[Federal Register Volume 77, Number 7 (Wednesday, January 11, 2012)]
[Notices]
[Pages 1761-1764]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-322]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66112; File No. SR-NYSEArca-2011-80]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting 
Approval of Proposed Rule Change To List and Trade Shares of the 
Rockledge SectorSAM ETF Under NYSE Arca Equities Rule 8.600

January 5, 2012.

I. Introduction

    On November 3, 2011, NYSE Arca, Inc. (``Exchange'' or ``NYSE 
Arca'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to list and trade shares (``Shares'') of the 
Rockledge SectorSAM ETF (``Fund'') under NYSE Arca Equities Rule 8.600. 
The proposed rule change was published in the Federal Register on 
November 23, 2011.\3\ The Commission received no comments on the 
proposal. This order grants approval of the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 65778 (November 17, 
2011), 76 FR 72474 (``Notice'').
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II. Description of the Proposal

    The Exchange proposes to list and trade the Shares of the Fund 
pursuant to NYSE Arca Equities Rule 8.600, which governs the listing 
and trading of Managed Fund Shares on the Exchange. The Shares will be 
offered by AdvisorShares Trust (``Trust''), a statutory trust organized 
under the laws of the State of Delaware and registered with the 
Commission as an open-end management investment company.\4\ The 
investment adviser to the Fund is AdvisorShares Investments, LLC 
(``Adviser''). Rockledge Advisers LLC serves as investment sub-adviser 
to the Fund (``Rockledge'' or ``Sub-Adviser'') and provides day-to-day 
portfolio management of the Fund. Foreside Fund Services, LLC is the 
principal underwriter and distributor of the Fund's Shares. The Bank of 
New York Mellon Corporation serves as administrator, custodian, and 
transfer agent for the Fund. The Exchange states that neither the 
Adviser nor the Sub-Adviser is affiliated with a broker-dealer.\5\
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    \4\ The Trust is registered under the Investment Company Act of 
1940 (``1940 Act''). On April 11, 2011, the Trust filed with the 
Commission Post-Effective Amendment No. 23 to Form N-1A under the 
Securities Act of 1933 (15 U.S.C. 77a) and under the 1940 Act 
relating to the Fund (File Nos. 333-157876 and 811-22110) 
(``Registration Statement''). In addition, the Commission has issued 
an order granting exemptive relief to the Trust under the 1940 Act. 
See Investment Company Act Release No. 29291 (May 28, 2010) (File 
No. 812-13677) (``Exemptive Order'').
    \5\ See Commentary .06 to NYSE Arca Equities Rule 8.600. The 
Exchange represents that, in the event (a) the Adviser or Sub-
Adviser becomes newly affiliated with a broker-dealer, or (b) any 
new adviser or sub-adviser becomes affiliated with a broker-dealer, 
such adviser and/or sub-adviser 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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Description of the Fund

