Federal Register / Vol. 79, No. 237 / Wednesday, December 10, 2014 / Notices 73377 

25 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 71894 

(Apr. 7, 2014), 79 FR 20273 (‘‘Notice’’). 

4 15 U.S.C. 78s(b)(2). 

5Securities Exchange Act Release No. 72214 (May 

21, 2014), 79 FR 30672 (May 28, 2014). The 

Commission determined that it was appropriate to 

designate a longer period within which to take 

action on the proposed rule change so that it would 

have sufficient time to consider the proposed rule 

change. Accordingly, the Commission designated 

July 10, 2014 as the date by which it should 

approve, disapprove, or institute proceedings to 

determine whether to disapprove the proposed rule 

change. 

6Securities Exchange Act Release No. 72571 (July 

9, 2014), 79 FR 41330 (July 15, 2014). 

7See Letter from Christopher S. Jones, Associate 

Professor, University of Southern California to 

Elizabeth M. Murphy, Secretary, Commission (Sept. 

16, 2014) (‘‘Jones Letter’’). 

8See Securities Exchange Act Release No. 73320, 

79 FR 61911 (Oct. 15, 2014) (designating December 

5, 2014 as the date by which the Commission must 

either approve or disapprove the proposed rule 

change). 

9 In Amendment No. 1, the Exchange clarified 

that the Sub-Adviser will utilize more than one 

proprietary, analytical investment model to make 

investment decisions for the Fund, that the SubAdviser’s determination whether to take certain 

long or short positions in S&P 500-related ETFs and 

S&P 500-related futures will depend on the 

investment signals delivered by the models and on 

the judgment of the Sub-Advisor, and that the SubAdviser may adjust the Fund’s long and short 

positions when necessary to take into account new 

market conditions as well as data from the models. 

Because Amendment No. 1 provides clarification to 

the proposed rule change and does not materially 

affect the substance of the proposed rule change or 

raise any unique or novel regulatory issues, 

Amendment No. 1 does not require notice and 

comment. 

10The Trust is registered under the Investment 

Company Act of 1940 (‘‘1940 Act’’). The Exchange 

states that on July 26, 2013, the Trust filed with the 

Commission a post-effective amendment to its 

registration statement on Form N–1A relating to the 

Fund (File Nos. 333–156529 and 811–22263) 

(‘‘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.30445 (Apr. 2, 2013) (File No. 812– 

13969) (‘‘Exemptive Order’’). 

11The Exchange states that neither the Adviser 

nor the Sub-Adviser is, or is affiliated with, a 

broker-dealer. The Exchange states that, in the event 

(a) the Adviser or Sub-Adviser becomes, or becomes 

newly affiliated with, a broker-dealer, or (b) any 

new manager, adviser or sub-adviser is, or becomes 

affiliated with, a broker-dealer, the adviser or subadviser will implement a fire wall with respect to 

its relevant personnel or broker-dealer affiliate, as 

applicable, regarding access to information 

concerning the composition of or changes to the 

portfolio, and that adviser or sub-adviser will be 

subject to procedures designed to prevent the use 

and dissemination of material non-public 

information regarding such portfolio. 

consistent with the Act. Comments may 

be submitted by any of the following 

methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rulecomments@sec.gov. Please include File 

No. SR–EDGX–2014–27 on the subject 

line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE., 

Washington, DC 20549–1090. 

All submissions should refer to File No. 

SR–EDGX–2014–27. This file number 

should be included on the subject line 

if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE., 

Washington, DC 20549, on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of such 

filing will also be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change; 

the Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File No. SR–EDGX– 

2014–27 and should be submitted on or 

before December 31, 2014. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.25

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–28909 Filed 12–9–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73741; File No. SR– 

NYSEArca–2014–30] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Order Granting Approval of 

Proposed Rule Change, as Modified by 

Amendment No. 1, To List and Trade 

Shares of Hull Tactical US ETF Under 

NYSE Arca Equities Rule 8.600 

December 4, 2014. 

I. Introduction 

On March 24, 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 Hull Tactical US ETF 

(‘‘Fund’’) under NYSE Arca Equities 

Rule 8.600. The proposed rule change 

was published for comment in the 

Federal Register on April 11, 2014.3 On 

May 21, 2014, pursuant to Section 

19(b)(2) of the Act,4 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.5 On July 9, 2014, 

the Commission instituted proceedings 

to determine whether to approve or 

disapprove the proposed rule change.6

The Commission received one comment 

letter.7 On October 8, 2014, the 

Commission designated a longer period 

of time for Commission action on the 

proposed rule change.8 On October 23, 

2014, the Exchange filed Amendment 

No. 1 to the proposal.9 This order grants 

approval of the proposed rule change, as 

modified by Amendment No. 1. 

