[Federal Register Volume 78, Number 76 (Friday, April 19, 2013)]
[Notices]
[Pages 23601-23611]
[FR Doc No: 2013-09193]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69373; File No. SR-NYSEArca-2012-108]

Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting
Approval of Proposed Rule Change, as Modified by Amendment No. 1
Thereto, Relating to the Listing and Trading of Shares of the NYSE Arca
U.S. Equity Synthetic Reverse Convertible Index Fund Under NYSE Arca
Equities Rule 5.2(j)(3)

April 15, 2013.

I. Introduction

    On September 27, 2012, 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 NYSE Arca U.S. Equity Synthetic Reverse Convertible
Index Fund (``Fund'') under NYSE Arca Equities Rule 5.2(j)(3). On
October 2, 2012, the Exchange submitted Amendment No. 1 to the proposed
rule change.\3\ The proposed rule change, as modified by Amendment No.
1 thereto, was published in the Federal Register on October 18,
2012.\4\ On November 29, 2012, pursuant to Section 19(b)(2) of the
Act,\5\ the Commission designated a longer period within which to
either approve the proposed rule change, disapprove the proposed rule
change, or institute proceedings to determine whether to disapprove the
proposed rule change.\6\ On January 16, 2013, the Commission instituted
proceedings to determine whether to approve or disapprove the proposed
rule change, as modified by Amendment No. 1.\7\ The Commission
thereafter received one comment letter on the proposal.\8\ 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\ In Amendment No. 1, the Exchange amended the filing to
specify that a list of components of the Index (as defined below),
with percentage weightings, will be available on the Exchange's Web
site, and that the Exchange may halt trading in the Shares (as
defined below) if the Index value, or the value of the components of
the Index, is not available or not disseminated as required.
    \4\ See Securities Exchange Act Release No. 68043 (October 12,
2012), 77 FR 64153 (``Notice'').
    \5\ 15 U.S.C. 78s(b)(2).
    \6\ Securities Exchange Act Release No. 68320, 77 FR 72429 (Dec.
5, 2012).
    \7\ See Securities Exchange Act Release No. 68671, 78 FR 4919
(Jan. 23, 2013) (``Order Instituting Proceedings'').
    \8\ See Letter from Kevin Rich, Rich Investment Solutions, LLC,
dated February 12, 2013 (``Rich Letter'').
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II. Description of the Proposal

    The Exchange proposes to list and trade the Shares of the Fund
under Commentary .01 to NYSE Arca Equities Rule 5.2(j)(3), which
governs the listing and trading of Investment Company Units. The Shares
will be issued by the ALPS ETF Trust (``Trust'').\9\ ALPS Advisors,
Inc. will be the Fund's investment adviser (``Adviser''), and Rich
Investment Solutions, LLC will be the Fund's investment sub-adviser
(``Sub-Adviser'').\10\
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    \9\ The Trust is registered under the Investment Company Act of
1940 (``1940 Act''). On June 22, 2012, the Trust filed with the
Commission an amendment to its registration statement on Form N-1A
(``Registration Statement'') under the Securities Act of 1933 and
under the 1940 Act relating to the Fund (File Nos. 333-148826 and
811-22175). In addition, the Commission has issued an order granting
certain exemptive relief to the Trust under the 1940 Act. See
Investment Company Act Release No. 28262 (May 1, 2008) (File No.
812-13430).
    \10\ The Adviser is affiliated with a broker-dealer and will
implement and maintain procedures designed to prevent the use and
dissemination of material, non-public information regarding the
Fund's portfolio. The Sub-Adviser is not affiliated with a broker-
dealer. In the event (a) the Sub-Adviser becomes newly affiliated
with a broker-dealer, or (b) any new adviser or sub-adviser becomes
affiliated with a broker-dealer, it will implement and maintain
procedures designed to prevent the use and dissemination of
material, non-public information regarding the Fund's portfolio.
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    The Bank of New York Mellon (``BNY'') will serve as custodian, fund
accounting agent, and transfer agent for the Fund. ALPS Distributors,
Inc. will be the Fund's distributor (``Distributor''). NYSE Arca will
be the ``Index Provider'' for the Fund.\11\
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    \11\ NYSE Arca is not affiliated with the Trust, the Adviser,
the Sub-Adviser, or the Distributor. NYSE Arca is affiliated with a
broker-dealer and will implement a fire wall and maintain procedures
designed to prevent the use and dissemination of material, non-
public information regarding the Index.
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Description of the Fund

    The Fund will seek investment results that correspond generally to
the performance, before the Fund's fees and expenses, of the NYSE Arca
U.S. Equity Synthetic Reverse Convertible Index (``Index''). The Index
reflects the performance of a portfolio consisting of over-the-counter
(``OTC'') ``down-and-in'' put options that have been written on 20 of
the most volatile U.S. stocks that also have market capitalization of
at least $5 billion.
    In seeking to replicate, before expenses, the performance of the
Index,

the Fund will generally sell (i.e., write) 90-day OTC down-and-in put
options, as described below, in proportion to their weightings in the
Index on economic terms which mirror those of the Index. Each option
written by the Fund will be covered through investments in three-month
Treasury bills (``T-bills'') at least equal to the Fund's maximum
liability under the option (i.e., the strike price). The Sub-Adviser
will seek a correlation over time of 0.95 or better between the Fund's
performance and the performance of the Index. A figure of 1.00 would
represent perfect correlation.\12\
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    \12\ While the Fund will not invest in traditional reverse
convertible securities (i.e., those which convert into the
underlying stock), the down-and-in put options written by the Fund
will have the effect of exposing the Fund to the return of reverse
convertible securities (based on equity securities) as if the Fund
owned such reverse convertible securities directly.
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    The Exchange submitted this proposed rule change because the Index
for the Fund does not meet all of the ``generic'' listing requirements
of Commentary .01(a)(A) to NYSE Arca Equities Rule 5.2(j)(3) applicable
to the listing of Investment Company Units based upon an index of
``U.S. Component Stocks.'' \13\ Specifically, Commentary .01(a)(A) to
NYSE Arca Equities Rule 5.2(j)(3) sets forth the requirements to be met
by components of an index or portfolio of U.S. Component Stocks.
Commentary .01(a)(A) to NYSE Arca Equities Rule 5.2(j)(3) states, in
relevant part, that the components of an index of U.S. Component
Stocks, upon the initial listing of a series of Investment Company
Units pursuant to Rule 19b-4(e) under the Exchange Act, shall be NMS
Stocks as defined in Rule 600 of Regulation NMS under the Exchange
Act.\14\ As described further below, the Index consists of OTC down-
and-in put options. The Exchange has represented that the Shares will
conform to the initial and continued listing criteria under NYSE Arca
Equities Rules 5.2(j)(3) and 5.5(g)(2), except that the Index includes
OTC down-and-in put options, which are not NMS Stocks as defined in
Rule 600 of Regulation NMS.
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    \13\ NYSE Arca Equities Rule 5.2(j)(3) provides that the term
``US Component Stock'' shall mean an equity security that is
registered under Sections 12(b) or 12(g) of the Exchange Act or an
American Depositary Receipt, the underlying equity security of which
is registered under Sections 12(b) or 12(g) of the Exchange Act.
    \14\ See 17 CFR 242.600(b)(47) (defining ``NMS Stock'' as any
NMS Security other than an option).
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Index Methodology and Construction

