Document ID: SEC-2013-0375-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: NYSE Arca, Inc.
Posted Date: 2013-02-21T05:00Z

[Federal Register Volume 78, Number 35 (Thursday, February 21, 2013)]
[Notices]
[Pages 12110-12116]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-03970]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68930; File No. SR-NYSEArca-2013-14]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change, as Modified by Amendment No. 1, Relating to 
Listing and Trading of Shares of the Cambria Shareholder Yield ETF 
Pursuant to NYSE Arca Equities Rule 8.600

February 14, 2013.
    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 January 31, 2013, 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. On February 13, 2013, the Exchange filed Amendment No. 1 
to the proposed rule change.\4\ 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.
    \4\ In Amendment No. 1, the Exchange: (1) made technical changes 
to the proposed rule change to clarify how the net asset value of 
the Cambria Shareholder Yield ETF would be calculated; and (2) 
stated that quotation and last-sale information for many securities 
held by the Cambria Shareholder Yield ETF would be available via the 
Consolidated Tape Association high speed line.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to list and trade the following under NYSE 
Arca Equities Rule 8.600 (``Managed Fund Shares''): Cambria Shareholder 
Yield ETF. The text of the proposed rule change is available on the 
Exchange's Web site at www.nyse.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
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 \5\ on the Exchange: Cambria 
Shareholder Yield ETF (the ``Fund'').\6\ The Shares of the Fund will be 
offered by Cambria ETF Trust (the ``Trust''). The Trust will be 
registered with the Securities and Exchange Commission (``Commission'') 
as an open-end management investment company.\7\ Cambria Investment 
Management, L.P. will serve as the investment adviser to the Fund (the 
``Adviser''). SEI Investments Distribution Co. (the ``Distributor'') 
will be the principal underwriter and distributor of the Fund's Shares. 
SEI Investments Global Funds Services (the ``Administrator'') will 
serve as administrator for the Fund. Brown Brothers Harriman & Co. will 
serve as the custodian and transfer agent for the Fund (``Custodian'' 
and ``Transfer Agent,'') respectively.
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    \5\ 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.
    \6\ 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).
    \7\ The Trust will be registered under the 1940 Act. On July 6, 
2012, the Trust filed an amendment to the Trust's 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. 333-180879 and 811-22704) (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. 812-13959), dated 
November 13, 2012 (``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. 30340 (January 
4, 2013) (``Exemptive Order''). Investments made by the Fund will 
comply with the conditions set forth in the Exemptive Application 
and the 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.\8\ Commentary

[[Page 12111]]

.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 is not affiliated with any broker-
dealers. In the event (a) the Adviser or any sub-adviser becomes newly 
affiliated with a broker-dealer, or (b) any new adviser or sub-adviser 
becomes affiliated with a broker-dealer, it will implement a fire wall 
with respect to such broker-dealer 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 the portfolio.
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    \8\ An investment adviser to an open-end fund is required to be 
registered under the Investment Advisers Act of 1940 (the ``Advisers 
Act''). As a result, the Adviser and its 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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Fund Investments