    The Fund is considered a ``fund-of-funds'' that seeks to achieve 
its investment objective by primarily investing in other U.S.-listed 
exchange-traded funds (``Underlying ETFs'') that offer diversified 
exposure to U.S. large capitalization (generally, Standard & Poor 500 
companies) sectors. The Sub-Adviser will use ``Sector Scoring and 
Allocation Methodology'' (``SectorSAM''), which is a proprietary 
quantitative analysis, to forecast each sector's excess return within a 
specific time horizon. The Sub-Adviser will seek to achieve the Fund's 
investment objective by buying (taking long positions in) Underlying 
ETFs intended to capture the performance of the most promising sectors 
and selling (establishing short positions) in Underlying ETFs with the 
intent of profiting from the least promising sectors of U.S. large 
capitalization broad market securities. The strategy is designed to 
generate higher returns in a higher interest rate environment, which is 
often associated with increased inflation.\6\
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    \6\ The Underlying ETFs are registered under the 1940 Act and 
will be listed and traded in the U.S. on registered exchanges.
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    Under normal circumstances,\7\ the Fund intends to invest equal 
dollar amounts to obtain both long and short exposure in the market at 
each major rebalancing point (on at least a monthly basis). When fully 
invested, the Fund will typically be both 100% long and 100% short of 
total portfolio value. The Sub-Adviser, in its discretion, may choose 
an additional long or short bias of up to 50% exposure, or may choose 
to hold amounts in cash or cash equivalents depending on its view of 
market conditions.
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    \7\ 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 Underlying ETFs in which the Fund will invest will primarily be 
ETFs that hold substantially all of their assets in securities 
representing a specific index. The main risk of investing in index-
based investments is the same as investing in a portfolio of securities 
comprising the index. The market prices of index-based investments will 
fluctuate in accordance with both changes in the market value of their 
underlying portfolio securities and due to supply and demand for the 
instruments on the exchanges on which they are traded (which may result 
in their trading at a discount or premium to their net asset values 
(``NAVs'')).
    The Fund, through its investment in Underlying ETFs, may invest in 
equity securities. Equity securities represent ownership interests in a 
company or partnership and consist of common stocks, preferred stocks, 
warrants to acquire common stock, securities convertible into common 
stock, and investments in master limited partnerships.
    The Fund, through its investment in Underlying ETFs, may invest in 
American Depositary Receipts (``ADRs''), as well as Global Depositary 
Receipts (``GDRs'', together with ADRs, ``Depositary Receipts''), which 
are certificates evidencing ownership of shares of a foreign issuer. 
Depositary Receipts may be sponsored or unsponsored. These certificates 
are issued by depositary banks and generally trade on an established 
market in the United States or elsewhere. The underlying shares are 
held in trust by a custodian bank or similar financial institution in 
the issuer's home country. The depositary bank may not have physical 
custody of the underlying securities at all times and may charge fees 
for various services, including forwarding dividends and interest and 
corporate actions. ADRs are alternatives to directly purchasing the 
underlying foreign securities in their national markets and currencies. 
However, ADRs

[[Page 1762]]

continue to be subject to many of the risks associated with investing 
directly in foreign securities.
    Through Underlying ETFs, the Fund may invest in the equity 
securities of foreign issuers, including the securities of foreign 
issuers in emerging market countries. Emerging or developing markets 
exist in countries that are considered to be in the initial stages of 
industrialization. The risks of investing in these markets are similar 
to the risks of international investing in general, although the risks 
are greater in emerging and developing markets. Countries with emerging 
or developing securities markets tend to have economic structures that 
are less stable than countries with developed securities markets. This 
is because their economies may be based on only a few industries and 
their securities markets may trade a small number of securities. Prices 
on these exchanges tend to be volatile, and securities in these 
countries historically have offered greater potential for gain (as well 
as loss) than securities of companies located in developed countries.
    The Fund, through its investment in Underlying ETFs, may invest in 
closed-end funds, pooled investment vehicles that are registered under 
the 1940 Act and whose shares are listed and traded on U.S. national 
securities exchanges.
    The Fund, through its investment in Underlying ETFs, may invest in 
shares of real estate investment trusts (``REITs''). REITs are pooled 
investment vehicles which invest primarily in real estate or real 
estate related loans. REITs are generally classified as equity REITs, 
mortgage REITs or a combination of equity and mortgage REITs.
    The Fund intends to invest primarily in the securities of 
Underlying ETFs consistent with the requirements of Section 12(d)(1) of 
the 1940 Act, or any rule, regulation or order of the Commission or 
interpretation thereof.
    The Underlying ETFs may invest in complex securities such as equity 
options, index options, repurchase agreements, foreign currency 
contracts and swaps. The Fund does not intend to invest in leveraged, 
inverse or inverse leveraged Underlying ETFs.

