Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 1, Relating to Listing and Trading of Shares of the Cambria Shareholder Yield ETF Pursuant to NYSE Arca Equities Rule 8.600, 12110-12116 [2013-03970]
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Federal Register / Vol. 78, No. 35 / Thursday, February 21, 2013 / Notices
manipulation provisions of the federal
securities laws, particularly Section
10(b) of the Exchange Act,6 and Rule
10b–5 thereunder.7 Responsibility for
compliance with these and any other
applicable provisions of the federal
securities laws must rest with the
persons relying on this exemption.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.8
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–03899 Filed 2–20–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–68930; File No. SR–
NYSEArca–2013–14]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of Proposed
Rule Change, as Modified by
Amendment No. 1, Relating to Listing
and Trading of Shares of the Cambria
Shareholder Yield ETF Pursuant to
NYSE Arca Equities Rule 8.600
February 14, 2013.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on January
31, 2013, NYSE Arca, Inc. (the
‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the self-regulatory
organization. On February 13, 2013, the
Exchange filed Amendment No. 1 to the
proposed rule change.4 The Commission
is publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to list and
trade the following under NYSE Arca
Equities Rule 8.600 (‘‘Managed Fund
Shares’’): Cambria Shareholder Yield
6 15
U.S.C. 78j(b).
CFR 240.10b–5.
8 See 17 CFR 200.30–3(a)(11).
1 15 U.S.C.78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
4 In Amendment No. 1, the Exchange: (1) made
technical changes to the proposed rule change to
clarify how the net asset value of the Cambria
Shareholder Yield ETF would be calculated; and (2)
stated that quotation and last-sale information for
many securities held by the Cambria Shareholder
Yield ETF would be available via the Consolidated
Tape Association high speed line.
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ETF. The text of the proposed rule
change is available on the Exchange’s
Web site at www.nyse.com, at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to list and
trade shares (‘‘Shares’’) of the following
under NYSE Arca Equities Rule 8.600,
which governs the listing and trading of
Managed Fund Shares 5 on the
Exchange: Cambria Shareholder Yield
ETF (the ‘‘Fund’’).6 The Shares of the
Fund will be offered by Cambria ETF
Trust (the ‘‘Trust’’). The Trust will be
registered with the Securities and
Exchange Commission (‘‘Commission’’)
as an open-end management investment
company.7 Cambria Investment
5 A Managed Fund Share is a security that
represents an interest in an investment company
registered under the Investment Company Act of
1940 (15 U.S.C. 80a–1) (‘‘1940 Act’’) organized as
an open-end investment company or similar entity
that invests in a portfolio of securities selected by
its investment adviser consistent with its
investment objectives and policies. In contrast, an
open-end investment company that issues
Investment Company Units, listed and traded on
the Exchange under NYSE Arca Equities Rule
5.2(j)(3), seeks to provide investment results that
correspond generally to the price and yield
performance of a specific foreign or domestic stock
index, fixed income securities index or combination
thereof.
6 The Commission has previously approved
listing and trading on the Exchange of a number of
actively managed funds under Rule 8.600. See, e.g.,
Securities Exchange Act Release Nos. 57801 (May
8, 2008), 73 FR 27878 (May 14, 2008) (SR–
NYSEArca–2008–31) (order approving Exchange
listing and trading of twelve actively-managed
funds of the WisdomTree Trust); 60460 (August 7,
2009), 74 FR 41468 (August 17, 2009) (SR–
NYSEArca–2009–55) (order approving listing and
trading of Dent Tactical ETF); 63076 (October 12,
2010), 75 FR 63874 (October 18, 2010) (SR–
NYSEArca–2010–79) (order approving listing and
trading of Cambria Global Tactical ETF).
7 The Trust will be registered under the 1940 Act.
On July 6, 2012, the Trust filed an amendment to
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Management, L.P. will serve as the
investment adviser to the Fund (the
‘‘Adviser’’). SEI Investments
Distribution Co. (the ‘‘Distributor’’) will
be the principal underwriter and
distributor of the Fund’s Shares. SEI
Investments Global Funds Services (the
‘‘Administrator’’) will serve as
administrator for the Fund. Brown
Brothers Harriman & Co. will serve as
the custodian and transfer agent for the
Fund (‘‘Custodian’’ and ‘‘Transfer
Agent,’’) respectively.
Commentary .06 to Rule 8.600
provides that, if the investment adviser
to the investment company issuing
Managed Fund Shares is affiliated with
a broker-dealer, such investment adviser
shall erect a ‘‘fire wall’’ between the
investment adviser and the brokerdealer with respect to access to
information concerning the composition
of and/or changes to such investment
company portfolio. Commentary .06
further requires that personnel who
make decisions on the open-end fund’s
portfolio composition must be subject to
procedures designed to prevent the use
and dissemination of material
nonpublic information regarding the
open-end fund’s portfolio.8 Commentary
the Trust’s registration statement on Form N–1A
under the Securities Act of 1933 (the ‘‘1933 Act’’)
(15 U.S.C. 77a), and under the 1940 Act relating to
the Fund (File Nos. 333–180879 and 811–22704)
(the ‘‘Registration Statement’’). The description of
the operation of the Trust and the Fund herein is
based, in part, on the Registration Statement. The
Trust filed an Amended and Restated Application
for an Order under Section 6(c) of the 1940 Act for
exemptions from various provisions of the 1940 Act
and rules thereunder (File No. 812–13959), dated
November 13, 2012 (‘‘Exemptive Application’’). The
Commission has issued an order granting certain
exemptive relief to the Trust under the 1940 Act.
See Investment Company Act Release No. 30340
(January 4, 2013) (‘‘Exemptive Order’’). Investments
made by the Fund will comply with the conditions
set forth in the Exemptive Application and the
Exemptive Order.
8 An investment adviser to an open-end fund is
required to be registered under the Investment
Advisers Act of 1940 (the ‘‘Advisers Act’’). As a
result, the Adviser and its related personnel are
subject to the provisions of Rule 204A–1 under the
Advisers Act relating to codes of ethics. This Rule
requires investment advisers to adopt a code of
ethics that reflects the fiduciary nature of the
relationship to clients as well as compliance with
other applicable securities laws. Accordingly,
procedures designed to prevent the communication
and misuse of non-public information by an
investment adviser must be consistent with Rule
204A–1 under the Advisers Act. In addition, Rule
206(4)–7 under the Advisers Act makes it unlawful
for an investment adviser to provide investment
advice to clients unless such investment adviser has
(i) adopted and implemented written policies and
procedures reasonably designed to prevent
violation, by the investment adviser and its
supervised persons, of the Advisers Act and the
Commission rules adopted thereunder; (ii)
implemented, at a minimum, an annual review
regarding the adequacy of the policies and
procedures established pursuant to subparagraph (i)
above and the effectiveness of their
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.06 to Rule 8.600 is similar to
Commentary .03(a)(i) and (iii) to NYSE
Arca Equities Rule 5.2(j)(3); however,
Commentary .06 in connection with the
establishment of a ‘‘fire wall’’ between
the investment adviser and the brokerdealer reflects the applicable open-end
fund’s portfolio, not an underlying
benchmark index, as is the case with
index-based funds. The Adviser is not
affiliated with any broker-dealers. In the
event (a) the Adviser or any sub-adviser
becomes newly affiliated with a brokerdealer, or (b) any new adviser or subadviser becomes affiliated with a brokerdealer, it will implement a fire wall
with respect to such broker-dealer
regarding access to information
concerning the composition of and/or
changes to the portfolio, and will be
subject to procedures designed to
prevent the use and dissemination of
material non-public information
regarding the portfolio.
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Fund Investments
According to the Registration
Statement, the Fund seeks income and
capital appreciation with an emphasis
on income from investments in the U.S.
equity market. The Fund will seek to
achieve its investment objective by
investing, under normal market
conditions,9 primarily in equity
securities that provide a high
‘‘shareholder yield.’’ The Adviser views
equity securities as providing a high
shareholder yield if they exhibit strong
cash flows, as reflected by their
payment of dividends to shareholders
and their return of capital to
shareholders in other forms, such as
through net stock buybacks, net debt
paydown, mergers, acquisitions and
other forms of reinvestment in the
business. The Adviser believes that,
while any one of these measures of a
company’s cash flows, in isolation, is
inadequate to determine the
attractiveness of its equity securities,
considered together these measures
have the potential to result in the
construction of a portfolio of companies
with better cash flows, stronger growth
potential and higher yield
characteristics. Considering these
implementation; and (iii) designated an individual
(who is a supervised person) responsible for
administering the policies and procedures adopted
under subparagraph (i) above.
9 The term ‘‘under normal market conditions’’
includes, but is not limited to, the absence of
extreme volatility or trading halts in the equity
markets or the financial markets generally;
operational issues causing dissemination of
inaccurate market information; or force majeure
type events such as systems failure, natural or manmade disaster, act of God, armed conflict, act of
terrorism, riot or labor disruption or any similar
intervening circumstance.
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measures, which comprise shareholder
yield, together, therefore may result in
a more attractive investment portfolio.
The Fund will invest primarily in
equity securities, including the common
stock, of U.S. companies. The Fund may
obtain a limited amount of foreign and
emerging markets exposure through
investments in depositary receipts,
including American Depositary Receipts
(‘‘ADRs’’) and Global Depositary
Receipts (‘‘GDRs’’). 10 The Fund may
invest in securities of companies in any
industry and of any market
capitalization. Although the Fund
generally expects to invest in companies
with larger market capitalizations, the
Fund may invest in small- and midcapitalization companies.
Cambria will utilize a quantitative
model to identify which securities the
Fund might purchase and sell and
opportune times for purchases and
sales. While the Fund will invest in
approximately 100 of the top equity
securities as determined by their
shareholder yield, the quantity of
holdings in the Fund will be based on
a number of factors, including the asset
size of the Fund and the number of
companies that satisfy the Adviser’s
quantitative measurements at any one
time. Filters will be implemented to
screen for companies that pass various
market capitalization, sector
concentration, and liquidity
requirements. The Fund’s portfolio will
be rebalanced to the Adviser’s internal
target allocations, developed pursuant
to the Adviser’s strategy described
above, at least quarterly.
The Fund will not invest in non-US
equity securities other than through
ADRs and GDRs.11
Other Investments
According to the Registration
Statement, to respond to adverse
10 Depositary receipts are receipts, typically
issued by a bank or trust issuer, which evidence
ownership of underlying securities issued by a nonU.S. issuer. For ADRs, the depository is typically
a U.S. financial institution and the underlying
securities are issued by a non-U.S. issuer.
