Document ID: SEC-2014-1257-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2014-07-28T04:00Z

[Federal Register Volume 79, Number 144 (Monday, July 28, 2014)]
[Notices]
[Pages 43801-43808]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-17639]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72651; File No. SR-NYSEArca-2014-79]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Proposing To List and Trade Shares of InfraCap 
Active MLP ETF Under NYSE Arca Equities Rule 8.600

July 22, 2014.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on July 9, 2014, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
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 the 
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''): InfraCap 
Active MLP ETF. The text of the proposed rule change is available on 
the

[[Page 43802]]

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 (``Shares'') of the 
following under NYSE Arca Equities Rule 8.600, which governs the 
listing and trading of Managed Fund Shares \4\ on the Exchange: 
InfraCap Active MLP ETF (the ``Fund'').\5\ The Shares of the Fund will 
be offered by ETFis Series Trust I (the ``Trust''). The Trust will be 
registered with the Securities and Exchange Commission (``Commission'') 
as an open-end management investment company.\6\ Etfis Capital LLC will 
serve as the investment adviser to the Fund (the ``Adviser''). ETF 
Distributors LLC (the ``Distributor'') will be the principal 
distributor of the Fund's Shares. Infrastructure Capital Advisors, LLC 
(the ``Sub-Adviser'') will serve as sub-adviser for the Fund. The Bank 
of New York Mellon will serve as the administrator, accountant, 
custodian and transfer agent for the Fund (``Administrator,'' 
``Accountant,'' ``Custodian'' and ``Transfer Agent,'' respectively).
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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) (``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 previously 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. 57801 (May 8, 
2008), 73 FR 27878 (May 14, 2008) (SR-NYSEArca-2008-31) (order 
approving Exchange listing and trading of twelve actively-managed 
funds of the WisdomTree Trust); 60460 (August 7, 2009), 74 FR 41468 
(August 17, 2009) (SR-NYSEArca-2009-55) (order approving listing and 
trading of Dent Tactical ETF); 63076 (October 12, 2010), 75 FR 63874 
(October 18, 2010) (SR-NYSEArca-2010-79) (order approving listing 
and trading of Cambria Global Tactical ETF).
    \6\ The Trust is registered under the 1940 Act. On February 26, 
2014, the Trust filed a post-effective amendment to its registration 
statement on Form N-1A under the Securities Act of 1933 (the ``1933 
Act'') (15 U.S.C. 77a), and under the 1940 Act relating to the Fund 
(File Nos. 333-187668 and 811-22819) (the ``Registration 
Statement''). The description of the operation of the Trust and the 
Fund herein is based, in part, on the Registration Statement. The 
Trust filed an Amended and Restated Application for an Order under 
Section 6(c) of the 1940 Act for exemptions from various provisions 
of the 1940 Act and rules thereunder (File No. 812-14080), dated 
June 19, 2013 (``Exemptive Application''). The Commission has issued 
an order granting certain exemptive relief to the Trust under the 
1940 Act. See Investment Company Act Release No. 30607 (July 23, 
2013) (``Exemptive Order'').
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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 of and/or 
changes to such investment company portfolio. 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.\7\ Commentary .06 to Rule 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. The Adviser and 
Sub-Adviser are not registered as a broker-dealer; however the Adviser 
(but not the Sub-Adviser) is affiliated with a broker-dealer and has 
implemented a fire wall with respect to such broker-dealer regarding 
access to information concerning the composition 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 the 
portfolio. In the event (a) the Adviser or any sub-adviser registers as 
a 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, they will implement a fire 
wall with respect to their relevant personnel or broker-dealer 
affiliate regarding access to information concerning the composition 
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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    \7\ 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 are subject to the provisions of Rule 204A-1 under the 
Advisers Act relating to codes of ethics. This Rule requires 
investment advisers to adopt a code of ethics that reflects the 
fiduciary nature of the relationship to clients as well as 
compliance with other applicable securities laws. Accordingly, 
procedures designed to prevent the communication and misuse of non-
public information by an investment adviser must be consistent with 
Rule 204A-1 under the Advisers Act. In addition, Rule 206(4)-7 under 
the Advisers Act makes it unlawful for an investment adviser to 
provide investment advice to clients unless such investment adviser 
has (i) adopted and implemented written policies and procedures 
reasonably designed to prevent violation, by the investment adviser 
and its supervised persons, of the Advisers Act and the Commission 
rules adopted thereunder; (ii) implemented, at a minimum, an annual 
review regarding the adequacy of the policies and procedures 
established pursuant to subparagraph (i) above and the effectiveness 
of their implementation; and (iii) designated an individual (who is 
a supervised person) responsible for administering the policies and 
procedures adopted under subparagraph (i) above.
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Principal Fund Investments
    According to the Registration Statement, the Fund seeks total 
return primarily through investments in equity securities of publicly-
traded master limited partnerships and limited liability companies 
taxed as partnerships (``MLPs'').\8\ The Fund will seek to achieve its 
investment objective by normally \9\ investing up to 100% (but

