[Federal Register Volume 79, Number 176 (Thursday, September 11, 2014)]
[Notices]
[Pages 54333-54338]
[FR Doc No: 2014-21643]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73004; File No. SR-NYSEArca-2014-76]

Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting
Approval of Proposed Rule Change, as Modified by Amendment Nos. 1, 2,
3, 4, and 5, To List and Trade Shares of the Cambria Global Momentum
ETF Under NYSE Arca Equities Rule 8.600

September 5, 2014.

I. Introduction

    On July 1, 2014, 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'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to
list and trade shares (``Shares'') of the Cambria Global Momentum ETF
(``Fund'') under NYSE Arca Equities Rule 8.600. The Exchange filed
Amendment No. 1 to the proposal on July 14, 2014, and on July 15, 2014,
the Exchange filed Amendment No. 2 to the proposal.\3\ The proposed
rule change, as modified by Amendments No. 1 and 2, was published for
comment in the Federal Register on July 22, 2014.\4\ On July 22, 2014,
the Exchange filed Amendment No. 3 to the proposal; \5\ on July 29,
2014, the Exchange filed Amendment No. 4 to the proposal; \6\ and on
September 4, 2014, the Exchange filed partial Amendment No. 5 to the
proposal.\7\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 replaced and superseded the original filing
in its entirety, and Amendment No. 2 replaced and superseded
Amendment No. 1 in its entirety.
    \4\ See Securities Exchange Act Release No. 72631 (July 16,
2014), 79 FR 42605 (``Notice'').
    \5\ Amendment No. 3 replaced and superseded Amendment No. 2 in
its entirety. In Amendment No. 3, the Exchange modified inconsistent
representations in the fling regarding leverage to clarify that the
Fund's investments will be consistent with the Fund's investment
objective and will not be used to achieve leveraged returns (i.e.,
2X and 3X) of the Fund's broad-based securities market index (as
defined in Form N-1A).
    \6\ Amendment No. 4 replaced and superseded Amendment No. 3 in
its entirety. In Amendment No. 4, the Exchange modified Exhibit 1 to
be consistent with the 19b-4, as amended by Amendment No. 3.
    \7\ Amendment No. 5 partially amended the filing, as amended by
Amendment Nos. 1, 2, 3 and 4, to: (i) remove the Fund's ability to
invest in inverse Underlying Vehicles (as defined herein); (ii)
clarify that the Fund will not invest in leveraged Underlying
Vehicles; and (iii) clarify that the Fund's investments will not be
used to achieve inverse returns or leveraged returns. Because
Amendment Nos. 3, 4 and 5 provide clarification to the proposed rule
change and do not materially affect the substance of the proposed
rule change or raise any unique or novel regulatory issues,
Amendment Nos. 3, 4 and 5 do not require notice and comment.
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    The Commission received no comments on the proposed rule change.
This order grants approval of the proposed rule change, as modified by
Amendment Nos. 1, 2, 3, 4 and 5.

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
the Cambria ETF Trust (``Trust''), a Delaware statutory trust which is
registered with the Commission as an open-end management investment
company.\8\ Cambria Investment Management, L.P. (``Adviser'') will
serve as the investment adviser of the Fund. The Exchange states that
the Adviser is not registered as a broker-dealer or affiliated with a
broker-dealer.\9\
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    \8\ The Trust will be registered under the Investment Company
Act of 1940 (``1940 Act''). The Exchange states that on March 4,
2014, the Trust filed an amendment to the Trust's registration
statement on Form N-1A under the Securities Act of 1933 (``1933
Act'') (15 U.S.C. 77a), and under the 1940 Act relating to the Fund
(File Nos. 333-180879 and 811-22704) (``Registration Statement'').
In addition, the Exchange states that the Commission has issued an
order granting certain exemptive relief to the Trust under the 1940
Act. See Investment Company Act Release No. 30340 (January 4, 2013)
(``Exemptive Order''). The Exchange represents that investments made
by the Fund will comply with the conditions set forth in the
Exemptive Order.
    \9\ See NYSE Arca Equities Rule 8.600, Commentary .06. The
Exchange represents that in the event (a) the Adviser or any sub-
adviser becomes registered as a broker-dealer or 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,
such adviser or sub-adviser will implement 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 such adviser or sub-adviser 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 Exchange has made the following representations and statements
in describing the Fund and its principal investment policies, other
investments, and investment restrictions.\10\
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    \10\ The Commission notes that additional information regarding
the Trust, the Fund, and the Shares, including investment
strategies, risks, creation and redemption procedures, fees,
portfolio holdings disclosure policies, distributions, and taxes,
among other things, can be found in the Notice and Registration
Statement, as applicable. See supra notes 4 and 8, respectively.
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Principal Investment Policies