Depositary receipts are not necessarily denominated
in the same currency as their underlying securities.
Generally, ADRs, issued in registered form, are
designed for use in the U.S. securities markets. In
general, ADRs must be sponsored, but the Fund
may invest in unsponsored ADRs under certain
limited circumstances. It is expected that not more
than 10% of the net assets of the Fund will be
invested in unsponsored ADRs. GDRs are receipts
typically issued by non-United States banks and
trust companies that evidence ownership of either
foreign or domestic securities. The Fund will invest
only in ADRs and GDRs that are traded on an
exchange that is a member of the Intermarket
Surveillance Group (‘‘ISG’’) or with which the
Exchange has in place a comprehensive
surveillance sharing agreement. See note 25, infra.
11 See note 10, supra.
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12111
market, economic, political or other
conditions, the Fund may invest 100%
of its total assets, without limitation, in
high-quality debt securities and money
market instruments. The Fund may be
invested in these instruments for
extended periods, depending on the
Adviser’s assessment of market
conditions. Debt securities and money
market instruments include shares of
other fixed income or money market
mutual funds, commercial paper,
certificates of deposit, bankers’
acceptances, U.S. Government
securities, repurchase agreements and
bonds that are rated BBB or higher.
While the Fund is in a defensive
position, the opportunity to achieve its
investment objective will be limited.
Furthermore, to the extent that the Fund
invests in money market mutual funds,
the Fund would bear its pro rata portion
of such money market fund’s advisory
fees and operational fees.12
The Fund may hold up to an aggregate
amount of 15% of its net assets in
illiquid securities (calculated at the time
of investment), including Rule 144A
securities. The Fund will monitor its
portfolio liquidity on an ongoing basis
to determine whether, in light of current
circumstances, an adequate level of
liquidity is being maintained, and will
consider taking appropriate steps in
order to maintain adequate liquidity if,
through a change in values, net assets,
or other circumstances, more than 15%
of the Fund’s net assets are held in
illiquid securities. Illiquid securities
include securities subject to contractual
or other restrictions on resale and other
instruments that lack readily available
markets as determined in accordance
with Commission staff guidance.13
12 Circumstances under which the Fund may
temporarily depart from its normal investment
process include, but are not limited to, extreme
volatility or trading halts in the equity markets or
the financial markets generally; operational issues
causing dissemination of inaccurate market
information; or force majeure type events such as
systems failure, natural or man-made disaster, act
of God, armed conflict, act of terrorism, riot or labor
disruption or any similar intervening circumstance.
13 The Commission has stated that long-standing
Commission guidelines have required open-end
funds to hold no more than 15% of their net assets
in illiquid securities and other illiquid assets. See
Investment Company Act Release No. 28193 (March
11, 2008), 73 FR 14618 (March 18, 2008), footnote
34. See also, Investment Company Act Release No.
5847 (October 21, 1969), 35 FR 19989 (December
31, 1970) (Statement Regarding ‘‘Restricted
Securities’’); Investment Company Act Release No.
18612 (March 12, 1992), 57 FR 9828 (March 20,
1992) (Revisions of Guidelines to Form N–1A). A
fund’s portfolio security is illiquid if it cannot be
disposed of in the ordinary course of business
within seven days at approximately the value
ascribed to it by the fund. See Investment Company
Act Release No. 14983 (March 12, 1986), 51 FR
9773 (March 21, 1986) (adopting amendments to
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The Fund may make secured loans of
its portfolio securities; however,
securities loans will not be made if, as
a result, the aggregate amount of all
outstanding securities loans by the Fund
exceeds 331⁄3% of its total assets
(including the market value of collateral
received). To the extent the Fund
engages in securities lending, securities
loans will be made to broker-dealers
that the Adviser believes to be of
relatively high credit standing pursuant
to agreements requiring that the loans
continuously be collateralized by cash,
liquid securities, or shares of other
investment companies with a value at
least equal to the market value of the
loaned securities.
The Fund may invest in preferred
stocks. Preferred stocks include
convertible and non-convertible
preferred and preference stocks that are
senior to common stock. Preferred
stocks are equity securities that are
senior to common stock with respect to
the right to receive dividends and a
fixed share of the proceeds resulting
from the issuer’s liquidation. Some
preferred stocks also entitle their
holders to receive additional liquidation
proceeds on the same basis as holders
of the issuer’s common stock, and thus
represent an ownership interest in the
issuer.
The Fund may enter into repurchase
agreements with banks and brokerdealers. A repurchase agreement is an
agreement under which securities are
acquired by a Fund from a securities
dealer or bank subject to resale at an
agreed upon price on a later date. The
acquiring Fund bears a risk of loss in the
event that the other party to a
repurchase agreement defaults on its
obligations and the Fund is delayed or
prevented from exercising its rights to
dispose of the collateral securities.
The Fund may invest in U.S.
government securities and foreign
government securities rated BBB or
higher. U.S. government securities
include securities issued or guaranteed
by the U.S. government or its
authorities, agencies, or
instrumentalities. Foreign government
securities include securities issued or
guaranteed by foreign governments
(including political subdivisions) or
their authorities, agencies, or
instrumentalities or by supra-national
agencies.
The Fund may invest in the securities
of other investment companies
(including money market funds) to the
Rule 2a–7 under the 1940 Act); Investment
Company Act Release No. 17452 (April 23, 1990),
55 FR 17933 (April 30, 1990) (adopting Rule 144A
under the 1933 Act).
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extent permitted under the 1940 Act.
Under the 1940 Act, the Fund’s
investment in investment companies is
limited to, subject to certain exceptions:
(i) 3% of the total outstanding voting
stock of any one investment company,
(ii) 5% of the Fund’s total assets with
respect to any one investment company
and (iii) 10% of the Fund’s total assets
of investment companies in the
aggregate.
The Fund will be classified as a
‘‘diversified’’ investment company
under the 1940 Act.14
The Fund will not purchase the
securities of issuers conducting their
principal business activity in the same
industry if, immediately after the
purchase and as a result thereof, the
value of the Fund’s investments in that
industry would equal or exceed 25% of
the current value of the Fund’s total
assets, provided that this restriction
does not limit the Fund’s: (i)
Investments in securities of other
investment companies, (ii) investments
in securities issued or guaranteed by the
U.S. government, its agencies or
instrumentalities, or (iii) investments in
repurchase agreements collateralized by
U.S. government securities.15
The Fund intends to qualify for and
to elect treatment as a separate regulated
investment company (‘‘RIC’’) under
Subchapter M of the Internal Revenue
Code.16
The Shares will conform to the initial
and continued listing criteria under
NYSE Arca Equities Rule 8.600. The
Exchange represents that, for initial
and/or continued listing, the Fund will
be in compliance with Rule 10A–3 17
under the Act, as provided by NYSE
Arca Equities Rule 5.3. A minimum of
100,000 Shares for the Fund will be
outstanding at the commencement of
trading on the Exchange. The Exchange
will obtain a representation from the
issuer of the Shares that the net asset
value (‘‘NAV’’) per Share will be
calculated daily and that the NAV and
the Disclosed Portfolio as defined in
NYSE Arca Equities Rule 8.600(c)(2)
will be made available to all market
participants at the same time.
The Fund will not invest in options,
futures or swaps. The Fund’s
investments will be consistent with its
14 The diversification standard is set forth in
Section 5(b)(1) of the 1940 Act.
15 See Form N–1A, Item 9. The Commission has
taken the position that a fund is concentrated if it
invests more than 25% of the value of its total
assets in any one industry. See, e.g., Investment
Company Act Release No. 9011 (October 30, 1975),
40 FR 54241 (November 21, 1975).
16 26 U.S.C. 851 et seq.
17 17 CFR 240.10A–3.
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respective investment objective and will
not be used to enhance leverage.
Creation and Redemption of Shares
According to the Registration
Statement, the Fund will issue and
redeem Shares on a continuous basis at
NAV in aggregations of 50,000 Shares
(‘‘Creation Units’’).
The consideration for a Creation Unit
of a Fund will be the ‘‘Fund Deposit,’’
which will consist of the basket of
securities to be deposited to purchase
Creation Units of the Fund (the ‘‘InKind Creation Basket’’). The Fund
Deposit will consist of the In-Kind
Creation Basket and an amount of cash
consisting of a ‘‘Balancing Amount’’ (as
described below) and a transaction fee
calculated in connection with creations
(together with the Balancing Amount,
the ‘‘Cash Component’’), or a Cash
Component that includes an all cash
payment (‘‘Cash Value’’).
In addition to the In-Kind Creation
Basket, a purchaser will typically pay to
the Fund a ‘‘Balancing Amount’’
reflecting the difference, if any, between
the NAV of a Creation Unit and the
market value of the securities in the InKind Creation Basket. If the NAV per
Creation Unit exceeds the market value
of the securities in the In-Kind Creation
Basket, the purchaser will pay the
Balancing Amount to the Fund. By
contrast, if the NAV per Creation Unit
is less than the market value of the
securities in the In-Kind Creation
Basket, the Fund will pay the Balancing
Amount to the purchaser. The Balancing
Amount ensures that the consideration
paid by an investor for a Creation Unit
is exactly equal to the value of the
Creation Unit.
A portfolio composition file, to be
sent via the National Securities Clearing
Corporation (‘‘NSCC’’), will be made
available on each business day, prior to
the opening of business on the Exchange
(currently 9:30 a.m., Eastern time), a list
of the names and the required number
of shares of each security in the In-Kind
Creation Basket to be included in the
current Fund Deposit for the Fund
(based on information about the Fund’s
portfolio at the end of the previous
business day). In addition, on each
business day, the estimated Cash
Component, effective through and
including the previous business day,
will be made available through NSCC.
The In-Kind Creation Basket is
applicable for purchases of Creation
Units of the Fund until such time as the
next-announced In-Kind Creation
Basket is made available. The Fund
reserves the right to accept a
nonconforming (i.e., custom) Fund
Deposit. In addition, the composition of
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the In-Kind Creation Basket may change
as, among other things, corporate
actions and investment decisions by the
Adviser are implemented for the Fund’s
portfolio.
All purchase orders must be placed by
or through an ‘‘Authorized Participant’’.
An Authorized Participant must be
either a broker-dealer or other
participant in the Continuous Net
Settlement System (‘‘Clearing Process’’)
of the NSCC or a participant in The
Depository Trust Company (‘‘DTC’’)
with access to the DTC system, and
must execute an agreement with the
Distributor that governs transactions in
the Fund’s Creation Units. In-kind
portions of purchase orders will be
processed through the Clearing Process
when it is available.
