[Federal Register Volume 81, Number 35 (Tuesday, February 23, 2016)]
[Notices]
[Pages 9029-9038]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-03667]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77160; File No. SR-NYSEArca-2016-14]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Relating To Listing and Trading of Shares of 
WBI Tactical Rotation Shares Under NYSE Arca Equities Rule 8.600

February 17, 2016.
    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 February 3, 2016, 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, II, 
and III 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''): WBI 
Tactical Rotation Shares. 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.

[[Page 9030]]

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 
WBI Tactical Rotation Shares (the ``Fund'') under NYSE Arca Equities 
Rule 8.600, which governs the listing and trading of Managed Fund 
Shares.\4\ The Shares will be offered by the Absolute Shares Trust (the 
``Trust''),\5\ a statutory trust organized under the laws of the State 
of Delaware and registered with the Commission as an open-end 
management investment company.\6\
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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 Trust is registered under the 1940 Act. On August 24, 
2015, the Trust filed with the Commission a registration statement 
on Form N-1A, and on November 6, 2015 filed an amendment thereto, 
under the Securities Act of 1933 (15 U.S.C. 77a) (``Securities 
Act'') and the 1940 Act relating to the Fund (File Nos. 333-192733 
and 811-22917) (as amended, the ``Registration Statement''). The 
description of the operation of the Trust and the Fund herein is 
based, in part, on the Registration Statement. In addition, the 
Commission has issued an order granting certain exemptive relief to 
the Trust under the 1940 Act. See Investment Company Act Release No. 
30543 (May 29, 2013) (File No. 812-13886) (``Exemptive Order'').
    \6\ The Commission previously approved listing and trading on 
the Exchange of the following actively managed funds under Rule 
8.600. See 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); 60981 (November 10, 2009), 74 FR 59594 (November 
18, 2009) (SR-NYSEArca-2009-79) (order approving listing of five 
fixed income funds of the PIMCO ETF Trust); 63329 (November 17, 
2010), 75 FR 71760 (November 24, 2010) (SR-NYSEArca-2010-86) (order 
approving listing of Peritus High Yield ETF); 64550 (May 26, 2011), 
76 FR 32005 (June 2, 2011) (SR-NYSEArca-2011-11) (order approving 
listing of Guggenheim Enhanced Core Bond ETF and Guggenheim Enhanced 
Ultra-Short Bond ETF).
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    Millington Securities, Inc. (``Adviser''), a wholly-owned 
subsidiary of WBI Trading Company, Inc., will be the investment advisor 
to the Fund. WBI Investments, Inc. (``WBI'' or the ``Sub-Adviser''), an 
affiliate of WBI Trading Company, Inc., will act as Sub-Adviser to the 
Fund. U.S. Bancorp Fund Services, LLC will serve as ``Administrator'', 
``Transfer Agent'' and ``Index Receipt Agent''. U.S. Bank, National 
Association will serve as the Fund's ``Custodian'' and ``Securities 
Lending Agent''. Foreside Fund Services, LLC will serve as the 
``Distributor'' for the Fund on an agency basis.
    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.\7\ In addition, 
Commentary .06 further requires that personnel who make decisions on 
the open-end fund's portfolio composition must be subject to procedures 
designed to prevent the use and dissemination of material nonpublic 
information regarding the open-end fund's portfolio. The Adviser is a 
registered broker-dealer and is affiliated with a broker-dealer. The 
Sub-Adviser is not registered as a broker-dealer but is affiliated with 
a broker-dealer. In such capacity, the Adviser and Sub-Adviser have 
implemented a firewall with respect to their relevant personnel and 
their respective broker-dealer affiliates 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. In the event (a) the Adviser becomes newly affiliated with a 
broker-dealer or Sub-Adviser becomes registered as a broker-dealer or 
newly affiliated with a broker-dealer, as applicable, or (b) any new 
adviser or sub-adviser is a broker-dealer or becomes affiliated with a 
broker-dealer, it will implement a fire wall with respect to its 
personnel or 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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    \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, 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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Principal Investments
    According to the Registration Statement, the Fund's investment 
objective is to seek long term capital appreciation while also seeking 
to protect principal during unfavorable market conditions.\8\
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    \8\ The Sub-Adviser's proprietary portfolio selection process 
used for the Fund attempts to identify investments that can provide 
consistent, attractive returns net of expenses with potentially less 
volatility and risk to capital than traditional approaches, whatever 
market conditions may be.
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    The Fund, under normal market conditions,\9\ will seek to invest 
primarily (more than 50% of its total assets) in the securities 
included in its principal investment strategy as indicated in the 
following discussion. The Fund will invest directly in equity 
securities, debt instruments and ``Financial Instruments'' (as 
described below) or will invest in them indirectly by investing in the 
equity securities of other registered investment companies (including 
exchange traded funds (``ETFs''),\10\ mutual funds, unit investment 
trusts, exchange-traded and over-the counter (``OTC'') closed-end funds 
(``CEFs'') and exchange-traded and OTC business development companies), 
equity securities of exchange-traded pooled vehicles not required to be 
registered under the 1940 Act and issuing equity securities

[[Page 9031]]

