
[Federal Register Volume 79, Number 176 (Thursday, September 11, 2014)]
[Notices]
[Pages 54333-54338]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-21643]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73004; File No. SR-NYSEArca-2014-76]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting 
Approval of Proposed Rule Change, as Modified by Amendment Nos. 1, 2, 
3, 4, and 5, To List and Trade Shares of the Cambria Global Momentum 
ETF Under NYSE Arca Equities Rule 8.600

September 5, 2014.

I. Introduction

    On July 1, 2014, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to 
list and trade shares (``Shares'') of the Cambria Global Momentum ETF 
(``Fund'') under NYSE Arca Equities Rule 8.600. The Exchange filed 
Amendment No. 1 to the proposal on July 14, 2014, and on July 15, 2014, 
the Exchange filed Amendment No. 2 to the proposal.\3\ The proposed 
rule change, as modified by Amendments No. 1 and 2, was published for 
comment in the Federal Register on July 22, 2014.\4\ On July 22, 2014, 
the Exchange filed Amendment No. 3 to the proposal; \5\ on July 29, 
2014, the Exchange filed Amendment No. 4 to the proposal; \6\ and on 
September 4, 2014, the Exchange filed partial Amendment No. 5 to the 
proposal.\7\
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 replaced and superseded the original filing 
in its entirety, and Amendment No. 2 replaced and superseded 
Amendment No. 1 in its entirety.
    \4\ See Securities Exchange Act Release No. 72631 (July 16, 
2014), 79 FR 42605 (``Notice'').
    \5\ Amendment No. 3 replaced and superseded Amendment No. 2 in 
its entirety. In Amendment No. 3, the Exchange modified inconsistent 
representations in the fling regarding leverage to clarify that the 
Fund's investments will be consistent with the Fund's investment 
objective and will not be used to achieve leveraged returns (i.e., 
2X and 3X) of the Fund's broad-based securities market index (as 
defined in Form N-1A).
    \6\ Amendment No. 4 replaced and superseded Amendment No. 3 in 
its entirety. In Amendment No. 4, the Exchange modified Exhibit 1 to 
be consistent with the 19b-4, as amended by Amendment No. 3.
    \7\ Amendment No. 5 partially amended the filing, as amended by 
Amendment Nos. 1, 2, 3 and 4, to: (i) remove the Fund's ability to 
invest in inverse Underlying Vehicles (as defined herein); (ii) 
clarify that the Fund will not invest in leveraged Underlying 
Vehicles; and (iii) clarify that the Fund's investments will not be 
used to achieve inverse returns or leveraged returns. Because 
Amendment Nos. 3, 4 and 5 provide clarification to the proposed rule 
change and do not materially affect the substance of the proposed 
rule change or raise any unique or novel regulatory issues, 
Amendment Nos. 3, 4 and 5 do not require notice and comment.
---------------------------------------------------------------------------

    The Commission received no comments on the proposed rule change. 
This order grants approval of the proposed rule change, as modified by 
Amendment Nos. 1, 2, 3, 4 and 5.

II. Description of the Proposed Rule Change

    The Exchange proposes to list and trade Shares of the Fund pursuant 
to NYSE Arca Equities Rule 8.600, which governs the listing and trading 
of Managed Fund Shares on the Exchange. The Shares will be offered by 
the Cambria ETF Trust (``Trust''), a Delaware statutory trust which is 
registered with the Commission as an open-end management investment 
company.\8\ Cambria Investment Management, L.P. (``Adviser'') will 
serve as the investment adviser of the Fund. The Exchange states that 
the Adviser is not registered as a broker-dealer or affiliated with a 
broker-dealer.\9\
---------------------------------------------------------------------------

    \8\ The Trust will be registered under the Investment Company 
Act of 1940 (``1940 Act''). The Exchange states that on March 4, 
2014, the Trust filed an amendment to the Trust's registration 
statement on Form N-1A under the Securities Act of 1933 (``1933 
Act'') (15 U.S.C. 77a), and under the 1940 Act relating to the Fund 
(File Nos. 333-180879 and 811-22704) (``Registration Statement''). 
In addition, the Exchange states that 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''). The Exchange represents that investments made 
by the Fund will comply with the conditions set forth in the 
Exemptive Order.
    \9\ See NYSE Arca Equities Rule 8.600, Commentary .06. The 
Exchange represents that in the event (a) the Adviser or any sub-
adviser becomes registered as a broker-dealer or 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, 
such adviser or sub-adviser will implement a fire wall with respect 
to its relevant personnel or broker-dealer affiliate regarding 
access to information concerning the composition and/or changes to 
the portfolio, and such adviser or sub-adviser will be subject to 
procedures designed to prevent the use and dissemination of material 
non-public information regarding such portfolio.
---------------------------------------------------------------------------

