[Federal Register Volume 79, Number 187 (Friday, September 26, 2014)]
[Notices]
[Pages 58001-58003]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-22993]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73181; File No. SR-NYSEArca-2014-103]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Relating to an
Increase in the Number of Securities Held by the Peritus High Yield ETF
September 23, 2014.
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 September 17, 2014, NYSE Arca, Inc. (the ``Exchange'' or
``NYSE Arca'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to reflect an increase in the number of
securities that may be held by the Peritus High Yield ETF. The text of
the proposed rule change is available on the Exchange's Web site at
www.nyse.com, at the principal office of the Exchange, and at the
Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Commission has approved a proposed rule change relating to
listing and trading on the Exchange of shares (``Shares'') of the
Peritus High Yield ETF (``Fund'') under NYSE Arca Equities Rule 8.600
\4\, which governs the listing and trading of Managed Fund Shares.\5\
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\4\ See Securities Exchange Act Release No. 63329 (November 17,
2010), 75 FR 71760 (November 24, 2010) (SR-NYSEArca-2010-86) (the
``Prior Order''). The notice with respect to the Prior Order was
published in Securities Exchange Act Release No. 63041 (October 5,
2010), 75 FR 62905 (October 13, 2010) (``Prior Notice'' and,
together with the Prior Order, the ``Prior Release''). The Exchange
subsequently filed with the Commission several proposed rule changes
relating to changes in the Fund's holdings. See Securities Exchange
Act Release Nos. 66818 (April 17, 2012), 77 FR 24233 (April 23,
2012) (SR-NYSEArca-2012-33) (notice of filing and immediate
effectiveness of proposed rule change relating to the Fund's
investment in equity securities) (``Equities Investment Release'');
70284 (August 29, 2013), 78 FR 54715 (September 5, 2013) (SR-
NYSEArca-2013-83) (notice of filing and immediate effectiveness of
proposed rule change relating to the Fund's investments in leveraged
loans) (``Leveraged Loan Release''); 72433 (June 19, 2014), 79 FR
36114 (June 25, 2014) (SR-NYSEArca-2014-69) (notice of filing and
immediate effectiveness of proposed rule change relating to an
increase in the Fund's investments in equity securities) (``Equities
Increase Release'', and together with the Prior Release, the Equity
Investment Release, and the Leveraged Loan Release, the ``Prior
Releases'').
\5\ 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.
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The Shares are offered by AdvisorShares Trust (the ``Trust''), a
[[Page 58002]]
statutory trust organized under the laws of the State of Delaware and
registered with the Commission as an open-end management investment
company.\6\ The Fund's Shares are currently listed and traded on the
Exchange under NYSE Arca Equities Rule 8.600.
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\6\ The Trust is registered under the 1940 Act. On October 29,
2012, the Trust filed with the Commission an amendment to its
registration statement on Form N-1A under the Securities Act of 1933
(15 U.S.C. 77a) and the 1940 Act relating to the Fund (File Nos.
333-157876 and 811-22110) (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.
29291 (May 28, 2010) (File No. 812-13677) (``Exemptive Order'').
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The investment adviser to the Fund is AdvisorShares Investments,
LLC (the ``Adviser''). Peritus I Asset Management, LLC is the Fund's
sub-adviser (``Peritus'' or the ``Sub-Adviser'').
According to the Registration Statement and as stated in the Prior
Release, the Fund's investment objective is to achieve high current
income with a secondary goal of capital appreciation. The Sub-Adviser
seeks to achieve the Fund's investment objective by selecting, among
other investments, a focused portfolio of high yield debt securities,
which include senior and subordinated corporate debt obligations (such
as bonds, debentures, notes and commercial paper). The Fund does not
have any portfolio maturity limitation and may invest its assets from
time to time primarily in instruments with short-term, medium-term or
long-term maturities. The Adviser represents that the investment
objective of the Fund is not changing.
As stated in the Prior Release, the Fund's portfolio typically
consists of 40-60 holdings, which are disclosed on its Web site
(www.advisorshares.com) daily after the close of trading on the
Exchange (normally, 4:00 p.m., Eastern time) and prior to the opening
of trading on the Exchange the following day.
The Exchange proposes to reflect a change to be implemented by the
Fund with respect to the number of holdings that will be included in
the Fund's portfolio. Specifically, going forward, under normal
circumstances,\7\ the Fund's portfolio will consist of 40-100 holdings;
however, the Fund's portfolio may consist of more than 100 holdings if
such increase is in the Fund's best interest.\8\
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\7\ The term ``under normal circumstances'' includes, but is not
limited to, the absence of adverse market, economic, political or
other conditions, including extreme volatility or trading halts in
the fixed income 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.
\8\ The change to the number of the Fund's holdings will be
effective upon filing with the Commission of an amendment to the
Trust's Registration Statement on Form N-1A, and shareholders will
be notified of such change by means of such amendment.