    According to the Registration Statement, the Fund seeks income and 
capital appreciation with an emphasis on income from investments in the 
U.S. equity market. The Fund will seek to achieve its investment 
objective by investing, under normal market conditions,\9\ primarily in 
equity securities that provide a high ``shareholder yield.'' The 
Adviser views equity securities as providing a high shareholder yield 
if they exhibit strong cash flows, as reflected by their payment of 
dividends to shareholders and their return of capital to shareholders 
in other forms, such as through net stock buybacks, net debt paydown, 
mergers, acquisitions and other forms of reinvestment in the business. 
The Adviser believes that, while any one of these measures of a 
company's cash flows, in isolation, is inadequate to determine the 
attractiveness of its equity securities, considered together these 
measures have the potential to result in the construction of a 
portfolio of companies with better cash flows, stronger growth 
potential and higher yield characteristics. Considering these measures, 
which comprise shareholder yield, together, therefore may result in a 
more attractive investment portfolio.
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    \9\ The term ``under normal market conditions'' 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.
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    The Fund will invest primarily in equity securities, including the 
common stock, of U.S. companies. The Fund may obtain a limited amount 
of foreign and emerging markets exposure through investments in 
depositary receipts, including American Depositary Receipts (``ADRs'') 
and Global Depositary Receipts (``GDRs''). \10\ The Fund may invest in 
securities of companies in any industry and of any market 
capitalization. Although the Fund generally expects to invest in 
companies with larger market capitalizations, the Fund may invest in 
small- and mid-capitalization companies.
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    \10\ Depositary receipts are receipts, typically issued by a 
bank or trust issuer, which evidence ownership of underlying 
securities issued by a non-U.S. issuer. For ADRs, the depository is 
typically a U.S. financial institution and the underlying securities 
are issued by a non-U.S. issuer. Depositary receipts are not 
necessarily denominated in the same currency as their underlying 
securities. Generally, ADRs, issued in registered form, are designed 
for use in the U.S. securities markets. In general, ADRs must be 
sponsored, but the Fund may invest in unsponsored ADRs under certain 
limited circumstances. It is expected that not more than 10% of the 
net assets of the Fund will be invested in unsponsored ADRs. GDRs 
are receipts typically issued by non-United States banks and trust 
companies that evidence ownership of either foreign or domestic 
securities. The Fund will invest only in ADRs and GDRs 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. See note 25, infra.
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    Cambria will utilize a quantitative model to identify which 
securities the Fund might purchase and sell and opportune times for 
purchases and sales. While the Fund will invest in approximately 100 of 
the top equity securities as determined by their shareholder yield, the 
quantity of holdings in the Fund will be based on a number of factors, 
including the asset size of the Fund and the number of companies that 
satisfy the Adviser's quantitative measurements at any one time. 
Filters will be implemented to screen for companies that pass various 
market capitalization, sector concentration, and liquidity 
requirements. The Fund's portfolio will be rebalanced to the Adviser's 
internal target allocations, developed pursuant to the Adviser's 
strategy described above, at least quarterly.
    The Fund will not invest in non-US equity securities other than 
through ADRs and GDRs.\11\
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    \11\ See note 10, supra.
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Other Investments
    According to the Registration Statement, to respond to adverse 
market, economic, political or other conditions, the Fund may invest 
100% of its total assets, without limitation, in high-quality debt 
securities and money market instruments. The Fund may be invested in 
these instruments for extended periods, depending on the Adviser's 
assessment of market conditions. Debt securities and money market 
instruments include shares of other fixed income or money market mutual 
funds, commercial paper, certificates of deposit, bankers' acceptances, 
U.S. Government securities, repurchase agreements and bonds that are 
rated BBB or higher. While the Fund is in a defensive position, the 
opportunity to achieve its investment objective will be limited. 
Furthermore, to the extent that the Fund invests in money market mutual 
funds, the Fund would bear its pro rata portion of such money market 
fund's advisory fees and operational fees.\12\
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    \12\ Circumstances under which the Fund may temporarily depart 
from its normal investment process include, but are not limited to, 
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.
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    The Fund may hold up to an aggregate amount of 15% of its net 
assets in illiquid securities (calculated at the time of investment), 
including Rule 144A securities. 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 securities. Illiquid securities include securities subject to 
contractual or other restrictions on resale and other instruments that 
lack readily available markets as determined in accordance with 
Commission staff guidance.\13\
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    \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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[[Page 12112]]

