Document ID: SEC-2016-0670-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2016-04-18T04:00Z

[Federal Register Volume 81, Number 74 (Monday, April 18, 2016)]
[Notices]
[Pages 22651-22656]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-08818]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77587; File No. SR-NYSEArca-2016-28]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Amendment No. 1 and Order Granting Accelerated Approval of a 
Proposed Rule Change, as Modified by Amendment No. 1, To List and Trade 
Shares of RiverFront Dynamic US Dividend Advantage ETF and RiverFront 
Dynamic US Flex-Cap ETF under NYSE Arca Equities Rule 8.600

April 12, 2016.

I. Introduction

    On February 5, 2016, NYSE Arca, Inc. (``Exchange'') filed with the 
Securities and Exchange Commission (``Commission''), pursuant to 
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Exchange 
Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to list 
and trade shares (``Shares'') of the following under NYSE Arca Equities 
Rule 8.600: RiverFront Dynamic US Dividend Advantage ETF and RiverFront 
Dynamic US Flex-Cap ETF (each a ``Fund,'' and collectively, ``Funds''). 
The Commission published notice of the proposed rule change in the 
Federal Register on February 25, 2016.\3\ On April 7, 2016, the 
Exchange submitted Amendment No. 1 to the proposed rule change.\4\ The 
Commission is publishing this notice to solicit comment on Amendment 
No. 1 to the proposed rule change from interested persons and is 
approving the proposed rule change, as modified by Amendment No. 1, on 
an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 34-77183 (February 
19, 2016), 81 FR 9535 (February 25, 2016) (NYSEArca-2016-28) 
(``Notice'').
    \4\ Amendment No. 1 replaced and superseded the original filing 
in its entirety. Amendment No. 1 is available at http://www.sec.gov/comments/sr-nysearca-2016-28/nysearca201628-1.pdf.
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II. The Exchange's Description of the Proposal \5\
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    \5\ Additional information regarding the Trust (as defined 
herein), the Funds, and the Shares, including investment strategies, 
risks, creation and redemption procedures, fees, portfolio holdings, 
disclosure policies, calculation of net asset value (``NAV''), 
distributions, and taxes, among other things, can be found in the 
Notice and the Registration Statement, as applicable. See Notice, 
supra note 3, and Registration Statement, infra note 6.
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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. The Funds are each a series of

[[Page 22652]]

ALPS ETF Trust (``Trust''), a statutory trust organized under the laws 
of the State of Delaware and registered with the Commission as an open-
end management investment company.\6\ The Funds will be managed by ALPS 
Advisors, Inc. (``Adviser''). RiverFront Investment Group, LLC (``Sub-
Adviser'') is the investment sub-adviser for the Funds.\7\
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    \6\ The Exchange states that the Trust is registered under the 
1940 Act. According to the Exchange, on December 4, 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 the 1940 Act relating to the Funds (File 
Nos. 333-148826 and 811-22175) (``Registration Statement''). The 
Exchange states that the Commission has issued an order granting 
certain exemptive relief to the Trust and the Adviser (as defined 
herein) under the 1940 Act. See Investment Company Act Release No. 
30553 (June 11, 2013) (File No. 812-13884) (``Exemptive Order''). 
The Exchange states that the Funds will be offered in reliance upon 
the Exemptive Order issued to the Trust and the Adviser.
    \7\ The Exchange states that neither the Adviser nor the Sub-
Adviser is registered as a broker-dealer but that each of the 
Adviser and the Sub-Adviser is affiliated with a broker-dealer. The 
Exchange represents that each of the Adviser and the Sub-Adviser has 
implemented and will maintain a fire wall with respect to its 
affiliated broker-dealer(s) regarding access to information 
concerning the composition and/or changes to a Fund's portfolio. In 
the event (a) the Adviser or Sub-Adviser becomes newly affiliated 
with a broker-dealer, or (b) any new adviser or sub-adviser becomes 
affiliated with a broker-dealer, such adviser or sub-adviser will 
implement a fire wall with respect to such broker-dealer affiliate 
regarding access to information concerning the composition of and/or 
changes to the portfolio, and will be subject to procedures designed 
to prevent the use and dissemination of material non-public 
information regarding such portfolio.
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RiverFront Dynamic US Dividend Advantage ETF: Principal Investments

