[Federal Register Volume 73, Number 166 (Tuesday, August 26, 2008)]
[Notices]
[Pages 50382-50385]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E8-19707]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-58395; File No. SR-NYSEArca-2008-85]
Self-Regulatory Organizations; Notice of Filing of Proposed Rule
Change by NYSE Arca, Inc. Relating to Listing and Trading of
PowerShares Active U.S. Real Estate Fund
August 20, 2008.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Exchange Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is
hereby given that, on August 11, 2008, NYSE Arca, Inc. (``NYSE Arca''
or the ``Exchange'') 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 Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 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
NYSE Arca, through its wholly-owned subsidiary NYSE Arca Equities,
Inc. (``NYSE Arca Equities'' or the ``Corporation''), proposes to list
and trade the following under NYSE Arca Equities Rule 8.600 (``Managed
Fund Shares''): the PowerShares Active U.S. Real Estate Fund. The text
of the proposed rule change is available on the Exchange's Web site at
http://www.nyse.com, at the Exchange's principal office 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 Exchange 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 these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant parts of such
statements.
[[Page 50383]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to list and trade the following Managed Fund
Shares \4\ (``Shares'') under NYSE Arca Equities Rule 8.600: The
PowerShares Active U.S. Real Estate Fund (``Fund'').\5\ The Shares will
be offered by PowerShares Actively Managed Exchange-Traded Fund Trust
(the ``Trust''), a business 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) (``1940 Act'') organized as an
open-end investment company or similar entity that invests in a
portfolio of securities selected by its investment adviser
consistent with its investment objectives and policies. In contrast,
an open-end investment company that issues Investment Company Units,
listed and traded on the Exchange under NYSE Arca Equities Rule
5.2(j)(3), seeks to provide investment results that correspond
generally to the price and yield performance of a specific foreign
or domestic stock index, fixed income securities index or
combination thereof.
\5\ The Commission previously approved listing and trading on
the Exchange of the following PowerShares actively managed funds
under Rule 8.600: PowerShares Active AlphaQ Fund, the PowerShares
Active Alpha Multi-Cap Fund, the PowerShares Active Mega-Cap
Portfolio and the PowerShares Active Low Duration Portfolio. See
Securities Exchange Act Release No. 57619 (April 4, 2008), 73 FR
19544 (April 10, 2008) (SR-NYSEArca-2008-25).
\6\ The Trust is registered under the 1940 Act. On June 26,
2008, the Trust filed with the Commission a Registration Statement
for the Fund on Form N-1A under the Securities Act of 1933, as
amended, (15 U.S.C. 77a), and under the 1940 Act relating to the
Fund (File Nos. 333-147622 and 811-22148) (``Registration
Statement''). The description of the operation of the Trust herein
is based on the Registration Statement.
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The Shares will conform to the initial and continued listing
criteria under Rule 8.600. The Fund will not purchase or sell
securities in markets outside the U.S. The Exchange represents that,
for initial and/or continued listing, the Fund will be in compliance
with Rule 10A-3 \7\ under the Exchange Act, as provided by NYSE Arca
Equities Rule 5.3.
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\7\ 17 CFR 240.10A-3.
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Description of the Fund
Invesco PowerShares Capital Management LLC (the ``Adviser'') is the
investment adviser for the Fund and is registered as an ``investment
adviser'' under the Investment Advisers Act of 1940 (the ``Advisers
Act'').\8\ Invesco Institutional (N.A.), Inc. (``Invesco
Institutional'') is the Fund's primary investment sub-adviser and is
also registered as an ``investment adviser'' under the Advisers Act.
Invesco Aim Distributors, Inc. (the ``Distributor'') serves as the
principal underwriter and distributor for the Fund. The Adviser is
affiliated with the Distributor, a broker-dealer. As required by NYSE
Arca Equities Rule 8.600, Commentary .07, the Exchange represents that
the Adviser has implemented a ``fire wall'' with respect to such
broker-dealer regarding access to information concerning the
composition and/or changes to the Fund's portfolio.
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\8\ 15 U.S.C. 80b-1. The Exchange represents that the Adviser
and its related personnel, are subject to Advisers Act Rule 204A-1.
