
[Federal Register Volume 79, Number 178 (Monday, September 15, 2014)]
[Notices]
[Pages 55050-55054]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-21868]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73022; File No. SR-NYSEArca-2014-79]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting 
Approval of Proposed Rule Change, as Modified by Amendments No. 1 and 
No. 2, To List and Trade Shares of InfraCap MLP ETF Under NYSE Arca 
Equities Rule 8.600

September 9, 2014.

I. Introduction

    On July 9, 2014, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'') 
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 InfraCap MLP ETF (``Fund'') under 
NYSE Arca Equities Rule 8.600. The proposed rule change was published 
for comment in the Federal Register on July 28, 2014.\3\ On July 25, 
2014, NYSE Arca filed

[[Page 55051]]

Amendment No. 1 to the proposal.\4\ On August 8, 2014, NYSE Arca filed 
Amendment No. 2 to the proposal.\5\ The Commission received no comments 
on the proposal. This order grants approval of the proposed rule 
change, as modified by Amendments No. 1 and No. 2.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 72651 (July 22, 
2014), 79 FR 43801 (``Notice'').
    \4\ Amendment No. 1 replaced and superseded the original filing 
in its entirety. In Amendment No. 1, the Exchange amended the 
proposed rule change to: (a) Clarify the type of investment company 
securities that the Fund may invest in as part of its principal 
investment strategy; (b) clarify that the real estate investment 
trust interests that the Fund may invest in as part of its non-
principal investment strategy will be exchange-traded; (c) state 
that not more than 10% of the assets of the Fund will be invested in 
equity securities that are traded on an exchange that is not a 
member of the Intermarket Surveillance Group (``ISG'') or with which 
the Exchange does not have in place a comprehensive surveillance 
sharing agreement; (d) describe how the over-the-counter (``OTC'') 
securities in which the Fund invests will be valued for purposes of 
calculating the Fund's Net Asset Value (``NAV'') of the Fund, and 
specify where pricing information for such securities may be 
obtained; and (e) state, for surveillance purposes, that the 
Financial Industry Regulatory Authority (``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''). See Amendment No. 
1, available at: http://www.sec.gov/comments/sr-nysearca-2014-79/nysearca201479-1.pdf. Amendment No. 1 provided clarification to the 
proposed rule change, and because it does not materially affect the 
substance of the proposed rule change or raise novel or unique 
regulatory issues, Amendment No. 1 is not subject to notice and 
comment.
    \5\ Amendment No. 2 amended the filing, as modified by Amendment 
No. 1, to: (a) Reflect a name change to the Fund from ``InfraCap 
Active MLP ETF'' to ``InfraCap MLP ETF;'' and (b) clarify that all 
of the principal investments of the Fund, including the other open-
end and closed-end investment companies that the Fund may invest in 
as part of its principal investment strategy, will be exchange-
traded. Amendment No. 2 provided clarification to the proposed rule 
change, and because it does not materially affect the substance of 
the proposed rule change or raise novel or unique regulatory issues, 
Amendment No. 2 is not subject to notice and comment.
---------------------------------------------------------------------------

II. Description of the Proposed Rule Change

    The Exchange proposes to list and trade the Shares under NYSE Arca 
Equities Rule 8.600, which governs the listing and trading of Managed 
Fund Shares on the Exchange. The Shares will be offered by ETFis Series 
Trust I (``Trust''). The Trust is registered with the Commission as an 
investment company.\6\
---------------------------------------------------------------------------

    \6\ The Trust is registered under the Investment Company Act of 
1940 (``1940 Act''). The Exchange states that on February 26, 2014, 
the Trust filed with the Commission a post-effective amendment to 
its registration statement on Form N-1A under the Securities Act of 
1933 and under the 1940 Act relating to the Fund (File Nos. 333-
187668 and 811-22819) (``Registration Statement''). In addition, the 
Exchange states that the Trust filed an Amended and Restated 
Application for an Order under Section 6(c) of the 1940 Act for 
exemptions from various provisions of the 1940 Act and rules 
thereunder (File No. 812-14080), dated June 19, 2013, and that the 
Commission has issued an order granting certain exemptive relief to 
the Trust under the 1940 Act. See Investment Company Act Release No. 
30607 (July 23, 2013) (File No. 812-14080).
---------------------------------------------------------------------------