II. Description of 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 

Exchange Traded Concepts Trust 

(‘‘Trust’’), a Delaware statutory trust. 

The Trust is registered with the 

Commission as an investment 

company.10 Exchange Traded Concepts, 

LLC will be the investment adviser 

(‘‘Adviser’’) to the Fund. HTAA, LLC 

will be the sub-adviser to the Fund 

(‘‘Sub-Adviser’’).11 SEI Investments Co. 

will serve as the administrator of the 

Fund (‘‘Administrator’’). JP Morgan 

Chase Bank N.A. will serve as the 

custodian, transfer agent and dividend 

disbursing agent of the Fund. SEI 

Investments Distribution Co. will serve 

as the distributor for the Trust. 

The Exchange has made the following 

representations and statements in 

describing the Fund and its investment 

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73378 Federal Register / Vol. 79, No. 237 / Wednesday, December 10, 2014 / Notices 

12The Commission notes that additional 

information regarding the Trust, the Fund, and the 

Shares, including investment strategies, risks, net 

asset value (‘‘NAV’’) calculation, creation and 

redemption procedures, fees, Fund holdings 

disclosure policies, distributions, and taxes, among 

other information, is included in the Notice and the 

Registration Statement, as applicable. See Notice 

and Registration Statement, supra notes 3 and 10, 

respectively. 

13The term ‘‘under normal market conditions’’ 

includes, but is not limited to, the absence of 

adverse market, economic, political or other 

conditions, including extreme volatility or trading 

halts in the equity markets or the financial markets 

generally; operational issues causing dissemination 

of inaccurate market information; and force majeure 

type events such as systems failure, natural or manmade disaster, act of God, armed conflict, act of 

terrorism, riot or labor disruption, or any similar 

intervening circumstance. 

14Short sales are transactions in which the Fund 

sells a security it does not own. To complete the 

transaction, the Fund must borrow or otherwise 

obtain the security to make delivery to the buyer. 

The Fund is then obligated to replace the security 

borrowed by purchasing the security at the market 

price at the time of replacement. The Fund may use 

repurchase agreements to satisfy delivery 

obligations in short sales transactions. The Fund 

may use up to 100% of its net assets to engage in 

short sales transactions and collateralize its open 

short positions. 

15ETFs are securities registered under the 1940 

Act such as those listed and traded on the Exchange 

under NYSE Arca Equities Rules 5.2(j)(3) 

(Investment Company Units), 8.100 (Portfolio 

Depositary Receipts) and 8.600 (Managed Fund 

Shares). 

16To the extent the Fund enters into futures 

contracts or invests in underlying ETFs that invest 

in futures, options on futures or other instruments 

subject to regulation by the U.S. Commodity 

Futures Trading Commission (‘‘CFTC’’), it will do 

so in reliance upon and in accordance with CFTC 

Rule 4.5. The Exchange states that the Trust has 

filed a notice of eligibility for exclusion from the 

definition of the term ‘‘commodity pool operator’’ 

in accordance with CFTC Rule 4.5. Therefore, 

neither the Trust nor any of its series is deemed to 

be a ‘‘commodity pool’’ or ‘‘commodity pool 

operator’’ under the Commodity Exchange Act 

(‘‘CEA’’), and they are not subject to registration or 

regulation as such under the CEA. In addition, 

neither the Adviser nor the Sub-Adviser is deemed 

to be a ‘‘commodity pool operator’’ or ‘‘commodity 

trading adviser’’ with respect to the advisory 

services it provides to the Fund. 

17The use of leverage may exaggerate changes in 

an ETF’s share price and the return on its 

investments. Inverse and leveraged ETFs are 

designed to achieve their objectives for a single day 

only. 

18Convertible securities are bonds, debentures, 

notes, preferred stocks, or other securities that may 

be converted or exchanged (by the holder or by the 

issuer) into shares of the underlying common stock 

(or cash or securities of equivalent value) at a stated 

exchange ratio. 

19MLPs are limited partnerships in which the 

ownership units are publicly traded. MLP units are 

registered with the Commission and are freely 

traded on a securities exchange or in the over-thecounter market. 

20A right is a privilege granted to existing 

shareholders of a corporation to subscribe to shares 

of a new issue of common stock before it is issued. 

Rights normally have a short life of usually two to 

four weeks. 

strategies, including portfolio holdings 

and investment restrictions.12

General 

The investment objective of the Fund 

will be to seek long-term capital 

appreciation. The Fund will be actively 

managed. 