    The Fund will seek to preserve and grow capital from investments in
the U.S. and foreign equity, fixed income, commodity and currency
markets, independent of market direction. The Fund will be considered a
``fund of funds'' that seeks to achieve its investment objective by
primarily investing in other 1940 Act-registered exchange-traded funds
(``ETFs'') and other exchange traded products (``ETPs''), including,
but not limited to, exchange-traded notes (``ETNs''),\11\ exchange
traded currency trusts, and closed-end funds \12\ (collectively,
``Underlying Vehicles'') \13\ that offer diversified exposure,
including inverse exposure,\14\ to global regions (including

emerging markets), countries, styles (i.e., market capitalization,
value, growth, etc.) and sectors. Under normal market conditions,\15\
the Fund will invest at least 80% of its net assets in the securities
of Underlying Vehicles.
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    \11\ ETFs are registered investment companies whose shares are
exchange-traded and give investors a proportional interest in the
pool of securities and other assets held by the ETF. ETPs are
exchange-traded equity securities whose value derives from an
underlying asset or portfolio of assets, which may correlate to a
benchmark, such as a commodity, currency, interest rate or index.
ETFs are one type of ETP. ETNs are unsecured and unsubordinated debt
securities whose value derives, in part, from an underlying asset or
benchmark and, in part, from the credit quality of the securities'
issuer.
    \12\ A closed-end fund is a pooled investment vehicle that is
registered under the 1940 Act and whose shares are listed and traded
on a U.S. national securities exchange.
    \13\ The Exchange states that for purposes of this filing, the
term ``Underlying Vehicles'' includes Investment Company Units (as
described in NYSE Arca Equities Rule 5.2(j)(3)); Index-Linked
Securities (as described in NYSE Arca Equities Rule 5.2(j)(6));
Portfolio Depositary Receipts (as described in NYSE Arca Equities
Rule 8.100); Trust Issued Receipts (as described in NYSE Arca
Equities Rule 8.200); Commodity-Based Trust Shares (as described in
NYSE Arca Equities Rule 8.201); Currency Trust Shares (as described
in NYSE Arca Equities Rule 8.202); Commodity Index Trust Shares (as
described in NYSE Arca Equities Rule 8.203); Commodity Futures Trust
Shares (as described in NYSE Arca Equities Rule 8.204); Managed Fund
Shares (as described in NYSE Arca Equities Rule 8.600); and closed-
end funds. All Underlying Vehicles will be listed and traded in the
U.S. on a national securities exchange. The Fund will not invest in
inverse (i.e., -1X) or leveraged (e.g., 2X, -2X, 3X or -3X)
Underlying Vehicles.
    \14\ The Commission understands that, although the Fund will not
invest in inverse Underlying Vehicles (i.e., Underlying Vehicles
that seek to achieve returns equal to -1X an index or benchmark),
the Fund may invest in Underlying Vehicles that may provide inverse
exposure in certain circumstances, such as ETFs that pursue a long/
short strategy.
    \15\ The term ``under normal market conditions'' includes, but
is not limited to, the absence of extreme volatility or trading
halts in the equity markets or the financial markets generally;
operational issues causing dissemination of inaccurate market
information; or force majeure type events such as systems failure,
natural or man-made disaster, act of God, armed conflict, act of
terrorism, riot or labor disruption or any similar intervening
circumstance.
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    The Fund will seek to preserve and grow capital by producing
absolute returns with reduced volatility and manageable risk and
drawdowns. The Fund will invest in Underlying Vehicles spanning all the
major world asset classes including equities, bonds (including high
yield bonds, which are commonly referred to as ``junk bonds''), real
estate, derivatives, commodities, and currencies. The Adviser will
actively manage the Fund's portfolio utilizing a quantitative strategy
with risk management controls in an attempt to protect capital. Through
Underlying Vehicles, the Fund may have exposure to companies in any
industry and of any market capitalization. Under normal market
conditions, the Fund expects to invest at least 40% of its net assets,
including through investments in Underlying Vehicles, in securities of
issuers located in at least three different countries (including the
United States).
    Through Underlying Vehicles, the Fund may invest in shares of real
estate investment trusts (``REITs''), which are pooled investment
vehicles that invest primarily in real estate or real estate-related
loans and trade on a U.S. exchange.