Investment Process

    The following describes the Sub-Adviser's investment process:
    (a) Quantitative Analysis. Rockledge has developed a proprietary 
SectorSAMTM quantitative research and evaluation process 
that forecasts economic excess sector returns (over/under the Standard 
& Poor's 500 Index (``S&P 500 Index'') for a given timeframe). Absolute 
returns may be captured by investing long in sectors which are 
forecasted to outperform the overall U.S. equity market and shorting 
sectors that are forecasted to underperform the market.
    SectorSAM analysis provides for individual sector forecasts through 
analysis of over 200 fundamental, macroeconomic, and technical factors 
influencing stock returns. The SectorSAM process creates a basket of 
factors that are meaningful to each economic sector within the S&P 500 
Index. Rockledge reviews the information to make portfolio decisions on 
behalf of the Fund.
    (b) Long/Short Portfolio Construction. The Fund's portfolio will be 
comprised primarily of an equal dollar amount of long and short 
positions based on the Rockledge relative value strategy.\8\ Rockledge 
will actively manage and adjust the positions in its long and short 
portfolios as dictated by its proprietary SectorSAM quantitative 
research and evaluation process.
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    \8\ The following convictions constitute the guiding philosophy 
for the relative investment strategy pursued by the Sub-Adviser:
    1. The U.S. economy goes through various growth and contraction 
stages and the various economic sectors reflect these changes.
    2. Large capitalization stocks are heavily researched and well 
known to equity analysts. The valuations and pricing of these stocks 
are very close to efficient. It is difficult to make significant 
outsized returns by investing in individual large capitalization 
stocks.
    3. The valuation of each U.S economic sector is directly based 
on the aggregation of valuation of the individual companies making 
up that sector. Up to 90% of an individual stock's performance can 
be attributed to the return of the sector that stock is in.
    4. Sector investing provides a better risk/return profile than 
individual stock investing. Sector investing eliminates company 
specific risk as sectors are inherently diversified.
    5. Appropriately and correctly forecasted, one can capture both 
the upside potential of the outperforming sectors and downside loss 
of the underperforming sectors, relative to a broad market index.
    6. There can be significant performance dispersion among various 
economic sectors. The ability to identify which sectors will 
outperform the broad market and which will underperform over a 
specified time period can lead to considerable cumulative absolute 
returns.
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    (c) Risk Management. The Fund's core long/short portfolio 
construction generally will be dollar neutral, where the value of all 
long positions is equal to the value of all short positions. This 
provides a high degree of inherent risk control, especially when stock 
markets are falling. The short positions provide protection against 
market declines, and may offer the potential to generate positive 
returns when markets are falling if the short positions fall more than 
the long positions. Rockledge will use a number of methods to monitor 
and manage the inherent risk of the portfolio including the tracking of 
relative sector exposure, volatility, and sector correlations. 
Rockledge proactively will monitor its positions, exposure and 
performance attribution on a real-time basis to identify, monitor and 
mitigate the most threatening risks to the Fund's ability to attain its 
investment objective.
    The Fund's portfolio holdings will be disclosed on the Trust's Web 
site daily after the close of trading on the Exchange and prior to the 
opening of trading on the Exchange the following day.

Other Investments of the Fund

    To respond to adverse market, economic, political, or other 
conditions,\9\ the Fund may invest 100% of its total assets, without 
limitation, in high-quality debt securities and money market 
instruments either directly or through Underlying ETFs. The Fund may be 
invested in these instruments for extended periods, depending on the 
Sub-Adviser's assessment of market conditions. These debt securities 
and money market instruments include shares of other mutual funds, 
commercial paper, certificates of deposit, bankers' acceptances, U.S. 
Government securities,\10\ repurchase

[[Page 1763]]