Under normal market conditions,13

the Fund will seek to achieve its 

investment objective by taking long and 

short positions 14 in one or more 

exchange traded funds (‘‘ETFs’’) 15 that 

seek to track the performance of the S&P 

500 Index (each, an ‘‘S&P 500-related 

ETF’’). The ETFs the Fund invests in all 

will be listed and traded in the U.S. on 

registered exchanges. Under normal 

market conditions, substantially all of 

the Fund’s assets will be invested in one 

or more S&P 500-related ETFs; ETFs 

that provide leveraged or inverse 

exposure to the S&P 500 Index; and, to 

seek the desired exposure to the S&P 

500 Index, futures contracts. The Fund 

may also, as described below, invest in 

cash instruments. 

The Sub-Adviser will utilize a 

proprietary, analytical investment 

model that examines current and 

historical market data to attempt to 

predict the performance of the S&P 500 

Index. The model will deliver 

investment signals that the Sub-Adviser 

will use to make investment decisions 

for the Fund. Depending on the 

investment signal delivered by the 

model, the Sub-Adviser will take certain 

long or short positions in one or more 

S&P 500-related ETFs: (1) If the model 

indicates bull-market conditions, the 

Sub-Adviser will take long positions; or 

(2) if the model indicates bear-market 

conditions, the Sub-Adviser will take 

short positions. When the Fund takes 

long positions, it may maintain long 

exposure of up to 200% of net assets; 

exposure to short positions will be 

limited to no more than 100% of net 

assets. The Sub-Adviser will adjust the 

Fund’s long and short positions when 

necessary to take into account new data 

from the model that reflects changing 

market conditions. Positions may be 

adjusted as the model predictions 

fluctuate. 

The Fund will enter into futures 

contracts to seek the desired exposure to 

the S&P 500 Index.16 The Fund will 

limit its investment in futures contracts 

such that either (1) the aggregate net 

notional value of its futures investments 

will not exceed the value of the Fund’s 

net assets, after taking into account 

unrealized profits and unrealized losses 

on the futures positions it has entered 

into; or (2) the aggregate initial margin 

and premiums required to establish 

positions in its futures investments will 

not exceed 5% of the Fund’s net assets, 

after taking into account unrealized 

profits and unrealized losses on any 

such positions. The Fund will only 

enter into futures contracts traded on a 

national futures exchange regulated by 

the CFTC. The Fund will trade futures 

when the Sub-Adviser determines that 

doing so may provide an efficient means 

of seeking exposure to the S&P 500 

Index that is complimentary to its 

investment in shares of one or more S&P 

500-related ETFs. 

In addition to investments in the S&P 

500-related ETFs and futures contracts, 

the Fund may invest up to 10% of its 

total assets in leveraged ETFs or inverse 

ETFs that seek to deliver multiples, or 

the inverse, of the performance of the 

S&P 500 Index, respectively 

(collectively with S&P 500-related ETFs, 

‘‘Underlying ETFs’’). Such investments 

will be made in accordance with the 

1940 Act and consistent with the Fund’s 

investment objective and policies, and 

they will not be used to seek 

performance that is the multiple or 

inverse multiple (e.g., 2X or 3X) of any 

securities market index. The inverse and 

leveraged ETFs held by the Fund may 

utilize leverage (i.e., borrowing) to 

acquire their underlying portfolio 

investments.17

The Fund may invest in Underlying 

ETFs that are primarily index-based 

ETFs that hold substantially all of their 

assets in securities representing a 

specific index. The Fund also may 

invest in Underlying ETFs that are 

actively managed. The Underlying ETFs 

in which the Fund may invest may 

invest in equity securities. Equity 

securities consist of common stocks, 

preferred stocks, warrants to acquire 

common stock, securities convertible 

into common stock,18 investments in 

master limited partnerships (‘‘MLPs’’) 19

and rights.20

The Underlying ETFs in which the 

Fund may invest may engage in futures 

and options transactions. The Fund will 

only invest in Underlying ETFs that 

engage in futures contracts if such 

futures contracts are traded on a 

national futures exchange regulated by 

the CFTC. Underlying ETFs in which 

the Fund may invest may use futures 

contracts and related options for bona 

fide hedging; attempting to offset 

changes in the value of securities held 

or expected to be acquired or be 

disposed of; attempting to gain exposure 

to a particular market, index, or 

instrument; or other risk management 

purposes. When an Underlying ETF 

purchases or sells a futures contract, or 

sells an option thereon, it is required to 

cover its position in order to limit 

leveraging and related risks. 

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Federal Register / Vol. 79, No. 237 / Wednesday, December 10, 2014 / Notices 73379 

21A put option on a security gives the purchaser 

of the option the right to sell, and the writer of the 

option the obligation to buy, the underlying 

security. A call option on a security gives the 

purchaser of the option the right to buy, and the 

writer of the option the obligation to sell, the 

underlying security. Put and call options on indices 

are similar to options on securities except that 

options on an index give the holder the right to 

receive, upon exercise of the option, an amount of 

cash if the closing level of the underlying index is 

greater than (or less than, in the case of puts) the 

exercise price of the option. 