Other Investments

    While, under normal market conditions, the Fund will invest at
least 80% of its net assets in Underlying Vehicles as described above,
the Fund may invest its remaining 20% of net assets in other securities
and financial instruments, other than Underlying Vehicles, including
futures contracts, cash and cash equivalents, as described below.
    The Fund may invest in exchange-traded common stocks. The Fund also
may invest in foreign securities by purchasing ``Depositary Receipts,''
including American Depositary Receipts (``ADRs''), European Depositary
Receipts (``EDRs''), and Global Depositary Receipts (``GDRs''), or
other securities convertible into securities of issuers based in
foreign countries. These securities may not necessarily be denominated
in the same currency as the securities which they represent.\16\
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    \16\ Generally, ADRs, in registered form, are denominated in
U.S. dollars and are designed for use in the U.S. securities
markets, GDRs, in bearer form, are issued and designed for use
outside the United States, and EDRs, in bearer form, may be
denominated in other currencies and are designed for use in European
securities markets. ADRs are receipts typically issued by a U.S.
bank or trust company evidencing ownership of the underlying
securities. EDRs are European receipts evidencing a similar
arrangement. GDRs are receipts typically issued by non-United States
banks and trust companies that evidence ownership of either foreign
or domestic securities. ADRs may be sponsored or unsponsored, but
unsponsored ADRs will not exceed 10% of the Fund's net assets.
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    With respect to its exchange-traded equity securities investments,
the Fund will normally invest in equity securities that are listed and
traded on a U.S. exchange or in markets that are members of the
Intermarket Surveillance Group (``ISG'') or parties to a comprehensive
surveillance sharing agreement with the Exchange. In any case, not more
than 10% of the net assets of the Fund in the aggregate invested in
exchange-traded equity securities will consist of equity securities
whose principal market is not a member of ISG or a market with which
the Exchange does not have a comprehensive surveillance sharing
agreement.
    The Fund may invest in debt and other fixed income securities, as
described below. Debt and other fixed income securities include fixed
and floating rate securities of any maturity. Fixed rate securities pay
a specified rate of interest or dividends. Floating rate securities pay
a rate that is adjusted periodically by reference to a specified index
or market rate. Fixed and floating rate securities may be issued by
federal, state, local, and foreign governments and related agencies,
and by a wide range of private issuers. The Fund's investments in debt
and other fixed income securities will be limited to those described
below.
    The Fund may invest in indexed bonds, which are a type of fixed
income security whose principal value and/or interest rate is adjusted
periodically according to a specified instrument, index, or other
statistic (e.g., another security, inflation index, currency, or
commodity).
    The Fund may invest in securities issued or guaranteed by the U.S.
Government, its agencies, instrumentalities, and political
subdivisions; \17\ securities issued by foreign governments, their
authorities, agencies, instrumentalities, and political subdivisions;
securities issued by supra-national agencies;\18\ corporate debt
securities; master demand notes;\19\ Yankee dollar and Eurodollar bank
certificates of deposit; time deposits; bankers' acceptances;
commercial paper;\20\ and inflation-indexed securities. The Fund may
invest also in zero coupon securities, which may be issued by a wide
variety of corporate and governmental issuers.
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    \17\ U.S. Government securities include securities issued or
guaranteed by the U.S. Government or its authorities, agencies, or
instrumentalities. Foreign government securities include securities
issued or guaranteed by foreign governments (including political
subdivisions) or their authorities, agencies, or instrumentalities
or by supra-national agencies. Different kinds of U.S. government
securities and foreign government securities have different kinds of
government support. For example, some U.S. government securities
(e.g., U.S. Treasury bonds) are supported by the full faith and
credit of the U.S. Other U.S. government securities are issued or
guaranteed by federal agencies or government-chartered or -sponsored
enterprises but are neither guaranteed nor insured by the U.S.
government (e.g., debt securities issued by the Federal Home Loan
Mortgage Corporation (``Freddie Mac''), Federal National Mortgage
Association (``Fannie Mae''), and Federal Home Loan Banks
(``FHLBs''). Similarly, some foreign government securities are
supported by the full faith and credit of a foreign national
government or political subdivision and some are not.
    \18\ Supra-national agencies are agencies whose member nations
make capital contributions to support the agencies' activities.
Examples include the International Bank for Reconstruction and
Development (the World Bank), the Asian Development Bank, the
European Coal and Steel Community, and the Inter-American
Development Bank.
    \19\ The Fund may invest in master demand notes that are
denominated in U.S. dollars. Master demand notes are demand notes
that permit the investment of fluctuating amounts of money at
varying rates of interest pursuant to arrangements with issuers who
meet the quality criteria of the Fund. The interest rate on a master
demand note may fluctuate based upon changes in specified interest
rates, be reset periodically according to a prescribed formula or be
a set rate. Although there is no secondary market in master demand
notes, if such notes have a demand future, the payee may demand
payment of the principal amount of the note upon relatively short
notice. Master demand notes are generally illiquid and therefore
subject to a Fund's percentage limitations for investments in
illiquid securities.
    \20\ Commercial paper consists of short-term promissory notes
issued by corporations. Commercial paper may be traded in the
secondary market after its issuance.
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    The Fund may invest in fixed income securities of any credit
quality, from investment grade securities to high yield securities.
Investment grade securities are securities rated in one of the four
highest rating categories by at least two nationally recognized
statistical rating organizations (``Rating Organizations'') rating that
security, such as Standard & Poor's Ratings Services (``Standard &
Poor's'') or Moody's Investors Service, Inc. (``Moody's''), or rated in
one of the four highest rating categories by one Rating Organization if
it is the only

