Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change Proposing To List and Trade Shares of InfraCap Active MLP ETF Under NYSE Arca Equities Rule 8.600, 43801-43808 [2014-17639]
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Federal Register / Vol. 79, No. 144 / Monday, July 28, 2014 / Notices
will continuously redeem at the NAV
Creation Unit size aggregations of the
Shares of the Fund and that a close
alignment between the market price of
Shares and the Fund’s NAV is expected,
the Commission finds that it is
appropriate in the public interest and
consistent with the protection of
investors to grant the Trust an
exemption under paragraph (d) of Rule
101 of Regulation M with respect to the
Fund, thus permitting persons
participating in a distribution of Shares
of the Fund to bid for or purchase such
Shares during their participation in
such distribution.5
Rule 102 of Regulation M
Rule 102 of Regulation M prohibits
issuers, selling security holders, and any
affiliated purchaser of such person from
bidding for, purchasing, or attempting to
induce any person to bid for or purchase
a covered security during the applicable
restricted period in connection with a
distribution of securities effected by or
on behalf of an issuer or selling security
holder.
Based on the representations and facts
presented in the Letter, particularly that
the Trust is a registered open-end
management investment company that
will redeem at the NAV Creation Units
of Shares of the Fund and that a close
alignment between the market price of
Shares and the Fund’s NAV is expected,
the Commission finds that it is
appropriate in the public interest and
consistent with the protection of
investors to grant the Trust an
exemption under paragraph (e) of Rule
102 of Regulation M with respect to the
Fund, thus permitting the Fund to
redeem Shares of the Fund during the
continuous offering of such Shares.
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Rule 10b–17
Rule 10b–17, with certain exceptions,
requires an issuer of a class of publicly
traded securities to give notice of certain
specified actions (for example, a
dividend distribution) relating to such
class of securities in accordance with
Rule 10b–17(b). Based on the
representations and facts in the Letter,
and subject to the conditions below, we
find that it is appropriate in the public
interest, and consistent with the
protection of investors to grant the Trust
a conditional exemption from Rule 10b–
17 because market participants will
5 Additionally, we confirm the interpretation that
a redemption of Creation Unit size aggregations of
Shares of the Fund and the receipt of securities in
exchange by a participant in a distribution of Shares
of the Fund would not constitute an ‘‘attempt to
induce any person to bid for or purchase, a covered
security during the applicable restricted period’’
within the meaning of Rule 101 of Regulation M
and therefore would not violate that rule.
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receive timely notification of the
existence and timing of a pending
distribution, and thus the concerns that
the Commission raised in adopting Rule
10b–17 will not be implicated.6
Conclusion
It is hereby ordered, pursuant to Rule
101(d) of Regulation M, that the Trust,
based on the representations and facts
presented in the Letter, is exempt from
the requirements of Rule 101 with
respect to the Fund, thus permitting
persons who may be deemed to be
participating in a distribution of Shares
of the Fund to bid for or purchase such
Shares during their participation in
such distribution.
It is further ordered, pursuant to Rule
102(e) of Regulation M, that the Trust,
based on the representations and the
facts presented in the Letter, is exempt
from the requirements of Rule 102 with
respect to the Fund, thus permitting the
Fund to redeem Shares of the Fund
during the continuous offering of such
Shares.
It is further ordered, pursuant to Rule
10b–17(b)(2), that the Trust, based on
the representations and the facts
presented in the Letter and subject to
the conditions below, is exempt from
the requirements of Rule 10b–17 with
respect to transactions in the shares of
the Fund.
This exemptive relief is subject to the
following conditions:
• The Trust will comply with Rule
10b–17 except for Rule 10b–
17(b)(1)(v)(a) and (b); and
• The Trust will provide the
information required by Rule 10b–
17(b)(1)(v)(a) and (b) to the Exchange as
soon as practicable before trading begins
on the ex-dividend date, but in no event
later than the time when the Exchange
last accepts information relating to
distributions on the day before the exdividend date.
This exemptive relief is subject to
modification or revocation at any time
the Commission determines that such
action is necessary or appropriate in
furtherance of the purposes of the
Exchange Act. Persons relying upon this
exemption shall discontinue
transactions involving the Shares of the
Fund under the circumstances
described above and in the Letter,
pending presentation of the facts for the
Commission’s consideration, in the
event that any material change occurs
with respect to any of the facts or
6 We also note that timely compliance with Rule
10b–17(b)(1)(v)(a) and (b) would be impractical in
light of the nature of the Fund. This is because it
is not possible for the Fund to accurately project ten
days in advance what dividend, if any, would be
paid on a particular record date.
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43801
representations made by the Requestors.