[[Page 43803]]

not less than 80%) of its total assets in exchange-traded securities of 
MLPs in the energy infrastructure sector. The Fund will focus on 
investing in MLPs selected by the Sub-Adviser that trade on the New 
York Stock Exchange (``NYSE'') or the NASDAQ Stock Market (``Nasdaq'') 
and that, as their principal business, operate assets used in the 
gathering, transporting, processing, storing, refining, distributing, 
mining or marketing of natural gas, natural gas liquids, crude oil, 
refined petroleum products or coal (collectively, ``Energy Products'').
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    \8\ According to the Registration Statement, the Fund may invest 
in MLP units, securities of companies holding primarily general 
partner or managing member interests in MLPs, securities that 
themselves own interests in MLPs (e.g., exchange-traded funds 
(``ETFs''), exchange-traded notes (``ETNs'') and open-end and 
closed-end other investment companies that invest in MLPs).
    \9\ The term ``normally'' includes, but is not limited to, the 
absence of extreme volatility or trading halts in the equity markets 
or the financial markets generally; operational issues causing 
dissemination of inaccurate market information; or force majeure 
type events such as systems failure, natural or man-made disaster, 
act of God, armed conflict, act of terrorism, riot or labor 
disruption or any similar intervening circumstance. According to the 
Registration Statement, the Fund may, from time to time, take 
temporary defensive positions that are inconsistent with its 
principal investment strategies in an attempt to respond to adverse 
market, economic, political or other conditions. In such 
circumstances, the Fund may also hold up to 100% of its portfolio in 
cash and cash equivalent positions. According to the Registration 
Statement, when the Fund takes a temporary defensive position, it 
may not be able to achieve its investment objective.
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    According to the Registration Statement, the Fund will typically 
focus on ``midstream'' MLPs which are MLPs that collect, gather, 
process, transport and store natural resources and their byproducts 
(primarily crude oil, natural gas and refined petroleum products), 
generally without taking ownership of the energy products.\10\
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    \10\ According to the Registration Statement, Midstream MLPs may 
also operate ancillary businesses, including the marketing of energy 
products and logistical services related thereto, but are typically 
not engaged in the mining, production or distribution of energy 
products.
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    The Fund expects to typically invest in a portfolio of between 25 
to 50 MLPs, however there is no limit on the number of MLPs in which 
the Fund will invest.\11\ The Sub-Adviser's investment decisions will 
be based on a variety of quantitative, qualitative and relative 
valuation factors. The Sub-Adviser will typically evaluate potential 
investments with respect to certain key variables that the Sub-Adviser 
believes make a business successful over time, including, without 
limitation, a company's competitive position, its perceived ability to 
earn a high return on capital, the historical and projected stability 
and reliability of its earnings and cash flow, its anticipated ability 
to generate cash in excess of its growth needs and its access to 
additional capital. The Sub-Adviser also expects to utilize its 
personnel's experience in evaluating energy infrastructure investments 
and long-term relationships with energy industry participants to help 
identify investment opportunities.
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    \11\ According to the Registration Statement, under normal 
circumstances, the Fund will not invest more than 15% of its total 
assets in any one issuer.
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Other Fund Investments
    According to the Registration Statement, although the Fund will 
normally invest not less than 80% of its total assets as described 
above, the Fund has flexibility to invest the remaining 20% of its 
assets in other types of securities, including exchange-traded equity 
securities of large, medium and small capitalization companies, money 
market mutual funds, ETFs and other open-end and closed-end investment 
