Document ID: SEC-2015-2189-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.,
Posted Date: 2015-12-30T05:00Z

[Federal Register Volume 80, Number 250 (Wednesday, December 30, 2015)]
[Notices]
[Pages 81564-81573]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-32821]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76761; File No. SR-NYSEArca-2015-107]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change To List and Trade Shares of the REX Gold Hedged 
S&P 500 ETF and the REX Gold Hedged FTSE Emerging Markets ETF Under 
NYSE Arca Equities Rule 8.600

December 23, 2015.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on December 10, 2015, NYSE Arca, Inc. (``Exchange'' or ``NYSE 
Arca'') 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 the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to list and trade shares of the following 
under NYSE Arca Equities Rule 8.600 (``Managed Fund Shares''): The REX 
Gold Hedged S&P 500 ETF and the REX Gold Hedged FTSE Emerging Markets 
ETF. The text of the proposed rule change is available on the 
Exchange's Web site at www.nyse.com, at the principal office of the 
Exchange, 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, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to list and trade shares (the ``Shares'') of 
the following under NYSE Arca Equities Rule 8.600, which governs the 
listing and trading of Managed Fund Shares \4\: The REX Gold Hedged S&P 
500 ETF and the REX Gold Hedged FTSE Emerging Markets ETF (each a 
``Fund'' and, collectively, the ``Funds'').\5\
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    \4\ 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) (the ``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.
    \5\ The Commission has approved listing and trading on the 
Exchange of a number of actively managed funds under Rule 8.600. 
See, e.g., Securities Exchange Act Release Nos. 63076 (October 12, 
2010), 75 FR 63874 (October 18, 2010) (SR-NYSEArca-2010-79) (order 
approving Exchange listing and trading of Cambria Global Tactical 
ETF); 70055 (July 29, 2013) (SR-NYSEArca-2013-52) (order approving 
proposed rule change relating to listing and trading of shares of 
the First Trust Morningstar Managed Futures Strategy Fund under NYSE 
Arca Equities Rule 8.600); and 71456 (January 31, 2014), 79 FR 7258 
(February 6, 2014) (SR-NYSEArca-2013-116) (order approving proposed 
rule change relating to listing and trading of shares of the 
AdvisorShares International Gold ETF, AdvisorShares Gartman Gold/Yen 
ETF, AdvisorShares Gartman Gold/British Pound ETF, and AdvisorShares 
Gartman Gold/Euro ETF under NYSE Arca Equities Rule 8.600).
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    The Shares will be offered by Exchange Traded Concepts Trust (the 
``Trust''), a Delaware statutory trust. Exchange Traded Concepts, LLC 
will serve as the investment adviser to the Funds (``Adviser''). Vident 
Investment Advisory, LLC (the ``Sub-Adviser'') will serve as sub-
adviser to the Funds.\6\
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    \6\ The Trust is registered under the 1940 Act. On October 9, 
2015, the Trust filed with the Commission an amendment to its 
registration statement on Form N-1A under the Securities Act of 1933 
(15 U.S.C. 77a) (``Securities Act''), and under the 1940 Act 
relating to the Funds (File Nos. 333-156529 and 811-22263) 
(``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 Trust under the 1940 
Act. See Investment Company Act Release No. 30445, April 2, 2013 
(File No. 812-13969) (``Exemptive Order'').
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    SEI Investments Distribution Co. (``SIDCO''), (the ``Distributor'') 
will be the principal underwriter and distributor of the Funds' Shares. 
SEI Investments Global Funds Services (the ``Administrator'') will 
serve as the administrator, custodian, transfer agent and fund 
accounting agent for the Funds.\7\
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    \7\ The Funds are subject to regulation under the Commodity 
Exchange Act (``CEA'') and Commodity Futures Trading Commission 
(``CFTC'') rules as commodity pools. The Adviser is registered as a 
commodity pool operator (``CPO''), and the Funds will be operated in 
accordance with CFTC rules.
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    Commentary .06 to Rule 8.600 provides that, if the investment 
adviser to the investment company issuing Managed Fund Shares is 
affiliated with a broker-dealer, such investment adviser shall erect a 
``fire wall'' between the investment adviser and the broker-dealer with 
respect to access to information concerning the composition and/or 
changes to such investment company portfolio. In addition, Commentary 
.06 further requires that personnel who make decisions on the open-end 
fund's portfolio composition must be subject to procedures designed to 
prevent the use and dissemination of material nonpublic information 
regarding the open-end fund's portfolio.\8\ Commentary .06 to Rule

[[Page 81565]]