This Rule specifically requires the adoption of a code of ethics by
an investment adviser to include, at a minimum: (i) Standards of
business conduct that reflect the firm's/personnel fiduciary
obligations; (ii) provisions requiring supervised persons to comply
with applicable federal securities laws; (iii) provisions that
require all access persons to report, and the firm to review, their
personal securities transactions and holdings periodically as
specifically set forth in Rule 204A-1; (iv) provisions requiring
supervised persons to report any violations of the code of ethics
promptly to the chief compliance officer (``CCO'') or, provided the
CCO also receives reports of all violations, to other persons
designated in the code of ethics; and (v) provisions requiring the
investment adviser to provide each of the supervised persons with a
copy of the code of ethics with an acknowledgement by said
supervised persons. 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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According to the Registration Statement, the Fund has an investment
objective of high total return through growth of capital and current
income. It seeks to achieve its investment objective by investing,
under normal market conditions, at least 80% of its assets in
securities of companies that are principally engaged in the U.S. real
estate industry. A company is considered to be principally engaged in
the U.S. real estate industry if (i) it derives 50% of its revenues or
profits from the ownership, leasing, construction, financing or sale of
U.S. real estate; or (ii) it has at least 50% of the value of its
assets invested in U.S. real estate. The Fund plans to invest
principally in equity real estate investment trusts (``REITs''). Equity
REITs pool investors'' funds for investments primarily in real estate
properties or real estate-related loans (such as mortgages). The Fund
may also invest in real estate operating companies (``REOCs''), as well
as securities of other companies principally engaged in the U.S. real
estate industry. REOCs are similar to REITs, except that REOCs reinvest
their earnings into the business, rather than distributing them to
unitholders like REITs. The 80% investment policy is non-fundamental
and requires 60 days' prior written notice to shareholders before it
can be changed.
In constructing the portfolio, the sub-advisers (as described in
the Registration Statement) analyze quantitative and statistical
metrics to identify attractively priced securities. The security and
portfolio evaluation process is generally conducted monthly. The sub-
advisers will consider selling or reducing a security position if (i)
The relative attractiveness of a security falls below desired levels;
(ii) a particular security's risk/return profile changes significantly;
or (iii) a more attractive investment opportunity is identified.
Creations and redemptions of Shares occur in large specified blocks
of Shares, referred to as ``Creation Units''. The Creation Unit size
for the Fund is 50,000 Shares.
The NAV of the Fund will normally be determined as of the close of
the regular trading session on the NYSE (ordinarily 4 p.m. Eastern
Time) on each business day.
Availability of Information
The Fund's Web site (http://www.powershares.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 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''),\9\ 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
[[Page 50384]]
Web site the Disclosed Portfolio as defined in proposed Rule
8.600(c)(2) that will form the basis for the Fund's calculation of NAV
at the end of the business day.\10\ The Web site information will be
publicly available at no charge.
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\9\ The Bid/Ask Price of the Fund is determined using 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 their service providers.
\10\ Under accounting procedures followed by the Fund, trades
made on the prior business day (``T'') will be booked and reflected
in NAV on the current business day (``T+1''). Accordingly, the Fund
will be able to disclose at the beginning of the business day the
portfolio that will form the basis for the NAV calculation at the
end of the business day.
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Investors can also obtain the Trust's Statement of Additional
Information (``SAI''), the Fund's Shareholder Reports, and its 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 http://www.sec.gov.
Information regarding market price and trading volume of the Shares
is and will be continually available on a real-time basis throughout
the day on brokers' computer screens and other electronic services.
Information regarding the previous day's closing price and trading
volume information will be published daily in the financial section of
newspapers. Quotation and last sale information for the Shares will be
available via the Consolidated Tape Association (``CTA'') high-speed
line. In addition, the Portfolio Indicative Value, as defined in NYSE
Arca Equities Rule 8.600(c)(3), will be disseminated by the Exchange at
least every 15 seconds during the Core Trading Session through the
facilities of CTA. The dissemination of the Portfolio Indicative Value,
together with the Disclosed Portfolio, will allow investors to
determine the value of the underlying portfolio of a Fund on a daily
basis and to provide a close estimate of that value throughout the
trading day.
For more information regarding the Shares and the Fund, including
investment strategies, risks, creation and redemption procedures, fees,
portfolio holdings disclosure policies, distributions and taxes, see
the Registration Statement. All terms relating to the Fund that are
referred to, but not defined in, this proposed rule change are defined
in the Registration Statement.
Initial and Continued Listing Criteria
The Fund will be subject to the initial and continued listing
criteria of NYSE Arca Equities Rule 8.600(d). The Exchange has
established that a minimum of 100,000 Shares will be required to be
outstanding at the time of commencement of trading on the Exchange. In
addition, the Exchange will obtain a representation from the Fund 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.
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.\11\ 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 comprising
the Disclosed Portfolio and/or the Financial Instruments 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 Rule 8.600(d)(2)(D), which sets forth
circumstances under which Shares of the Fund may be halted.
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\11\ See NYSE Arca Equities Rule 7.12, Commentary .04.
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Trading Rules
The Exchange deems the Shares to be equity securities, thus
rendering trading in the Shares subject to the Exchange's existing
rules governing the trading of equity securities. Shares will trade on
the NYSE Arca Marketplace from 4 a.m. to 8 p.m. Eastern Time in
accordance with NYSE Arca Equities Rule 7.34 (Opening, Core, and Late
Trading Sessions). The Exchange has appropriate rules to facilitate
transactions in the Shares during all trading sessions. The minimum
trading increment for Shares on the Exchange will be $0.01.