    The Exchange has made the following representations and statements 
in describing the Fund and its principal investment policies, other 
investments, and investment restrictions.\10\
---------------------------------------------------------------------------

    \10\ The Commission notes that additional information regarding 
the Trust, the Fund, and the Shares, including investment 
strategies, risks, creation and redemption procedures, fees, 
portfolio holdings disclosure policies, distributions, and taxes, 
among other things, can be found in the Notice and Registration 
Statement, as applicable. See supra notes 4 and 8, respectively.
---------------------------------------------------------------------------

Principal Investment Policies

    The Fund will seek to preserve and grow capital from investments in 
the U.S. and foreign equity, fixed income, commodity and currency 
markets, independent of market direction. The Fund will be considered a 
``fund of funds'' that seeks to achieve its investment objective by 
primarily investing in other 1940 Act-registered exchange-traded funds 
(``ETFs'') and other exchange traded products (``ETPs''), including, 
but not limited to, exchange-traded notes (``ETNs''),\11\ exchange 
traded currency trusts, and closed-end funds \12\ (collectively, 
``Underlying Vehicles'') \13\ that offer diversified exposure, 
including inverse exposure,\14\ to global regions (including

[[Page 54334]]

emerging markets), countries, styles (i.e., market capitalization, 
value, growth, etc.) and sectors. Under normal market conditions,\15\ 
the Fund will invest at least 80% of its net assets in the securities 
of Underlying Vehicles.
---------------------------------------------------------------------------

    \11\ ETFs are registered investment companies whose shares are 
exchange-traded and give investors a proportional interest in the 
pool of securities and other assets held by the ETF. ETPs are 
exchange-traded equity securities whose value derives from an 
underlying asset or portfolio of assets, which may correlate to a 
benchmark, such as a commodity, currency, interest rate or index. 
ETFs are one type of ETP. ETNs are unsecured and unsubordinated debt 
securities whose value derives, in part, from an underlying asset or 
benchmark and, in part, from the credit quality of the securities' 
issuer.
    \12\ A closed-end fund is a pooled investment vehicle that is 
registered under the 1940 Act and whose shares are listed and traded 
on a U.S. national securities exchange.
    \13\ The Exchange states that for purposes of this filing, the 
term ``Underlying Vehicles'' includes Investment Company Units (as 
described in NYSE Arca Equities Rule 5.2(j)(3)); Index-Linked 
Securities (as described in NYSE Arca Equities Rule 5.2(j)(6)); 
Portfolio Depositary Receipts (as described in NYSE Arca Equities 
Rule 8.100); Trust Issued Receipts (as described in NYSE Arca 
Equities Rule 8.200); Commodity-Based Trust Shares (as described in 
NYSE Arca Equities Rule 8.201); Currency Trust Shares (as described 
in NYSE Arca Equities Rule 8.202); Commodity Index Trust Shares (as 
described in NYSE Arca Equities Rule 8.203); Commodity Futures Trust 
Shares (as described in NYSE Arca Equities Rule 8.204); Managed Fund 
Shares (as described in NYSE Arca Equities Rule 8.600); and closed-
end funds. All Underlying Vehicles will be listed and traded in the 
U.S. on a national securities exchange. The Fund will not invest in 
inverse (i.e., -1X) or leveraged (e.g., 2X, -2X, 3X or -3X) 
Underlying Vehicles.
    \14\ The Commission understands that, although the Fund will not 
invest in inverse Underlying Vehicles (i.e., Underlying Vehicles 
that seek to achieve returns equal to -1X an index or benchmark), 
the Fund may invest in Underlying Vehicles that may provide inverse 
exposure in certain circumstances, such as ETFs that pursue a long/
short strategy.
    \15\ 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.
---------------------------------------------------------------------------