    The Index measures the return of a hypothetical portfolio
consisting of OTC down-and-in put options which have been written on
each of 20 stocks and a cash position calculated as described below.
The 20 stocks that will underlie the options in the Index are those 20
stocks from a selection of the largest capitalized (over $5 billion in
market capitalization) stocks which also have listed options and which
have the highest volatility, as determined by the Index Provider. These
stocks will be required to be NMS stocks, as defined in Rule 600 of
Regulation NMS.
    A down-and-in option is a contract that becomes a typical option
(i.e., the option ``knocks in'' at a predetermined strike price) once
the underlying stock declines to a specified price (``barrier price'').
These types of options have the same return as ``reverse convertible''
securities, which convert into the underlying stock (or settle in cash)
only upon a decline in the value of the underlying stock rather than a
rise (as is the case with typical convertible instruments).
    Each option included in the Index will be a ``European-style''
option (i.e., an option which can only be exercised at its expiration)
with a 90-day term. The strike prices of the option positions included
in the Index will be determined based on the closing prices of the
options' underlying stocks as of the beginning of each 90-day period.
The barrier price of each such option will be 80% of the strike price.
At the expiration of each 90-day period, if an underlying stock closes
at or below its respective barrier price, a cash settlement payment in
an amount equal to the difference between the strike price and the
closing price of the stock will be deemed to be made, and the Index
value will be correspondingly reduced. If the underlying stock does not
close at or below the barrier price, then the option expires worthless
and the entire amount of the premium payment will be retained within
the Index.
    The components of the Index will be OTC down-and-in put options
written on 20 NMS stocks selected based on the following screening
parameters:
    1. U.S. listing of U.S. companies;
    2. Publicly listed and traded options available;
    3. Market capitalization greater than $5 billion;
    4. Top 20 stocks when ranked by 3-month implied volatility;
    5. Each underlying NMS stock will have a minimum trading volume of
at least 50 million shares for the preceding six months; and
    6. Each underlying NMS stock will have a minimum average daily
trading volume of at least one million shares and a minimum average
daily trading value of at least $10 million for the preceding six
months.
    The selection of the 20 underlying NMS stocks will occur each
quarter (March, June, September, and December) two days prior to the
third Friday of the month, in line with option expiration for listed
options. The selection of the 20 underlying stocks will not, however,
be limited to those with listed options expiring in March, June,
September, or December.
    The Index value will reflect a cash amount invested in on-the-run
three-month T-Bills, plus the premium collected on the short position
in the 20 down-and-in put options written by the Index each quarter.
The notional amount of each of the 20 down-and-in put options will be
equal to 1/20th of the cash amount in the Index at the beginning of
each quarter. The cash amount (initially 1,000 for the origination date
of the Index) will be incremented by premiums generated each quarter
from the 20 down-and-in put options sold, then decremented by cash
settlements of any down-and-in put options expiring in-the-money and
the distribution amount (as described below). The cash amount will be
invested in T-Bills and will accrete by interest earned on the T-Bills.
    The End of Day Index Value will be calculated as follows: End of
Day Index Value = Beginning of Quarter Index Value + Premium
Generated--Option Values + Accrued Interest--distribution amount,
where:
     Beginning of Quarter Index Value is 1,000 for the
origination date of the Index; thereafter, it is the previous quarter-
end End of Day Index Value;
     Premium Generated is the sum of Option Values for each of
the 20 down-and-in put options sold by the Index at the end of the
previous quarter;
     Option Value is the settlement value of each of the 20
down-and-in put options written by the Index at the end of each
quarter. The notional amount of each down-and-in put option sold by the
Index for the current quarter is 1/20th of the Beginning of Quarter
Index Value;
     Accrued Interest is the daily interest earned on the cash
amount held by the Index and invested in T-Bills;
     Cash amount of the Index for any quarter is the Beginning
of Quarter Index Value plus the Premium Generated for that quarter; and
     Distribution amount for any quarter and paid out at the
beginning of the next quarter is 2.5% of the End of Day Index Value for
the final day of the quarter. If such an amount exceeds the amount of
the Premium Generated, then the

distribution amount will equal the Premium Generated.
    A total return level for the Index will be calculated and published
at the end of each day. The total return calculation will assume the
quarterly index distribution is invested directly in the Index at the
beginning of the quarter in which it is paid.
    The Exchange has provided the following example. Stock ``ABC''
trades at $50 per share at the start of the 90-day period, and a down-
and-in 90-day put option was written at an 80% barrier (resulting in a
strike price of $50 per share and a barrier price of $40 per share) for
a premium of $4 per share:
     Settlement above the barrier price: If at the end of 90
days the ABC stock closed at any value above the barrier price of $40,
then the option would expire worthless and the Index's value would
reflect the retention of the $4 per share premium. The Index's value
thus would be increased by $4 per share on the ABC option position.
     Settlement at the barrier price: If at the end of 90 days
ABC closed at the barrier price of $40, then the option would settle in
cash at the closing price of $40, and the Index's value would be
reduced by $10 per share to reflect the settlement of the option.
However, the Index's value would reflect the retention of the $4 per
share premium, so the net loss to the Index's value would be $6 per
share on the ABC option position.
     Settlement below the barrier price: If at the end of 90
days, ABC closed at $35, then the option would settle in cash at the
closing price of $35, and the Index's value would be reduced by $15 per
share to reflect the settlement of the option. However, the Index's
value would reflect the retention of the $4 per share premium, so the
net loss to the Index's value would be $11 per share on the ABC option
position.
    As discussed above, the Index's value is equal to the value of the
options positions comprising the Index, plus a cash position. The cash
position starts at a base of 1,000. The cash position is increased by
option premiums generated by the option positions comprising the Index
and interest on the cash position at an annual rate equal to the three
month T-Bill rate. The cash position is decreased by cash settlement on
options which ``knock in'' (i.e., where the closing price of the
underlying stock at the end of the 90-day period is at or below the
barrier price). The cash position is also decreased by a deemed
quarterly cash distribution, currently targeted at the rate of 2.5% of
the value of the Index. However, if the option premiums generated
during the quarter are less than 2.5%, the deemed distribution will be
reduced by the amount of the shortfall.

The Fund's Investments

    The Fund, under normal circumstances,\15\ will invest at least 80%
of its total assets in component securities that comprise the Index and
in T-Bills which will be collateral for the options positions. The Fund
will enter into the option positions determined by the Index Provider
by writing (i.e., selling) OTC 90-day down-and-in put options in
proportion to their weightings in the Index on economic terms which
mirror those of the Index. By writing an option, the Fund will receive
premiums from the buyer of the option, which will increase the Fund's
return if the option does not ``knock in'' and thus expires worthless.
However, if the option's underlying stock declines by a specified
amount (or more), the option will ``knock in'' and the Fund will be
required to pay the buyer the difference between the option's strike
price and the closing price. Therefore, by writing a down-and-in put
option, the Fund will be exposed to the amount by which the price of
the underlying is less than the strike price. Accordingly, the
potential return to the Fund will be limited to the amount of option
premiums it receives, while the Fund can potentially lose up to the
entire strike price of each option it sells. Further, if the value of
the stocks underlying the options sold by the Fund increases, the
Fund's returns will not increase accordingly.
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    \15\ The term ``under normal circumstances'' includes, but is
not limited to, the absence of extreme volatility or trading halts
in the equities or options 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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    Typically, the writer of a put option incurs an obligation to buy
the underlying instrument from the purchaser of the option at the
option's exercise price, upon exercise by the option purchaser.
However, the down-and-in put options to be sold by the Fund will be
settled in cash only. The Fund may need to sell down-and-in put options
on stocks other than those underlying the option positions contained in
the Index if the Fund is unable to obtain a competitive market from OTC
option dealers on a stock underlying a particular option position in
the Index, thus preventing the Fund from writing an option on that
stock.\16\
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    \16\ The Fund will transact only with OTC options dealers that
have in place an International Swaps and Derivatives Association
agreement with the Fund.
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    Every 90 days, the options included within the Index are cash
settled or expire, and new option positions are established. The Fund
will enter into new option positions accordingly. This 90-day cycle
likely will cause the Fund to have frequent and substantial portfolio
turnover. If the Fund receives additional inflows (and issues more
Shares accordingly in large numbers known as ``Creation Units'') during
a 90-day period, the Fund will sell additional OTC down-and-in put
options which will be exercised or expire at the end of such 90-day
period. Conversely, if the Fund redeems Shares in Creation Unit size
during a 90-day period, the Fund will terminate the appropriate portion
of the options it has sold accordingly.