    The Fund may make secured loans of its portfolio securities; 
however, securities loans will not be made if, as a result, the 
aggregate amount of all outstanding securities loans by the Fund 
exceeds 33\1/3\% of its total assets (including the market value of 
collateral received). To the extent the Fund engages in securities 
lending, securities loans will be made to broker-dealers that the 
Adviser believes to be of relatively high credit standing pursuant to 
agreements requiring that the loans continuously be collateralized by 
cash, liquid securities, or shares of other investment companies with a 
value at least equal to the market value of the loaned securities.
    The Fund may invest in preferred stocks. Preferred stocks include 
convertible and non-convertible preferred and preference stocks that 
are senior to common stock. Preferred stocks are equity securities that 
are senior to common stock with respect to the right to receive 
dividends and a fixed share of the proceeds resulting from the issuer's 
liquidation. Some preferred stocks also entitle their holders to 
receive additional liquidation proceeds on the same basis as holders of 
the issuer's common stock, and thus represent an ownership interest in 
the issuer.
    The Fund may enter into repurchase agreements with banks and 
broker-dealers. A repurchase agreement is an agreement under which 
securities are acquired by a Fund from a securities dealer or bank 
subject to resale at an agreed upon price on a later date. The 
acquiring Fund bears a risk of loss in the event that the other party 
to a repurchase agreement defaults on its obligations and the Fund is 
delayed or prevented from exercising its rights to dispose of the 
collateral securities.
    The Fund may invest in U.S. government securities and foreign 
government securities rated BBB or higher. U.S. government securities 
include securities issued or guaranteed by the U.S. government or its 
authorities, agencies, or instrumentalities. Foreign government 
securities include securities issued or guaranteed by foreign 
governments (including political subdivisions) or their authorities, 
agencies, or instrumentalities or by supra-national agencies.
    The Fund may invest in the securities of other investment companies 
(including money market funds) to the extent permitted under the 1940 
Act. Under the 1940 Act, the Fund's investment in investment companies 
is limited to, subject to certain exceptions: (i) 3% of the total 
outstanding voting stock of any one investment company, (ii) 5% of the 
Fund's total assets with respect to any one investment company and 
(iii) 10% of the Fund's total assets of investment companies in the 
aggregate.
    The Fund will be classified as a ``diversified'' investment company 
under the 1940 Act.\14\
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    \14\ The diversification standard is set forth in Section 
5(b)(1) of the 1940 Act.
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    The Fund will not purchase the securities of issuers conducting 
their principal business activity in the same industry if, immediately 
after the purchase and as a result thereof, the value of the Fund's 
investments in that industry would equal or exceed 25% of the current 
value of the Fund's total assets, provided that this restriction does 
not limit the Fund's: (i) Investments in securities of other investment 
companies, (ii) investments in securities issued or guaranteed by the 
U.S. government, its agencies or instrumentalities, or (iii) 
investments in repurchase agreements collateralized by U.S. government 
securities.\15\
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    \15\ See Form N-1A, Item 9. The Commission has taken the 
position that a fund is concentrated if it invests more than 25% of 
the value of its total assets in any one industry. See, e.g., 
Investment Company Act Release No. 9011 (October 30, 1975), 40 FR 
54241 (November 21, 1975).
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    The Fund intends to qualify for and to elect treatment as a 
separate regulated investment company (``RIC'') under Subchapter M of 
the Internal Revenue Code.\16\
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    \16\ 26 U.S.C. 851 et seq.
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    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 \17\ 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 net asset value (``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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    \17\ 17 CFR 240.10A-3.
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    The Fund will not invest in options, futures or swaps. The Fund's 
investments will be consistent with its respective investment objective 
and will not be used to enhance leverage.
Creation and Redemption of Shares
    According to the Registration Statement, the Fund will issue and 
redeem Shares on a continuous basis at NAV in aggregations of 50,000 
Shares (``Creation Units'').
    The consideration for a Creation Unit of a Fund will be the ``Fund 
Deposit,'' which will consist of the basket of securities to be 
deposited to purchase Creation Units of the Fund (the ``In-Kind 
Creation Basket''). The Fund Deposit will consist of the In-Kind 
Creation Basket and an amount of cash consisting of a ``Balancing 
Amount'' (as described below) and a transaction fee calculated in 
connection with creations (together with the Balancing Amount, the 
``Cash Component''), or a Cash Component that includes an all cash 
payment (``Cash Value'').
    In addition to the In-Kind Creation Basket, a purchaser will 
typically pay to the Fund a ``Balancing Amount'' reflecting the 
difference, if any, between the NAV of a Creation Unit and the market 
value of the securities in the In-Kind Creation Basket. If the NAV per 
Creation Unit exceeds the market value of the securities in the In-Kind 
Creation Basket, the purchaser will pay the Balancing Amount to the 
Fund. By contrast, if the NAV per Creation Unit is less than the market 
value of the securities in the In-Kind Creation Basket, the Fund will 
pay the Balancing Amount to the purchaser. The Balancing Amount ensures 
that the consideration paid by an investor for a Creation Unit is 
exactly equal to the value of the Creation Unit.
    A portfolio composition file, to be sent via the National 
Securities Clearing Corporation (``NSCC''), will be made available on 
each business day, prior to the opening of business on the Exchange 
(currently 9:30 a.m., Eastern time), a list of the names and the 
required number of shares of each security in the In-Kind Creation 
Basket to be included in the current Fund Deposit for the Fund (based 
on information about the Fund's portfolio at the end of the previous 
business day). In addition, on each business day, the estimated Cash 
Component, effective through and including the previous business day, 
will be made available through NSCC.
    The In-Kind Creation Basket is applicable for purchases of Creation 
Units of the Fund until such time as the next-announced In-Kind 
Creation Basket is made available. The Fund reserves the right to 
accept a nonconforming (i.e., custom) Fund Deposit. In addition, the 
composition of