    The Fund will seek to preserve and grow capital by producing 
absolute returns with reduced volatility and manageable risk and 
drawdowns. The Fund will invest in Underlying Vehicles spanning all the 
major world asset classes including equities, bonds (including high 
yield bonds, which are commonly referred to as ``junk bonds''), real 
estate, derivatives, commodities, and currencies. The Adviser will 
actively manage the Fund's portfolio utilizing a quantitative strategy 
with risk management controls in an attempt to protect capital. Through 
Underlying Vehicles, the Fund may have exposure to companies in any 
industry and of any market capitalization. Under normal market 
conditions, the Fund expects to invest at least 40% of its net assets, 
including through investments in Underlying Vehicles, in securities of 
issuers located in at least three different countries (including the 
United States).
    Through Underlying Vehicles, the Fund may invest in shares of real 
estate investment trusts (``REITs''), which are pooled investment 
vehicles that invest primarily in real estate or real estate-related 
loans and trade on a U.S. exchange.

Other Investments

    While, under normal market conditions, the Fund will invest at 
least 80% of its net assets in Underlying Vehicles as described above, 
the Fund may invest its remaining 20% of net assets in other securities 
and financial instruments, other than Underlying Vehicles, including 
futures contracts, cash and cash equivalents, as described below.
    The Fund may invest in exchange-traded common stocks. The Fund also 
may invest in foreign securities by purchasing ``Depositary Receipts,'' 
including American Depositary Receipts (``ADRs''), European Depositary 
Receipts (``EDRs''), and Global Depositary Receipts (``GDRs''), or 
other securities convertible into securities of issuers based in 
foreign countries. These securities may not necessarily be denominated 
in the same currency as the securities which they represent.\16\
---------------------------------------------------------------------------

    \16\ Generally, ADRs, in registered form, are denominated in 
U.S. dollars and are designed for use in the U.S. securities 
markets, GDRs, in bearer form, are issued and designed for use 
outside the United States, and EDRs, in bearer form, may be 
denominated in other currencies and are designed for use in European 
securities markets. ADRs are receipts typically issued by a U.S. 
bank or trust company evidencing ownership of the underlying 
securities. EDRs are European receipts evidencing a similar 
arrangement. GDRs are receipts typically issued by non-United States 
banks and trust companies that evidence ownership of either foreign 
or domestic securities. ADRs may be sponsored or unsponsored, but 
unsponsored ADRs will not exceed 10% of the Fund's net assets.
---------------------------------------------------------------------------

    With respect to its exchange-traded equity securities investments, 
the Fund will normally invest in equity securities that are listed and 
traded on a U.S. exchange or in markets that are members of the 
Intermarket Surveillance Group (``ISG'') or parties to a comprehensive 
surveillance sharing agreement with the Exchange. In any case, not more 
than 10% of the net assets of the Fund in the aggregate invested in 
exchange-traded equity securities will consist of equity securities 
whose principal market is not a member of ISG or a market with which 
the Exchange does not have a comprehensive surveillance sharing 
agreement.
    The Fund may invest in debt and other fixed income securities, as 
described below. Debt and other fixed income securities include fixed 
and floating rate securities of any maturity. Fixed rate securities pay 
a specified rate of interest or dividends. Floating rate securities pay 
a rate that is adjusted periodically by reference to a specified index 
or market rate. Fixed and floating rate securities may be issued by 
federal, state, local, and foreign governments and related agencies, 
and by a wide range of private issuers. The Fund's investments in debt 
and other fixed income securities will be limited to those described 
below.
    The Fund may invest in indexed bonds, which are a type of fixed 
income security whose principal value and/or interest rate is adjusted 
periodically according to a specified instrument, index, or other 
statistic (e.g., another security, inflation index, currency, or 
commodity).
    The Fund may invest in securities issued or guaranteed by the U.S. 
Government, its agencies, instrumentalities, and political 
subdivisions; \17\ securities issued by foreign governments, their 
authorities, agencies, instrumentalities, and political subdivisions; 
securities issued by supra-national agencies;\18\ corporate debt 
securities; master demand notes;\19\ Yankee dollar and Eurodollar bank 
certificates of deposit; time deposits; bankers' acceptances; 
commercial paper;\20\ and inflation-indexed securities. The Fund may 
invest also in zero coupon securities, which may be issued by a wide 
variety of corporate and governmental issuers.
---------------------------------------------------------------------------