companies unrelated to the energy infrastructure sector, when the Sub-
Adviser believes they offer more attractive opportunities or to meet 
liquidity, redemption or short-term investing needs.
    According to the Registration Statement, the Fund may invest up to 
20% of its total assets in securities convertible into common stock. 
Convertible securities eligible for purchase by the Fund will be 
exchange-traded and include convertible bonds, convertible preferred 
stocks, and warrants. The Fund will not invest directly in real estate, 
but may invest in exchange-traded readily marketable securities issued 
by companies that invest in real estate or interests therein. The Fund 
may also invest in readily marketable interests in real estate 
investment trusts.
    According to the Registration Statement, the Fund may invest in 
money market instruments, foreign debt or equity securities traded on 
U.S. exchanges, in over-the-counter markets or in the form of American 
Depositary Receipts.
    According to the Registration Statement, the Fund may also use 
leverage (including margin borrowing) to the extent permitted by the 
1940 Act. However, the Fund's investments will not be used to seek 
performance that is the multiple or inverse multiple (i.e., 2Xs and 
3Xs) of an index. The Fund may also invest, or establish short 
positions, in ETFs, exchange-traded options or futures contracts in an 
effort to hedge against market, interest rate or commodity risks in the 
Fund's portfolio.
General Limitations
    The Fund may hold up to an aggregate amount of 15% of its net 
assets in illiquid assets (calculated at the time of investment), 
including Rule 144A securities deemed to be illiquid by the Sub-
Adviser.\12\ The Fund will monitor its portfolio liquidity on an 
ongoing basis to determine whether, in light of current circumstances, 
an adequate level of liquidity is being maintained, and will consider 
taking appropriate steps in order to maintain adequate liquidity if, 
through a change in values, net assets, or other circumstances, more 
than 15% of the Fund's net assets are held in illiquid assets. Illiquid 
assets include assets subject to contractual or other restrictions on 
resale and other instruments that lack readily available markets as 
determined in accordance with Commission staff guidance.\13\
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    \12\ According to the Registration Statement, in determining the 
liquidity of the Fund's investments, the Sub-Adviser may consider 
various factors including: (i) The frequency of trades and 
quotations; (ii) the number of dealers and prospective purchasers in 
the marketplace; (iii) dealer undertakings to make a market; (iv) 
the nature of the security (including any demand or tender 
features); and (v) the nature of the marketplace for trades 
(including the ability to assign or offset the Fund's rights and 
obligations relating to the investment).
    \13\ 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 1933 Act).
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    The Fund may lend portfolio securities in an amount equal to up to 
33% of its total assets to broker-dealers, major banks, or other 
recognized domestic institutional borrowers of securities which the 
Sub-Adviser has determined are creditworthy under guidelines 
established by the Board of Trustees. The Fund may not lend securities 
to any company affiliated with the Sub-Adviser. Each loan of securities 
will be collateralized by cash, securities, or letters of credit. The 
Fund might experience a loss if the borrower defaults on the loan.
    The Fund will not invest in swaps. The Fund's investments will be 
consistent with its investment objective.
    The Fund will not invest in unsponsored ADRs. The Fund will invest 
only in ADRs, futures and options that are traded on an exchange that 
is a member of the Intermarket Surveillance Group (``ISG'') or with 
which the Exchange has in place a comprehensive surveillance sharing 
agreement.
Creation and Redemption of Shares
    According to the Registration Statement, the Fund will issue and 
redeem Shares on a continuous basis at net asset value (``NAV'') in 
aggregations of 50,000 Shares (``Creation Units'').
    The consideration for purchase of a Creation Unit of the Fund 
generally consists of an in-kind deposit of a designated portfolio of 
securities (the ``Deposit Securities'') per each Creation

[[Page 43804]]