    The Exchange states that the investment objective of the Fund will 
be to seek to provide capital appreciation and dividend income. Under 
normal market conditions,\8\ the Fund will seek to achieve its 
investment objective by investing at least 65% of its net assets in a 
portfolio of exchange-traded equity securities of publicly traded U.S. 
companies with the potential for dividend growth. The exchange-traded 
equity securities the Fund may invest in as part of its principal 
investments are common stocks and common or preferred shares of real 
estate investment trusts (``REITs'').
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    \8\ The term ``under normal market conditions'' includes, but is 
not limited to, the absence of extreme volatility or trading halts 
in the securities markets or the financial markets generally; 
circumstances under which a Fund's investments are made for 
temporary defensive purposes; operational issues causing 
dissemination of inaccurate market information; or force majeure 
type events such as systems failure, natural or man-made disaster, 
act of God, armed conflict, act of terrorism, riot or labor 
disruption or any similar intervening circumstance.
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    The Fund may invest in exchange-traded equities issued by small-, 
mid-, and large-capitalization companies. The Fund may also invest in 
other exchange-traded funds (``ETFs'') \9\ and/or exchange-traded 
closed-end funds (``CEFs'') which invest in equity securities.
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    \9\ For purposes of this filing, ETFs consist of Investment 
Company Units (as described in NYSE Arca Equities Rule 5.2(j)(3)), 
Portfolio Depositary Receipts (as described in NYSE Arca Equities 
Rule 8.100); and Managed Fund Shares (as described in NYSE Arca 
Equities Rule 8.600). All ETFs will be listed and traded in the U.S. 
on a national securities exchange. The Funds will not invest in 
leveraged or leveraged inverse ETFs.
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    The Exchange states that in selecting the Fund's portfolio 
securities, the Sub-Adviser assembles a portfolio of eligible 
securities based on several core attributes such as value, quality, and 
momentum. The Sub-Adviser will consider multiple proprietary factors 
within each core attribute, such as the price-to-book value of a 
security when determining value, a company's cash as a percentage of 
the company's market capitalization when determining quality, and a 
security's three month relative price change when determining momentum. 
Additionally, within a given sector, security selection will emphasize 
companies offering a meaningful dividend yield premium over alternative 
investments within that sector. This dividend yield emphasis is subject 
to quality screens intended to limit exposure to companies whose 
financial characteristics suggest the potential for dividend cuts. The 
Sub-Adviser then assigns each qualifying security a score based on its 
core attributes, including its dividend growth score, and selects the 
individual securities with the highest scores for investment. The 
Exchange states that in doing so, the Sub-Adviser will utilize its 
proprietary optimization process to maximize the percentage of high-
scoring securities included in the portfolio. The Exchange states that 
the Sub-Adviser will also consider the market capitalization of the 
companies in which the Fund may invest, the potential for dividend 
income, and the trading volume of a company's shares in the secondary 
market.

RiverFront Dynamic US Flex-Cap ETF: Principal Investments

    The Exchange states that the investment objective of the Fund will 
be to seek to provide capital appreciation. Under normal market 
conditions,\10\ the Fund will seek to achieve its investment objective 
by investing at least 65% of its net assets in a portfolio of exchange-
traded equity securities of publicly traded U.S. companies. The 
exchange-traded equity securities the Fund may invest in as part of its 
principal investments are common stocks and common or preferred shares 
of REITs.
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    \10\ See note 8, supra.
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    The Fund may invest in exchange traded equities issued by small-, 
mid-, and large-capitalization companies. The Fund may also invest in 
other ETFs \11\ and/or CEFs which invest in equity securities.
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    \11\ See note 9, supra.
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    The Exchange states that in selecting the Fund's portfolio 
securities, the Sub-Adviser assembles a portfolio of eligible 
securities based on several core attributes such as value, quality, and 
momentum. According to the Exchange, the Sub-Adviser will consider 
multiple proprietary factors within each core attribute, such as the 
price-to-book value of a security when determining value, a company's 
cash as a percentage of the company's market capitalization when 
determining quality, and a security's three month relative price change 
when determining momentum. The Sub-Adviser then assigns each qualifying 
security a score based on its core attributes and selects the 
individual securities with the highest scores for investment. In doing 
so, the Sub-Adviser utilizes its proprietary optimization process to 
maximize the percentage of high-scoring securities included in the 
portfolio. The Sub-Adviser will also consider the market capitalization 
of the companies in which the Fund may invest, and the trading volume 
of a company's shares in the secondary market.