(``ETPVs''),\11\ exchange-traded notes (``ETNs''),\12\ equity-linked 
notes (``ELNs'') \13\ and index-linked exchangeable notes 
(``ILENs'').\14\ (Collectively, ETFs, ETPVs, ETNs, ELNs and ILENs are 
referred to as ``exchange traded products'' or ``ETPs''. Collectively, 
ETFs, mutual funds, unit investment trusts, CEFs and business 
development companies are referred to as ``Registered Funds''.) The 
foregoing investments, which are further detailed below, will be 
selected on the basis of the Sub-Adviser's proprietary global asset 
rotation investment model and selection process as described herein and 
in the Fund's Registration Statement.
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    \9\ The term ``under normal market conditions'' includes, but is 
not limited to, the absence of extreme volatility or trading halts 
in the equity markets or the financial markets generally; 
operational issues causing dissemination of inaccurate market 
information; or force majeure type events such as systems failure, 
natural or man-made disaster, act of God, armed conflict, act of 
terrorism, riot or labor disruption or any similar intervening 
circumstance.
    \10\ For purposes of this filing, ETFs consist of Investment 
Company Units (as described in NYSE Arca Equities Rule 5.2(j)(3)); 
Portfolio Depositary Receipts (as described in NYSE Arca Equities 
Rule 8.100; and Managed Fund Shares (as described in NYSE Arca 
Equities Rule 8.600). All ETFs will be listed and traded in the U.S. 
on a national securities exchange. While the Fund may invest in 
inverse ETFs, the Fund will not invest in leveraged (e.g., 2X, -2X, 
3X or -3X) ETFs.
    \11\ For purposes of this filing, the ``exchange-traded pooled 
vehicles'' or ``ETPVs'' consist of Trust Issued Receipts (as 
described in NYSE Arca Equities Rule 8.200); Commodity-Based Trust 
Shares (as described in NYSE Arca Equities Rule 8.201); Currency 
Trust Shares (as described in NYSE Arca Equities Rule 8.202); 
Commodity Index Trust Shares (as described in NYSE Arca Equities 
Rule 8.203); and Commodity Futures Trust Shares (as described in 
NYSE Arca Equities Rule 8.204).
    \12\ ETNs include Index-Linked Securities (as described in NYSE 
Arca Equities Rule 5.2(j)(6)).
    \13\ Equity Linked Notes are described in NYSE Arca Equities 
Rule 5.2(j)(2).
    \14\ Index-Linked Exchangeable Notes are described in NYSE Arca 
Equities Rule 5.2(j)(4).
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    The Fund may invest in exchange-traded and OTC U.S. and foreign 
equity securities (other than non-exchange-traded investment company 
securities), which are the following: Common stocks, preferred stocks, 
rights, warrants, convertibles, master limited partnerships (exchange-
traded businesses organized as partnerships (``MLPs'')), Depositary 
Receipts (``DRs'', as described below),\15\ and exchange-traded real 
estate investment trusts (``REITs'').
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    \15\ For purposes of this filing, DRs means the following: 
American Depositary Receipts (``ADRs''), American Depositary Shares 
(``ADSs''), European Depositary Receipts (``EDRs''), Global 
Depositary Receipts (``GDRs'') and International Depositary Receipts 
(``IDRs''). DRs are receipts typically issued in connection with a 
U.S. or foreign bank or trust company which evidence ownership of 
underlying securities issued by a non-U.S. company. ADRs are 
depositary receipts for foreign securities denominated in U.S. 
dollars and traded on U.S. securities markets. These securities may 
not necessarily be denominated in the same currency as the 
securities for which they may be exchanged. These are certificates 
evidencing ownership of shares of a foreign-based issuer held in 
trust by a bank or similar financial institutions. Designed for use 
in U.S. securities markets, ADRs are alternatives to the purchase of 
the underlying securities in their national market and currencies. 
ADRs may be purchased through ``sponsored'' or ``unsponsored'' 
facilities. ADSs are U.S. dollar-denominated equity shares of a 
foreign-based company available for purchase on an American stock 
exchange. ADSs are issued by depository banks in the United States 
under an agreement with the foreign issuer, and the entire issuance 
is called an ADR and the individual shares are referred to as ADSs. 
EDRs, GDRs, and IDRs are similar to ADRs in that they are 
certificates evidencing ownership of shares of a foreign issuer, 
however, GDRs, EDRs, and IDRs may be issued in bearer form and 
denominated in other currencies, and are generally designed for use 
in specific or multiple securities markets outside the U.S. EDRs, 
for example, are designed for use in European securities markets 
while GDRs are designed for use throughout the world. ADRs, GDRs, 
EDRs, and IDRs will not necessarily be denominated in the same 
currency as their underlying securities. Not more than 10% of the 
Fund's assets will be invested in non-exchange-listed ADRs.
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    As part of the Fund's principal investment strategy, up to 20% of 
the Fund's net assets may be invested in exchange-traded or OTC 
``Financial Instruments''. For purposes of this filing, ``Financial 
Instruments'' are the following: Foreign exchange forward contracts; 
futures on equity securities, debt securities, equity indices, fixed 
income indices, commodity indices, currencies, commodities, and 
interest rates; exchange-traded and OTC options on equity indices, 
currencies, and equity and debt securities; exchange-traded and OTC 
options on futures contracts; exchange-traded and OTC interest rate 
swaps, cross-currency swaps, total return swaps on fixed income and 
equity securities, inflation swaps and credit default swaps; and 
options on such swaps (``swaptions'').\16\ Financial Instruments will 
be utilized in connection with option strategies used by the Fund, 
including writing (selling) covered calls, buying puts, using 
combinations of calls and puts, and using combinations of calls and 
combinations of puts. The Fund may also use options on indices and on 
futures, such as by writing a call on a futures contract.\17\ The Fund 
may enter cap, floor and collar agreements as a part of its option 
strategies.\18\
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    \16\ Options on swaps are traded OTC. In the future, in the 
event that there are exchange-traded options on swaps, the Fund may 
invest in these instruments.
    \17\ The Fund may directly write call options on stocks and 
stock indices if the calls are ``covered'' throughout the life of 
the option. The Fund may also write and purchase put options 
(``puts'').
    \18\ In a typical cap or floor agreement, one party agrees to 
make payments only under specified circumstances, usually in return 
for payment of a fee by the other party. For example, the buyer of 
an interest rate cap obtains the right to receive payments to the 
extent that a specified interest rate exceeds an agreed-upon level. 
The seller of an interest rate floor is obligated to make payments 
to the extent that a specified interest rate falls below an agreed-
upon level. An interest rate collar combines elements of buying a 
cap and selling a floor.
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    As part of its principal investment strategy, the Fund may invest 
in the following types of debt securities (``Debt Instruments''): 
Corporate debt securities; \19\ corporate debt securities that are 
convertible into common stock or interests; U.S. Government securities; 
\20\ debt securities of foreign issuers; sovereign debt securities; 
repurchase agreements; municipal securities; sovereign debt 
obligations; obligations of international agencies or supranational 
agencies; sovereign, quasi-sovereign, supranational or local authority 
debt obligations issued by non-U.S. governments; Treasury Inflation-
Protected Securities (``TIPs''); and zero coupon bonds. Debt 
Instruments may be of all maturities, from less than one year to more 
than thirty years (if available). Debt Instruments may be fixed, 
variable or floating rate securities.
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    \19\ Such corporate debt securities also includes debt 
securities sold pursuant to Rule 144A under the Securities Act.
    The Adviser expects that, under normal market conditions, the 
Fund generally will seek to invest at least 75% of its corporate 
debt securities in issuances that have at least $100,000,000 par 
amount outstanding in developed countries or at least $200,000,000 
par amount outstanding in emerging market countries.
    \20\ The Fund may invest in U.S. Government obligations and 
other quasi government related obligations. Such obligations include 
Treasury bills, certificates of indebtedness, notes and bonds, and 
issues of such entities as the Government National Mortgage 
Association (``GNMA''), Federal Home Loan Banks, Federal 
Intermediate Credit Banks, Federal Farm Credit Banks, Federal 
Housing Administration, Federal National Mortgage Association 
(``FNMA''), Federal Home Loan Mortgage Corporation (``FHLMC''), and 
the Student Loan Marketing Association.
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    The Fund may invest in and hold cash or ``Cash Equivalents'' \21\ 
as part of the normal operation of its principal investment strategy. 
As a result, an investment in cash or Cash Equivalents may periodically 
represent a material percentage of the Fund's assets.
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    \21\ ``Cash Equivalents'' means: High-quality short-term debt 
securities; money market instruments, certificates of deposit issued 
by commercial banks as well as savings banks or savings and loan 
associations; bankers' acceptances; time deposits; and commercial 
paper and short-term notes rated at the time of purchase ``A-2'' or 
higher by Standard & Poor's, ``Prime-1'' by Moody's Investors 
Services Inc., or similarly rated by another nationally recognized 
statistical rating organization, or, if unrated, will be determined 
by the Sub-Adviser to be of comparable quality, as well as U.S. 
Government obligations.
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    For investments in Registered Funds, the Fund may invest in excess 
of the limits contained in the 1940 Act.\22\
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    \22\ The Commission has granted exemptive relief to the Trust 
under Section 12(d)(1)(J) of the 1940 Act permitting the Fund to 
operate as a ``fund of funds'' and invest in other investment 
companies without complying with the limitations set forth in 
Section 12(d)(1) of the 1940 Act, subject to certain terms and 
limitations that are contained in the Exemptive Order.
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Non-Principal Investment Strategies
    While the Fund, under normal market conditions, will seek to invest 
primarily (at least 50% of its total assets) in the securities 
described above, the Fund may invest as part of its non-principal 
investment strategy (less than 50% of

