
[Federal Register Volume 80, Number 121 (Wednesday, June 24, 2015)]
[Notices]
[Pages 36380-36385]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-15452]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75244; File No. SR-NYSEArca-2015-23]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting 
Approval of Proposed Rule Change, as Modified by Amendment Nos. 1 and 3 
Thereto, Relating to the Listing and Trading of Shares of the ALPS 
Enhanced Put Write Strategy ETF Under NYSE Arca Equities Rule 8.600

June 18, 2015.

I. Introduction

    On April 15, 2015, NYSE Arca, Inc. (``Exchange'') filed with the 
Securities and Exchange Commission (``Commission''), pursuant to 
section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'' or 
``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule 
change to list and trade shares (``Shares'') of the ALPS Enhanced Put 
Write Strategy ETF (``Fund'') under NYSE Arca Equities Rule 8.600, 
which governs the listing and trading of Managed Fund Shares. The 
proposed rule change was published for comment in the Federal Register 
on May 5, 2015.\3\ On May 12, 2015, the Exchange filed Amendment No. 1 
to the proposed rule change.\4\ On May 19, 2015, the Exchange filed 
Amendment No. 2 to the proposed rule change, but withdrew that 
amendment on May 20, 2015.\5\ On May 20, 2015, the Exchange filed 
Amendment No. 3 to the proposed rule change.\6\ The Commission received 
no

[[Page 36381]]

comments on the proposal, as modified by Amendment Nos. 1 and 3 
thereto. This order grants approval of the proposed rule change, as 
modified by Amendment Nos. 1 and 3 thereto.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 74839 (Apr. 29, 
2015), 80 FR 25729 (``Notice'').
    \4\ Amendment No. 1 to the proposed rule change replaced and 
superseded the original filing in its entirety.
    \5\ The Exchange withdrew Amendment No. 2 to the proposed rule 
change due to certain errors.
    \6\ Amendment No. 3 to the proposed rule change corrected 
typographical errors and clarified that any futures and options on 
futures utilized by the Fund will be U.S. exchange-traded futures 
contracts on the S&P 500 Index and U.S. exchange-traded options on 
futures contracts on the S&P 500 Index. Amendment Nos. 1 and 3 are 
available at: http://www.sec.gov/comments/sr-nysearca-2015-23/nysearca201523.shtml.
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II. Description of the Proposal

    NYSE Arca proposes to list and trade Shares of the Fund 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 ALPS 
ETF Trust (``Trust''), which is registered with the Commission as an 
investment company.\7\ ALPS Advisors, Inc. is the investment adviser 
(``Adviser'') to the Fund.\8\ Rich Investment Solutions, LLC is the 
investment sub-adviser (``Sub-Adviser'') to the Fund. ALPS Fund 
Services, Inc. serves as the Trust's administrator, and The Bank of New 
York Mellon serves as custodian (``Custodian'') and transfer agent for 
the Fund. ALPS Portfolio Solutions Distributor, Inc. is the distributor 
of the Fund's Shares.
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    \7\ The Trust is registered under the Investment Company Act of 
1940 (``1940 Act''). The Exchange states that the Trust filed with 
the Commission a registration statement on Form N-1A under the 
Securities Act of 1933 (``Securities Act'') and under the 1940 Act 
relating to the Fund (File Nos. 333-148826 and 811-22175) 
(``Registration Statement'') on January 6, 2015. In addition, the 
Exchange represents that the Trust has obtained certain exemptive 
relief under the1940 Act. See Investment Company Act Release No. 
30553 (June 11, 2013) (File No. 812-13884).
    \8\ The Exchange represents that the Adviser is not a registered 
broker-dealer, but 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 Fund's portfolio. The Exchange further 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, the 
Adviser or any new adviser or sub-adviser, as the case may be, 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 will be subject to procedures designed to prevent the 
use and dissemination of material, non-public information regarding 
the portfolio.
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    The Exchange has made the following representations and statements 
in describing the Fund and its investment strategy, including the 
Fund's portfolio holdings and investment restrictions.\9\
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    \9\ The Commission notes that additional information regarding 
the Fund, the Trust, and the Shares, including investment 
strategies, risks, creation and redemption procedures, fees, 
portfolio holdings disclosure policies, calculation of net asset 
value (``NAV''), distributions, and taxes, among other things, can 
be found in the Notice and the Registration Statement, as 
applicable. See Notice and Registration Statement, supra notes 3 and 
7, respectively.
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A. The Exchange's Description of the Fund's Principal Investment 
Policies

