[Federal Register Volume 84, Number 247 (Thursday, December 26, 2019)]
[Notices]
[Pages 71057-71063]
[FR Doc No: 2019-27732]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87791; File No. SR-NYSEArca-2019-77]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change To List and Trade Shares of the AdvisorShares
Pure US Cannabis ETF Under NYSE Arca Rule 8.600-E

December 18, 2019.
    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 December 13, 2019, NYSE Arca, Inc. (``NYSE Arca'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to list and trade shares of the AdvisorShares
Pure US Cannabis ETF under NYSE Arca Rule 8.600-E. The proposed change
is available on the Exchange's website 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 Exchange proposes to list and trade shares (``Shares'') of the
AdvisorShares Pure US Cannabis ETF (the ``Fund'') under NYSE Arca Rule
8.600-E, which provides generic criteria applicable to the listing and
trading of Managed Fund Shares on the Exchange.\4\
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    \4\ A Managed Fund Share is a security that represents an
interest in an investment company registered under the Investment
Company Act of 1940 (15 U.S.C. 80a-1) (the ``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 Rule 5.2-E(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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    AdvisorShares Investments, LLC (the ``Adviser'') is the investment
adviser for the Fund. AdvisorShares Trust (the ``Trust'') and the
Adviser manage the Fund's investments, subject to the oversight and
supervision by the Board of Trustees (the ``Board'') of the Trust.\5\

Foreside Fund Services, LLC (``Distributor''), a registered broker-
dealer, will act as the distributor for the Fund's Shares. The Bank of
New York Mellon (``BNY Mellon'') will serve as the administrator,
custodian, and transfer agent (``Transfer Agent'') for the Fund.
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    \5\ The Trust is registered under the 1940 Act. On August 19,
2019, the Trust filed with the Commission Post-Effective Amendment
No. 145 to the Trust's 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. 333-157876 and
811-22110) (``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).
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    Commentary .06 to Rule 8.600-E provides that, if the investment
adviser to the investment company issuing Managed Fund Shares is
affiliated with a broker-dealer, such investment adviser shall erect
and maintain a ``fire wall'' between the investment adviser and the
broker-dealer with respect to access to information concerning the
composition and/or changes to such investment company portfolio. In
addition, Commentary .06 further requires that personnel who make
decisions on the open-end fund's portfolio composition must be subject
to procedures designed to prevent the use and dissemination of material
non-public information regarding the open-end fund's portfolio.
Commentary .06 to Rule 8.600-E is similar to Commentary .03(a)(i) and
(iii) to NYSE Arca Rule 5.2-E(j)(3); however, Commentary .06 in
connection with the establishment and maintenance of a ``fire wall''
between the investment adviser and the broker-dealer reflects the
applicable open-end fund's portfolio, not an underlying benchmark
index, as is the case with index-based funds.
    The Adviser is not registered as a broker-dealer. The Adviser is
not affiliated with any broker-dealers. In the event (a) the Adviser
becomes registered as a broker-dealer or newly affiliated with a
broker-dealer, or (b) any new adviser is a registered broker-dealer or
becomes affiliated with a broker-dealer, it will implement and maintain
a ``fire wall'' with respect to its relevant personnel or broker-dealer
affiliate regarding access to information concerning the composition
and/or changes to the portfolio, and will be subject to procedures,
each designed to prevent the use and dissemination of material non-
public information regarding such portfolio.
AdvisorShares Pure US Cannabis ETF
Principal Investments
    According to the Registration Statement, the investment objective
of the Fund is to seek long-term capital appreciation. The Fund will
seek to achieve its investment objective by investing, under normal
market conditions,\6\ at least 80% of its net assets in securities of
companies that derive at least 50% of their net revenue from the
marijuana and hemp business in the United States and in derivatives
that have economic characteristics similar to such securities.\7\
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    \6\ The term ``normal market conditions'' is defined in NYSE
Arca Rule 8.600-E(c)(5).
    \7\ The Fund's investments in derivatives will include
investments in both listed derivatives and over-the-counter
(``OTC'') derivatives, as those terms are defined in Commentary
.01(d) and (e) to NYSE Arca Rule 8.600-E.
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    In addition to its investment in securities of companies that
derive a significant portion of their revenue from the marijuana and
hemp business, and in derivatives providing exposure to such
securities, the Fund may invest in securities of companies that, in the
opinion of the Advisor, may have current or future revenues from
cannabis-related business or that are registered with the United States
Drug Enforcement Agency (DEA) specifically for the purpose of handling
marijuana for lawful research and development of cannabis or
cannabinoid-related products.
    According to the Registration Statement, the Fund will not invest
directly in or hold ownership in any companies that engage in cannabis-
related business unless permitted by national and local laws of the
relevant jurisdiction, including U.S. federal and state laws. The Fund
has represented that this restriction does not apply to the Fund's
investment in derivatives instruments. All of the Fund's investments,
including derivatives instruments, would be made in accordance with all
applicable laws, including U.S. federal and state laws. The Fund will
concentrate at least 25% of its investments in the pharmaceuticals,
biotechnology and life sciences industry group within the health care
sector.
    The Fund primarily may invest in U.S. and foreign exchange-listed
equity securities (described below), and in derivative instruments
(described below) intended to provide exposure to such securities.
    The Fund may invest in the following types of U.S. and foreign
exchange-listed equity securities: Common stock; preferred stock;
warrants; Real Estate Investment Trusts (REITs); and rights.
    The Fund may invest in U.S. exchange-listed exchange-traded funds
(``ETFs'') \8\ and in U.S. exchange-listed closed-end funds.
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    \8\ For purposes of this filing, the term ``ETFs'' includes
Investment Company Units (as described in NYSE Arca Rule 5.2-
E(j)(3)); Portfolio Depositary Receipts (as described in NYSE Arca
Rule 8.100-E); and Managed Fund Shares (as described in NYSE Arca
Rule 8.600-E). All ETFs will be listed and traded in the U.S. on a
national securities exchange. While the Fund may invest in inverse
ETFs, the Fund will not invest in leveraged (e.g., 2X, -2X, 3X or -
3X) ETFs.
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    The Fund may hold cash and cash equivalents.\9\
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    \9\ For purposes of this filing, ``cash equivalents'' are the
short-term instruments enumerated in Commentary .01(c) to NYSE Arca
Rule 8.600-E.
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    The Fund may hold over-the-counter (``OTC'') total return swaps on
U.S. and foreign exchange-listed equity securities.
Non-Principal Investments
    The Fund may invest in U.S. exchange-listed equity options and
equity index options.
    The Fund may invest in Rule 144A securities.
    The Fund will not invest in securities or other financial
instruments that have not been described in this proposed rule change.
Use of Derivatives by the Fund
    Investments in derivative instruments will be made in accordance
with the 1940 Act and consistent with the Fund's investment objective
and policies.
    To limit the potential risk associated with such transactions, the
Fund will enter into offsetting transactions or segregate or
``earmark'' assets determined to be liquid by the Adviser in accordance
with procedures established by the Trust's Board and in accordance with
the 1940 Act or as permitted by applicable Commission guidance. These
procedures have been adopted consistent with Section 18 of the 1940 Act
and related Commission guidance. In addition, the Fund has included
appropriate risk disclosure in its offering documents, including
leveraging risk. Leveraging risk is the risk that certain transactions
of the Fund, including the Fund's use of derivatives, may give rise to
leverage, causing the Fund to be more volatile than if it had not been
leveraged.
Other Restrictions
    The Fund's investments, including derivatives, will be consistent
with the Fund's investment objective and will not be used to enhance
leverage (although certain derivatives and other investments may result
in leverage). That is, the Fund's investments will not be used to seek
performance that is the multiple or inverse multiple (e.g., 2X or

