[Federal Register Volume 77, Number 29 (Monday, February 13, 2012)]
[Notices]
[Pages 7643-7647]
[FR Doc No: 2012-3218]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66345; File No. SR-NYSEArca-2011-84]

 Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting
Approval of a Proposed Rule Change, as Modified by Amendment No. 3
Thereto, Relating to the Listing and Trading of the Russell Global
Opportunity ETF; Russell Bond ETF; and Russell Real Return ETF Under
NYSE Arca Equities Rule 8.600

February 7, 2012.

I. Introduction

    On November 16, 2011, NYSE Arca, Inc. (``Exchange'' or ``NYSE
Arca'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'' or ``Exchange Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to list and trade shares
(``Shares'') of the Russell Global Opportunity ETF; Russell Bond ETF;
and Russell Real Return ETF (each, a ``Fund'' and, collectively,
``Funds'') under NYSE Arca Equities Rule 8.600. The proposed rule
change was published for comment in the Federal Register on December 6,
2011.\3\ On January 13, 2012, the Exchange filed Amendment No. 1 to the
proposed rule change.\4\ On January 18, 2012, the Exchange filed
Amendment No. 2 to the proposed rule change.\5\ On January 23, 2012,
the Exchange further extended the time period for Commission action to
February 8, 2012. On January 25, 2012, the Exchange filed Amendment No.
3 to the proposed rule change.\6\ The Commission received no comments
on the proposal. This order grants approval of the proposed rule
change, as modified by Amendment No. 3 thereto.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 65859 (December 1,
2011), 76 FR 76205 (``Notice'').
    \4\ The Exchange withdrew Amendment No. 1 on January 18, 2012
and extended the time period for Commission action to January 25,
2012.
    \5\ The Exchange withdrew Amendment No. 2 on January 25, 2012.
    \6\ Amendment No. 3 amended three aspects of the proposed rule
change. First, Amendment No. 3 deleted the sentence: ``A minimum of
30% of Fund [Russell Global Opportunity ETF] assets will be invested
in securities of non-U.S. issuers through Underlying ETFs.'' This
amendment was intended to clarify that, with respect to the Russell
Global Opportunity ETF, while investments by the Underlying ETFs
(which are all listed and traded on a national securities exchange)
may be in non-U.S. securities, there will not be a required minimum
level of investment in securities of non-U.S. issuers and,
therefore, less than 30% of the Russell Global Opportunity ETF's
assets may be invested in securities of non-U.S. issuers through
Underlying ETFs. Second, Amendment No. 3 amended the following
sentence: ``Each Fund may invest up to an aggregate amount of 15% of
its net assets in (a) illiquid securities, and (b) Rule 144A
securities.'' As amended, the sentence reads: ``Each Fund may hold
up to an aggregate amount of 15% of its net assets in (a) illiquid
securities, and (b) Rule 144A securities.'' Amendment No. 3 also
deleted the following sentence: ``This limitation is applied at the
time of purchase.'' The purpose of these amendments was to make the
proposed rule change more consistent with the Investment Company Act
of 1940 (``1940 Act'') requirements relating to restrictions on
holdings of illiquid securities by registered open-end management
investment companies. Third, Amendment No. 3 replaced the sentence:
``A Creation Unit of the Funds will consist of 50,000 Shares'' with
the sentence: ``A Creation Unit of the Funds will consist of at
least 50,000 Shares.'' This amendment was intended to reflect the
possibility that the issuer may determine to apply a minimum
Creation Unit size of greater than 50,000 Shares with respect to the
Funds. Because the changes made in Amendment No. 3 do not materially
alter the substance of the proposed rule change or raise any novel
regulatory issues, Amendment No. 3 is not subject to notice and
comment.
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II. Description of the Proposed Rule Change

    The Exchange proposes to list and trade Shares of the Funds
pursuant to NYSE Arca Equities Rule 8.600, which governs the listing
and trading of