22Forms of swaps include interest rate caps, 

under which, in return for a premium, one party 

agrees to make payments to the other to the extent 

that interest rates exceed a specified rate, or ‘‘cap’’; 

interest rate floors, under which, in return for a 

premium, one party agrees to make payments to the 

other to the extent that interest rates fall below a 

specified level, or ‘‘floor’’; and interest rate collars, 

under which a party sells a cap and purchases a 

floor or vice versa in an attempt to protect itself 

against interest rate movements exceeding given 

minimum or maximum levels. 

23The Fund may enter into repurchase 

agreements with financial institutions, which may 

be deemed to be loans. The Fund will effect 

repurchase transactions only with large, wellcapitalized, and well-established financial 

institutions whose condition will be continually 

monitored by the Sub-Advisor. In addition, the 

value of the collateral underlying the repurchase 

agreement will always be at least equal to the 

repurchase price, including any accrued interest 

earned on the repurchase agreement. 

24Securities issued or guaranteed by the U.S. 

government or its agencies or instrumentalities 

include U.S. Treasury securities, which are backed 

by the full faith and credit of the U.S. Treasury and 

which differ only in their interest rates, maturities, 

and times of issuance. Certain U.S. government 

securities are issued or guaranteed by agencies or 

instrumentalities of the U.S. government, including, 

but not limited to, obligations of U.S. government 

agencies or instrumentalities such as the Federal 

National Mortgage Association (‘‘Fannie Mae’’), the 

Federal Home Loan Mortgage Corporation (‘‘Freddie 

Mac’’), the Government National Mortgage 

Association (‘‘Ginnie Mae’’), the Federal Home 

Loan Banks, and other agencies or 

instrumentalities. Some obligations issued or 

guaranteed by U.S. government agencies and 

instrumentalities, including, for example, Ginnie 

Mae pass-through certificates, are supported by the 

full faith and credit of the U.S. Treasury. Other 

obligations issued by or guaranteed by federal 

agencies or instrumentalities, such as those 

securities issued by Fannie Mae, are supported by 

the discretionary authority of the U.S. government 

to purchase certain obligations of the federal agency 

or instrumentality, while other obligations issued 

by or guaranteed by federal agencies or 

instrumentalities, such as those of the Federal 

Home Loan Banks, are supported by the right of the 

issuer to borrow from the U.S. Treasury. The Fund 

may invest in U.S. Treasury zero-coupon bonds. 

25See note 13, supra. 

26 In reaching liquidity decisions, the Adviser and 

Sub-Adviser may consider the following factors: 

The frequency of trades and quotes for the security; 

the number of dealers wishing 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). 

The Underlying ETFs in which the 

Fund may invest may buy and sell 

index futures contracts with respect to 

any index that is traded on a recognized 

exchange or board of trade. 

The Underlying ETFs in which the 

Fund may invest may purchase and 

write (sell) put and call options on 

indices and enter into related closing 

transactions.21 All such options written 

on indices or securities must be covered 

by the Underlying ETF. 

An Underlying ETF in which the 

Fund may invest may trade put and call 

options on securities, securities indices, 

and currencies, as the Underlying ETF’s 

investment adviser determines is 

appropriate in seeking the ETF’s 

investment objective, and except as 

restricted by the Underlying ETF’s 

investment limitations. An Underlying 

ETF may purchase put and call options 

on securities to protect against a decline 

in the market value of the securities in 

its portfolio or to anticipate an increase 

in the market value of securities that the 

Fund may seek to purchase in the 

future. An Underlying ETF may write 

covered call options on securities as a 

means of increasing the yield on its 

assets and as a means of providing 

limited protection against decreases in 

its market value. An Underlying ETF 

may purchase and write options on an 

exchange or over-the-counter. 

The Underlying ETFs in which the 

Fund may invest may enter into swaps, 

including, but not limited to, total 

return swaps, index swaps, and interest 

rate swaps. An Underlying ETF may 

utilize swaps in an attempt to gain 

exposure to the securities in a market 

without actually purchasing those 

securities, or to hedge a position.22 The 

Underlying ETFs in which the Fund 

may invest may enter into swaps to 

invest in a market without owning or 

taking physical custody of the 

underlying securities in circumstances 

in which direct investment is restricted 

for legal reasons or is otherwise 

impracticable. 

