[Federal Register Volume 78, Number 131 (Tuesday, July 9, 2013)]
[Notices]
[Pages 41145-41149]
[FR Doc No: 2013-16382]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69915; File No. SR-NYSEArca-2013-56]

Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting
Approval of Proposed Rule Change Relating to Listing and Trading of
Shares of the PowerShares China A-Share Portfolio Under NYSE Arca
Equities Rule 8.600

July 2, 2013.

I. Introduction

    On May 21, 2013, 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
PowerShares China A-Share Portfolio (``Fund'') under NYSE Arca Equities
Rule 8.600. The proposed rule change was published for comment in the
Federal Register on May 30, 2013.\3\ The Commission received no
comments on the proposed rule change. This order grants approval of the
proposed rule change.
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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. 69634 (May 23,
2013), 78 FR 32487 (``Notice'').
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II. Description of the Proposed Rule Change

    The Exchange proposes to list and trade Shares of the Fund pursuant
to NYSE Arca Equities Rule 8.600, which governs the listing and trading
of Managed Fund Shares on the Exchange. The Shares will be offered by
PowerShares Actively Managed Exchange-Traded Fund Trust (``Trust''), a
statutory trust organized under the laws of the State of Delaware and
registered with the Commission as an open-end management investment
company.\4\ The investment adviser to the Fund will be Invesco
PowerShares Capital Management LLC (``Adviser''). Invesco Distributors,
Inc. (``Distributor'') will serve as the distributor of the Fund
Shares. The Bank of New York Mellon Corporation (``Administrator,''
``Transfer Agent,'' or ``Custodian'') will serve as administrator,
custodian, and transfer agent for the Fund. The Exchange states that
the Adviser is not a broker-dealer but is affiliated with a broker-
dealer and has implemented a fire wall with respect to its broker-
dealer affiliate regarding access to information concerning the
composition and/or changes to the Fund's portfolio.\5\
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    \4\ The Trust is registered under the Investment Company Act of
1940 (``1940 Act''). On April 20, 2012, the Trust filed with the
Commission a post-effective amendment to Form N-1A under the
Securities Act of 1933 and under the 1940 Act relating to the Fund
(File Nos. 333-147622 and 811-22148) (``Registration Statement'').
The Commission has issued an order granting certain exemptive relief
to the Trust under the 1940 Act. See Investment Company Act Release
No. 28171 (February 27, 2008) (File No. 812-13386) (``Exemptive
Order'').
    \5\ See NYSE Arca Equities Rule 8.600, Commentary .06. In the
event (a) the Adviser becomes newly affiliated with a broker-dealer,
or (b) any new adviser or sub-adviser is a registered broker-dealer
or becomes affiliated with a broker-dealer, it will implement a fire
wall with respect to its relevant personnel or its broker-dealer
affiliate regarding access to information concerning the composition
and/or changes to the 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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    The Fund's investment objective will be to seek to provide long
term capital appreciation. The Fund will seek to achieve its investment
objective by using a quantitative, rules-based strategy designed to
provide returns that correspond to the performance of the FTSE China
A50 Index (``Benchmark''). The Benchmark is designed for investors who
seek exposure to China's domestic market through ``A-Shares,'' which
are securities of companies that are incorporated in mainland China and
that trade on the Shanghai Stock Exchange or the Shenzhen Stock
Exchange. The Benchmark is comprised of the securities of the largest
50 A-Share companies, as determined by full market capitalization,
listed on the Shanghai and Shenzhen Stock Exchanges.
    Under normal circumstances,\6\ the Fund generally will invest at
least 80%