[[Page 9032]]

the Fund's assets) in the types of investments discussed below.
    The Fund may invest in short positions in equity securities.
    The Fund may invest in agency and non-agency residential mortgage-
backed securities (``RMBS''); agency and non-agency commercial 
mortgage-backed securities (``CMBS''); and agency and non-agency asset-
backed securities (``ABS'').
Investment Restrictions
    The Fund may invest up to 40% of its net assets in Debt Instruments 
rated below investment grade (also known as ``junk bonds'').
    The Fund will not invest more than 50% of its net assets in 
securities of issuers in emerging markets, which could consist of DRs, 
dollar-denominated foreign securities or non-U.S. dollar denominated 
foreign securities.
    Investments in non-agency mortgage and asset backed securities will 
be limited to 20% of the Fund's total assets in the aggregate.
    The Fund may invest up to 30% of its total assets in securities 
denominated in non-U.S. Dollars, but this limitation will not apply to 
securities of non-U.S. issuers that are denominated in U.S. Dollars. 
The Fund may invest up to 50% of the Fund's principal investments in 
the securities of issuers in emerging markets.
    The Fund may hold up to an aggregate amount of 15% of its net 
assets in illiquid assets (calculated at the time of investment), 
including Rule 144A securities deemed illiquid by the Adviser. The Fund 
will monitor its portfolio liquidity on an ongoing basis to determine 
whether, in light of current circumstances, an adequate level of 
liquidity is being maintained, and will consider taking appropriate 
steps in order to maintain adequate liquidity if, through a change in 
values, net assets, or other circumstances, more than 15% of the Fund's 
net assets are held in illiquid assets. Illiquid assets 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.\23\
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    \23\ 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. 31835 (September 22, 2015), 
discussions at footnotes 92 & 93; 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 
1933 Act).
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    The Fund will be non-diversified under the 1940 Act.\24\
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    \24\ The diversification standard is set forth in Section 
5(b)(1) of the 1940 Act (15 U.S.C. 80e).
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    The Fund intends to qualify for and to elect to be treated as a 
separate regulated investment company (``RIC'') under Subchapter M of 
the Internal Revenue Code.\25\
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    \25\ 26 U.S.C. 851.
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    The Fund's investments will be consistent with the Fund's 
investment objective and will not be used to enhance leverage. That is, 
while the Fund will be permitted to borrow as permitted under the 1940 
Act, the Fund's investments will not be used to seek performance that 
is the multiple or inverse multiple (i.e., 2Xs and 3Xs) of the Fund's 
primary broad-based securities benchmark index (as defined in Form N-
1A).\26\
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    \26\ The Fund's broad-based securities benchmark index will be 
identified in a future amendment to the Registration Statement 
following the Fund's first full calendar year of performance.
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Net Asset Value (``NAV'')
    The NAV per Share of the Fund will be computed by dividing the 
value of the net assets of the Fund (i.e., the Fund's total assets less 
total liabilities) by the total number of outstanding Shares of the 
Fund, rounded to the nearest cent.
    For purposes of calculating NAV, portfolio securities and other 
assets for which market quotes are readily available will be valued at 
market value. Market value will generally be determined on the basis of 
last reported sales prices, or if no sales are reported, based on 
quotes obtained from a quotation reporting system, established market 
makers, or pricing services.
    Exchange-traded equity securities (including common stocks, ETPs, 
CEFs, convertibles, REITs, warrants, MLPs, DRs and preferred 
securities) will be valued at the official closing price or the last 
trading price on the exchange or market on which the security is 
primarily traded at the time of valuation. If no sales or closing 
prices are reported during the day, exchange-traded equity securities 
will generally be valued at the mean of the last available bid and ask 
quotation on the exchange or market on which the security is primarily 
traded, or using other market information obtained from quotation 
reporting systems, established market makers, or pricing services. 
Investment company securities that are not exchange-traded will be 
valued at NAV. Equity securities traded OTC will be valued at the last 
sale price in the OTC market. If a non-exchange traded security does 
not trade on a particular day, then the mean between the last quoted 
closing bid and asked price will be used. In the event that such market 
quotations are not readily available, then the security will be fair 
valued in accordance with the Trust's procedures.
    U.S. and non-U.S. debt securities with a maturity of greater than 
60 days at the time of acquisition, as well as non-exchange traded 
Financial Instruments, will be valued at prices that reflect broker/
dealer supplied valuations or are obtained from independent pricing 
services. Short-term securities with remaining maturities of 60 days or 
less will be valued at amortized cost, provided such amount 
approximates market value. Cash Equivalents will be valued based on 
information provided by third party pricing services.
    Financial Instruments for which market quotes are readily available 
will be valued at market value or on the basis of quotes obtained from 
a quotation reporting system, established market makers and pricing 
services. Local closing prices will be used for all instrument 
valuation purposes. Futures and options on futures will be valued at 
the closing price on the day of valuation. Non-exchange traded 
Financial Instruments, including forwards, swaps, and certain options, 
will normally be valued on the basis of quotes obtained from brokers 
and dealers or pricing services using data reflecting the closing of 
the principal market for those assets. Caps and floors will be valued 
using the exchange closing prices on the applicable options.
    Generally, trading in foreign securities markets is substantially 
completed each day at various times prior to the close of the New York 
Stock Exchange (``NYSE'') (generally 4:00 p.m. Eastern time (``E.T.'') 
(the ``NYSE Close'')). The values of foreign securities are determined 
as of the close of such foreign markets or the close of the NYSE, if 
earlier. If a foreign security's value has materially changed after the 
close of the security's primary exchange or principal market but before 
the NYSE Close, the security will be valued at fair value based on 
procedures established and approved by the Trust's Board of Trustees 
(the ``Board''). Foreign securities that do not trade when the

