Document ID: SEC-2014-1443-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2014-08-27T04:00Z

[Federal Register Volume 79, Number 166 (Wednesday, August 27, 2014)]
[Notices]
[Pages 51210-51217]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-20343]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72895; File No. SR-NYSEArca-2014-67]

Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a 
Proposed Rule Change, as Modified by Amendment No. 1, To List and Trade 
WBI SMID Tactical Growth Shares; WBI SMID Tactical Value Shares; WBI 
SMID Tactical Yield Shares; WBI SMID Tactical Select Shares; WBI Large 
Cap Tactical Growth Shares; WBI Large Cap Tactical Value Shares; WBI 
Large Cap Tactical Yield Shares; WBI Large Cap Tactical Select Shares; 
WBI Tactical Income Shares; and WBI Tactical High Income Shares Under 
NYSE Arca Equities Rule 8.600

August 21, 2014.

I. Introduction

    On June 20, 2014, NYSE Arca, Inc. (the ``Exchange'' or ``NYSE 
Arca'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) \1\ of the Securities 
Exchange Act of 1934 (``Act'' or ``Exchange Act'') \2\ and Rule 19b-4 
thereunder,\3\ a proposed rule change to list and trade the following 
shares (collectively, ``Shares'') of the funds (each a ``Fund'' and 
collectively, the ``Funds'') under NYSE Arca Equities Rule 8.600: the 
WBI SMID Tactical Growth Shares; WBI SMID Tactical Value Shares; WBI 
SMID Tactical Yield Shares; WBI SMID Tactical Select Shares; WBI Large 
Cap Tactical Growth Shares; WBI Large Cap Tactical Value Shares; WBI 
Large Cap Tactical Yield Shares; WBI Large Cap Tactical Select Shares; 
WBI Tactical Income Shares; and WBI Tactical High Income Shares. On 
July 1, 2014, the Exchange filed Amendment No. 1 to the proposed rule 
change. The proposed rule change was published for comment in the 
Federal Register on July 9, 2014.\4\ The Commission received no 
comments on the proposed rule change. This order approves the proposed 
rule change, as modified by Amendment No. 1.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
    \4\ See Securities Exchange Act Release No. 72526 (July 2, 
2014), 79 FR 39035 (``Notice'').
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II. Description of the Proposal \5\
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    \5\ Additional information regarding the Funds; Shares; 
investment objectives; strategies; methodology and restrictions; 
risks; fees and expenses; creations and redemptions of Shares; 
availability of information; trading rules and halts; and 
surveillance procedures, among other things, can be found in the 
Registration Statement and in the Notice. See Notice, supra note 4, 
and Registration Statement, infra note 7, respectively.
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    The Exchange proposes to list and trade the Shares under NYSE Arca 
Equities Rule 8.600, which governs the listing and trading of Managed 
Fund Shares.\6\ The Shares will be offered by Absolute Shares Trust 
(``Trust''),\7\ a

[[Page 51211]]

statutory trust organized under the laws of the State of Delaware and 
registered with the Commission as an open-end management investment 
company. Millington Securities, Inc. will be the investment adviser for 
each Fund (``Adviser'') and WBI Investments, Inc. will be the sub-
adviser to each Fund (``Sub-Adviser'').\8\ The Exchange states that the 
Adviser is a registered broker-dealer and is affiliated with a broker-
dealer, and that the Sub-Adviser is also affiliated with a broker-
dealer.\9\ The Exchange represents that the Adviser and Sub-Adviser 
will implement a firewall with respect to their relevant personnel and 
their broker-dealer affiliates regarding access to information 
concerning the composition and/or changes to a portfolio, and will be 
subject to procedures designed to prevent the use and dissemination of 
material non-public information regarding such portfolio.\10\ U.S. 
Bank, National Association will be the administrator, custodian, 
transfer agent and securities lending agent for each Fund. Foreside 
Fund Services, LLC will be the distributor for the Funds.
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    \6\ A Managed Fund Share is a security that represents an 
interest in an investment company registered under the Investment 
Company Act of 1940 (15 U.S.C. 80a-1), as amended (``1940 Act''), 
organized as an open-end investment company or similar entity that 
invests in a portfolio of securities selected by its investment 
adviser consistent with its investment objectives and policies. In 
contrast, an open-end investment company that issues Investment 
Company Units, listed and traded on the Exchange under NYSE Arca 
Equities Rule 5.2(j)(3), seeks to provide investment results that 
correspond generally to the price and yield performance of a 
specific foreign or domestic stock index, fixed income securities 
index or combination thereof.
    \7\ The Trust is registered under the 1940 Act. On February 28, 
2014, the Trust filed with the Commission an amended registration 
statement on Form N-1A relating to the Funds (File Nos. 333-192733 
and 811-22917) (the ``Registration Statement''). The description of 
the operation of the Trust and the Funds herein is based, in part, 
on the Registration Statement. In addition, the Commission has 
issued an order granting certain exemptive relief to the Adviser and 
the actively managed exchange-traded trusts it advises, including 
the Trust, under the 1940 Act. See Investment Company Act Release 
No. 30543 (May 29, 2013) (File No. 812-13886) (the ``Exemptive 
Order'').
    \8\ An investment adviser to an open-end fund is required to be 
registered under the Investment Advisers Act of 1940 (the ``Advisers 
Act''). The Adviser is wholly owned by WBI Trading Company, Inc., 
and the Sub-Adviser is an affiliate of WBI Trading Company. See 
Notice, supra note 4, 79 FR at 39035, n.8. The Adviser and the Sub-
Adviser are each registered as an investment adviser under the 
Advisers Act. As a result, the Adviser, 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, the Adviser, the 
Sub-Adviser, and their related personnel are subject to the 
provisions of Rule 206(4)-7 under the Advisers Act, which 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.
    \9\ See id. at 39036.
    \10\ See id. The Exchange also states that, in the event that 
(a) the Adviser and/or Sub-Adviser become newly affiliated with 
another broker-dealer, or (b) any new adviser or sub-adviser is a 
registered broker-dealer or becomes affiliated with a broker-dealer, 
it will implement a firewall with respect to such relevant personnel 
and/or its broker-dealer affiliate regarding access to information 
concerning the composition and/or changes to a portfolio, and will 
be subject to procedures designed to prevent the use and 
dissemination of material non-public information regarding such 
portfolio. See id.
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A. Common Fund Strategy and Characteristics