of its net assets in a combination of investments whose collective
performance is designed to correspond to the performance of the
Benchmark. These investments will be: (i) Futures contracts on the
Benchmark; (ii) exchange-traded funds (``ETFs'') that provide exposure
to the China A-Shares market (``Underlying ETFs''); \7\ and (iii) A-
Shares included in the Benchmark, to the extent permissible under
Chinese law. As described below, the Fund expects to invest its
remaining assets in U.S. government securities, money market
instruments (including repurchase agreements), cash, and cash
equivalent securities (i.e., corporate commercial paper) to
collateralize investments in futures contracts or for other purposes.
Although the Fund will seek to provide returns that generally
correspond to the performance of the Benchmark, the Fund will be
actively managed by the Adviser and will not be designed to track the
performance of any index.
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    \6\ The term ``under normal circumstances'' includes, but is not
limited to, the absence of: extreme volatility or trading halts in
the equity markets or the financial markets generally; operational
issues causing dissemination of inaccurate market information; or
force majeure type events such as systems failure, natural or man-
made disaster, act of God, armed conflict, act of terrorism, riot or
labor disruption, or any similar intervening circumstance.
    \7\ For purposes of this proposed rule change, Underlying ETFs
include Investment Company Units (as described in NYSE Arca Equities
Rule 5.2(j)(3)) and Managed Fund Shares (as described in NYSE Arca
Equities Rule 8.600). The Underlying ETFs all will be listed and
traded in the U.S. on registered exchanges or the Stock Exchange of
Hong Kong Limited (``HKSE''), a wholly-owned subsidiary of Hong Kong
Exchanges and Clearing Limited. Hong Kong Exchanges and Clearing
Limited is a member of the Intermarket Surveillance Group (``ISG'').
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    ``A-Shares'' are shares of stock that are issued by companies
incorporated in mainland China and that are traded in Renminbi on the
Shanghai Stock Exchange or the Shenzhen Stock Exchange. Due to strict
controls imposed by the Chinese government, the Fund currently cannot
invest directly in A-Shares, which are available only to domestic
Chinese investors and a limited pool of foreign investors, including
foreign investors who have been approved as a Qualified Foreign
Institutional Investor (``QFII'') by the China Securities Regulatory
Commission and have obtained a QFII license. After obtaining a QFII
license, a QFII applies to China's State Administration of Foreign
Exchange for a specific aggregate dollar amount investment quota of A-
Shares (``A-Share Quota'') in which the QFII can invest. In order for
the Fund to invest directly in A-Shares, the Adviser would need to
apply for a QFII license and obtain an A-Share Quota.
    If the Adviser obtains a QFII license, the Fund may invest directly
in A-Shares through the QFII license. There are no assurances that such
a QFII license would be granted, or that such a license, if granted,
would permit the Fund to purchase A-Shares in an amount necessary to
provide the Fund with sufficient A-Shares exposure.
    Because it currently cannot invest in A-Shares directly, the Fund
will invest primarily in futures contracts on the Benchmark that
provide exposure to the China A-Shares market. These futures contracts
are listed on the Singapore Exchange (``SGX'').\8\ By investing in
futures contracts on the Benchmark, the Fund will have no direct
ownership of the A-Shares of the companies included in the Benchmark,
but the Fund will gain exposure to the performance of those
companies.\9\
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    \8\ SGX is a member of the ISG.
    \9\ Futures contracts on the Benchmark were first approved for
investment by U.S. investors by the Commodity Futures Trading
Commission (``CFTC'') in January 2012. Futures contracts on the
Benchmark have expirations ranging from the two nearest consecutive
months, and March, June, September, and December on a 1-year cycle,
and provide investors the ability to invest based on their view of
the future direction or movement of the Benchmark. FTSE
International Limited (``FTSE'') reviews constituents in the
Benchmark quarterly using data from the close of business on the
Monday following the third Friday in February, May, August, and
November. FTSE will implement any constituent changes on the next
trading day following the third Friday in March, June, September,
and December.
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    The Fund also may invest in Underlying ETFs listed on U.S.
securities exchanges or on the HKSE that provide exposure to China A-
Shares.
    The Fund will invest in futures contracts on the Benchmark--
specifically, in SGX-listed futures contracts--as a significant part of
its investment strategy. Generally, futures contracts are a type of
derivative whose value depends upon, or is derived from, the value of
an underlying asset, reference rate, or index. The Fund's use of
futures contracts will be underpinned by investments in short-term,
high quality U.S. Treasury Securities, money market instruments, cash,
and cash equivalent securities, as described below.\10\ The Trust's
Exemptive Order places no limit on the amount of derivatives in which
the Fund can invest. The futures contracts will be used to simulate
full investment in China A-Share securities. To the extent the Fund
uses futures, it will do so only in accordance with Rule 4.5 of the
Commodity Exchange Act (``CEA'').\11\
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    \10\ With respect to certain kinds of futures entered into by
the Fund that involve obligations to make future payments to third
parties, under applicable federal securities laws, rules, and
interpretations thereof, the Fund must ``set aside'' (referred to
sometimes as ``asset segregation'') liquid assets, or engage in
other measures to ``cover'' open positions with respect to such
transactions. With respect to futures contracts that are not
contractually required to ``cash-settle,'' the Fund must cover its
open positions by setting aside liquid assets equal to the
contracts' full, notional value. With respect to futures contracts
that are contractually required to ``cash-settle,'' the Fund may set
aside liquid assets in an amount equal to the Fund's daily marked-
to-market (net) obligation rather than the notional value of the
futures contract.
    \11\ 7 U.S.C. 1. To the extent the Fund uses futures contracts,
it will do so only in accordance with Rule 4.5 of the CEA. The Trust
has filed a notice of eligibility for exclusion from the definition
of the term ``commodity pool operator'' or ``CPO'' in accordance
with Rule 4.5 of the CEA. Under amendments to Rule 4.5 adopted in
February 2012, an investment adviser of a registered investment
company may claim exclusion from registration as a CPO only if the
registered investment company it advises uses futures contracts
solely for ``bona fide hedging purposes'' or limits its use of
futures contracts for non-bona fide hedging purposes in specified
ways. Because the Fund does not expect to use futures contracts
solely for ``bona fide hedging purposes,'' the Fund will be subject
to rules that will require it to limit its use of positions in
futures contracts in accordance with the requirements of amended
Rule 4.5 unless the Adviser otherwise complies with CPO regulation.
To the extent that the Fund is unable to rely on Rule 4.5, the Fund
will be operated in accordance with CFTC rules; the Adviser already
is registered as a CPO.
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The Subsidiary