Unit constituting a substantial replication, or a representation, of 
the securities included in the Fund's portfolio and an amount of cash 
(the ``Cash Component''). 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 the 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''), makes 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 the Fund. Such Fund Deposit is applicable in order to effect 
creations of Creation Units of the Fund until such time as the next-
announced composition of the Deposit Securities is made available.
    The identity and number of shares of the Deposit Securities 
required for the Fund Deposit for the Fund changes as rebalancing 
adjustments and corporate action events are reflected from time to time 
by the portfolio managers with a view to the investment objective of 
the Fund. In addition, the Trust reserves the right to permit or 
require the substitution of an amount of cash to be added to the Cash 
Component to replace any Deposit Security which may not be available. 
The Adviser represents that, to the extent that cash is substituted to 
replace any Deposit Security, 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 the Fund Deposit, the Administrator, through the NSCC, 
also makes available on each business day, the estimated Cash 
Component, effective through and including the previous business day, 
per outstanding Creation Unit of the Fund.
    All purchase orders must be placed by or through an ``Authorized 
Participant.'' An Authorized Participant must be either a broker-dealer 
or other participant in the Continuous Net Settlement System 
(``Clearing Process'') of the NSCC or a participant in The Depository 
Trust Company (``DTC'') with access to the DTC system, and must execute 
an agreement with the Trust, the Distributor and the Administrator that 
governs transactions in the Fund's Creation Units. All orders to create 
Creation Units must be received by the Distributor no later than the 
close of the regular trading session on the Exchange (ordinarily 4:00 
p.m. Eastern Time) 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 
the Fund as next determined on such date after receipt of the order in 
proper form.
    Fund Shares may be redeemed only in Creation Units at their NAV 
next determined after receipt of a redemption request in proper form by 
the Distributor and the Fund through the Administrator and only on a 
business day. The Trust will not redeem Shares in amounts less than 
Creation Units.
    The redemption proceeds for a Creation Unit generally will consist 
of securities held by the Fund (the ``Fund Securities'') (as announced 
on the Fund's Web site prior to the commencement of trading 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 a 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.
    The right of redemption may be suspended or the date of payment 
postponed with respect to the 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 the Fund or determination of 
the Shares' NAV is not reasonably practicable \14\; or (4) in such 
other circumstance as is permitted by the Commission.
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    \14\ Pursuant to NYSE Arca Equities Rule 7.34(a)(5), trading in 
the Shares will be halted if the Fund's NAV is not disseminated to 
all market participants at the same time.
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    Detailed descriptions of the Fund's procedures for creating and 
redeeming Shares, transaction fees and expenses, dividends, 
distributions, taxes, risks, and reports to be distributed to 
beneficial owners of the Shares can be found in the Registration 
Statement or on the Web site for the Fund (www.infracapmlp.com), as 
applicable.
Determination of Net Asset Value
    According to the Registration Statement, the NAV per Share for the 
Fund will be computed by dividing the value of the net assets of the 
Fund (i.e., the value of its total assets less total liabilities) by 
the total number of Shares outstanding, rounded to the nearest cent. 
Expenses and fees, including the management fee, will be accrued daily 
and taken into account for purposes of determining NAV. The NAV of the 
Fund will be determined as of the close of the regular trading session 
on the Exchange (ordinarily 4:00 p.m., Eastern time) on each day that 
the Exchange is open.
    Exchange-traded securities will be valued at market closing price 
or, if no sale has occurred, at the last quoted bid price on the 
primary exchange on which they are traded. Price information for 
exchange-traded securities, including equity securities of MLPs and 
large, medium and small capitalization companies, ETFs, ETNs, ADRs, 
convertible securities and options will be taken from the exchange 
where the security is primarily traded.
    Futures will be valued at the settlement price determined by the 
applicable exchange.
    Investment company securities, including money market mutual funds 
and open-end and closed-end investment companies, will be valued at 
NAV, utilizing pricing services.
    In computing the Fund's NAV, the value of the Fund's portfolio 
holdings is based on such holdings' closing price on local markets when 
available. When a portfolio holding's market price is not readily 
available or does not otherwise accurately reflect the fair value of 
such security, the Fund will use such holding's fair value as 
determined in good faith in accordance with the Fund's fair value 
pricing procedures, which will be approved by the Board of

[[Page 43805]]