    Each Fund will be an actively-managed exchange-traded fund 
(``ETF'') and will not seek to replicate the performance of a specified 
index. Each Fund will, under normal market conditions,\11\ invest at 
least 80% of its net assets in securities according to its individual 
principal investment strategies as described below. Additionally, 
certain Funds may use American depositary receipts (``ADR''), European 
depositary receipts (``EDR'') and global depositary receipts (``GDR'') 
(collectively, ``Depositary Receipts'') when, in the discretion of the 
Sub-Adviser, the use of such securities is warranted for liquidity, 
pricing, timing or other reasons. No Fund will invest more than 10% of 
its net assets in unsponsored Depositary Receipts. Each Fund that 
invests primarily in equities as described further below also may 
invest up to 20% of its principal investment assets in high-yield bonds 
(also known as ``junk bonds'').
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    \11\ The term ``under normal market conditions'' or ``under 
normal circumstances'' includes, but is not limited to, the absence 
of adverse market, economic, political or other conditions, 
including extreme volatility or trading halts in the fixed income 
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. However, 
each Fund may temporarily depart from its principal investment 
strategy by making short-term investments in cash, cash equivalents, 
high-quality short-term debt securities, and money market 
instruments for temporary defensive purposes in response to adverse 
market, economic or political conditions. According to the Exchange, 
each Fund may acquire the following short-term investments: (1) 
certificates of deposit issued by commercial banks as well as 
savings banks or savings and loan associations; (2) bankers' 
acceptances; (3) time deposits; and (4) commercial paper and short 
term notes rated at the time of purchase ``A-2'' or higher by 
Standard & Poor's[supreg], ``Prime-1'' by Moody's[supreg] Investors 
Service, Inc., or similarly rated by another nationally recognized 
statistical rating organization or, if unrated, will be determined 
by the Sub-Adviser to be of comparable quality, as well as U.S. 
Government obligations.
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B. Individual Fund Investments

1. WBI SMID Tactical Growth Shares
    According to the Exchange, the WBI SMID Tactical Growth Shares will 
seek long-term capital appreciation and the potential for current 
income, while also seeking to protect principal during unfavorable 
market conditions.
a. Principal Investments
    Under normal market conditions, the Fund will invest at least 80% 
of its net assets in the exchange-listed equity securities of small-
capitalization and mid-capitalization domestic and foreign 
companies.\12\ The types of equity securities in which the Fund will 
invest are common stocks, preferred stocks, rights, warrants, 
convertibles, master limited partnerships (exchange-traded businesses 
organized as partnerships (``MLPs'')), and exchange-traded real estate 
investment trusts (``REITs''). The Fund may invest up to 50% of the 
Fund's principal investments in the securities of issuers in emerging 
markets, which could consist of Depositary Receipts, dollar denominated 
foreign securities and foreign equity securities. The Fund's principal 
investments also may consist of ETFs \13\ that invest predominantly in 
small-capitalization and mid-capitalization equity securities and will 
be considered small-capitalization and mid-capitalization equity 
securities for purposes of the Fund's equity allocation target.
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    \12\ Each Fund will generally invest in equity securities that 
trade in markets that are members of the Intermarket Surveillance 
Group (``ISG'') or are parties to a comprehensive surveillance 
sharing agreement with the Exchange. For each Fund, not more than 
10% of the net assets invested in exchange-traded equity securities 
shall consist of equity securities whose principal market is not a 
member of ISG or is a market with which the Exchange does not have a 
comprehensive surveillance sharing agreement. Furthermore, for each 
Fund not more than 10% of the net assets invested in futures 
contracts or options contracts shall consist of futures contracts or 
options contracts whose principal market is not a member of ISG or 
is a market with which the Exchange does not have a comprehensive 
surveillance sharing agreement. See id. at 39037, n.11.
    \13\ ETFs include Investment Company Units (NYSE Arca Equities 
Rule 5.2(j)(3)); Portfolio Depositary Receipts (NYSE Arca Equities 
Rule 8.100); and Managed Fund Shares (NYSE Arca Equities Rule 
8.600). The ETFs all will be listed and traded in the U.S. on 
registered exchanges. The ETFs in which a Fund may invest will 
primarily be index-based exchange-traded funds that hold 
substantially all of their assets in securities representing a 
specific index. While each Fund may invest in inverse ETFs, a Fund 
will not invest in leveraged (e.g., 2X, -2X, 3X or -3X) ETFs. See 
id. at 39037, n.12.
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b. Non-Principal Investments
    While the Fund, under normal circumstances, will invest at least 
80% of its net assets as described above, the Fund may directly invest 
in certain other investments. According to the Exchange, to enhance the 
Fund's returns or to mitigate risk and volatility, the Fund may invest 
up to 20% of the Fund's net assets in large-capitalization