[[Page 9033]]

NYSE is open will also be valued at fair value.
    All investments quoted in foreign currency will be valued in U.S. 
dollars on the basis of the foreign currency exchange rates prevailing 
at the close of U.S. business at 4:00 p.m. E.T. As a result, the NAV of 
the Fund's Shares may be affected by changes in the value of currencies 
in relation to the U.S. dollar.
    When market quotations are not readily available, are deemed 
unreliable or do not reflect material events occurring between the 
close of local markets and the time of valuation, investments will be 
valued using fair value pricing as determined in good faith by the Sub-
Adviser under procedures established by and under the general 
supervision and responsibility of the Board. Investments that may be 
valued using fair value pricing include, but are not limited to: (1) 
Illiquid assets; (2) securities of an issuer that becomes bankrupt or 
enters into a restructuring; (3) securities whose trading has been 
halted or suspended; and (4) foreign securities traded on exchanges 
that close before the Fund's NAV is calculated.
Indicative Intra-Day Value
    An independent third party calculator, initially the Exchange, will 
calculate the Indicative Intra-Day Value (``IIV'') (which is the 
Portfolio Indicative Value, as defined in NYSE Arca Equities Rule 
8.600(c)(3)) for the Fund during the Exchange's Core Trading Session 
(as defined in NYSE Arca Equities Rule 7.34) by dividing the 
``Estimated Fund Value'' as of the time of the calculation by the total 
number of outstanding Shares of the Fund. ``Estimated Fund Value'' is 
the sum of the estimated amount of cash held in the Fund's portfolio, 
the estimated amount of accrued interest owed to the Fund and the 
estimated value of assets held in the Fund's portfolio minus the 
estimated amount of the Fund's liabilities. The IIV will be calculated 
based on the same portfolio holdings disclosed on the Trust's Web site. 
The IIV will be widely disseminated by one or more major market data 
vendors at least every 15 seconds during the Core Trading Session.
    The Fund will provide the independent third party calculator with 
information to calculate the IIV, but the Fund will not be involved in 
the actual calculation of the IIV and is not responsible for the 
calculation or dissemination of the IIV. The IIV should not be viewed 
as a ``real-time'' update of NAV because the IIV may not be calculated 
in the same manner as the NAV, which will be computed once per day.
    In addition, the IIV will be widely disseminated by one or more 
major market data vendors at least every 15 seconds during the Core 
Trading Session. The IIV dissemination together with the Disclosed 
Portfolio will allow investors to determine the value of the underlying 
portfolio of the Fund on a daily basis and to provide a close estimate 
of that value throughout the trading day.
    For the purposes of determining the IIV, the third party market 
data provider's valuation of Financial Instruments is expected to be 
similar to their valuation of all securities. The third party market 
data provider may use market quotes if available or may fair value 
securities against proxies (such as swap or yield curves).
    With respect to specific Financial Instruments:
     Foreign exchange forward contracts may be valued intraday 
using market quotes, or another proxy as determined to be appropriate 
by the third party market data provider.
     Futures may be valued intraday using the relevant futures 
exchange data, or another proxy as determined to be appropriate by the 
third party market data provider.
     Interest rate swaps and cross-currency swaps may be mapped 
to a swap curve and valued intraday based on changes of the swap curve, 
or another proxy as determined to be appropriate by the third party 
market data provider.
     Credit default swaps (such as, CDX/CDS) may be valued 
using intraday data from market vendors, or based on underlying asset 
price, or another proxy as determined to be appropriate by the third 
party market data provider.
     Total return swaps may be valued intraday using the 
underlying asset price, or another proxy as determined to be 
appropriate by the third party market data provider.
     Exchange listed options may be valued intraday using the 
relevant exchange data, or another proxy as determined to be 
appropriate by the third party market data provider.
     OTC options and swaptions may be valued intraday through 
option valuation models (e.g., Black-Scholes) or using exchange-traded 
options as a proxy, or another proxy as determined to be appropriate by 
the third party market data provider.
     Currency spot and forward rates from major market data 
vendors will generally be determined as of the NYSE Close.
Disclosures About Financial Instruments in the Disclosed Portfolio
    The Fund's disclosure of Financial Instrument positions in the 
Disclosed Portfolio will include information that market participants 
can use to value these positions intraday. On a daily basis, the 
Adviser will disclose on the Fund's Web site the following information 
regarding each portfolio holding, as applicable to the type of holding: 
Ticker symbol, CUSIP number or other identifier, if any; a description 
of the holding (including the type of holding, such as the type of 
swap); the identity of the security, commodity, index or other asset or 
instrument underlying the holding, if any; for options, the option 
strike price; quantity held (as measured by, for example, par value, 
notional value or number of shares, contracts or units); maturity date, 
if any; coupon rate, if any; effective date, if any; market value of 
the holding; and the percentage weighting of the holding in the Fund's 
portfolio. The Web site information will be publicly available at no 
charge.
Impact on Arbitrage Mechanism
    The Adviser and the Sub-Adviser believe there will be minimal, if 
any, impact to the arbitrage mechanism as a result of the use of 
Financial Instruments. Market makers and participants should be able to 
value Financial Instruments as long as the positions are disclosed with 
relevant information. The Adviser and the Sub-Adviser believe that the 
price at which Shares trade will continue to be disciplined by 
arbitrage opportunities created by the ability to purchase or redeem 
creation Shares at their NAV, which should ensure that Shares will not 
trade at a material discount or premium in relation to their NAV.
    The Adviser and the Sub-Adviser do not believe there will be any 
significant impacts to the settlement or operational aspects of the 
Fund's arbitrage mechanism due to the use of Financial Instruments. 
Because Financial Instruments generally are not eligible for in-kind 
transfer, they will typically be substituted with a ``cash in lieu'' 
amount when the Fund processes purchases or redemptions of creation 
units in-kind.
Creation and Redemption of Shares
    According to the Registration Statement, the Trust will issue and 
sell Shares of the Fund only in aggregations of a specified number of 
Shares (each a ``Creation Unit''). Creation Unit sizes will be 50,000 
Shares per Creation Unit. The Creation Unit size may be changed.