    The Fund may seek to gain exposure to the A-Shares market through
investments in a subsidiary organized in the Cayman Islands
(``Subsidiary'') that in turn would make investments in futures
contracts that provide exposure to China A-Shares. If utilized, the
Subsidiary would be wholly-owned and controlled by the Fund, and its
investments would be consolidated into the Fund's financial statements.
Should the Fund invest in the Subsidiary, that investment may not
exceed 25% of the Fund's total assets at each quarter end of the Fund's
fiscal year. Further, should the Fund invest in the Subsidiary, it
would be expected to provide the Fund with exposure to A-Share returns
within the limits of the federal tax requirements applicable to
investment companies, such as the Fund.
    The Subsidiary would be able to invest in futures contracts that
would provide exposure to A-Shares, as well in other investments that
would serve as margin or collateral or otherwise support the
Subsidiary's futures positions. The Subsidiary, accordingly, would be
subject to the same general investment policies and restrictions as the
Fund, except that unlike the Fund, which must invest in futures
contracts in compliance with the requirements of Subchapter M of the
Internal Revenue Code,\12\ federal securities laws, and the CEA, the
Subsidiary may invest without limitation in futures. References to the

investment strategies and risks of the Fund include the investment
strategies and risks of the Subsidiary.
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    \12\ 26 U.S.C. 851.
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    The Fund may utilize the Subsidiary, but is not required to do so.
If it is utilized, the Subsidiary will not be registered under the 1940
Act. As an investor in the Subsidiary, the Fund, as the Subsidiary's
sole shareholder, would not have the protections offered to investors
in registered investment companies. However, because the Fund would
wholly own and control the Subsidiary, and the Fund and Subsidiary
would be managed by the Adviser, the Subsidiary would not take action
contrary to the interests of the Fund or the Fund's shareholders. The
Board of Trustees of the Trust (``Board'') has oversight responsibility
for the investment activities of the Fund, including its investment in
the Subsidiary, and the Fund's role as the sole shareholder of the
Subsidiary. Also, in managing the Subsidiary's portfolio, the Adviser
would be subject to the same investment restrictions and operational
guidelines that apply to the management of the Fund. Changes in the
laws of the United States, under which the Fund is organized, or of the
Cayman Islands, under which the Subsidiary is organized, could result
in the inability of the Fund or the Subsidiary to operate as described
in the filing or in the Registration Statement and could negatively
affect the Fund and its shareholders.