    Etfis Capital LLC (``Adviser'') will serve as the investment 
adviser to the Fund and Infrastructure Capital Advisors, LLC (``Sub-
Adviser'') will serve as sub-adviser for the Fund. The Exchange states 
that neither the Adviser nor the Sub-Adviser is registered as a broker-
dealer. The Exchange states that the Adviser (but not the Sub-Adviser) 
is affiliated with a broker-dealer; that the Adviser has implemented a 
fire wall with respect to such broker-dealer affiliate regarding access 
to information concerning the composition of, or changes to, the 
portfolio; and that the Adviser will be subject to procedures designed 
to prevent the use and dissemination of material non-public information 
regarding the portfolio.\7\
---------------------------------------------------------------------------

    \7\ See Commentary .06 to NYSE Arca Equities Rule 8.600. The 
Exchange states that, in the event (a) the Adviser or any sub-
adviser registers as a broker-dealer or becomes newly affiliated 
with a broker-dealer, or (b) any new adviser or sub-adviser is a 
registered broker-dealer or becomes affiliated with a broker-dealer, 
the adviser or sub-adviser will implement a fire wall with respect 
to its relevant personnel or broker-dealer affiliate, as applicable, 
regarding access to information concerning the composition of, or 
changes to, the portfolio, and that adviser or sub-adviser will be 
subject to procedures designed to prevent the use and dissemination 
of material non-public information regarding such portfolio.
---------------------------------------------------------------------------

    ETF Distributors LLC will be the principal distributor of the 
Fund's Shares. The Bank of New York Mellon will serve as the 
administrator, accountant, custodian, and transfer agent for the Fund.
    The Exchange has made the following representations and statements 
in describing the Fund and its investment strategies, including 
portfolio holdings and investment restrictions.\8\
---------------------------------------------------------------------------

    \8\ The Commission notes that additional information regarding 
the Trust, the Fund, and the Shares, investment strategies, risks, 
NAV calculation, creation and redemption procedures, fees, portfolio 
holdings disclosure policies, distributions, and taxes, among other 
information, is included in the Notice, Amendment Nos. 1 and 2, and 
the Registration Statement, as applicable. See Notice, Amendment 
Nos. 1 and 2, and Registration Statement, supra notes 3, 4, 5, and 6 
respectively.
---------------------------------------------------------------------------

Principal Fund Investments

    According to the Exchange, the Fund seeks total return primarily 
through investments in equity securities of publicly-traded master 
limited partnerships and limited liability companies taxed as 
partnerships (``MLPs'').\9\ The Fund will seek to achieve its 
investment objective by normally \10\ investing up to 100% (but not 
less than 80%) of its total assets in exchange-traded securities of 
MLPs in the energy infrastructure sector. The Fund will focus on 
investing in MLPs selected by the Sub-Adviser that trade on the New 
York Stock Exchange (``NYSE'') or the NASDAQ Stock Market (``Nasdaq'') 
and that, as their principal business, operate assets used in the 
gathering, transporting, processing, storing, refining, distributing, 
mining, or marketing of natural gas, natural gas liquids, crude oil, 
refined petroleum products, or coal.
---------------------------------------------------------------------------

    \9\ According to the Exchange, the Fund may invest in MLP units, 
securities of companies holding primarily general partner or 
managing member interests in MLPs, and securities that themselves 
own interests in MLPs (e.g., exchange-traded funds (``ETFs''), 
exchange-traded notes (``ETNs''), and other exchange-traded open-end 
and closed-end investment companies that invest in MLPs). The 
Exchange states that, for purposes of this filing, ETFs include the 
following: Investment Company Units (as described in NYSE Arca 
Equities Rule 5.2(j)(3)); Portfolio Depositary Receipts (as 
described in NYSE Arca Equities Rule 8.100); and Managed Fund Shares 
(as described in NYSE Arca Equities Rule 8.600). The Exchange 
further states that, for purposes of this filing, ETNs include 
securities listed and traded on the Exchange under NYSE Arca 
Equities Rule 5.2(j)(6) (Index-Linked Securities).
    \10\ The term ``normally'' includes, but is not limited to, the 
absence of extreme volatility or trading halts in the equity markets 
or the financial markets generally; operational issues causing 
dissemination of inaccurate market information; or force majeure 
type events such as systems failure, natural or man-made disaster, 
act of God, armed conflict, act of terrorism, riot or labor 
disruption, or any similar intervening circumstance. According to 
the Registration Statement, the Fund may, from time to time, take 
temporary defensive positions that are inconsistent with its 
principal investment strategies in an attempt to respond to adverse 
market, economic, political, or other conditions. In such 
circumstances, the Fund may also hold up to 100% of its portfolio in 
cash and cash equivalent positions. According to the Registration 
Statement, when the Fund takes a temporary defensive position, it 
may not be able to achieve its investment objective.
---------------------------------------------------------------------------