Rating Organization rating that security, or unrated, if deemed to be
of comparable quality \21\ by the Adviser and traded publicly on the
world market. The Fund, at the discretion of the Adviser, may retain a
debt security that has been downgraded below the initial investment
criteria.\22\
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    \21\ In determining whether a security is of ``comparable
quality,'' the Adviser will consider, for example, whether the
issuer of the security has issued other rated securities; whether
the obligations under the security are guaranteed by another entity
and the rating of such guarantor (if any); whether and (if
applicable) how the security is collateralized; other forms of
credit enhancement (if any); the security's maturity date; liquidity
features (if any); relevant cash flow(s); valuation features; other
structural analysis; macroeconomic analysis; and sector or industry
analysis.
    \22\ Securities rated lower than Baa by Moody's, or equivalently
rated by S&P or Fitch, are sometimes referred to as ``high yield
securities'' or ``junk bonds.''
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    For securities that carry a rating assigned by a Rating
Organization, the Adviser will use the highest rating assigned by the
Rating Organization to determine a security's credit rating. Commercial
paper must be rated at least ``A-1'' or equivalent by a Rating
Organization. Corporate debt obligations must be rated at least ``B-
''or equivalent by a Rating Organization. For securities that are not
rated by a Rating Organization, the Adviser's internal credit rating
will apply and be subject to equivalent rating minimums.
    The Fund may invest in futures contracts on indices, currencies,
and commodities. The Fund will trade only futures contracts that are
listed and traded on a U.S. board of trade. The Fund's investments in
futures will be subject to the limits on leverage imposed by the 1940
Act. Section 18(f) of the 1940 Act and related Commission guidance
limit the amount of leverage that an investment company, such as the
Fund, can obtain.
    The Fund may temporarily invest a portion of its assets in cash or
cash equivalents pending other investments or to maintain liquid assets
required in connection with some of the Fund's investments. Cash and
cash equivalents include money market instruments, such as obligations
issued or guaranteed by the U.S. Government, its agencies and/or
instrumentalities (including government-sponsored enterprises),
bankers' acceptances, bank certificates of deposit, repurchase
agreements,\23\ and investment companies that invest primarily in such
instruments (i.e., money market funds). The Fund may hold funds in bank
deposits in U.S. or foreign currency, including during the completion
of investment programs.
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    \23\ A repurchase agreement is an agreement under which
securities are acquired by a Fund from a securities dealer or bank
subject to resale at an agreed upon price on a later date. The Fund
may enter into repurchase agreements with banks and broker-dealers.
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    The Fund may invest in the securities of other investment companies
to the extent permitted by law. The Fund may make significant
investments in money market funds. In addition, the Trust intends to
enter into agreements with unaffiliated ETFs that permit such
unaffiliated ETFs to sell, and the Fund to purchase, the unaffiliated
ETFs' shares in excess of the limits imposed by Sections 12(d)(1)(A)
and (B) of the 1940 Act.
    To respond to adverse market, economic, political or other
conditions, the Fund may invest 100% of its total assets, without
limitation, in high-quality debt securities (i.e., BBB or higher) and
money market instruments (as described above). The Fund may be invested
in these instruments for extended periods, depending on the Adviser's
assessment of market conditions.