During periods when the Fund’s 

assets (or portion thereof) are not fully 

invested in one or more S&P 500-related 

ETFs or otherwise exposed to the S&P 

500 Index, all or a portion of the Fund 

may be invested in cash instruments 

(‘‘Cash Instruments’’), which include 

U.S. Treasury obligations; cash and cash 

equivalents including commercial 

paper, certificates of deposit and 

bankers’ acceptances; repurchase 

agreements; 23 shares of money market 

mutual funds; and high-quality, shortterm debt instruments including, in 

addition to U.S. Treasury obligations, 

other U.S. government securities.24

Other Investments 

In addition to the investments 

described above, the Fund may invest in 

other investments, as described below. 

In the absence of normal market 

conditions,25 the Fund may invest 100% 

of its assets, without limitation, in Cash 

Instruments. The Fund may be invested 

in this manner for extended periods, 

depending on the Sub-Adviser’s 

assessment of market conditions. 

In addition to the Underlying ETFs 

discussed above, which are primary 

investments of the Fund, the Fund will 

invest in money market mutual funds, 

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. 

Restrictions on Investment 

The Fund may not purchase or sell 

commodities or commodity contracts 

unless acquired as a result of ownership 

of securities or other instruments issued 

by persons that purchase or sell 

commodities or commodities contracts, 

but this shall not prevent the Fund from 

entering into futures contracts. 

The Fund will not directly enter into 

swaps or engage in options transactions. 

The Fund may not, with respect to 

75% of its total assets, purchase 

securities of any issuer (except 

securities issued or guaranteed by the 

U.S. government, its agencies, or its 

instrumentalities or shares of 

investment companies) if, as a result, 

more than 5% of its total assets would 

be invested in the securities of such 

issuer. 

The Fund may not acquire more than 

10% of the outstanding voting securities 

of any one issuer. 

The Fund may not invest 25% or 

more of its total assets in the securities 

of one or more issuers conducting their 

principal business activities in the same 

industry or group of industries. This 

limitation does not apply to investments 

in securities issued or guaranteed by the 

U.S. government, its agencies or 

instrumentalities, or shares of 

investment companies. 

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 securities 

deemed illiquid by the Adviser or SubAdviser consistent with Commission 

guidance 26 and repurchase agreements 

that do not mature within seven days. 

The Fund will monitor its portfolio 

liquidity on an ongoing basis to 

determine whether, in light of current 

circumstances, an adequate level of 

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73380 Federal Register / Vol. 79, No. 237 / Wednesday, December 10, 2014 / Notices 

27See Jones Letter, supra note 7. 

28 Id. at 2. The commenter states that maintaining 

constant exposures to different asset classes is 

suboptimal, that investors can reap greater longterm rewards without increasing risk by increasing 

exposure to an asset class when its future returns 

are predicted to be above average and by trimming 

or shorting an asset class when its future returns are 

predicted to be poor, and that there is strong 

evidence from the finance literature that these 

tactical asset allocation strategies have significant 

value to investors who use them. Id. at 1. 

29 Id. at 2. 

30 Id. 

31 15 U.S.C. 78f. 

32 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

formation. See 15 U.S.C. 78c(f). 

33 15 U.S.C. 78f(b)(5). 

34 15 U.S.C. 78k–1(a)(1)(C)(iii). 35 17 CFR 240.10A–3. 

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 each year 

as a regulated investment company 

under Subchapter M of the Internal 

Revenue Code of 1986, as amended. 

III. Summary of Comment Letter 

Received 

The Commission received one 

comment letter supporting the 

Exchange’s proposal.27 The commenter 

states that tactical asset allocation 

strategies are beneficial to investors, 

may have positive effects on market 

stability, and should be encouraged both 

by investment advisors and regulators.28

The commenter states his belief that 

there is nothing inherently risky about 

tactical asset allocation, especially for 

strategies limited to holding cash and a 

market index.29 Furthermore, the 

commenter states that the managers of 

the Fund have allowed him to see the 

equity exposures that have arisen from 

their model since 2001, and based on 

this the commenter believes the Fund 

should be ‘‘noticeably less risky than a 

standard equity index fund.’’ 30

IV. 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 31 and the rules and 

regulations thereunder applicable to a 

national securities exchange.32 In 

particular, the Commission finds that 

the proposal, as modified by 

Amendment No. 1., is consistent with 

Section 6(b)(5) of the Act,33 which 

requires, among other things, that the 

Exchange’s rules be designed 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 also 

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,34 which sets forth the finding of 

Congress 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. 

The Commission notes that the 

Exchange has represented 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. The Commission also 

notes that, in support of this proposal, 

the Exchange has made the following 

representations: 

(1) The Shares will be subject to Rule 

8.600, which sets forth the initial and 

continued listing criteria applicable to 

Managed Fund Shares. 