    \17\ 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. Different kinds of U.S. government 
securities and foreign government securities have different kinds of 
government support. For example, some U.S. government securities 
(e.g., U.S. Treasury bonds) are supported by the full faith and 
credit of the U.S. Other U.S. government securities are issued or 
guaranteed by federal agencies or government-chartered or -sponsored 
enterprises but are neither guaranteed nor insured by the U.S. 
government (e.g., debt securities issued by the Federal Home Loan 
Mortgage Corporation (``Freddie Mac''), Federal National Mortgage 
Association (``Fannie Mae''), and Federal Home Loan Banks 
(``FHLBs''). Similarly, some foreign government securities are 
supported by the full faith and credit of a foreign national 
government or political subdivision and some are not.
    \18\ Supra-national agencies are agencies whose member nations 
make capital contributions to support the agencies' activities. 
Examples include the International Bank for Reconstruction and 
Development (the World Bank), the Asian Development Bank, the 
European Coal and Steel Community, and the Inter-American 
Development Bank.
    \19\ The Fund may invest in master demand notes that are 
denominated in U.S. dollars. Master demand notes are demand notes 
that permit the investment of fluctuating amounts of money at 
varying rates of interest pursuant to arrangements with issuers who 
meet the quality criteria of the Fund. The interest rate on a master 
demand note may fluctuate based upon changes in specified interest 
rates, be reset periodically according to a prescribed formula or be 
a set rate. Although there is no secondary market in master demand 
notes, if such notes have a demand future, the payee may demand 
payment of the principal amount of the note upon relatively short 
notice. Master demand notes are generally illiquid and therefore 
subject to a Fund's percentage limitations for investments in 
illiquid securities.
    \20\ Commercial paper consists of short-term promissory notes 
issued by corporations. Commercial paper may be traded in the 
secondary market after its issuance.
---------------------------------------------------------------------------

    The Fund may invest in fixed income securities of any credit 
quality, from investment grade securities to high yield securities. 
Investment grade securities are securities rated in one of the four 
highest rating categories by at least two nationally recognized 
statistical rating organizations (``Rating Organizations'') rating that 
security, such as Standard & Poor's Ratings Services (``Standard & 
Poor's'') or Moody's Investors Service, Inc. (``Moody's''), or rated in 
one of the four highest rating categories by one Rating Organization if 
it is the only

[[Page 54335]]

Rating Organization rating that security, or unrated, if deemed to be 
of comparable quality \21\ by the Adviser and traded publicly on the 
world market. The Fund, at the discretion of the Adviser, may retain a 
debt security that has been downgraded below the initial investment 
criteria.\22\
---------------------------------------------------------------------------

    \21\ In determining whether a security is of ``comparable 
quality,'' the Adviser will consider, for example, whether the 
issuer of the security has issued other rated securities; whether 
the obligations under the security are guaranteed by another entity 
and the rating of such guarantor (if any); whether and (if 
applicable) how the security is collateralized; other forms of 
credit enhancement (if any); the security's maturity date; liquidity 
features (if any); relevant cash flow(s); valuation features; other 
structural analysis; macroeconomic analysis; and sector or industry 
analysis.
    \22\ Securities rated lower than Baa by Moody's, or equivalently 
rated by S&P or Fitch, are sometimes referred to as ``high yield 
securities'' or ``junk bonds.''
---------------------------------------------------------------------------

    For securities that carry a rating assigned by a Rating 
Organization, the Adviser will use the highest rating assigned by the 
Rating Organization to determine a security's credit rating. Commercial 
paper must be rated at least ``A-1'' or equivalent by a Rating 
Organization. Corporate debt obligations must be rated at least ``B-
''or equivalent by a Rating Organization. For securities that are not 
rated by a Rating Organization, the Adviser's internal credit rating 
will apply and be subject to equivalent rating minimums.
    The Fund may invest in futures contracts on indices, currencies, 
and commodities. The Fund will trade only futures contracts that are 
listed and traded on a U.S. board of trade. The Fund's investments in 
futures will be subject to the limits on leverage imposed by the 1940 
Act. Section 18(f) of the 1940 Act and related Commission guidance 
limit the amount of leverage that an investment company, such as the 
Fund, can obtain.
    The Fund may temporarily invest a portion of its assets in cash or 
cash equivalents pending other investments or to maintain liquid assets 
required in connection with some of the Fund's investments. Cash and 
cash equivalents include money market instruments, such as obligations 
issued or guaranteed by the U.S. Government, its agencies and/or 
instrumentalities (including government-sponsored enterprises), 
bankers' acceptances, bank certificates of deposit, repurchase 
agreements,\23\ and investment companies that invest primarily in such 
instruments (i.e., money market funds). The Fund may hold funds in bank 
deposits in U.S. or foreign currency, including during the completion 
of investment programs.
---------------------------------------------------------------------------