Managed Fund Shares on the Exchange. The Funds are series of the
Russell Exchange Traded Funds Trust (``Trust'').\7\ Each of the Funds
is a ``fund of funds,'' which means that each Fund seeks to achieve its
investment objective by investing primarily in the retail shares of
other exchange-traded funds that are registered under the 1940 Act
(``Underlying ETFs''). The Funds also may invest in other types of U.S.
exchange-traded products, such as Exchange Traded Notes (``ETNs'') and
exchange-traded pooled investment vehicles (collectively, with
Underlying ETFs, ``Underlying ETPs'').\8\ Russell Investment Management
Company (``Adviser'') is the adviser for the Funds. State Street Bank &
Trust Company serves as the custodian and transfer agent, and Russell
Fund Services Company serves as the administrator for the Funds. The
Adviser is affiliated with multiple broker-dealers and has implemented
a ``fire wall'' with respect to such broker-dealers regarding access to
information concerning the composition and/or changes to the Funds'
portfolios.\9\
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    \7\ The Trust is registered under the 1940 Act. On May 9, 2011,
the Trust filed with the Commission Post-Effective Amendment No. 6
under the Securities Act of 1933 (15 U.S.C. 77a) and Amendment No. 9
under the 1940 Act to the Trust's registration statement on Form N-
1A relating to the Funds (File Nos. 333-160877 and 811-22320)
(``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. 29164 (March 1,
2010) (File No. 812-13815 and 812-13658-01) (``Exemptive Order'').
    \8\ ``Underlying ETPs,'' which will be listed on a national
securities exchange, include the following: Investment Company Units
(as described in NYSE Arca Equities Rule 5.2(j)(3)); Index-Linked
Securities (as described in NYSE Arca Equities Rule 5.2(j)(6));
Portfolio Depositary Receipts (as described in NYSE Arca Equities
Rule 8.100); 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); Trust Units (as
described in NYSE Arca Equities Rule 8.500); Managed Fund Shares (as
described in NYSE Arca Equities Rule 8.600); and closed-end funds.
    \9\ See NYSE Arca Equities Rule 8.600, Commentary .06. In the
event (a) the Adviser or any sub-adviser becomes newly affiliated
with a broker-dealer, or (b) any new adviser or sub-adviser becomes
affiliated with a broker-dealer, it will implement a fire wall with
respect to such broker-dealer 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.
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Russell Global Opportunity ETF

    The Fund's investment objective will be to seek to provide long-
term capital growth. The Fund will be a ``fund of funds,'' which means
that the Fund will seek to achieve its investment objective by
investing primarily in shares of Underlying ETFs. In pursuing the
Fund's investment objective, the Adviser will normally invest the
Fund's assets in Underlying ETFs that seek to track various
indices.\10\ These indices include those that track the performance of
equity, fixed income, real estate, commodities, infrastructure or
currency markets. There is no maximum limit on the percentage of Fund
assets that may be invested in securities of non-U.S. issuers through
Underlying ETFs.\11\ The Fund also may invest in other Underlying ETPs.
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    \10\ The terms ``normally'' and ``under normal circumstances''
as used herein include, but are not limited to, the absence of
extreme volatility or trading halts in the debt or equities 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.
    \11\ See supra note 6.
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    The Adviser will employ an asset allocation strategy that seeks to
provide exposure to multiple asset classes in a variety of domestic and
foreign markets. The Adviser's asset allocation strategy will establish
a target asset allocation for the Fund and the Adviser then will
implement the strategy by selecting Underlying ETPs that represent each
of the desired asset classes, sectors and strategies. The Adviser's
strategy also will involve periodic review of the Fund's holdings as
markets rise and fall to ensure that the portfolio adheres to the
strategic allocation and to add value through tactical allocation that
may over or underweight Underlying ETPs around the strategic
allocation. The Adviser may modify the strategic allocation for the
Fund from time to time based on capital markets research. The Adviser
also may modify the Fund's allocation based on tactical factors such as
the Adviser's outlook for the economy, financial markets generally and/
or relative market valuation of the asset classes, sectors or
strategies represented by each Underlying ETP.
    The Adviser intends to invest in Underlying ETPs that hold equity
securities of large, medium and small capitalization companies across
the globe including developed countries and emerging countries. Equity
securities may include common and preferred stocks, warrants and rights
to subscribe to common stock and convertible securities. The Adviser
also intends to invest in Underlying ETPs that (1) hold U.S. and non-
U.S. government issued debt, investment grade corporate bonds, below
investment grade bonds (generally referred to as high yield bonds or
``junk''), and mortgage and asset backed securities, and (2) track
performance of commodities, real estate, infrastructure and currency
markets by investing in energy, metals, agriculture, REITs, utilities,
roads and bridges or construction/engineering companies. The Adviser
may also, on a limited basis, sell short Underlying ETPs.
    The Adviser will select Underlying ETPs based on their potential to
represent the underlying asset class, sector or strategy to which the
Adviser seeks exposure for the Fund. The Fund will only invest in U.S.-
listed Underlying ETPs.