Trustees. Fair value pricing may be used, for example, in situations 
where (i) portfolio holdings, such as holdings with small 
capitalizations, are so thinly traded that there have been no 
transactions for that portfolio holding over an extended period of 
time; (ii) an event occurs after the close of the exchange on which a 
portfolio holding is principally traded that is likely to change the 
value of the portfolio holding prior to the Fund's NAV calculation; 
(iii) the exchange on which the portfolio holding is principally traded 
closes early; or (iv) trading of the particular portfolio holding is 
halted during the day and does not resume prior to the Fund's NAV 
calculation. In addition, the Fund may fair value foreign equity 
portfolio holdings each day the Fund calculates its NAV. Accordingly, 
the Fund's NAV may reflect certain portfolio holdings' fair values 
rather than their market prices.
    In valuing non-exchange traded securities, the Fund will first use 
publicly-available pricing sources, including Bloomberg, IDC, and 
Reuters. Non-exchange traded securities will only be fair valued if 
their market prices are not readily available.
    To the extent the assets of the Fund are invested in the other 
open-end investment companies that are registered under the 1940 Act, 
the Fund's NAV is calculated based upon the NAVs reported by such 
registered open-end investment companies, and the prospectuses for 
these companies explain the circumstances under which they will use 
fair value pricing and the effects of using fair value pricing.
Availability of Information
    The Fund's Web site (www.infracapmlp.com), which will be publicly 
available prior to the public offering of Shares, will include a form 
of the prospectus for the Fund that may be downloaded. The Fund's Web 
site will include additional quantitative information updated on a 
daily basis, including, for the Fund, (1) 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''),\15\ and a 
calculation of the premium and discount of the Bid/Ask Price against 
the NAV, and (2) data in chart format displaying the frequency 
distribution of discounts and premiums of the daily Bid/Ask Price 
against the NAV, within appropriate ranges, for each of the four 
previous calendar quarters. On each business day, before commencement 
of trading in Shares in the Core Trading Session on the Exchange, the 
Fund will disclose on its Web site the Disclosed Portfolio that will 
form the basis for the Fund's calculation of NAV at the end of the 
business day.\16\
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    \15\ The Bid/Ask Price of the 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 the Fund's NAV. The records relating 
to Bid/Ask Prices will be retained by the Fund and its service 
providers.
    \16\ Under accounting procedures to be followed by the Fund, 
trades made on the prior business day (``T'') will be booked and 
reflected in NAV on the current business day (``T+1''). Accordingly, 
the Fund will be able to disclose at the beginning of the business 
day the portfolio that will form the basis for the NAV calculation 
at the end of the business day.
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    On a daily basis, the Adviser will disclose for each portfolio 
security or other financial instrument of the Fund the following 
information on the Fund's Web site: 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 the Fund's portfolio. The Web site information will be 
publicly available at no charge.
    In addition, a basket composition file, which includes the security 
names and share quantities required to be delivered in exchange for the 
Fund's Shares, together with estimates and actual cash components, will 
be publicly disseminated daily prior to the opening of the NYSE via 
NSCC. The basket will represent one Creation Unit of Shares of the 
Fund.
    Investors can also obtain the Trust's Statement of Additional 
Information (``SAI''), the Fund's shareholder reports, and the Trust's 
Form N-CSR and Form N-SAR, filed twice a year. The Trust's SAI and 
Shareholder Reports are 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 and any 
underlying securities that are exchange-listed, including equity 
securities of MLPs and large, medium and small capitalization 
companies, ETFs, ETNs, ADRs and convertible securities will be 
available via the Consolidated Tape Association (``CTA'') high-speed 
line. Information relating to futures will be available from the 
exchange on which such futures are traded. Information relating to 
exchange-traded options will be available via the Options Price 
Reporting Authority. Information for investment companies, including 
money market mutual funds and open-end and closed-end investment 
companies, will be available from publicly-available pricing souces 
[sic], including Bloomberg, IDC and Reuters. In addition, the 
Indicative Optimized Portfolio Value (``IOPV''),\17\ which is 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.\18\
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    \17\ The IOPV calculations will be estimates of the value of the 
Fund's NAV per Share using market data converted into U.S. dollars 
at the current currency rates. The IOPV price will be based on 
quotes and closing prices from the securities' local market and may 
not reflect events that occur subsequent to the local market's 
close. The quotations of certain Fund holdings may not be updated 
during U.S. trading hours if such holdings do not trade in the 
United States. Premiums and discounts between the IOPV and the 
market price may occur. This should not be viewed as a ``real-time'' 
update of the NAV per Share of the Fund, which will be calculated 
only once a day.
    \18\ Currently, it is the Exchange's understanding that several 
major market data vendors display and/or make widely available IOPVs 
taken from the CTA or other data feeds.
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    The IOPV will be calculated by an independent third party 
calculator and will be calculated based on the same portfolio holdings 
disclosed on the Fund's Web site.
    The dissemination of the IOPV, together with the Disclosed 
Portfolio, will allow investors to determine the value of the 
underlying portfolio of the Fund on a daily basis and to provide a 
close estimate of that value throughout the trading day. The intra-day, 
closing and settlement prices of the portfolio securities and other 
Fund investments will also be readily available from the national 
securities exchanges trading such securities, automated quotation 
systems, published or other public sources, or on-line information 
services such as Bloomberg or Reuters.
    Additional information regarding the Trust and the Shares, 
including investment strategies, risks, creation and redemption 
procedures, fees, portfolio