Investment Restrictions

    The Fund may invest in the securities of other investment companies
to the extent that such an investment would be consistent with the
requirements of Section 12(d)(1) of the 1940 Act, or any rule,
regulation or order of the Commission or interpretation thereof.
    The Fund will seek to qualify for treatment as a Regulated
Investment Company (``RIC'') under the Internal Revenue Code.
    The Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid assets (calculated at the time of investment),
including Rule 144A securities deemed illiquid by the Adviser \24\ and
master demand notes, consistent with Commission guidance. 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 assets. Illiquid assets 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.
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    \24\ In reaching liquidity decisions, the Adviser may consider
the following factors: the frequency of trades and quotes for the
security; the number of dealers willing to purchase or sell the
security and the number of other potential purchasers; dealer
undertakings to make a market in the security; and the nature of the
security and the nature of the marketplace in which it trades (e.g.,
the time needed to dispose of the security, the method of soliciting
offers, and the mechanics of transfer).
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    The Fund's investments will be consistent with the Fund's
investment objective and will not be used to achieve inverse returns or
leveraged returns (e.g., -1X, 2X, and 3X) of the Fund's broad-based
securities market index (as defined in Form N-1A).\25\
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    \25\ The Fund's broad-based securities market 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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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 \26\
and the rules and regulations thereunder applicable to a national
securities exchange.\27\ In particular, the Commission finds that the
proposed rule change, as modified by Amendment Nos. 1, 2, 3, 4, and 5,
is consistent with Section 6(b)(5) of the Act,\28\ 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 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 for the Shares to be
listed and traded on the Exchange.
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    \26\ 15 U.S.C. 78f.
    \27\ 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).
    \28\ 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,\29\ 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 Exchange's
proprietary quote and trade services and via the Consolidated Tape
Association's (``CTA'') high-speed line. In addition, the Intraday
Indicative Value (``IIV''),\30\