-3X) of the Fund's primary broad-based securities benchmark index (as
defined in Form N-1A).\10\
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    \10\ The Fund's broad-based securities benchmark index will be
identified in a future amendment to the Registration Statement
following the Fund's first full calendar year of performance.
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Impact on Arbitrage Mechanism
    The Adviser believes there will be minimal, if any, impact to the
arbitrage mechanism as a result of the Fund's use of derivatives. The
Adviser understands that market makers and participants should be able
to value derivatives as long as the positions are disclosed with
relevant information. The Adviser believes that the price at which
Shares of the Fund trade will continue to be disciplined by arbitrage
opportunities created by the ability to purchase or redeem Shares of
the Fund at their net asset value (``NAV''), which should ensure that
Shares of the Fund will not trade at a material discount or premium in
relation to their NAV.
Creation of Creation Units
    The Trust issues and sells Shares of the Fund only in aggregations
of 25,000 Shares (each aggregation is called a ``Creation Unit'') on a
continuous basis through the Distributor at the NAV next determined
after receipt of an order in proper form on any Business Day.\11\ The
size of a Creation Unit is subject to change.
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    \11\ A ``Business Day'' with respect to the Fund is any day on
which the Exchange is open for business.
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    The consideration for a purchase of Creation Units generally will
consist of an in-kind deposit of a portfolio of securities and other
investments (the ``Deposit Securities'') for each Creation Unit
constituting a substantial replication, or a representation, of the
securities included in the Fund's portfolio and an amount of cash
computed as described below (the ``Cash Component''). The Cash
Component together with the Deposit Securities, as applicable, are
referred to as the ``Fund Deposit,'' which represents the minimum
initial and subsequent investment amount for a Creation Unit of the
Fund.
    The Cash Component would be an amount equal to the difference
between the NAV of the Shares (per Creation Unit) and the ``Deposit
Amount,'' which is an amount equal to the aggregate market value of the
Deposit Securities, and serves to compensate for any differences
between the NAV per Creation Unit and the Deposit Amount.
    The Administrator, through the National Securities Clearing
Corporation (``NSCC''), makes available on each Business Day,
immediately prior to the opening of business on the Exchange (currently
9:30 a.m. E.T.), the list of the names and the required number of
shares of each Deposit Security to be included in the current Fund
Deposit (based on information at the end of the previous Business Day)
for the Fund. Such Fund Deposit is applicable, subject to any
adjustments as described below, in order to effect creations of
Creation Units of the Fund until such time as the next-announced
composition of the Deposit Securities is made available.
    All orders to create Creation Units generally must be received by
the Distributor no later than 3:00 p.m. E.T. on the date such order is
placed in order for creation of Creation Units to be effected based on
the NAV of the Fund as determined on such date.
    In addition, the Trust reserves the right to permit or require the
substitution of an amount of cash (i.e., a ``cash in lieu'' amount) to
be added to the Cash Component to replace any Deposit Security which
may, among other reasons, not be available in sufficient quantity for
delivery, or which may not be eligible for transfer through the
Clearing Process (defined below), or which may not be eligible for
trading by a Participating Party (defined below).
    To be eligible to place orders with the Distributor to create
Creation Units of the Fund, an entity must be (1) a ``Participating
Party,'' i.e., a broker-dealer or other participant in the clearing
process through the Continuous Net Settlement System of the NSCC (the
``Clearing Process''); or (2) a Depository Trust Company (``DTC'')
Participant; which, in either case, must have executed an agreement
with the Trust, the Distributor and the Transfer Agent (``Participant
Agreement''). A Participating Party and DTC Participant are
collectively referred to as an ``Authorized Participant.''
Redemption of Creation Units
    Shares may be redeemed only in Creation Units at their NAV next
determined after receipt of a redemption request in proper form by the
Distributor and only on a Business Day.
    The Administrator, through NSCC, will make available immediately
prior to the opening of business on the Exchange (9:30 a.m. E.T.) on
each Business Day, the securities (``Fund Securities'') that will be
applicable (subject to possible amendment or correction) to redemption
requests received in proper form on that day. The Fund Securities
received on redemption may not be identical to Deposit Securities that
are applicable to creations of Creation Units. Unless cash redemptions
are available or specified for the Fund, the redemption proceeds for a
Creation Unit generally consist of Fund Securities as announced by the
Administrator on the Business Day of the request for redemption, plus
cash in an amount equal to the difference between the NAV of the Shares
being redeemed, as next determined after a receipt of a request in
proper form, and the value of the Fund Securities, less the redemption
transaction fee. In the event that the Fund Securities have a value
greater than the NAV of the Shares, a compensating cash payment equal
to the differential is required to be made by or through an Authorized
Participant by the redeeming shareholder.
    In order to redeem Creation Units of the Fund, an Authorized
Participant must submit an order to redeem for one or more Creation
Units. An order to redeem Creation Units of a Fund using the Clearing
Process generally must be received by the Administrator not later than
3:00 p.m. E.T. on the Business Day of the request for redemption in
order for such order to be effected based on the NAV of the Fund as
next determined. An order to redeem Creation Units of the Fund using
the NSCC Clearing Process made in proper form but received by the Fund
after 3:00 p.m. E.T. will be deemed received on the next Business Day
immediately following the day on which such order request is
transmitted.
Application of Generic Listing Requirements
    The Exchange is submitting this proposed rule change because the
portfolio for the Fund will not meet all of the ``generic'' listing
requirements of Commentary .01 to NYSE Arca Rule 8.600-E applicable to
the listing of Managed Fund Shares. The Fund's portfolio will meet all
such requirements except for those set forth in Commentary .01(e), as
described below.
    The Fund will not comply with the requirements set forth in
Commentary .01(e) to NYSE Arca Rule 8.600-E with respect to the Fund's
investments in OTC total return swaps on U.S. and foreign exchange-
listed equity securities.\12\ Specifically, the aggregate