[[Page 12113]]

the In-Kind Creation Basket may change as, among other things, 
corporate actions and investment decisions by the Adviser are 
implemented for the Fund's portfolio.
    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 Distributor that governs transactions in the 
Fund's Creation Units. In-kind portions of purchase orders will be 
processed through the Clearing Process when it is available.
    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 Fund through the Distributor and only on a business day. The 
redemption proceeds for a Creation Unit will consist of the basket of 
securities a shareholder will receive upon redemption of a Creation 
unit (the ``In-Kind Redemption Basket'') and an amount of cash 
consisting of a Balancing Amount and a transaction fee (the ``Cash 
Redemption Amount''), or, in certain circumstances, the Cash Value, in 
all instances equal to the value of a Creation Unit. In addition, 
investors may incur brokerage and other costs in connection with 
assembling a Creation Unit.
    The redemption proceeds for a Creation Unit generally consist of 
the In-Kind Redemption Basket and a Cash Redemption Amount (``Fund 
Redemption''), which consists of a Balancing Amount and a Transaction 
Fee. In lieu of the In-Kind Redemption Basket and Balancing Amount, 
Creation Units may be redeemed consisting solely of cash in an amount 
equal to the NAV of a Creation Unit (the ``Cash Value''). In such 
instances, information about the Cash Value of a Creation Unit also 
will be published. The Fund reserves the right to accept a 
nonconforming (i.e., custom) Fund Redemption.\18\
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    \18\ As stated in the Exemptive Application, the Fund may, in 
certain circumstances, allow cash creations or partial cash 
creations but not redemptions (or vice versa) if: (a) There is a 
Balancing Amount; (b) the Fund announces before the open of trading 
that all purchases, all redemptions or all purchases and redemptions 
on that day will be made entirely in cash; (c) upon receiving a 
purchase or redemption order from an Authorized Participant the Fund 
determines to require the purchase or redemption to be made entirely 
in cash because, among other things, it would benefit the Fund and 
its investors; (d) the Fund requires all Authorized Participants 
purchasing or redeeming Shares on that day to deposit or receive (as 
applicable) cash in lieu of some or all of the In-Kind Creation 
Basket or In-Kind Redemption Basket, respectively, solely because 
(i) certain instruments therein are not eligible for transfer 
through either the NSCC Process or DTC Process (as described in the 
Exemptive Application) or (ii) such instruments are not eligible for 
trading due to local (foreign) trading or transfer restrictions or 
the like; or (e) the Fund permits an Authorized Participant to 
deposit or receive (as applicable) cash in lieu of some or all of 
the In-Kind Creation Basket or In-Kind Redemption Basket, 
respectively, solely because (i) certain instruments therein are, in 
the case of the purchase of a Creation Unit, not available in 
sufficient quantity, (ii) such instruments are not eligible for 
trading by an Authorized Participant or the investor on whose behalf 
the Authorized Participant is acting, or (iii) an investor would be 
subject to unfavorable income tax treatment based on receipt of 
redemption proceeds in kind. According to the Registration 
Statement, an additional variable charge for cash or partial cash 
creations, and cash or partial cash redemptions, may also be imposed 
to compensate the Fund for the costs associated with buying the 
applicable securities.
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    The right of redemption may be suspended or the date of payment 
postponed: (i) For any period during which the New York Stock Exchange 
(``NYSE'') is closed (other than customary weekend and holiday 
closings); (ii) for any period during which trading on the NYSE is 
suspended or restricted; (iii) for any period during which an emergency 
exists as a result of which disposal of the Shares or determination of 
the Fund's NAV is not reasonably practicable; or (iv) in such other 
circumstances as permitted by the Commission.
    For an order involving a Creation Unit to be effectuated at the 
Fund's NAV on a particular day, it must be received by the Distributor 
by or before the deadline for such order (``Order Cut-Off Time''). The 
Order Cut-Off Time for creation and redemption orders for the Fund is 
generally expected to be 4:00 p.m. Eastern time for In-Kind Creation 
and Redemption Baskets, and 2:00 p.m. Eastern time for Cash Value 
transactions. In-Kind Creation and Redemption Baskets are expected to 
be accepted until the close of regular trading on the Exchange on each 
business day, which is usually 4:00 p.m. Eastern time. A standard 
redemption transaction fee will be imposed to offset transfer and other 
transaction costs that may be incurred by the Fund.
    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.cambriafunds.com), as 
applicable.
Determination of Net Asset Value
    According to the Registration Statement, the NAV of the Fund will 
be calculated each business day as of the close of regular trading on 
the NYSE, generally 4:00 p.m., Eastern time. The Fund will calculate 
its NAV per Share by taking the current market value of its total 
assets, subtracting any liabilities, and dividing that amount by the 
total number of Shares owned by shareholders.
    When calculating the NAV of the Fund's Shares, expenses are accrued 
and applied daily and stocks held by the Fund will be valued at their 
market value when reliable market quotations are readily available. 
Equity securities will be valued primarily on the basis of market 
prices reported on stock exchanges and other securities markets around 
the world. If a security is listed on a national securities exchange, 
the security will be valued at the closing price or, if the closing 
price is not readily available, the mean of the closing bid and ask 
prices. Unlisted securities for which market quotations are readily 
available will be valued at the last sale price, if available, or, if 
the last sale price is unavailable, at the mean of the closing bid and 
ask prices, if both such prices are readily available, or, if both such 
prices are unavailable, at the last quoted bid price, as applicable. 
Debt securities and other assets for which market quotations are 
readily available will be valued at market values in the principal 
market in which they normally are traded, as furnished by recognized 
dealers in such securities or assets. Certain equity securities, debt 
securities and other assets will be valued differently. For instance, 
fixed-income investments maturing in 60 days or less will be valued 
primarily using the amortized cost method. Investments in open-end 
funds are valued at their NAVs. Both market quotations and indicative 
bids are obtained from outside pricing services approved and monitored 
pursuant to a policy approved by the Fund's Board of Trustees.
    If a market price is not readily available or is deemed not to 
reflect market value, the Fund will determine the price of the security 
held by the Fund based on a determination of the security's fair value 
pursuant to a policy approved by the Fund's Board of Trustees.
Availability of Information
    The Fund's Web site (www.cambriafunds.com), which will be publicly 
available prior to the public offering of Shares, will include a form