Fund Shares may be redeemed only in
Creation Units at their NAV next
determined after receipt of a redemption
request in proper form by the Fund
through the Distributor and only on a
business day. The redemption proceeds
for a Creation Unit will consist of the
basket of securities a shareholder will
receive upon redemption of a Creation
unit (the ‘‘In-Kind Redemption Basket’’)
and an amount of cash consisting of a
Balancing Amount and a transaction fee
(the ‘‘Cash Redemption Amount’’), or, in
certain circumstances, the Cash Value,
in all instances equal to the value of a
Creation Unit. In addition, investors
may incur brokerage and other costs in
connection with assembling a Creation
Unit.
The redemption proceeds for a
Creation Unit generally consist of the InKind Redemption Basket and a Cash
Redemption Amount (‘‘Fund
Redemption’’), which consists of a
Balancing Amount and a Transaction
Fee. In lieu of the In-Kind Redemption
Basket and Balancing Amount, Creation
Units may be redeemed consisting
solely of cash in an amount equal to the
NAV of a Creation Unit (the ‘‘Cash
Value’’). In such instances, information
about the Cash Value of a Creation Unit
also will be published. The Fund
reserves the right to accept a
nonconforming (i.e., custom) Fund
Redemption.18
18 As stated in the Exemptive Application, the
Fund may, in certain circumstances, allow cash
creations or partial cash creations but not
redemptions (or vice versa) if: (a) There is a
Balancing Amount; (b) the Fund announces before
the open of trading that all purchases, all
redemptions or all purchases and redemptions on
that day will be made entirely in cash; (c) upon
receiving a purchase or redemption order from an
Authorized Participant the Fund determines to
require the purchase or redemption to be made
entirely in cash because, among other things, it
would benefit the Fund and its investors; (d) the
Fund requires all Authorized Participants
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The right of redemption may be
suspended or the date of payment
postponed: (i) For any period during
which the New York Stock Exchange
(‘‘NYSE’’) is closed (other than
customary weekend and holiday
closings); (ii) for any period during
which trading on the NYSE is
suspended or restricted; (iii) for any
period during which an emergency
exists as a result of which disposal of
the Shares or determination of the
Fund’s NAV is not reasonably
practicable; or (iv) in such other
circumstances as permitted by the
Commission.
For an order involving a Creation Unit
to be effectuated at the Fund’s NAV on
a particular day, it must be received by
the Distributor by or before the deadline
for such order (‘‘Order Cut-Off Time’’).
The Order Cut-Off Time for creation and
redemption orders for the Fund is
generally expected to be 4:00 p.m.
Eastern time for In-Kind Creation and
Redemption Baskets, and 2:00 p.m.
Eastern time for Cash Value
transactions. In-Kind Creation and
Redemption Baskets are expected to be
accepted until the close of regular
trading on the Exchange on each
business day, which is usually 4:00 p.m.
Eastern time. A standard redemption
transaction fee will be imposed to offset
transfer and other transaction costs that
may be incurred by the Fund.
Detailed descriptions of the Fund’s
procedures for creating and redeeming
Shares, transaction fees and expenses,
dividends, distributions, taxes, risks,
and reports to be distributed to
beneficial owners of the Shares can be
found in the Registration Statement or
on the Web site for the Fund
(www.cambriafunds.com), as applicable.
purchasing or redeeming Shares on that day to
deposit or receive (as applicable) cash in lieu of
some or all of the In-Kind Creation Basket or InKind Redemption Basket, respectively, solely
because (i) certain instruments therein are not
eligible for transfer through either the NSCC Process
or DTC Process (as described in the Exemptive
Application) or (ii) such instruments are not eligible
for trading due to local (foreign) trading or transfer
restrictions or the like; or (e) the Fund permits an
Authorized Participant to deposit or receive (as
applicable) cash in lieu of some or all of the In-Kind
Creation Basket or In-Kind Redemption Basket,
respectively, solely because (i) certain instruments
therein are, in the case of the purchase of a Creation
Unit, not available in sufficient quantity, (ii) such
instruments are not eligible for trading by an
Authorized Participant or the investor on whose
behalf the Authorized Participant is acting, or (iii)
an investor would be subject to unfavorable income
tax treatment based on receipt of redemption
proceeds in kind. According to the Registration
Statement, an additional variable charge for cash or
partial cash creations, and cash or partial cash
redemptions, may also be imposed to compensate
the Fund for the costs associated with buying the
applicable securities.
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12113
Determination of Net Asset Value
According to the Registration
Statement, the NAV of the Fund will be
calculated each business day as of the
close of regular trading on the NYSE,
generally 4:00 p.m., Eastern time. The
Fund will calculate its NAV per Share
by taking the current market value of its
total assets, subtracting any liabilities,
and dividing that amount by the total
number of Shares owned by
shareholders.
When calculating the NAV of the
Fund’s Shares, expenses are accrued
and applied daily and stocks held by the
Fund will be valued at their market
value when reliable market quotations
are readily available. Equity securities
will be valued primarily on the basis of
market prices reported on stock
exchanges and other securities markets
around the world. If a security is listed
on a national securities exchange, the
security will be valued at the closing
price or, if the closing price is not
readily available, the mean of the
closing bid and ask prices. Unlisted
securities for which market quotations
are readily available will be valued at
the last sale price, if available, or, if the
last sale price is unavailable, at the
mean of the closing bid and ask prices,
if both such prices are readily available,
or, if both such prices are unavailable,
at the last quoted bid price, as
applicable. Debt securities and other
assets for which market quotations are
readily available will be valued at
market values in the principal market in
which they normally are traded, as
furnished by recognized dealers in such
securities or assets. Certain equity
securities, debt securities and other
assets will be valued differently. For
instance, fixed-income investments
maturing in 60 days or less will be
valued primarily using the amortized
cost method. Investments in open-end
funds are valued at their NAVs. Both
market quotations and indicative bids
are obtained from outside pricing
services approved and monitored
pursuant to a policy approved by the
Fund’s Board of Trustees.
If a market price is not readily
available or is deemed not to reflect
market value, the Fund will determine
the price of the security held by the
Fund based on a determination of the
security’s fair value pursuant to a policy
approved by the Fund’s Board of
Trustees.
Availability of Information
The Fund’s Web site
(www.cambriafunds.com), which will
be publicly available prior to the public
offering of Shares, will include a form
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of the prospectus for the Fund that may
be downloaded. The Fund’s Web site
will include additional quantitative
information updated on a daily basis,
including, for the Fund, (1) the prior
business day’s reported closing price,
NAV and mid-point of the bid/ask
spread at the time of calculation of such
NAV (the ‘‘Bid/Ask Price’’),19 and a
calculation of the premium and
discount of the Bid/Ask Price against
the NAV, and (2) data in chart format
displaying the frequency distribution of
discounts and premiums of the daily
Bid/Ask Price against the NAV, within
appropriate ranges, for each of the four
previous calendar quarters. On each
business day, before commencement of
trading in Shares in the Core Trading
Session on the Exchange, the Fund will
disclose on its Web site the Disclosed
Portfolio that will form the basis for the
Fund’s calculation of NAV at the end of
the business day.20
On a daily basis, the Adviser will
disclose for each portfolio security or
other financial instrument of the Fund
the following information on the Fund’s
Web site: Ticker symbol (if applicable),
name of security and financial
instrument, number of shares or dollar
value of financial instruments held in
the portfolio, and percentage weighting
of the security and financial instrument
in the portfolio. The Web site
information will be publicly available at
no charge.
In addition, a basket composition file,
which includes the security names and
share quantities required to be delivered
in exchange for the Fund’s Shares,
together with estimates and actual cash
components, will be publicly
disseminated daily prior to the opening
of the NYSE via NSCC. The basket will
represent one Creation Unit of Shares of
the Fund.
Investors can also obtain the Trust’s
Statement of Additional Information
(‘‘SAI’’), the Fund’s Shareholder
Reports, and the Trust’s Form N–CSR
and Form N–SAR, filed twice a year.
The Trust’s SAI and Shareholder
Reports are available free upon request
from the Trust, and those documents
and the Form N–CSR and Form N–SAR
19 The Bid/Ask Price of the Fund will be
determined using the mid-point of the highest bid
and the lowest offer on the Exchange as of the time
of calculation of the Fund’s NAV. The records
relating to Bid/Ask Prices will be retained by the
Fund and its service providers.
20 Under accounting procedures to be followed by
the Fund, trades made on the prior business day
(‘‘T’’) will be booked and reflected in NAV on the
current business day (‘‘T+1’’). Accordingly, the
Fund will be able to disclose at the beginning of the
business day the portfolio that will form the basis
for the NAV calculation at the end of the business
day.
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may be viewed on-screen or
downloaded from the Commission’s
Web site at www.sec.gov. Information
regarding market price and trading
volume of the Shares will be continually
available on a real-time basis throughout
the day on brokers’ computer screens
and other electronic services.
Information regarding the previous
day’s closing price and trading volume
information for the Shares are expected
to be published daily in the financial
section of newspapers. Quotation and
last sale information for the Shares and
many securities held by the Fund will
be available via the Consolidated Tape
Association (‘‘CTA’’) high-speed line. In
addition, the Indicative Optimized
Portfolio Value (‘‘IOPV’’),21 which is the
Portfolio Indicative Value as defined in
NYSE Arca Equities Rule 8.600(c)(3),
will be widely disseminated at least
every 15 seconds during the Core
Trading Session by one or more major
market data vendors.22 The
dissemination of the IOPV, together
with the Disclosed Portfolio, will allow
investors to determine the value of the
underlying portfolio of the Fund on a
daily basis and to provide a close
estimate of that value throughout the
trading day. The intra-day, closing and
settlement prices of the portfolio
securities and other Fund investments
will also be readily available from the
national securities exchanges trading
such securities, automated quotation
systems, published or other public
sources, or on-line information services
such as Bloomberg or Reuters.
Additional information regarding the
Trust and the Shares, including
investment strategies, risks, creation and
redemption procedures, fees, portfolio
holdings disclosure policies,
distributions and taxes is included in
the Registration Statement. All terms
relating to the Fund that are referred to,
but not defined in, this proposed rule
change are defined in the Registration
Statement.
21 The IOPV calculations will be estimates of the
value of the Fund’s NAV per Share using market
data converted into U.S. dollars at the current
currency rates. The IOPV price will be based on
quotes and closing prices from the securities’ local
market and may not reflect events that occur
subsequent to the local market’s close. The
quotations of certain Fund holdings may not be
updated during U.S. trading hours if such holdings
do not trade in the United States. Premiums and
discounts between the IOPV and the market price
may occur. This should not be viewed as a ‘‘realtime’’ update of the NAV per Share of the Fund,
which will be calculated only once a day.