Russell Bond ETF

    The Fund will seek total return. The Fund will be a ``fund of
funds,'' which means that the Fund will seek to achieve its investment
objective by investing primarily in shares of Underlying ETFs. In
pursuing the Fund's investment objective, the Adviser will normally
invest the Fund's assets in Underlying ETFs that seek to track various
fixed income indices.\12\ These indices include those that track the
performance of fixed income securities issued by governments and
corporations in the United States, Europe and Asia, as well as other
developed and emerging markets. There is no limit on the percentage of
Fund assets that may be invested in securities of non-U.S. issuers
through Underlying ETFs. The Fund also may invest in other Underlying
ETPs.
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    \12\ See supra note 10.
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    The Fund will invest, under normal circumstances, such that at
least 80% of the value of its net assets is exposed to bonds through
Underlying ETPs. The Fund considers bonds to include fixed income
equivalent instruments, which may be represented by forwards or
derivatives such as options, futures contracts, or swap agreements.
    The Adviser will employ an asset allocation strategy that provides
exposure to multiple fixed income asset classes or sectors in a variety
of U.S. and non-U.S. markets. The Adviser's allocation strategy will
establish a target allocation for the Fund and the Adviser then will
implement the strategy by selecting Underlying ETPs that represent each
of the desired exposures including asset classes or sectors. The
Adviser's strategy also will involve periodic review of the Fund's
holdings as markets rise and fall to ensure that the portfolio adheres
to the strategic allocation and to add value through tactical
allocation that may over or

underweight Underlying ETPs around the strategic allocation. The
Adviser may modify the strategic allocation for the Fund from time to
time based on capital markets research. The Adviser also may modify the
Fund's allocation based on tactical factors such as the Adviser's
outlook for the economy, financial markets generally and/or relative
market valuation of the asset classes or sectors represented by each
Underlying ETP.
    The Adviser intends to invest in Underlying ETPs that hold
government-issued debt, investment grade corporate bonds, below
investment grade bonds (generally referred to as high yield bonds or
``junk'') and mortgage and asset backed securities. Issuers of debt
securities may be U.S. or non-U.S. (including developed and emerging
markets countries) governments or corporate issuers. The Adviser also
intends to select Underlying ETPs based on their exposure to asset
class or sectors and the duration and credit quality of their
portfolios within broader sectors of a fixed income market. The Adviser
may also, on a limited basis, sell short Underlying ETPs.
    The Adviser will select Underlying ETPs based on their potential to
represent the underlying asset class or sector to which the Adviser
seeks exposure for the Fund. The Fund will only invest in U.S.-listed
Underlying ETPs.

Russell Real Return ETF

    The Fund will seek a total return that exceeds the rate of
inflation over an economic cycle. The Fund will be a ``fund of funds,''
which means that the Fund will seek to achieve its investment objective
by investing primarily in shares of Underlying ETFs. In pursuing the
Fund's investment objective, the Adviser will normally invest the
Fund's assets in Underlying ETFs that seek to track various
indices.\13\ These indices include indices that track the performance
of equity, fixed income (including Treasury Inflation-Protected
Securities or ``TIPS'') and real assets such as real estate,
commodities and infrastructure assets. The Fund will invest in
Underlying ETFs that invest in U.S. and non-U.S. (including developed
and emerging markets) securities. There is no limit on the percentage
of Fund assets that may be invested in securities of non-U.S. issuers
through Underlying ETFs. The Fund also may invest in other Underlying
ETPs.
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    \13\ See supra note 10.
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    The Adviser will employ an asset allocation strategy that provides
exposure to multiple asset classes in a variety of domestic and foreign
markets. The Adviser's allocation strategy will establish a target
asset allocation for the Fund and the Adviser will then implement the
strategy by selecting Underlying ETPs that represent each of the
desired asset classes, sectors or strategies. The Adviser's strategy
also will involve periodic review of the Fund's holdings as markets
rise and fall to ensure that the portfolio adheres to the strategic
allocation and to add value through tactical allocation that may over
or underweight Underlying ETPs around the strategic allocation. The
Adviser may modify the strategic allocation for the Fund from time to
time based on capital markets research. The Adviser also may modify the
Fund's allocation based on tactical factors such as the Adviser's
outlook for the economy, inflation expectations, financial markets
generally and/or relative market valuation of the asset classes,
sectors or strategies represented by each Underlying ETP.
    The Adviser intends to invest in Underlying ETPs that hold equity
securities of large, medium and small capitalization companies and
fixed income securities, including government issued debt, investment
grade corporate bonds, below investment grade bonds and mortgage and
asset backed securities issued by companies across the globe including
developed countries and emerging countries. The Adviser also intends to
invest in Underlying ETPs that hold U.S. inflation-indexed securities
and have exposure to commodities, real estate, infrastructure markets
and other real assets. The Adviser may also, on a limited basis, sell
short Underlying ETPs.
    The Adviser will select Underlying ETPs based on their potential to
represent the underlying asset class, sector or strategy to which the
Adviser seeks exposure for the Fund. The Fund will only invest in U.S.-
listed Underlying ETPs.