    \23\ 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 Fund 
may enter into repurchase agreements with banks and broker-dealers.
---------------------------------------------------------------------------

    The Fund may invest in the securities of other investment companies 
to the extent permitted by law. The Fund may make significant 
investments in money market funds. In addition, the Trust intends to 
enter into agreements with unaffiliated ETFs that permit such 
unaffiliated ETFs to sell, and the Fund to purchase, the unaffiliated 
ETFs' shares in excess of the limits imposed by Sections 12(d)(1)(A) 
and (B) of the 1940 Act.
    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 (i.e., BBB or higher) and 
money market instruments (as described above). The Fund may be invested 
in these instruments for extended periods, depending on the Adviser's 
assessment of market conditions.

Investment Restrictions

    The Fund may invest in the securities of other investment companies 
to the extent that such an investment would be consistent with the 
requirements of Section 12(d)(1) of the 1940 Act, or any rule, 
regulation or order of the Commission or interpretation thereof.
    The Fund will seek to qualify for treatment as a Regulated 
Investment Company (``RIC'') under the Internal Revenue Code.
    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 illiquid by the Adviser \24\ and 
master demand notes, consistent with Commission guidance. 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 
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.
---------------------------------------------------------------------------

    \24\ In reaching liquidity decisions, the Adviser may consider 
the following factors: the frequency of trades and quotes for the 
security; the number of dealers willing to purchase or sell the 
security and the number of other potential purchasers; dealer 
undertakings to make a market in the security; and the nature of the 
security and the nature of the marketplace in which it trades (e.g., 
the time needed to dispose of the security, the method of soliciting 
offers, and the mechanics of transfer).
---------------------------------------------------------------------------

    The Fund's investments will be consistent with the Fund's 
investment objective and will not be used to achieve inverse returns or 
leveraged returns (e.g., -1X, 2X, and 3X) of the Fund's broad-based 
securities market index (as defined in Form N-1A).\25\
---------------------------------------------------------------------------

    \25\ The Fund's broad-based securities market index will be 
identified in a future amendment to the Registration Statement 
following the Fund's first full calendar year of performance.
---------------------------------------------------------------------------

III. Discussion and Commission's Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of Section 6 of the Act \26\ 
and the rules and regulations thereunder applicable to a national 
securities exchange.\27\ In particular, the Commission finds that the 
proposed rule change, as modified by Amendment Nos. 1, 2, 3, 4, and 5, 
is consistent with Section 6(b)(5) of the Act,\28\ which requires, 
among other things, that the Exchange's rules be designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest. The 
Commission notes that the Fund and the Shares must comply with the 
requirements of NYSE Arca Equities Rule 8.600 for the Shares to be 
listed and traded on the Exchange.
---------------------------------------------------------------------------

    \26\ 15 U.S.C. 78f.
    \27\ In approving this proposed rule change, the Commission 
notes that it has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
    \28\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Commission finds that the proposal to list and trade the Shares 
on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the 
Act,\29\ which sets forth Congress's finding that it is in the public 
interest and appropriate for the protection of investors and the 
maintenance of fair and orderly markets to assure the availability to 
brokers, dealers, and investors of information with respect to 
quotations for, and transactions in, securities. Quotation and last 
sale information for the Shares will be available via the Exchange's 
proprietary quote and trade services and via the Consolidated Tape 
Association's (``CTA'') high-speed line. In addition, the Intraday 
Indicative Value (``IIV''),\30\

[[Page 54336]]