Other Investments

    The Fund, under normal circumstances, may invest no more than 20%
of its net assets in other investments such as money market instruments
(including repurchase agreements, as described below), cash, and cash
equivalents to provide liquidity or to collateralize its investments in
futures contracts. The instruments in which the Fund may invest
include: (i) Short-term obligations issued by the U.S. Government; \13\
(ii) short-term negotiable obligations of commercial banks, fixed time
deposits,\14\ and bankers' acceptances \15\ of U.S. and foreign banks
and similar institutions; (iii) commercial paper rated at the date of
purchase ``Prime-1'' by Moody's Investors Service, Inc. or ``A-1+'' or
``A-1'' by Standard & Poor's or, if unrated, of comparable quality, as
the Adviser of the Fund determines; and (iv) money market mutual funds.
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    \13\ The Fund may invest in U.S. government obligations.
Obligations issued or guaranteed by the U.S. Government, its
agencies, and instrumentalities include bills, notes, and bonds
issued by the U.S. Treasury, as well as ``stripped'' or ``zero
coupon'' U.S. Treasury obligations representing future interest or
principal payments on U.S. Treasury notes or bonds.
    \14\ Time deposits are non-negotiable deposits maintained in
banking institutions for specified periods of time at stated
interest rates.
    \15\ Banker's acceptances are time drafts drawn on commercial
banks by borrowers, usually in connection with international
transactions.
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    The Fund may invest in the securities of other investment companies
(including money market funds) beyond the limits permitted under the
1940 Act, subject to certain terms and conditions set forth in a
Commission exemptive order issued pursuant to Section 12(d)(1)(J) of
the 1940 Act.\16\
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    \16\ Investment Company Act Release No. 30238 (October 23, 2012)
(File No. 812-13820).
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    The Fund may enter into repurchase agreements, which are agreements
pursuant to which securities are acquired by the Fund from a third
party with the understanding that they will be repurchased by the
seller at a fixed price on an agreed date. These agreements may be made
with respect to any of the portfolio securities in which the Fund is
authorized to invest. Repurchase agreements may be characterized as
loans secured by the underlying securities. The Fund may enter into
repurchase agreements with (i) member banks of the Federal Reserve
System having total assets in excess of $500 million and (ii)
securities dealers (``Qualified Institutions''). The Adviser will
monitor the continued creditworthiness of Qualified Institutions.
    The Fund may enter into reverse repurchase agreements, which
involve the sale of securities with an agreement to repurchase the
securities at an agreed-upon price, date, and interest payment and have
the characteristics of borrowing. The securities purchased with the
funds obtained from the agreement and securities collateralizing the
agreement will have maturity dates no later than the repayment date.