Other Investments of the Funds

    The Funds will not invest in derivatives. The Underlying ETPs in
which the Funds invest may, to a limited extent, invest in derivatives;
however, the Funds will not invest in Underlying ETPs that use
derivatives as a principal investment strategy unless the Underlying
ETP uses futures contracts and related options for bona fide hedging,
attempting to gain exposure to a particular market, index or
instrument, or other risk management purposes. To the extent an
Underlying ETP uses futures and/or options on futures, it will do so in
accordance with the Commodity Exchange Act\14\ and applicable rules and
regulations promulgated by the Commodity Futures Trading Commission and
the National Futures Association.
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    \14\ 7 U.S.C. 1 et seq.
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    Underlying ETPs may enter into swap agreements including interest
rate, index, and credit default swap agreements. An Underlying ETP may
invest in commodity-linked derivative instruments, such as structured
notes, swap agreements, commodity options, futures and options on
futures, to gain exposure to commodities markets. Financial futures
contracts may be used by an Underlying ETP during or in anticipation of
adverse market events such as interest rate changes. An Underlying ETP
may purchase a put and/or sell a call option on a stock index futures
contract instead of selling a futures contract in anticipation of an
equity market decline.
    Money market instruments, including repurchase agreements, or funds
that invest exclusively in money market instruments, including
affiliated money market funds (subject to applicable limitations under
the 1940 Act), convertible securities, variable rate demand notes, or
commercial paper may be used by a Fund in seeking to meet its
investment objective and in managing cash flows.
    The Funds expect to invest almost entirely in Underlying ETPs but
may also invest in, among other investments, common stocks; sponsored
American Depositary Receipts (``ADRs''), American Depositary Shares
(``ADSs'') and European Depositary Receipts (``EDRs''), Global
Depositary Receipts (``GDRs''); short-term instruments (including money
market instruments); U.S. government securities; TIPS; commercial
paper; and other debt instruments described in the Registration
Statement. The Funds and the Underlying ETPs may enter into repurchase
and reverse repurchase agreements.

Investment Policies and Restrictions

    Each Fund will seek to qualify for treatment as a regulated
investment company under Subchapter M of the Internal Revenue Code of
1986, as amended.\15\
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    \15\ 26 U.S.C. 851.
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    Each Fund may hold up to an aggregate amount of 15% of its net
assets in (a) illiquid securities, and (b) Rule 144A securities.\16\
The term ``illiquid,'' in this context, means a security that cannot be
sold or disposed of within seven days in the ordinary

course of business at approximately the amount at which a Fund has
valued such security.
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    \16\ See supra note 6.
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    Each Fund may invest in securities of other investment companies,
including ETFs, closed end funds and money market funds, subject to
applicable limitations under Section 12(d)(1) of the 1940 Act or
exemptions granted thereunder.
    A Fund may not:
    1. (i) With respect to 75% of its total assets, purchase securities
of any issuer (except securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities or shares of investment
companies) if, as a result, more than 5% of its total assets would be
invested in the securities of such issuer; or (ii) acquire more than
10% of the outstanding voting securities of any one issuer.\17\
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    \17\ The diversification standard is contained in Section
5(b)(1) of the 1940 Act. 15 U.S.C. 80a-5.
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    2. Invest 25% or more of its total assets in the securities of one
or more issuers conducting their principal business activities in a
particular industry or group of industries; except that, to the extent
the underlying index selected for a particular passive Underlying ETF
is concentrated in a particular industry or group of industries, the
Funds will necessarily be concentrated in that industry or group of
industries. This limitation does not apply to investments in securities
issued or guaranteed by the U.S. government, its agencies or
instrumentalities, or shares of investment companies, including the
Underlying ETPs.
    Underlying ETPs will be listed and traded in the U.S. on a national
securities exchange. While the Underlying ETPs may hold non-U.S. equity
securities, the Funds will not invest in non-U.S. listed equity
securities. Each Fund's investments will be consistent with its
investment objective and will not be used to enhance leverage. The
Funds will not hold leveraged, inverse and inverse leveraged Underlying
ETPs. Consistent with the Exemptive Order, the Funds will not invest in
options contracts, futures contracts or swap agreements.
    Additional information regarding the Trust, Funds, Shares, Funds'
investment strategies, risks, creation and redemption procedures, fees,
portfolio holdings and disclosure policies, distributions and taxes,
availability of information, trading rules and halts, and surveillance
procedures, among other things, can be found in the Notice and the
Registration Statement, as applicable.\18\
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    \18\ See Notice and Registration Statement, supra notes 3 and 7,
respectively.
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III. Discussion and Commission's Findings