gross notional value of the Fund's investments in such OTC derivatives
may exceed 20% of Fund assets, calculated as the aggregate gross
notional value of such OTC derivatives.\13\ The Exchange proposes that
up to 60% of the Fund's assets (calculated as the aggregate gross
notional value) may be invested in such OTC derivatives. The proposed
exception would allow the Fund to gain increased exposure to certain
equity securities that have economic characteristics similar to
securities listed in the principal strategies, and allow the Fund to
obtain exposure, through the use of total return swaps, to certain
equity securities that the Fund may not be able to invest in or choose
not to invest in directly, in furtherance of the Fund's investment
objective. As stated above, the only OTC derivatives that the Fund may
invest in are OTC total return swaps on U.S. and foreign exchange-
listed equity securities.
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    \12\ Commentary .01(e) to NYSE Arca Rule 8.600-E provides that a
portfolio may hold OTC derivatives, including forwards, options and
swaps on commodities, currencies and financial instruments (e.g.,
stocks, fixed income, interest rates, and volatility) or a basket or
index of any of the foregoing; however, on both an initial and
continuing basis, no more than 20% of the assets in the portfolio
may be invested in OTC derivatives. For purposes of calculating this
limitation, a portfolio's investment in OTC derivatives will be
calculated as the aggregate gross notional value of the OTC
derivatives.
    \13\ The Adviser monitors counterparty credit risk exposure
(including for OTC derivatives) and evaluates counterparty credit
quality on a continuous basis.
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    The Adviser believes that it is important to provide the Fund with
additional flexibility to manage its investments. OTC derivatives
provide the Fund with flexibility as well as a precise means to
effectively gain exposure to U.S. and foreign exchange-listed equities
that the Fund otherwise would not be able to invest in or choose not to
invest in directly. Generally, OTC derivatives can be customized to a
greater degree and can provide equity exposure with Fund assets, as
well as allow for control over the duration of the exposure which can
also mitigate trading costs. Therefore, while the Fund is able to
invest 20% of the assets in the Fund's portfolio in OTC derivatives
pursuant to NYSE Arca Rule 8.600-E, Commentary .01(e), the Exchange
believes it is appropriate to apply a limit of up to 60% of the Fund's
assets to the Fund's investments in OTC total return swaps on U.S. and
foreign exchange-listed equity securities (calculated as the aggregate
gross notional value of such OTC derivatives), that are used for equity
investment exposure purposes, as described above.\14\
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    \14\ The Commission has previously approved an exception from
requirements set forth in Commentary .01(e) relating to investments
in OTC derivatives. See e.g., Securities Exchange Act Release Nos.
86636 (August 12, 2019), 84 FR 42030 (August 16, 2019) (SR-NYSEArca-
2018-98) (Notice of Filing of Amendment No. 4 and Order Granting
Accelerated Approval of a Proposed Rule Change, as Modified by
Amendment No. 4, To List and Trade Shares of the iShares Commodity
Multi-Strategy ETF Under NYSE Arca Rule 8.600-E); and 87190 (October
1, 2019), 84 FR 53522 (October 7, 2019) (SR-NYSEArca-2019-57) (Order
Granting Approval of Proposed Rule Change To List and Trade Shares
of the Franklin Liberty Systematic Style Premia ETF, a Series of the
Franklin Templeton ETF Trust Under NYSE Arca Rule 8.600-E).
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    The Adviser represents that deviations from the generic
requirements are necessary for the Fund to achieve its investment
objective in a manner that is cost-effective and that maximizes
investors' returns because OTC derivatives generally provide the Fund
with more flexibility to negotiate the exact exposure that the Fund
requires, and minimize trading costs because OTC derivatives are not
subject to costs of rolling that are associated with listed
derivatives.
    The Adviser represents that it intends to engage in strategies that
utilize total return swaps (which are traded OTC), as described above,
based on its investment strategies. Depending on market conditions, the
exposure due to these strategies may exceed 20% of the Fund's assets.
The Adviser represents further that the swaps market is OTC, and, as
such, it is not possible to implement these strategies efficiently
using listed derivatives. In addition, use of OTC swaps may be an
important means to reduce risk in the Fund's equity investments, or,
depending on market conditions, to enhance returns of such investments.
If the Fund were limited to investing up to 20% of assets in OTC
derivatives, the Fund would have to exclude or underweight these
strategies and would be less diversified, concentrating risk in the
other strategies it will utilize.
    The Exchange notes that, other than Commentary .01(e), the Shares
of the Fund will conform to the initial and continued listing criteria
under NYSE Arca Rule 8.600-E and will meet all other requirements of
NYSE Arca Rule 8.600-E and Commentary .01 thereto.
    The Adviser represents that the proposed exception described above
is consistent with the Fund's investment objective, and will further
assist the Adviser to achieve such investment objective.
Availability of Information
    The Fund's website (www.advisorshares.com) will include the
prospectus for the Fund that may be downloaded. The Fund's website will
include additional quantitative information updated on a daily basis
including, for the Fund, (1) daily trading volume, closing price and
closing NAV for the Fund; (ii) the reported midpoint of the bid-ask
spread at the time of NAV calculation (the ``Bid-Ask Price''); \15\
(iii) a calculation of the premium or discount of the Bid-Ask Price
against such NAV; and (iv) data in chart format displaying the
frequency distribution of discounts and premiums of the 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 website the Disclosed Portfolio as defined in
NYSE Arca Rule 8.600-E(c)(2) that forms the basis for the Fund's
calculation of NAV at the end of the Business Day.\16\
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    \15\ The Bid-Ask Price of the Fund's Shares will be determined
using the mid-point of the highest bid and the lowest offer on the
Exchange as of the time of calculation of the Fund's NAV. The
records relating to Bid-Ask Prices will be retained by the Fund and
its service providers.
    \16\ 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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    On a daily basis, the Fund will disclose the information required
under NYSE Arca Rule 8.600-E(c)(2) to the extent applicable. The
website information will be publicly available at no charge.
    In addition, a basket composition file, which includes the security
names and share quantities, if applicable, required to be delivered in
exchange for the Fund's Shares, together with estimates and actual cash
components, will be publicly disseminated daily prior to the opening of
the Exchange via the NSCC. The basket represents one Creation Unit of
the Fund. Authorized Participants may refer to the basket composition
file for information regarding any security, and any other instrument
that may comprise the Fund's basket on a given day.
    Investors can also obtain the Trust's Statement of Additional
Information (``SAI''), the Fund's Shareholder Reports, and the Fund's
Forms N-CSR and Forms N-SAR, filed twice a year. The Fund's SAI and
Shareholder Reports will be available free upon request from the Trust,
and those documents and the Form N-CSR, Form N-PX and Form N-SAR may be
viewed on-screen or downloaded from the Commission's website at
www.sec.gov.
    Intra-day and closing price information regarding U.S. exchange-
listed equity options and equity index options will be available from
the exchange on which such instruments are traded. Price information
relating to