Secondary Investment Strategies

    The Fund may invest its remaining assets in money market
instruments,\17\ including repurchase agreements \18\ or other funds
which invest exclusively in money market instruments, convertible
securities, structured notes (notes on which the amount of principal
repayment and interest payments are based on the movement of one or
more specified factors, such as the movement of a particular stock or
stock index), forward foreign currency exchange

contracts, and in swaps,\19\ options (other than options the Fund
principally will write), and futures contracts.\20\ Swaps, options
(other than options the Fund principally will write), and futures
contracts (and convertible securities and structured notes) may be used
by the Fund in seeking performance that corresponds to the Index and in
managing cash flows.\21\ The Fund will not invest in money market
instruments as part of a temporary defensive strategy to protect
against potential stock market declines. The Adviser anticipates that
it may take approximately three business days (i.e., each day the New
York Stock Exchange (``NYSE'') is open) for additions and deletions to
the Index to be reflected in the portfolio composition of the Fund.
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    \17\ The Fund may invest a portion of its assets in high-quality
money market instruments on an ongoing basis to provide liquidity.
The instruments in which the Fund may invest include: (i) Short-term
obligations issued by the U.S. Government; (ii) negotiable
certificates of deposit (``CDs''), fixed time deposits, and bankers'
acceptances 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 determined by the
Adviser; (iv) repurchase agreements; and (v) money market mutual
funds. CDs are short-term negotiable obligations of commercial
banks. Time deposits are non-negotiable deposits maintained in
banking institutions for specified periods of time at stated
interest rates. Banker's acceptances are time drafts drawn on
commercial banks by borrowers, usually in connection with
international transactions.
    \18\ Repurchase agreements 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 also 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.
    \19\ Swap agreements are contracts between parties in which one
party agrees to make periodic payments to the other party
(``counterparty'') based on the change in market value or level of a
specified rate, index, or asset. In return, the counterparty agrees
to make periodic payments to the first party based on the return of
a different specified rate, index, or asset. Swap agreements will
usually be done on a net basis, the Fund receiving or paying only
the net amount of the two payments. The net amount of the excess, if
any, of the Fund's obligations over its entitlements with respect to
each swap will be accrued on a daily basis and an amount of cash or
highly liquid securities having an aggregate value at least equal to
the accrued excess will be maintained in an account at the Trust's
custodian bank.
    \20\ The Fund may utilize U.S. listed exchange-traded futures.
In connection with its management of the Trust, the Adviser has
claimed an exclusion from registration as a commodity pool operator
under the Commodity Exchange Act (``CEA''). Therefore, it is not
subject to the registration and regulatory requirements of the CEA,
and there are no limitations on the extent to which the Fund may
engage in non-hedging transactions involving futures and options
thereon, except as set forth in the Registration Statement.
    \21\ Swaps, options (other than options the Fund principally
will write), and futures contracts will not be included in the
Fund's investment, under normal market circumstances, of at least
80% of its total assets in component securities that comprise the
Index and in T-Bills, as described above.
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    The Fund may invest in the securities of other investment companies
(including money market funds). Under the 1940 Act, the Fund's
investment in investment companies is limited to, subject to certain
exceptions, (i) 3% of the total outstanding voting stock of any one
investment company, (ii) 5% of the Fund's total assets with respect to
any one investment company, and (iii) 10% of the Fund's total assets of
investment companies in the aggregate.
    The Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid securities (calculated at the time of investment),
including Rule 144A securities. 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 intends to qualify for and to elect to be treated as a
separate regulated investment company under Subchapter M of the
Internal Revenue Code of 1986, as amended
    The Fund will not invest in non-U.S. equity securities. The Fund's
investments will be consistent with the Fund's investment objective and
will not be used to enhance leverage.

Pricing Fund Shares

    The Fund's OTC down-and-in put options on equity securities will be
valued pursuant to a third-party option pricing model. Debt securities
will be valued at the mean between the last available bid and ask
prices for such securities or, if such prices are not available, at
prices for securities of comparable maturity, quality, and type.
Securities for which market quotations are not readily available,
including restricted securities, will be valued by a method that the
Fund's Board of Trustees believe accurately reflects fair value.
Securities will be valued at fair value when market quotations are not
readily available or are deemed unreliable, such as when a security's
value or meaningful portion of the Fund's portfolio is believed to have
been materially affected by a significant event. Such events may
include a natural disaster, an economic event like a bankruptcy filing,
trading halt in a security, an unscheduled early market close, or a
substantial fluctuation in domestic and foreign markets that has
occurred between the close of the principal exchange and the NYSE. In
such a case, the value for a security is likely to be different from
the last quoted market price. In addition, due to the subjective and
variable nature of fair market value pricing, it is possible that the
value determined for a particular asset may be materially different
from the value realized upon such asset's sale.

Creations and Redemptions of Shares

    The Trust will issue and sell Shares of the Fund only in ``Creation
Units'' of 100,000 Shares each on a continuous basis through the
Distributor, without a sales load, at its net asset value (``NAV'')
next determined after receipt, on any business day, of an order in
proper form. Creation Units of the Fund generally will be sold for cash
only, calculated based on the NAV per Share multiplied by the number of
Shares representing a Creation Unit (``Deposit Cash''), plus a
transaction fee.
    The Custodian, through the National Securities Clearing Corporation
(``NSCC''), will make available on each business day, prior to the
opening of business on NYSE Arca (currently 9:30 a.m. Eastern Time
(``E.T.'')), the amount of the Deposit Cash to be deposited in exchange
for a Creation Unit of the Fund.
    To be eligible to place orders with the Distributor and to create a
Creation Unit of the Fund, an entity must be (i) a ``Participating
Party,'' i.e., a broker-dealer or other participant in the clearing
process through the Continuous Net Settlement System of the NSCC; or
(ii) a Depository Trust Company (``DTC'') participant, and, in each
case, must have executed an agreement with the Distributor, with
respect to creations and redemptions of Creation Units.
    All orders to create Creation Units, whether through a
Participating Party or a DTC participant, must be received by the
Distributor no later than the closing time of the regular trading
session on the NYSE (ordinarily 4:00 p.m. E.T.) in each case on the
date such order is placed in order for creation of Creation Units to be
effected based on the NAV of Shares of the Fund as next determined on
such date after receipt of the order in proper form.
    Fund Shares may be redeemed only in Creation Units at the NAV next
determined after receipt of a redemption request in proper form by the
Fund through BNY and only on a business day. The Fund will not redeem
Shares in amounts less than a Creation Unit.
    With respect to the Fund, BNY, through the NSCC, will make
available prior to the opening of business on NYSE Arca (currently 9:30
a.m. E.T.) on each business day, the amount of cash that will be paid
(subject to possible amendment or correction) in respect of redemption
requests received in proper form on that day (``Redemption Cash'').
    The redemption proceeds for a Creation Unit generally will consist
of the Redemption Cash, as announced on the business day of the request
for redemption received in proper form, less a redemption transaction
fee.