(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 and underlying 

equity securities (including, without 

limitation, ETFs) and futures contracts 

with other markets and other entities 

that are members of the Intermarket 

Surveillance Group (‘‘ISG’’) and FINRA, 

on behalf of the Exchange, may obtain 

trading information regarding trading in 

the Shares and underlying equity 

securities (including, without 

limitation, ETFs) and futures contracts 

from such markets and other entities. In 

addition, the Exchange may obtain 

information regarding trading in the 

Shares and underlying equity securities 

(including, without limitation, ETFs) 

and futures contracts from markets and 

other entities that are members of ISG or 

with which the Exchange has in place 

a comprehensive surveillance sharing 

agreement. In addition, FINRA, on 

behalf of the Exchange, is able to access, 

as needed, trade information for certain 

fixed income securities held by the 

Fund reported to FINRA’s Trade 

Reporting and Compliance Engine 

(‘‘TRACE’’). 

(4) The ETFs the Fund invests in all 

will be listed and traded in the U.S. on 

registered exchanges. The Fund will 

only enter into futures contracts traded 

on a national futures exchange regulated 

by the CFTC. 

(5) Prior to the commencement of 

trading, the Exchange will inform its 

Equity Trading Permit Holders in an 

Information Bulletin of the special 

characteristics and risks associated with 

trading the Shares. Specifically, the 

Information Bulletin will discuss the 

following: (a) The procedures for 

purchases and redemptions of Shares in 

creation unit aggregations (and that 

Shares are not individually redeemable); 

(b) NYSE Arca Equities Rule 9.2(a), 

which imposes a duty of due diligence 

on its 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 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. 

(6) For initial and continued listing, 

the Fund must be in compliance with 

Rule 10A–3 under the Act,35 as 

provided by NYSE Arca Equities Rule 

5.3. 

(7) 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 

securities deemed illiquid by the 

Adviser or Sub-Adviser, consistent with 

Commission guidance. 

(8) Under normal market conditions, 

substantially all of the Fund’s assets 

will be invested in one or more S&P 

500-related ETFs; ETFs that provide 

leveraged or inverse exposure to the 

S&P 500 Index; and, to seek the desired 

exposure to the S&P 500 Index, futures 

contracts. The Fund may also invest in 

Cash Instruments. 

(9) The Fund will limit its investment 

in futures contracts such that either (1) 

the aggregate net notional value of its 

futures investments will not exceed the 

value of the Fund’s net assets, after 

taking into account unrealized profits 

and unrealized losses on the futures 

positions it has entered into; or (2) the 

aggregate initial margin and premiums 

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Federal Register / Vol. 79, No. 237 / Wednesday, December 10, 2014 / Notices 73381 

36According to the Exchange, the Portfolio 

Indicative Value will be calculated using the 

estimates of the value of the Fund’s NAV per Share 

using market data converted into U.S. dollars at the 

current currency rates. The Portfolio Indicative 

Value will be based upon the current value for the 

components of the Disclosed Portfolio. The 

Portfolio Indicative Value will be based on quotes 

and closing prices from the securities’ local market 

and may not reflect events that occur subsequent to 

the local market’s close. Premiums and discounts 

between the Portfolio Indicative Value and the 

market price may occur. The Portfolio Indicative 

Value should not be viewed as a ‘‘real-time’’ update 

of the NAV per Share of the Fund, which is 

calculated once per day. All asset classes in which 

the Fund will invest will be included in the 

calculation of the Portfolio Indicative Value. 

37According to the Exchange, several major 

market data vendors display or make widely 

available Portfolio Indicative Values published on 

CTA or other data feeds. 

38The Disclosed Portfolio will include each 

portfolio security and other financial instruments of 

the Fund with the following information on the 

Fund’s Web site: Ticker symbol (if applicable), 

name of security and financial instrument, number 

of shares (if applicable) and dollar value of 

securities and financial instruments held in the 

Fund, and percentage weighting of the security and 

financial instrument in the Fund. The Web site 

information will be publicly available at no charge. 

39The Fund will calculate NAV by: (i) Taking the 

current market value of its total assets; (ii) 

subtracting any liabilities; and (iii) dividing that 

amount by the total number of Shares owned by 

shareholders. 

40These reasons may include: (1) The extent to 

which trading is not occurring in the securities or 

financial instruments composing the Disclosed 

Portfolio of the Fund; or (2) whether other unusual 

conditions or circumstances detrimental to the 

maintenance of a fair and orderly market are 

present. 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. 

41See supra note 11. The Exchange states 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 the Sub-Adviser and their 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 

Continued 

required to establish positions in its 

futures investments will not exceed 5% 

of the Fund’s net assets, after taking into 

account unrealized profits and 

unrealized losses on any such positions. 