    According to the Exchange, the Fund will typically focus on 
``midstream'' MLPs which are MLPs that collect, gather, process, 
transport, and store natural resources and their byproducts (primarily 
crude oil, natural gas, and refined petroleum products), generally 
without taking ownership of the energy products.\11\
---------------------------------------------------------------------------

    \11\ According to the Exchange, Midstream MLPs may also operate 
ancillary businesses, including the marketing of energy products and 
logistical services related thereto, but are typically not engaged 
in the mining, production, or distribution of energy products.
---------------------------------------------------------------------------

    The Fund expects to typically invest in a portfolio of between 25 
and 50 MLPs, but there is no limit on the number of MLPs in which the 
Fund will invest.\12\ The Sub-Adviser's investment decisions will be 
based on a variety of quantitative, qualitative, and relative

[[Page 55052]]

valuation factors. The Sub-Adviser will typically evaluate potential 
investments with respect to certain key variables that the Sub-Adviser 
believes make a business successful over time, including, without 
limitation, a company's competitive position, its perceived ability to 
earn a high return on capital, the historical and projected stability 
and reliability of its earnings and cash flow, its anticipated ability 
to generate cash in excess of its growth needs, and its access to 
additional capital. The Sub-Adviser also expects to utilize its 
personnel's experience in evaluating energy infrastructure investments 
and long-term relationships with energy industry participants to help 
identify investment opportunities.
---------------------------------------------------------------------------

    \12\ Under normal circumstances, the Fund will not invest more 
than 15% of its total assets in any one issuer.
---------------------------------------------------------------------------

Other Fund Investments

    According to the Exchange, although the Fund will normally invest 
not less than 80% of its total assets as described above, the Fund has 
flexibility to invest the remaining 20% of its assets in other types of 
securities, including exchange-traded equity securities of large, 
medium, and small capitalization companies; money market mutual funds; 
ETFs; and other open-end or closed-end investment companies unrelated 
to the energy infrastructure sector, when the Sub-Adviser believes they 
offer more attractive opportunities or to meet liquidity, redemption, 
or short-term investing needs.
    According to the Exchange, the Fund may invest up to 20% of its 
total assets in securities convertible into common stock. Convertible 
securities eligible for purchase by the Fund will be exchange-traded 
and include convertible bonds, convertible preferred stocks, and 
warrants. The Fund will not invest directly in real estate, but may 
invest in exchange-traded readily marketable securities issued by 
companies that invest in real estate or interests therein. The Fund may 
also invest in readily marketable interests in exchange-traded real 
estate investment trusts.
    According to the Exchange, the Fund may invest in money market 
instruments and foreign debt traded on U.S. exchanges or in OTC 
markets, and the Fund may invest in equity securities (including equity 
securities in the form of American Depositary Receipts) traded on U.S. 
exchanges or in the OTC markets.
    The Fund may also invest, or establish short positions, in ETFs, 
exchange-traded options, or futures contracts in an effort to hedge 
against market, interest rate, or commodity risks in the Fund's 
portfolio.