Initial and Continued Listing

    The Exchange represents that the Shares will conform to the initial
and continued listing criteria under NYSE Arca Equities Rules 5.2(j)(3)
and

5.5(g)(2), except that the Index is comprised of down-and-in put
options based on ``U.S. Component Stocks'' \22\ rather than U.S.
Component Stocks themselves. The Exchange further represents that, for
initial and/or continued listing, the Fund will be in compliance with
Rule 10A-3 under the Exchange Act,\23\ as provided by NYSE Arca
Equities Rule 5.3. A minimum of 100,000 Shares will be outstanding at
the commencement of trading on the Exchange. The Exchange will obtain a
representation from the issuer of the Shares that the NAV will be
calculated daily and made available to all market participants at the
same time.
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    \22\ NYSE Arca Equities Rule 5.2(j)(3) defines the term ``U.S.
Component Stock'' to mean an equity security that is registered
under Sections 12(b) or 12(g) of the Exchange Act or an American
Depositary Receipt, the underlying equity security of which is
registered under Sections 12(b) or 12(g) of the Exchange Act.
    \23\ 17 CFR 240.10A-3.
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Availability of Information

    The Fund's Web site (www.alpsetfs.com), which will be publicly
available prior to the public offering of the Shares, will include a
form of the prospectus for the Fund that may be downloaded. The Fund's
Web site will include additional quantitative information updated on a
daily basis, including, for the Fund, (1) daily trading volume, the
prior business day's reported closing price, NAV and mid-point of the
bid/ask spread at the time of calculation of such NAV (``Bid/Ask
Price''),\24\ and a calculation of the premium and discount of the Bid/
Ask Price against the NAV, and (2) data in chart format displaying the
frequency distribution of discounts and premiums of the daily Bid/Ask
Price against the NAV, within appropriate ranges, for each of the four
previous calendar quarters.\25\
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    \24\ The Bid/Ask Price of the Fund would be determined using the
mid-point of the highest bid and the lowest offer for Shares on the
Exchange as of the time of calculation of the Fund's NAV. The
records relating to Bid/Ask Prices would be retained by the Fund and
its service providers.
    \25\ Under accounting procedures followed by the Fund, trades
made on the prior business day (``T'') would be booked and reflected
in NAV on the current business day (``T+1''). Accordingly, the Fund
would be able to disclose at the beginning of the business day the
portfolio that would form the basis for the NAV calculation at the
end of the business day.
---------------------------------------------------------------------------

    On a daily basis, the Adviser will disclose for each portfolio
security and other financial instrument of the Fund the following
information: ticker symbol (if applicable), name of security and
financial instrument, number of securities or dollar value of financial
instruments held in the portfolio, and percentage weighting of the
security and financial instrument in the portfolio. The Fund's
portfolio holdings, including information regarding its option
positions, will be disclosed each day on the Fund's Web site. The Web
site information will be publicly available at no charge.
    The NAV per Share for the Fund will be determined once daily as of
the close of the NYSE, usually 4:00 p.m. E.T., each day the NYSE is
open for trading. NAV per Share will be determined by dividing the
value of the Fund's portfolio securities, cash and other assets
(including accrued interest), less all liabilities (including accrued
expenses), by the total number of Shares outstanding. As discussed
above, the OTC down-and-in put options will be valued pursuant to a
third-party option pricing model.\26\
---------------------------------------------------------------------------

    \26\ See ``Pricing Fund Shares'' supra.
---------------------------------------------------------------------------

    Investors can also obtain the Trust's Statement of Additional
Information (``SAI''), the Fund's Shareholder Reports, and its Form N-
CSR and Form N-SAR, filed twice a year. The Trust's SAI and Shareholder
Reports will be available free upon request from the Trust, and those
documents and the Form N-CSR and Form N-SAR may be viewed on-screen or
downloaded from the Commission's Web site at www.sec.gov. 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 will be published daily in the financial section of
newspapers. Quotation and last-sale information for the Shares will be
available via the Consolidated Tape Association (``CTA'') high-speed
line. The value of the Index and the values of the OTC down-and-in put
options components in the Index (which will each be weighted at \1/20\
of the Index value) will be published by one or more major market data
vendors every 15 seconds during the NYSE Arca Core Trading Session of
9:30 a.m. E.T. to 4:00 p.m. E.T. A list of components of the Index,
with percentage weightings, will be available on the Exchange's Web
site. Each of the stocks underlying the OTC down-and-in put options in
the Index also will underlie standardized options contracts traded on
U.S. options exchanges, which will disseminate quotation and last-sale
information with respect to such contracts. In addition, the Intraday
Indicative Value will be calculated and disseminated by the Exchange,
and widely disseminated by one or more major market data vendors, at
least every 15 seconds during the Core Trading Session.\27\ The
Exchange states that the dissemination of the Intraday Indicative Value
will allow investors to determine the value of the underlying portfolio
of the Fund on a daily basis and to provide a close estimate of that
value throughout the trading day.
---------------------------------------------------------------------------

    \27\ Currently, it is the Exchange's understanding that several
major market data vendors display and/or make widely available
Intraday Indicative Values taken from the CTA or other data feeds.
See Notice, supra note 4, at 64157. The IIV calculations are based
on local market prices and may not reflect events that occur
subsequent to the local market's close. See Registration Statement,
supra note 9, at 11.
---------------------------------------------------------------------------

Trading Halts

    With respect to trading halts, the Exchange states that it may
consider all relevant factors in exercising its discretion to halt or
suspend trading in the Shares of the Fund.\28\ 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. These may include:
(1) The extent to which trading is not occurring in the securities
comprising the Fund's portfolio holdings and/or the financial
instruments of the Fund; or (2) whether other unusual conditions or
circumstances detrimental to the maintenance of a fair and orderly
market are present.
---------------------------------------------------------------------------

    \28\ See NYSE Arca Equities Rule 7.12, Commentary .04.
---------------------------------------------------------------------------

    If the Intraday Indicative Value, the Index value, or the value of
the components of the Index is not available or is not being
disseminated as required, the Exchange may halt trading during the day
in which the disruption occurs; if the interruption persists past the
day in which it occurred, the Exchange will halt trading no later than
the beginning of the trading day following the interruption. The
Exchange will obtain a representation from the Fund that the NAV for
the Fund will be calculated daily and will be made available to all
market participants at the same time. Under NYSE Arca Equities Rule
7.34(a)(5), if the Exchange becomes aware that the NAV for the Fund is
not being disseminated to all market participants at the same time, it
will halt trading in the Shares until such time as the NAV is available
to all market participants.

Trading Rules

    The Exchange deems the Shares to be equity securities, thus
rendering trading

in the Shares subject to the Exchange's existing rules governing the
trading of equity securities. Shares will trade on the NYSE Arca
Marketplace from 4:00 a.m. to 8:00 p.m. E.T. in accordance with NYSE
Arca Equities Rule 7.34 (Opening, Core, and Late Trading Sessions). The
Exchange states that it has appropriate rules to facilitate
transactions in the Shares during all trading sessions. As provided in
NYSE Arca Equities Rule 7.6, Commentary .03, the minimum price
variation (``MPV'') for quoting and entry of orders in equity
securities traded on the NYSE Arca Marketplace is $0.01, with the
exception of securities that are priced less than $1.00 for which the
MPV for order entry is $0.0001.

Surveillance

    The Exchange intends to utilize its existing surveillance
procedures applicable to derivative products (which include Investment
Company Units) to monitor trading in the Shares. The Exchange
represents that these procedures are adequate to properly monitor
Exchange trading of the Shares in all trading sessions and to deter and
detect violations of Exchange rules and applicable federal securities
laws.
    The Exchange's current trading surveillance focuses on detecting
securities trading outside their normal patterns. When such situations
are detected, surveillance analysis follows and investigations are
opened, where appropriate, to review the behavior of all relevant
parties for all relevant trading violations.
    The Exchange may obtain information via the Intermarket
Surveillance Group (``ISG'') from other exchanges that are members of
ISG or with which the Exchange has entered into a comprehensive
surveillance sharing agreement.\29\
---------------------------------------------------------------------------

    \29\ For a list of the current members of ISG, see
www.isgportal.org. The Exchange notes that not all components of the
portfolio for the Fund may trade on markets that are members of ISG
or with which the Exchange has in place a comprehensive surveillance
sharing agreement.
---------------------------------------------------------------------------

    In addition, the Exchange also has a general policy prohibiting the
distribution of material, non-public information by its employees.