    According to the Exchange, the investment objective of the Fund is 
to seek total return, with an emphasis on income as the source of that 
total return. The Fund will seek to achieve its investment objective by 
selling listed one-month put options on the SPDR[supreg] S&P 
500[supreg] ETF Trust (``SPY''). SPY is an exchange-traded fund that 
seeks to provide investment results that, before expenses, correspond 
generally to the price and yield performance of the S&P 500[supreg] 
Index (``SPX'' or ``Index''). SPY holds a portfolio of the common 
stocks that are included in the SPX, with the weight of each stock in 
its portfolio substantially corresponding to the weight of that stock 
in the SPX. The Fund may also sell listed one-month put options 
directly on the SPX under certain circumstances (such as if those 
options have more liquidity and narrower spreads than options on SPY). 
SPY shares are listed on the Exchange and traded on national securities 
exchanges. SPX options are traded on the Chicago Board Options 
Exchange, and options on SPY are traded on national securities 
exchanges.
    Each listed put option sold by the Fund will be an ``American-
style'' option (i.e., an option that can be exercised at the strike 
price at any time prior to its expiration). As the seller of a listed 
put option, the Fund will incur an obligation to buy SPY underlying the 
option from the purchaser of the option at the option's strike price, 
upon exercise by the option purchaser. If a listed put option sold by 
the Fund is exercised prior to expiration, the Fund will buy the SPY 
underlying the option at the time of exercise and at the strike price, 
and will hold SPY until the market close on expiration.\10\
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    \10\ The Fund may also sell put options on the SPX directly 
under certain circumstances (such as if such options have more 
liquidity and narrower spreads than options on SPY) resulting in 
lower transaction costs than options on SPY. The puts are struck at-
the-money (i.e., with a strike price that is equal to the market 
price of the underlying SPY) and are typically sold on a monthly 
basis, usually on the third Friday of the month (the ``roll date'').
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    The option premiums and cash (in respect of orders to create Shares 
in large aggregations known as ``Creation Units,'' as further described 
below) received by the Fund will be invested in an actively-managed 
portfolio of investment grade debt securities (``Collateral 
Portfolio'') at least equal in value to the Fund's maximum liability 
under its written options (i.e., the strike price of each option). 
Investment grade debt securities are those rated ``Baa'' equivalent or 
higher by a nationally recognized statistical rating organization 
(``NRSROs''), or are unrated securities that the Sub-Adviser believes 
are of comparable quality. These investment grade debt securities will 
include Treasury bills (short-term U.S. government debt securities), 
corporate bonds, commercial paper, mortgage-backed securities 
(``MBS''), asset-backed securities (``ABS''), and notes issued or 
guaranteed by federal agencies or U.S. government sponsored 
instrumentalities, such as the Government National Mortgage 
Administration, the Federal Housing Administration, the Federal 
National Mortgage Association, and the Federal Home Loan Mortgage 
Corporation. It is expected that the average duration of these 
securities will not exceed six months, and the maximum maturity of any 
single security will not exceed one year.
    Under normal market conditions,\11\ substantially all of the Fund's 
net assets will be invested in options on SPY or SPX and in the 
Collateral Portfolio.
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    \11\ The term ``under normal market conditions'' includes, but 
is not limited to, the absence of extreme volatility or trading 
halts in the equity, options or fixed income markets or the 
financial markets generally; events or circumstances causing a 
disruption in market liquidity or orderly markets; operational 
issues causing dissemination of inaccurate market information; or 
force majeure type events such as systems failure, natural or man-
made disaster, act of God, armed conflict, act of terrorism, riot or 
labor disruption, or any similar intervening circumstance.
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    The Fund may invest up to 20% of its net assets in non-agency MBS 
and ABS in the aggregate. The Fund may seek to obtain exposure to U.S. 
agency mortgage pass-through securities primarily through the use of 
``to-be-announced'' or ``TBA transactions.'' According to the Exchange, 
``TBA'' refers to a commonly used mechanism for the forward settlement 
of U.S. agency mortgage pass-through securities and not to a separate 
type of mortgage-backed security. Most transactions in mortgage pass-
through securities occur through the use of TBA transactions. TBA 
transactions are generally conducted in accordance with widely-accepted 
guidelines that establish commonly observed terms and conditions for 
execution, settlement and delivery. In a TBA transaction, the buyer and 
seller decide on general trade parameters, such as agency, settlement 
date, par amount, and price. The actual pools delivered are generally 
determined two days prior to settlement date. The Fund will enter into 
TBA transactions only with established counterparties (such as major 
broker-dealers) and the Sub-Adviser will