OTC swaps will be available from major market data vendors. For U.S.
and foreign exchange-listed equity securities, intraday price
quotations will generally be available from broker-dealers and trading
platforms (as applicable). Price information for 144A securities will
be available from major market data vendors. Price information for cash
equivalents will be available from major market data vendors. Price
information regarding U.S. government securities generally may be
obtained from brokers and dealers who make markets in such securities
or through nationally recognized pricing services through subscription
agreements. Additionally, the Trade Reporting and Compliance Engine
(``TRACE'') of the Financial Industry Regulatory Authority (``FINRA'')
will be a source of price information for certain cash equivalents to
the extent transactions in such securities are reported to TRACE.\17\
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    \17\ Broker-dealers that are FINRA member firms have an
obligation to report transactions in specified debt securities to
TRACE to the extent required under applicable FINRA rules.
Generally, such debt securities will have at issuance a maturity
that exceeds one calendar year. For fixed income securities that are
not reported to TRACE, (i) intraday price quotations will generally
be available from broker-dealers and trading platforms (as
applicable) and (ii) price information will be available from feeds
from market data vendors, published or other public sources, or
online information services, as described above.
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    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.
    Quotation and last sale information for the Shares, ETFs, closed-
end funds and other U.S. exchange-traded equity securities will be
available via the Consolidated Tape Association (``CTA'') high-speed
line. Exchange-traded options quotation and last sale information for
options cleared via the Options Clearing Corporation (``OCC'') are
available via the Options Price Reporting Authority (``OPRA''). In
addition, the Portfolio Indicative Value (``PIV''), as defined in NYSE
Arca Rule 8.600-E(c)(3), will be widely disseminated by one or more
major market data vendors at least every 15 seconds during the Core
Trading Session.
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. Trading in Shares of the Fund will
be halted if the circuit breaker parameters in NYSE Arca Rule 7.12-E
have been reached. Trading also may be halted because of market
conditions or for reasons that, in the view of the Exchange, make
trading in the Shares inadvisable. These may include: (1) The extent to
which trading is not occurring in the securities and/or the financial
instruments comprising the Disclosed Portfolio of the Fund; or (2)
whether other unusual conditions or circumstances detrimental to the
maintenance of a fair and orderly market are present. Trading in the
Shares will be subject to NYSE Arca Rule 8.600-E(d)(2)(D), which sets
forth circumstances under which Shares of the Fund may be halted.
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 4:00 a.m. to 8:00 p.m. E.T. in
accordance with NYSE Arca Rule 7.34-E (Trading Sessions). The Exchange
has appropriate rules to facilitate transactions in the Shares during
all trading sessions. As provided in NYSE Arca Rule 7.6-E, the minimum
price variation (``MPV'') for quoting and entry of orders in equity
securities traded on the NYSE Arca Marketplace is $0.01, with the
exception of securities that are priced less than $1.00 for which the
MPV for order entry is $0.0001.
    With the exception of the requirements of Commentary .01(e) as
described above under ``Application of Generic Listing Requirements,''
the Shares of the Fund will conform to the initial and continued
listing criteria under NYSE Arca Rule 8.600-E. The Exchange represents
that for initial and continued listing, the Fund will be in compliance
with Rule 10A-3 under the Act, as provided by NYSE Arca Rule 5.3-E. A
minimum of 100,000 Shares will be outstanding at the commencement of
trading on the Exchange. The Exchange has obtained 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.
Surveillance
    The Exchange represents that trading in the Shares will be subject
to the existing trading surveillances administered by the Exchange, as
well as cross-market surveillances administered by FINRA on behalf of
the Exchange, which are designed to detect violations of Exchange rules
and applicable federal securities laws. The Exchange represents that
these procedures are adequate to properly monitor Exchange trading of
the Shares in all trading sessions and to deter and detect violations
of Exchange rules and federal securities laws applicable to trading on
the Exchange.
    The surveillances referred to above generally focus on detecting
securities trading outside their normal patterns, which could be
indicative of manipulative or other violative activity. When such
situations are detected, surveillance analysis follows and
investigations are opened, where appropriate, to review the behavior of
all relevant parties for all relevant trading violations.
    The Exchange or FINRA, on behalf of the Exchange, or both, will
communicate as needed regarding trading in the Shares, certain
exchange-traded equity securities (including ETFs) and certain
exchange-traded options with other markets and other entities that are
members of the Intermarket Surveillance Group (``ISG''), and the
Exchange or FINRA, on behalf of the Exchange, or both, may obtain
trading information regarding trading in the Shares, certain exchange-
traded equity securities (including ETFs) and certain exchange-traded
options from such markets and other entities. In addition, the Exchange
may obtain information regarding trading in the Shares, certain
exchange-traded equity securities (including ETFs) and certain
exchange-traded options from markets and other entities that are
members of ISG or with which the Exchange has in place a comprehensive
surveillance sharing agreement (``CSSA''). In addition, FINRA, on
behalf of the Exchange, is able to access, as needed, trade information
for certain cash equivalents held by the Fund reported to FINRA's
TRACE.
    In addition, the Exchange also has a general policy prohibiting the
distribution of material, non-public information by its employees.
    All statements and representations made in this filing regarding
(a) the description of the portfolio or reference asset, (b)
limitations on portfolio holdings or reference assets, or (c) the
applicability of Exchange listing rules specified in this rule filing
shall constitute continued listing requirements for listing the Shares
on the Exchange.
    The issuer has represented to the Exchange that it will advise the