Suitability

    Currently, NYSE Arca Equities Rule 9.2(a) (Diligence as to
Accounts) provides that an Equity Trading Permit (``ETP'') Holder,
before recommending a transaction in any security, must have reasonable
grounds to believe that the recommendation is suitable for the customer
based on any facts disclosed by the customer as to its other security
holdings and as to its financial situation and needs. Further, the rule
provides, with a limited exception, that prior to the execution of a
transaction recommended to a non-institutional customer, the ETP Holder
must make reasonable efforts to obtain information concerning the
customer's financial status, tax status, investment objectives, and any
other information that such ETP Holder believes would be useful to make
a recommendation.
    Prior to the commencement of trading, the Exchange will inform its
ETP Holders of the suitability requirements of NYSE Arca Equities Rule
9.2(a) in an Information Bulletin (``Information Bulletin'' or
``Bulletin''). Specifically, ETP Holders will be reminded in the
Information Bulletin that, in recommending transactions in these
securities, they must have a reasonable basis to believe that (1) the
recommendation is suitable for a customer given reasonable inquiry
concerning the customer's investment objectives, financial situation,
needs, and any other information known by such member, and (2) the
customer can evaluate the special characteristics, and is able to bear
the financial risks, of an investment in the Shares. In connection with
the suitability obligation, the Information Bulletin will also provide
that members must make reasonable efforts to obtain the following
information: (1) The customer's financial status; (2) the customer's
tax status; (3) the customer's investment objectives; and (4) such
other information used or considered to be reasonable by such member or
registered representative in making recommendations to the customer.
    In addition, FINRA has issued a regulatory notice relating to sales
practice procedures applicable to recommendations to customers by FINRA
members of reverse convertibles, as described in FINRA Regulatory
Notice 10-09 (February 2010) (``FINRA Regulatory Notice'').\30\ As
described above, while the Fund will not invest in traditional reverse
convertible securities, the down-and-in put options written by the Fund
will have the effect of exposing the Fund to the return of reverse
convertible securities as if the Fund owned such reverse convertible
securities directly. Therefore, the Bulletin will state that ETP
Holders that carry customer accounts should follow the FINRA guidance
set forth in the FINRA Regulatory Notice.
---------------------------------------------------------------------------

    \30\ The Exchange notes that NASD Rule 2310 relating to
suitability, referenced in the FINRA Regulatory Notice, has been
superseded by FINRA Rule 2111. See FINRA Regulatory Notice 12-25
(May 2012).
---------------------------------------------------------------------------

    The Registration Statement states that the Fund is designed for
investors who seek to obtain income through selling options on select
equity securities which the Index Provider determines to have the
highest volatility. It further states that because of the high
volatility of the stocks underlying the options sold by the Fund, it is
possible that the value of such stocks would decline in sufficient
magnitude to trigger the exercise of the options and cause a loss which
may outweigh the income from selling such options. The Registration
Statement states that, accordingly, the Fund should be considered a
speculative trading instrument and is not necessarily appropriate for
investors who seek to avoid or minimize their exposure to stock market
volatility. The Exchange's Information Bulletin regarding the Fund will
provide information regarding the suitability of an investment in the
Shares, as stated in the Registration Statement.

Information Bulletin

    Prior to the commencement of trading, the Exchange will inform its
ETP Holders in the Bulletin of the special characteristics and risks
associated with trading the Shares. Specifically, the Bulletin will
discuss the following: (1) The procedures for purchases and redemptions
of Shares in Creation Units (and that Shares are not individually
redeemable); (2) NYSE Arca 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; (3) the risks
involved in trading the Shares during the Opening and Late Trading
Sessions when an updated Intraday Indicative Value would not be
calculated or publicly disseminated; (4) how information regarding the
Intraday Indicative Value is disseminated; (5) the requirement that ETP
Holders deliver a prospectus to investors purchasing newly issued
Shares prior to or concurrently with the confirmation of a transaction;
and (6) trading information.
    In addition, the Bulletin will reference that the Fund is subject
to various fees and expenses described in the Registration Statement.
The Bulletin will discuss any exemptive, no-action, and interpretive
relief granted by the Commission from any rules under the Exchange Act.
The Bulletin will also disclose that the NAV for the Shares would be
calculated after 4:00 p.m. E.T. each trading day.
    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, is included in the Notice
and Registration Statement, as applicable.\31\
---------------------------------------------------------------------------

    \31\ See Notice and Registration Statement, supra notes 4 and 9.
---------------------------------------------------------------------------

III. Summary of Comment Letters

    In the Order Instituting Proceedings, the Commission asked a number
of detailed questions about the proposal, including questions related
to the trading of the Shares of the Fund, such as the extent to which
the down-and-in put options written by the Fund could be subject to
manipulation as well as the extent to which market makers would be able
to effectively arbitrage the Shares to help keep the intra-day market
price in line with the intra-day NAV.\32\ The Commission did not
receive any comment letters expressing concern about the Shares or the
Fund.
---------------------------------------------------------------------------

    \32\ See Order Instituting Proceedings, supra note 7, at 4925-6.
---------------------------------------------------------------------------

    The Commission received one comment letter in support of the
proposal from the Sub-Adviser.\33\ The commenter states that the Fund
will provide the benefits of investing in reverse convertible notes
while mitigating some negative features associated with reverse
convertible notes, including that the Fund will offer diversification
by selling options of twenty underlying issuers, rather than just one
underlying issuer; the Fund's structure will give investors a lower
initial and ongoing cost due to the economies of scale rather than
incurring deal by deal imbedded costs for privately placed reverse
convertible notes; the Fund will not carry the credit risk of banks and
financial firms imbedded into reverse convertible notes; and the Fund
will sell options and collect premium upfront, thereby decreasing risks
to the Fund as compared to a reverse convertible note.\34\
---------------------------------------------------------------------------

    \33\ See Rich Letter, supra note 8.
    \34\ Id. at 3.
---------------------------------------------------------------------------

A. Disclosure Relating to the Shares

    In the Order Instituting Proceedings, the Commission requested
comment on whether investors would be able to understand the strategy,
risks and potential rewards, assumptions and expected performance of
the Fund, including the effect of the Fund's exposure to its down-and-
in put options.\35\ In response, the commenter states its belief that
investors in the Fund will clearly under these characteristics of the
Fund. First, the commenter states that the name of the Fund is very
descriptive and will not be misleading to potential investors.\36\ In
addition, the commenter states that the Fund's prospectus clearly
describes the Fund's strategy and index methodology and construction,
provides examples of how the options are structured and hypothetical
scenarios regarding changes in stock prices, and contains a ``Who
Should Invest'' section.\37\
---------------------------------------------------------------------------

    \35\ See Order Instituting Proceedings, supra note 7, at 4925.
    \36\ See Rich Letter, supra note 8, at 6.
    \37\ Id. at 7-9.
---------------------------------------------------------------------------

    In the Order Instituting Proceedings, the Commission requested
comment on whether the Exchange's rules governing sales practices are
adequately designed to ensure the suitability of recommendations
regarding the Fund's Shares.\38\ In response, the commenter states its
belief that the Exchange's rules governing sales practices adequately
ensure the suitability of recommendations regarding the Fund's Shares,
and that the Exchange's rules governing sales practices should not be
altered for the Fund.\39\ The commenter notes that NYSE Arca Equities
Rule 9.2(a) (Diligence as to Accounts) imposes obligations on ETP
Holders relating to suitability and due diligence, and that the
Exchange has represented that, prior to the commencement of trading, it
will provide ETP Holders with an Information Bulletin which will
describe the suitability requirements of NYSE Arca Equities Rule 9.2(a)
and will state that ETP Holders that carry customer accounts should
follow the FINRA guidance set forth in the FINRA Regulatory Notice.\40\
---------------------------------------------------------------------------

    \38\ See Order Instituting Proceedings, supra note 7, at 4925.
    \39\ See Rich Letter, supra note 8, at 9.
    \40\ Id. at 9-10. See also ``Suitability'' supra.
---------------------------------------------------------------------------

    In the Order Instituting Proceedings, the Commission requested
comment on whether the proposed disclosure of the nature of, and the
risks of investing in, the Shares is sufficient.\41\ The commenter
states that such disclosure is sufficient, as the Exchange has provided
a detailed description of the Fund and the Shares in the Notice, and
the Fund is required to deliver a prospectus to investors pursuant to
Commission rules which will contain key information relating to the
Shares necessary to make informed investment decisions.\42\
---------------------------------------------------------------------------