[[Page 36382]]

monitor the creditworthiness of such counterparties.\12\
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    \12\ The Fund intends to invest cash pending settlement of any 
TBA transactions in money market instruments, repurchase agreements, 
commercial paper (including asset-backed commercial paper), or other 
high-quality, liquid short-term instruments, which may include money 
market funds affiliated with the Adviser or Sub-Adviser.
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    According to the Exchange, every month, the options sold by the 
Fund will be settled by delivery at expiration or will expire with no 
value, and new option positions will be established while the Fund 
sells any units of SPY it owns as a result of such settlements or of 
the Fund's prior option positions having been exercised. \13\ The 
Exchange states that this monthly cycle likely will cause the Fund to 
have frequent and substantial turnover in its option positions. If the 
Fund receives additional inflows (and issues more Shares in ``Creation 
Unit'' size during a one-month period), the Fund will sell additional 
listed put options, which will be exercised or expire at the end of 
such one-month period. Conversely, if the Fund redeems Shares in 
Creation Unit size during a monthly period, the Fund will terminate the 
appropriate portion of the options it has sold.
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    \13\ The Fund may hold U.S. exchange-listed equity securities, 
generally shares of SPY, for temporary periods upon settlement or 
exercise of the options sold by the Fund.
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    With respect to no more than 20% of the Fund's assets, the Fund may 
engage in certain opportunistic ``put spread'' and ``call spread'' 
strategies. Specifically, when the Sub-Adviser believes the SPX (and 
thus SPY) will rise or not decline in value, the Fund may engage in 
``put spreads'' whereby the Fund will buy back certain of the written 
put options that are out of the money (i.e., the strike price of the 
put option is lower than the market price of the underlying SPY) prior 
to expiration in order to sell new put options that are less out of the 
money. Similarly, the Fund may buy back certain of its written put 
options prior to expiration in order to sell new longer-dated options 
that will remain open past the one-month period of the original option. 
Conversely, when the Sub-Adviser believes the SPX will decline in 
value, the Fund may engage in ``call spreads'' whereby the Fund will 
sell call options that are in-the-money (i.e., the strike price of the 
call option is lower than the market price of the underlying SPY) and 
buy back less in-the-money call options. The Sub-Adviser may employ a 
variant of this call spread strategy whereby the Fund buys more calls 
than it sells (as long as the Fund receives a net premium on the 
transactions). This may enable the Fund to perform better when the SPX 
(and thus SPY) experiences gains well above the strike price of the 
calls bought by the Fund. However, even if the Fund engages in such 
call spreads, a declining SPX (and thus SPY) will significantly detract 
from Fund performance (given the Fund's principal strategy of selling 
put options on SPY).