[[Page 43806]]

holdings disclosure policies, distributions and taxes is included in 
the Registration Statement. All terms relating to the Fund that are 
referred to, but not defined in, this proposed rule change are defined 
in the Registration Statement.
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 Fund.\19\ Trading in Shares of the Fund 
will be halted if the circuit breaker parameters in NYSE Arca Equities 
Rule 7.12 have been reached. Trading also may be halted because of 
market conditions or for reasons that, in the view of the Exchange, 
make trading in the Shares inadvisable. These may include: (1) The 
extent to which trading is not occurring in the securities and/or the 
financial instruments comprising the Disclosed Portfolio of the Fund; 
or (2) whether other unusual conditions or circumstances detrimental to 
the maintenance of a fair and orderly market are present. Trading in 
the Shares will be subject to NYSE Arca Equities Rule 8.600(d)(2)(D), 
which sets forth circumstances under which Shares may be halted.
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    \19\ See NYSE Arca Equities Rule 7.12, Commentary .04.
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Trading Rules
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. Shares will trade on 
the NYSE Arca Marketplace from 4:00 a.m. to 8:00 p.m. 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, Commentary .03, the minimum price 
variation (``MPV'') for quoting and entry of orders in equity 
securities traded on the NYSE Arca Marketplace is $0.01, with the 
exception of securities that are priced less than $1.00 for which the 
MPV for order entry is $0.0001.
    The Shares will conform to the initial and continued listing 
criteria under NYSE Arca Equities Rule 8.600. The Exchange represents 
that, for initial and/or continued listing, the Fund will be in 
compliance with Rule 10A-3 \20\ under the Act, as provided by NYSE Arca 
Equities Rule 5.3. A minimum of 100,000 Shares for the Fund will be 
outstanding at the commencement of trading on the Exchange. The 
Exchange will obtain a representation from the issuer of the Shares 
that the NAV 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.
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    \20\ 17 CFR 240.10A-3.
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Surveillance
    The Exchange represents that trading in the Shares will be subject 
to the existing trading surveillances, administered by the Financial 
Industry Regulatory Authority (``FINRA'') on behalf of the Exchange, 
which are designed to detect violations of Exchange rules and 
applicable federal securities laws.\21\ 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.
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    \21\ FINRA surveils 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 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.
    FINRA, on behalf of the Exchange, will communicate as needed 
regarding trading in the Shares and exchange-traded securities held by 
the Fund with other markets that are members of the ISG and FINRA, on 
behalf of the Exchange, may obtain trading information regarding 
trading in the Shares and exchange-traded securities held by the Fund 
from such markets or other entities. In addition, the Exchange may 
obtain information regarding trading in the Shares and exchange-traded 
securities held by the Fund from markets and other entities that are 
members of ISG or with which the Exchange has in place a comprehensive 
surveillance sharing agreement.\22\
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    \22\ 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 the Fund may trade on markets that are 
members of ISG or with which the Exchange has in place a 
comprehensive surveillance sharing agreement.
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    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 (``ETP'') 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 ETP Holders to learn the essential facts 
relating to every customer prior to trading the Shares; (3) the risks 
involved in trading the Shares during the Opening and Late Trading 
Sessions when an updated IOPV will not be calculated or publicly 
disseminated; (4) how information regarding the IOPV is disseminated; 
(5) the requirement that ETP Holders deliver a prospectus to investors 
purchasing newly issued Shares prior to or concurrently with the 
confirmation of a transaction; and (6) trading information.
    In addition, the Bulletin will reference that the Fund is subject 
to various fees and expenses described in the Registration Statement. 
The Bulletin will discuss any exemptive, no-action, and interpretive 
relief granted by the Commission from any rules under the 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)\23\ 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.
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    \23\ 15 U.S.C. 78f(b)(5).
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    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. The Shares will be subject to the existing trading 
surveillances, administered by FINRA on behalf of the Exchange, which 
are designed to detect violations of Exchange rules and applicable 
federal securities laws. The Adviser is affiliated with a broker-dealer