    \41\ See Order Instituting Proceedings, supra note 7, at 4925.
    \42\ See Rich Letter, supra note 8, at 10.
---------------------------------------------------------------------------

B. Potential for Manipulation of the Down-and-in Put Options Written by
the Fund

    In the Order Instituting Proceedings, the Commission requested
comment on whether the discontinuous payoff structure of down-and-in
put options could give rise to the potential for manipulation.\43\ The
commenter responds that the down-and-in put options in which the Fund
will invest do have the potential to provide an incentive for someone
who has a position in an option sold by the Fund, or the Fund itself,
to manipulate the price of the underlying stock when it is near the
knock-in price on the expiration date, but argues that this potential
is very limited because the diversification of the Fund greatly
restricts gains from the manipulation of any one underlying stock.\44\
The commenter provides examples to illustrate that due to the
diversification of the Fund and the market capitalization and daily
trading volume requirements for the stock underlying the options
positions written by the Fund, the cost of attempting to force a
particular underlying stock either higher or lower is not proportional
to the prospective gain.\45\
---------------------------------------------------------------------------

    \43\ See Order Instituting Proceedings, supra note 7, at 4925.
    \44\ See Rich Letter, supra note 8, at 10.
    \45\ Id. at 11-12.
---------------------------------------------------------------------------

C. Valuation and Arbitrage Relating to the Shares

    In the Order Instituting Proceedings, the Commission requested
comment on whether the market for OTC down-and-in put options is
sufficiently liquid and the pricing of those options is sufficiently
transparent (1) for investors to be able to accurately value such
options, and (2) for authorized participants and market makers to
effectively arbitrage the OTC market and the market for the Shares
throughout the trading day.\46\ The commenter responds that the market
for OTC down-and-in put options is sufficiently liquid and pricing is
sufficiently transparent so that the down-and-in put options can be
priced uniformly by investors, market makers, and authorized
participants.\47\
---------------------------------------------------------------------------

    \46\ See Order Instituting Proceedings, supra note 7, at 4925-6.
    \47\ See Rich Letter, supra note 8, at 12-16.
---------------------------------------------------------------------------

    First, the commenter states that the down-and-in puts sold by the
Fund are very short dated (with terms to expiration of only 3 months),
European-style (meaning the down-and-in put will only knock in if the
price of the underlying stock finishes at or below the knock-in price
on the expiration

date of the option), and have very liquid underlying stocks with
exchange traded options on those underlying stocks.\48\ The commenter
states that there is a well-known model for pricing European-style,
very short dated down-and-in puts using pricing inputs easily obtained
from the listed option and stock markets.\49\ In addition, the
commenter states that the down-and-in puts in the Fund may also be
priced without an explicit model through the use of plain vanilla puts
and put spreads.\50\ The commenter notes that the OTC market for
barrier options is the largest exotic option OTC market.\51\
Furthermore, the commenter states that the Fund will provide to the
public on its Web site the model used to calculate the down-and-in put
option values used by the Index provider and its calculation agent,
with detailed explanations of the formula calculation and inputs.\52\
---------------------------------------------------------------------------

    \48\ Id.
    \49\ Id. at 13-16.
    \50\ Id.
    \51\ Id.
    \52\ Id.
---------------------------------------------------------------------------

    In addition, with respect to the ability of market makers and
authorized participants to engage in arbitrage, the commenter further
states that initially, many market makers will be associated with the
dealers buying and selling the down-and-in put options from and to the
Fund, and therefore these market makers will have the necessary
infrastructure and knowledge to price, make markets in, and hedge their
positions in the Shares throughout the trading day.\53\ The commenter
also states that authorized participants only clear the Shares when
there are creates or redeems and do not arbitrage throughout the day to
ensure that prices of the Shares closely track the NAV per Share of the
Fund.\54\ The commenter states that the only situation in which
significant discounts or premiums to the intraday NAV per Share of a
Fund could develop is when a large number of the down-and-in put
options in the Fund are close to maturity and the underlying stock
price is very close to the knock-in barrier.\55\ The commenter states
that such a situation would cause market makers to widen bid and offer
spreads for the Shares as a reflection of the economics of the down-
and-in put option possible payout.\56\
---------------------------------------------------------------------------

    \53\ Id.
    \54\ Id.
    \55\ Id. at 15.
    \56\ Id. at 17.
---------------------------------------------------------------------------

    In the Order Instituting Proceedings, the Commission requested
comment on ways for market makers and authorized participants to
arbitrage the value of a down-and-in put option against the price of
the Shares.\57\ The commenter responds that in many cases, the purchase
and sale of specific listed options would be an effective way for
market makers to arbitrage the value of the down-and-in put options
against the price of the Shares because the down-and-in puts written by
the Fund will be European-style.\58\ Therefore, the purchase or sale of
the down-and-in puts written by the Fund may be efficiently hedged by
selling or purchasing a static portfolio of listed puts and put
spreads, and such a strategy would be most effective when the listed
options have the same maturity date as the down-and-in put, option in
the Fund, when the strike prices of the listed options are very close
to the knock-in price of the down-and-in put option in the Fund, and
when the available listed options have strikes relatively close to one
another \59\ When this is not the case, however, the commenter states
that hedging with a static portfolio of listed puts and put spreads may
not be the most efficient hedging methodology, and using a dynamic
portfolio of options and stock to hedge may be more efficient and
effective.\60\
---------------------------------------------------------------------------

    \57\ See Order Instituting Proceedings, supra note 7, at 4925.
    \58\ See Rich Letter, supra note 8, at 14.
    \59\ Id.
    \60\ Id.
---------------------------------------------------------------------------

IV. Discussion and Commission's Findings

    The Commission has carefully reviewed the proposed rule change, as
modified by Amendment No. 1 thereto, and finds that it is consistent
with the requirements of Section 6 of the Act \61\ and the rules and
regulations thereunder applicable to a national securities
exchange.\62\ In particular, the Commission finds that the proposed
rule change is consistent with the requirements of Section 6(b)(5) of
the Act,\63\ 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
applicable requirements of NYSE Arca Equities Rules 5.2(j)(3) and
5.5(g)(2) to be listed and traded on the Exchange.
---------------------------------------------------------------------------

    \61\ 15 U.S.C. 78f.
    \62\ 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).
    \63\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    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,\64\ which sets forth Congress's finding that it is in the public
interest and appropriate for the protection of investors and the
maintenance of fair and orderly markets to assure the availability to
brokers, dealers, and investors of information with respect to
quotations for, and transactions in, securities. Quotation and last-
sale information for the Shares will be available via the Consolidated
Tape Association (``CTA'') high-speed line. The Index value and the
values of the OTC put options components in the Index will be published
by one or more major market data vendors every 15 seconds during the
NYSE Arca Core Trading Session (9:30 a.m. to 4:00 p.m., Eastern Time).
A list of components of the Index, with percentage weightings, will be
available on the Exchange's Web site. Each of the stocks underlying the
OTC put options in the Index also will underlie standardized options
contracts traded on U.S. options exchanges, which will disseminate
quotation and last-sale information with respect to such options
contracts. In addition, an Intraday Indicative Value (``IIV'') for the
Shares will be widely disseminated at least every 15 seconds during the
NYSE Arca Core Trading Session by one or more major market data
vendors.\65\ The Fund's portfolio holdings, including information
regarding its options positions, will be disclosed each day on the
Fund's Web site, which Web site information will be publicly available
at no charge.\66\ The Fund's NAV per Share will be determined once
daily as of the close of the NYSE (normally 4:00 p.m., Eastern Time) on
each day the NYSE is open for trading. BNY, through the National
Securities Clearing Corporation, will make available on each business
day, prior to the opening of business on NYSE Arca (currently