[[Page 51212]]

equities; domestic and foreign debt securities (including junk bonds); 
ETFs (other than ETFs noted in the Principal Investment section for the 
Fund, above, that invest predominantly in small-capitalization and mid-
capitalization equity securities); and/or exchange-traded or over-the-
counter (``OTC'') options overlying: exchange listed equity indices; 
and futures on debt, interest rates, and currencies (``Options 
Strategies'').\14\
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    \14\ See id. at 39037.
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    The Fund may invest in the following types of debt securities: 
Fixed, floating and variable corporate debt securities, U.S. Government 
securities, debt securities of foreign issuers, sovereign debt 
securities, U.S. government agency securities, and high-yield bonds. 
The Fund also may invest in agency and non-agency residential mortgage-
backed securities (``RMBS'') and asset-backed securities.\15\ The Fund 
also may invest in debt-based exchange-traded notes (``ETNs'').\16\ The 
Fund expects to invest in debt securities of all maturities, from less 
than one year up to thirty years, depending on the portfolio manager's 
assessment of the risks and opportunities along the yield curve. 
According to the Exchange, the yield curve refers to the differences in 
yield among debt assets of varying maturities.
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    \15\ ``Non-agency'' securities are financial instruments that 
have been issued by an entity that is not a government-sponsored 
agency, such as the Federal National Mortgage Association (``Fannie 
Mae''), Federal Home Loan Mortgage Corporation (``Freddie Mac''), 
Federal Home Loan Banks, or the Government National Mortgage 
Association (``Ginnie Mae'').
    \16\ See id. ETNs are debt obligations of investment banks which 
are traded on exchanges and the returns of which are linked to the 
performance of market indexes and include securities listed and 
traded on the Exchange under NYSE Arca Equities Rule 5.2(j)(6) 
(``Index-Linked Securities''). In addition to trading ETNs on 
exchanges, investors may redeem ETNs directly with the issuer on a 
weekly basis, typically in a minimum amount of 50,000 units, or hold 
the ETNs until maturity.
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    In addition, the Fund may utilize equity options for individual 
securities including writing (selling) covered calls, buying puts, 
using combinations of calls and puts, using combinations of calls and 
combinations of puts, and entering into cap and floor agreements.\17\ 
The Fund also may use Options Strategies.
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    \17\ The Exchange describes cap and floor agreements in the 
Notice. See id. at 39037, n.16.
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    The Fund also may enter into the following types of financial 
instruments: futures overlying equity indexes, interest rates, debt 
instruments, and currencies; government debt repurchase agreements; 
depository receipt conversion swaps \18\ into and out of the underlying 
stock; and forward contracts on currencies (collectively, the 
``Financial Instruments'').\19\ Cash balances arising from the use of 
Financial Instruments typically will be held in money market 
instruments.
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    \18\ The Exchange describes depository receipt conversion swap 
in the Notice. See id. at 39037, n.18.
    \19\ See id. at 39037.
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2. WBI SMID Tactical Value Shares
    According to the Exchange, the WBI SMID Tactical Value Shares will 
seek long-term capital appreciation and the potential for current 
income, while also seeking to protect principal during unfavorable 
market conditions.
a. Principal Investments
    Under normal market conditions, the Fund will invest at least 80% 
of its net assets in the exchange-listed equity securities of small-
capitalization and mid-capitalization domestic and foreign companies 
selected by the Sub-Adviser. The types of equity securities in which 
the Fund will invest are common stocks, preferred stocks, rights, 
warrants, convertibles, MLPs, and REITs. The Fund may invest up to 50% 
of the Fund's principal investments in the securities of issuers in 
emerging markets, which could consist of Depositary Receipts, dollar 
denominated foreign securities and foreign equity securities. The 
Fund's principal investments also may consist of ETFs that invest 
predominantly in small-capitalization and mid-capitalization equity 
securities and will be considered small-capitalization and mid-
capitalization equity securities for purposes of the Fund's equity 
allocation target.
b. Non-Principal Investments
    While the Fund, under normal circumstances, will invest at least 
80% of its net assets in its investments as described above, the Fund 
may directly invest in certain other investments. According to the 
Registration Statement, the Fund may invest up to 20% of its net assets 
in large-capitalization equities, domestic and foreign debt securities 
(including junk bonds), ETFs (other than ETFs noted in the Principal 
Investments section for the Fund, above, that invest predominantly in 
small-capitalization and mid-capitalization equity securities), and/or 
in Options Strategies to enhance the Fund's returns or to mitigate risk 
and volatility. The Fund also may use Financial Instruments. Cash 
balances arising from the use of Financial Instruments typically will 
be held in money market instruments.
    The types of debt securities in which the Fund will invest are 
fixed, floating and variable corporate debt securities, U.S. Government 
securities, debt securities of foreign issuers, sovereign debt 
securities, U.S. government agency securities, and high-yield bonds. 
The Fund also may invest in debt-based ETNs. The Fund expects to invest 
in debt securities of all maturities, from less than one year up to 
thirty years, depending on the portfolio manager's assessment of the 
risks and opportunities along the yield curve.
3. WBI SMID Tactical Yield Shares
    According to the Exchange, the WBI SMID Tactical Yield Share will 
seek long-term capital appreciation and the potential for current 
income, while also seeking to protect principal during unfavorable 
market conditions.
a. Principal Investments
    Under normal market conditions, the Fund will invest at least 80% 
of its net assets in the exchange-listed dividend-paying equity 
securities of small-capitalization and mid-capitalization domestic and 
foreign companies selected by the Sub-Adviser. The types of equity 
securities in which the Fund will invest are common stocks, preferred 
stocks, rights, warrants, convertibles, MLPs, and REITs. The Fund may 
invest up to 50% of the Fund's principal investments in the securities 
of issuers in emerging markets, which could consist of Depositary 
Receipts, dollar-denominated foreign securities and foreign equity 
securities. The Fund's principal investments also may consist of ETFs 
that invest predominantly in small-capitalization and mid-
capitalization equity securities and will be considered small-
capitalization and mid-capitalization equity securities for purposes of 
the Fund's equity allocation target.
b. Non-Principal Investments
    While the Fund, under normal circumstances, will invest at least 
80% of its net assets in its investments as described above, the Fund 
may directly invest in certain other investments. According to the 
Registration Statement, the Fund may invest up to 20% of the Fund's net 
assets in large-capitalization equities, domestic and foreign debt 
securities, high-yield bonds and/or in Options Strategies and Financial 
Instruments. Cash balances arising from the use of Financial 
Instruments typically will be held in money market instruments.
    The types of debt securities in which the Fund will invest are 
fixed, floating and variable corporate debt securities, U.S. Government 
securities, debt