    After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of Section 6 of the Act \19\
and the rules and regulations thereunder applicable to a national
securities exchange.\20\ In particular, the Commission finds that the
proposed rule change is consistent with the requirements of Section
6(b)(5) of the Act,\21\ which requires, among other things, that the
Exchange's rules be designed to prevent fraudulent and manipulative
acts and practices, to promote just and equitable principles of trade,
to foster cooperation and coordination with persons engaged in
facilitating transactions in securities, to remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general, to protect investors and the public interest.
The Commission notes that the Funds and the Shares must comply with the
requirements of NYSE Arca Equities Rule 8.600 to be listed and traded
on the Exchange.
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    \19\ 15 U.S.C. 78f.
    \20\ In approving this proposed rule change, the Commission
notes that it has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
    \21\ 15 U.S.C. 78f(b)(5).
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    The Commission finds that the proposal to list and trade the Shares
on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the
Act,\22\ which sets forth Congress's finding that it is in the public
interest and appropriate for the protection of investors and the
maintenance of fair and orderly markets to assure the availability to
brokers, dealers, and investors of information with respect to
quotations for, and transactions in, securities. Quotation and last
sale information for the Shares will be available via the Consolidated
Tape Association (``CTA'') high-speed line. The intra-day and closing
values of Underlying ETPs also will be disseminated by the U.S.
exchange on which they are listed. 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.\23\ On each
business day, before commencement of trading in Shares in the Core
Trading Session on the Exchange, the Funds will disclose on their Web
site the Disclosed Portfolio, as defined in NYSE Arca Equities Rule
8.600(c)(2), that will form the basis for the Funds' calculation of net
asset value (``NAV'') at the end of the business day.\24\ The NAV of
each Fund will normally be determined as of the close of the regular
trading session on the New York Stock Exchange (ordinarily 4 p.m.
Eastern Time) on each 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. Information regarding the previous day's
closing price and trading volume information for the Shares will be
published daily in the financial section of newspapers. The Web site
for the Funds will include a form of the prospectus for the Funds and
additional data relating to NAV and other applicable quantitative
information.
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    \22\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \23\ According to the Exchange, several major market data
vendors display and/or make widely available Portfolio Indicative
Values published on CTA or other data feeds.
    \24\ On a daily basis, the Adviser will disclose for each
portfolio security or other financial instrument of the Funds the
following information: Ticker symbol (if applicable), name of
security or financial instrument, number of shares or dollar value
of financial instruments held in the portfolio, and percentage
weighting of the security or financial instrument in the portfolio.
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    The Commission further believes that the proposal to list and trade
the Shares is reasonably designed to promote fair disclosure of
information that may be necessary to price the Shares appropriately and
to prevent trading when a reasonable degree of transparency cannot be
assured. The Commission notes that the Exchange will obtain a
representation from the issuer of the Shares that the NAV 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.\25\
In addition, the Exchange will halt trading in the Shares under the
specific circumstances set forth in NYSE Arca Equities Rule
8.600(d)(2)(D) and may halt trading in the Shares if trading is not
occurring in the securities and/or the financial instruments comprising
the Disclosed Portfolio of a Fund, or if other unusual conditions or
circumstances detrimental to the maintenance of a fair and orderly
market are present.\26\ Further, the

