information regarding a 
Fund's holdings, the IOPV, the Disclosed Portfolio, and quotation and 
last sale information for the Shares. The proposed rule change would 
benefit investors by providing them with additional choice of 
transparent and tradeable products.

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 purpose of the Act. The Exchange notes that the 
proposed rule change will facilitate the listing and trading of other 
actively-managed exchange-traded products that hold equity securities 
and will enhance competition among market participants, to the benefit 
of investors and the marketplace.

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 up to 90 days after 
publication (i) as the Commission may designate if it finds such longer 
period to be appropriate and publishes its reasons for so finding or 
(ii) as to which the self-regulatory organization consents, the 
Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:
Electronic Comments
     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2013-138 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-2013-138. 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 
10:00 a.m. and 3:00 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-2013-138 and should 
be submitted on or before January 23, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\34\
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    \34\ 17 CFR 200.30-3(a)(12).
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Lynn Powalski,
Deputy Secretary.
[FR Doc. 2013-31372 Filed 12-31-13; 8:45 am]
BILLING CODE 8011-01-P