(10) The Fund may invest up to 10% 

of its total assets in leveraged ETFs or 

inverse ETFs that seek to deliver 

multiples, or the inverse, of the 

performance of the S&P 500 Index, 

respectively. Such investments will be 

made in accordance with the 1940 Act 

and consistent with the Fund’s 

investment objective and policies, and 

they will not be used to seek 

performance that is the multiple or 

inverse multiple (e.g., 2X or 3X) of any 

securities market index. 

(11) The Fund will not directly enter 

into swaps or engage in options 

transactions. 

(12) A minimum of 100,000 Shares 

will be outstanding at the 

commencement of trading on the 

Exchange. 

Quotation and last-sale information 

for the Shares will be available via the 

Consolidated Tape Association (‘‘CTA’’) 

high-speed line. In addition, the 

Portfolio Indicative Value 36 as defined 

in NYSE Arca Equities Rule 8.600(c)(3), 

will be widely disseminated at least 

every 15 seconds during the Core 

Trading Session by one or more major 

market data vendors.37 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 identities 

and quantities of the portfolio of 

securities and other assets (‘‘Disclosed 

Portfolio’’) held by the Fund that will 

form the basis for the Fund’s calculation 

of NAV at the end of the business day.38

The Administrator, through the National 

Securities Clearing Corporation 

(‘‘NSCC’’), will make available on each 

business day, immediately prior to the 

opening of business on the Exchange 

(currently 9:30 a.m., E.T.), the list of the 

names and the required number of 

shares of each security, and amount of 

cash, to be delivered in exchange for a 

creation unit of the Fund. The NAV of 

the Fund will be calculated once each 

business day as of the regularly 

scheduled close of normal trading on 

the Exchange (normally, 4:00 p.m., 

Eastern Time).39 Information regarding 

market price and trading volume of the 

Shares will be continually available on 

a real-time basis throughout the day on 

brokers’ computer screens and other 

electronic services. Information 

regarding the previous day’s closing 

price and trading volume information 

for the Shares will be published daily in 

the financial section of newspapers. The 

intra-day, closing, and settlement prices 

of the Fund investments will be readily 

available from the exchanges trading 

such securities, automated quotation 

systems, published or other public 

sources, or on-line information services 

such as Bloomberg or Reuters. 

Quotation and last sale information for 

underlying U.S. exchange-traded 

equities, including the Underlying 

ETFs, will be available via the CTA 

high-speed line and from the national 

securities exchange on which they are 

listed. Quotations and last sale 

information for the Fund’s futures 

investments will be available from the 

futures exchange on which the futures 

are listed. Quotation information from 

brokers and dealers or pricing services 

will be available for Cash Instruments 

and non-exchange traded securities of 

money market mutual funds held by the 

Fund. Pricing information regarding 

each asset class in which the Fund will 

invest is generally available through 

nationally recognized data service 

providers through subscription 

arrangements. The Fund’s Web site will 

include a form of the prospectus for the 

Fund and additional data relating to 

NAV and other applicable quantitative 

information. 

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 

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. 

Trading in Shares of a Fund will be 

halted if the circuit breaker parameters 

in NYSE Arca Equities Rule 7.12 have 

been reached or because of market 

conditions or for reasons that, in the 

view of the Exchange, make trading in 

the Shares inadvisable,40 and trading in 

the Shares will be subject to NYSE Arca 

Equities Rule 8.600(d)(2)(D), which sets 

forth additional circumstances under 

which trading in the Shares of a Fund 

may be halted. The Exchange states that 

it has a general policy prohibiting the 

distribution of material, non-public 

information by its employees. 

Consistent with NYSE Arca Equities 

Rule 8.600(d)(2)(B)(ii), the Reporting 

Authority 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 Fund’s portfolio. In 

addition, the Exchange states that 

neither the Adviser nor the Sub-Adviser 

is or is affiliated with a broker-dealer.41

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73382 Federal Register / Vol. 79, No. 237 / Wednesday, December 10, 2014 / Notices 

administering the policies and procedures adopted 

under subparagraph (i) above. 

42The 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. 

43 15 U.S.C. 78f(b)(5). 

44 15 U.S.C. 78k–1(a)(1)(C)(iii). 

45 15 U.S.C. 78s(b)(2). 

46This 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. 

47 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3The Exchange will explain the proposed change 

to its participants via an Options Trader Alert. 

4See Securities Exchange Act Release No. 64463 

(May 11, 2011), 76 FR 28257 (May 16, 2011)(SR– 

NASDAQ–2011–037)(approval order regarding 

updates to Opening Cross). 

5 ‘‘System Securities’’ means all options that are 

currently trading on NOM pursuant to Chapter IV. 

All other options shall be ‘‘Non System Securities.’’ 