8.600 is similar to Commentary .03(a)(i) and (iii) to NYSE Arca 
Equities Rule 5.2(j)(3); however, Commentary .06 in connection with the 
establishment of a ``fire wall'' between the investment adviser and the 
broker-dealer reflects the applicable open-end fund's portfolio, not an 
underlying benchmark index, as is the case with index-based funds. 
Neither the Adviser nor the Sub-Adviser is a broker-dealer or 
affiliated with a broker-dealer.
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    \8\ An investment adviser to an open-end fund is required to be 
registered under the Investment Advisers Act of 1940 (the ``Advisers 
Act''). As a result, the Adviser and Sub-Adviser and their related 
personnel will be 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 violations, by the investment adviser 
and its supervised persons, of the Advisers Act and the Commission 
rules adopted thereunder; (ii) implemented, at a minimum, an annual 
review regarding the adequacy of the policies and procedures 
established pursuant to subparagraph (i) above and the effectiveness 
of their implementation; and (iii) designated an individual (who is 
a supervised person) responsible for administering the policies and 
procedures adopted under subparagraph (i) above.
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    In the event (a) the Adviser or Sub-Adviser becomes a registered 
broker-dealer or becomes newly affiliated with a broker-dealer, or (b) 
any new adviser or sub-adviser is a registered broker-dealer, or 
becomes affiliated with a broker-dealer, it will implement a fire wall 
with respect to its relevant personnel or its broker-dealer affiliate 
regarding access to information concerning the composition and/or 
changes to a portfolio, and will be subject to procedures designed to 
prevent the use and dissemination of material non-public information 
regarding such portfolio.
    The REX Gold Hedged S&P 500 ETF--Principal Investments
    According to the Registration Statement, the Fund will seek to 
outperform the total return performance of the S&P 500 Dynamic Gold 
Hedged Index (the ``S&P Benchmark'') by actively hedging the returns of 
the S&P 500[supreg] Index using gold futures.
    The Fund will seek to achieve its investment objective of 
outperforming the S&P Benchmark by providing exposure to a gold-hedged 
U.S. large-cap portfolio using a quantitative, rules-based strategy. 
The Fund will invest at least 80% of its assets (plus the amount of any 
borrowings for investment purposes) in (i) U.S. exchange-listed large-
cap U.S. stocks; (ii) gold futures, (iii) exchange-traded funds 
(``ETFs'') \9\ and exchange-traded closed-end funds (together with 
ETFs, the ``Underlying Funds'') that provide exposure to large-cap U.S. 
stocks, (iv) ETFs or exchange-traded notes (``ETNs'') \10\ that provide 
exposure to gold, and (v) futures that provide exposure to the S&P 
500[supreg] Index. The Fund will not invest in non-U.S. stocks.
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    \9\ For purposes of this filing, ETFs include Investment Company 
Units (as described in NYSE Arca Equities Rule 5.2(j)(3)); Portfolio 
Depository Receipts (as described in NYSE Arca Equities Rule 8.100); 
and Managed Fund Shares (as described in NYSE Arca Equities Rule 
8.600). The Underlying Funds in which a Fund will invest all will be 
listed and traded on national securities exchanges. While the Funds 
may invest in inverse ETFs, the Funds will not invest in leveraged 
(e.g., 2X, -2X, 3X or -3X) ETFs.
    \10\ ETNs, which will be listed on a national securities 
exchange, are securities such as those described in NYSE Arca 
Equities Rule 5.2(j)(6). While the Funds may invest in inverse ETNs, 
the Funds will not invest in leveraged (e.g., 2X, -2X, 3X or -3X) 
ETNs.
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    The Fund will seek to achieve a similar level of volatility as that 
of the S&P Benchmark, although there is no assurance it will do so.
    According to the Registration Statement, the S&P Benchmark seeks to 
reflect the returns of a portfolio of S&P 500[supreg] stocks, hedged 
with a long gold futures overlay. Specifically, the S&P Benchmark 
measures the total return performance of a hypothetical portfolio 
consisting of securities that compose the S&P 500[supreg] Index, which 
measures the performance of the large-capitalization sector of the U.S. 
equity market, and a long position in gold futures contracts, the 
notional value of which is comparable to the value of the S&P 
Benchmark's equity component.
    The Sub-Adviser will continuously monitor the Fund's holdings in 
order to enhance performance while still providing approximately equal 
notional exposure to equity securities and gold futures contracts.
    According to the Registration Statement, futures contracts, by 
their terms, have stated expirations and, at a specified point in time 
prior to expiration, trading in a futures contract for the current 
delivery month will cease. Therefore, in order to maintain exposure to 
gold futures contracts, the S&P Benchmark must periodically migrate out 
of gold futures contracts nearing expiration and into gold futures 
contracts that have longer remaining until expiration, a process 
referred to as ``rolling.'' The impact from this continuous process of 
selling expiring contracts and buying longer-dated contracts is called 
roll yield. The S&P Benchmark rolls these futures contracts according 
to a predefined schedule, regardless of the liquidity or roll yield of 
the futures contract selected.
    The Fund will look to minimize the impact of rolling futures 
contracts in a number of ways. For example, the Fund may roll positions 
in gold futures contracts before or after the scheduled roll dates for 
the S&P Benchmark, to the extent of favorable market prices and 
available liquidity. Additionally, the Fund may attempt to minimize 
roll costs (and maximize yields) by rolling into the gold futures 
contract with the largest positive or smallest negative roll yield. 
This strategy for taking long positions in and unwinding exposure to 
gold futures contracts may cause the Fund to have more or less exposure 
to gold futures contracts than the S&P Benchmark. Additionally, the 
Fund is not obligated to rebalance its exposures at the same time that 
the S&P Benchmark rebalances its exposures, and the Fund may rebalance 
more or less frequently than the S&P Benchmark in order to ensure that 
the Fund's exposure to equities remains comparable to the Fund's 
exposure to the price of gold.
    The Fund will not directly hold gold futures contracts or other 
commodity-linked instruments (namely, commodity-related pooled vehicles 
(as described below) and options on commodity futures). Rather, the 
Fund expects to gain exposure to these instruments by investing up to 
25% of its total assets, as measured at the end of every quarter of the 
Fund's taxable year, in a wholly-owned and controlled Cayman Islands 
subsidiary (the ``Subsidiary''). The Subsidiary will be advised by the 
Adviser and the Fund's investment in the Subsidiary will primarily be 
intended to provide the Fund primarily with exposure to the price of 
gold. The Fund's investment in the Subsidiary is expected to provide 
the Fund with an effective means of obtaining exposure to the 
commodities markets in a manner consistent with U.S. federal tax law 
requirements applicable to registered investment companies.

The REX Gold Hedged FTSE Emerging Markets ETF--Principal Investments

    According to the Registration Statement, the REX Gold Hedged FTSE 
Emerging Markets ETF (the ``Fund'') will seek to outperform the total 
return performance of the FTSE Emerging Gold Overlay Index (the ``FTSE 
Benchmark'') by actively hedging a portfolio of emerging markets 
securities using gold futures.
    The Fund will seek to achieve its investment objective of 
outperforming the FTSE Benchmark by providing exposure to a gold-hedged 
emerging markets portfolio using a quantitative, rules-based strategy. 
The Fund will invest at least 80% of its assets (plus the amount of any 
borrowings for investment purposes) in (i) equity securities of 
emerging markets companies, as such companies are classified by the 
FTSE Benchmark

[[Page 81566]]