Non-Principal Investments for Each Fund

    The Exchange states that while each Fund will, under normal market 
conditions, principally invest at least 65% of its net assets in the 
securities and financial instruments as described above, each Fund may 
invest its remaining assets in the securities and financial instruments 
described below.
    A Fund may invest in other types of equity securities, as follows: 
Non-exchange traded common stock (including REITs), exchange-traded and 
non-exchange traded preferred stock (including REITs), exchange-traded 
and non-exchange traded convertible securities, exchange-traded master 
limited partnerships (``MLPs''), and exchange-traded business 
development companies (``BDCs'').
    According to the Exchange, a Fund may invest in exchange-traded or 
over-the-counter (``OTC'') equity securities of

[[Page 22653]]

non-U.S. companies, including issuers in emerging market countries,\12\ 
but investments in non-U.S. securities, including non-U.S. equity 
securities, may not exceed 20% of a Fund's net assets, plus the amount 
of any borrowings for investment purposes, under normal market 
conditions.\13\
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    \12\ According to the Exchange, the Funds consider an ``emerging 
market country'' to be any country whose issuers are included in the 
Morgan Stanley Capital International Emerging Markets Index and/or 
those countries considered to be developing by the World Bank, the 
International Finance Corporation or the United Nations. The Funds 
consider an ``emerging market issuer'' to be one (i) domiciled or 
with a principal place of business or primary securities trading 
market in an emerging market country, or (ii) that derives a 
substantial portion of its total revenues or profits from emerging 
market countries.
    \13\ Similarly, at least 80% of each Fund's net assets, plus the 
amount of any borrowings for investment purposes, must be invested 
in the securities of U.S. issuers under normal market conditions. A 
Fund considers a ``U.S. issuer'' to be one (i) domiciled or with a 
principal place of business or primary securities trading market in 
the United States, or (ii) that derives a substantial portion of its 
total revenues or profits from the United States.
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    The Exchange states that a Fund may also invest in the following 
short-term instruments on an ongoing basis to provide liquidity or for 
other reasons: Money market instruments, cash, and cash equivalents. 
Cash equivalents include the following: (i) Short-term obligations 
issued by the U.S. Government; (ii) negotiable certificates of deposit, 
fixed time deposits, and bankers' acceptances of U.S. and foreign banks 
and similar institutions; (iii) commercial paper rated at the date of 
purchase ``Prime-1'' by Moody's Investors Service, Inc. or ``A-1+'' or 
``A-1'' by Standard & Poor's or, if unrated, of comparable quality as 
determined by the Adviser or Sub-Adviser; (iv) repurchase agreements; 
and (v) money market mutual funds.
    In addition, the Exchange states that a Fund may use derivative 
instruments. Specifically, a Fund may use options, futures, swaps, and 
forwards, for hedging or risk management purposes or as part of its 
investment practices.\14\ The Exchange states that a Fund may enter 
into the following derivatives: Futures on securities, indices, and 
currencies, and options on such futures; exchange-traded and OTC 
options on securities, indices, and currencies; exchange-traded and OTC 
interest rate swaps, cross-currency swaps, total return swaps, 
inflation swaps, and credit default swaps; and options on such swaps 
(``swaptions'').\15\ The swaps in which a Fund will invest may be 
cleared swaps or non-cleared. A Fund may enter into derivatives traded 
in the U.S. or in non-U.S. countries. A Fund will collateralize its 
obligations with liquid assets consistent with the 1940 Act and 
interpretations thereunder.
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    \14\ The Funds will only enter into transactions in derivative 
instruments with counterparties that the Adviser or Sub-Adviser 
reasonably believes are capable of performing under the contract and 
will post collateral as required by the counterparty. The Funds will 
seek, where possible, to use counterparties, as applicable, whose 
financial status is such that the risk of default is reduced; 
however, the risk of losses resulting from default is still 
possible. The Adviser or Sub-Adviser will evaluate the 
creditworthiness of counterparties on a regular basis. In addition 
to information provided by credit agencies, the Adviser or Sub-
Adviser will review approved counterparties using various factors, 
which may include the counterparty's reputation, the Adviser's or 
Sub-Adviser's past experience with the counterparty and the price/
market actions of debt of the counterparty.
    \15\ Options on swaps are traded OTC. According to the Exchange, 
in the event that there are exchange-traded options on swaps, a Fund 
may invest in these instruments.
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    The Exchange states that a Fund may invest in forward currency 
contracts. Currency forward contracts may be used to increase or reduce 
exposure to currency price movements. At the discretion of the Adviser 
or Sub-Adviser, the Funds may enter into forward currency exchange 
contracts for hedging purposes to help reduce the risks and volatility 
caused by changes in foreign currency exchange rates.
    A Fund may gain exposure to foreign securities by purchasing U.S. 
exchange-listed and traded American Depositary Receipts (``ADRs''), 
non-exchange-listed ADRs, exchange-traded European Depositary Receipts 
(``EDRs''), and exchange-traded Global Depositary Receipts (``GDRs'', 
together with ADRs and EDRs, ``Depositary Receipts'').\16\
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    \16\ Non-exchange-listed ADRs will not exceed 10% of a Fund's 
net assets.
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    The Exchange states that the Funds may invest in Rule 144A 
restricted securities.