agreements,\11\ and bonds that are BBB or higher.
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    \9\ Adverse market conditions would include large downturns in 
the broad market value of two or more times current average 
volatility, where the Sub-Adviser views such downturns as likely to 
continue for an extended period of time. Adverse economic conditions 
would include significant negative results in factors deemed 
critical at the time by the Sub-Adviser, including significant 
negative results regarding unemployment, Gross Domestic Product, 
consumer spending or housing numbers. Adverse political conditions 
would include events such as government overthrows or instability, 
where the Sub-Adviser expects that such events may potentially 
create a negative market or economic condition for an extended 
period of time.
    \10\ Securities issued or guaranteed by the U.S. government or 
its agencies or instrumentalities include U.S. Treasury securities, 
which are backed by the full faith and credit of the U.S. Treasury 
and which differ only in their interest rates, maturities, and times 
of issuance. U.S. Treasury bills have initial maturities of one year 
or less; U.S. Treasury notes have initial maturities of one to ten 
years; and U.S. Treasury bonds generally have initial maturities of 
greater than ten years. Certain U.S. government securities are 
issued or guaranteed by agencies or instrumentalities of the U.S. 
government including, but not limited to, obligations of U.S. 
government agencies or instrumentalities such as Fannie Mae, Freddie 
Mac, the Government National Mortgage Association, the Small 
Business Administration, the Federal Farm Credit Administration, the 
Federal Home Loan Banks, Banks for Cooperatives (including the 
Central Bank for Cooperatives), the Federal Land Banks, the Federal 
Intermediate Credit Banks, the Tennessee Valley Authority, the 
Export-Import Bank of the United States, the Commodity Credit 
Corporation, the Federal Financing Bank, the Student Loan Marketing 
Association, the National Credit Union Administration, and the 
Federal Agricultural Mortgage Corporation.
    \11\ The Fund may enter into repurchase agreements with 
financial institutions, which may be deemed to be loans. The Fund 
follows certain procedures designed to minimize the risks inherent 
in such agreements. These procedures include effecting repurchase 
transactions only with large, well-capitalized and well-established 
financial institutions whose condition will be continually monitored 
by the Sub-Adviser. In addition, the value of the collateral 
underlying the repurchase agreement will always be at least equal to 
the repurchase price, including any accrued interest earned on the 
repurchase agreement. The Fund may enter into reverse repurchase 
agreements as part of the Fund's investment strategy. Reverse 
repurchase agreements involve sales by the Fund of portfolio assets 
concurrently with an agreement by the Fund to repurchase the same 
assets at a later date at a fixed price.
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    The Fund, or the Underlying ETFs in which it invests, may invest in 
U.S. Treasury zero-coupon bonds. These securities are U.S. Treasury 
bonds which have been stripped of their unmatured interest coupons, the 
coupons themselves, and receipts or certificates representing interests 
in such stripped debt obligations and coupons.
    The Fund may invest in exchange-traded notes (``ETNs''). ETNs are 
debt obligations of investment banks which are traded on exchanges and 
the returns of which are linked to the performance of market indexes. 
In addition to trading ETNs on exchanges, investors may redeem ETNs 
directly with the issuer on a weekly basis, typically in a minimum 
amount of 50,000 units, or hold the ETNs until maturity. ETNs may be 
riskier than ordinary debt securities and may have no principal 
protection.
    The Fund will seek to qualify for treatment as a Regulated 
Investment Company under Subchapter M of the Internal Revenue Code. The 
Fund may not (i) with respect to 75% of its total assets, purchase 
securities of any issuer (except securities issued or guaranteed by the 
U.S. Government, its agencies or instrumentalities or shares of 
investment companies) if, as a result, more than 5% of its total assets 
would be invested in the securities of such issuer; or (ii) acquire 
more than 10% of the outstanding voting securities of any one issuer. 
For purposes of this policy, the issuer of the underlying security will 
be deemed to be the issuer of any respective Depositary Receipt. The 
Fund may not invest 25% or more of its total assets in the securities 
of one or more issuers conducting their principal business activities 
in the same industry or group of industries. This limitation does not 
apply to investments in securities issued or guaranteed by the U.S. 
Government, its agencies or instrumentalities, or shares of investment 
companies. The Fund will not invest 25% or more of its total assets in 
any investment company that so concentrates. For purposes of this 
policy, the issuer of the underlying security will be deemed to be the 
issuer of any respective Depositary Receipt.
    Except for Underlying ETFs that may hold non-U.S. issues, the Fund 
will not otherwise invest in non-U.S.-registered issues.
    Pursuant to the terms of the Exemptive Order, the Fund will not 
invest in options contracts, futures contracts, or swap agreements. The 
Fund's investments will be consistent with the Fund's investment 
objective and will not be used to enhance leverage. The Fund will not 
purchase illiquid securities, including Rule 144A securities and loan 
participation interests.
    Additional information regarding the Trust, the Fund, and the 
Shares, including investment strategies, risks, creation and redemption 
procedures, fees, portfolio holdings disclosure policies, 
distributions, and taxes, among other things, 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 Notice and/or Registration Statement, as applicable.\12\
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    \12\ See Notice and Registration Statement, supra notes 3 and 4, 
respectively.
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III. Discussion and Commission's Findings