B. The Exchange's Description of the Fund's Non-Principal Investment 
Policies

    While, under normal market conditions, substantially all of the 
Fund's net assets will be invested in options on SPY or SPX and in the 
Collateral Portfolio, the Fund may invest its remaining assets in other 
securities and financial instruments, as described below. The Fund may 
invest its remaining assets in any one or more of the following 
instruments: money market instruments (as described below), in addition 
to those in which the Fund invests as part of the Collateral Portfolio, 
and including repurchase agreements or other funds that invest 
exclusively in money market instruments; convertible securities; 
structured notes (notes on which the amount of principal repayment and 
interest payments are based on the movement of one or more specified 
factors, such as the movement of a particular stock or stock index); 
forward foreign currency exchange contracts; swaps; over-the-counter 
(``OTC'') options on SPY or on the S&P 500 Index; and futures contracts 
and options on futures contracts, as described further below. Swaps, 
options, and futures contracts may be used by the Fund in seeking to 
achieve its investment objective and in managing cash flows. The Fund 
may also invest in money market instruments or other short-term fixed 
income instruments as part of a temporary defensive strategy to protect 
against temporary market declines.
    The Fund may invest in high-quality money market instruments on an 
ongoing basis to provide liquidity. The instruments in which the Fund 
may invest include: (i) Short-term obligations issued by the U.S. 
Government; \14\ (ii) negotiable certificates of deposit (``CDs''), 
fixed time deposits, and bankers' acceptances of U.S. and foreign banks 
and similar institutions; \15\ (iii) commercial paper rated at the date 
of purchase ``Prime-1'' by Moody's Investors Service, Inc. or ``A-1+'' 
or ``A-1'' by Standard & Poor's or, if unrated, of comparable quality 
as determined by the Adviser; (iv) repurchase agreements; \16\ and (v) 
money market mutual funds.
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    \14\ Obligations issued or guaranteed by the U.S. Government, 
its agencies and instrumentalities include bills, notes, and bonds 
issued by the U.S. Treasury, as well as ``stripped'' or ``zero 
coupon'' U.S. Treasury obligations representing future interest or 
principal payments on U.S. Treasury notes or bonds.
    \15\ CDs are short-term negotiable obligations of commercial 
banks. Time deposits are non-negotiable deposits maintained in 
banking institutions for specified periods of time at stated 
interest rates. Banker's acceptances are time drafts drawn on 
commercial banks by borrowers, usually in connection with 
international transactions.
    \16\ Repurchase agreements may be characterized as loans secured 
by the underlying securities. The Fund may enter into repurchase 
agreements with (i) member banks of the Federal Reserve System 
having total assets in excess of $500 million and (ii) securities 
dealers (``Qualified Institutions''). The Adviser will monitor the 
continued creditworthiness of Qualified Institutions.
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    The Fund may enter into reverse repurchase agreements, which 
involve the sale of securities with an agreement to repurchase the 
securities at an agreed-upon price, date, and interest payment and have 
the characteristics of borrowing. The securities purchased with the 
funds obtained from the agreement and securities collateralizing the 
agreement will have maturity dates no later than the repayment date.
    The Fund may invest in the securities of other investment companies 
(including money market funds), subject to applicable restrictions 
under the 1940 Act.
    To the extent the Fund utilizes futures and options on futures, the 
Fund will utilize U.S. exchange-traded futures contracts on the S&P 500 
Index and U.S. exchange-traded options on futures contracts on the S&P 
500 Index. The Fund may utilize such options on futures contracts as a 
hedge against changes in value of its portfolio securities, or in 
anticipation of the purchase of securities, and may enter into closing 
transactions with respect to such options to terminate existing 
positions.
    To the extent the Fund enters into swap agreements, the Fund will 
enter into swap agreements based on the S&P 500 Index.
    The Fund may invest in investment grade debt obligations traded in 
the U.S. Such debt obligations include, among others, bonds, notes, 
debentures, and variable rate demand notes. In choosing corporate debt 
securities on behalf of the Fund, the Sub-Adviser may consider (i) 
general economic and financial conditions; and (ii) the specific 
issuer's (a) business and management, (b) cash flow, (c) earnings 
coverage of interest and dividends, (d) ability to operate