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 Exchange's Core Trading Session (9:30 a.m., 
Eastern Time to 4:00 p.m., Eastern Time) by one or more major market 
data vendors.\31\ 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 net asset value (``NAV'') at the 
end of the business day.\32\ The NAV of Shares will be calculated each 
business day as of the close of regular trading on the New York Stock 
Exchange (``NYSE''), generally 4:00 p.m., Eastern Time, on each day 
that the NYSE is open.\33\ 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 the National Securities Clearing Corporation. 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. Intra-day price quotations on the securities and 
other assets held by the Fund will be available from major broker-
dealer firms. Intra-day price information on such assets will also be 
available through free and subscription services that can be accessed 
by authorized participants and other investors. For example, pricing 
information for exchange-traded securities (including exchange-traded 
equity securities (such as common stocks and Underlying Vehicles), 
futures contracts, and sponsored Depositary Receipts, will be readily 
available from the Web sites of the exchanges or boards of trade 
trading such securities or futures contracts, automated quotation 
systems, published or other public sources, and subscription services 
such as Bloomberg or Reuters. Pricing information for unsponsored 
Depositary Receipts, non-exchange-traded investment company securities, 
fixed income securities (including bonds; U.S. Government obligations; 
corporate debt securities; securities issued by foreign governments and 
supra-national agencies; master-demand notes; Yankee dollar and 
Eurodollar bank certificates of deposit; time deposits; bankers' 
acceptances; commercial paper; inflation-indexed securities; and zero 
coupon securities), repurchase agreements, and money market instruments 
will be available through brokers and dealers and/or subscription 
services, such as Markit, Bloomberg and Thompson Reuters. The Fund's 
Web site (www.cambriafunds.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 and additional data relating to NAV 
and other applicable quantitative information.
---------------------------------------------------------------------------

    \29\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \30\ According to the Exchange, the IIV is an approximate per 
Share value of the Fund's portfolio holdings, which is disseminated 
every fifteen seconds throughout the trading day by one or more 
market data vendors. The IIV will be based on the current market 
value of the Fund's ``Disclosed Portfolio'' as defined in Rule 
8.600(c)(2). The IIV does not necessarily reflect the precise 
composition of the current portfolio of securities held by the Fund 
at a particular point in time. The IIV should not be viewed as a 
``real-time'' update of the NAV of the Fund because the approximate 
value may not be calculated in the same manner as the NAV. The 
quotations for certain investments may not be updated during U.S. 
trading hours if such holdings do not trade in the U.S., except such 
quotations may be updated to reflect currency fluctuations.
    \31\ The Exchange states that several major market data vendors 
display or make widely available IIVs taken from the CTA or other 
data feeds.
    \32\ On a daily basis, the Fund will disclose on its Web site 
the following information regarding each portfolio holding, as 
applicable to the type of holding: ticker symbol, CUSIP number or 
other identifier, if any; a description of the holding (including 
the type of holding); the identity of the security, commodity, index 
or other asset or instrument underlying the holding, if any; 
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.
    \33\ The Fund will calculate its NAV per Share by taking the 
value of its total assets, subtracting any liabilities, and dividing 
that amount by the total number of Shares outstanding, rounded to 
the nearest cent. Expenses and fees, including the management fees, 
will be accrued daily and taken into account for purposes of 
determining NAV. The Exchange represents that in calculating the NAV 
of the Fund's Shares, investments will generally be valued using 
market valuations. Market valuations are generally valuations (i) 
obtained from an exchange, a pricing service or a major market maker 
(or dealer) or (ii) based on a price quotation or other equivalent 
indication of a value supplied by an exchange, a pricing service or 
a major market maker (or dealer), in each case as approved by the 
Trust's Board of Trustees pursuant to the Trust's valuation policies 
and procedures. Thus, to the extent that the Fund uses a pricing 
vendor approved for the Trust by the Board, whether the pricing 
vendor bases valuations upon dealer quotes, a proprietary analysis 
of the relevant market, matrix pricing, sensitivity analysis, a 
combination of the above, or any other means, the price provided by 
the pricing vendor may be considered a market valuation. Exchange-
traded equity securities, including Underlying Vehicles, common 
stocks and sponsored Depositary Receipts, as well as futures 
contracts, will be valued at the official closing price on their 
principal exchange or board of trade, or, lacking any current 
reported sale at the time of valuation, at the mean of the most 
recent bid and asked quotations on their principal exchange or board 
of trade. Unsponsored Depositary Receipts, fixed income securities 
(including bonds; U.S. Government obligations; corporate debt 
securities; securities issued by foreign governments and supra-
national agencies; master-demand notes; Yankee dollar and Eurodollar 
bank certificates of deposit; time deposits; bankers' acceptances; 
commercial paper; inflation-indexed securities; zero coupon 
securities; and money market instruments) will be valued at the mean 
between the most recent bid and asked quotations. Repurchase 
agreements will be valued at cost. Fixed-income instruments maturing 
in 60 days or less will be valued at amortized cost, and those 
maturing in excess of 60 days will be valued at the midpoint of bid 
and asked quotations. Investments in non-exchange-traded investment 
companies (including money market funds) will be valued at their 
NAV. Any assets or liabilities denominated in currencies other than 
the U.S. dollar will be converted into U.S. dollars at the current 
exchange rate on the date of valuation as quoted by one or more 
third parties. If a market quotation is not readily available or is 
deemed not to reflect an instrument's market value, the Fund will 
determine its fair value pursuant to policies and procedures 
approved by the Board. The Fund may use fair valuation to price 
securities that trade on a foreign exchange, if any, when a 
significant event has occurred after the foreign exchange closes but 
before the time at which the Fund's NAV is calculated.
---------------------------------------------------------------------------