Exchange of any failure by the Fund to comply with the continued
listing requirements, and, pursuant to its obligations under Section
19(g)(1) of the Act, the Exchange will monitor for compliance with the
continued listing requirements. If the Fund is not in compliance with
the applicable listing requirements, the Exchange will commence
delisting procedures under NYSE Arca Rule 5.5-E(m).
Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its
Equity Trading Permit (``ETP'') Holders in an Information Bulletin
(``Bulletin'') of the special characteristics and risks associated with
trading the Shares of the Fund. Specifically, the Bulletin will discuss
the following: (1) The procedures for purchases and redemptions of
Shares in Creation Units (and that Shares are not individually
redeemable); (2) NYSE Arca Rule 9.2-E(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; (3) the risks involved in
trading the Shares during the Early and Late Trading Sessions when an
updated PIV will not be calculated or publicly disseminated; (4) how
information regarding the PIV and the Disclosed Portfolio 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.
    In addition, the Bulletin will reference that the Fund is subject
to various fees and expenses described in the Registration Statement.
The Bulletin will discuss any exemptive, no-action, and interpretive
relief granted by the Commission from any rules under the Act. The
Bulletin will also disclose that the NAV for the Shares of the Fund
will be calculated after 4:00 p.m. E.T. each trading day.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the
requirement under Section 6(b)(5) of the Act 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 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 Rule 8.600-E. The
Exchange has in place surveillance procedures that are adequate to
properly monitor trading in the Shares in all trading sessions and to
deter and detect violations of Exchange rules and federal securities
laws applicable to trading on the Exchange. The Adviser is not
registered as a broker-dealer nor is the Adviser affiliated with a
broker-dealer. The Exchange or FINRA, on behalf of the Exchange, or
both, will communicate as needed regarding trading in the Shares,
certain exchange-traded equity securities (including ETFs) and certain
exchange-traded options with other markets and other entities that are
members of the ISG, and the Exchange or FINRA, on behalf of the
Exchange, or both, may obtain trading information regarding trading in
the Shares, certain exchange-traded equity securities (including ETFs)
and certain exchange-traded options from such markets and other
entities. In addition, the Exchange may obtain information regarding
trading in the Shares, certain exchange-traded equity securities
(including ETFs) and certain exchange-traded options from markets and
other entities that are members of ISG or with which the Exchange has
in place a comprehensive surveillance sharing agreement. In addition,
FINRA, on behalf of the Exchange, is able to access, as needed, trade
information for certain cash equivalents held by the Fund reported to
FINRA's TRACE.
    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 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. In addition, a large amount of
information is publicly available regarding the Fund and the Shares,
thereby promoting market transparency. The website for the Fund
includes a form of the prospectus for the Fund and additional data
relating to NAV and other applicable quantitative information. Trading
in Shares of the Fund will be halted if the circuit breaker parameters
in NYSE Arca Rule 7.12-E have been reached or because of market
conditions or for reasons that, in the view of the Exchange, make
trading in the Shares inadvisable, and trading in the Shares will be
subject to NYSE Arca Rule 8.600-E(d)(2)(D), which sets forth
circumstances under which trading in the Shares of the Fund may be
halted. In addition, as noted above, investors have ready access to
information regarding the Fund's holdings, the PIV, the Disclosed
Portfolio, and quotation and last sale information for the Shares.
    The Exchange believes that while the Fund is able to invest 20% of
the assets in the Fund's portfolio in OTC derivatives pursuant to
Commentary .01(e) to NYSE Arca Rule 8.600-E, it is appropriate to apply
a limit of up to 60% of the Fund's assets to the Fund's investments in
OTC total return swaps on U.S. and foreign exchange-listed equity
securities (calculated as the aggregate gross notional value of such
OTC derivatives) that are used for equity investment exposure purposes,
as described above. While the Fund will not invest directly in or hold
ownership in any companies that engage in cannabis-related business
unless permitted by national and local laws of the relevant
jurisdiction, including U.S. federal and state laws, the Adviser
believes that it is in the best interests of the Fund's shareholders
for the Fund to gain increased exposure to certain equity securities
that have economic characteristics similar to securities listed in the
principal strategies. The proposed exception would allow the Fund to
gain increased exposure, through the use of total return swaps, to
certain equity securities that the Fund may not be able to invest in or
choose not to invest in directly, in furtherance of the Fund's
investment objective. All Fund investments, including derivative
instruments (i.e., OTC total return swaps on U.S. and foreign exchange-
listed equity securities), would be made in accordance with all
applicable laws, including U.S. federal and state laws.
    In addition, the Fund's investments in OTC derivatives used to gain
increased exposure in furtherance of the Fund's investment objective,
will be limited to 60% of the assets in the Fund's portfolio,
calculated as the aggregate gross notional value of such OTC
derivatives. While certain derivatives can be traded on exchanges,
total return swaps (which can be customized) are only available for
trading on the OTC market. Accordingly, the Adviser believes that OTC
derivatives may frequently be a more efficient investment vehicle than
listed derivatives. Therefore, the Exchange believes that increasing
the percentage limit in Commentary .01(e), as described above,
applicable to the Fund's investments in OTC total return swaps on U.S.
and foreign exchange-listed equity securities would permit the Fund to
satisfy its investment objective and