[[Page 9034]]

The Fund will issue and redeem Shares only in Creation Units at the NAV 
next determined after receipt of order on a continuous basis on a 
``Business Day''. A Business Day will be, generally, any day on which 
the Exchange is open for business. The NAV of the Fund will be 
determined once each Business Day, normally as of the close of trading 
on the NYSE (normally, 4:00 p.m. E.T.). An order to purchase or redeem 
Creation Units will be deemed to be received on the Business Day on 
which the order is placed through the Distributor at the Shares' NAV 
next determined after receipt of an order in proper form.
    The Fund will issue and redeem Creation Units to or through an 
``Authorized Participant'', which is either a ``Participating Party'' 
(i.e., a broker-dealer or other participant in the continuous net 
settlement system of the National Securities Clearing Corporation 
(``NSCC''), or a participant of the Depository Trust Company (``DTC''), 
and, in each case, must have entered an agreement with the Distributor 
with respect to the creation and redemption of Creation Units).
    The consideration for purchase of Creation Units of the Fund 
generally will consist of an in-kind deposit of a designated portfolio 
of securities--the ``Deposit Securities''--for each Creation Unit 
constituting a substantial replication, or representation, of the 
securities included in the Fund's portfolio as selected by the Sub-
Adviser (``Fund Securities'') and an amount of cash--the ``Cash 
Component''--computed as described below. Together, the Deposit 
Securities and the Cash Component constitute the ``Fund Deposit,'' 
which represents the minimum initial and subsequent investment amount 
for a Creation Unit of the Fund. The Cash Component is an amount equal 
to the difference between the NAV of the Shares (per Creation Unit) and 
an amount equal to the market value of the Deposit Securities (the 
``Deposit Amount''). If the Cash Component is a positive number (i.e., 
the NAV per Creation Unit exceeds the Deposit Amount), the Authorized 
Participant will deliver the Cash Component. If the Cash Component is a 
negative number (i.e., the NAV per Creation Unit is less than the 
Deposit Amount), the Authorized Participant will receive the Cash 
Component. The Cash Component serves to compensate the Trust or the 
Authorized Participant, as applicable, for any differences between the 
NAV per Creation Unit and the Deposit Securities. Authorized 
Participants will be required to pay the Custodian a fixed transaction 
fee in connection with creation and redemption of Shares.
    In addition, the Trust reserves the right to permit or require the 
substitution of an amount of cash (that is a ``cash in lieu'' amount) 
to be added to the Cash Component to replace any Deposit Security which 
may not be available in sufficient quantity for delivery or that may 
not be eligible for transfer or for other similar reasons. The Trust 
also reserves the right to permit or require a ``cash in lieu'' amount 
where the delivery of Deposit Securities by the Authorized Participant 
(as described below) would be restricted under the securities laws or 
where delivery of Deposit Securities to the Authorized Participant 
would result in the disposition of Deposit Securities by the Authorized 
Participant becoming restricted under the securities laws, and in 
certain other situations.
    The Custodian through the (``NSCC''), will make available on each 
Business Day, prior to the opening of business on the Exchange 
(currently 9:30 a.m. E.T.), the list of the names and the required 
number of shares of each Deposit Security to be included in the current 
Fund Deposit (based on information at the end of the previous Business 
Day) for the Fund. This Fund Deposit will be applicable, subject to any 
adjustments, to orders to effect creations of Creation Units of the 
Fund until such time as the next-announced composition of the Deposit 
Securities is made available.
    In addition to the list of names and number of securities 
constituting the current Deposit Securities of a Fund Deposit, the 
Custodian, through the NSCC, also will make available on each Business 
Day the estimated Cash Component, effective through and including the 
previous Business Day, per outstanding Creation Unit of the Fund.
    The process to redeem Creation Units is essentially the reverse of 
the process by which Creation Units are created, as described above. To 
redeem Shares directly from the Fund, an investor must be an Authorized 
Participant or must redeem through an Authorized Participant. The Trust 
redeems Creation Units on a continuous basis on any Business Day 
through the Distributor at the Shares' NAV next determined after 
receipt of an order in proper form.
    Generally, Creation Units of the Fund will be redeemed in-kind, at 
NAV per Share next computed, plus a transaction fee as described below. 
The Custodian, through the NSCC, makes available prior to the opening 
of business on the Exchange (currently 9:30 a.m. E.T.) on each Business 
Day, the identity of the Fund Securities that will be applicable 
(subject to possible amendment or correction) to redemption requests 
received in proper form (as described below) on that day. Fund 
Securities received on redemption may not be identical to Deposit 
Securities that are applicable to creations of Creation Units. The 
redemption proceeds for a Creation Unit consists of Fund Securities--as 
announced on the Business Day the request for redemption is received in 
proper form--plus or minus cash in an amount equal to the difference 
between the NAV of the Shares being redeemed, as next determined after 
a receipt of a redemption request in proper form, and the value of the 
Fund Securities (``Cash Redemption Amount''), less a redemption 
transaction fee.
    The right of redemption may be suspended or the date of payment 
postponed with respect to any Fund (1) for any period during which the 
NYSE is closed (other than customary weekend and holiday closings); (2) 
for any period during which trading on the Exchange is suspended or 
restricted; (3) for any period during which an emergency exists as a 
result of which disposal of the Shares of the Fund or determination of 
the Fund's NAV is not reasonably practicable; or (4) in such other 
circumstances as is permitted by the Commission.
    The Trust may in its discretion at any time, or from time to time, 
exercise its option to redeem Shares by providing the redemption 
proceeds in cash, and the redeeming Authorized Participant will be 
required to receive its redemption proceeds in cash. In addition, an 
investor may request a redemption in cash that the Trust may permit, in 
its sole discretion. In either case, the investor will receive a cash 
payment equal to the NAV of its Shares based on the NAV of Shares of 
the Fund next determined after the redemption request is received in 
proper form (minus a transaction fee).\27\ The Fund may also, in its 
sole discretion, upon request of a shareholder, provide such redeemer a 
portfolio of securities that differs from the exact composition of the 
Fund Securities, or cash in lieu of some securities added to the Cash 
Redemption Amount, but in no event will the total value of the 
securities delivered and the cash transmitted differ from the NAV.
---------------------------------------------------------------------------