    The Commission has carefully reviewed the proposed rule change and 
finds that it is consistent with the requirements of Section 6 of the 
Act \13\ and the rules and regulations thereunder applicable to a 
national securities exchange.\14\ In particular, the Commission finds 
that the proposal is consistent with Section 6(b)(5) of the Act,\15\ 
which requires, among other things, that the Exchange's rules be 
designed to promote just and equitable principles of trade, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general, to protect investors and the 
public interest. The Commission notes that the Shares must comply with 
the requirements of NYSE Arca Equities Rule 8.600 to be listed and 
traded on the Exchange.
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    \13\ 15 U.S.C. 78f.
    \14\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \15\ 17 U.S.C. 78f(b)(5).
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    The Commission finds that the proposal to list and trade the Shares 
on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the 
Act,\16\ which sets forth Congress' finding that it is in the public 
interest and appropriate for the protection of investors and the 
maintenance of fair and orderly markets to assure the availability to 
brokers, dealers, and investors of information with respect to 
quotations for, and transactions in, securities. Quotation and last-
sale information for the Shares will be available via the Consolidated 
Tape Association high-speed line and, for the Underlying ETFs, will be 
available from the national securities exchange(s) on which they are 
listed.\17\ In addition, the Portfolio Indicative Value (``PIV''), as 
defined in NYSE Arca Equities Rule 8.600(c)(3), will be widely 
disseminated by one or more major market data vendors at least every 15 
seconds during the Core Trading Session.\18\ On each business day, 
before commencement of trading in Shares during the Core Trading 
Session on the Exchange, the Fund will disclose on its Web site the 
Disclosed Portfolio, as defined in NYSE Arca Equities Rule 8.600(c)(2), 
that will form the basis for the Fund's calculation of the NAV at the 
end of the business day.\19\ The Fund will calculate NAV once each 
business day as of the regularly scheduled close of the Core Trading 
Session on the Exchange (normally 4 p.m. Eastern Time). A basket 
composition file, which includes the security names and share 
quantities required to be delivered in exchange for Fund shares, 
together with estimates and actual cash components, will be publicly 
disseminated daily prior to the opening of the New York Stock Exchange 
via the National Securities Clearing Corporation. Information regarding 
market price and trading volume of the Shares will be continually 
available on a real-time basis throughout the day on brokers' computer 
screens and other electronic services, and information regarding the 
previous day's closing price and trading volume information for the 
Shares will

[[Page 1764]]