[[Page 51213]]

securities of foreign issuers, sovereign debt securities, U.S. 
government agency securities, and high-yield bonds. The Fund also may 
invest in debt-based ETNs and ETFs. The Fund expects to invest in debt 
securities of all maturities, from less than one year up to thirty 
years, depending on the portfolio manager's assessment of the risks and 
opportunities along the yield curve.
4. WBI SMID Tactical Select Shares
    According to the Exchange, the WBI SMID Tactical Select Shares will 
seek long-term capital appreciation and the potential for current 
income, while also seeking to protect principal during unfavorable 
market conditions.
a. Principal Investments
    Under normal market conditions, the Fund will invest at least 80% 
of its net assets in the exchange-listed equity securities of small-
capitalization and mid-capitalization domestic and foreign companies 
selected by the Sub-Adviser. The types of equity securities in which 
the Fund will invest are common stocks, preferred stocks, rights, 
warrants, convertibles, MLPs, and REITs. The Fund may invest up to 50% 
of the Fund's principal investments in the securities of issuers in 
emerging markets, which could consist of Depositary Receipts, dollar 
denominated foreign securities and foreign equity securities. The Fund 
also may invest up to 20% of the Fund's principal investments in junk 
bonds. The Fund's principal investments also may consist of ETFs that 
invest predominantly in small-capitalization and mid-capitalization 
equity securities and will be considered small-capitalization and mid-
capitalization equity securities for purposes of the Fund's equity 
allocation target.
b. Non-Principal Investments
    While the Fund, under normal circumstances, will invest at least 
80% of its net assets in its investments as described above, the Fund 
may directly invest in certain other investments. The Fund may invest 
up to 20% of the Fund's net assets in large-capitalization equities, 
domestic and foreign debt securities, high-yield bonds and/or in 
Options Strategies and Financial Instruments. Cash balances arising 
from the use of Financial Instruments typically will be held in money 
market instruments.
    The types of debt securities in which the Fund will invest are 
fixed, floating and variable corporate debt securities, U.S. Government 
securities, debt securities of foreign issuers, sovereign debt 
securities, U.S. government agency securities, and high-yield bonds. 
The Fund also may invest in debt-based ETNs and ETFs. The Fund expects 
to invest in debt securities of all maturities, from less than one year 
up to thirty years, depending on the portfolio manager's assessment of 
the risks and opportunities along the yield curve.
5. WBI Large Cap Tactical Growth Shares
    According to the Exchange, the WBI Large Cap Tactical Growth Shares 
objectives are to seek long-term capital appreciation and the potential 
for current income, while also seeking to protect principal during 
unfavorable market conditions.
a. Principal Investments
    Under normal market conditions, the Fund will invest at least 80% 
of its net assets in the exchange-listed equity securities of large 
capitalization domestic and foreign companies selected by the Sub-
Adviser. The types of equity securities in which the Fund will invest 
are common stocks, preferred stocks, rights, warrants, convertibles, 
MLPs, and REITs. The Fund may invest up to 50% of the Fund's principal 
investments in the securities of issuers in emerging markets, which 
could consist of Depositary Receipts, dollar denominated foreign 
securities and foreign equity securities. The Fund's principal 
investments also may consist of ETFs that invest predominantly in 
small-capitalization and mid-capitalization equity securities and will 
be considered small-capitalization and mid-capitalization equity 
securities for purposes of the Fund's equity allocation target.
b. Non-Principal Investments
    While the Fund, under normal circumstances, will invest at least 
80% of its net assets in its investments as described above, the Fund 
may directly invest in certain other investments. Namely, up to 20% of 
the Fund's net assets may be invested in small-capitalization and mid-
capitalization equities, domestic and foreign debt securities, and 
high-yield bonds and/or in Options Strategies and Financial 
Instruments. Cash balances arising from the use of Financial 
Instruments typically will be held in money market instruments.
    The types of debt securities in which the Fund will invest are 
fixed, floating and variable corporate debt securities, U.S. Government 
securities, debt securities of foreign issuers, sovereign debt 
securities, U.S. government agency securities, and high-yield bonds. 
The Fund also may invest in debt-based ETNs and ETFs. The Fund expects 
to invest in debt securities of all maturities, from less than one year 
up to thirty years, depending on the portfolio manager's assessment of 
the risks and opportunities along the yield curve.
6. WBI Large Cap Tactical Value Shares
    According to the Exchange, the WBI Large Cap Tactical Value Shares 
objectives are to seek long-term capital appreciation and the potential 
for current income, while also seeking to protect principal during 
unfavorable market conditions.
a. Principal Investments
    Under normal market conditions, the Fund will invest at least 80% 
of its net assets in the exchange-listed equity securities of large 
capitalization domestic and foreign companies selected by the Sub-
Adviser. The types of equity securities in which the Fund will invest 
are common stocks, preferred stocks, rights, warrants, convertibles, 
MLPs, and REITs. The Fund may invest up to 50% of the Fund's principal 
investments in the securities of issuers in emerging markets, which 
could consist of Depositary Receipts, dollar denominated foreign 
securities and foreign equity securities. The Fund also may invest up 
to 20% of the Fund's principal investments in junk bonds. The Fund's 
principal investments also may consist of ETFs that invest 
predominantly in small-capitalization and mid-capitalization equity 
securities and will be considered small-capitalization and mid-
capitalization equity securities for purposes of the Fund's equity 
allocation target.
b. Non-Principal Investments
    While the Fund, under normal circumstances, will invest at least 
80% of its net assets in its investments as described above, the Fund 
may directly invest in certain other investments Specifically, up to 
20% of the Fund's net assets may be invested in small-capitalization 
and mid-capitalization equities, domestic and foreign debt securities, 
and high-yield bonds and/or in Options Strategies and Financial 
Instruments. Cash balances arising from the use of Financial 
Instruments typically will be held in money market instruments.
    The types of debt securities in which the Fund will invest are 
fixed, floating and variable corporate debt securities, U.S. Government 
securities, debt