Investment Restrictions

    The Fund may hold up to an aggregate amount of 15% of its net 
assets in illiquid assets (calculated at the time of investment), 
including Rule 144A securities deemed to be illiquid by the Sub-
Adviser.\13\ The Fund will monitor its portfolio liquidity on an 
ongoing basis to determine whether, in light of current circumstances, 
an adequate level of liquidity is being maintained, and will consider 
taking appropriate steps in order to maintain adequate liquidity if, 
through a change in values, net assets, or other circumstances, more 
than 15% of the Fund's net assets are held in illiquid assets. Illiquid 
assets include assets subject to contractual or other restrictions on 
resale and other instruments that lack readily available markets as 
determined in accordance with Commission staff guidance.
---------------------------------------------------------------------------

    \13\ In determining the liquidity of the Fund's investments, the 
Sub-Adviser may consider various factors including: (i) The 
frequency of trades and quotations; (ii) the number of dealers and 
prospective purchasers in the marketplace; (iii) dealer undertakings 
to make a market; (iv) the nature of the security (including any 
demand or tender features); and (v) the nature of the marketplace 
for trades (including the ability to assign or offset the Fund's 
rights and obligations relating to the investment).
---------------------------------------------------------------------------

    The Fund may lend portfolio securities in an amount equal to up to 
33% of its total assets to broker-dealers, major banks, or other 
recognized domestic institutional borrowers of securities that the Sub-
Adviser has determined are creditworthy under guidelines established by 
the Board of Trustees. The Fund may not lend securities to any company 
affiliated with the Sub-Adviser. Each loan of securities will be 
collateralized by cash, securities, or letters of credit. The Fund 
might experience a loss if the borrower defaults on the loan.
    The Fund will not invest in swaps. The Fund's investments will be 
consistent with its investment objective.
    The Fund will not invest in unsponsored ADRs. The Fund will invest 
only in ADRs, futures, and options that are traded on an exchange that 
is a member of the ISG or with which the Exchange has in place a 
comprehensive surveillance sharing agreement. Not more than 10% of the 
assets of the Fund will be invested in equity securities that are 
traded on an exchange that is not a member of the ISG or with which the 
Exchange does not have in place a comprehensive surveillance sharing 
agreement.
    The Fund may use leverage (including margin borrowing) to the 
extent permitted by the 1940 Act. However, the Fund's investments will 
not be used to seek performance that is the multiple or inverse 
multiple (i.e., 2Xs and 3Xs) of an index.

III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change, as modified by Amendments No. 1 and No. 2, is consistent with 
the requirements of Section 6 of the Act \14\ and the rules and 
regulations thereunder applicable to a national securities 
exchange.\15\ In particular, the Commission finds that the proposed 
rule change is consistent with the requirements of Section 6(b)(5) of 
the Act,\16\ 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 foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities, 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.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78f.
    \15\ 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).
    \16\ 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,\17\ which sets forth Congress' 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 Consolidated 
Tape Association (``CTA'') high-speed line. In addition, the Indicative 
Optimized Portfolio Value (``IOPV''),\18\

[[Page 55053]]