Investment Restrictions for Each Fund

    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 securities that are offered pursuant to Rule 144A under the 
Securities Act deemed illiquid by the Adviser or Sub-Adviser.\17\ 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 held in illiquid assets. Illiquid assets include 
securities subject to contractual or other restrictions on resale and 
other instruments that lack readily available markets as determined in 
accordance with Commission staff guidance.
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    \17\ According to the Exchange, in reaching liquidity decisions 
with respect to Rule 144A securities, the Adviser or Sub-Adviser may 
consider the following factors: the frequency of trades and quotes 
for the security; the number of dealers willing to purchase or sell 
the security and the number of other potential purchasers; dealer 
undertakings to make a market in the security; and the nature of the 
security and the nature of the marketplace in which it trades (e.g., 
the time needed to dispose of the security, the method of soliciting 
offers, and the mechanics of transfer).
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    Each Fund may invest up to 10% of its net assets in equity 
securities traded OTC.
    The Funds intend to qualify for and to elect to be treated as 
separate regulated investment companies under Subchapter M of the 
Internal Revenue Code.
    Each Fund's investments will be consistent with such Fund's 
investment objective and will not be used to enhance leverage. That is, 
while each Fund will be permitted to borrow as permitted under the 1940 
Act, a Fund's investments will not be used to seek performance that is 
the multiple or inverse multiple (i.e., 2Xs and 3Xs) of a Fund's 
primary broad-based securities benchmark index (as defined in Form N-
1A).\18\
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    \18\ The Exchange states that a Fund's broad-based securities 
benchmark index will be identified in a future amendment to the 
Registration Statement following a Fund's first full calendar year 
of performance.
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    Not more than 10% of the net assets of each Fund in the aggregate 
invested in equity securities (other than non-exchange traded money 
market funds) shall consist of equity securities whose principal market 
is not a member of the Intermarket Surveillance Group (``ISG'') or 
party to a comprehensive surveillance sharing agreement (``CSSA'') with 
the Exchange. 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 exchange-traded options contracts whose 
principal market is not a member of the ISG or is a market with which 
the Exchange does not have a CSSA.

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.\19\ In particular, the Commission finds that

[[Page 22654]]