9:30 a.m., Eastern Time), the amount of cash to be deposited in
exchange for a Creation Unit \67\ and the amount of cash that will be
paid by the Fund in respect of redemption requests. 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, and
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 Fund's Web site will also include
a form of the prospectus for the Fund, information relating to NAV
(updated daily), and other quantitative and trading information.
---------------------------------------------------------------------------

    \64\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \65\ See NYSE Arca Equities Rule 5.2(j)(3), Commentaries
.01(b)(2) and .01(c). According to the Exchange, several major
market data vendors widely disseminate IIVs taken from the CTA or
other data feeds. See Notice, supra note 4, at 64157.
    \66\ On a daily basis, the Adviser will disclose for each
portfolio security and other financial instrument of the Fund the
following information: ticker symbol (if applicable), name of
security and financial instrument, number of securities or dollar
value of financial instruments held in the portfolio, and percentage
weighting of the security and financial instrument in the portfolio.
    \67\ Creation Units (100,000 Shares) of the Fund generally will
be sold for cash only, calculated based on the NAV per Share,
multiplied by the number of Shares representing a Creation Unit,
plus a transaction fee.
---------------------------------------------------------------------------

    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 will be
calculated daily and will be made available to all market participants
at the same time.\68\ If the IIV, the Index value, or the value of the
components of the Index is not being disseminated as required, the
Exchange may halt trading during the day in which the disruption
occurs. If the interruption to the dissemination of the applicable IIV,
Index value, or value of the components of the Index persists past the
trading day in which it occurred, the Exchange will halt trading no
later than the beginning of the trading day following the
interruption.\69\ In addition, if the Exchange becomes aware that the
NAV is not being disseminated to all market participants at the same
time, it will halt trading in the Shares on the Exchange until such
time as the NAV is available to all market participants. The Exchange
states that it has a general policy prohibiting the distribution of
material, non-public information by its employees. The Exchange states
that the Index Provider is affiliated with a broker-dealer and will
implement a firewall and maintain procedures designed to prevent the
use and dissemination of material, non-public information regarding the
Index. The Exchange further states that the Adviser is affiliated with
a broker-dealer and will implement and maintain procedures designed to
prevent the use and dissemination of material, non-public information
regarding the Fund's portfolio.\70\ The Exchange may obtain information
via the ISG from other exchanges that are members of ISG or with which
the Exchange has entered into a comprehensive surveillance sharing
agreement.
---------------------------------------------------------------------------

    \68\ See NYSE Arca Equities Rule 5.2(j)(3)(A)(v).
    \69\ 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. These may include:
(1) The extent to which trading is not occurring in the securities
and/or the financial instruments comprising the Fund's portfolio; or
(2) whether other unusual conditions or circumstances detrimental to
the maintenance of a fair and orderly market are present.
    \70\ The Commission also notes that an investment adviser to an
open-end fund is required to be registered under the Investment
Advisers Act of 1940 (``Advisers Act''). As a result, the Adviser
and Sub-Adviser and their 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 Commission notes that, prior to the commencement of trading,
the Exchange will inform its ETP Holders of the suitability
requirements of NYSE Arca Equities Rule 9.2(a) in an Information
Bulletin.\71\ Specifically, the Exchange will remind ETP Holders that,
in recommending transactions in these securities, they must have a
reasonable basis to believe that (1) the recommendation is suitable for
a customer given reasonable inquiry concerning the customer's
investment objectives, financial situation, needs, and any other
information known by such member, and (2) the customer can evaluate the
special characteristics, and is able to bear the financial risks, of an
investment in the Shares. In connection with the suitability
obligation, the Information Bulletin will also provide that members
must make reasonable efforts to obtain the following information: (a)
The customer's financial status; (b) the customer's tax status; (c) the
customer's investment objectives; and (d) such other information used
or considered to be reasonable by such member or registered
representative in making recommendations to the customer.
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    \71\ NYSE Arca Equities Rule 9.2(a) provides that an ETP Holder,
before recommending a transaction in any security, must have
reasonable grounds to believe that the recommendation is suitable
for the customer based on any facts disclosed by the customer as to
its other security holdings and as to its financial situation and
needs. Further, the rule provides, with a limited exception, that
prior to the execution of a transaction recommended to a non-
institutional customer, the ETP Holder must make reasonable efforts
to obtain information concerning the customer's financial status,
tax status, investment objectives, and any other information that
such ETP Holder believes would be useful to make a recommendation.
---------------------------------------------------------------------------

    As described above, the Fund will seek to track the performance of
the Index by selling OTC 90-day down-and-in put options in proportion
to their weightings in the Index on economic terms which mirror those
of the Index. If the option's underlying stock declines by a specified
amount (or more), the option will ``knock in'' and the Fund will be
required to pay the buyer the difference between the option's strike
price and the closing price. Therefore, by writing a put option, the
Fund will be exposed to the amount by which the price of the underlying
stock is less than the strike price. FINRA has issued a regulatory
notice relating to sales practice procedures applicable to
recommendations to customers by FINRA members of reverse convertibles,
as described in FINRA Regulatory Notice 10-09 (February 2010) (``FINRA
Regulatory Notice'').\72\ While the Fund will not invest in traditional
reverse convertible securities, the down-and-in put options written by
the Fund will have the effect of exposing the Fund to the return of
reverse convertible securities as if the Fund owned such reverse
convertible securities directly. Therefore, the Information Bulletin
will state that ETP Holders that carry customer accounts should follow
the FINRA Regulatory Notice with respect to suitability.
---------------------------------------------------------------------------

    \72\ NASD Rule 2310 relating to suitability, referenced in the
FINRA Regulatory Notice, has been superseded by FINRA Rule 2111. See
FINRA Regulatory Notice 12-25 (May 2012).
---------------------------------------------------------------------------

    The Registration Statement states that the Fund is designed for
investors who seek to obtain income through selling options on select
equity securities which the Index Provider determines to have the
highest volatility. It further

states that because of the high volatility of the stocks underlying the
options sold by the Fund, it is possible that the value of such stocks
will decline in sufficient magnitude to trigger the exercise of the
options and cause a loss which may outweigh the income from selling
such options. The Registration Statement states that, accordingly, the
Fund should be considered as a speculative trading instrument and is
not necessarily appropriate for investors who seek to avoid or minimize
their exposure to stock market volatility. The Exchange's Information
Bulletin regarding the Fund will provide information regarding the
suitability of an investment in the Shares, as stated in the
Registration Statement.
    The Index will consist of 20 OTC down-and-in put options, selected
in accordance with NYSE Arca's rules-based methodology, and the stocks
underlying the put options must be U.S. exchange-listed and must also
underlie exchange-listed and traded options. In addition, the stocks
underlying the down-and-in put options contained in the Index must meet
minimum market capitalization and trading volume requirements as
described above. The diversification of the Index (20 components) and
the nature of the market for the underlying securities (largest
capitalized stocks with minimum trading volume requirements) should
serve to mitigate concerns about manipulation. In addition, the
Commission did not receive any comments or information questioning or
expressing concern about manipulation or the ability of market makers
to perform intraday arbitrage on a product whose underlying holdings
include positions in down-and-in put options, such as the Fund.
Furthermore, as stated by the Sub-Adviser, the availability of listed
equity options on the securities underlying the down-and-in put options
contained in the Index should mitigate concerns regarding the ability
of market makers to arbitrage the value of the down-and-in put options
against the price of the Shares.\73\
---------------------------------------------------------------------------

    \73\ See Rich Letter, supra note 8, at 12-16.
---------------------------------------------------------------------------