[[Page 12114]]

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''),\19\ 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.\20\
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    \19\ 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.
    \20\ 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 (if applicable), name 
of security and financial instrument, number of shares or dollar value 
of financial instruments held in the portfolio, and percentage 
weighting of the security and financial instrument in the 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 are expected to be published daily in the 
financial section of newspapers. Quotation and last sale information 
for the Shares and many securities held by the Fund will be available 
via the Consolidated Tape Association (``CTA'') high-speed line. In 
addition, the Indicative Optimized Portfolio Value (``IOPV''),\21\ 
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.\22\ 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.
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    \21\ 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.
    \22\ 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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    Additional information regarding the Trust and the Shares, 
including investment strategies, risks, creation and redemption 
procedures, fees, portfolio 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.\23\ 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 of the Fund may be 
halted.
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    \23\ 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.
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.\24\ The Exchange represents that 
these procedures are adequate to properly monitor Exchange trading of 
the Shares in all trading

[[Page 12115]]

sessions and to deter and detect violations of Exchange rules and 
applicable federal securities laws.
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    \24\ 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 with other markets that are members of the Intermarket 
Surveillance Group (``ISG'') or with which the Exchange has in place a 
comprehensive surveillance sharing agreement.\25\
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    \25\ 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) \26\ 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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    \26\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares will be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria in NYSE Arca Equities Rule 
8.600. 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 not affiliated with any broker-
dealers. In the event (a) the Adviser or any sub-adviser becomes newly 
affiliated with a broker-dealer, or (b) any new adviser or sub-adviser 
becomes affiliated with a broker-dealer, it will implement a ``fire 
wall'' with respect to such broker-dealer 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. It is expected that not more than 10% of the net assets of 
the Fund will be invested in unsponsored ADRs. The Fund will invest 
only in GDRs 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 in U.S. government securities 
and foreign government securities rated BBB or higher. The Fund may 
invest up to 15% of its net assets in illiquid securities (calculated 
at the time of investment), including Rule 144A securities.
    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 and many 
securities held by the Fund 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

[[Page 12116]]

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 will not invest in options, futures or swaps. The 
Fund's investments will be consistent with its investment objective and 
will not be used to enhance leverage.

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 such 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 No. SR-NYSEArca-2013-14 on the subject line.
Paper Comments
     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File No. SR-NYSEArca-2013-14. 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 Web site (http://www.sec.gov/rules/sro.shtml). Copies 
of the submission, all subsequent amendments, all written statements 
with respect to the proposed rule change that are filed with the 
Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for Web site viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE., Washington, 
DC 20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of such filing 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 No. SR-NYSEArca-2013-14 and should be 
submitted on or before March 14, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
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    \27\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-03970 Filed 2-20-13; 8:45 am]
BILLING CODE 8011-01-P