the proposed rule change, as modified by Amendment No. 1, is consistent 
with Section 6(b)(5) of the Exchange Act,\20\ which requires, among 
other things, that the Exchange's rules be designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest. The 
Commission also finds that the proposal to list and trade the Shares on 
the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the 
Exchange Act,\21\ which sets forth the finding of Congress that it is 
in the public interest and appropriate for the protection of investors 
and the maintenance of fair and orderly markets to assure the 
availability to brokers, dealers, and investors of information with 
respect to quotations for and transactions in securities.
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    \19\ 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).
    \20\ 15 U.S.C. 78f(b)(5).
    \21\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    The Exchange has represented that quotation and last sale 
information for the Shares, U.S. exchange-traded common stocks, as well 
as other exchange traded equity securities, including Depositary 
Receipts (excluding ADRs traded OTC and GDRs), preferred securities, 
convertible securities, REITs, BDCs, CEFs, ETFs, and MLPs 
(collectively, ``Exchange-Traded Equities'') will be available via the 
Consolidated Tape Association (``CTA'') high-speed line and from the 
securities exchanges on which they are listed. The Exchange represents 
that price information for exchange-traded derivative instruments will 
be available from the applicable exchange and from major market data 
vendors. The Exchange states that price information for instruments 
traded OTC (such as common stock traded OTC (including REITs), non-
exchange-listed ADRs, preferred securities (including REITs), 
convertible securities, and cash equivalents) will be available from 
major market data vendors. Price information for non-U.S. exchange-
traded equity securities will be readily available from the exchanges 
trading such securities as well as automated quotation systems, 
published or other public sources, or on-line information services. 
Price information for money market instruments will be available from 
major market data vendors. Quotation and last sale information for GDRs 
will be available from the securities exchanges on which they are 
listed. Information relating to futures, options on futures, and 
exchange-traded swaps will be available from the exchange on which such 
instruments are traded. Price information relating to exchange-traded 
options will be available via the Options Price Reporting Authority. 
Quotation information from brokers and dealers or pricing services will 
be available for Rule 144A securities, ADRs traded OTC, and non-
exchange-traded derivatives, including forwards, OTC swaps, and OTC 
options. The Exchange states that pricing information regarding each 
asset class in which the Funds will invest is generally available 
through nationally recognized data services providers through 
subscription agreements.
    In addition, the indicative intra-day value, which is the Portfolio 
Indicative Value, as defined in NYSE Arca Equities Rule 8.600 (c)(3), 
will be widely disseminated by one or more major market data vendors at 
least every 15 seconds during the Core Trading Session.\22\ On each 
business day, before commencement of trading in Shares in the Core 
Trading Session 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.\23\
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    \22\ 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.
    \23\ On a daily basis, the Adviser or Sub-Adviser 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, such as the type of 
swap); 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 each Fund's portfolio. The Web site information will be 
publicly available at no charge. The Funds' disclosure of derivative 
positions in the Disclosed Portfolio will include information that 
market participants can use to value these positions intraday.
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    The NAV per Share will be calculated by each Fund's custodian and 
determined as of the close of the regular trading session on the New 
York Stock Exchange (``NYSE'') (ordinarily 4:00 p.m., Eastern Time) on 
each day that the NYSE is open. A basket composition file, which will 
include the security names and share quantities required to be 
delivered in exchange for each Fund's Shares, together with estimates 
and actual cash components, will be publicly disseminated daily prior 
to the opening of the NYSE via the National Securities Clearing 
Corporation. Information regarding market price and trading volume for 
the Shares will be continually available on a real-time basis 
throughout the day on brokers' computer screens and other electronic 
services. Information regarding the previous day's closing price and 
trading volume information for the Shares will be published daily in 
the financial section of newspapers. The Web site for the Funds will 
include a form of the prospectus for each Fund and additional data 
relating to NAV and other applicable quantitative information.
    The Commission further believes that the proposal to list and trade 
the Shares is reasonably designed to promote fair disclosure of 
information that may be necessary to price the Shares appropriately and 
to prevent trading when a reasonable degree of transparency cannot be 
assured. The Commission notes that the Exchange will obtain a 
representation from the issuer of the Shares that the NAV per Share 
will be calculated daily and that the NAV and the Disclosed Portfolio 
for each Fund will be made available to all market participants at the 
same time.\24\
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    \24\ See NYSE Arca Equities Rule 8.600(d)(1)(B).
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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. 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.\25\ 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.
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    \25\ 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.
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    The Exchange represents that it has a general policy prohibiting 
the distribution of material, non-public information by its employees. 
Each of the Adviser and the Sub-Adviser is affiliated with a broker-
dealer and has implemented and will maintain a fire wall with respect 
to its broker-dealer affiliate regarding access to information 
concerning the composition and/or changes to a Fund's portfolio.\26\ 
Further, the Commission notes that the Reporting Authority that 
provides the Disclosed Portfolio of each Fund must implement and 
maintain, or be subject to, procedures designed to prevent the use and 
dissemination of material, non-