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.\19\ 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, as defined in NYSE 
Arca Equities Rule 8.600(c)(2), that will form the basis for the Fund's 
calculation of NAV at the end of the business day.\20\ The NAV of the 
Fund will be determined as of the close of the regular trading session 
on the Exchange (ordinarily 4:00 p.m. Eastern Time) on each day that 
the Exchange is open.\21\ 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. The intra-day, closing, and settlement prices of 
the portfolio securities and other Fund investments will be readily 
available from the national securities exchanges trading those 
securities, automated quotation systems, published or other public 
sources, or on-line information services such as Bloomberg or Reuters. 
Quotation and last sale information for underlying securities that are 
exchange-listed--including equity securities of MLPs and large, medium, 
and small capitalization companies, ETFs, ETNs, ADRs, and convertible 
securities--will be available via the CTA high-speed line. Information 
relating to futures will be available from the exchange on which such 
futures are traded. Information relating to exchange-traded options 
will be available via the Options Price Reporting Authority. 
Information for investment companies, including money market mutual 
funds and open-end and closed-end investment companies, will be 
available from publicly available pricing sources, including Bloomberg, 
IDC, and Reuters. Quotation information for foreign debt securities, 
domestic debt securities, and equity securities that trade in OTC 
markets may be obtained from brokers and dealers who make markets in 
those securities or through nationally recognized pricing services 
through subscription agreements. The Fund's Web site 
(www.infracapmlp.com), which will be publicly available prior to the 
public offering of Shares, will include a form of the prospectus for 
the Fund and additional data relating to NAV and other applicable 
quantitative information.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \18\ According to the Exchange, 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 
will be calculated by an independent third party calculator and will 
be calculated based on the same portfolio holdings disclosed on the 
Fund's Web site. The 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. The 
Exchange states that the IOPV 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.
    \19\ According to the Exchange, several major market data 
vendors currently display or make widely available IOPVs taken from 
the CTA or other data feeds.
    \20\ On a daily basis, the Adviser will disclose for each 
portfolio security or other financial instrument of the Fund the 
following information on the Fund's Web site: ticker symbol, CUSIP 
number or other identifier, if any; a description of the holding 
(including the type of holding); the identity of the security, 
commodity, index, or other asset or instrument underlying the 
holding, if any; for options, the option strike price; quantity held 
(as measured by, for example, par value, notional value, or number 
of shares, contracts, or units); maturity date, if any; coupon rate, 
if any; effective date, if any; market value of the holding; and the 
percentage weighting of the holding in the Fund's portfolio. The Web 
site information will be publicly available at no charge.
    \21\ The NAV per Share for the Fund will be computed by dividing 
the value of the net assets of the Fund (i.e., the value of its 
total assets less total liabilities) by the total number of Shares 
outstanding, rounded to the nearest cent. Expenses and fees, 
including the management fee, will be accrued daily and taken into 
account for purposes of determining NAV. The Exchange represents 
that for purposes of calculating NAV, exchange-traded securities 
will be valued at market closing price or, if no sale has occurred, 
at the last quoted bid price on the primary exchange on which they 
are traded. Price information for exchange-traded securities--
including equity securities of MLPs and large, medium, and small 
capitalization companies, ETFs, ETNs, ADRs, convertible securities, 
and options--will be taken from the exchange where the security is 
primarily traded. Futures will be valued at the settlement price 
determined by the applicable exchange. Foreign debt securities, 
domestic debt securities, and equity securities, in each case that 
trade in the OTC market, will be valued based on price quotations 
obtained from a broker-dealer who makes markets in such securities 
or on other equivalent indications of value provided by a third-
party pricing service. Any such third-party pricing service may use 
a variety of methodologies to value some or all such securities to 
determine the market price. The Fund's foreign and domestic debt 
securities that trade in the OTC market will generally be valued at 
bid prices. Investment company securities, including money market 
mutual funds and open-end and closed-end investment companies, will 
be valued at NAV, utilizing pricing services. In computing the 
Fund's NAV, the value of the Fund's portfolio holdings is based on 
the holdings' closing price on local markets when available. When a 
portfolio holding's market price is not readily available or does 
not otherwise accurately reflect the fair value of such security, 
the Fund will use that holding's fair value as determined in good 
faith in accordance with the Fund's fair value pricing procedures, 
which will be approved by the Board of Trustees. In addition, the 
Fund may fair value foreign equity portfolio holdings each day the 
Fund calculates its NAV. Accordingly, the Fund's NAV may reflect 
certain portfolio holdings' fair values rather than their market 
prices. In valuing non-exchange traded securities, the Fund will 
first use publicly available pricing sources, including Bloomberg, 
IDC, and Reuters. Non-exchange traded securities will only be fair 
valued if their market prices are not readily available. To the 
extent the assets of the Fund are invested in other open-end 
investment companies that are registered under the 1940 Act, the 
Fund's NAV is calculated based upon the NAVs reported by those 
registered open-end investment companies.
---------------------------------------------------------------------------

    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.\22\ 
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.\23\ 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. 
The Exchange states that it has a general policy prohibiting the 
distribution of material, non-public information by its employees. 
Further, the Commission notes that the Reporting Authority that 
provides the Disclosed 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 Fund's portfolio.\24\ In addition, the Exchange 
states that, while neither the Adviser nor the Sub-Adviser is 
registered as a broker-dealer, the

[[Page 55054]]

Adviser (but not the Sub-Adviser) is affiliated with a broker-dealer 
and has implemented a fire wall with respect to that broker-dealer 
regarding access to information concerning the composition of, 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.\25\ The Exchange represents that trading in 
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.\26\ 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 applicable federal securities laws.
---------------------------------------------------------------------------