[[Page 36383]]

under adverse economic conditions, (e) fair market value of assets, and 
(f) other considerations deemed appropriate.
    The Fund, in the absence of normal market conditions, may invest up 
to 100% of its total assets in debt securities that are rated 
investment grade by an NRSRO or are unrated securities that the Sub-
Adviser believes are of comparable quality.
    The Fund may invest in securities that have variable or floating 
interest rates which are readjusted on set dates (such as the last day 
of the month or calendar quarter) in the case of variable rates or 
whenever a specified interest rate change occurs in the case of a 
floating rate instrument.
    The Fund may use delayed delivery transactions as an investment 
technique. Delayed delivery transactions, also referred to as forward 
commitments, involve commitments by the Fund to dealers or issuers to 
acquire or sell securities at a specified future date beyond the 
customary settlement for such securities. These commitments may fix the 
payment price and interest rate to be received or paid on the 
investment. The Fund may purchase securities on a delayed delivery 
basis to the extent that it can anticipate having available cash on the 
settlement date. Delayed delivery agreements will not be used as a 
speculative or leverage technique. The Fund also may purchase when-
issued securities.
    In addition, the Fund may invest in zero-coupon or pay-in-kind 
securities. These securities are debt securities that do not make 
regular cash interest payments. Zero-coupon securities are sold at a 
deep discount to their face value. Pay-in-kind securities pay interest 
through the issuance of additional securities.

C. The Exchange's Description of the Fund's Investment Restrictions

    The Fund may hold up to an aggregate of 15% of its net assets in 
illiquid assets (calculated at the time of investment), including Rule 
144A securities deemed illiquid by the Adviser or Sub-Adviser.\17\ 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.
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    \17\ Rule 144A securities are securities that, while privately 
placed, are eligible for purchase and resale pursuant to Rule 144A 
under the Securities Act. This rule permits certain qualified 
institutional buyers, such as the Fund, to trade in privately placed 
securities even though such securities are not registered under the 
Securities Act. The Sub-Adviser, under supervision of the Board, 
will consider whether securities purchased under Rule 144A are 
illiquid and thus subject to the Fund's restriction on illiquid 
assets. Determination of whether a Rule 144A security is liquid or 
not is a question of fact. In making this determination, the Sub-
Adviser will consider the trading markets for the specific security 
taking into account the unregistered nature of a Rule 144A security. 
In addition, the Sub-Adviser could consider the (i) frequency of 
trades and quotes; (ii) number of dealers and potential purchasers; 
(iii) dealer undertakings to make a market; and (iv) nature of the 
security and of market place trades (for example, the time needed to 
dispose of the security, the method of soliciting offers and the 
mechanics of transfer). The Sub-Adviser will also monitor the 
liquidity of Rule 144A securities, and if, as a result of changed 
conditions, the Sub-Adviser determines that a Rule 144A security is 
no longer liquid, the Sub-Adviser will review the Fund's holdings of 
illiquid securities to determine what, if any, action is required to 
assure that the Fund complies with its restriction on investment of 
illiquid securities.
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    The Fund intends to qualify for and to elect to be treated as a 
separate regulated investment company under subchapter M of the 
Internal Revenue Code. The Exchange further represents that the Fund's 
investments will be consistent with the Fund's investment objective and 
will not be used to enhance leverage.\18\
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    \18\ Investments in derivative instruments by the Fund will be 
made in accordance with the 1940 Act and consistent with the Fund's 
