[Federal Register Volume 78, Number 192 (Thursday, October 3, 2013)]
[Notices]
[Pages 61411-61413]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-24263]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70570; File No. SR-NYSEArca-2013-97]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Reflecting Changes
to the Means of Achieving the Investment Objective Applicable to Shares
of the PowerShares China A-Share Portfolio
September 30, 2013.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on September 19, 2013, NYSE Arca, Inc. (``Exchange'' or ``NYSE
Arca'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the 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 reflect changes to the means of achieving
the investment objective applicable to shares of the PowerShares China
A-Share Portfolio (the ``Fund''). The text of the proposed rule change
is available on the Exchange's Web site at www.nyse.com, at the
principal office of the Exchange, and at the Commission's Public
Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Commission has approved listing and trading on the Exchange of
shares (``Shares'') of the PowerShares China A-Share Portfolio, a
series of PowerShares Actively Managed Exchange-Traded Trust (the
``Trust''),\4\ under NYSE Arca Equities Rule 8.600, which governs the
listing and trading of Managed Fund Shares. Shares of the Fund have not
commenced listing and trading on the Exchange.
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\4\ See Securities Exchange Act Release No. 69915 (July 2,
2013), 78 FR 41145 (July 9, 2013) (SR-NYSEArca-2013-56) (``Prior
Order''). See also Securities Exchange Act Release No. 69634 (May
23, 2013), 78 FR 32487 (May 30, 2013) (SR-NYSEArca-2013-56) (``Prior
Notice,'' and together with the Prior Order, the ``Prior Release'').
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The Shares are offered by the Trust, a statutory trust organized
under the laws of the State of Delaware and registered with the
Commission as an open-end management investment company.\5\ The
investment advisor to the Fund will be Invesco PowerShares Capital
Management LLC (the ``Adviser'').
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\5\ The Trust is registered under the Investment Company Act of
1940 (15 U.S.C. 80a-1) (``1940 Act''). On August 30, 2013, the Trust
filed with the Commission a post-effective amendment to its
registration statement on Form N-1A under the Securities Act of 1933
(15 U.S.C. 77a) (``Securities Act''), and under the 1940 Act
relating to the Fund (File Nos. 333-147622 and 811-22148)
(``Registration Statement''). The description of the operation of
the Trust and the Fund herein is based, in part, on the Registration
Statement. In addition, the Commission has issued an order granting
certain exemptive relief to the Trust under the 1940 Act. See
Investment Company Act Release No. 28171 (February 27, 2008) (File
No. 812-13386) (``Exemptive Order'').
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In this proposed rule change, the Exchange proposes to reflect
changes to the description of the measures the Adviser will utilize to
implement the Fund's investment objective, as described below.\6\
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\6\ The changes described herein will be effective contingent
upon effectiveness of the Trust's most recent post-effective
amendment to its Registration Statement. See note 5, supra. The
Adviser represents that the Adviser will not implement the changes
described herein until the instant proposed rule change is
operative.
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First, the Prior Release stated that, under normal
circumstances,\7\ the Fund generally will invest at least 80% of its
net assets in a combination of investments whose collective performance
is designed to correspond to the performance of the FTSE China A50
Index (the ``Benchmark''). The Adviser now represents that, rather than
being designed to correspond to the performance of the Benchmark, the
Fund will seek to achieve its investment objective by providing
exposure to the China ``A-Shares'' market using a quantitative, rules-
based investment strategy. The Fund will be actively managed by the
Adviser and will not be obligated to invest in the instruments included
in the Benchmark or to track the performance of the Benchmark or of any
index. However, although the Fund will seek to exceed the performance
of the Benchmark, there can be no assurance that the Fund will do so at
any time.
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\7\ The term ``under normal circumstances'' includes, but is not
limited to, the absence of: Extreme volatility or trading halts in
the equity markets or the financial markets generally; operational
issues causing dissemination of inaccurate market information; or
force majeure type events such as systems failure, natural or man-
made disaster, act of God, armed conflict, act of terrorism, riot or
labor disruption or any similar intervening circumstance.