Commission notes that the Reporting Authority that provides the
Disclosed Portfolio must implement and maintain, or be subject to,
procedures designed to prevent the use and dissemination of material
non-public information regarding the actual components of the
portfolio.\27\ The Exchange states that it has a general policy
prohibiting the distribution of material, non-public information by its
employees. The Exchange also states that the Adviser is affiliated with
multiple broker-dealers, and the Adviser has implemented a ``fire
wall'' with respect to such broker-dealers regarding access to
information concerning the composition and/or changes to the Funds'
portfolios.\28\ Further, the Commission notes that the Exchange can
obtain surveillance information from other exchanges that trade the
Underlying ETPs that are members of the Intermarket Surveillance Group
or with which the Exchange has in place a comprehensive surveillance
sharing agreement.
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    \25\ See NYSE Arca Equities Rule 8.600(d)(1)(B).
    \26\ See NYSE Arca Equities Rule 8.600(d)(2)(C). With respect to
trading halts, the Exchange may consider other relevant factors in
exercising its discretion to halt or suspend trading in the Shares
of the Funds. Trading in Shares of the Funds 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.
    \27\ See NYSE Arca Equities Rule 8.600(d)(2)(B)(ii).
    \28\ See supra note 9. The Commission notes that an investment
adviser to an open-end fund is required to be registered under the
Investment Advisers Act of 1940 (``Advisers Act''). As a result, the
Adviser and its related personnel are subject to the provisions of
Rule 204A-1 under the Advisers Act relating to codes of ethics. This
rule requires investment advisers to adopt a code of ethics that
reflects the fiduciary nature of the relationship to clients as well
as compliance with other applicable securities laws. Accordingly,
procedures designed to prevent the communication and misuse of non-
public information by an investment adviser must be consistent with
Rule 204A-1 under the Advisers Act. In addition, Rule 206(4)-7 under
the Advisers Act makes it unlawful for an investment adviser to
provide investment advice to clients unless such investment adviser
has (i) adopted and implemented written policies and procedures
reasonably designed to prevent violation, by the investment adviser
and its supervised persons, of the Advisers Act and the Commission
rules adopted thereunder; (ii) implemented, at a minimum, an annual
review regarding the adequacy of the policies and procedures
established pursuant to subparagraph (i) above and the effectiveness
of their implementation; and (iii) designated an individual (who is
a supervised person) responsible for administering the policies and
procedures adopted under subparagraph (i) above.
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    The Exchange represents that the Shares are deemed to be equity
securities, thus rendering trading in the Shares subject to the
Exchange's existing rules governing the trading of equity securities.
In support of this proposal, the Exchange has made representations,
including:
    (1) The Shares will conform to the initial and continued listing
criteria under NYSE Arca Equities Rule 8.600.
    (2) The Exchange has appropriate rules to facilitate transactions
in the Shares during all trading sessions.
    (3) The Exchange's surveillance procedures applicable to derivative
products, which include Managed Fund Shares, are adequate to properly
monitor Exchange trading of the Shares in all trading sessions and to
deter and detect violations of Exchange rules and applicable federal
securities laws.
    (4) Prior to the commencement of trading, the Exchange will inform
its Equity Trading Permit (``ETP'') Holders in an Information Bulletin
of the special characteristics and risks associated with trading the
Shares. Specifically, the Information Bulletin will discuss the
following: (a) The procedures for purchases and redemptions of Shares
in Creation Unit aggregations (and that Shares are not individually
redeemable); (b) NYSE Arca Equities Rule 9.2(a), which imposes a duty
of due diligence on its ETP Holders to learn the essential facts
relating to every customer prior to trading the Shares; (c) the risks
involved in trading the Shares during the Opening and Late Trading
Sessions when an updated Portfolio Indicative Value will not be
calculated or publicly disseminated; (d) how information regarding the
Portfolio Indicative Value is disseminated; (e) 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 (f) trading information.
    (5) For initial and/or continued listing, the Trust will be in
compliance with Rule 10A-3 under the Exchange Act,\29\ as provided by
NYSE Arca Equities Rule 5.3.
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    \29\ 17 CFR 240.10A-3.
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    (6) The Funds will not: (a) Invest in non-U.S. registered equity
securities (except for Underlying ETPs, which may hold non-U.S. equity
securities); (b) use investments to enhance leverage; (c) hold
leveraged, inverse, and inverse leveraged Underlying ETPs; and (d)
consistent with the Exemptive Order, invest in options, swaps, or
futures.
    (7) Each Fund may hold up to an aggregate amount of 15% of its net
assets in (a) illiquid securities, and (b) Rule 144A securities.\30\
---------------------------------------------------------------------------

    \30\ See supra note 6.
---------------------------------------------------------------------------

    (8) A minimum of 100,000 Shares of each Fund will be outstanding at
the commencement of trading on the Exchange.

This approval order is based on the Exchange's representations.
    For the foregoing reasons, the Commission finds that the proposed
rule change is consistent with Section 6(b)(5) of the Act \31\ and the
rules and regulations thereunder applicable to a national securities
exchange.
---------------------------------------------------------------------------

    \31\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\32\ that the proposed rule change (SR-NYSEArca-2011-84), as
modified by Amendment No. 3 thereto, be, and it hereby is, approved.
---------------------------------------------------------------------------

    \32\ 15 U.S.C. 78s(b)(2).
    \33\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\33\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-3218 Filed 2-10-12; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 80, Number 191 (Friday, October 2, 2015)]
[Notices]
[Pages 59786-59787]
[FR Doc No: 2015-25117]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

[Docket No. FDA-2013-N-0418]

An Evaluation of the Prescription Drug User Fee Act Workload
Adjuster; Request for Comments

AGENCY: Food and Drug Administration, HHS.