    \27\ The Adviser represents that, to the extent the Trust 
effects the creation or redemption of Shares in cash, such 
transactions will be effected in the same manner for all Authorized 
Participants.

---------------------------------------------------------------------------

[[Page 9035]]

Availability of Information
    The Fund's Web site (www.wbishares.com), which will be publicly 
available prior to the public offering of Shares, will include a form 
of the prospectus for the Fund that may be downloaded. The Fund's Web 
site will include additional quantitative information updated on a 
daily basis, including, for the Fund, (1) daily trading volume, the 
prior Business Day's reported closing price, NAV and mid-point of the 
bid/ask spread at the time of calculation of such NAV (the ``Bid/Ask 
Price''),\28\ and a calculation of the premium and discount of the Bid/
Ask Price against the NAV, and (2) data in chart format displaying the 
frequency distribution of discounts and premiums of the daily Bid/Ask 
Price against the NAV, within appropriate ranges, for each of the four 
previous calendar quarters. On each Business Day, before commencement 
of trading in Shares in the Core Trading Session on the Exchange, the 
Fund will disclose on its Web site the Disclosed Portfolio as defined 
in NYSE Arca Equities Rule 8.600(c)(2) that will form the basis for the 
Fund's calculation of NAV at the end of the Business Day.\29\
---------------------------------------------------------------------------

    \28\ The Bid/Ask Price of Shares of the 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 the Fund's NAV. The 
records relating to Bid/Ask Prices will be retained by the Fund and 
its service providers.
    \29\ Under accounting procedures to be followed by the Fund, 
trades made on the prior Business Day (``T'') will be booked and 
reflected in NAV on the current Business Day (``T+1''). Accordingly, 
the Fund will be able to disclose at the beginning of the Business 
Day the portfolio that will form the basis for the NAV calculation 
at the end of the Business Day.
---------------------------------------------------------------------------

    In addition, a basket composition file, which will include the 
security names and share quantities required to be delivered in 
exchange for Fund Shares, together with estimates and actual cash 
components, will be publicly disseminated daily prior to the opening of 
the NYSE via NSCC. The basket represents one Creation Unit of the Fund.
    Investors can also obtain the Trust's Statement of Additional 
Information (``SAI''), the Fund's Shareholder Reports, and 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 for the Shares will be 
continually available on a real-time basis throughout the day on 
brokers' computer screens and other electronic services. Quotation and 
last sale information for the Shares, and U.S. exchange-traded common 
stocks, preferred stocks, rights, warrants, convertibles, MLPs, DRs, 
REITs, CEFs, ETFs, ETPs and ETNs will be available via the Consolidated 
Tape Association (``CTA'') high-speed line. Intra-day price information 
for foreign exchange-traded common stocks, preferred stocks, rights, 
warrants, convertibles, MLPs, DRs and REITs, will be available from the 
applicable foreign exchange and from major market data vendors. Price 
information for OTC common stocks, OTC CEFs, and OTC Financial 
Instruments will be available from major market data vendors. Intra-day 
and closing price information for exchange-traded Financial Instruments 
will be available from the applicable exchange and from major market 
data vendors. In addition, price information for U.S. exchange-traded 
options is available from the Options Price Reporting Authority. Intra-
day price information for Cash Equivalents will be available from major 
market data vendors.
    Intra-day and closing price information from brokers and dealers or 
independent pricing services will be available for Debt Instruments. In 
addition, the Portfolio Indicative Value, as defined in NYSE Arca 
Equities Rule 8.600 (c)(3), will be widely disseminated by one or more 
major market data vendors at least every 15 seconds during the Core 
Trading Session.\30\ The dissemination of the Portfolio Indicative 
Value, together with the Disclosed Portfolio, will allow investors to 
determine the value of the underlying portfolio of the Fund on a daily 
basis and provide a close estimate of that value throughout the trading 
day.
---------------------------------------------------------------------------