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Second, the Prior Release stated that the Trust has filed a notice
of eligibility for exclusion from the definition of the term
``commodity pool operator'' (``CPO'') in accordance with Rule 4.5 of
the Commodity Exchange Act (``CEA'').\8\ As stated in the Prior
Release, under amendments to Rule 4.5 adopted in February 2012, an
investment adviser of a registered investment company may claim
exclusion from registration as a CPO only if the registered investment
company it advises uses futures contracts solely for ``bona fide
hedging purposes'' or limits its use of futures contracts for non-bona
fide hedging purposes in specified ways. The Prior Release stated that,
because the Fund did not expect to use futures contracts solely for
``bona fide hedging purposes,'' the Fund would be subject to rules that
would require it to limit its use of positions in futures contracts in
accordance with the requirements of amended Rule 4.5 unless the Adviser
otherwise complies with CPO
[[Page 61412]]
regulation. The Adviser now represents that, because the Fund does not
expect to use futures contracts solely for ``bona fide hedging
purposes,'' nor limit its use of positions in futures contracts in
accordance with the requirements of amended Rule 4.5, the Fund is
unable to rely on the exclusion from amended Rule 4.5, and therefore
will be subjected to regulation under the CEA and Commodity Futures
Trading Commission (``CFTC'') rules as a commodity pool. As noted in
the Prior Release, the Adviser is registered as a CPO.
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\8\ 7 U.S.C. 1.
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Third, the Prior Release stated that, according to the Registration
Statement, the Fund may seek to gain exposure to the A-Shares market
through investments in a subsidiary organized in the Cayman Islands
(``Subsidiary'') that in turn would make investments in futures
contracts that provide exposure to China A-Shares. The Adviser now
represents that the Trust will not utilize a Subsidiary and that the
Fund will make its investments directly. Therefore, all references to
the Subsidiary in the Prior Release are of no effect.
Fourth, the Prior Release stated that the Fund may enter into
repurchase and reverse repurchase agreements. The Adviser now
represents that the Fund will not enter into such agreements.
Therefore, all references in the Prior Release to the Fund's
investments in repurchase and reverse repurchase agreements are of no
effect.
The Adviser represents that there is no change to the Fund's
investment objective. The Fund will continue to comply with all initial
and continued listing requirements under NYSE Arca Equities Rule 8.600.
Except for the changes noted above, all other facts presented and
representations made in the Prior Release remain unchanged.
All terms referenced but not defined herein are defined in the
Prior Release.
2. Statutory Basis
The basis under the Act for this proposed rule change is the
requirement under Section 6(b)(5) \9\ that an exchange have rules that
are designed to prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of trade, to remove
impediments to, and perfect the mechanism of a free and open market
and, in general, to protect investors and the public interest.
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\9\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposed rule change is designed to
prevent fraudulent and manipulative acts and practices, and is designed
to promote just and equitable principles of trade and to protect
investors and the public interest, in that the Adviser represents that
there is no change to the Fund's investment objective and the Adviser
is clarifying that the Fund will seek to achieve its investment
objective by providing exposure to the China ``A-Shares'' market,
rather than being designed to correspond to the performance of the
Benchmark. As an actively-managed fund, the Fund will not be obligated
to invest in the instruments included in the Benchmark or to track the
performance of the Benchmark or of any index and the Fund will seek to
exceed the performance of the Benchmark. These changes are intended to
conform more closely with requirements of the 1940 Act, as a result of
guidance from the Commission staff. This change is consistent with the
operation of other issues of Managed Fund Shares traded on the Exchange
that seek to outperform rather than track a benchmark index, as is the
case for index funds. The Adviser also is clarifying the representation
in the Prior Release regarding regulations applicable to CPOs to
clarify that the Trust is unable to rely on the exclusion from amended
Rule 4.5 and therefore will be subjected to regulation under the CEA
and CFTC rules as a commodity pool. The Adviser is registered as a CPO.