    \22\ See NYSE Arca Equities Rule 8.600(d)(1)(B).
    \23\ 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.
    \24\ See NYSE Arca Equities Rule 8.600(d)(2)(B)(ii).
    \25\ See supra note 7 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 Sub-Adviser and their related personnel are subject to 
the provisions of Rule 204A-1 under the Advisers Act relating to 
codes of ethics. This Rule requires investment advisers to adopt a 
code of ethics that reflects the fiduciary nature of the 
relationship to clients as well as compliance with other applicable 
securities laws. Accordingly, procedures designed to prevent the 
communication and misuse of non-public information by an investment 
adviser must be consistent with Rule 204A-1 under the Advisers Act. 
In addition, Rule 206(4)-7 under the Advisers Act makes it unlawful 
for an investment adviser to provide investment advice to clients 
unless such investment adviser has (i) adopted and implemented 
written policies and procedures reasonably designed to prevent 
violation, by the investment adviser and its supervised persons, of 
the Advisers Act and the Commission rules adopted thereunder; (ii) 
implemented, at a minimum, an annual review regarding the adequacy 
of the policies and procedures established pursuant to subparagraph 
(i) above and the effectiveness of their implementation; and (iii) 
designated an individual (who is a supervised person) responsible 
for administering the policies and procedures adopted under 
subparagraph (i) above.
    \26\ 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.
---------------------------------------------------------------------------

    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 the following 
representations:
    (1) The Shares will conform to the initial and continuing 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 and exchange-traded assets held by the 
Fund with other markets that are members of ISG, and FINRA, on behalf 
of the Exchange, may obtain trading information regarding trading in 
the Shares and exchange-traded assets held by the Fund from such 
markets and other entities. In addition, the Exchange may obtain 
information regarding trading in the Shares and exchange-traded assets 
held by the Fund from markets and other entities that are members of 
ISG or with which the Exchange has in place a comprehensive 
surveillance sharing agreement. In addition, 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 TRACE.
    (4) Prior to the commencement of trading, the Exchange will inform 
its Equity Trading Permit Holders in an Information Bulletin of the 
special characteristics and risks associated with trading the Shares. 
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 IOPV will not be calculated or publicly 
disseminated; (d) how information regarding the IOPV 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 Rule 10A-3 under the Act,\27\ as provided by NYSE Arca 
Equities Rule 5.3.
---------------------------------------------------------------------------

    \27\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------

    (6) The Fund will normally invest up to 100% (but not less than 
80%) of its total assets in exchange-traded securities of MLPs in the 
energy infrastructure sector.
    (7) The Fund will not invest in swaps.
    (8) The Fund will not invest in unsponsored ADRs. The Fund will 
invest only in ADRs, futures, and options that are traded on an 
exchange that is a member of ISG or with which the Exchange has in 
place a comprehensive surveillance sharing agreement.
    (9) Not more than 10% of the assets of the Fund will be invested in 
equity securities that are traded on an exchange that is not a member 
of the ISG or with which the Exchange does not have in place a 
comprehensive surveillance sharing agreement.
    (10) The Fund may hold up to an aggregate amount of 15% of its net 
assets in illiquid assets (calculated at the time of investment), 
including Rule 144A securities deemed to be illiquid by the Sub-
Adviser. 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.
    (11) The Fund's investments will be consistent with its investment 
objective. The Fund may use leverage (including margin borrowing) to 
the extent permitted by the 1940 Act. However, the Fund's investments 
will not be used to seek performance that is the multiple or inverse 
multiple (i.e., 2Xs and 3Xs) of an index.
    (12) 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 and description of the Fund, including those set forth 
above and in the Notice and Amendments No. 1 and No. 2.
    For the foregoing reasons, the Commission finds that the proposed 
rule change, as modified by Amendments No. 1 and No. 2, is consistent 
with Section 6(b)(5) of the Act \28\ and the rules and regulations 
thereunder applicable to a national securities exchange.
---------------------------------------------------------------------------

    \28\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\29\ that the proposed rule change (SR-NYSEArca-2014-79), as 
modified by Amendments No. 1 and No. 2, be, and it hereby is, approved.
---------------------------------------------------------------------------

    \29\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\30\
---------------------------------------------------------------------------

    \30\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-21868 Filed 9-12-14; 8:45 am]
BILLING CODE 8011-01-P