22 Currently, it is the Exchange’s understanding
that several major market data vendors display and/
or make widely available IOPVs taken from the CTA
or other data feeds.
PO 00000
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Trading Halts
With respect to trading halts, the
Exchange may consider all relevant
factors in exercising its discretion to
halt or suspend trading in the Shares of
the Fund.23 Trading in Shares of the
Fund will be halted if the circuit breaker
parameters in NYSE Arca Equities Rule
7.12 have been reached. Trading also
may be halted because of market
conditions or for reasons that, in the
view of the Exchange, make trading in
the Shares inadvisable. These may
include: (1) The extent to which trading
is not occurring in the securities and/or
the financial instruments comprising
the Disclosed Portfolio of the Fund; or
(2) whether other unusual conditions or
circumstances detrimental to the
maintenance of a fair and orderly
market are present. Trading in the
Shares will be subject to NYSE Arca
Equities Rule 8.600(d)(2)(D), which sets
forth circumstances under which Shares
of the Fund may be halted.
Trading Rules
The Exchange deems the Shares to be
equity securities, thus rendering trading
in the Shares subject to the Exchange’s
existing rules governing the trading of
equity securities. Shares will trade on
the NYSE Arca Marketplace from 4:00
a.m. to 8:00 p.m. Eastern time in
accordance with NYSE Arca Equities
Rule 7.34 (Opening, Core, and Late
Trading Sessions). The Exchange has
appropriate rules to facilitate
transactions in the Shares during all
trading sessions. As provided in NYSE
Arca Equities Rule 7.6, Commentary .03,
the minimum price variation (‘‘MPV’’)
for quoting and entry of orders in equity
securities traded on the NYSE Arca
Marketplace is $0.01, with the exception
of securities that are priced less than
$1.00 for which the MPV for order entry
is $0.0001.
Surveillance
The Exchange represents that trading
in the Shares will be subject to the
existing trading surveillances,
administered by the Financial Industry
Regulatory Authority (‘‘FINRA’’) on
behalf of the Exchange, which are
designed to detect violations of
Exchange rules and applicable federal
securities laws.24 The Exchange
represents that these procedures are
adequate to properly monitor Exchange
trading of the Shares in all trading
23 See NYSE Arca Equities Rule 7.12,
Commentary .04.
24 FINRA surveils trading on the Exchange
pursuant to a regulatory services agreement. The
Exchange is responsible for FINRA’s performance
under this regulatory services agreement.
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sessions and to deter and detect
violations of Exchange rules and
applicable federal securities laws.
The surveillances referred to above
generally focus on detecting securities
trading outside their normal patterns,
which could be indicative of
manipulative or other violative activity.
When such situations are detected,
surveillance analysis follows and
investigations are opened, where
appropriate, to review the behavior of
all relevant parties for all relevant
trading violations. FINRA, on behalf of
the Exchange, will communicate as
needed regarding trading in the Shares
with other markets that are members of
the Intermarket Surveillance Group
(‘‘ISG’’) or with which the Exchange has
in place a comprehensive surveillance
sharing agreement.25
In addition, the Exchange also has a
general policy prohibiting the
distribution of material, non-public
information by its employees.
Information Bulletin
Prior to the commencement of
trading, the Exchange will inform its
Equity Trading Permit (‘‘ETP’’) Holders
in an Information Bulletin (‘‘Bulletin’’)
of the special characteristics and risks
associated with trading the Shares.
Specifically, the Bulletin will discuss
the following: (1) The procedures for
purchases and redemptions of Shares in
Creation Unit aggregations (and that
Shares are not individually redeemable);
(2) NYSE Arca Equities Rule 9.2(a),
which imposes a duty of due diligence
on its ETP Holders to learn the essential
facts relating to every customer prior to
trading the Shares; (3) the risks involved
in trading the Shares during the
Opening and Late Trading Sessions
when an updated IOPV will not be
calculated or publicly disseminated; (4)
how information regarding the IOPV is
disseminated; (5) the requirement that
ETP Holders deliver a prospectus to
investors purchasing newly issued
Shares prior to or concurrently with the
confirmation of a transaction; and (6)
trading information.
In addition, the Bulletin will
reference that the Fund is subject to
various fees and expenses described in
the Registration Statement. The Bulletin
will discuss any exemptive, no-action,
and interpretive relief granted by the
Commission from any rules under the
Act. The Bulletin will also disclose that
the NAV for the Shares will be
25 For a list of the current members of ISG, see
www.isgportal.org. The Exchange notes that not all
components of the Disclosed Portfolio for the Fund
may trade on markets that are members of ISG or
with which the Exchange has in place a
comprehensive surveillance sharing agreement.
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14:47 Feb 20, 2013
Jkt 229001
calculated after 4:00 p.m. Eastern time
each trading day.
2. Statutory Basis
The basis under the Act for this
proposed rule change is the requirement
under Section 6(b)(5) 26 that an
exchange have rules that are designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, to remove
impediments to, and perfect the
mechanism of a free and open market
and, in general, to protect investors and
the public interest.
The Exchange believes that the
proposed rule change is designed to
prevent fraudulent and manipulative
acts and practices in that the Shares will
be listed and traded on the Exchange
pursuant to the initial and continued
listing criteria in NYSE Arca Equities
Rule 8.600. The Shares will be subject
to the existing trading surveillances,
administered by FINRA on behalf of the
Exchange, which are designed to detect
violations of Exchange rules and
applicable federal securities laws. The
Adviser is not affiliated with any
broker-dealers. In the event (a) the
Adviser or any sub-adviser becomes
newly affiliated with a broker-dealer, or
(b) any new adviser or sub-adviser
becomes affiliated with a broker-dealer,
it will implement a ‘‘fire wall’’ with
respect to such broker-dealer regarding
access to information concerning the
composition and/or changes to the
Fund’s portfolio. FINRA, on behalf of
the Exchange, may obtain information
via ISG from other exchanges that are
members of ISG or with which the
Exchange has entered into a
comprehensive surveillance sharing
agreement. It is expected that not more
than 10% of the net assets of the Fund
will be invested in unsponsored ADRs.
The Fund will invest only in GDRs that
are traded on an exchange that is a
member of the ISG or with which the
Exchange has in place a comprehensive
surveillance sharing agreement. The
Fund may invest in U.S. government
securities and foreign government
securities rated BBB or higher. The
Fund may invest up to 15% of its net
assets in illiquid securities (calculated
at the time of investment), including
Rule 144A securities.
The proposed rule change is designed
to promote just and equitable principles
of trade and to protect investors and the
public interest in that the Exchange will
obtain a representation from the issuer
of the Shares that the NAV per Share
will be calculated daily and that the
NAV and the Disclosed Portfolio will be
26 15
PO 00000
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Frm 00085
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12115
made available to all market
participants at the same time. In
addition, a large amount of information
is publicly available regarding the Fund
and the Shares, thereby promoting
market transparency. Moreover, the
IOPV will be widely disseminated by
one or more major market data vendors
at least every 15 seconds during the
Exchange’s Core Trading Session. On
each business day, before
commencement of trading in Shares in
the Core Trading Session on the
Exchange, the Fund will disclose on its
Web site the Disclosed Portfolio that
will form the basis for the Fund’s
calculation of NAV at the end of the
business day. Information regarding
market price and trading volume of the
Shares and many securities held by the
Fund will be continually available on a
real-time basis throughout the day on
brokers’ computer screens and other
electronic services, and quotation and
last sale information will be available
via the CTA high-speed line. The Web
site for the Fund will include the
prospectus for the Fund and additional
data relating to NAV and other
applicable quantitative information.
Moreover, prior to the commencement
of trading, the Exchange will inform its
ETP Holders in an Information Bulletin
of the special characteristics and risks
associated with trading the Shares.
Trading in Shares of the Fund will be
halted if the circuit breaker parameters
in NYSE Arca Equities Rule 7.12 have
been reached or because of market
conditions or for reasons that, in the
view of the Exchange, make trading in
the Shares inadvisable, and trading in
the Shares will be subject to NYSE Arca
Equities Rule 8.600(d)(2)(D), which sets
forth circumstances under which Shares
of the Fund may be halted. In addition,
as noted above, investors will have
ready access to information regarding
the Fund’s holdings, the IOPV, the
Disclosed Portfolio, and quotation and
last sale information for the Shares.
The proposed rule change is designed
to perfect the mechanism of a free and
open market and, in general, to protect
investors and the public interest in that
it will facilitate the listing and trading
of an additional type of activelymanaged exchange-traded product that
will enhance competition among market
participants, to the benefit of investors
and the marketplace. As noted above,
the Shares will be subject to the existing
trading surveillances, administered by
FINRA on behalf of the Exchange,
which are designed to detect violations
of Exchange rules and applicable federal
securities laws and FINRA, on behalf of
the Exchange, may obtain information
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via ISG from other exchanges that are
members of ISG or with which the
Exchange has entered into a
comprehensive surveillance sharing
agreement. In addition, as noted above,
investors will have ready access to
information regarding the Fund’s
holdings, the IOPV, the Disclosed
Portfolio, and quotation and last sale
information for the Shares. The Fund
will not invest in options, futures or
swaps. The Fund’s investments will be
consistent with its investment objective
and will not be used to enhance
leverage.
Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purpose of the Act. The Exchange
notes that the proposed rule change will
facilitate the listing and trading of an
additional type of actively-managed
exchange-traded product that will
enhance competition among market
participants, to the benefit of investors
and the marketplace.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will:
(A) By order approve or disapprove
such proposed rule change, or
(B) Institute proceedings to determine
whether the proposed rule change
should be disapproved.
erowe on DSK2VPTVN1PROD with NOTICES
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
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14:47 Feb 20, 2013
Jkt 229001
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
No. SR–NYSEArca–2013–14 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street NE., Washington, DC
20549–1090.
All submissions should refer to File No.
SR–NYSEArca-2013–14. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Web site (https://www.sec.gov/rules/
sro.shtml). Copies of the submission, all
subsequent amendments, all written
statements with respect to the proposed
rule change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File No. SR–NYSEArca–
2013–14 and should be submitted on or
before March 14, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.27
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–03970 Filed 2–20–13; 8:45 am]
BILLING CODE 8011–01–P
27 17
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–68925; File No. SR–
NASDAQ–2012–137]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Designation of a Longer Period for
Commission Action on Proposed Rule
Change, as Modified by Amendment
Nos. 1 and 3 Thereto, To Establish the
Market Quality Program
February 14, 2013.