(``Emerging Markets Securities'') \11\, (ii) gold futures, (iii) ETFs 
and exchange-traded closed-end funds (together with ETFs, the 
``Underlying Funds''), American Depository Receipts (``ADRs'') \12\, 
Global Depository Receipts (``GDRs'', American Depositary Shares 
(``ADS''), European Depositary Receipts (``EDRs''), International 
Depository Receipts (``IDRs'', and together with ADRs, GDRs and ADS, 
``Depositary Receipts'') that provide exposure to Emerging Markets 
Securities, (iv) ETFs \13\ or ETNs \14\ that provide exposure to gold, 
and (v) futures that provide exposure to Emerging Markets Securities. 
The Fund will seek to achieve a similar level of volatility as that of 
the FTSE Benchmark, although there is no assurance it will do so. The 
FTSE Benchmark classifies a market as an emerging market based on a 
number of considerations related to the strength of the economy and the 
strength of capital market systems. The FTSE Benchmark classifies a 
company as being an emerging markets company based on a number of 
factors related to incorporation, listing, governance and operations of 
the company.
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    \11\ The non-U.S. equity securities in the Fund's portfolio will 
meet the following criteria at time of purchase: (1) Non-U.S. equity 
securities each shall have a minimum market value of at least $100 
million; (2) non-U.S. equity securities each shall have a minimum 
global monthly trading volume of 250,000 shares, or minimum global 
notional volume traded per month of $25,000,000, averaged over the 
last six months; (3) the most heavily weighted non-U.S. equity 
security shall not exceed 25% of the weight of the Fund's entire 
portfolio, and, to the extent applicable, the five most heavily 
weighted non-U.S. equity securities shall not exceed 60% of the 
weight of the Fund's entire portfolio; and (4) each non-U.S. equity 
security shall be listed and traded on an exchange that has last-
sale reporting. For purposes of this filing, the term ``non-U.S. 
equity securities'' includes the following (each as referenced 
below): common stocks and preferred securities of foreign 
corporations; warrants; convertible securities; master limited 
partnerships (``MLPs''); rights; and ``Depositary Receipts'' (as 
defined below, excluding Depositary Receipts that are registered 
under the Act).
    \12\ According to the Registration Statement, ADRs are receipts 
typically issued by United States banks and trust companies which 
evidence ownership of underlying securities issued by a foreign 
corporation. Generally, ADRs in registered form are designed for use 
in domestic securities markets and are traded on exchanges or over-
the-counter in the United States. American Depositary Shares (ADSs) 
are U.S. dollar-denominated equity shares of a foreign-based company 
available for purchase on an American stock exchange. ADSs are 
issued by depository banks in the United States under an agreement 
with the foreign issuer, and the entire issuance is called an ADR 
and the individual shares are referred to as ADSs. GDRs, EDRs, and 
IDRs are similar to ADRs in that they are certificates evidencing 
ownership of shares of a foreign issuer, however, GDRs, EDRs, and 
IDRs may be issued in bearer form and denominated in other 
currencies, and are generally designed for use in specific or 
multiple securities markets outside the U.S. EDRs, for example, are 
designed for use in European securities markets while GDRs are 
designed for use throughout the world. ADRs, GDRs, EDRs, and IDRs 
will not necessarily be denominated in the same currency as their 
underlying securities. Non-exchange-listed ADRs will not exceed 10% 
of the Fund's net assets.
    \13\ See note 9, supra.
    \14\ See note 10, supra.
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    The FTSE Benchmark seeks to reflect the returns of a portfolio of 
Emerging Markets Securities, hedged with a long gold futures overlay. 
Specifically, the FTSE Benchmark measures the total return performance 
of a hypothetical portfolio consisting of Emerging Markets Securities 
and a long position in gold futures, the notional value of which is 
comparable to the value of the FTSE Benchmark's equity component.
    The Sub-Adviser will continuously monitor the Fund's holdings in 
order to enhance performance while still providing approximately equal 
notional exposure to equity securities and gold futures contracts.
    According to the Registration Statement, futures contracts, by 
their terms, have stated expirations and, at a specified point in time 
prior to expiration, trading in a futures contract for the current 
delivery month will cease. Therefore, in order to maintain exposure to 
gold futures contracts, the FTSE Benchmark must periodically migrate 
out of gold futures contracts nearing expiration and into gold futures 
contracts that have longer remaining until expiration, a process 
referred to as ``rolling.'' The impact from this continuous process of 
selling expiring contracts and buying longer-dated contracts is called 
roll yield. The FTSE Benchmark rolls these futures contracts according 
to a predefined schedule, regardless of the liquidity or roll yield of 
the futures contract selected.
    The Fund will look to minimize the impact of rolling futures 
contracts in a number of ways. For example, the Fund may roll positions 
in gold futures contracts before or after the scheduled roll dates for 
the FTSE Benchmark, to the extent of favorable market prices and 
available liquidity. Additionally, the Fund may attempt to minimize 
roll costs (and maximize yields) by rolling into the gold futures 
contract with the largest positive or smallest negative roll yield. 
This strategy for taking long positions in and unwinding exposure to 
gold futures contracts may cause the Fund to have more or less exposure 
to gold futures contracts than the FTSE Benchmark. Additionally, the 
Fund is not obligated to rebalance its exposures at the same time that 
the FTSE Benchmark rebalances its exposures, and the Fund may rebalance 
more or less frequently than the FTSE Benchmark in order to ensure that 
the Fund's exposure to equities remains comparable to the Fund's 
exposure to the price of gold.
    The Fund will not directly hold gold futures contracts or other 
commodity-linked instruments (namely, commodity-related pooled vehicles 
(as described below) and options on commodity futures). Rather, the 
Fund expects to gain exposure to these instruments by investing up to 
25% of its total assets, as measured at the end of every quarter of the 
Fund's taxable year, in a wholly-owned and controlled Cayman Islands 
subsidiary (the ``Subsidiary''). The Subsidiary will be advised by the 
Adviser and the Fund's investment in the Subsidiary will primarily be 
intended to provide the Fund with exposure to the price of gold. The 
Fund's investment in the Subsidiary is expected to provide the Fund 
with an effective means of obtaining exposure to the commodities 
markets in a manner consistent with U.S. federal tax law requirements 
applicable to registered investment companies.

Other Investments

    While each Fund will invest at least 80% of its net assets in the 
securities and financial instruments described above, a Fund may invest 
its remaining assets in the securities and financial instruments 
described below.
    In addition to the exchange-traded equity securities described 
above for the Funds, the Funds may invest in the following exchange-
traded equity securities: exchange-traded common stock (other than 
large-cap U.S. stocks or Emerging Markets Securities, respectively, for 
the respective Funds); exchange-traded preferred stock (other than 
preferred stock referred to above with respect to the REX Gold Hedged 
S&P 500 ETF), warrants, MLPs, rights, and convertible securities.
    The Funds may invest in restricted (Rule 144A) securities.
    In addition to the futures transactions described above under 
``Principal Investments'' of a Fund, the Funds may engage in other 
index, commodity and currency futures transactions and may engage in 
exchange-traded options transactions on such futures. The Funds 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.
    The Funds may purchase and write (sell) exchange-traded and OTC put 
and call options on securities, securities indices and currencies. A 
Fund may

[[Page 81567]]