Investment Restrictions

    The Fund's investments will be consistent with the Fund's
investment objective and will not be used to enhance leverage.
    The Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid securities (calculated at the time of investment).
The Fund will monitor its portfolio liquidity on an ongoing basis to
determine whether, in light of current circumstances, an adequate level
of liquidity is being maintained, and will consider taking appropriate
steps in order to maintain adequate liquidity if, through a change in
values, net assets, or other circumstances, more than 15% of the Fund's
net assets are held in illiquid securities. Illiquid securities include
securities subject to contractual or other restrictions on resale and
other instruments that lack readily available markets as determined in
accordance with Commission staff guidance.
    The Fund will not use futures for speculative purposes.
    The Fund may not concentrate its investments (i.e., invest more
than 25% of the value of its net assets) in securities of issuers in
any one industry or group of industries. This restriction does not
apply to obligations issued or guaranteed by the U.S. Government, its
agencies, or instrumentalities.
    The Fund intends to qualify for, and to elect to be treated as, a
separate regulated investment company under Subchapter M of the
Internal Revenue Code.\17\
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    \17\ 26 U.S.C. 851.
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    The Fund will not invest in any non-U.S. equity securities (other
than shares of the Subsidiary and Underlying ETFs listed on HKSE), to
the extent that the Fund may not invest directly in China A-Shares
through the QFII license, as described above. The Fund will not invest
in options or swaps.
    Additional information regarding the Trust and the Shares,
including investment strategies, risks, creation and redemption
procedures, fees, portfolio holdings disclosure policies,
distributions, and taxes, among other things, is included in the Notice
and Registration Statement, as applicable.\18\
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    \18\ See Notice and Registration Statement, supra notes 3 and 4,
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 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 Fund 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. In addition, the Portfolio
Indicative Value, as defined in NYSE Arca Equities Rule 8.600(c)(3),
will be widely disseminated at least every 15 seconds during the Core
Trading Session by one or more major market data vendors.\23\ On each
business day, before commencement of trading in Shares in the Core
Trading Session on the Exchange, the Fund will disclose on its Web site
the Disclosed Portfolio, as defined in NYSE Arca Equities Rule
8.600(c)(2), held by the Fund and the Subsidiary that will form the
basis for the Fund's calculation of NAV at the end of the business
day.\24\ The NAV per Share of the Fund will be determined at the close
of regular trading (normally 4:00 p.m. Eastern Time) every day the New
York Stock Exchange is open. A basket composition file, which will
include the security names and share quantities to deliver in exchange
for Shares, together with estimates and actual cash components, will be
publicly disseminated daily prior to the opening of the Exchange via
the National Securities Clearing Corporation. 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 on the value and the
constituents of the Benchmark may be found on the Web site of FTSE, the
Benchmark's provider. 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 intra-day, closing,
and settlement prices of the portfolio investments (e.g., futures
contracts and Underlying ETFs) are also readily available from the
exchanges trading such securities or futures contracts, automated
quotation systems, published or other public sources, or on-line
information services such as Bloomberg or Reuters. The Fund's Web site
will include a form of the prospectus for the Fund 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 widely disseminate Portfolio Indicative Values taken from
CTA or other data feeds.
    \24\ On a daily basis, the Fund will disclose for each portfolio
security, futures contract, and other financial instrument of the
Fund and the Subsidiary the following information on the Fund's Web
site: ticker symbol (if applicable); name of security, futures
contract, and financial instrument; number of shares, if applicable,
and dollar value of each security, futures contract, and financial
instrument in the portfolio; and percentage weighting of the
security, futures contract, and financial instrument in the
portfolio. The Web site information will be publicly available at no
charge.
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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, trading in the Shares will be subject to NYSE Arca
Equities Rule 8.600(d)(2)(D), which sets forth circumstances under
which Shares of the Fund may be halted. The Exchange may halt trading
in the Shares if trading is not occurring in the securities, futures
contracts, and/or the financial instruments comprising the Disclosed
Portfolio of the 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 Commission notes that the Financial Industry
Regulatory Authority (``FINRA''), on behalf of the Exchange,\28\ will
communicate as needed regarding trading in the Shares with other
markets that are members of the ISG or with which the Exchange has in
place a comprehensive surveillance sharing agreement. 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 a broker-dealer, and the
Adviser has implemented a fire wall with respect to its broker-dealer
affiliate regarding access to information concerning the composition
and/or changes to the portfolio.\29\
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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) (providing
additional considerations for the suspension of trading in or
removal from listing of Managed Fund Shares on the Exchange). 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 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\ The Exchange states that, while FINRA surveils trading on
the Exchange pursuant to a regulatory services agreement, the
Exchange is responsible for FINRA's performance under this
regulatory services agreement.
    \29\ See supra note 5. 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 represents that trading in the Shares will be
subject to the existing trading surveillances, administered by FINRA on
behalf of the