reduce investment risks in a more cost-effective manner and, therefore,
would help protect investors and the public interest.
    The proposed rule change is designed to perfect the mechanism of a
free and open market and, in general, to protect investors and the
public interest in that it will permit the listing and trading of an
actively-managed exchange-traded product that, through permitted use of
an increased level of OTC derivatives above that currently permitted by
the generic listing requirements of Commentary .01 to NYSE Arca Rule
8.600-E, will enhance competition among market participants, to the
benefit of investors and the marketplace.
    The Exchange believes that it is appropriate and in the public
interest to allow the Fund to exceed the 20% limit in Commentary .01(e)
to Rule 8.600-E of portfolio assets that may be invested in OTC
derivatives. Under Commentary .01(e), a series of Managed Fund Shares
listed under the ``generic'' standards may invest up to 20% of its
assets (calculated as the aggregate gross notional value) in OTC
derivatives. Because the Fund, in furtherance of its investment
objective, may invest a substantial percentage of its investments in
OTC total return swaps on U.S. and foreign exchange-listed equity
securities, the 20% limit in Commentary .01(e) to Rule 8.600-E could
result in the Fund being unable to fully pursue its investment
objective while attempting to sufficiently mitigate investment risks.
The inability of the Fund to adequately increase its exposure would
effectively limit the Fund's ability to invest in certain instruments,
or could expose the Fund to additional investment risk.