investment objective and policies. To limit the potential risk 
associated with transactions in derivatives, the Fund will segregate 
or ``earmark'' assets determined to be liquid by the Adviser in 
accordance with procedures that will established by the Trust's 
Board of Trustees (``Board'') and in accordance with the 1940 Act 
(or, as permitted by applicable regulation, enter into certain 
offsetting positions) to cover its obligations under derivative 
instruments. These procedures will be adopted consistent with 
section 18 of the 1940 Act and related Commission guidance. In 
addition, the Fund will include appropriate risk disclosure in its 
offering documents, including leveraging risk. Leveraging risk is 
the risk that certain transactions of the Fund, including the Fund's 
use of derivatives, may give rise to leverage, causing the Fund's 
Shares to be more volatile than if they had not been leveraged.
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the Exchange's 
proposal to list and trade the Shares is consistent with the Exchange 
Act and the rules and regulations thereunder applicable to a national 
securities exchange.\19\ In particular, the Commission finds that the 
proposed rule change, as modified by Amendment Nos. 1 and 3 thereto, is 
consistent with section 6(b)(5) of the Exchange Act,\20\ which 
requires, among other things, that the Exchange's rules be designed to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general, to protect investors and the public 
interest. The Commission also finds that the proposal to list and trade 
the Shares on the Exchange is consistent with section 11A(a)(1)(C)(iii) 
of the Exchange Act,\21\ which sets forth the finding of Congress that 
it is in the public interest and appropriate for the protection of 
investors and the maintenance of fair and orderly markets to assure the 
availability to brokers, dealers, and investors of information with 
respect to quotations for and transactions in securities.
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    \19\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \20\ 15 U.S.C. 78f(b)(5).
    \21\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    Quotation and last-sale information for the Shares will be 
available via the Consolidated Tape Association high-speed line and 
from the Exchange. The approximate value of the Fund's investments on a 
per-Share basis, the Indicative Intra-Day Value (``IIV''), which is the 
Portfolio Indicative Value as defined in NYSE Arca Equities Rule 
8.600(c)(3), will be disseminated by one or more major market data 
vendors every 15 seconds during the Exchange's Core Trading 
Session.\22\ On each business day, before commencement of trading in 
the Shares in the Core Session on the Exchange, the Fund will disclose 
on its Web site the portfolio that will form the basis for the Fund's 
calculation of NAV at the end of the business day.\23\
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    \22\ According to the Exchange, several major market data 
vendors display or make widely available IIVs taken from CTA or 
other data feeds.
    \23\ The Fund will disclose on the Fund's Web site the following 
information regarding each portfolio holding, as applicable to the 
type of holding: ticker symbol, CUSIP number or other identifier, if 
any; a description of the holding (including the type of holding, 
such as the type of swap); the identity of the security, commodity, 
index, or other asset or instrument underlying the holding, if any; 
for options, the option strike price; quantity held (as measured by, 
for example, par value, notional value, or number of shares, 
contracts or units); maturity date, if any; coupon rate, if any; 
effective date, if any; market value of the holding; and the 
percentage weighting of the holding in the Fund's portfolio. The Web 
site information will be publicly available at no charge.
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    The NAV per Share will be calculated by the Custodian and 
determined as of the close of the regular trading session on the New 
York Stock Exchange (ordinarily 4:00 p.m., Eastern time) (``NYSE 
Close'') on each day that such exchange is open. Information regarding 
market price and trading volume of the