[[Page 51214]]

securities of foreign issuers, sovereign debt securities, U.S. 
government agency securities, and high-yield bonds. The Fund also may 
invest in debt-based ETNs and ETFs. The Fund expects to invest in debt 
securities of all maturities, from less than one year up to thirty 
years, depending on the portfolio manager's assessment of the risks and 
opportunities along the yield curve.
7. WBI Large Cap Tactical Yield Shares
    According to the Exchange, the WBI Large Cap Tactical Yield Shares 
will seek long-term capital appreciation and the potential for current 
income, while also seeking to protect principal during unfavorable 
market conditions.
a. Principal Investments
    Under normal market conditions, the Fund will invest at least 80% 
of its net assets in the exchange-listed dividend-paying equity 
securities of large capitalization domestic and foreign companies 
selected by the Sub-Adviser. The types of equity securities in which 
the Fund will invest are common stocks, preferred stocks, rights, 
warrants, convertibles, MLPs, and REITs. The Fund may invest up to 50% 
of the Fund's principal investments in the securities of issuers in 
emerging markets, which could consist of Depositary Receipts, dollar 
denominated foreign securities and foreign equity securities. The Fund 
also may invest up to 20% of the Fund's principal investments in high-
yield bonds. The Fund's principal investments also may consist of ETFs 
that invest predominantly in small-capitalization and mid-
capitalization equity securities and will be considered small-
capitalization and mid-capitalization equity securities for purposes of 
the Fund's equity allocation target.
b. Non-Principal Investments
    While the Fund, under normal circumstances, will invest at least 
80% of its net assets in its investments as described above, the Fund 
may directly invest in certain other investments Namely, up to 20% of 
the Fund's net assets may be invested in small-capitalization and mid-
capitalization equities, domestic and foreign debt securities, high-
yield bonds and/or in Options Strategies and Financial Instruments. 
Cash balances arising from the use of Financial Instruments typically 
will be held in money market instruments.
    The types of debt securities in which the Fund will invest are 
fixed, floating and variable corporate debt securities, U.S. Government 
securities, debt securities of foreign issuers, sovereign debt 
securities, U.S. government agency securities, and high-yield bonds. 
The Fund also may invest in debt-based ETNs and ETFs. The Fund expects 
to invest in debt securities of all maturities, from less than one year 
up to thirty years, depending on the portfolio manager's assessment of 
the risks and opportunities along the yield curve.
8. WBI Large Cap Tactical Select Shares
    According to the Registration Statement, the WBI Large Cap Tactical 
Select Shares objectives are to seek long-term capital appreciation and 
the potential for current income, while also seeking to protect 
principal during unfavorable market conditions.
a. Principal Investments
    Under normal market conditions, the Fund will invest at least 80% 
of its net assets in the exchange-listed equity securities of large 
capitalization domestic and foreign companies selected by the Sub-
Adviser. The types of equity securities in which the Fund will invest 
are common stocks, preferred stocks, rights, warrants, convertibles, 
MLPs, and REITs. The Fund may invest up to 50% of the Fund's principal 
investments in the securities of issuers in emerging markets, which 
could consist of Depositary Receipts, dollar denominated foreign 
securities and foreign equity securities. The Fund also may invest up 
to 20% of the Fund's principal investments in junk bonds. The Fund's 
principal investments also may consist of ETFs that invest 
predominantly in small-capitalization and mid-capitalization equity 
securities and will be considered small-capitalization and mid-
capitalization equity securities for purposes of the Fund's equity 
allocation target.
b. Non-Principal Investments
    While the Fund, under normal circumstances, will invest at least 
80% of its net assets in its investments as described above, the Fund 
may directly invest in certain other investments. Namely, up to 20% of 
the Fund's net assets may be invested in small-capitalization and mid-
capitalization equities, domestic and foreign debt securities, and 
high-yield bonds and/or in Options Strategies described above and 
Financial Instruments. Cash balances arising from the use of Financial 
Instruments typically will be held in money market instruments.
    The types of debt securities in which the Fund will invest are 
fixed, floating and variable corporate debt securities, U.S. Government 
securities, debt securities of foreign issuers, sovereign debt 
securities, U.S. government agency securities, and high-yield bonds. 
The Fund also may invest in debt-based ETNs and ETFs. The Fund expects 
to invest in debt securities of all maturities, from less than one year 
up to thirty years, depending on the portfolio manager's assessment of 
the risks and opportunities along the yield curve.
9. WBI Tactical Income Shares
    According to the Exchange, the WBI Tactical Income Shares 
objectives are to seek current income with the potential for long-term 
capital appreciation, while also seeking to protect principal during 
unfavorable market conditions.
a. Principal Investments
    Under normal market conditions, the Fund will invest at least 80% 
of its net assets in income producing debt and exchange listed equity 
securities of foreign and domestic issuers, including the securities of 
foreign and domestic corporate and governmental entities selected by 
the Sub-Adviser. The types of debt securities in which the Fund will 
invest are corporate debt securities, U.S. Government securities, debt 
securities of foreign issuers, sovereign debt securities, U.S. 
government agency securities, high- yield bonds and variable and 
floating rate securities. The Fund also may invest in debt-based ETNs. 
The Fund expects to invest in debt securities of all maturities, from 
less than one year up to thirty years, depending on the portfolio 
manager's assessment of the risks and opportunities along the yield 
curve. The types of equity securities in which the Fund will invest are 
common stocks, preferred stocks, rights, warrants, convertibles MLPs, 
and REITs. The Fund may invest in companies of any size market 
capitalization.
    The Fund may invest up to 50% of the Fund's principal investments 
in the securities of issuers in emerging markets, which could consist 
of Depositary Receipts, dollar denominated foreign securities and 
foreign equity securities. The Fund also may invest up to 40% of the 
Fund's principal investments in junk bonds. The Fund's principal 
investments also may consist of ETFs that invest predominantly in debt 
securities and will be considered debt securities for the purposes of 
the Fund's debt target allocation and investments in other investment 
companies that invest predominantly in dividend-paying equity 
securities are considered