    The Commission further believes that the proposal to list and trade 
the Shares is reasonably designed to promote fair disclosure of 
information that may be necessary to price the Shares appropriately and 
to prevent trading when a reasonable degree of transparency cannot be 
assured. The Commission notes that the Exchange will obtain a 
representation from the issuer of the Shares that the NAV per Share 
will be calculated daily and that the NAV and the Disclosed Portfolio 
will be made available to all market participants at the same time.\34\ 
The Exchange may halt trading in the Shares if trading is not occurring 
in the securities or the financial instruments constituting the 
Disclosed Portfolio of the Fund, or if other unusual conditions or 
circumstances detrimental to the maintenance of a fair and orderly 
market are present.\35\ In addition, trading in the Shares will be 
subject to NYSE Arca Equities Rule 8.600(d)(2)(D), which sets forth 
additional circumstances under which Shares of the Fund may be halted. 
Further, the Commission notes that the Reporting Authority that 
provides the Disclosed

[[Page 54337]]

Portfolio of the Fund must implement and maintain, or be subject to, 
procedures designed to prevent the use and dissemination of material, 
non-public information regarding the actual components of the 
portfolio.\36\ The Commission further notes that 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.\37\ The Exchange further represents that these 
procedures are adequate to properly monitor Exchange-trading of the 
Shares in all trading sessions and to deter and detect violations of 
Exchange rules and federal securities laws applicable to trading on the 
Exchange. The Exchange states that it has a general policy prohibiting 
the distribution of material, non-public information by its employees. 
The Exchange also represents that the Adviser is not a broker-dealer 
and is not affiliated with a broker-dealer.\38\
---------------------------------------------------------------------------

    \34\ See NYSE Arca Equities Rule 8.600(d)(1)(B).
    \35\ See NYSE Arca Equities Rule 8.600(d)(2)(C) (providing 
additional considerations for the suspension of trading in or 
removal from listing of Managed Fund Shares on the Exchange). 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. 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.
    \36\ See NYSE Arca Equities Rule 8.600(d)(2)(B)(ii).
    \37\ The Exchange states that FINRA surveils trading on the 
Exchange pursuant to a regulatory services agreement and that the 
Exchange is responsible for FINRA's performance under this 
regulatory services agreement.
    \38\ See supra note 9 and accompanying text. An investment 
adviser to an open-end fund is required to be registered under the 
Investment Advisers Act of 1940 (``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.
---------------------------------------------------------------------------