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Pursuant to the terms of the Exemptive Order, the Fund will not
invest in options contracts, futures contracts or swap agreements. The
Fund's investments will be consistent with its investment objective and
will not be used to enhance leverage.
As stated in the Prior Release, on a daily basis, the Adviser
discloses for each portfolio security or other financial instrument of
the Fund the following information: ticker symbol (if applicable), name
of security or financial instrument, number of shares or dollar value
of financial instruments held in the portfolio, and percentage
weighting of the security or financial instrument in the portfolio. All
representations made in the Prior Releases regarding the availability
of information relating to the Shares, trading halts, trading rules,
the Portfolio Indicative Value and surveillance, among others, will
continue to apply to trading in the Shares.
The Adviser represents that the proposed change to permit an
increase in the number of portfolio holdings, as described above, is
consistent with the Fund's investment objective, and will further
assist the Adviser and Sub-Adviser to achieve such investment
objective. Because the size of the Fund has grown substantially since
its inception, in terms of market capitalization and Shares
outstanding, the Adviser and Sub-Adviser believe that it is appropriate
for the Fund to increase the number of securities in which the Fund may
invest under normal circumstances for the purpose of allowing the Fund
to take advantage of an increased number of investment opportunities in
the fixed income and equities markets. Such an increase will provide
the Fund with additional flexibility to achieve high current income
through investments in fixed income and equity securities, and to
achieve the secondary goal of capital appreciation through possible
price appreciation of such investments. Except for the change noted
above, all other representations made in the Prior Releases remain
unchanged.\9\ The Fund will continue to comply with all initial and
continued listing requirements under NYSE Arca Equities Rule 8.600.
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\9\ See note 4, supra. All terms referenced but not defined
herein are defined in the Prior Release.
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2. Statutory Basis
The basis under the Act for this proposed rule change is the
requirement under Section 6(b)(5) \10\ 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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\10\ 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 in that the
Shares will be listed and traded on the Exchange pursuant to the
initial and continued listing criteria in NYSE Arca Equities Rule
8.600. The Exchange has in place surveillance procedures that are
adequate to properly monitor trading in the Shares in all trading
sessions and to deter and detect violations of Exchange rules and
applicable federal securities laws. The Exchange may obtain information
via the Intermarket Surveillance Group (``ISG'') from other exchanges
that are members of ISG or with which the Exchange has entered into a
comprehensive surveillance sharing agreement.
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 NAV per Share is calculated daily and that the NAV and the
Disclosed Portfolio is made available to all market participants at the
same time. In addition, a large amount of information is publicly
available regarding the Fund and the Shares, thereby promoting market
transparency. The Portfolio Indicative Value, as defined in NYSE Arca
Equities Rule 8.600(c)(3), is disseminated by one or more major market
data vendors at least every 15 seconds during the Exchange's Core
Trading Session. On a daily basis, the Adviser discloses for each
portfolio security or other financial instrument of the Fund the
following information: ticker symbol (if applicable), name of security
or financial instrument, number of shares or dollar value of financial
instruments held in the portfolio, and percentage weighting of the
security or financial instrument in the portfolio. The Fund's holdings
are disclosed on its Web site daily after the close of trading on the
Exchange and prior to the opening of trading on the Exchange the
following day. Information regarding
[[Page 58003]]
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, and quotation
and last sale information is available via the Consolidated Tape
Association high-speed line. Price information regarding the Fund's
fixed income investments is available from major market data vendors.
The intra-day, closing and settlement prices for exchange-listed equity
securities held by the Fund are also readily available from the
national securities exchanges trading such securities. 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. Trading in the Shares is subject to
NYSE Arca Equities Rule 8.600(d)(2)(D), which sets forth circumstances
under which Shares of the Fund may be halted. The Web site for the Fund
includes a form of the prospectus for the Fund and additional data
relating to NAV and other applicable quantitative information. In
addition, as stated in the Prior Notice, investors 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. 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. In addition, as stated in the Prior Release, investors 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 Adviser represents that the
proposed change to permit an increase in the number of portfolio
holdings, as described above, is consistent with the Fund's investment
objective, and will further assist the Adviser and Sub-Adviser to
achieve such investment objective. Such an increase may further the
public interest by providing the Fund with additional flexibility to
achieve high current income through investments in fixed income and
equity securities, and to achieve the secondary goal of capital
appreciation through possible price appreciation of such investments.
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 believes the
proposed rule change, in permitting the Fund, under normal
circumstances, to hold an increased number of securities as part of its
portfolio, will help the Fund to achieve its investment objective, and
will enhance competition among issues of Managed Fund Shares that
invest in fixed income and equity securities.
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 does not: (i)
significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and (iii)
become operative for 30 days from the date on which it was filed, 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
\11\ and Rule 19b-4(f)(6)(iii) thereunder.\12\
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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file 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 satisfied this requirement.
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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-2014-103 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-2014-103.
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 such filing will also 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-2014-103 and should be submitted on or before October 17,
2014.
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. 2014-22993 Filed 9-25-14; 8:45 am]
BILLING CODE 8011-01-P