[[Page 51215]]

dividend-paying equity securities for the purposes of the fund's income 
producing securities target allocation.
b. Non-Principal Investments
    While the Fund, under normal circumstances, will invest at least 
80% of its net assets in its investments as described above, the Fund 
may directly invest in certain other investments. Namely, up to 20% of 
the Fund's net assets may be invested in exchange listed foreign and 
domestic equities (other than the foreign and domestic equities noted 
in the Principal Investment section for the Fund, above), ETFs, ETNs 
(other than the debt-based ETFs and ETNs noted in the Principal 
Investment section for the Fund, above), and/or in Options Strategies 
and Financial Instruments. Cash balances arising from the use of 
Financial Instruments typically will be held in money market 
instruments.
10. WBI Tactical High Income Shares
    According to the Exchange, the WBI Tactical High Income Shares 
investment objectives are to seek high current income with the 
potential for long-term capital appreciation, while also seeking to 
protect principal during unfavorable market conditions.
a. Principal Investments
    Under normal market conditions, the Fund will invest at least 80% 
of its net assets in income producing debt and exchange listed equity 
securities of foreign and domestic issuers, including the securities of 
foreign and domestic corporate and governmental entities selected by 
the Sub-Adviser.
    The types of debt securities in which the Fund will invest are 
corporate debt securities, U.S. Government securities, debt securities 
of foreign issuers, sovereign debt securities, U.S. government agency 
securities, high-yield bonds, variable and floating rate securities, 
and debt-based ETNs and ETFs. The Fund expects to invest in debt 
securities of all maturities, from less than one year up to thirty 
years, depending on the portfolio manager's assessment of the risks and 
opportunities along the yield curve.
    The types of equity securities in which the Fund will invest are 
common stocks, preferred stocks, rights, warrants, convertibles, MLPs, 
and REITs. The Fund may invest in companies of any size market 
capitalization.
    The Fund may invest up to 50% of the Fund's principal investments 
in the securities of issuers in emerging markets, which could consist 
of Depositary Receipts, dollar denominated foreign securities and 
foreign equity securities. The Fund also may invest up to 80% of the 
Fund's principal investments in junk bonds. The Fund's principal 
investments also may consist of ETFs that invest predominantly in debt 
securities and will be considered debt securities for the purposes of 
the Fund's debt target allocation and investments in other investment 
companies that invest predominantly in dividend-paying equity 
securities are considered dividend-paying equity securities for the 
purposes of the fund's income producing securities target allocation.
b. Non-Principal Investments
    While the Fund, under normal circumstances, will invest at least 
80% of its net assets in its investments as described above, the Fund 
may directly invest in certain other investments. According to the 
Exchange, up to 20% of the Fund's net assets may be invested in 
exchange listed foreign and domestic equities (other than the foreign 
and domestic equities noted in the Principal Investment section for the 
Fund, above), ETFs, ETNs (other than the debt-based ETFs and ETNs noted 
in the Principal Investment section for the Fund, above), and/or in 
Options Strategies and Financial Instruments. Cash balances arising 
from the use of Financial Instruments typically will be held in money 
market instruments.