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 a Fund 
may seek to purchase in the future.
    Each Fund will also invest in money market mutual funds, cash and 
cash equivalents \15\ to collateralize its exposure to futures 
contracts and for investment purposes.
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    \15\ For purposes of this filing, cash equivalents include 
short-term instruments (instruments with maturities of less than 3 
months) of the following types: (i) U.S. Government securities, 
including bills, notes and bonds differing as to maturity and rates 
of interest, which are either issued or guaranteed by the U.S. 
Treasury or by U.S. Government agencies or instrumentalities; (ii) 
certificates of deposit issued against funds deposited in a bank or 
savings and loan association; (iii) bankers' acceptances, which are 
short-term credit instruments used to finance commercial 
transactions; (iv) repurchase agreements and reverse repurchase 
agreements; (v) bank time deposits, which are monies kept on deposit 
with banks or savings and loan associations for a stated period of 
time at a fixed rate of interest; (vi) commercial paper, which are 
short-term unsecured promissory notes; and (vii) money market funds.
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    In addition to the securities and financial instruments described 
under ``Principal Investments'' above for each Fund, each Fund may 
invest in the securities of pooled vehicles that are not investment 
companies and, thus, not required to comply with the provisions of the 
1940 Act. These pooled vehicles typically hold currency or commodities, 
such as gold or oil, or other property that is itself not a 
security.\16\
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    \16\ For purposes of the filing, pooled vehicles will mean: 
Trust Issued Receipts (as described in NYSE Arca Equities Rule 
8.200); Commodity-Based Trust Shares (as described in NYSE Arca 
Equities Rule 8.201); Commodity Index Trust Shares (as described in 
NYSE Arca Equities Rule 8.203); and Trust Units (as described in 
NYSE Arca Equities Rule 8.500).
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    Each Fund may enter into repurchase agreements with financial 
institutions, which may be deemed to be loans.
    Each Fund may enter into reverse repurchase agreements as part of a 
Fund's investment strategy.
    In addition, the Funds may invest in the following fixed income 
instruments (``Fixed Income Instruments''): U.S. government securities, 
namely, U.S. Treasury obligations \17\, U.S. government agency 
securities and U.S. Treasury zero-coupon bonds.
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    \17\ U.S. Treasury obligations consist of bills, notes and bonds 
issued by the U.S. Treasury and separately traded interest and 
principal component parts of such obligations that are transferable 
through the federal book-entry system known as Separately Traded 
Registered Interest and Principal Securities (``STRIPS'') and 
Treasury Receipts.
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    The Funds will invest in the securities of other investment 
companies, including the Underlying 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.

Investment in the Subsidiaries

    According to the Registration Statement, each Fund will achieve 
commodities exposure through investment in a Subsidiary. Such 
investment may not exceed 25% of a Fund's total assets, as measured at 
the end of every quarter of a Fund's taxable year. Each Subsidiary will 
invest in derivatives, including commodity and equity futures contracts 
and commodity-linked instruments, and other investments (cash, cash 
equivalents and Fixed Income Instruments with less than one year to 
maturity) intended to serve as margin or collateral or otherwise 
support the Subsidiary's derivatives positions. Unlike a Fund, the 
Subsidiary may invest without limitation in commodity futures and may 
use leveraged investment techniques. The Subsidiaries otherwise are 
subject to the same general investment policies and restrictions as the 
Funds.
    According to the Registration Statement, the Subsidiaries are not 
registered under the 1940 Act. As an investor in its Subsidiary, each 
Fund, as the Subsidiary's sole shareholder, would not have the 
protections offered to investors in registered investment companies. 
However, because a Fund would wholly own and control the Subsidiary, 
and a Fund and Subsidiary would be managed by the Adviser, it is 
unlikely that the Subsidiary would take action contrary to the 
interests of a Fund or a Fund's shareholders. A Fund's Board of 
Trustees has oversight responsibility for the investment activities of 
the Funds, including their investments in its respective Subsidiary, 
and each Fund's role as the sole shareholder of its Subsidiary. Also, 
in managing a Subsidiary's portfolio, the Adviser and Sub-Adviser would 
be subject to the same investment restrictions and operational 
guidelines that apply to the management of a Fund.

Investment Restrictions

    Each Fund will concentrate its investments (i.e., hold 25% or more 
of its total assets) in a particular industry or group of industries to 
approximately the same extent that the respective benchmark 
concentrates in an industry or group of industries.\18\
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    \18\ 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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    Each Fund will be classified as a non-diversified investment 
company under the 1940 Act. A ``non-diversified'' classification means 
that a Fund is not limited by the 1940 Act with regard to the 
percentage of their assets that may be invested in the securities of a 
single issuer.\19\
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    \19\ The diversification standard is set forth in Section 
5(b)(1) of the 1940 Act.
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    The Adviser will not take defensive positions in the Funds' 
portfolios during periods of adverse market, economic, political, or 
other conditions as the Adviser intends for each Fund to remain fully 
invested consistent with its investment strategy under all market 
conditions.
    Each Fund may invest up to an aggregate amount of 15% of its net 
assets in illiquid assets (calculated at the time of investment), 
including Rule 144A securities deemed illiquid by the Adviser,\20\ 
consistent with Commission guidance. Each Fund will monitor its 
portfolio liquidity on an ongoing basis to determine whether, in light 
of current circumstances, an adequate level of liquidity is being 
maintained, and will consider taking appropriate steps in order to 
maintain adequate liquidity if, through a change in values, net assets, 
or other circumstances, more than 15% of a Fund's net assets are 
invested in illiquid assets. Illiquid assets include securities subject 
to contractual or other restrictions on resale and other instruments 
that lack readily available markets as determined in accordance with 
Commission staff guidance.\21\
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    \20\ In reaching liquidity decisions, the 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).
    \21\ The Commission has stated that long-standing Commission 
guidelines have required open-end funds to hold no more than 15% of 
their net assets in illiquid securities and other illiquid assets. 
See Investment Company Act Release No. 28193 (March 11, 2008), 73 FR 
14618 (March 18, 2008), footnote 34. See also, Investment Company 
Act Release No. 5847 (October 21, 1969), 35 FR 19989 (December 31, 
1970) (Statement Regarding ``Restricted Securities''); Investment 
Company Act Release No. 18612 (March 12, 1992), 57 FR 9828 (March 
20, 1992) (Revisions of Guidelines to Form N-1A). A fund's portfolio 
security is illiquid if it cannot be disposed of in the ordinary 
course of business within seven days at approximately the value 
ascribed to it by the fund. See Investment Company Act Release No. 
14983 (March 12, 1986), 51 FR 9773 (March 21, 1986) (adopting 
amendments to Rule 2a-7 under the 1940 Act); Investment Company Act 
Release No. 17452 (April 23, 1990), 55 FR 17933 (April 30, 1990) 
(adopting Rule 144A under the Securities Act of 1933).

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[[Page 81568]]

    According to the Registration Statement, each Fund will seek to 
qualify for treatment as a Regulated Investment Company (``RIC'') under 
the Internal Revenue Code.\22\
---------------------------------------------------------------------------

    \22\ 26 U.S.C. 851.
---------------------------------------------------------------------------

    With respect to the REX Gold Hedged FTSE Emerging Markets ETF, the 
non-U.S. equity securities in such Fund's portfolio will meet the 
following criteria at time of purchase \23\: (1) Non-U.S. equity 
securities each shall have a minimum market value of at least $100 
million; (2) non-U.S. equity securities each shall have a minimum 
global monthly trading volume of 250,000 shares, or minimum global 
notional volume traded per month of $25,000,000, averaged over the last 
six months; (3) the most heavily weighted non-U.S. equity security 
shall not exceed 25% of the weight of the Fund's entire portfolio, and, 
to the extent applicable, the five most heavily weighted non-U.S. 
equity securities shall not exceed 60% of the weight of the Fund's 
entire portfolio; and (4) each non-U.S. equity security shall be listed 
and traded on an exchange that has last-sale reporting.
---------------------------------------------------------------------------

    \23\ These criteria are similar to certain ``generic'' listing 
criteria in NYSE Arca Equities Rule 5.2(j)(3), Commentary .01(a)(B), 
which relate to criteria applicable to an index or portfolio of U.S. 
and non-U.S. stocks underlying a series of Investment Company Units 
to be listed and traded on the Exchange pursuant to Rule 19b-4(e) 
under the Act.
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    According to the Registration Statement, the Funds are subject to 
regulation under the Commodity Exchange Act and CFTC rules as commodity 
pools. The Adviser is registered as a commodity pool operator, and the 
Funds will be operated in accordance with CFTC rules.
    Each Fund's investments will be consistent with its investment 
objective and will not be used to enhance leverage. While a Fund may 
invest in inverse ETFs and ETNs, a Fund will not invest in leveraged 
(e.g., 2X, -2X, 3X or -3X) ETFs and ETNs.