[[Page 22655]]

public information regarding the actual components of the 
portfolio.\27\
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    \26\ See note 7, supra. The Exchange represents that an 
investment adviser to an open-end fund is required to be registered 
under the Investment Advisers Act of 1940.
    \27\ See NYSE Arca Equities Rule 8.600(d)(2)(B)(ii).
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    Prior to the commencement of trading, the Exchange will inform its 
Equity Trading Permit Holders (``ETP Holders'') in an Information 
Bulletin (``Bulletin'') of the special characteristics and risks 
associated with trading the Shares. The Exchange represents that 
trading in the Shares will be subject to the existing trading 
surveillances, administered by the Exchange or the Financial Industry 
Regulatory Authority (``FINRA'') on behalf of the Exchange, which are 
designed to detect violations of Exchange rules and applicable federal 
securities laws. 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 federal securities laws applicable to trading on the Exchange.\28\
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    \28\ The Exchange states that FINRA conducts cross market 
surveillances of trading on the Exchange pursuant to a regulatory 
services agreement. The Exchange is responsible for FINRA's 
performance under this regulatory services agreement.
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    The Exchange represents that it 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 has also made the following 
representations:
    (1) The Shares will conform to the initial and continued listing 
criteria under NYSE Arca Equities Rule 8.600.
    (2) All statements and representations made in this filing 
regarding (a) the description of the portfolio, (b) limitations on 
portfolio holdings or reference assets, or (c) the applicability of 
Exchange rules and surveillance procedures shall constitute continued 
listing requirements for listing the Shares on the Exchange.
    (3) The issuer has represented to the Exchange that it will advise 
the Exchange of any failure by the Funds to comply with the continued 
listing requirements, and, pursuant to its obligations under Section 
19(g)(1) of the Exchange Act, the Exchange will monitor \29\ for 
compliance with the continued listing requirements. If the Funds are 
not in compliance with the applicable listing requirements, the 
Exchange will commence delisting procedures under NYSE Arca Equities 
Rule 5.5(m).
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    \29\ The Commission notes that certain other proposals for the 
listing and trading of managed fund shares include a representation 
that the exchange will ``surveil'' for compliance with the continued 
listing requirements. See, e.g., Amendment No. 2 to SR-BATS-2016-04, 
available at: http://www.sec.gov/comments/sr-bats-2016-04/bats201604-2.pdf. In the context of this representation, it is the 
Commission's view that ``monitor'' and ``surveil'' both mean ongoing 
oversight of the Fund's compliance with the continued listing 
requirements. Therefore, the Commission does not view ``monitor'' as 
a more or less stringent obligation than ``surveil'' with respect to 
the continued listing requirements.
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    (4) The Exchange has appropriate rules to facilitate transactions 
in the Shares during all trading sessions.
    (5) Trading in the Shares will be subject to the existing trading 
surveillances, administered by the Exchange or 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 deter and detect violations of Exchange rules and 
federal securities laws applicable to trading on the Exchange.
    (6) The Exchange or FINRA, on behalf of the Exchange, will 
communicate as needed regarding trading in the Shares, Exchange-Traded 
Equities, and certain exchange-traded options and futures with other 
markets and other entities that are members of the ISG, and the 
Exchange, or FINRA on behalf of the Exchange, may obtain trading 
information regarding trading in the Shares, Exchange-Traded Equities, 
and certain exchange-traded options and futures from such markets and 
other entities. In addition, the Exchange may obtain information 
regarding trading in the Shares, Exchange-Traded Equities, and certain 
exchange-traded options and futures from markets and other entities 
that are members of ISG or with which the Exchange has in place a CSSA.
    (7) Prior to the commencement of trading of the Shares, the 
Exchange will inform its ETP Holders in a Bulletin of the special 
characteristics and risks associated with trading the Shares. 
Specifically, the Bulletin will discuss the following: (a) The 
procedures for purchases and redemptions of Shares in creation units 
(and that Shares are not individually redeemable); (b) NYSE Arca 
Equities Rule 9.2(a), which imposes a duty of due diligence on its ETP 
Holders to learn the essential facts relating to every customer prior 
to trading the Shares; (c) the risks involved in trading the Shares 
during the Opening and Late Trading Sessions when an updated IIV will 
not be calculated or publicly disseminated; (d) how information 
regarding the Portfolio Indicative Value and the Disclosed Portfolio 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.
    (8) For initial and continued listing, each Fund will be in 
compliance with Rule 10A-3 under the Exchange Act,\30\ as provided by 
NYSE Arca Equities Rule 5.3.
---------------------------------------------------------------------------