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

    The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purpose of the Act. The Exchange notes that the
proposed rule change will permit the listing and trading of an issue of
Managed Fund Shares that, through permitted use of an increased level
of OTC derivatives above that currently permitted by the generic
listing requirements of Commentary .01 to NYSE Arca Rule 8.600-E will
enhance competition among market participants, to the benefit of
investors and the marketplace.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

    Within 45 days of the date of publication of this notice in the
Federal Register or up to 90 days (i) as the Commission may designate
if it finds such longer period to be appropriate and publishes its
reasons for so finding or (ii) as to which the self-regulatory
organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-NYSEArca-2019-77 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-NYSEArc-2019-77. 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 website (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 website 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. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NYSEArca-2019-77 and should be submitted
on or before January 16, 2020.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
---------------------------------------------------------------------------

    \18\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2019-27732 Filed 12-23-19; 8:45 am]
 BILLING CODE 8011-01-P


                                  MEMORANDUM

Tetra Tech, Inc.
10306 Eaton Place, Suite 340
Fairfax, VA 22030
phone<PHONE_NUMBER>
fax<PHONE_NUMBER>

TO:	Paul Shriner and Jan Matuszko, EPA
FROM:	Blaine Snyder and Kelly Meadows
DATE: 	October 21, 2008

SUBJECT:	Cost Estimates for Compliance Monitoring

EPA requested that Tetra Tech develop costs for compliance sampling for a regulatory option under consideration.  The assumptions for the sampling plan included weekly impingement samples used to show compliance with a monthly maximum limit and entrainment sampling for 20 density samples (10 samples during spawning season twice per year).

Approach

It is our assumption that one impingement sample per week covers the entire period of 12 months and that "10 samples during spawning season twice per year" means that only two entrainment sampling events would occur per year (scheduled during the spawn). For costing, the labor categories and rates presented in the Phase 2 NODA ICR were used as a starting point.  A 20% inflation mark-up was applied, since the ICR used 2001 labor rates.  Estimates presented here assume that either on-site staff are available for sample collection or that qualified contractors are available locally (i.e., travel costs are not considered here).  Also assumed here is that impingement and entrainment samples would require taxonomic identification; therefore, estimates include the services of biologists in the field and laboratory.  If EPA's approach requires only enumeration without identification, labor costs would be reduced below those presented here (e.g., technicians could be used for sampling and laboratory costs would be eliminated).  See Attachment A for more information.