Chapter VI, Section 1(b). 

6 In this proposal, all time is Eastern Time unless 

otherwise noted. 

7 ‘‘Imbalance’’ means the number of contracts of 

Eligible Interest that may not be equal. Chapter VI, 

Section 8(a)(1). ‘‘Eligible Interest’’ means any 

quotation or any order that may be entered into the 

system and designated with a time-in-force of IOC, 

DAY, GTC. Chapter VI, Section 8(a)(4). The 

Exchange is deleting the reference to Imbalance 

from Section 8(b) because, as discussed, the 

occurrence of the Opening Cross depends on the 

parameters proposed in Section 8(b) rather than on 

whether there is an imbalance. 

8 ‘‘Market for the Underlying Security’’ means 

either the primary listing market, the primary 

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.42 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 

applicable federal securities laws. 

Moreover, prior to the commencement 

of trading, the Exchange states that it 

will inform its Equity Trading Permit 

Holders in an Information Bulletin of 

the special characteristics and risks 

associated with trading the Shares. 

For the foregoing reasons, the 

Commission finds that the proposed 

rule change, as modified by Amendment 

No. 1, is consistent with Section 6(b)(5) 

of the Act,43 Section 11A(a)(1)(C)(iii) of 

the Act,44 and the rules and regulations 

thereunder applicable to a national 

securities exchange. 

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,45 that the 

proposed rule change (SR–NYSEArca– 

2014–30), as modified by Amendment 

No. 1, be, and it hereby is, approved.46

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.47

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–28879 Filed 12–9–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73739; File No. SR– 

NASDAQ–2014–116) 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Proposed Rule Change Relating to the 

NASDAQ Opening and Halt Cross 

December 4, 2014. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on November 

21, 2014, The NASDAQ Stock Market 

LLC (‘‘NASDAQ’’ or the ‘‘Exchange’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’) the 

proposed rule change as described in 

Items I, II, and III below, which Items 

have been prepared by NASDAQ. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of the Substance 

of the Proposed Rule Change 

NASDAQ proposes to modify and 

reorganize Chapter VI (Trading 

Systems), Section 8 (NASDAQ Opening 

and Halt Cross) of the NASDAQ Options 

Market, LLC (‘‘NOM’’). The proposal 

would update or add Section 1 and 

Section 8 definitions in respect of the 

NASDAQ Opening and Halt Cross. The 

proposal would also make changes 

regarding: The criteria for opening of 

trading or resumption of trading after a 

halt; NASDAQ posting on its Web site 

any changes to the dissemination 

interval or prior Order Imbalance 

Indicator; the procedure if more than 

one price exists; the procedure if there 

are unexecuted contracts; and the ability 

of firms to elect that orders be returned 

in symbols that were not opened on 

NOM before the conclusion of the 

Opening Order Cancel Timer. 

The text of the proposed rule change 

is available at http://

nasdaq.cchwallstreet.com/, at 

NASDAQ’s principal office, and at the 

Commission’s Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

NASDAQ included statements 

concerning the purpose of, and basis for, 

the proposed rule change. The text of 

these statements may be examined at 

the places specified in Item IV below, 

and is set forth in Sections A, B, and C 

below. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of the proposed rule 

change is to modify NOM Chapter VI, 

Section 1 and Section 8 to update or add 

definitions, which include Current 

Reference Price, NASDAQ Opening 

Cross, Eligible Interest, Valid Width 

National Best Bid or Offer (‘‘Valid 

Width NBBO’’), Away Best Bid or Offer 

(‘‘ABBO’’), and On the Open Order 

(‘‘OPG’’). The purpose is to also make 

changes regarding: The criteria for 

opening of trading or resumption of 

trading after a halt; NASDAQ posting on 

its Web site any changes to the 

dissemination interval or prior Order 

Imbalance Indicator; the procedure if 

more than one price exists; the 

procedure if there are unexecuted 

contracts; and the ability of firms to 

elect that orders be returned in symbols 

that were not opened on NOM before 

the conclusion of the Opening Order 

Cancel Timer.3

Section 8 of Chapter VI describes the 

NASDAQ opening and halt cross and 

opening imbalance process (‘‘Opening 

Cross’’).4 Section 8(a) currently contains 

definitions that are applicable to Section 

8. Section 8(b) currently states that for 

the opening of trading of System 

Securities,5 the Opening Cross shall 

occur at or after 9:30 a.m. Eastern Time 6

if any of the following ‘‘conditions’’ 

occur: (1) There is no Imbalance; 7 (2) 

the dissemination of a regular market 

hours quote or trade (as determined by 

the Exchange on a class-by-class basis) 

by the Market for the Underlying 

Security 8 has occurred (or, in the case 

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