be published daily in the financial section of newspapers. The Fund's 
Web site will also include a form of the prospectus for the Fund, 
information relating to NAV (updated daily), and other quantitative and 
trading information.
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    \16\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \17\ The intra-day, closing, and settlement prices of the 
portfolio securities are also readily available on automated 
quotation systems, published or other public sources, or online 
information services such as Bloomberg or Reuters.
    \18\ The Exchange states that it understands that several major 
market data vendors widely disseminate PIVs taken from the 
Consolidated Tape Association or other data feeds. See Notice at 
72478, supra note 3.
    \19\ On a daily basis, the Adviser will disclose for each 
portfolio security or other financial instrument of the Fund the 
following information: Ticker symbol (if applicable); name of 
security or financial instrument; number of shares or dollar value 
of financial instruments held in the portfolio; and percentage 
weighting of the security or financial instrument in the portfolio.
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    The Commission further believes that the proposal to list and trade 
the Shares is reasonably designed to promote fair disclosure of 
information that may be necessary to price the Shares appropriately and 
to prevent trading when a reasonable degree of transparency cannot be 
assured. The Commission notes that the Exchange will obtain a 
representation from the issuer of the Shares that the NAV will be 
calculated daily and that the NAV and the Disclosed Portfolio will be 
made available to all market participants at the same time.\20\ In 
addition, the Exchange will halt trading in the Shares under the 
specific circumstances set forth in NYSE Arca Equities Rule 
8.600(d)(2)(D) and may halt trading in the Shares if trading is not 
occurring in the securities and/or the financial instruments comprising 
the Disclosed Portfolio of the Fund, or if other unusual conditions or 
circumstances detrimental to the maintenance of a fair and orderly 
market are present.\21\ Further, the Commission notes that the 
Reporting Authority that provides the Disclosed Portfolio must 
implement and maintain, or be subject to, procedures designed to 
prevent the use and dissemination of material non-public information 
regarding the actual components of the portfolio.\22\ The Exchange 
states that it has a general policy prohibiting the distribution of 
material, non-public information by its employees, and neither the 
Adviser nor the Sub-Adviser is affiliated with a broker-dealer.\23\ The 
Commission also notes that the Exchange can obtain information with 
respect to the Underlying ETFs from the U.S. exchanges, which are all 
members of the Intermarket Surveillance Group, listing and trading such 
Underlying ETFs.
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    \20\ See NYSE Arca Equities Rule 8.600(d)(1)(B).
    \21\ See NYSE Arca Equities Rule 8.600(d)(2)(C). With respect to 
trading halts, the Exchange may consider other relevant factors in 
exercising its discretion to halt or suspend trading in the Shares 
of the Fund. Trading in Shares of the Fund will be halted if the 
circuit breaker parameters in NYSE Arca Equities Rule 7.12 have been 
reached. Trading also may be halted because of market conditions or 
for reasons that, in the view of the Exchange, make trading in the 
Shares inadvisable.
    \22\ See NYSE Arca Equities Rule 8.600(d)(2)(B)(ii).
    \23\ See supra note 5 and accompanying text. The Commission 
notes that an investment adviser to an open-end fund is required to 
be registered under the Investment Advisers Act of 1940 (``Advisers 
Act''). As a result, the Adviser and Sub-Adviser and their related 
personnel are subject to the provisions of Rule 204A-1 under the 
Advisers Act relating to codes of ethics. This Rule requires 
investment advisers to adopt a code of ethics that reflects the 
fiduciary nature of the relationship to clients as well as 
compliance with other applicable securities laws. Accordingly, 
procedures designed to prevent the communication and misuse of non-
public information by an investment adviser must be consistent with 
Rule 204A-1 under the Advisers Act. In addition, Rule 206(4)-7 under 
the Advisers Act makes it unlawful for an investment adviser to 
provide investment advice to clients unless such investment adviser 
has (i) adopted and implemented written policies and procedures 
reasonably designed to prevent violation, by the investment adviser 
and its supervised persons, of the Advisers Act and the Commission 
rules adopted thereunder; (ii) implemented, at a minimum, an annual 
review regarding the adequacy of the policies and procedures 
established pursuant to subparagraph (i) above and the effectiveness 
of their implementation; and (iii) designated an individual (who is 
a supervised person) responsible for administering the policies and 
procedures adopted under subparagraph (i) above.
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    The Exchange represents that the Shares are deemed to be equity 
securities, thus rendering trading in the Shares subject to the 
Exchange's existing rules governing the trading of equity securities. 
In support of this proposal, the Exchange has made representations, 
including:
    (1) The Shares will conform to the initial and continued listing 
criteria under NYSE Arca Equities Rule 8.600.
    (2) The Exchange has appropriate rules to facilitate transactions 
in the Shares during all trading sessions.
    (3) The Exchange's surveillance procedures applicable to derivative 
products, which include Managed Fund Shares, are adequate to properly 
monitor Exchange trading of the Shares in all trading sessions and to 
deter and detect violations of Exchange rules and applicable federal 
securities laws.
    (4) Prior to the commencement of trading, the Exchange will inform 
its Equity Trading Permit Holders in an Information Bulletin of the 
special characteristics and risks associated with trading the Shares. 
Specifically, the Information Bulletin will discuss the following: (a) 
The procedures for purchases and redemptions of Shares in Creation Unit 
Aggregations (and that Shares are not individually redeemable); (b) 
NYSE Arca Equities Rule 9.2(a), which imposes a duty of due diligence 
on its Equity Trading Permit Holders to learn the essential facts 
relating to every customer prior to trading the Shares; (c) the risks 
involved in trading the Shares during the Opening and Late Trading 
Sessions when an updated PIV will not be calculated or publicly 
disseminated; (d) how information regarding the PIV is disseminated; 
(e) the requirement that Equity Trading Permit Holders deliver a 
prospectus to investors purchasing newly issued Shares prior to or 
concurrently with the confirmation of a transaction; and (f) trading 
and other information.
    (5) For initial and/or continued listing, the Fund will be in 
compliance with Rule 10A-3 under the Act,\24\ as provided by NYSE Arca 
Equities Rule 5.3.
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    \24\ See 17 CFR 240.10A-3.
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    (6) The Fund will not: (a) Purchase illiquid securities, including 
Rule 144A securities and loan participation interests; (b) invest in 
non-U.S. issues (except for Underlying ETFs that may hold non-U.S. 
issues); (c) invest in leveraged, inverse, or inverse leveraged 
Underlying ETFs; and (d) pursuant to the terms of the Exemptive Order, 
invest in options contracts, futures contracts, or swap agreements.
    (7) A minimum of 100,000 Shares of the Fund will be outstanding at 
the commencement of trading on the Exchange.
    This approval order is based on the Exchange's representations.
    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act \25\ and the 
rules and regulations thereunder applicable to a national securities 
exchange.
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    \25\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\26\ that the proposed rule change (SR-NYSEArca-2011-80) be, and it 
hereby is, approved.
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    \26\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
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    \27\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-322 Filed 1-10-12; 8:45 am]
BILLING CODE 8011-01-P