    \30\ Currently, it is the Exchange's understanding that several 
major market data vendors display and/or make widely available 
Portfolio Indicative Values taken from CTA or other data feeds.
---------------------------------------------------------------------------

Trading Halts
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares of the Fund.\31\ Trading in Shares of the Fund 
will be halted if the circuit breaker parameters in NYSE Arca Equities 
Rule 7.12 have been reached. Trading also may be halted because of 
market conditions or for reasons that, in the view of the Exchange, 
make trading in the Shares inadvisable. These may include: (1) The 
extent to which trading is not occurring in the securities and/or the 
Financial Instruments comprising the Disclosed Portfolio of the Fund; 
or (2) whether other unusual conditions or circumstances detrimental to 
the maintenance of a fair and orderly market are present. Trading in 
the Shares will be subject to NYSE Arca Equities Rule 8.600(d)(2)(D), 
which sets forth circumstances under which Shares of the Fund may be 
halted.
---------------------------------------------------------------------------

    \31\ See NYSE Arca Equities Rule 7.12, Commentary .04.
---------------------------------------------------------------------------

Trading Rules
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. Shares will trade on 
the NYSE Arca Marketplace from 4 a.m. to 8 p.m. E.T. in accordance with 
NYSE Arca Equities Rule 7.34 (Opening, Core, and Late Trading 
Sessions). The Exchange has appropriate rules to facilitate 
transactions in the Shares during all trading sessions. As provided in 
NYSE Arca Equities Rule 7.6, Commentary .03, the minimum price 
variation (``MPV'') for quoting and entry of orders in equity 
securities traded on the NYSE Arca Marketplace is $0.01, with the 
exception of securities that are priced less than $1.00 for which the 
MPV for order entry is $0.0001.
    The Shares will conform to the initial and continued listing 
criteria under NYSE Arca Equities Rule 8.600. The Exchange represents 
that, for initial and/or continued listing, the Fund will be in 
compliance with Rule 10A-3\32\ under the Act, as provided by NYSE Arca 
Equities Rule 5.3. A minimum of 100,000 Shares of the 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 will be calculated daily and that the NAV and 
the Disclosed Portfolio will be made available to all market 
participants at the same time.
---------------------------------------------------------------------------

    \32\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------

Surveillance
    The Exchange represents that trading in the Shares will be subject 
to the existing trading surveillances, administered by the Financial 
Industry Regulatory Authority (``FINRA'') on behalf of the Exchange, or 
by regulatory staff of the Exchange, which are designed to detect 
violations of Exchange rules and applicable federal securities laws. 
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 federal

[[Page 9036]]

securities laws applicable to trading on the Exchange. \33\
---------------------------------------------------------------------------

    \33\ 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 surveillances referred to above generally focus on detecting 
securities trading outside their normal patterns, which could be 
indicative of manipulative or other violative activity. 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, and regulatory staff of the 
Exchange, will communicate as needed regarding trading in the Shares, 
certain exchange-traded options and futures, certain exchange-traded 
equities (including ETFs, ETPs. ETNs, CEFs, certain common stocks and 
certain REITs) with other markets or other entities that are members of 
the Intermarket Surveillance Group (``ISG'')\34\, and FINRA and 
regulatory staff of the Exchange may obtain trading information 
regarding trading in the Shares, certain exchange-traded options and 
futures, certain exchange-traded equities (including ETFs, ETPs. ETNs, 
CEFs, certain common stocks and certain REITs) from such markets or 
entities. In addition, the Exchange may obtain information regarding 
trading in the Shares, certain exchange-traded options and futures, 
certain exchange-traded equities (including ETFs, ETPs. ETNs, CEFs, 
certain common stocks and certain REITs) from markets or other entities 
that are members of ISG or with which the Exchange has in place a 
comprehensive surveillance sharing agreement.\35\ FINRA, on behalf of 
the Exchange, is able to access, as needed, trade information for 
certain fixed income securities held by the Fund reported to FINRA's 
Trade Reporting and Compliance Engine (``TRACE'').
---------------------------------------------------------------------------

    \34\ For a list of the current members of ISG, see 
www.isgportal.org. The Exchange notes that not all components of the 
Disclosed Portfolio may trade on markets that are members of ISG or 
with which the Exchange has in place a comprehensive surveillance 
sharing agreement.
    \35\ Certain of the exchange-traded equity securities in which 
the Fund may invest may trade in markets that are not members of 
ISG.
---------------------------------------------------------------------------

    Not more than 10% of the net assets of the Fund in the aggregate 
invested in equity securities (other than non-exchange-traded 
investment company securities) shall consist of equity securities whose 
principal market is not a member of the ISG or is a market with which 
the Exchange does not have a comprehensive surveillance sharing 
agreement. Furthermore, not more than 10% of the net assets of the Fund 
in the aggregate invested in futures contracts or exchange-traded 
options contracts shall consist of futures contracts or exchange-traded 
options contracts whose principal market is not a member of ISG or is a 
market with which the Exchange does not have a comprehensive 
surveillance sharing agreement.
    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its 
Equity Trading Permit Holders in an Information Bulletin (``Bulletin'') 
of the special characteristics and risks associated with trading the 
Shares. Specifically, the Bulletin will discuss the following: (1) The 
procedures for purchases and redemptions of Shares in Creation Units 
(and that Shares are not individually redeemable); (2) NYSE Arca 
Equities Rule 9.2(a), which imposes a duty of due diligence on its 
Equity Trading Permit Holders to learn the essential facts relating to 
every customer prior to trading the Shares; (3) the risks involved in 
trading the Shares during the Opening and Late Trading Sessions when an 
updated Portfolio Indicative Value will not be calculated or publicly 
disseminated; (4) how information regarding the Portfolio Indicative 
Value and the Disclosed Portfolio is disseminated; (5) 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 (6) trading information.
    In addition, the Bulletin will reference that the Fund is subject 
to various fees and expenses described in the Registration Statement. 
The Bulletin will discuss any exemptive, no-action, and interpretive 
relief granted by the Commission from any rules under the Act. The 
Bulletin will also disclose that the NAV for the Shares will be 
calculated after 4:00 p.m. E.T. each trading day.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \36\ 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.
---------------------------------------------------------------------------