Creation of Shares

    According to the Registration Statement, the Trust will issue and 
sell shares of each Fund only in Creation Units of at least 50,000 
Shares each on a continuous basis through the Distributor, at their NAV 
next determined after receipt, on any business day of an order received 
in proper form.
    The consideration for purchase of a Creation Unit of a Fund 
generally will consist of an in-kind deposit of a designated portfolio 
of securities--the ``Deposit Securities''--per each Creation Unit 
constituting a substantial replication, or a representation, of the 
securities included in a Fund's portfolio and an amount of cash--the 
Cash Component--computed as described below. Together, the Deposit 
Securities and the Cash Component constitute the ``Fund Deposit,'' 
which represents the minimum initial and subsequent investment amount 
for a Creation Unit of the Fund. The Cash Component is an amount equal 
to the difference between the NAV of the Shares (per Creation Unit) and 
the market value of the Deposit Securities. If the Cash Component is a 
positive number (i.e., the NAV per Creation Unit exceeds the market 
value of the Deposit Securities), the Cash Component shall be such 
positive amount. If the Cash Component is a negative number (i.e., the 
NAV per Creation Unit is less than the market value of the Deposit 
Securities), the Cash Component shall be such negative amount and the 
creator will be entitled to receive cash from a Fund in an amount equal 
to the Cash Component. The Cash Component serves the function of 
compensating for any differences between the NAV per Creation Unit and 
the market value of the Deposit Securities.
    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., Eastern Time), the list of the names and the required number 
of shares of each Deposit Security to be included in the current Fund 
Deposit (based on information at the end of the previous business day) 
for each Fund.
    The Trust reserves the right to permit or require the substitution 
of an amount of cash--i.e., a ``cash in lieu'' amount--to be added to 
the Cash Component to replace any Deposit Security which may not be 
available in sufficient quantity for delivery or which may not be 
eligible for transfer, or which may not be eligible for trading by an 
Authorized Participant (as defined below) or the investor for which it 
is acting. The Trust also reserves the right to offer an ``all cash'' 
option for creations of Creation Units for each Fund.\24\
---------------------------------------------------------------------------

    \24\ The Adviser represents that, to the extent the Trust 
effects the creation or redemption of Shares in cash, such 
transactions will be effected in the same manner for all Authorized 
Participants.
---------------------------------------------------------------------------

    In addition to the list of names and numbers of securities 
constituting the current Deposit Securities of a Fund Deposit, the 
Administrator, through the NSCC, also will make available on each 
business day, the estimated Cash Component, effective through and 
including the previous business day, per outstanding Creation Unit of 
each Fund.
    To be eligible to place orders with the Distributor to create a 
Creation Unit of a Fund, an entity must be (i) a ``Participating 
Party,'' i.e., a broker-dealer or other participant in the clearing 
process through the Continuous Net Settlement System of the NSCC, a 
clearing agency that is registered with the Commission; or (ii) a 
Depository Trust Company (``DTC'') Participant, and, in each case, must 
have executed an agreement with the Trust, the Distributor and the 
Administrator with respect to creations and redemptions of Creation 
Units (``Participant Agreement''). A Participating Party and DTC 
Participant are collectively referred to as an ``Authorized 
Participant.''
    All orders to create or redeem Creation Units must be placed for 
one or more Creation Unit size aggregations of at least 50,000 Shares 
and must be received by the Distributor no later than 3:00 p.m., 
Eastern Time, an hour earlier than the close of the regular trading 
session on the Exchange (ordinarily 4:00 p.m., Eastern Time) (``Closing 
Time''), in each case on the date such order is placed in order for the 
creation of Creation Units to be effected based on the NAV of Shares of 
each Fund as next determined on such date after receipt of the order in 
proper form.
    If permitted by the Adviser or Sub-Adviser in its sole discretion 
with respect to a Fund, an Authorized Participant may also agree to 
enter into or arrange for an exchange of a futures contract for a 
related position (``EFCRP'') or block trade with the relevant Fund or 
its Subsidiary whereby the Authorized Participant would also transfer 
to such Fund a number and type of exchange-traded futures contracts at 
or near the closing settlement price for such contracts on the purchase 
order date. Similarly, the Sub-Adviser in its sole discretion may agree 
with an Authorized Participant to use an EFCRP or block trade to effect 
an order to redeem Creation Units.\25\
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    \25\ According to the Registration Statement, an EFCRP is a 
technique permitted by the rules of certain futures exchanges that, 
as utilized by a Fund in the Sub-Adviser's discretion, would allow 
such Fund or its Subsidiary to take a position in a futures contract 
from an Authorized Participant, or give futures contracts to an 
Authorized Participant, in the case of a redemption, rather than to 
enter the futures exchange markets to obtain such a position. An 
EFCRP by itself will not change either party's net risk position 
materially. Because the futures position that a Fund would otherwise 
need to take in order to meet its investment objective can be 
obtained without unnecessarily impacting the financial or futures 
markets or their pricing, EFCRPs can generally be viewed as 
transactions beneficial to a Fund. A block trade is a technique that 
permits certain funds to obtain a futures position without going 
through the market auction system and can generally be viewed as a 
transaction beneficial to such funds.