On December 7, 2012, The NASDAQ
Stock Market LLC (‘‘Exchange’’ or
‘‘NASDAQ’’) 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
establish the Market Quality Program
(‘‘MQP’’ or ‘‘Program’’) on a pilot basis.
On December 20, 2012, the Exchange
submitted Amendment No. 1 to the
proposed rule change, which replaced
and superseded the proposed rule
change in its entirety. The proposed rule
change, as modified by Amendment No.
1 thereto, was published for comment in
the Federal Register on December 31,
2012.3 The Commission received two
comment letters on the proposed rule
change.4 On February 7, 2013, the
Exchange submitted Amendment No. 2
to the proposed rule change. On
February 8, 2013, the Exchange
withdrew Amendment No. 2 5 and filed
Amendment No. 3 to the proposed rule
change.6
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 Securities Exchange Act Release No. 68515 (Dec.
21, 2012), 77 FR 77141 (Dec. 31, 2012).
4 See Letter from Rey Ramsey, President & CEO,
TechNet, dated January 22, 2013 and Letter from
Daniel G. Weaver, Ph.D., Professor of Finance,
Rutgers Business School, dated January 30, 2013.
5 The Exchange withdrew Amendment No. 2 due
to a technical error in the amendment.
6 In Amendment No. 3, the Exchange clarified: (i)
that the Exchange may limit on a Program-wide
basis the number of Exchange-Traded Funds
(‘‘ETFs’’) per MQP Company that can participate in
the MQP, and that the Exchange would not be
limiting the number of actual shares issued by an
MQP Company for a particular ETF participating in
the Program; (ii) that the Exchange will provide in
the monthly public report to the Commission
relating to the MQP (a) information on the market
quality of MQP Securities after they exceed the
threshold and ‘‘graduate’’ from the Program
pursuant to proposed Rule 5950(d)(1)(A), and (b) its
analysis of the information to be included in the
report and its assessment of the efficacy of the
MQP; and (iii) that the Exchange will provide to the
Commission data and analyses about comparable
ETFs that are listed on the Exchange but that are
not in the MQP, as well as any other MQP-related
data and analyses requested by Commission staff for
the purpose of evaluating the efficacy of the MQP.
Amendment No. 3 provides clarification to the
2 17
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[Federal Register Volume 78, Number 35 (Thursday, February 21, 2013)]
[Notices]
[Pages 12110-12116]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-03970]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68930; File No. SR-NYSEArca-2013-14]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change, as Modified by Amendment No. 1, Relating to
Listing and Trading of Shares of the Cambria Shareholder Yield ETF
Pursuant to NYSE Arca Equities Rule 8.600
February 14, 2013.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on January 31, 2013, NYSE Arca, Inc. (the ``Exchange'' or
``NYSE Arca'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the self-regulatory
organization. On February 13, 2013, the Exchange filed Amendment No. 1
to the proposed rule change.\4\ The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C.78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
\4\ In Amendment No. 1, the Exchange: (1) made technical changes
to the proposed rule change to clarify how the net asset value of
the Cambria Shareholder Yield ETF would be calculated; and (2)
stated that quotation and last-sale information for many securities
held by the Cambria Shareholder Yield ETF would be available via the
Consolidated Tape Association high speed line.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to list and trade the following under NYSE
Arca Equities Rule 8.600 (``Managed Fund Shares''): Cambria Shareholder
Yield ETF. The text of the proposed rule change is available on the
Exchange's Web site at www.nyse.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to list and trade shares (``Shares'') of the
following under NYSE Arca Equities Rule 8.600, which governs the
listing and trading of Managed Fund Shares \5\ on the Exchange: Cambria
Shareholder Yield ETF (the ``Fund'').\6\ The Shares of the Fund will be
offered by Cambria ETF Trust (the ``Trust''). The Trust will be
registered with the Securities and Exchange Commission (``Commission'')
as an open-end management investment company.\7\ Cambria Investment
Management, L.P. will serve as the investment adviser to the Fund (the
``Adviser''). SEI Investments Distribution Co. (the ``Distributor'')
will be the principal underwriter and distributor of the Fund's Shares.
SEI Investments Global Funds Services (the ``Administrator'') will
serve as administrator for the Fund. Brown Brothers Harriman & Co. will
serve as the custodian and transfer agent for the Fund (``Custodian''
and ``Transfer Agent,'') respectively.
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\5\ A Managed Fund Share is a security that represents an
interest in an investment company registered under the Investment
Company Act of 1940 (15 U.S.C. 80a-1) (``1940 Act'') organized as an
open-end investment company or similar entity that invests in a
portfolio of securities selected by its investment adviser
consistent with its investment objectives and policies. In contrast,
an open-end investment company that issues Investment Company Units,
listed and traded on the Exchange under NYSE Arca Equities Rule
5.2(j)(3), seeks to provide investment results that correspond
generally to the price and yield performance of a specific foreign
or domestic stock index, fixed income securities index or
combination thereof.
\6\ The Commission has previously approved listing and trading
on the Exchange of a number of actively managed funds under Rule
8.600. See, e.g., Securities Exchange Act Release Nos. 57801 (May 8,
2008), 73 FR 27878 (May 14, 2008) (SR-NYSEArca-2008-31) (order
approving Exchange listing and trading of twelve actively-managed
funds of the WisdomTree Trust); 60460 (August 7, 2009), 74 FR 41468
(August 17, 2009) (SR-NYSEArca-2009-55) (order approving listing and
trading of Dent Tactical ETF); 63076 (October 12, 2010), 75 FR 63874
(October 18, 2010) (SR-NYSEArca-2010-79) (order approving listing
and trading of Cambria Global Tactical ETF).
\7\ The Trust will be registered under the 1940 Act. On July 6,
2012, the Trust filed an amendment to the Trust's registration
statement on Form N-1A under the Securities Act of 1933 (the ``1933
Act'') (15 U.S.C. 77a), and under the 1940 Act relating to the Fund
(File Nos. 333-180879 and 811-22704) (the ``Registration
Statement''). The description of the operation of the Trust and the
Fund herein is based, in part, on the Registration Statement. The
Trust filed an Amended and Restated Application for an Order under
Section 6(c) of the 1940 Act for exemptions from various provisions
of the 1940 Act and rules thereunder (File No. 812-13959), dated
November 13, 2012 (``Exemptive Application''). The Commission has
issued an order granting certain exemptive relief to the Trust under
the 1940 Act. See Investment Company Act Release No. 30340 (January
4, 2013) (``Exemptive Order''). Investments made by the Fund will
comply with the conditions set forth in the Exemptive Application
and the Exemptive Order.
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Commentary .06 to Rule 8.600 provides that, if the investment
adviser to the investment company issuing Managed Fund Shares is
affiliated with a broker-dealer, such investment adviser shall erect a
``fire wall'' between the investment adviser and the broker-dealer with
respect to access to information concerning the composition of and/or
changes to such investment company portfolio. Commentary .06 further
requires that personnel who make decisions on the open-end fund's
portfolio composition must be subject to procedures designed to prevent
the use and dissemination of material nonpublic information regarding
the open-end fund's portfolio.\8\ Commentary
[[Page 12111]]
.06 to Rule 8.600 is similar to Commentary .03(a)(i) and (iii) to NYSE
Arca Equities Rule 5.2(j)(3); however, Commentary .06 in connection
with the establishment of a ``fire wall'' between the investment
adviser and the broker-dealer reflects the applicable open-end fund's
portfolio, not an underlying benchmark index, as is the case with
index-based funds. The Adviser is not affiliated with any broker-
dealers. In the event (a) the Adviser or any sub-adviser becomes newly
affiliated with a broker-dealer, or (b) any new adviser or sub-adviser
becomes affiliated with a broker-dealer, it will implement a fire wall
with respect to such broker-dealer regarding access to information
concerning the composition of and/or changes to the portfolio, and will
be subject to procedures designed to prevent the use and dissemination
of material non-public information regarding the portfolio.
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\8\ An investment adviser to an open-end fund is required to be
registered under the Investment Advisers Act of 1940 (the ``Advisers
Act''). As a result, the Adviser and its related personnel are
subject to the provisions of Rule 204A-1 under the Advisers Act
relating to codes of ethics. This Rule requires investment advisers
to adopt a code of ethics that reflects the fiduciary nature of the
relationship to clients as well as compliance with other applicable
securities laws. Accordingly, procedures designed to prevent the
communication and misuse of non-public information by an investment
adviser must be consistent with Rule 204A-1 under the Advisers Act.
In addition, Rule 206(4)-7 under the Advisers Act makes it unlawful
for an investment adviser to provide investment advice to clients
unless such investment adviser has (i) adopted and implemented
written policies and procedures reasonably designed to prevent
violation, by the investment adviser and its supervised persons, of
the Advisers Act and the Commission rules adopted thereunder; (ii)
implemented, at a minimum, an annual review regarding the adequacy
of the policies and procedures established pursuant to subparagraph
(i) above and the effectiveness of their implementation; and (iii)
designated an individual (who is a supervised person) responsible
for administering the policies and procedures adopted under
subparagraph (i) above.
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Fund Investments
According to the Registration Statement, the Fund seeks income and
capital appreciation with an emphasis on income from investments in the
U.S. equity market. The Fund will seek to achieve its investment
objective by investing, under normal market conditions,\9\ primarily in
equity securities that provide a high ``shareholder yield.'' The
Adviser views equity securities as providing a high shareholder yield
if they exhibit strong cash flows, as reflected by their payment of
dividends to shareholders and their return of capital to shareholders
in other forms, such as through net stock buybacks, net debt paydown,
mergers, acquisitions and other forms of reinvestment in the business.
The Adviser believes that, while any one of these measures of a
company's cash flows, in isolation, is inadequate to determine the
attractiveness of its equity securities, considered together these
measures have the potential to result in the construction of a
portfolio of companies with better cash flows, stronger growth
potential and higher yield characteristics. Considering these measures,
which comprise shareholder yield, together, therefore may result in a
more attractive investment portfolio.
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\9\ The term ``under normal market conditions'' includes, but is
not limited to, the absence of extreme volatility or trading halts
in the equity markets or the financial markets generally;
operational issues causing dissemination of inaccurate market
information; or force majeure type events such as systems failure,
natural or man-made disaster, act of God, armed conflict, act of
terrorism, riot or labor disruption or any similar intervening
circumstance.