Exchange, which are designed to detect violations of Exchange rules and
applicable federal securities laws and that these procedures are
adequate to properly monitor Exchange trading of the Shares in all
trading sessions and to deter and detect violations of Exchange rules
and applicable federal securities laws.
    (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 Units (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 will be 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 Fund will be in
compliance with Rule 10A-3 under the Exchange Act,\30\ as provided by
NYSE Arca Equities Rule 5.3.
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    \30\ 17 CFR 240.10A-3.
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    (6) The Fund will not invest in any non-U.S. equity securities
(other than shares of the Subsidiary and Underlying ETFs listed on
HKSE), to the extent that the Fund may not invest directly in China A-
Shares. To the extent that the Fund invests directly in China A-Shares,
not more than 10% of the weight of the Fund's portfolio in the
aggregate shall consist of such China A-Shares whose principal trading
market is not a member of ISG or is a market with which the Exchange
does not have a comprehensive surveillance sharing agreement.
    (7) The Fund will invest solely in SGX-listed futures contracts on
the Benchmark. It is possible that the futures contracts on the
Benchmark may become listed on other exchanges that are members of ISG
or with which the Exchange has in place a comprehensive surveillance
sharing agreement, at which time the Fund may invest in those futures
contracts listed on such exchanges. To the extent that the Fund or the
Subsidiary were to invest in futures contracts on the Benchmark that
were traded on exchanges other than SGX, not more than 10% of the
weight of such futures contracts held by the Fund or the Subsidiary in
the aggregate would consist of components whose principal trading
market is not a member of ISG or is a market with which the Exchange
does not have a comprehensive surveillance sharing agreement. The Fund
will not invest in options or swaps. The Fund's investments will be
consistent with its investment objective and will not be used to
enhance leverage.
    (8) The Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid securities (calculated at the time of investment).
    (9) Should the Fund invest in the Subsidiary, that investment may
not exceed 25% of the Fund's total assets at each quarter end of the
Fund's fiscal year.
    (10) A minimum of 100,000 Shares of the Fund will be outstanding at
the commencement of trading on the Exchange.
    This approval order is based on all of the Exchange's
representations and description of the Fund, including those set forth
above and in the Notice.\31\
---------------------------------------------------------------------------

    \31\ The Commission notes that it does not regulate the market
for futures in which the Fund plans to take positions. Limits on the
positions that any person may take in futures may be directly set by
the CFTC or by the markets on which the futures are traded. The
Commission has no role in establishing position limits on futures
even though such limits could impact an exchange-traded product that
is under the jurisdiction of the Commission.
---------------------------------------------------------------------------

    For the foregoing reasons, the Commission finds that the proposed
rule change is consistent with Section 6(b)(5) of the Act \32\ and the
rules and regulations thereunder applicable to a national securities
exchange.
---------------------------------------------------------------------------

    \32\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\33\ that the proposed rule change (SR-NYSEArca-2013-56) be, and it
hereby is, approved.
---------------------------------------------------------------------------

    \33\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\34\
Elizabeth M. Murphy,
Secretary.
---------------------------------------------------------------------------

    \34\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

[FR Doc. 2013-16382 Filed 7-8-13; 8:45 am]
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[Federal Register Volume 76, Number 251 (Friday, December 30, 2011)]
[Notices]
[Pages 82311-82312]
[FR Doc No: 2011-33573]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

[Docket No. FDA-2009-N-0247]

Food and Drug Administration Transparency Initiative: Food and
Drug Administration Report on Good Guidance Practices: Improving
Efficiency and Transparency; Availability

AGENCY: Food and Drug Administration, HHS.

ACTION: Notice of availability; request for comments.

-----------------------------------------------------------------------

SUMMARY: As part of the Transparency Initiative, the Food and Drug
Administration (FDA or Agency) is announcing the availability of a
report entitled ``Food and Drug Administration Report on Good Guidance
Practices: Improving Efficiency and Transparency.'' This report was
prepared in response to Action Item 11 in the Phase III Report (FDA
Transparency Initiative: Improving Transparency to Regulated Industry,
dated January 2011). In that action item, the Commissioner of Food and
Drugs (the Commissioner), Dr. Margaret A. Hamburg, called for a cross-
Agency working group to prepare a report identifying FDA's ``best
practices'' and making recommendations to streamline the development of
guidance documents, reduce the time between issuing draft and final
guidance documents, and make it easier to find guidance documents on
FDA's Web site.

DATES: Submit either electronic or written comments by February 28,
2012.