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[[Page 81569]]

Redemption of Shares

    Shares may be redeemed only in Creation Units at their NAV next 
determined after receipt of a redemption request in proper form by a 
Fund through the Administrator and only on a business day. The Trust 
will not redeem Shares in amounts less than Creation Units. Beneficial 
owners must accumulate enough Shares in the secondary market to 
constitute a Creation Unit in order to have such Shares redeemed by the 
Trust.
    With respect to the Funds, the Administrator, through the NSCC, 
will make available immediately prior to the opening of business on the 
Exchange (currently 9:30 a.m., Eastern Time) on each business day, the 
``Fund Securities'' that will be applicable (subject to possible 
amendment or correction) to redemption requests received in proper form 
on that day. Fund Securities received on redemption may not be 
identical to Deposit Securities which are applicable to creations of 
Creation Units.
    Unless cash redemptions are available or specified for a Fund, the 
redemption proceeds for a Creation Unit generally will consist of Fund 
Securities, as announced by the Administrator on the business day of 
the request for redemption received in proper form, plus cash in an 
amount equal to the difference between the NAV of the Shares being 
redeemed, as next determined after receipt of a request in proper form, 
and the value of the Fund Securities (the ``Cash Redemption Amount''), 
less a redemption transaction fee. In the event that the Fund 
Securities have a value greater than the NAV of the Shares, a 
compensating cash payment equal to the differential will be required to 
be made by or through an Authorized Participant by the redeeming 
shareholder.
    If it is not possible to effect deliveries of the Fund Securities, 
the Trust may in its discretion exercise its option to redeem such 
shares in cash, and the redeeming ``Beneficial Owner'' will be required 
to receive its redemption proceeds in cash. In addition, an investor 
may request a redemption in cash which a Fund may, in its sole 
discretion, permit. In either case, the investor will receive a cash 
payment equal to the NAV of its Shares based on the NAV of Shares of a 
Fund next determined after the redemption request is received in proper 
form (minus a redemption transaction fee and additional charge for 
requested cash redemptions, to offset the Trust's brokerage and other 
transaction costs associated with the disposition of Fund Securities). 
Each Fund may also, in its sole discretion, upon request of a 
shareholder, provide such redeemer a portfolio of securities which 
differs from the exact composition of the Fund Securities but does not 
differ in NAV.
    The right of redemption may be suspended or the date of payment 
postponed with respect to a Fund (1) for any period during which the 
Exchange is closed (other than customary weekend and holiday closings); 
(2) for any period during which trading on the Exchange is suspended or 
restricted; (3) for any period during which an emergency exists as a 
result of which disposal of the Shares of a Fund or determination of 
the Shares' NAV is not reasonably practicable; or (4) in such other 
circumstance as is permitted by the Commission.

Net Asset Value

    The NAV per Share of each Fund will be computed by dividing the 
value of the net assets of a Fund (i.e., the value of its total assets 
less total liabilities) by the total number of Shares of a Fund 
outstanding, rounded to the nearest cent. Expenses and fees, including 
without limitation, the management, administration and distribution 
fees, will be accrued daily and taken into account for purposes of 
determining NAV per Share. The NAV per Share for each Fund will be 
calculated by the Administrator and determined as of the close of the 
regular trading session on the Exchange (ordinarily 4:00 p.m., Eastern 
Time) on each day that such exchange is open.
    In computing a Fund's NAV, a Fund's securities holdings will be 
valued based on their last readily available market price. Price 
information on exchange-listed securities, including common stocks, 
preferred stocks, warrants, convertible securities, MLPs, rights, 
commodity-linked instruments (as described above), Underlying Funds, 
ETNs, Depositary Receipts and pooled vehicles in which a Fund invests, 
will be taken from the exchange where the security is primarily traded. 
Other portfolio securities and assets for which market quotations are 
not readily available or determined to not represent the current fair 
value will be valued based on fair value as determined in good faith by 
the Sub-Adviser in accordance with procedures adopted by the Board.
    Futures contracts and exchange-traded options on futures will be 
valued at the settlement or closing price determined by the applicable 
exchange. Exchange-traded options contracts will be valued at their 
most recent sale price. OTC options normally will be valued on the 
basis of quotes obtained from a third-party broker-dealer who makes 
markets in such securities or on the basis of quotes obtained from a 
third-party pricing service.
    Cash and cash equivalents may be valued at market values, as 
furnished by recognized dealers in such securities or assets. Cash 
equivalents also may be valued on the basis of information furnished by 
an independent pricing service that uses a valuation matrix which 
incorporates both dealer-supplied valuations and electronic data 
processing techniques.
    Fixed Income Instruments, Rule 144A securities, repurchase 
agreements and reverse repurchase agreements will generally be valued 
at bid prices received from independent pricing services as of the 
announced closing time for trading in fixed-income instruments in the 
respective market. Shares of money market mutual funds held by each 
Fund will be valued at their respective NAVs.

Availability of Information

    The Funds' Web site, which will be publicly available prior to the 
public offering of Shares, will include a form of the prospectus for 
the Funds that may be downloaded. The Funds' Web site will include 
additional quantitative information updated on a daily basis, 
including, for each Fund, (1) daily trading volume, the prior business 
day's reported closing price, NAV and mid-point of the bid/ask spread 
at the time of calculation of such NAV (the ``Bid/Ask Price''),\26\ and 
a calculation of the premium or discount of the Bid/Ask Price against 
the NAV, and (2) data in chart format displaying the frequency 
distribution of discounts and premiums of the daily Bid/Ask Price 
against the NAV, within appropriate ranges, for each of the four 
previous calendar quarters. On each business day, before commencement 
of trading in Shares in the Core Trading Session on the Exchange, the 
Funds' Web site will disclose the Disclosed Portfolio that will form 
the basis for each Fund's calculation of NAV at the end of the business 
day.\27\
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    \26\ The Bid/Ask Price of Shares of each Fund will be determined 
using the mid-point of the highest bid and the lowest offer on the 
Exchange as of the time of calculation of a Fund's NAV. The records 
relating to Bid/Ask Prices will be retained by a Fund and its 
service providers.
    \27\ Under accounting procedures followed by the Funds, trades 
made on the prior business day (``T'') will be booked and reflected 
in NAV on the current business day (``T+1''). Accordingly, the Funds 
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.

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[[Page 81570]]