[[Page 43807]]

and has implemented a fire wall with respect to such broker-dealer 
regarding access to information concerning the composition 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 the portfolio. In the event (a) the Adviser or the Sub-
Adviser 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, they will implement a ``fire wall'' 
with respect to their relevant personnel or broker-dealer affiliate 
regarding access to information concerning the composition and/or 
changes to the Fund's portfolio. FINRA, on behalf of the Exchange, may 
obtain information via ISG from other exchanges that are members of ISG 
or with which the Exchange has entered into a comprehensive 
surveillance sharing agreement. The Fund will invest only in ADRs, 
futures and options that are traded on an exchange that is a member of 
the ISG or with which the Exchange has in place a comprehensive 
surveillance sharing agreement. The Fund may invest up to 15% of its 
net assets in illiquid assets (calculated at the time of investment), 
including Rule 144A securities deemed illiquid by the Sub-Adviser.
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the 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 is publicly available regarding the Fund and the Shares, 
thereby promoting market transparency. Moreover, the IOPV will be 
widely disseminated by one or more major market data vendors at least 
every 15 seconds during the Exchange's Core Trading Session. On each 
business day, before commencement of trading in Shares in the Core 
Trading Session on the Exchange, the Fund will disclose on its Web site 
the Disclosed Portfolio that will form the basis for the Fund's 
calculation of NAV at the end of the business day. Information 
regarding market price and trading volume of the Shares will be 
continually available on a real-time basis throughout the day on 
brokers' computer screens and other electronic services, and quotation 
and last sale information will be available via the CTA high-speed 
line. The Web site for the Fund will include the prospectus for the 
Fund and additional data relating to NAV and other applicable 
quantitative information. Moreover, prior to the commencement of 
trading, the Exchange will inform its ETP Holders in an Information 
Bulletin of the special characteristics and risks associated with 
trading the Shares. Trading in Shares of the Fund will be halted if the 
circuit breaker parameters in NYSE Arca Equities Rule 7.12 have been 
reached or because of market conditions or for reasons that, in the 
view of the Exchange, make trading in the Shares inadvisable, and 
trading in the Shares will be subject to NYSE Arca Equities Rule 
8.600(d)(2)(D), which sets forth circumstances under which Shares of 
the Fund may be halted. In addition, as noted above, investors will 
have ready access to information regarding the Fund's holdings, the 
IOPV, 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 
an additional type of actively-managed exchange-traded product that 
will enhance competition among market participants, to the benefit of 
investors and the marketplace. As noted above, the Shares will be 
subject to the existing trading surveillances, administered by FINRA on 
behalf of the Exchange, which are designed to detect violations of 
Exchange rules and applicable federal securities laws and FINRA, on 
behalf of the Exchange, may obtain information via ISG from other 
exchanges that are members of ISG or with which the Exchange has 
entered into a comprehensive surveillance sharing agreement. In 
addition, as noted above, investors will have ready access to 
information regarding the Fund's holdings, the IOPV, the Disclosed 
Portfolio, and quotation and last sale information for the Shares. The 
Fund's investments will be consistent with its investment objective.

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 an 
additional type of actively-managed exchange-traded product 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 within such longer period 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-2014-79 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-2014-79. 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

[[Page 43808]]

provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing 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-2014-79, and should 
be submitted on or before August 18, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
Kevin M. O'Neill,
Deputy Secretary.
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    \24\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2014-17639 Filed 7-25-14; 8:45 am]
BILLING CODE 8011-01-P