[[Page 36384]]

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 and closing price 
information regarding exchange-traded options (including options on 
futures) and futures will be available from the exchange on which such 
instruments are traded. Intra-day and closing price information 
regarding debt securities, money market instruments, convertible 
securities, structured notes, forward foreign currency exchange 
contracts, swaps, repurchase agreements, reverse repurchase agreements, 
US government securities, MBS and ABS, mortgage pass-throughs, variable 
or floating interest rate securities, when-issued securities, delayed 
delivery securities, zero-coupon securities, and pay-in-kind securities 
also will be available from major market data vendors. Price 
information for non-exchange-traded investment company securities will 
be available from major market data vendors and from the Web site of 
the applicable investment company. In addition, quotation and last-sale 
information for exchange-listed options cleared via the Options 
Clearing Corporation will be available via the Options Price Reporting 
Authority. The S&P 500 Index value is available from major market data 
vendors.
    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 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. 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\ Trading in the Shares also 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. The 
Exchange represents that it has a general policy prohibiting the 
distribution of material, non-public information by its employees. The 
Adviser is not a registered broker-dealer, but 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 or changes to the Fund's portfolio.\25\ Prior to the 
commencement of trading, the Exchange will inform its Equity Trading 
Permit Holders (``ETP Holders'') in an Information Bulletin 
(``Bulletin'') of the special characteristics and risks associated with 
trading the Shares. The Exchange represents that trading in the Shares 
will be subject to the existing trading surveillances, administered by 
the Financial Industry Regulatory Authority (``FINRA'') on behalf of 
the Exchange, which are designed to detect violations of Exchange rules 
and applicable federal securities laws.\26\
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    \24\ These may include: (1) the extent to which trading is not 
occurring in the securities or the financial instruments 
constituting 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.
    \25\ See supra note 8. The Exchange represents that 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, 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 that 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. The Exchange 
is responsible for FINRA's performance under this regulatory 
services agreement.
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    The Exchange represents that it deems the Shares to be equity 
securities, thus rendering trading in the Shares subject to the 
Exchange's existing rules governing the trading of equity securities. 
In support of this proposal, the Exchange has also made the following 
representations:
    (1) The Shares will conform to the initial and continued listing 
criteria under NYSE Arca Equities Rule 8.600.
    (2) The Exchange has appropriate rules to facilitate transactions 
in the Shares during all trading sessions.
    (3) 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, and these procedures are adequate to properly 
monitor Exchange trading of the Shares in all trading sessions and to 
deter and detect violations of Exchange rules and federal securities 
laws applicable to trading on the Exchange.
    (4) FINRA, on behalf of the Exchange, will communicate as needed 
regarding trading in the Shares, other exchange-traded equity 
securities, exchange-traded investment company securities, futures 
contracts, and exchange-traded options contracts with other market and 
other entities that are members of the Intermarket Surveillance Group 
(``ISG''), and FINRA, on behalf of the Exchange, may obtain trading 
information in the Shares, other exchange-traded equity securities, 
exchange-traded investment company securities, futures contracts, and 
exchange-traded options contracts from those markets and other 
entities. In addition, the Exchange may obtain information regarding 
trading in the Shares, other exchange-traded equity securities, 
exchange-traded investment company securities, futures contracts, and 
exchange-traded options contracts from markets and other entities that 
are members of ISG or with which the Exchange has in place a 
comprehensive surveillance sharing agreement.\27\ The Exchange states 
that 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.
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    \27\ 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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    (5) Prior to the commencement of trading of Shares in the Fund, the 
Exchange will inform its ETP Holders in a Bulletin of the special 
characteristics and risks associated with trading the Shares. 
Specifically, the Bulletin will discuss the following: (i) The 
procedures for purchases and redemptions of Shares in Creation Unit 
aggregations (and that Shares are not individually redeemable); (ii) 
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

[[Page 36385]]

trading the Shares; (iii) the risks involved in trading the Shares 
during the Opening and Late Trading Sessions when an updated IIV or 
Index value will not be calculated or publicly disseminated; (iv) how 
information regarding the IIV, the Disclosed Portfolio, and the Index 
value will be disseminated; (v) 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 (vi) 
trading information.
    (6) For initial and continued listing, the Fund will be in 
compliance with Rule 10A-3 under the Act,\28\ as provided by NYSE Arca 
Equities Rule 5.3.
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    \28\ 17 CFR 240.10A-3.
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    (7) 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 restricted securities deemed illiquid by the 
Adviser or Sub-Adviser, consistent with Commission guidance.
    (8) The Fund's investments will be consistent with its investment 
objective and will not be used to enhance leverage.
    (9) To the extent the Fund utilizes futures and options on futures, 
the Fund will utilize U.S. exchange-traded futures contracts on the S&P 
500 Index and U.S. exchange-traded options on futures contracts on the 
S&P 500 Index. To the extent the Fund enters into swap agreements, the 
Fund will enter into swap agreements based on the S&P 500 Index.
    (10) Not more than 20% of the net assets of the Fund will be 
invested in MBS and ABS in the aggregate.
    (11) 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 
Amendment Nos. 1 and 3 to the proposed rule change. The Commission 
notes that the Fund and the Shares must comply with the requirements of 
NYSE Arca Equities Rule 8.600 to be initially and continuously listed 
and traded on the Exchange.
    For the foregoing reasons, the Commission finds that the proposed 
rule change, as modified by Amendment Nos. 1 and 3 thereto, is 
consistent with section 6(b)(5) of the Act \29\ and the rules and 
regulations thereunder applicable to a national securities exchange.
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    \29\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Exchange Act,\30\ that the proposed rule change (SR-NYSEArca-2015-23), 
as modified by Amendment Nos. 1 and 3 thereto, be, and it hereby is, 
approved.
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    \30\ 15 U.S.C. 78s(b)(2).
    \31\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\31\
Brent J. Fields,
Secretary.
[FR Doc. 2015-15452 Filed 6-23-15; 8:45 am]
 BILLING CODE 8011-01-P