    On a daily basis, the Funds will disclose on the Funds' Web site 
the following information regarding each portfolio holding of a Fund 
and its respective Subsidiary, as applicable to the type of holding: 
Ticker symbol, CUSIP number or other identifier, if any; a description 
of the holding (including the type of holding); the identity of the 
security, commodity, index or other asset or instrument underlying the 
holding, if any; for options, the option strike price; quantity held 
(as measured by, for example, par value, notional value or number of 
shares, contracts or units); maturity date, if any; coupon rate, if 
any; effective date, if any; market value of the holding; and the 
percentage weighting of the holding in a Fund's portfolio. The Web site 
information will be publicly available at no charge.
    In addition, a basket composition file (i.e., the Deposit 
Securities), which includes the security names and share quantities (as 
applicable) required to be delivered in exchange for Fund Shares, 
together with estimates and actual cash components, will be publicly 
disseminated daily prior to the opening of the New York Stock Exchange 
via the NSCC. The basket will represent one Creation Unit of a Fund.
    Investors will also be able to obtain the Trust's Statement of 
Additional Information (``SAI''), a Fund's Shareholder Reports, and its 
Form N-CSR and Form N-SAR, filed twice a year. The Trust's SAI and 
Shareholder Reports will be available free upon request from the Trust, 
and those documents and the Form N-CSR and Form N-SAR may be viewed on-
screen or downloaded from the Commission's Web site at www.sec.gov. 
Information regarding market price and trading volume of the Shares 
will be continually available on a real-time basis throughout the day 
on brokers' computer screens and other electronic services. Information 
regarding the previous day's closing price and trading volume 
information for the Shares will be published daily in the financial 
section of newspapers. Quotation and last sale information for the 
Shares, Underlying Funds, ETNs and other U.S. exchange-traded equities, 
will be available via the Consolidated Tape Association (``CTA'') high-
speed line, and, for equity securities that are U.S. exchange-listed, 
will be available from the national securities exchange on which they 
are listed. With respect to non-U.S. exchange-listed equity securities, 
intra-day, closing and settlement prices of common stocks and other 
equity securities (including shares of preferred securities, and non-
U.S. Depositary Receipts), will be available from the foreign exchanges 
on which such securities trade as well as from major market data 
vendors. Price information for money market funds will be available 
from the investment company's Web site and from market data vendors. 
Price information relating to money market mutual funds, cash, cash 
equivalents, futures, options, options on futures, Depositary Receipts, 
Rule 144A securities, repurchase agreements, reverse repurchase 
agreements, the S&P Benchmark and the FTSE Benchmark will be available 
from major market data vendors. Information relating to futures and 
exchange-traded options on futures also will be available from the 
exchange on which such instruments are traded. Information relating to 
U.S. exchange-traded options will be available via the Options Price 
Reporting Authority. Pricing information regarding each asset class in 
which a Fund will invest will generally be available through nationally 
recognized data service providers through subscription agreements.
    In addition, the Portfolio Indicative Value, as defined in NYSE 
Arca Equities Rule 8.600(c)(3), will be widely disseminated at least 
every 15 seconds during the Core Trading Session by one or more major 
market data vendors.\28\ The dissemination of the Portfolio Indicative 
Value, together with the Disclosed Portfolio, will allow investors to 
determine the value of the underlying portfolio of each Fund on a daily 
basis and will provide a close estimate of that value throughout the 
trading day.
---------------------------------------------------------------------------

    \28\ Currently, it is the Exchange's understanding that several 
major market data vendors display and/or make widely available 
Portfolio Indicative Values taken from CTA or other data feeds.
---------------------------------------------------------------------------

Trading Halts

    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 Funds.\29\ Trading in Shares of the Funds 
will be halted if the circuit breaker parameters in NYSE Arca Equities 
Rule 7.12 have been reached. Trading also may be halted because of 
market conditions or for reasons that, in the view of the Exchange, 
make trading in the Shares inadvisable. These may include: (1) The 
extent to which trading is not occurring in the securities and/or the 
financial instruments comprising the Disclosed Portfolio of the Funds; 
or (2) whether other unusual conditions or circumstances detrimental to 
the maintenance of a fair and orderly market are present. Trading in 
the Shares will be subject to NYSE Arca Equities Rule 8.600(d)(2)(D), 
which sets forth circumstances under which Shares of the Funds may be 
halted.
---------------------------------------------------------------------------

    \29\ See NYSE Arca Equities Rule 7.12.
---------------------------------------------------------------------------

Trading Rules

    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. Shares will trade on 
the NYSE Arca Marketplace from 4 a.m. to 8 p.m. Eastern Time in 
accordance with NYSE Arca Equities Rule 7.34 (Opening, Core, and Late 
Trading Sessions). The Exchange has appropriate rules to facilitate 
transactions in the Shares during all trading sessions. As provided in 
NYSE Arca Equities Rule 7.6, the minimum price variation (``MPV'') for 
quoting and entry of orders in equity securities traded on the NYSE 
Arca Marketplace is $0.01, with the exception of securities that are 
priced less than $1.00, for which the MPV for order entry is $0.0001.
    The Shares of each Fund will conform to the initial and continued 
listing criteria under NYSE Arca Equities Rule 8.600. Consistent with 
NYSE Arca Equities Rule 8.600(d)(2)(B)(ii), the Adviser, as the 
``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 a Fund's 
portfolio. The Exchange represents that, for initial and/or continued 
listing, each Fund will be in compliance with Rule 10A-3 \30\ under the 
Act, as provided by NYSE Arca Equities Rule 5.3. A minimum of 100,000 
Shares of each Fund will be outstanding at the commencement of trading 
on the Exchange. The Exchange will obtain a representation from the 
issuer of the Shares of each Fund 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.
---------------------------------------------------------------------------

    \30\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------

Surveillance

    The Exchange represents that trading in the Shares will be subject 
to the existing trading surveillances, administered by regulatory staff 
of the Exchange or the Financial Industry Regulatory Authority 
(``FINRA'') on

[[Page 81571]]

behalf of the Exchange, which are designed to detect violations of 
Exchange rules and applicable federal securities laws.\31\ The Exchange 
represents that these procedures are adequate to properly monitor 
Exchange trading of the Shares in all trading sessions and to deter and 
detect violations of Exchange rules and applicable federal securities 
laws.
---------------------------------------------------------------------------

    \31\ FINRA surveils certain trading activity on the Exchange 
pursuant to a regulatory services agreement. The Exchange is 
responsible for FINRA's performance under this regulatory services 
agreement.
---------------------------------------------------------------------------

    The surveillances referred to above generally focus on detecting 
securities trading outside their normal patterns, which could be 
indicative of manipulative or other violative activity. When such 
situations are detected, surveillance analysis follows and 
investigations are opened, where appropriate, to review the behavior of 
all relevant parties for all relevant trading violations.
    The regulatory staff of the Exchange or FINRA, on behalf of the 
Exchange, will communicate as needed regarding trading in the Shares, 
certain exchange-listed equity securities, certain futures, certain 
options on futures, and certain exchange-traded options 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 such securities and 
financial instruments from such markets and other entities. In 
addition, the regulatory staff of the Exchange may obtain information 
regarding trading in such securities and financial instruments from 
markets and other entities that are members of ISG or with which the 
Exchange has in place a comprehensive surveillance sharing 
agreement.\32\ FINRA, on behalf of the Exchange, is able to access, as 
needed, trade information for certain fixed income securities held by a 
Fund reported to FINRA's Trade Reporting and Compliance Engine 
(``TRACE'').
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    \32\ For a list of the current members of ISG, see 
www.isgportal.org. The Exchange notes that not all components of the 
Disclosed Portfolio for a Fund may trade on markets that are members 
of ISG or with which the Exchange has in place a comprehensive 
surveillance sharing agreement.
---------------------------------------------------------------------------