ACTION: Notice; request for comments.

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SUMMARY: The Food and Drug Administration (FDA) is announcing an
opportunity for public comment on an assessment of the Prescription
Drug User Fee Act (PDUFA) Workload Adjuster conducted by an independent
consulting firm. This assessment was conducted to fulfill FDA
performance commitments made as part of the fifth authorization of
PDUFA in section XV, ``Improving FDA Performance Management,''
subsection B, which was reauthorized by the Food and Drug
Administration Safety and Innovation Act of 2012 (FDASIA). Independent
consulting firms conducted two assessments during PDUFA V. This is the
second assessment to evaluate whether the adjustment reasonably
represents actual changes in workload volume and complexity in the
human drug review program and to present options to discontinue,
retain, or modify any elements of the adjustment. After review of the
report and receipt of public comment, FDA can adopt appropriate change
to the workload adjustment methodology, if warranted.

DATES: Submit electronic or written comments by November 2, 2015.

ADDRESSES: You may submit comments as follows:

Electronic Submissions

    Submit electronic comments in the following way:
     Federal eRulemaking Portal: http://www.regulations.gov.
Follow the instructions for submitting comments. Comments submitted
electronically, including attachments, to http://www.regulations.gov
will be posted to the docket unchanged. Because your comment will be
made public, you are solely responsible for ensuring that your comment
does not include any confidential information that you or a third party
may not wish to be posted, such as medical information, your or anyone
else's Social Security number, or confidential business information,
such as a manufacturing process. Please note that if you include your
name, contact information, or other information that identifies you in
the body of your comments, that information will be posted on http://www.regulations.gov.
     If you want to submit a comment with confidential
information that you do not wish to be made available to the public,
submit the comment as a written/paper submission and in the manner
detailed (see ``Written/Paper Submissions'' and ``Instructions'').

Written/Paper Submissions

    Submit written/paper submissions as follows:
     Mail/Hand delivery/Courier (for written/paper
submissions): Division of Dockets Management (HFA-305), Food and Drug
Administration, 5630 Fishers Lane, Rm. 1061, Rockville, MD 20852.
     For written/paper comments submitted to the Division of
Dockets Management, FDA will post your comment, as well as any
attachments, except for information submitted, marked and identified,
as confidential, if submitted as detailed in ``Instructions.''
    Instructions: All submissions received must include the Docket No.
FDA-2013-N-0418 for ``An Evaluation of the Prescription Drug User Fee
Act Workload Adjuster; Request for Comments.'' Received comments will
be placed in the docket and, except for those submitted as
``Confidential Submissions,'' publicly viewable at http://www.regulations.gov or at the Division of Dockets Management between 9
a.m. and 4 p.m., Monday through Friday.
     Confidential Submissions--To submit a comment with
confidential information that you do not wish to be made publicly
available, submit your comments only as a written/paper submission. You
should submit two copies total. One copy will include the information
you claim to be confidential with a heading or cover note that states
``THIS DOCUMENT CONTAINS CONFIDENTIAL INFORMATION''. The Agency will
review this copy, including the claimed confidential information, in
its consideration of comments. The second copy, which will have the
claimed confidential information redacted/blacked out, will be
available for public viewing and posted on http://www.regulations.gov.
Submit both copies to the Division of Dockets Management. If you do not
wish your name and contact information to be made publicly available,
you can provide this information on the cover sheet and not in the body
of your comments and you must identify this information as
``confidential.'' Any information marked as ``confidential'' will not
be disclosed except in accordance with 21 CFR 10.20 and other

applicable disclosure law. For more information about FDA's posting of
comments to public dockets, see 80 FR 56469, September 18, 2015, or
access the information at: http://www.fda.gov/regulatoryinformation/dockets/default.htm.
    Docket: For access to the docket to read background documents or
the electronic and written/paper comments received, go to http://www.regulations.gov and insert the docket number, found in brackets in
the heading of this document, into the ``Search'' box and follow the
prompts and/or go to the Division of Dockets Management, 5630 Fishers
Lane, rm. 1061, Rockville, MD 20852.