    \36\ 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 
federal securities laws applicable to trading on the Exchange.
    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 Advisor is a broker-dealer and has represented that it has 
implemented a firewall with respect to relevant personnel regarding 
access to information concerning the composition and/or changes to the 
portfolio. The Exchange will obtain a representation from the issuer of 
the Shares that the NAV per Share will be calculated daily and that the 
NAV and the Disclosed Portfolio will be made available to all market 
participants at the same time. FINRA, on behalf of the Exchange, and 
regulatory staff of the Exchange, will communicate as needed regarding 
trading in the Shares, certain exchange-traded options and futures, 
certain exchange-traded equities (including ETFs, ETPs. ETNs, CEFs, 
certain common stocks and certain REITs) with other markets or other 
entities that are members of the ISG, and FINRA, on behalf of the 
Exchange, and regulatory staff of the Exchange, may obtain trading 
information regarding trading in the Shares, certain exchange-traded 
options and futures, certain exchange-traded equities (including ETFs, 
ETPs. ETNs, CEFs, certain common stocks and certain REITs) from such 
markets or entities. In addition, the Exchange may obtain information 
regarding trading in the Shares, certain exchange-traded options and 
futures, certain exchange-traded equities (including ETFs, ETPs, ETNs, 
CEFs, certain common stocks and certain REITs) from markets or other 
entities that are members of ISG or with which the Exchange has in 
place a comprehensive surveillance sharing agreement. FINRA, on behalf 
of the Exchange, is able to access, as needed, trade information for 
certain fixed income securities held by the Fund reported to FINRA's 
TRACE.
    The Fund's disclosure of Financial Instrument positions in the 
Disclosed Portfolio will include information that

[[Page 9037]]

market participants can use to value these positions intraday. On a 
daily basis, the Fund will disclose on the Fund's Web site the 
following information regarding each portfolio holding, as applicable 
to the type of holding: Ticker symbol, CUSIP number or other 
identifier, if any; a description of the holding (including the type of 
holding, such as the type of swap); the identity of the security, 
commodity, index or other asset or instrument underlying the holding, 
if any; for options, the option strike price; quantity held (as 
measured by, for example, par value, notional value or number of 
shares, contracts or units); maturity date, if any; coupon rate, if 
any; effective date, if any; market value of the holding; and the 
percentage weighting of the holding in the Fund's portfolio. Price 
information for the debt and equity securities held by the Fund will be 
available through major market data vendors and on the applicable 
securities exchanges on which such securities are listed and traded. In 
addition, a large amount of information will be publicly available 
regarding the Fund and the Shares, thereby promoting market 
transparency. Moreover, the Portfolio Indicative Value will be widely 
disseminated by one or more major market data vendors at least every 15 
seconds during the Exchange's Core Trading Session. On each Business 
Day, before commencement of trading in Shares in the Core Trading 
Session on the Exchange, the Fund will disclose on its Web site the 
Disclosed Portfolio that will form the basis for the Fund's calculation 
of NAV at the end of the Business Day. Information regarding market 
price and trading volume of the Shares will be continually available on 
a real-time basis throughout the day on brokers' computer screens and 
other electronic services, and quotation and last sale information will 
be available via the CTA high-speed line. The Web site for the Fund 
will include a form of the prospectus for the Fund and additional data 
relating to NAV and other applicable quantitative information. 
Moreover, prior to the commencement of trading, the Exchange will 
inform its Equity Trading Permit Holders in an Information Bulletin of 
the special characteristics and risks associated with trading the 
Shares. Trading in Shares of the Fund will be halted if the circuit 
breaker parameters in NYSE Arca Equities Rule 7.12 have been reached or 
because of market conditions or for reasons that, in the view of the 
Exchange, make trading in the Shares inadvisable, and trading in the 
Shares will be subject to NYSE Arca Equities Rule 8.600(d)(2)(D), which 
sets forth circumstances under which Shares of the Fund may be halted. 
In addition, as noted above, investors will have ready access to 
information regarding the Fund's holdings, the Portfolio Indicative 
Value, the Disclosed Portfolio, and quotation and last sale information 
for the Shares.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
an additional type of actively-managed exchange-traded product that 
will enhance competition among market participants, to the benefit of 
investors and the marketplace. As noted above, the Exchange has in 
place surveillance procedures relating to trading in the Shares and may 
obtain information via ISG from other exchanges that are members of ISG 
or with which the Exchange has entered into a comprehensive 
surveillance sharing agreement. Not more than 10% of the net assets of 
the Fund in the aggregate invested in equity securities (other than 
non-exchange-traded investment company securities) shall consist of 
equity securities whose principal market is not a member of the ISG or 
is a market with which the Exchange does not have a comprehensive 
surveillance sharing agreement. Furthermore, not more than 10% of the 
net assets of the Fund in the aggregate invested in futures contracts 
or exchange-traded options contracts shall consist of futures contracts 
or exchange-traded options contracts whose principal market is not a 
member of ISG or is a market with which the Exchange does not have a 
comprehensive surveillance sharing agreement. In addition, as noted 
above, investors will have ready access to information regarding the 
Fund's holdings, the Portfolio Indicative Value, the Disclosed 
Portfolio, and quotation and last sale information for the Shares.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purpose of the Act. The Exchange notes that the 
proposed rule change will facilitate the listing and trading of an 
additional type of actively-managed exchange-traded product that holds 
equities and fixed income securities, which may be represented by 
certain Financial Instruments as discussed above, which 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 up to 90 days (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 [email protected]. Please include 
File Number SR-NYSEArca-2016-14 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca2016-14. 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

[[Page 9038]]

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-2016-14 and should 
be submitted on or before March 15, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\37\
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    \37\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-03667 Filed 2-22-16; 8:45 am]
 BILLING CODE 8011-01-P