C. Investment Restrictions

    Each Fund will seek to qualify for treatment as a regulated 
investment company (``RIC'') under Subchapter M of the Internal Revenue 
Code of 1986, as amended.\20\
---------------------------------------------------------------------------

    \20\ 26 U.S.C. 851.
---------------------------------------------------------------------------

    A Fund may hold up to an aggregate amount of 15% of its net assets 
in illiquid assets (calculated at the time of investment), including 
Rule 144A securities. The Funds will monitor their portfolio liquidity 
on an ongoing basis to determine whether, in the 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 a Fund's net assets are held in 
illiquid securities and other illiquid assets.
    A Fund will not invest more than 25% of its total assets, directly 
or indirectly, through underlying ETFs, in an individual industry, as 
defined by the Standard Industrial Classification Codes utilized by the 
Division of Corporate Finance of the Commission.\21\ This limitation 
does not apply to investments in securities issued or guaranteed by the 
U.S. Government, its agencies or instrumentalities, or investments in 
shares of investment companies.
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    \21\ See Form N-1A, Item 5. The Commission has taken the 
position that a fund is concentrated if it invests more than 25% of 
the value of its total assets in any one industry. See, e.g., 
Investment Company Act Release No. 9011 (October 30, 1975), 40 FR 
54241 (November 21, 1975).
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    According to the Exchange, a Fund may not purchase or sell physical 
commodities or physical 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 a Fund from purchasing, selling and entering into financial 
futures contracts (including futures contracts on indices of 
securities, interest rates and currencies), options on financial 
futures contracts (including futures contracts on indices of 
securities, interest rates and currencies), warrants, swaps, forward 
contracts, or other derivative instruments that are not related to 
physical commodities.
    No Fund will invest more than 10% of its net assets in unsponsored 
Depositary Receipts. For each Fund, not more than 10% of the net assets 
invested in exchange-traded equity securities shall consist of equity 
securities whose principal market is not a member of the ISG or is a 
market with which the Exchange does not have a comprehensive 
surveillance sharing agreement. Further, for each Fund, not more than 
10% of the net assets invested in futures contracts or options 
contracts shall consist of futures contracts or options contracts whose 
principal market is not a member of ISG or is a market with which the 
Exchange does not have a comprehensive surveillance sharing agreement.
    No Fund will invest in leveraged or inverse leveraged (e.g., 2X, -
2X, 3X, or -3X) ETFs.

III. Discussion and Commission Findings

    After careful review, the Commission finds that the Exchange's 
proposal to list and trade the Shares is consistent with the Exchange 
Act and the rules and regulations thereunder applicable to a national 
securities exchange.\22\ In particular, the Commission finds that the 
proposed rule change is consistent with Section 6(b)(5) of the Exchange

[[Page 51216]]

Act,\23\ 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 notes that the Funds 
and the Shares must comply with the requirements of NYSE Arca Equities 
Rule 8.600 to be listed and traded on the Exchange.
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    \22\ 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).
    \23\ 15 U.S.C. 78f(b)(5).
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    The Commission finds that the proposal to list and trade the Shares 
on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the 
Exchange Act,\24\ which sets forth Congress' 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 and underlying domestic exchange listed 
equities securities, including common stocks, preferred stocks, rights, 
warrants, convertibles, Depositary Receipts, ETFs, ETNs, MLPs and 
REITS, will be available via the Consolidated Tape Association high-
speed line and from the national securities exchange on which they are 
listed. Quotation and last-sale information for domestic exchange-
listed options contracts will be available via the Options Price 
Reporting Authority.
---------------------------------------------------------------------------

    \24\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
---------------------------------------------------------------------------

    Quotation information for unsponsored Depositary Receipts will be 
available from major market data vendors. Quotation information for 
non-exchange-traded derivatives, including OTC options, forwards, and 
swaps may be obtained from brokers and dealers who make markets in such 
securities or major market data vendors. Price information on futures 
and options on futures will be available from major market data vendors 
and from securities and futures exchanges, as applicable.
    Quotation information for debt securities, including fixed, 
floating and variable corporate debt securities, U.S. Government 
securities, debt securities of foreign issuers, sovereign debt 
securities, U.S. government agency securities and high-yield bonds, 
will be available from major market data vendors. In addition, 
quotation information from brokers and dealers or major market data 
vendors will be available for mortgage-backed; asset-backed securities; 
money market instruments; short-term debt securities; and Financial 
Instruments. 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. Price information regarding equity 
securities and options traded on non-U.S. securities exchanges will be 
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.
    The Commission also 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. On each business day, before commencement of trading in Shares 
in the Core Trading Session (9:30 a.m. E.T. to 4:00 p.m. E.T.) on the 
Exchange, each Fund will disclose on its Web site the Disclosed 
Portfolio as defined in NYSE Arca Equities Rule 8.600(c)(2) that will 
form the basis for a Fund's calculation of NAV at the end of the 
business day.\25\ The Web site information will be publicly available 
at no charge. The NAV of a Fund will be determined once each Business 
Day, normally as of the close of trading on the NYSE (normally, 4:00 
p.m. E.T.). 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 as defined in NYSE Arca Equities 
Rule 8.600(c)(2) will be made available to all market participants at 
the same time.\26\ The Intraday Indicative Value (``IIV'') will be 
widely disseminated by one or more major market data vendors at least 
every 15 seconds during the Core Trading Session.\27\ The Web site for 
each Fund will include a form of the prospectus for each Fund and 
additional data relating to NAV and other applicable quantitative 
information.\28\
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    \25\ Under accounting procedures followed by each Funds, trades 
made on the prior business day (``T'') will be booked and reflected 
in NAV on the current business day (``T+1''). Accordingly, each Fund 
will be able to disclose at the beginning of the business day the 
portfolio that will form the basis for the NAV calculation at the 
end of the business day.
    \26\ See Notice, supra note 4, 79 FR at 39044.
    \27\ The IIV is the same as the Portfolio Indicative Value as 
defined in NYSE Arca Equities Rule 8.600(c)(3). See id. at 39042.
    \28\ See id. at 39043.
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    The Exchange represents that trading in Shares of a Fund will be 
halted if the circuit breaker parameters in NYSE Arca Equities Rule 
7.12 have been reached.\29\ 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,\30\ and trading in the Shares 
will be subject to NYSE Arca Equities Rule 8.600(d)(2)(D), which sets 
forth circumstances under which Shares may be halted.
---------------------------------------------------------------------------