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The Fund will invest primarily in equity securities, including the
common stock, of U.S. companies. The Fund may obtain a limited amount
of foreign and emerging markets exposure through investments in
depositary receipts, including American Depositary Receipts (``ADRs'')
and Global Depositary Receipts (``GDRs''). \10\ The Fund may invest in
securities of companies in any industry and of any market
capitalization. Although the Fund generally expects to invest in
companies with larger market capitalizations, the Fund may invest in
small- and mid-capitalization companies.
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\10\ Depositary receipts are receipts, typically issued by a
bank or trust issuer, which evidence ownership of underlying
securities issued by a non-U.S. issuer. For ADRs, the depository is
typically a U.S. financial institution and the underlying securities
are issued by a non-U.S. issuer. Depositary receipts are not
necessarily denominated in the same currency as their underlying
securities. Generally, ADRs, issued in registered form, are designed
for use in the U.S. securities markets. In general, ADRs must be
sponsored, but the Fund may invest in unsponsored ADRs under certain
limited circumstances. It is expected that not more than 10% of the
net assets of the Fund will be invested in unsponsored ADRs. GDRs
are receipts typically issued by non-United States banks and trust
companies that evidence ownership of either foreign or domestic
securities. The Fund will invest only in ADRs and GDRs that are
traded on an exchange that is a member of the Intermarket
Surveillance Group (``ISG'') or with which the Exchange has in place
a comprehensive surveillance sharing agreement. See note 25, infra.
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Cambria will utilize a quantitative model to identify which
securities the Fund might purchase and sell and opportune times for
purchases and sales. While the Fund will invest in approximately 100 of
the top equity securities as determined by their shareholder yield, the
quantity of holdings in the Fund will be based on a number of factors,
including the asset size of the Fund and the number of companies that
satisfy the Adviser's quantitative measurements at any one time.
Filters will be implemented to screen for companies that pass various
market capitalization, sector concentration, and liquidity
requirements. The Fund's portfolio will be rebalanced to the Adviser's
internal target allocations, developed pursuant to the Adviser's
strategy described above, at least quarterly.
The Fund will not invest in non-US equity securities other than
through ADRs and GDRs.\11\
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\11\ See note 10, supra.
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Other Investments
According to the Registration Statement, to respond to adverse
market, economic, political or other conditions, the Fund may invest
100% of its total assets, without limitation, in high-quality debt
securities and money market instruments. The Fund may be invested in
these instruments for extended periods, depending on the Adviser's
assessment of market conditions. Debt securities and money market
instruments include shares of other fixed income or money market mutual
funds, commercial paper, certificates of deposit, bankers' acceptances,
U.S. Government securities, repurchase agreements and bonds that are
rated BBB or higher. While the Fund is in a defensive position, the
opportunity to achieve its investment objective will be limited.
Furthermore, to the extent that the Fund invests in money market mutual
funds, the Fund would bear its pro rata portion of such money market
fund's advisory fees and operational fees.\12\
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\12\ Circumstances under which the Fund may temporarily depart
from its normal investment process include, but are not limited to,
extreme volatility or trading halts in the equity markets or the
financial markets generally; operational issues causing
dissemination of inaccurate market information; or force majeure
type events such as systems failure, natural or man-made disaster,
act of God, armed conflict, act of terrorism, riot or labor
disruption or any similar intervening circumstance.
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The Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid securities (calculated at the time of investment),
including Rule 144A securities. The Fund will monitor its portfolio
liquidity on an ongoing basis to determine whether, in light of current
circumstances, an adequate level of liquidity is being maintained, and
will consider taking appropriate steps in order to maintain adequate
liquidity if, through a change in values, net assets, or other
circumstances, more than 15% of the Fund's net assets are held in
illiquid securities. Illiquid securities include securities subject to
contractual or other restrictions on resale and other instruments that
lack readily available markets as determined in accordance with
Commission staff guidance.\13\
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\13\ The Commission has stated that long-standing Commission
guidelines have required open-end funds to hold no more than 15% of
their net assets in illiquid securities and other illiquid assets.
See Investment Company Act Release No. 28193 (March 11, 2008), 73 FR
14618 (March 18, 2008), footnote 34. See also, Investment Company
Act Release No. 5847 (October 21, 1969), 35 FR 19989 (December 31,
1970) (Statement Regarding ``Restricted Securities''); Investment
Company Act Release No. 18612 (March 12, 1992), 57 FR 9828 (March
20, 1992) (Revisions of Guidelines to Form N-1A). A fund's portfolio
security is illiquid if it cannot be disposed of in the ordinary
course of business within seven days at approximately the value
ascribed to it by the fund. See Investment Company Act Release No.
14983 (March 12, 1986), 51 FR 9773 (March 21, 1986) (adopting
amendments to Rule 2a-7 under the 1940 Act); Investment Company Act
Release No. 17452 (April 23, 1990), 55 FR 17933 (April 30, 1990)
(adopting Rule 144A under the 1933 Act).
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[[Page 12112]]
The Fund may make secured loans of its portfolio securities;
however, securities loans will not be made if, as a result, the
aggregate amount of all outstanding securities loans by the Fund
exceeds 33\1/3\% of its total assets (including the market value of
collateral received). To the extent the Fund engages in securities
lending, securities loans will be made to broker-dealers that the
Adviser believes to be of relatively high credit standing pursuant to
agreements requiring that the loans continuously be collateralized by
cash, liquid securities, or shares of other investment companies with a
value at least equal to the market value of the loaned securities.
The Fund may invest in preferred stocks. Preferred stocks include
convertible and non-convertible preferred and preference stocks that
are senior to common stock. Preferred stocks are equity securities that
are senior to common stock with respect to the right to receive
dividends and a fixed share of the proceeds resulting from the issuer's
liquidation. Some preferred stocks also entitle their holders to
receive additional liquidation proceeds on the same basis as holders of
the issuer's common stock, and thus represent an ownership interest in
the issuer.
The Fund may enter into repurchase agreements with banks and
broker-dealers. A repurchase agreement is an agreement under which
securities are acquired by a Fund from a securities dealer or bank
subject to resale at an agreed upon price on a later date. The
acquiring Fund bears a risk of loss in the event that the other party
to a repurchase agreement defaults on its obligations and the Fund is
delayed or prevented from exercising its rights to dispose of the
collateral securities.
The Fund may invest in U.S. government securities and foreign
government securities rated BBB or higher. U.S. government securities
include securities issued or guaranteed by the U.S. government or its
authorities, agencies, or instrumentalities. Foreign government
securities include securities issued or guaranteed by foreign
governments (including political subdivisions) or their authorities,
agencies, or instrumentalities or by supra-national agencies.
The Fund may invest in the securities of other investment companies
(including money market funds) to the extent permitted under the 1940
Act. Under the 1940 Act, the Fund's investment in investment companies
is limited to, subject to certain exceptions: (i) 3% of the total
outstanding voting stock of any one investment company, (ii) 5% of the
Fund's total assets with respect to any one investment company and
(iii) 10% of the Fund's total assets of investment companies in the
aggregate.
The Fund will be classified as a ``diversified'' investment company
under the 1940 Act.\14\
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\14\ The diversification standard is set forth in Section
5(b)(1) of the 1940 Act.
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The Fund will not purchase the securities of issuers conducting
their principal business activity in the same industry if, immediately
after the purchase and as a result thereof, the value of the Fund's
investments in that industry would equal or exceed 25% of the current
value of the Fund's total assets, provided that this restriction does
not limit the Fund's: (i) Investments in securities of other investment
companies, (ii) investments in securities issued or guaranteed by the
U.S. government, its agencies or instrumentalities, or (iii)
investments in repurchase agreements collateralized by U.S. government
securities.\15\
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\15\ See Form N-1A, Item 9. The Commission has taken the
position that a fund is concentrated if it invests more than 25% of
the value of its total assets in any one industry. See, e.g.,
Investment Company Act Release No. 9011 (October 30, 1975), 40 FR
54241 (November 21, 1975).
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The Fund intends to qualify for and to elect treatment as a
separate regulated investment company (``RIC'') under Subchapter M of
the Internal Revenue Code.\16\
---------------------------------------------------------------------------
\16\ 26 U.S.C. 851 et seq.
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The Shares will conform to the initial and continued listing
criteria under NYSE Arca Equities Rule 8.600. The Exchange represents
that, for initial and/or continued listing, the Fund will be in
compliance with Rule 10A-3 \17\ under the Act, as provided by NYSE Arca
Equities Rule 5.3. A minimum of 100,000 Shares for the Fund will be
outstanding at the commencement of trading on the Exchange. The
Exchange will obtain a representation from the issuer of the Shares
that the net asset value (``NAV'') per Share will be calculated daily
and that the NAV and the Disclosed Portfolio as defined in NYSE Arca
Equities Rule 8.600(c)(2) will be made available to all market
participants at the same time.
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\17\ 17 CFR 240.10A-3.
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The Fund will not invest in options, futures or swaps. The Fund's
investments will be consistent with its respective investment objective
and will not be used to enhance leverage.
Creation and Redemption of Shares
According to the Registration Statement, the Fund will issue and
redeem Shares on a continuous basis at NAV in aggregations of 50,000
Shares (``Creation Units'').
The consideration for a Creation Unit of a Fund will be the ``Fund
Deposit,'' which will consist of the basket of securities to be
deposited to purchase Creation Units of the Fund (the ``In-Kind
Creation Basket''). The Fund Deposit will consist of the In-Kind
Creation Basket and an amount of cash consisting of a ``Balancing
Amount'' (as described below) and a transaction fee calculated in
connection with creations (together with the Balancing Amount, the
``Cash Component''), or a Cash Component that includes an all cash
payment (``Cash Value'').
In addition to the In-Kind Creation Basket, a purchaser will
typically pay to the Fund a ``Balancing Amount'' reflecting the
difference, if any, between the NAV of a Creation Unit and the market
value of the securities in the In-Kind Creation Basket. If the NAV per
Creation Unit exceeds the market value of the securities in the In-Kind
Creation Basket, the purchaser will pay the Balancing Amount to the
Fund. By contrast, if the NAV per Creation Unit is less than the market
value of the securities in the In-Kind Creation Basket, the Fund will
pay the Balancing Amount to the purchaser. The Balancing Amount ensures
that the consideration paid by an investor for a Creation Unit is
exactly equal to the value of the Creation Unit.