which is 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 Exchange's Core Trading Session (9:30 a.m.,
Eastern Time to 4:00 p.m., Eastern Time) by one or more major market
data vendors.\31\ 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 that will form the
basis for the Fund's calculation of net asset value (``NAV'') at the
end of the business day.\32\ The NAV of Shares will be calculated each
business day as of the close of regular trading on the New York Stock
Exchange (``NYSE''), generally 4:00 p.m., Eastern Time, on each day
that the NYSE is open.\33\ A basket composition file, which includes
the security names and share quantities 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 NYSE 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
regarding the previous day's closing price and trading volume
information for the Shares will be published daily in the financial
section of newspapers. Intra-day price quotations on the securities and
other assets held by the Fund will be available from major broker-
dealer firms. Intra-day price information on such assets will also be
available through free and subscription services that can be accessed
by authorized participants and other investors. For example, pricing
information for exchange-traded securities (including exchange-traded
equity securities (such as common stocks and Underlying Vehicles),
futures contracts, and sponsored Depositary Receipts, will be readily
available from the Web sites of the exchanges or boards of trade
trading such securities or futures contracts, automated quotation
systems, published or other public sources, and subscription services
such as Bloomberg or Reuters. Pricing information for unsponsored
Depositary Receipts, non-exchange-traded investment company securities,
fixed income securities (including bonds; U.S. Government obligations;
corporate debt securities; securities issued by foreign governments and
supra-national agencies; master-demand notes; Yankee dollar and
Eurodollar bank certificates of deposit; time deposits; bankers'
acceptances; commercial paper; inflation-indexed securities; and zero
coupon securities), repurchase agreements, and money market instruments
will be available through brokers and dealers and/or subscription
services, such as Markit, Bloomberg and Thompson Reuters. The Fund's
Web site (www.cambriafunds.com), which will be publicly available prior
to the public offering of Shares, will include a form of the prospectus
for the Fund that may be downloaded and additional data relating to NAV
and other applicable quantitative information.
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    \29\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \30\ According to the Exchange, the IIV is an approximate per
Share value of the Fund's portfolio holdings, which is disseminated
every fifteen seconds throughout the trading day by one or more
market data vendors. The IIV will be based on the current market
value of the Fund's ``Disclosed Portfolio'' as defined in Rule
8.600(c)(2). The IIV does not necessarily reflect the precise
composition of the current portfolio of securities held by the Fund
at a particular point in time. The IIV should not be viewed as a
``real-time'' update of the NAV of the Fund because the approximate
value may not be calculated in the same manner as the NAV. The
quotations for certain investments may not be updated during U.S.
trading hours if such holdings do not trade in the U.S., except such
quotations may be updated to reflect currency fluctuations.
    \31\ The Exchange states that several major market data vendors
display or make widely available IIVs taken from the CTA or other
data feeds.
    \32\ On a daily basis, the Fund will disclose on its Web site
the following information regarding each portfolio holding, as
applicable to the type of holding: ticker symbol, CUSIP number or
other identifier, if any; a description of the holding (including
the type of holding); the identity of the security, commodity, index
or other asset or instrument underlying the holding, if any;
quantity held (as measured by, for example, par value, notional
value or number of shares, contracts, or units); maturity date, if
any; coupon rate, if any; effective date, if any; market value of
the holding; and the percentage weighting of the holding in the
Fund's portfolio. The Web site information will be publicly
available at no charge.
    \33\ The Fund will calculate its NAV per Share by taking the
value of its total assets, subtracting any liabilities, and dividing
that amount by the total number of Shares outstanding, rounded to
the nearest cent. Expenses and fees, including the management fees,
will be accrued daily and taken into account for purposes of
determining NAV. The Exchange represents that in calculating the NAV
of the Fund's Shares, investments will generally be valued using
market valuations. Market valuations are generally valuations (i)
obtained from an exchange, a pricing service or a major market maker
(or dealer) or (ii) based on a price quotation or other equivalent
indication of a value supplied by an exchange, a pricing service or
a major market maker (or dealer), in each case as approved by the
Trust's Board of Trustees pursuant to the Trust's valuation policies
and procedures. Thus, to the extent that the Fund uses a pricing
vendor approved for the Trust by the Board, whether the pricing
vendor bases valuations upon dealer quotes, a proprietary analysis
of the relevant market, matrix pricing, sensitivity analysis, a
combination of the above, or any other means, the price provided by
the pricing vendor may be considered a market valuation. Exchange-
traded equity securities, including Underlying Vehicles, common
stocks and sponsored Depositary Receipts, as well as futures
contracts, will be valued at the official closing price on their
principal exchange or board of trade, or, lacking any current
reported sale at the time of valuation, at the mean of the most
recent bid and asked quotations on their principal exchange or board
of trade. Unsponsored Depositary Receipts, fixed income securities
(including bonds; U.S. Government obligations; corporate debt
securities; securities issued by foreign governments and supra-
national agencies; master-demand notes; Yankee dollar and Eurodollar
bank certificates of deposit; time deposits; bankers' acceptances;
commercial paper; inflation-indexed securities; zero coupon
securities; and money market instruments) will be valued at the mean
between the most recent bid and asked quotations. Repurchase
agreements will be valued at cost. Fixed-income instruments maturing
in 60 days or less will be valued at amortized cost, and those
maturing in excess of 60 days will be valued at the midpoint of bid
and asked quotations. Investments in non-exchange-traded investment
companies (including money market funds) will be valued at their
NAV. Any assets or liabilities denominated in currencies other than
the U.S. dollar will be converted into U.S. dollars at the current
exchange rate on the date of valuation as quoted by one or more
third parties. If a market quotation is not readily available or is
deemed not to reflect an instrument's market value, the Fund will
determine its fair value pursuant to policies and procedures
approved by the Board. The Fund may use fair valuation to price
securities that trade on a foreign exchange, if any, when a
significant event has occurred after the foreign exchange closes but
before the time at which the Fund's NAV is calculated.
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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.\34\
The Exchange may halt trading in the Shares if trading is not occurring
in the securities or the financial instruments constituting 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.\35\ In addition, trading in the Shares will be
subject to NYSE Arca Equities Rule 8.600(d)(2)(D), which sets forth
additional circumstances under which Shares of the Fund may be halted.
Further, the Commission notes that the Reporting Authority that
provides the Disclosed