    \29\ See id. at 39044.
    \30\ These may include: (1) The extent to which trading is not 
occurring in the securities and/or the Financial Instruments 
comprising the Disclosed Portfolio of a Fund; or (2) whether other 
unusual conditions or circumstances detrimental to the maintenance 
of a fair and orderly market are present. See id.
---------------------------------------------------------------------------

    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), each Fund's 
Reporting Authority will 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 each Fund's 
portfolio.\31\
---------------------------------------------------------------------------

    \31\ See NYSE Arca Equities Rule 8.600(d)(2)(B)(ii).
---------------------------------------------------------------------------

    The Exchange states that the Adviser is a registered broker-dealer 
and is affiliated with a broker-dealer, and that the Sub-Adviser is 
also affiliated with a broker-dealer. The Exchange represents that the 
Adviser and Sub-Adviser will implement a firewall with respect to their 
relevant personnel and their broker-dealer affiliates regarding access 
to information concerning the composition and/or changes to a 
portfolio, and will be subject to procedures designed to prevent the 
use and dissemination of material non-public information regarding such 
portfolio.
    The Financial Industry Regulatory Authority (``FINRA''), on behalf 
of the Exchange, will communicate as needed regarding trading in the 
Shares, underlying exchange-traded equity securities (including, 
without limitation, domestic and foreign common stocks, preferred 
stocks, rights, warrants, convertibles, Depositary Receipts, ETFs, 
ETNs, MLPs and REITS), exchange-traded options, futures, options on 
futures contracts and options on securities indices with markets and 
entities that are members of ISG, and FINRA may obtain, on behalf of 
the Exchange, trading information regarding trading in the Shares, 
underlying exchange-traded equity securities, exchange-traded options, 
futures, options on futures contracts and

[[Page 51217]]

options on securities indices from such markets or entities. In 
addition, the Exchange may obtain information regarding trading in the 
Shares, underlying exchange-traded equity securities (including, 
without limitation, domestic and foreign common stocks, preferred 
stocks, rights, warrants, convertibles, Depositary Receipts, ETFs, 
ETNs, MLPs and REITS), exchange-traded options, futures, options on 
futures contracts and options on securities indices from markets and 
entities that are members of ISG or with which the Exchange has in 
place a comprehensive surveillance sharing agreement.\32\
---------------------------------------------------------------------------

    \32\ For a list of the current members of ISG, see 
www.isgportal.org.
---------------------------------------------------------------------------

    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. In support of this 
proposal, the Exchange represented that:
    (1) The Shares will conform to the initial and continuing listing 
criteria under NYSE Arca Equities Rule 8.600.
    (2) Trading in the Shares will be subject to the existing trading 
surveillances administered by FINRA on behalf of the Exchange, which 
are designed to detect violations of Exchange rules and applicable 
federal securities laws, and these procedures are adequate to properly 
monitor Exchange trading of the Shares in all trading sessions and to 
detect and help deter violations of Exchange rules and applicable 
federal securities laws.
    (3) The Exchange has appropriate rules to facilitate transactions 
in the Shares during all trading sessions.
    (4) Prior to the commencement of trading, the Exchange will inform 
its Equity Trading Permit Holders (``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 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 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.
    (5) For initial and/or continued listing, each Fund will be in 
compliance with Rule 10A-3 under the Act,\33\ as provided by NYSE Arca 
Equities Rule 5.3.
---------------------------------------------------------------------------

    \33\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------

    (6) Each Fund may hold up to an aggregate amount of 15% of its net 
assets in illiquid securities, including Rule 144A securities.
    (7) Unsponsored Depository Receipts will not exceed 10% of a Fund's 
net assets.
    (8) For each Fund, not more than 10% of the net assets invested in 
exchange-traded equity securities shall consist of equity securities 
whose principal market is not a member of the ISG or is a market with 
which the Exchange does not have a comprehensive surveillance sharing 
agreement.
    (9) For each Fund, not more than 10% of the net assets invested in 
futures contracts or options contracts shall consist of futures 
contracts or options contracts whose principal market is not a member 
of ISG or is a market with which the Exchange does not have a 
comprehensive surveillance sharing agreement.
    (10) No Fund will invest in leveraged or inverse leveraged (e.g., 
2X, -2X, 3X, or -3X) ETFs.
    (11) A minimum of 100,000 Shares will be outstanding at the 
commencement of trading on the Exchange.
    This approval order is based on all of the Exchange's 
representations, including those set forth above and in the Notice, and 
the Exchange's descriptions of the Funds. For the foregoing reasons, 
the Commission finds that the proposed rule change is consistent with 
Section 6(b)(5) of the Act \34\ and the rules and regulations 
thereunder applicable to a national securities exchange.
---------------------------------------------------------------------------

    \34\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Exchange Act,\35\ that the proposed rule change (SR-NYSEArca-2014-67), 
as modified by Amendment No. 1, is hereby approved.
---------------------------------------------------------------------------

    \35\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\36\
---------------------------------------------------------------------------

    \36\ 17 CFR 200.30-3(a)(12).
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Kevin O'Neill,
Deputy Secretary.
[FR Doc. 2014-20343 Filed 8-26-14; 8:45 am]
BILLING CODE 8011-01-P