A portfolio composition file, to be sent via the National
Securities Clearing Corporation (``NSCC''), will be made available on
each business day, prior to the opening of business on the Exchange
(currently 9:30 a.m., Eastern time), a list of the names and the
required number of shares of each security in the In-Kind Creation
Basket to be included in the current Fund Deposit for the Fund (based
on information about the Fund's portfolio at the end of the previous
business day). In addition, on each business day, the estimated Cash
Component, effective through and including the previous business day,
will be made available through NSCC.
The In-Kind Creation Basket is applicable for purchases of Creation
Units of the Fund until such time as the next-announced In-Kind
Creation Basket is made available. The Fund reserves the right to
accept a nonconforming (i.e., custom) Fund Deposit. In addition, the
composition of
[[Page 12113]]
the In-Kind Creation Basket may change as, among other things,
corporate actions and investment decisions by the Adviser are
implemented for the Fund's portfolio.
All purchase orders must be placed by or through an ``Authorized
Participant''. An Authorized Participant must be either a broker-dealer
or other participant in the Continuous Net Settlement System
(``Clearing Process'') of the NSCC or a participant in The Depository
Trust Company (``DTC'') with access to the DTC system, and must execute
an agreement with the Distributor that governs transactions in the
Fund's Creation Units. In-kind portions of purchase orders will be
processed through the Clearing Process when it is available.
Fund Shares may be redeemed only in Creation Units at their NAV
next determined after receipt of a redemption request in proper form by
the Fund through the Distributor and only on a business day. The
redemption proceeds for a Creation Unit will consist of the basket of
securities a shareholder will receive upon redemption of a Creation
unit (the ``In-Kind Redemption Basket'') and an amount of cash
consisting of a Balancing Amount and a transaction fee (the ``Cash
Redemption Amount''), or, in certain circumstances, the Cash Value, in
all instances equal to the value of a Creation Unit. In addition,
investors may incur brokerage and other costs in connection with
assembling a Creation Unit.
The redemption proceeds for a Creation Unit generally consist of
the In-Kind Redemption Basket and a Cash Redemption Amount (``Fund
Redemption''), which consists of a Balancing Amount and a Transaction
Fee. In lieu of the In-Kind Redemption Basket and Balancing Amount,
Creation Units may be redeemed consisting solely of cash in an amount
equal to the NAV of a Creation Unit (the ``Cash Value''). In such
instances, information about the Cash Value of a Creation Unit also
will be published. The Fund reserves the right to accept a
nonconforming (i.e., custom) Fund Redemption.\18\
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\18\ As stated in the Exemptive Application, the Fund may, in
certain circumstances, allow cash creations or partial cash
creations but not redemptions (or vice versa) if: (a) There is a
Balancing Amount; (b) the Fund announces before the open of trading
that all purchases, all redemptions or all purchases and redemptions
on that day will be made entirely in cash; (c) upon receiving a
purchase or redemption order from an Authorized Participant the Fund
determines to require the purchase or redemption to be made entirely
in cash because, among other things, it would benefit the Fund and
its investors; (d) the Fund requires all Authorized Participants
purchasing or redeeming Shares on that day to deposit or receive (as
applicable) cash in lieu of some or all of the In-Kind Creation
Basket or In-Kind Redemption Basket, respectively, solely because
(i) certain instruments therein are not eligible for transfer
through either the NSCC Process or DTC Process (as described in the
Exemptive Application) or (ii) such instruments are not eligible for
trading due to local (foreign) trading or transfer restrictions or
the like; or (e) the Fund permits an Authorized Participant to
deposit or receive (as applicable) cash in lieu of some or all of
the In-Kind Creation Basket or In-Kind Redemption Basket,
respectively, solely because (i) certain instruments therein are, in
the case of the purchase of a Creation Unit, not available in
sufficient quantity, (ii) such instruments are not eligible for
trading by an Authorized Participant or the investor on whose behalf
the Authorized Participant is acting, or (iii) an investor would be
subject to unfavorable income tax treatment based on receipt of
redemption proceeds in kind. According to the Registration
Statement, an additional variable charge for cash or partial cash
creations, and cash or partial cash redemptions, may also be imposed
to compensate the Fund for the costs associated with buying the
applicable securities.
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The right of redemption may be suspended or the date of payment
postponed: (i) For any period during which the New York Stock Exchange
(``NYSE'') is closed (other than customary weekend and holiday
closings); (ii) for any period during which trading on the NYSE is
suspended or restricted; (iii) for any period during which an emergency
exists as a result of which disposal of the Shares or determination of
the Fund's NAV is not reasonably practicable; or (iv) in such other
circumstances as permitted by the Commission.
For an order involving a Creation Unit to be effectuated at the
Fund's NAV on a particular day, it must be received by the Distributor
by or before the deadline for such order (``Order Cut-Off Time''). The
Order Cut-Off Time for creation and redemption orders for the Fund is
generally expected to be 4:00 p.m. Eastern time for In-Kind Creation
and Redemption Baskets, and 2:00 p.m. Eastern time for Cash Value
transactions. In-Kind Creation and Redemption Baskets are expected to
be accepted until the close of regular trading on the Exchange on each
business day, which is usually 4:00 p.m. Eastern time. A standard
redemption transaction fee will be imposed to offset transfer and other
transaction costs that may be incurred by the Fund.
Detailed descriptions of the Fund's procedures for creating and
redeeming Shares, transaction fees and expenses, dividends,
distributions, taxes, risks, and reports to be distributed to
beneficial owners of the Shares can be found in the Registration
Statement or on the Web site for the Fund (www.cambriafunds.com), as
applicable.
Determination of Net Asset Value
According to the Registration Statement, the NAV of the Fund will
be calculated each business day as of the close of regular trading on
the NYSE, generally 4:00 p.m., Eastern time. The Fund will calculate
its NAV per Share by taking the current market value of its total
assets, subtracting any liabilities, and dividing that amount by the
total number of Shares owned by shareholders.
When calculating the NAV of the Fund's Shares, expenses are accrued
and applied daily and stocks held by the Fund will be valued at their
market value when reliable market quotations are readily available.
Equity securities will be valued primarily on the basis of market
prices reported on stock exchanges and other securities markets around
the world. If a security is listed on a national securities exchange,
the security will be valued at the closing price or, if the closing
price is not readily available, the mean of the closing bid and ask
prices. Unlisted securities for which market quotations are readily
available will be valued at the last sale price, if available, or, if
the last sale price is unavailable, at the mean of the closing bid and
ask prices, if both such prices are readily available, or, if both such
prices are unavailable, at the last quoted bid price, as applicable.
Debt securities and other assets for which market quotations are
readily available will be valued at market values in the principal
market in which they normally are traded, as furnished by recognized
dealers in such securities or assets. Certain equity securities, debt
securities and other assets will be valued differently. For instance,
fixed-income investments maturing in 60 days or less will be valued
primarily using the amortized cost method. Investments in open-end
funds are valued at their NAVs. Both market quotations and indicative
bids are obtained from outside pricing services approved and monitored
pursuant to a policy approved by the Fund's Board of Trustees.
If a market price is not readily available or is deemed not to
reflect market value, the Fund will determine the price of the security
held by the Fund based on a determination of the security's fair value
pursuant to a policy approved by the Fund's Board of Trustees.
Availability of Information
The Fund's Web site (www.cambriafunds.com), which will be publicly
available prior to the public offering of Shares, will include a form
[[Page 12114]]
of the prospectus for the Fund that may be downloaded. The Fund's Web
site will include additional quantitative information updated on a
daily basis, including, for the Fund, (1) the prior business day's
reported closing price, NAV and mid-point of the bid/ask spread at the
time of calculation of such NAV (the ``Bid/Ask Price''),\19\ and a
calculation of the premium and discount of the Bid/Ask Price against
the NAV, and (2) data in chart format displaying the frequency
distribution of discounts and premiums of the daily Bid/Ask Price
against the NAV, within appropriate ranges, for each of the four
previous calendar quarters. On each business day, before commencement
of trading in Shares in the Core Trading Session on the Exchange, the
Fund will disclose on its Web site the Disclosed Portfolio that will
form the basis for the Fund's calculation of NAV at the end of the
business day.\20\
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\19\ The Bid/Ask Price of the Fund will be determined using the
mid-point of the highest bid and the lowest offer on the Exchange as
of the time of calculation of the Fund's NAV. The records relating
to Bid/Ask Prices will be retained by the Fund and its service
providers.
\20\ Under accounting procedures to be followed by the Fund,
trades made on the prior business day (``T'') will be booked and
reflected in NAV on the current business day (``T+1''). Accordingly,
the Fund will be able to disclose at the beginning of the business
day the portfolio that will form the basis for the NAV calculation
at the end of the business day.
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On a daily basis, the Adviser will disclose for each portfolio
security or other financial instrument of the Fund the following
information on the Fund's Web site: Ticker symbol (if applicable), name
of security and financial instrument, number of shares or dollar value
of financial instruments held in the portfolio, and percentage
weighting of the security and financial instrument in the portfolio.
The Web site information will be publicly available at no charge.
In addition, a basket composition file, which includes the security
names and share quantities required to be delivered in exchange for the
Fund's Shares, together with estimates and actual cash components, will
be publicly disseminated daily prior to the opening of the NYSE via
NSCC. The basket will represent one Creation Unit of Shares of the
Fund.
Investors can also obtain the Trust's Statement of Additional
Information (``SAI''), the Fund's Shareholder Reports, and the Trust's
Form N-CSR and Form N-SAR, filed twice a year. The Trust's SAI and
Shareholder Reports are available free upon request from the Trust, and
those documents and the Form N-CSR and Form N-SAR may be viewed on-
screen or downloaded from the Commission's Web site at www.sec.gov.
Information regarding market price and trading volume of the Shares
will be continually available on a real-time basis throughout the day
on brokers' computer screens and other electronic services. Information
regarding the previous day's closing price and trading volume
information for the Shares are expected to be published daily in the
financial section of newspapers. Quotation and last sale information
for the Shares and many securities held by the Fund will be available
via the Consolidated Tape Association (``CTA'') high-speed line. In
addition, the Indicative Optimized Portfolio Value (``IOPV''),\21\
which is the Portfolio Indicative Value as defined in NYSE Arca
Equities Rule 8.600(c)(3), will be widely disseminated at least every
15 seconds during the Core Trading Session by one or more major market
data vendors.\22\ The dissemination of the IOPV, together with the
Disclosed Portfolio, will allow investors to determine the value of the
underlying portfolio of the Fund on a daily basis and to provide a
close estimate of that value throughout the trading day. The intra-day,
closing and settlement prices of the portfolio securities and other
Fund investments will also be readily available from the national
securities exchanges trading such securities, automated quotation
systems, published or other public sources, or on-line information
services such as Bloomberg or Reuters.