    The Exchange represents that the Shares are deemed to be equity 
securities, thus rendering trading in the Shares subject to the 
Exchange's existing rules governing the trading of equity securities. 
In support of this proposal, the Exchange has made representations, 
including:
    (1) The Shares will conform to the initial and continued listing 
criteria under NYSE Arca Equities Rule 8.600.
    (2) The Exchange has appropriate rules to facilitate transactions 
in the Shares during all trading sessions.
    (3) FINRA, on behalf of the Exchange, will communicate as needed 
regarding trading in the Shares, Underlying Vehicles, other exchange-
traded equity securities, and futures with other markets and other 
entities that are members of the ISG, and FINRA, on behalf of the 
Exchange, may obtain trading information regarding trading in the 
Shares and Underlying Vehicles, other exchange-traded equity 
securities, and futures from such markets and other entities. In 
addition, the Exchange may obtain information regarding trading in the 
Shares, Underlying Vehicles, other exchange-traded equity securities, 
and futures from markets and other entities that are members of ISG or 
with which the Exchange has in place a comprehensive surveillance 
sharing agreement. FINRA, on behalf of the Exchange, is able to access, 
as needed, trade information for certain fixed income securities held 
by the Fund reported to FINRA's Trade Reporting and Compliance Engine 
(``TRACE'').
    (4) Prior to the commencement of trading, the Exchange will inform 
its Equity Trading Permit Holders in an Information Bulletin 
(``Bulletin'') of the special characteristics and risks associated with 
trading the Shares. Specifically, the Bulletin will discuss the 
following: (a) the procedures for purchases and redemptions of Shares 
in creation unit aggregations (and that Shares are not individually 
redeemable); (b) NYSE Arca Equities Rule 9.2(a), which imposes a duty 
of due diligence on its Equity Trading Permit Holders to learn the 
essential facts relating to every customer prior to trading the Shares; 
(c) the risks involved in trading the Shares during the Opening and 
Late Trading Sessions when an updated Portfolio Indicative Value will 
not be calculated or publicly disseminated; (d) how information 
regarding the Portfolio Indicative Value and the Disclosed Portfolio is 
disseminated; (e) the requirement that Equity Trading Permit Holders 
deliver a prospectus to investors purchasing newly issued Shares prior 
to or concurrently with the confirmation of a transaction; and (f) 
trading information.
    (5) For initial and continued listing, the Fund will be in 
compliance with Rule10A-3 under the Act,\39\ as provided by NYSE Arca 
Equities Rule 5.3.
---------------------------------------------------------------------------

    \39\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------

    (6) Under normal market conditions, the Fund will invest at least 
80% of its net assets in the securities of Underlying Vehicles. All 
Underlying Vehicles will be listed and traded in the U.S. on a national 
securities exchange.
    (7) The Fund will not invest in inverse (i.e., -1X) or leveraged 
(e.g., 2X, -2X, 3X or -3X) Underlying Vehicles.
    (8) Not more than 10% of the net assets of the Fund in the 
aggregate invested in exchange-traded equity securities will consist of 
equity securities whose principal market is not a member of ISG or a 
market with which the Exchange does not have a comprehensive 
surveillance sharing agreement.
    (9) Unsponsored ADRs will not exceed 10% of the Fund's net assets.
    (10) The Fund will trade only futures contracts that are listed and 
traded on a U.S. board of trade. The Fund's investments in futures will 
be subject to the limits on leverage imposed by the 1940 Act.
    (11) 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 illiquid by the Adviser and 
master demand notes, consistent with Commission guidance. 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.
    (12) The Fund's investments will be consistent with the Fund's 
investment objective and will not be used to achieve inverse returns or 
leveraged returns (e.g., -1X, 2X, or 3X) of the Fund's broad-based 
securities market index (as defined in Form N-1A).
    (13) A minimum of 100,000 Shares for the Fund will be outstanding 
at the commencement of trading on the Exchange.
    This approval order is based on all of the Exchange's 
representations, including those set forth above and in the Notice, and 
the Exchange's description of the Fund.
    For the foregoing reasons, the Commission finds that the proposed 
rule change, as modified by Amendment Nos. 1, 2, 3, 4, and 5, is 
consistent with Section 6(b)(5) of the Act \40\ and the rules and 
regulations thereunder

[[Page 54338]]

applicable to a national securities exchange.
---------------------------------------------------------------------------

    \40\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\41\ that the proposed rule change (SR-NYSEArca-2014-76), as 
modified by Amendment Nos. 1, 2, 3, 4, and 5, be, and it hereby is, 
approved.
---------------------------------------------------------------------------

    \41\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\42\
---------------------------------------------------------------------------

    \42\ 17 CFR 200.30-3(a)(12).

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-21643 Filed 9-10-14; 8:45 am]
BILLING CODE 8011-01-P