FOR FURTHER INFORMATION CONTACT: Alice Tsai, Center for Drug Evaluation
and Research, Food and Drug Administration, 10903 New Hampshire Ave.,
Bldg. 51, Rm. 1149, Silver Spring, MD 20993-0002,<PHONE_NUMBER>,
<EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION: On July 9, 2012, the President signed into
law FDASIA. This new law includes the reauthorization of PDUFA that
provides FDA with the necessary resources to maintain a predictable and
efficient review process for human drug and biologic products.
    Title I of FDASIA is the fifth authorization of PDUFA and includes
by reference the performance goals and procedures for PDUFA V
transmitted by the Secretary of Health and Human Services to Congress
in a commitment letter. FDA developed recommendations for PDUFA V in
consultation with drug industry representatives, patient and consumer
advocates, health care professionals, and other public stakeholders
from July 2010 through May 2011. These recommendations included an FDA
commitment to contract with an independent accounting or consulting
firm to review the adequacy of the PDUFA adjustment for changes in
workload (hereafter referred to as the workload adjuster).
    The workload adjuster was introduced in PDUFA III to allow for FDA
to augment the total user fee revenue amount each fiscal year (after
adjusting for inflation) to account for changes in workload volume in
the human drug application review process. Workload volume is measured
by the changes in the number of new drug applications (NDAs) and
biologics license applications (BLAs), active commercial
investigational new drugs (INDs), efficacy supplements, and
manufacturing supplements submitted to the human drug review program
during the most recent 5-year period.
    In PDUFA IV, the workload adjuster was expanded to account for the
workload complexity (known as the adjustment for changes in review
activities; hereafter referred to as the Complexity Factor) associated
with the review of NDAs/BLAs and active commercial INDs. The NDA/BLA
complexity is measured by changes in the number of labeling
supplements, annual report reviews, and NDA/BLA meetings per NDA/BLA.
IND complexity is measured by changes in the number of special protocol
assessments and IND meetings per active commercial IND.
    As part of the PDUFA IV recommendations, FDA committed to an
evaluation of the adjustment for changes in review activities by an
independent consulting firm. The study, conducted by Deloitte & Touche,
LLP, in fiscal year (FY) 2009, found that the adjustment methodology
used by FDA reasonably captures changes in the workload complexity for
reviewing human drug applications under PDUFA IV. Although the FY 2009
evaluation concluded that the adjustment methodology was reasonable at
that time, the complexity of new drug applications and FDA's regulatory
responsibilities are constantly evolving. Moreover, the complexity
component of the PDUFA IV workload adjuster was formulated before the
enactment of the Food and Drug Administration Amendments Act of 2007
(FDAAA). Thus, the workload adjuster does not account for new and
significant review activities required by FDAAA, such as risk
evaluation and mitigation strategies, safety labeling changes, advisory
committee meetings, and post-market safety requirements, among others.
    Given the dynamic nature of drug products and FDA's regulatory
responsibilities, FDA committed to periodic reassessments of the
workload adjuster in PDUFA V to ensure that it is achieving its
intended role of adjusting the user fee revenues to reflect actual
changes in FDA s workload volume and complexity.
    The PDUFA V commitment letter instructs FDA to contract with an
independent accounting or consulting firm to conduct two assessments of
the workload adjuster. The first assessment (to examine the performance
of the workload adjuster since FY 2009) conducted by IBM in FY 2013,
found that the workload adjuster does reasonably represent changes in
workload volume associated with the human drug review process. However,
the report concluded that methodology was flawed with respect to
measuring workload complexity, because it does not represent total
amount of work per submission. The report recommended that FDA consider
removing the Complexity Factor. In addition, the report found that the
workload adjuster's use of 5-year rolling averages to measure changes
in workload against the base years was not as sensitive to recent
trends as 3-year rolling averages would be. The report is available at
http://www.fda.gov/downloads/ForIndustry/UserFees/PrescriptionDrugUserFee/UCM350567. After reviewing the report and
public comments, FDA discontinued the use of the Complexity Factor in
the adjustment methodology and adopted 3-year averages to measure
changes in workload volume.
    The second assessment (to address the recommendations from the
first evaluation and assess the continued performance of the workload
adjuster) was just completed. The independent consulting firm is
required to submit a report based on its assessment. The report will
evaluate whether the workload adjuster reasonably represents actual
changes in workload volume and will present options to discontinue,
retain, or modify any elements of the adjustment. After review of the
report and receipt of public comment, FDA, if warranted, may adopt
appropriate changes to the methodology.
    FDA is seeking public comment now on the second assessment of the
PDUFA Workload Adjuster, available at http://www.fda.gov/downloads/ForIndustry/UserFees/PrescriptionDrugUserFee/UCM464878.pdf.

    Dated: September 29, 2015.
Leslie Kux,
Associate Commissioner for Policy.
[FR Doc. 2015-25117 Filed 10-1-15; 8:45 am]
 BILLING CODE 4164-01-P