    Not more than 10% of the net assets of a Fund in the aggregate 
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.
    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its 
Equity Trading Permit Holders in an Information Bulletin (``Bulletin'') 
of the special characteristics and risks associated with trading the 
Shares. Specifically, the Bulletin will discuss the following: (1) The 
procedures for purchases and redemptions of Shares in Creation Unit 
aggregations (and that Shares are not individually redeemable); (2) 
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; (3) 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; (4) how information regarding the 
Portfolio Indicative Value and the Disclosed Portfolio is disseminated; 
(5) 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 (6) trading 
information.
    In addition, the Bulletin will reference that the Funds will be 
subject to various fees and expenses described in the Registration 
Statement. The Bulletin will discuss any exemptive, no-action, and 
interpretive relief granted by the Commission from any rules under the 
Act. The Bulletin will also disclose that the NAV for the Shares will 
be calculated after 4:00 p.m. Eastern Time each trading day.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \33\ that an exchange have rules that 
are designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to remove 
impediments to, and perfect the mechanism of a free and open market 
and, in general, to protect investors and the public interest.
---------------------------------------------------------------------------

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

    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares will be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria in NYSE Arca Equities Rule 
8.600. Trading in the Shares will be subject to the existing trading 
surveillances, administered by the regulatory staff of the Exchange or 
FINRA on behalf of the Exchange, which are designed to detect 
violations of Exchange rules and applicable federal securities laws. 
The regulatory staff of the Exchange or FINRA, on behalf of the 
Exchange, will communicate as needed regarding trading in the Shares, 
certain exchange-listed equity securities, certain futures, certain 
options on futures, and certain exchange-traded options with other 
markets and other entities that are members of the ISG, and FINRA, on 
behalf of the Exchange, may obtain trading information regarding 
trading such securities and financial instruments from such markets and 
other entities. In addition, the Exchange may obtain information 
regarding trading in such securities and financial instruments from 
markets and other entities that are members of ISG or with which the 
Exchange has in place a comprehensive surveillance sharing agreement.
    With respect to the Rex Gold Hedged FTSE Emerging Markets ETF, the 
non-U.S. equity securities in the Fund's portfolio will meet the 
following criteria at time of purchase: (1) Non-U.S. equity securities 
each shall have a minimum market value of at least $100 million; (2) 
non-U.S. equity securities each shall have a minimum global monthly 
trading volume of 250,000 shares, or minimum global notional volume 
traded per month of $25,000,000, averaged over the last six months; (3) 
the most heavily weighted non-U.S. equity security shall not exceed 25% 
of the weight of the Fund's entire portfolio, and, to the extent 
applicable, the five most heavily weighted non-U.S. equity securities 
shall not exceed 60% of the weight of the Fund's entire portfolio; and 
(4) each non-U.S. equity security shall be listed and traded on an 
exchange that has last-sale reporting.
    Not more than 10% of the net assets of a Fund in the aggregate 
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. Each Fund's investments 
will be consistent with its investment objective and will not be used 
to enhance leverage. While a Fund may invest in inverse ETFs and ETNs, 
a Fund will not invest in leveraged (e.g., 2X, -2X, 3X or -3X) ETFs and 
ETNs.
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the

[[Page 81572]]

public interest in that the Exchange will obtain a representation from 
the issuer of the Shares that the NAV per Share will be calculated 
daily and that the NAV and the Disclosed Portfolio will be made 
available to all market participants at the same time. In addition, a 
large amount of information will be publicly available regarding the 
Funds and the Shares, thereby promoting market transparency.
    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. Quotation and last sale information for the 
Shares, Underlying Funds and other U.S. exchange-traded equities, will 
be available via the CTA high-speed line, and, for equity securities 
that are U.S. exchange-listed, will be available from the national 
securities exchange on which they are listed. Price information for 
money market funds will be available from the investment company's Web 
site and from market data vendors. Price information relating to money 
market mutual funds, cash, cash equivalents, futures, options, options 
on futures, Depositary Receipts, Rule 144A securities, repurchase 
agreements, reverse repurchase agreements, the S&P Benchmark and the 
FTSE Benchmark will be available from major market data vendors. 
Information relating to futures and exchange-traded options on futures 
also will be available from the exchange on which such instruments are 
traded. Information relating to U.S. exchange-traded options will be 
available via the Options Price Reporting Authority. Pricing 
information regarding each asset class in which a Fund will invest will 
generally be available through nationally recognized data service 
providers through subscription agreements.
    In addition, the Portfolio Indicative Value will be widely 
disseminated by the Exchange at least every 15 seconds during the Core 
Trading Session. The Funds' Web site will include a form of the 
prospectus for the Funds that may be downloaded, as well as additional 
quantitative information updated on a daily basis. On each business 
day, before commencement of trading in Shares in the Core Trading 
Session on the Exchange, the Funds' Web site will disclose the 
Disclosed Portfolio that will form the basis for each Fund's 
calculation of NAV at the end of the business day.
    On a daily basis, the Funds will disclose on the Funds' Web site 
the following information regarding each portfolio holding, as 
applicable to the type of holding: Ticker symbol, CUSIP number or other 
identifier, if any; a description of the holding (including the type of 
holding); the identity of the security, commodity, index or other asset 
or instrument underlying the holding, if any; for options, the option 
strike price; quantity held (as measured by, for example, par value, 
notional value or number of shares, contracts or units); maturity date, 
if any; coupon rate, if any; effective date, if any; market value of 
the holding; and the percentage weighting of the holding in a Fund's 
portfolio. Moreover, 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. Trading in Shares of the Funds 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. 
Trading in the Shares will be subject to NYSE Arca Equities Rule 
8.600(d)(2)(D), which sets forth circumstances under which Shares of a 
Fund may be halted. In addition, as noted above, investors will have 
ready access to information regarding the Funds' holdings, the 
Portfolio Indicative Value, the Disclosed Portfolio, and quotation and 
last sale information for the Shares.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
additional types of actively-managed exchange-traded products that will 
enhance competition among market participants, to the benefit of 
investors and the marketplace. In addition, as noted above, investors 
will have ready access to information regarding the Funds' holdings, 
the Portfolio Indicative Value, the Disclosed Portfolio, and quotation 
and last sale information for the Shares.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purpose of the Act. The Exchange notes that the 
proposed rule change will facilitate the listing and trading of 
additional types of actively-managed exchange-traded products based on 
the price of gold and other financial instruments that will enhance 
competition among market participants, to the benefit of investors and 
the marketplace.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received from Members, Participants or Others

    No written comments were solicited or received with respect to the 
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action
    Within 45 days of the date of publication of this notice in the 
Federal Register or up to 90 days (i) as the Commission may designate 
if it finds such longer period to be appropriate and publishes its 
reasons for so finding or (ii) as to which the self-regulatory 
organization consents, the Commission will:
    (A) by order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.
IV. Solicitation of Comments
    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is 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 rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2015-107 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 Number SR-NYSEArca-2015-107. 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

[[Page 81573]]

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 the filing also will 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 Number SR-NYSEArca-2015-107 and should 
be submitted on or before January 20, 2016.
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    \34\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\34\
Brent J. Fields,
Secretary.
[FR Doc. 2015-32821 Filed 12-29-15; 8:45 am]
 BILLING CODE 8011-01-P