    \30\ 17 CFR 240.10A-3.
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    (9) A minimum of 100,000 Shares of each Fund will be outstanding at 
the commencement of trading on the Exchange.
    (10) Under normal market conditions, the RiverFront Dynamic US 
Dividend Advantage ETF will seek to achieve its investment objective by 
investing at least 65% of its net assets in a portfolio of exchange-
traded equity securities of publicly traded U.S. companies with the 
potential for dividend growth.
    (11) Under normal market conditions, the RiverFront Dynamic US 
Flex-Cap ETF will seek to achieve its investment objective by investing 
at least 65% of its net assets in a portfolio of exchange-traded equity 
securities of publicly traded U.S. companies.
    (12) 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 securities that are offered pursuant to Rule 144A under the 
Securities Act deemed illiquid by the Adviser or Sub-Adviser.
    (13) Not more than 10% of the net assets of a Fund in the aggregate 
invested in equity securities (other than non-exchange traded money 
market funds) shall consist of equity securities whose principal market 
is not a member of the ISG or party to a CSSA with the Exchange.
    (14) 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 the ISG or is a market with which the Exchange does not have 
a CSSA.
    (15) A Fund's investments in non-U.S. securities, including non-
U.S. equity securities, may not exceed 20% of a Fund's net assets, plus 
the amount of any borrowings for investment purposes, under normal 
market conditions.
    (16) A Fund may invest up to 10% of its net assets in equity 
securities traded OTC.
    (17) The Funds will not invest in leveraged or leveraged inverse 
ETFs.
    (18) A Fund's investments will be consistent with such Fund's 
investment

[[Page 22656]]

objective and will not be used to enhance leverage. That is, while a 
Fund will be permitted to borrow as permitted under the 1940 Act, a 
Fund's investments will not be used to seek performance that is the 
multiple or inverse multiple (i.e., 2Xs and 3Xs) of a Fund's primary 
broad-based securities benchmark index (as defined in Form N-1A).
    This approval order is based on all of the Exchange's 
representations, including those set forth above, in the Notice, and in 
Amendment No. 1. The Commission notes that the Funds and the Shares 
must comply with the requirements of NYSE Arca Equities Rule 8.600 to 
be initially and continuously listed and traded on the Exchange.

IV. Solicitation of Comments on Amendment No. 1

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether Amendment No. 1 
to the proposed rule change is consistent with the Exchange 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-2016-28 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-2016-28. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of 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-2016-28 and should 
be submitted on or before May 9, 2016.

V. Accelerated Approval of Proposed Rule Change, as Modified by 
Amendment No. 1

    The Commission finds good cause to approve the proposed rule 
change, as modified by Amendment No. 1, prior to the 30th day after the 
date of publication of notice of Amendment No. 1 in the Federal 
Register. Amendment No. 1 revised the proposed rule change by: (1) 
Clarifying the permitted investments of the Funds; (2) modifying the 
investment restrictions applicable to the Funds; (3) clarifying how 
certain investments will be valued for computing each Fund's NAV; (4) 
describing where price information can be obtained for certain 
investments of the Funds; and (5) providing additional representations 
relating to the continued listing requirements for listing the Shares 
on the Exchange, including issuer notification requirements if a Fund 
fails to comply with such continued listing requirements, and Exchange 
surveillance obligations relating to such continued listing 
requirements.
    Amendment No. 1 supplements the proposed rule change by, among 
other things, clarifying the scope of the Funds' permitted investments 
and investment restrictions and providing additional information about 
the availability of pricing information for the Funds' underlying 
assets. It also helps the Commission evaluate whether the listing and 
trading of the Shares of the Funds would be consistent with the 
protection of investors and the public interest.
    Accordingly, the Commission finds good cause, pursuant to Section 
19(b)(2) of the Exchange Act,\31\ to approve the proposed rule change, 
as modified by Amendment No. 1 on an accelerated basis.
---------------------------------------------------------------------------

    \31\ 15 U.S.C. 78s(b)(2).
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VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Exchange Act,\32\ that the proposed rule change (SR-NYSEArca-2016-28), 
as modified by Amendment No. 1 thereto, be, and it hereby is, approved 
on an accelerated basis.
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    \32\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\33\
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    \33\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-08818 Filed 4-15-16; 8:45 am]
 BILLING CODE 8011-01-P