Surveillance
The Exchange intends to utilize its existing surveillance
procedures applicable to derivative products (which include Managed
Fund Shares) to monitor trading in the Shares. The Exchange represents
that these procedures are adequate to properly monitor Exchange trading
of the Shares in all trading sessions and to deter and detect
violations of Exchange rules and applicable federal securities laws.
The Exchange's current trading surveillance focuses on detecting
securities trading outside their normal patterns. When such situations
are detected, surveillance analysis follows and investigations are
opened, where appropriate, to review the behavior of all relevant
parties for all relevant trading violations.
The Exchange may obtain information via the Intermarket
Surveillance Group (``ISG'') from other exchanges who are members of
the ISG.\12\ In addition, the Exchange also has a general policy
prohibiting the distribution of material, non-public information by its
employees.
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\12\ For a list of the current members of ISG, see http://
www.isgportal.org.
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Information Bulletin
Prior to the commencement of trading, the Exchange will inform its
ETP Holders in an Information Bulletin (``Bulletin'') of the special
characteristics and risks associated with trading the Shares.
Specifically, the Bulletin will discuss the following: (1) The
procedures for purchases and redemptions of Shares in Creation Unit
aggregations (and that Shares are not individually redeemable); (2)
NYSE Arca Equities Rule 9.2(a),\13\ which imposes a duty of due
diligence on its ETP Holders to learn the essential facts relating to
every customer prior to trading the Shares; (3) the risks involved in
trading the Shares during the Opening and Late Trading Sessions when an
updated Portfolio Indicative Value will not be calculated or publicly
disseminated; (4) how information regarding the Portfolio Indicative
Value is disseminated; (5) the requirement that ETP Holders deliver a
prospectus to investors purchasing newly issued Shares prior to or
concurrently with the confirmation of a transaction; and (6) trading
information.
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\13\ NYSE Arca Equities Rule 9.2(a) provides that an ETP Holder,
before recommending a transaction, must have reasonable grounds to
believe that the recommendation is suitable for the customer based
on any facts disclosed by the customer as to his other security
holdings and as to his financial situation and needs. Further, the
rule provides, with a limited exception, that prior to the execution
of a transaction recommended to a non-institutional customer, the
ETP Holder shall make reasonable efforts to obtain information
concerning the customer's financial status, tax status, investment
objectives, and any other information that the ETP Holder believes
would be useful to make a recommendation. See Securities Exchange
Act Release No. 54026 (June 21, 2006), 71 FR 36850 (June 28, 2006)
(SR-PCX-2005-115).
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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,
[[Page 50385]]
and interpretive relief granted by the Commission from any rules under
the Exchange Act. The Bulletin will also disclose that the NAV for the
Shares will be calculated after 4 p.m. Eastern Time each trading day.
2. Statutory Basis
The basis under the Exchange Act for this proposed rule change is
the requirement under Section 6(b)(5) \14\ 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. The
Exchange believes that the proposed rule change 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.
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\14\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Exchange Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 35 days of the date of publication of this notice in the
Federal Register or within such longer period (i) as the Commission may
designate up to 90 days of such date if it finds such longer period to
be appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve the proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
The Exchange has requested accelerated approval of this proposed
rule change prior to the 30th day after the date of publication of the
notice in the Federal Register.\15\ The Commission is considering
granting accelerated approval of the proposed rule change at the end of
a 15-day comment period.
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\15\ E-mail from Michael Cavalier, Associate General Counsel,
NYSE Euronext, to Edward Cho and Christopher Chow, Special Counsels,
Commission, dated August 13, 2008.
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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 Exchange 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 e-mail to rule-comments@sec.gov. Please include
File Number SR-NYSEArca-2008-85 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2008-85.
This file number should be included on the subject line if e-mail is
used. To help the Commission process and review your comments more
efficiently, please use only one method. The Commission will post all
comments on the Commission's Internet Web site (http://www.sec.gov/
rules/sro.shtml). Copies of the submission, all subsequent amendments,
all written statements with respect to the proposed rule change that
are filed with the Commission, and all written communications relating
to the proposed rule change between the Commission and any person,
other than those that may be withheld from the public in accordance
with the provisions of 5 U.S.C. 552, will be available for inspection
and copying in the Commission's Public Reference Room, 100 F Street,
NE., Washington, DC 20549, on official business days between the hours
of 10 a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSEArca-2008-85 and should
be submitted on or before September 10, 2008.
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\16\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
Florence E. Harmon,
Acting Secretary.
[FR Doc. E8-19707 Filed 8-25-08; 8:45 am]
BILLING CODE 8010-01-P