The Adviser also is clarifying that, in seeking to achieve its
investment objective, the Trust will not utilize a Subsidiary and that
the Fund will make its investments directly, and the Fund will not
enter into repurchase or reverse repurchase agreements. The Exchange
notes that the advisers for other issues of actively managed funds may
be subject to regulation under the CEA and CFTC rules as a commodity
pool. In addition, other issues of actively managed funds do not make
investments through a subsidiary and do not invest in repurchase and
reverse repurchase agreements. 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 the Fund will
continue to comply with all initial and continued listing requirements
under NYSE Arca Equities Rule 8.600. The Adviser represents that there
is no change to the Fund's investment objective. Except for the changes
noted above, all other representations made in the Prior Release remain
unchanged.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposed changes will
accommodate Exchange listing and trading of an issue of Managed Fund
Shares that seeks to exceed the performance of a benchmark of non-U.S.
securities and will enhance competition among issues of Managed Fund
Shares that invest in equity securities. The changes from the Prior
Release described above are consistent with other issues of actively
managed funds, and the strategy utilized by the Fund is different from
other issues of Managed Fund Shares traded on the Exchange and will
provide another choice for investors investing in Managed Fund Shares.
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
Because the foregoing proposed rule change: (1) Does not
significantly affect the protection of investors or the public
interest; (2) does not impose any significant burden on competition;
and (3) by its terms does not become operative for 30 days after the
date of this filing, or such shorter time as the Commission may
designate if consistent with the protection of investors and the public
interest, the proposed rule change has become effective pursuant to
Section 19(b)(3)(A) of the Act \10\ and Rule 19b-4(f)(6)
thereunder.\11\
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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to provide the Commission
with written notice of its intent to file the proposed rule change,
along with a brief description and text of the proposed rule change,
at least five business days prior to the date of filing of the
proposed rule change, or such shorter time as designated by the
Commission. The Exchange has fulfilled this requirement.
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A proposed rule change filed under Rule 19b-4(f)(6) normally does
not become operative for 30 days after the date of filing. However,
Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter
time if such action is consistent with the protection of investors and
the public interest. The Exchange requests that the Commission waive
the 30-day operative delay to accommodate investments by the Fund and
Exchange trading of the Shares of the Fund without delay. The
Commission believes that waiving the 30-day operative delay is
consistent
[[Page 61413]]
with the protection of investors and the public interest.\12\ As stated
in the proposal, the proposed changes do not alter the Fund's
investment objective. Under the proposal, the Fund will seek to achieve
its investment objective by providing exposure to the China A-Shares
market, rather than being designed to correspond to the performance of
the Benchmark. In addition, the Fund will not be obligated to invest in
the instruments included in the Benchmark or to track the performance
of the Benchmark or of any index, and will seek to exceed the
performance of the Benchmark. Further, the proposal provides that in
seeking to achieve its investment objective, the Trust will not utilize
a Subsidiary and that the Fund will make its investments directly. As
proposed, the Fund also will not enter into repurchase or reverse
repurchase agreements. Moreover, the proposal states that the Trust is
unable to rely on the exclusion from amended CFTC Rule 4.5 and will be
subject to regulation under the CEA and CFTC rules as a commodity pool.
The proposal reiterates that the Adviser is registered as a CPO.
Because the proposed changes do not alter the Fund's investment
objective and conforms the Fund more closely with the requirements of
the 1940 Act, the Commission designates the proposed rule change as
operative upon filing.
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\12\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
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-2013-97 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2013-97. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSEArca-2013-97 and should
be submitted on or before October 24, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-24263 Filed 10-2-13; 8:45 am]
BILLING CODE 8011-01-P