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\21\ The IOPV calculations will be estimates of the value of the
Fund's NAV per Share using market data converted into U.S. dollars
at the current currency rates. The IOPV price will be based on
quotes and closing prices from the securities' local market and may
not reflect events that occur subsequent to the local market's
close. The quotations of certain Fund holdings may not be updated
during U.S. trading hours if such holdings do not trade in the
United States. Premiums and discounts between the IOPV and the
market price may occur. This should not be viewed as a ``real-time''
update of the NAV per Share of the Fund, which will be calculated
only once a day.
\22\ Currently, it is the Exchange's understanding that several
major market data vendors display and/or make widely available IOPVs
taken from the CTA or other data feeds.
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Additional information regarding the Trust and the Shares,
including investment strategies, risks, creation and redemption
procedures, fees, portfolio holdings disclosure policies, distributions
and taxes is included in the Registration Statement. All terms relating
to the Fund that are referred to, but not defined in, this proposed
rule change are defined in the Registration Statement.
Trading Halts
With respect to trading halts, the Exchange may consider all
relevant factors in exercising its discretion to halt or suspend
trading in the Shares of the Fund.\23\ Trading in Shares of the Fund
will be halted if the circuit breaker parameters in NYSE Arca Equities
Rule 7.12 have been reached. Trading also may be halted because of
market conditions or for reasons that, in the view of the Exchange,
make trading in the Shares inadvisable. These may include: (1) The
extent to which trading is not occurring in the securities and/or the
financial instruments comprising the Disclosed Portfolio of the Fund;
or (2) whether other unusual conditions or circumstances detrimental to
the maintenance of a fair and orderly market are present. Trading in
the Shares will be subject to NYSE Arca Equities Rule 8.600(d)(2)(D),
which sets forth circumstances under which Shares of the Fund may be
halted.
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\23\ See NYSE Arca Equities Rule 7.12, Commentary .04.
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Trading Rules
The Exchange deems the Shares to be equity securities, thus
rendering trading in the Shares subject to the Exchange's existing
rules governing the trading of equity securities. Shares will trade on
the NYSE Arca Marketplace from 4:00 a.m. to 8:00 p.m. Eastern time in
accordance with NYSE Arca Equities Rule 7.34 (Opening, Core, and Late
Trading Sessions). The Exchange has appropriate rules to facilitate
transactions in the Shares during all trading sessions. As provided in
NYSE Arca Equities Rule 7.6, Commentary .03, the minimum price
variation (``MPV'') for quoting and entry of orders in equity
securities traded on the NYSE Arca Marketplace is $0.01, with the
exception of securities that are priced less than $1.00 for which the
MPV for order entry is $0.0001.
Surveillance
The Exchange represents that trading in the Shares will be subject
to the existing trading surveillances, administered by the Financial
Industry Regulatory Authority (``FINRA'') on behalf of the Exchange,
which are designed to detect violations of Exchange rules and
applicable federal securities laws.\24\ The Exchange represents that
these procedures are adequate to properly monitor Exchange trading of
the Shares in all trading
[[Page 12115]]
sessions and to deter and detect violations of Exchange rules and
applicable federal securities laws.
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\24\ FINRA surveils trading on the Exchange pursuant to a
regulatory services agreement. The Exchange is responsible for
FINRA's performance under this regulatory services agreement.
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The surveillances referred to above generally focus on detecting
securities trading outside their normal patterns, which could be
indicative of manipulative or other violative activity. When such
situations are detected, surveillance analysis follows and
investigations are opened, where appropriate, to review the behavior of
all relevant parties for all relevant trading violations. FINRA, on
behalf of the Exchange, will communicate as needed regarding trading in
the Shares with other markets that are members of the Intermarket
Surveillance Group (``ISG'') or with which the Exchange has in place a
comprehensive surveillance sharing agreement.\25\
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\25\ For a list of the current members of ISG, see
www.isgportal.org. The Exchange notes that not all components of the
Disclosed Portfolio for the Fund may trade on markets that are
members of ISG or with which the Exchange has in place a
comprehensive surveillance sharing agreement.
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In addition, the Exchange also has a general policy prohibiting the
distribution of material, non-public information by its employees.
Information Bulletin
Prior to the commencement of trading, the Exchange will inform its
Equity Trading Permit (``ETP'') Holders in an Information Bulletin
(``Bulletin'') of the special characteristics and risks associated with
trading the Shares. Specifically, the Bulletin will discuss the
following: (1) The procedures for purchases and redemptions of Shares
in Creation Unit aggregations (and that Shares are not individually
redeemable); (2) NYSE Arca Equities Rule 9.2(a), which imposes a duty
of due diligence on its ETP Holders to learn the essential facts
relating to every customer prior to trading the Shares; (3) the risks
involved in trading the Shares during the Opening and Late Trading
Sessions when an updated IOPV will not be calculated or publicly
disseminated; (4) how information regarding the IOPV is disseminated;
(5) the requirement that ETP Holders deliver a prospectus to investors
purchasing newly issued Shares prior to or concurrently with the
confirmation of a transaction; and (6) trading information.
In addition, the Bulletin will reference that the Fund is subject
to various fees and expenses described in the Registration Statement.
The Bulletin will discuss any exemptive, no-action, and interpretive
relief granted by the Commission from any rules under the Act. The
Bulletin will also disclose that the NAV for the Shares will be
calculated after 4:00 p.m. Eastern time each trading day.
2. Statutory Basis
The basis under the Act for this proposed rule change is the
requirement under Section 6(b)(5) \26\ that an exchange have rules that
are designed to prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of trade, to remove
impediments to, and perfect the mechanism of a free and open market
and, in general, to protect investors and the public interest.
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\26\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposed rule change is designed to
prevent fraudulent and manipulative acts and practices in that the
Shares will be listed and traded on the Exchange pursuant to the
initial and continued listing criteria in NYSE Arca Equities Rule
8.600. The Shares will be subject to the existing trading
surveillances, administered by FINRA on behalf of the Exchange, which
are designed to detect violations of Exchange rules and applicable
federal securities laws. The Adviser is not affiliated with any broker-
dealers. In the event (a) the Adviser or any sub-adviser becomes newly
affiliated with a broker-dealer, or (b) any new adviser or sub-adviser
becomes affiliated with a broker-dealer, it will implement a ``fire
wall'' with respect to such broker-dealer regarding access to
information concerning the composition and/or changes to the Fund's
portfolio. FINRA, on behalf of the Exchange, may obtain information via
ISG from other exchanges that are members of ISG or with which the
Exchange has entered into a comprehensive surveillance sharing
agreement. It is expected that not more than 10% of the net assets of
the Fund will be invested in unsponsored ADRs. The Fund will invest
only in GDRs that are traded on an exchange that is a member of the ISG
or with which the Exchange has in place a comprehensive surveillance
sharing agreement. The Fund may invest in U.S. government securities
and foreign government securities rated BBB or higher. The Fund may
invest up to 15% of its net assets in illiquid securities (calculated
at the time of investment), including Rule 144A securities.
The proposed rule change is designed to promote just and equitable
principles of trade and to protect investors and the public interest in
that the Exchange will obtain a representation from the issuer of the
Shares that the NAV per Share will be calculated daily and that the NAV
and the Disclosed Portfolio will be made available to all market
participants at the same time. In addition, a large amount of
information is publicly available regarding the Fund and the Shares,
thereby promoting market transparency. Moreover, the IOPV will be
widely disseminated by one or more major market data vendors at least
every 15 seconds during the Exchange's Core Trading Session. On each
business day, before commencement of trading in Shares in the Core
Trading Session on the Exchange, the Fund will disclose on its Web site
the Disclosed Portfolio that will form the basis for the Fund's
calculation of NAV at the end of the business day. Information
regarding market price and trading volume of the Shares and many
securities held by the Fund will be continually available on a real-
time basis throughout the day on brokers' computer screens and other
electronic services, and quotation and last sale information will be
available via the CTA high-speed line. The Web site for the Fund will
include the prospectus for the Fund and additional data relating to NAV
and other applicable quantitative information. Moreover, prior to the
commencement of trading, the Exchange will inform its ETP Holders in an
Information Bulletin of the special characteristics and risks
associated with trading the Shares. Trading in Shares of the Fund will
be halted if the circuit breaker parameters in NYSE Arca Equities Rule
7.12 have been reached or because of market conditions or for reasons
that, in the view of the Exchange, make trading in the Shares
inadvisable, and trading in the Shares will be subject to NYSE Arca
Equities Rule 8.600(d)(2)(D), which sets forth circumstances under
which Shares of the Fund may be halted. In addition, as noted above,
investors will have ready access to information regarding the Fund's
holdings, the IOPV, the Disclosed Portfolio, and quotation and last
sale information for the Shares.
The proposed rule change is designed to perfect the mechanism of a
free and open market and, in general, to protect investors and the
public interest in that it will facilitate the listing and trading of
an additional type of actively-managed exchange-traded product that
will enhance competition among market participants, to the benefit of
investors and the marketplace. As noted above, the Shares will be
subject to the existing trading surveillances, administered by FINRA on
behalf of the Exchange, which are designed to detect violations of
Exchange rules and applicable federal securities laws and FINRA, on
behalf of the Exchange, may obtain information
[[Page 12116]]
via ISG from other exchanges that are members of ISG or with which the
Exchange has entered into a comprehensive surveillance sharing
agreement. In addition, as noted above, investors will have ready
access to information regarding the Fund's holdings, the IOPV, the
Disclosed Portfolio, and quotation and last sale information for the
Shares. The Fund will not invest in options, futures or swaps. The
Fund's investments will be consistent with its investment objective and
will not be used to enhance leverage.
Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purpose of the Act. The Exchange notes that the
proposed rule change will facilitate the listing and trading of an
additional type of actively-managed exchange-traded product that will
enhance competition among market participants, to the benefit of
investors and the marketplace.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove such proposed rule change, or
(B) Institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File No. SR-NYSEArca-2013-14 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File No. SR-NYSEArca-2013-14. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Web site (https://www.sec.gov/rules/sro.shtml). Copies
of the submission, all subsequent amendments, all written statements
with respect to the proposed rule change that are filed with the
Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for Web site viewing and printing in
the Commission's Public Reference Room, 100 F Street NE., Washington,
DC 20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of such filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change; the Commission does not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File No. SR-NYSEArca-2013-14 and should be
submitted on or before March 14, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\27\
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\27\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-03970 Filed 2-20-13; 8:45 am]
BILLING CODE 8011-01-P