Portfolio of the Fund 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.\36\ The Commission further notes that the Exchange
represents that trading in the Shares will be subject to the existing
trading surveillances, administered by the Financial Industry
Regulatory Authority (``FINRA'') on behalf of the Exchange, which are
designed to detect violations of Exchange rules and applicable federal
securities laws.\37\ The Exchange further 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 Exchange states that it has a general policy prohibiting
the distribution of material, non-public information by its employees.
The Exchange also represents that the Adviser is not a broker-dealer
and is not affiliated with a broker-dealer.\38\
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    \34\ See NYSE Arca Equities Rule 8.600(d)(1)(B).
    \35\ 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.
    \36\ See NYSE Arca Equities Rule 8.600(d)(2)(B)(ii).
    \37\ The Exchange states that FINRA surveils trading on the
Exchange pursuant to a regulatory services agreement and that the
Exchange is responsible for FINRA's performance under this
regulatory services agreement.
    \38\ See supra note 9 and accompanying text. 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) FINRA, on behalf of the Exchange, will communicate as needed
regarding trading in the Shares, Underlying Vehicles, other exchange-
traded equity securities, and futures with other markets and other
entities that are members of the ISG, and FINRA, on behalf of the
Exchange, may obtain trading information regarding trading in the
Shares and Underlying Vehicles, other exchange-traded equity
securities, and futures from such markets and other entities. In
addition, the Exchange may obtain information regarding trading in the
Shares, Underlying Vehicles, other exchange-traded equity securities,
and futures from markets and other entities that are members of ISG or
with which the Exchange has in place a comprehensive surveillance
sharing agreement. FINRA, on behalf of the Exchange, is able to access,
as needed, trade information for certain fixed income securities held
by the Fund reported to FINRA's Trade Reporting and Compliance Engine
(``TRACE'').
    (4) Prior to the commencement of trading, the Exchange will inform
its Equity Trading Permit Holders in an Information Bulletin
(``Bulletin'') of the special characteristics and risks associated with
trading the Shares. Specifically, the Bulletin will discuss the
following: (a) the procedures for purchases and redemptions of Shares
in creation unit aggregations (and that Shares are not individually
redeemable); (b) NYSE Arca Equities Rule 9.2(a), which imposes a duty
of due diligence on its Equity Trading Permit 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 and the Disclosed Portfolio is
disseminated; (e) the requirement that Equity Trading Permit 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 continued listing, the Fund will be in
compliance with Rule10A-3 under the Act,\39\ as provided by NYSE Arca
Equities Rule 5.3.
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    \39\ 17 CFR 240.10A-3.
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    (6) Under normal market conditions, the Fund will invest at least
80% of its net assets in the securities of Underlying Vehicles. All
Underlying Vehicles will be listed and traded in the U.S. on a national
securities exchange.
    (7) The Fund will not invest in inverse (i.e., -1X) or leveraged
(e.g., 2X, -2X, 3X or -3X) Underlying Vehicles.
    (8) Not more than 10% of the net assets of the Fund in the
aggregate invested in exchange-traded equity securities will consist of
equity securities whose principal market is not a member of ISG or a
market with which the Exchange does not have a comprehensive
surveillance sharing agreement.
    (9) Unsponsored ADRs will not exceed 10% of the Fund's net assets.
    (10) The Fund will trade only futures contracts that are listed and
traded on a U.S. board of trade. The Fund's investments in futures will
be subject to the limits on leverage imposed by the 1940 Act.
    (11) The Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid assets (calculated at the time of investment),
including Rule 144A securities deemed illiquid by the Adviser and
master demand notes, consistent with Commission guidance. 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 assets.
    (12) The Fund's investments will be consistent with the Fund's
investment objective and will not be used to achieve inverse returns or
leveraged returns (e.g., -1X, 2X, or 3X) of the Fund's broad-based
securities market index (as defined in Form N-1A).
    (13) A minimum of 100,000 Shares for 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, including those set forth above and in the Notice, and
the Exchange's description of the Fund.
    For the foregoing reasons, the Commission finds that the proposed
rule change, as modified by Amendment Nos. 1, 2, 3, 4, and 5, is
consistent with Section 6(b)(5) of the Act \40\ and the rules and
regulations thereunder

applicable to a national securities exchange.
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    \40\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\41\ that the proposed rule change (SR-NYSEArca-2014-76), as
modified by Amendment Nos. 1, 2, 3, 4, and 5, be, and it hereby is,
approved.
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    \41\ 15 U.S.C. 78s(b)(2).
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    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\42\
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    \42\ 17 CFR 200.30-3(a)(12).

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-21643 Filed 9-10-14; 8:45 am]
BILLING CODE 8011-01-P