    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 Rules 5.2(j)(3) and 5.5(g)(2), except
that the Index is comprised of OTC put options.
    (2) The Exchange has appropriate rules to facilitate transactions
in the Shares during all trading sessions.
    (3) The Exchange's surveillance procedures applicable to derivative
products, which include Investment Company Units, 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. The Exchange may obtain information via the
ISG from other exchanges that are members of ISG or with which the
Exchange has entered into a comprehensive surveillance sharing
agreement.
    (4) Prior to the commencement of trading, the Exchange will inform
its 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 IIV will
not be calculated or publicly disseminated; (d) how information
regarding the IIV is disseminated; (e) the requirement that ETP Holders
deliver a prospectus to investors purchasing newly issued Shares prior
to or concurrently with the confirmation of a transaction; and (f)
trading information. The Information Bulletin will also advise ETP
Holders of their suitability obligations with respect to recommended
transactions to customers in the Shares, and will state that ETP
Holders that carry customer accounts should follow the FINRA Regulatory
Notice with respect to suitability.
    (5) The Index will consist of 20 OTC put options, selected in
accordance with NYSE Arca's rules-based methodology, and the Fund,
under normal circumstances, will invest at least 80% of its total
assets in the components of the Index and in T-Bills. Each option
written by the Fund will be covered through investments in three month
T-Bills at least equal to the Fund's maximum liability under the option
(i.e., the strike price). A total return level for the Index will be
calculated and published at the end of each day. The Fund will transact
only with OTC options dealers that have in place an International Swaps
and Derivatives Association agreement with the Fund.
    (6) The stocks underlying the Index Components must be U.S.
exchange listed and must meet the following additional criteria: (a)
The availability of publicly listed and traded options; (b) minimum
market capitalization of greater than $5 billion; (c) minimum trading
volume of at least 50 million shares during the preceding 6 months; (d)
minimum average daily trading volume of at least one million shares
during the preceding 6 months; and (e) minimum average daily trading
value of at least $10 million during the preceding 6 months.
    (7) The Sub-Adviser will seek a correlation over time of 0.95 or
better between the Fund's performance and the performance of the Index.
A figure of 1.00 would represent perfect correlation.
    (8) The Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid securities. In addition, the Fund's investments will
be consistent with the Fund's investment objective and will not be used
to enhance leverage. The Fund will not invest in non-U.S. equity
securities.
    (9) Swaps, options (other than options in which the Fund
principally will invest), and futures contracts will not be included in
the Fund's investment, under normal market circumstances, of at least
80% of its total assets in component securities that comprise the Index
and in T-Bills.
    (10) A minimum of 100,000 Shares of the Fund will be outstanding as
of the start of trading on the Exchange.
    (11) For initial and continued listing, the Fund will be in
compliance with Rule 10A-3 under the Act,\74\ as provided by NYSE Arca
Equities Rule 5.3.
---------------------------------------------------------------------------

    \74\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------

    The Commission further notes that the Fund and the Shares must
comply with all other requirements as set forth in Exchange rules
applicable to Investment Company Units and prior Commission releases
relating to, and orders approving, the generic listing rules (and
amendments thereto) applicable to the listing and trading of Investment
Company Units. 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 No. 1 thereto, is consistent with
Section 6(b)(5) of the Act \75\ and the rules and

regulations thereunder applicable to a national securities exchange.
---------------------------------------------------------------------------

    \75\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\76\ that the proposed rule change (SR-NYSEArca-2012-108) be, and
it hereby is, approved.
---------------------------------------------------------------------------

    \76\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\77\
---------------------------------------------------------------------------

    \77\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-09193 Filed 4-18-13; 8:45 am]
BILLING CODE 8011-01-P


                 UNITED STATES ENVIRONMENTAL PROTECTION AGENCY
                NATIONAL VEHICLE AND FUEL EMISSIONS LABORATORY
                             2000 TRAVERWOOD DRIVE
                           ANN ARBOR, MI  48105-2498

									     OFFICE OF
									AIR AND RADIATION
October 12, 2017

MEMORANDUM

SUBJECT: Proposed Changes to Aircraft Engine Emissions Reporting Template

FROM: 	G. Cullen Leggett, Aerospace Engineer
	Assessment and Standards Division
	Office of Transport and Air Quality
	U.S. Environmental Protection Agency

TO:	Information Collection Request; Aircraft Engine Supplemental Information Related to Exhaust Emissions (Renewal)
	Docket EPA-HQ-OAR-2016-0546

This memo documents proposed changes to the Aircraft Engine Emissions Reporting Template (EPA Form Number: 5900-223).  These changes include the addition of non-volatile Particulate Matter (nvPM) parameters requested in the ICR renewal and amendment. These changes are in Columns BC to CN.

Attachments:
EPA_Form-5900-223-reporting_template_aircraft-Proposed_Revision.xlsx


[Federal Register Volume 76, Number 56 (Wednesday, March 23, 2011)]
[Notices]
[Pages 16469-16470]
[FR Doc No: 2011-6845]

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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

Sixteenth Meeting: RTCA Special Committee 205/EUROCAE WG-71:
Software Considerations in Aeronautical Systems

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Notice of RTCA Special Committee 205/EUROCAE WG-71 meeting:
Software Considerations in Aeronautical Systems.

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

SUMMARY: The FAA is issuing this notice to advise the public of a
meeting of RTCA Special Committee 205/EUROCAE WG-71: Software
Considerations in Aeronautical Systems Agenda for the 16th meeting.

DATES: The meeting will be held April 11-15, 2011, from 8:30 a.m. to 5
p.m.

ADDRESSES: The meeting will be held at Enea, PO Box 1033,
Skalholtsgatan 9, SE-164 21 KISTA, Sweden. Contacts: Joint Secretaries,
Europe: Mr. Ross Hannan, Telephone +44<PHONE_NUMBER>, e-mail<EMAIL_ADDRESS>US: Mrs. Leslie A. Alford,
<EMAIL_ADDRESS>
FOR FURTHER INFORMATION CONTACT: RTCA Secretariat, 1828 L Street, NW.,
Suite 805, Washington, DC 20036, telephone<PHONE_NUMBER>, fax (202)
833-9434, Web site http://www.rtca.org.

SUPPLEMENTARY INFORMATION: Pursuant to section 10(a)(2) of the Federal
Advisory Committee Act (Pub. L. 92-463, 5 U.S.C., and Appendix 2),
notice is hereby given for a Special Committee 205/EUROCAE WG-71,
Software Considerations in Aeronautical Systems Agenda for the 16th
meeting:

Agenda

Day 1, April 11, 2011

     Open Plenary Session.
     Chairmen's Introductory Remarks.
     Recognition of the FAA and EASA Representatives.
     Review of Meeting Agenda.
     Review and Approval of Fifteenth Meeting Summary, RTCA
Paper No. 119-10/SC186-030.
      Acceptance of Documents.
      DO-178C, Software Considerations in Airborne Systems and
Equipment Certification.
      DO-278A, Software Considerations for Communication,
Navigation, Surveillance and Air Traffic Management (CNS/ATM) Systems.
      DO-xxx, Software Tool Qualification Considerations.
      DO-xxx, Formal Methods Supplement to DO-178C and DO-278A.
      Approve Entry into RTCA Final Review and Comment Process
(FRAC).
      DO-xxx, Object-Oriented Technology Supplement to DO-178C
and DO-278A.
      DO-xxx, Model-Based Development and Verification
Supplement to DO-178C and DO-278A.
      Revision to DO-248B, Clarification of DO-178C and DO-
278A.

Day 2, April 12, 2011

     Acceptance of Documents and Approval for Entry into FRAC--
continued.

Day 3, April 13, 2011

     Acceptance of Documents and Approval for Entry into FRAC--
continued.

Day 4, April 14, 2011

     Acceptance of Documents and Approval for Entry into FRAC--
continued.

Day 5, April 15, 2011

     Acceptance of Documents and Approval for Entry into FRAC--
continued.
     Closing Remarks.
     Adjourn Plenary.
    Attendance is open to the interested public but limited to space
availability. With the approval of the chairman, members of the public
may present oral statements at the meeting. Persons wishing to present
statements or obtain information should contact the person listed in
the FOR FURTHER INFORMATION CONTACT section. Members of the public may
present a written statement to the committee at any time.

    Issued in Washington, DC, on March 16, 2011.
Robert L. Bostiga,
RTCA Advisory Committee.
[FR Doc. 2011-6845 Filed 3-22-11; 8:45 am]
BILLING CODE 4910-13-P