ADDRESSES: Submit electronic comments to http://www.regulations.gov.
Submit written comments to the Division of Dockets Management (HFA-
305), Food and Drug Administration, 5630 Fishers Lane, rm. 1061,
Rockville, MD 20852. All comments should be identified with the docket
number found in brackets at the heading of this document.

FOR FURTHER INFORMATION CONTACT: Lisa M. Dwyer, Office of Policy,
Office of the Commissioner, Food and Drug Administration, 10903 New
Hampshire Ave., Bldg. 32, rm. 4228, Silver Spring, MD 20993, (301) 796-
4820, FAX:<PHONE_NUMBER><EMAIL_ADDRESS>
SUPPLEMENTARY INFORMATION:

I. Background

    On January 21, 2009, President Obama issued a memorandum urging the
heads of executive departments and Agencies to create an
``unprecedented level of openness'' to ``strengthen our democracy and
promote efficiency and effectiveness'' (see Memorandum to Heads of
Executive Departments and Agencies on Transparency and Open Government,
January 21, 2009, (74 FR 4685, January 26, 2009)). In response, the
following June FDA launched its Transparency Initiative. Information on
the FDA Transparency Initiative is available at http://www.fda.gov/AboutFDA/Transparency/TransparencyInitiative/default.htm.
    As part of this initiative, FDA issued the Phase III Report (FDA
Transparency Initiative: Improving Transparency to Regulated Industry,
dated January 2011) in January 2011. The Phase III Report contained 19
action items and 5 draft proposals to make FDA's operations and
decisionmaking processes more transparent and to foster more efficient
and cost-effective regulatory processes. In Action Item 11 of the Phase
III Report, the Commissioner called for a cross-Agency working group to
prepare a report identifying FDA's ``best practices'' and making
recommendations to: (1) Streamline the development of guidance
documents, (2) reduce the time between issuing draft and final guidance
documents, and (3) make it easier to find guidance documents on FDA's
Web site.
    In response to that action item, a cross-Agency working group under
the leadership of the Office of Policy in the Office of the
Commissioner prepared a report entitled ``Food and Drug Administration
Report on Good Guidance Practices: Improving Efficiency and
Transparency'' (GGP