Impingement Sampling and Reporting

Impingement monitoring involves collecting data on aquatic organisms trapped on the outer part of an intake structure or against screening devices during periods of cooling water withdrawal, to determine the abundance and composition of impinged organisms.  Since impingement samples would be processed on site, there is no need for laboratory personnel or services.  Reporting would involve a simple accounting of monthly impingement for the year (i.e., numbers and composition of organisms compared to EPA's maximum threshold value).  Personnel involved with sampling, data compilation, and reporting would include:

   * Biologist -- A biologist will perform weekly sampling events over the course of twelve months (52 total samples).  For each sampling event the biologist will take one 24-hour composite sample.  Approximately four hours would be spent (on average) taking each impingement sample, and an additional four hours (on average) analyzing the impinged organisms.
   * Biological technician -- A biological technician would accompany the biologist on each site visit, spending four hours taking each impingement sample, and an additional four hours analyzing the impinged organisms.
   * Project manager -- The manager may spend a total of eighty hours managing the impingement monitoring program and supervising the impingement sampling.
   * Statistician -- A statistician spends approximately three days analyzing the impingement sampling results and preparing the data for reporting (i.e., simple tallies to show compliance with EPA's maximum threshold value).
   * Junior technical -- Junior technical staff take approximately three days to review the monitoring results from the impingement sampling and summarize the results.
   * Clerical  -  Clerical staff supports data document preparation and distribution during the monitoring program duration.

Impingement Sampling
                                Labor Category
                                     Rate
                                     Hours
                                     Total
Biologist
                                                                          $66.5
                                                                            416
                                                                        $27,664
Biological technician
                                                                          $42.6
                                                                            416
                                                                        $17,722
Project manager
                                                                         $102.4
                                                                             80
                                                                         $8,192
Statistician
                                                                          $68.5
                                                                             24
                                                                         $1,644
Junior technical
                                                                          $38.3
                                                                             24
                                                                           $919
Clerical
                                                                          $21.8
                                                                             24
                                                                           $532
ODCs

                                                                         $2,500
Total

                                                                        $59,173

Impingement Reporting
                                Labor Category
                                     Rate
                                     Hours
                                     Total
Biologist
                                                                          $66.5
                                                                             16
                                                                         $1,064
Project manager
                                                                         $102.4
                                                                             40
                                                                         $4,096
Statistician
                                                                          $68.5
                                                                              8
                                                                           $548
Clerical
                                                                          $21.8
                                                                             16
                                                                           $349
ODCs

                                                                           $250
Total

                                                                         $6,307

Entrainment Sampling and Reporting

Entrainment monitoring involves the collection of data on fish/shellfish eggs and larvae incorporated with cooling water flow (entering and passing through a cooling water intake structure and into a cooling water system), to determine the abundance and composition of entrained organisms.  Since entrained organisms are small, planktonic stages of fish and shellfish, sample processing would be conducted in the laboratory.  Reporting would involve a simple accounting of entrainment densities for the collection period (i.e., density and composition of organisms compared to an EPA threshold).  A total of two sampling events would be scheduled during the peak of the spawning season at each facility, and 10 samples would be collected during each sampling event (for a total of 20 samples per year).  Personnel involved with sampling, data compilation, and reporting would include:

   * Biologist -- A biologist will perform two sampling events over the course of the spawning period.  For each sampling event the biologist will take five samples over two twenty-four hour periods to capture daylight and dark hours (i.e., 5 samples x 2 sampling days x 2 sampling events per spawning season = 20 total samples).  The biologist spends approximately two hours taking each entrainment sample, and an additional two hours to prepare the sample for delivery to the laboratory.
   * Biological technician -- A biological technician accompanies the biologist on each site visit, spending two hours taking each entrainment sample, and an additional two hours to prepare the sample for delivery to the lab.
   * Project manager -- The manager may spend a total of eighty hours managing the entrainment monitoring program and supervising the entrainment sampling.
   * Statistician -- A statistician spends approximately three days analyzing the entrainment sampling results and preparing the data for reporting (i.e., simple tallies to show compliance with EPA's threshold value).
   * Junior technical -- Facility junior technical staff take approximately three days to review the monitoring results from the entrainment sampling and summarize the results.
   * Clerical -- Clerical staff supports data document preparation and distribution during the monitoring program duration.

Entrainment Sampling
                                Labor Category
                                     Rate
                                     Hours
                                     Total
Biologist
                                                                          $66.5
                                      80
                                                                         $5,320
Biological technician
                                                                          $42.6
                                      80
                                                                         $3,408
Project manager
                                                                         $102.4
                                      80
                                                                         $8,192
Statistician
                                                                          $68.5
                                      24
                                                                         $1,644
Junior technical
                                                                          $38.3
                                      24
                                                                           $919
Clerical
                                                                          $21.8
                                      24
                                                                           $532
ODCs

                                                                         $3,000
Total

                                                                        $23,015

Entrainment Laboratory
                               Number of Samples
                                Cost Per Sample
                                     Total
                                      20
                                                                           $350
                                                                         $7,000

Entrainment Reporting
                                Labor Category
                                     Rate
                                     Hours
                                     Total
Biologist
                                                                          $66.5
                                      16
                                                                         $1,064
Project manager
                                                                         $102.4
                                      40
                                                                         $4,096
Statistician
                                                                          $68.5
                                       8
                                                                           $548
Clerical
                                                                          $21.8
                                      16
                                                                           $349
ODCs

                                                                           $250
Total

                                                                         $6,307