Report). The GGP Report identifies current ``best practices'' and
recommends strategies to make the Agency's guidance processes more
efficient and transparent. The cross-Agency working group submitted the
GGP Report to the Commissioner on September 30, 2011.
    These ``best practices'' and strategies are critical to the Agency
because developing and issuing guidance documents is an enormous
undertaking and one that is critical to fulfilling FDA's mission. In
fiscal year (FY) 2009, the Agency issued approximately 124 guidance
documents. Since that time, its issuance of guidance documents has been
trending upward, with the Agency issuing approximately 133 guidance
documents in FY 2010 and approximately 144 guidance documents in FY
2011. These numbers include draft and final Level 1 guidance documents
and Level 2 guidance documents.
    Guidance documents are prepared for FDA staff, the regulated
industry, and/or the public and describe the Agency's interpretation of
or policy on a regulatory issue (Sec.  10.115(b) (21 CFR 10.115(b)).
Unlike statutes and regulations, guidance documents do not establish
legally enforceable rights or responsibilities (Sec.  10.115(d)). There
are two types of guidance documents: Level 1 and Level 2. Level 1
guidance documents are those that: (1) Set forth initial
interpretations of statutory or regulatory requirements, (2) set forth
changes in interpretation or policy that are of more than a minor
nature, (3) include complex scientific issues, or (4) cover highly
controversial issues (Sec.  10.115(c)). In contrast, Level 2 guidance
documents set forth existing practices or minor changes in
interpretation or policy. Level 2 guidance documents include all
guidance documents that are not classified as Level 1 (see id.).
    FDA's Good Guidance Practices regulation (Sec.  10.115) governs the
development and issuance of guidance documents, and it gives interested
persons a number of opportunities to provide input into the guidance
document development process. Generally, FDA solicits public input on
Level 1 guidance documents before implementation. The Agency posts
draft Level 1 guidance documents on its Web site, and it publicizes
them by issuing a Notice of Availability (NOA) in the Federal Register.
Generally, the Agency accepts public comments on the guidance document
for 60 days. In some instances, FDA may also hold public meetings or
workshops on draft Level 1 guidance documents to solicit additional
comments, or present the draft Level 1 guidance document to an advisory
committee for review. Once the comment period has closed, the Agency
reviews the comments and considers them as it prepares the final
guidance document. The Agency also posts final Level 1 guidance
documents on its Web site and publicizes them by issuing an NOA in the
Federal Register.
    Generally, FDA does not solicit public input on Level 2 guidance
documents or on Level 1 guidance documents ``for immediate
implementation'' (i.e., Level 1 guidance documents for which ``prior
public participation is not feasible or appropriate,'' Sec.
10.115(g)(2)) before implementing the guidance document. However, FDA
publishes an NOA in the Federal Register for Level 1 guidance ``for
immediate implementation'' and posts both types of guidance documents
on its Web site, and interested persons may comment on them at any time
after they have been issued. FDA will review the comments and revise
the guidance documents, as appropriate. This streamlined approach
permits FDA to issue Level 1 guidance documents ``for immediate
implementation'' and Level 2 guidance documents more expeditiously than
standard Level 1 guidance documents, while still providing stakeholders
with an opportunity to comment. Importantly, the additional
administrative steps required for standard Level 1 guidance documents
(i.e., issuing a draft guidance document, providing a comment period,
and issuing a final guidance document) generally make the issuance of
standard Level 1 guidance documents a longer process.
    In addition to the opportunity to comment on guidance documents
themselves, interested persons have opportunities to provide input to
FDA on topics for guidance documents. FDA publishes an annual guidance
agenda, listing possible topics for future guidance document
development or revision during the next year. FDA's most recent
guidance agenda may be found in the Federal Register (75 FR 76011,
December 7, 2010) online at http://edocket.access.gpo.gov/2010/pdf/2010-30623.pdf. Interested persons may submit comments on the topics on
the list or comments that suggest additional topics for guidance.
Interested persons also may identify issues in citizen petitions that
the Agency may decide to address by issuing a guidance document. (The
procedures for filing citizen petitions are in 21 CFR 10.30.)
    Requests for guidance documents also come to FDA informally.
Frequently, interested persons identify issues that would benefit from
guidance at advisory committee meetings, industry meetings,
roundtables, and listening sessions or by contacting the appropriate
FDA office. Interested persons sometimes submit a proposed draft
guidance document to FDA. Submitting proposed draft guidance documents,
rather than guidance topics, enables FDA to approach a guidance topic
with a better understanding of the issues that interest the
stakeholder. This may expedite the guidance document development
process, particularly if the topic involves novel scientific issues.
FDA solicits proposed draft guidance at a variety of different venues,
such as trade association meetings and on the FDA Web site. Interested
persons may submit proposed draft guidance documents on unsolicited
topics as well.
    All guidance topic suggestions and proposed draft guidance
documents are taken into consideration, but resource limitations may
prevent us from responding to each suggestion. In addition, resource
limitations often prevent the Agency from taking action on the
suggestions, as may legal constraints and policy considerations.
    The Commissioner is issuing the GGP Report to the public to make
the Agency's processes regarding guidance document development and
issuance more transparent and to solicit public comment on the report
and recommendations. The Agency looks forward to engaging with its
stakeholders as it continues to seek opportunities to enhance the
efficiency and transparency of the guidance document development
process.

II. Comments

    Interested persons may submit to the Division of Dockets Management
(see ADDRESSES) either electronic or written comments regarding this
document. It is only necessary to send one set of comments. Identify
comments with the docket number found in brackets in the heading of
this document. Received comments may be seen in the Division of Dockets
Management between 9 a.m. and 4 p.m., Monday through Friday.

III. Electronic Access

    Persons with access to the Internet may obtain the GGP Report at
either http://www.fda.gov/downloads/AboutFDA/Transparency/TransparencyInitiative/UCM285124.pdf or http://www.regulations.gov.

    Dated: December 27, 2011.
Leslie Kux,
Acting Assistant Commissioner for Policy.
[FR Doc. 2011-33573 Filed 12-29-11; 8:45 am]
BILLING CODE 4160-01-P