In addition, persons relying on this
exemption are directed to the anti-fraud
and anti-manipulation provisions of the
Exchange Act, particularly Sections 9(a),
10(b), and Rule 10b–5 thereunder.
Responsibility for compliance with
these and any other applicable
provisions of the federal securities laws
must rest with the persons relying on
this exemption. This order should not
be considered a view with respect to
any other question that the proposed
transactions may raise, including, but
not limited to the adequacy of the
disclosure concerning, and the
applicability of other federal or state
laws to, the proposed transactions.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.7
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–17641 Filed 7–25–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–72651; File No. SR–
NYSEArca–2014–79]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of Proposed
Rule Change Proposing To List and
Trade Shares of InfraCap Active MLP
ETF Under NYSE Arca Equities Rule
8.600
July 22, 2014.
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 July 9,
2014, 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. 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 the Substance
of the Proposed Rule Change
The Exchange proposes to list and
trade shares of the following under
NYSE Arca Equities Rule 8.600
(‘‘Managed Fund Shares’’): InfraCap
Active MLP ETF. The text of the
proposed rule change is available on the
7 17
CFR 200.30–3(a)(6) and (9).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 79, No. 144 / Monday, July 28, 2014 / Notices
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
Statutory Basis for, the Proposed Rule
Change
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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 4 on the
Exchange: InfraCap Active MLP ETF
(the ‘‘Fund’’).5 The Shares of the Fund
will be offered by ETFis Series Trust I
(the ‘‘Trust’’). The Trust will be
registered with the Securities and
Exchange Commission (‘‘Commission’’)
as an open-end management investment
company.6 Etfis Capital LLC will serve
4 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.
5 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).
6 The Trust is registered under the 1940 Act. On
February 26, 2014, the Trust filed a post-effective
amendment to its registration statement on Form
N–1A under the Securities Act of 1933 (the ‘‘1933
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as the investment adviser to the Fund
(the ‘‘Adviser’’). ETF Distributors LLC
(the ‘‘Distributor’’) will be the principal
distributor of the Fund’s Shares.
Infrastructure Capital Advisors, LLC
(the ‘‘Sub-Adviser’’) will serve as subadviser for the Fund. The Bank of New
York Mellon will serve as the
administrator, accountant, custodian
and transfer agent for the Fund
(‘‘Administrator,’’ ‘‘Accountant,’’
‘‘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.7 Commentary
.06 to Rule 8.600 is similar to
Act’’) (15 U.S.C. 77a), and under the 1940 Act
relating to the Fund (File Nos. 333–187668 and
811–22819) (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. 812–14080), dated June 19, 2013
(‘‘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. 30607 (July 23, 2013)
(‘‘Exemptive Order’’).
7 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 Sub-Adviser and their
related personnel are subject to the provisions of
Rule 204A–1 under the Advisers Act relating to
codes of ethics. This Rule requires investment
advisers to adopt a code of ethics that reflects the
fiduciary nature of the relationship to clients as
well as compliance with other applicable securities
laws. Accordingly, procedures designed to prevent
the communication and misuse of non-public
information by an investment adviser must be
consistent with Rule 204A–1 under the Advisers
Act. In addition, Rule 206(4)–7 under the Advisers
Act makes it unlawful for an investment adviser to
provide investment advice to clients unless such
investment adviser has (i) adopted and
implemented written policies and procedures
reasonably designed to prevent violation, by the
investment adviser and its supervised persons, of
the Advisers Act and the Commission rules adopted
thereunder; (ii) implemented, at a minimum, an
annual review regarding the adequacy of the
policies and procedures established pursuant to
subparagraph (i) above and the effectiveness of their
implementation; and (iii) designated an individual
(who is a supervised person) responsible for
administering the policies and procedures adopted
under subparagraph (i) above.
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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 and
Sub-Adviser are not registered as a
broker-dealer; however the Adviser (but
not the Sub-Adviser) is affiliated with a
broker-dealer and has implemented a
fire wall with respect to such brokerdealer regarding access to information
concerning the composition 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. In the event (a)
the Adviser or any sub-adviser registers
as a broker-dealer or becomes newly
affiliated with a broker-dealer, or (b) any
new adviser or sub-adviser is a
registered broker-dealer or becomes
affiliated with a broker-dealer, they will
implement a fire wall with respect to
their relevant personnel or broker-dealer
affiliate regarding access to information
concerning the composition 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 such portfolio.
Principal Fund Investments
According to the Registration
Statement, the Fund seeks total return
primarily through investments in equity
securities of publicly-traded master
limited partnerships and limited
liability companies taxed as
partnerships (‘‘MLPs’’).8 The Fund will
seek to achieve its investment objective
by normally 9 investing up to 100% (but
8 According to the Registration Statement, the
Fund may invest in MLP units, securities of
companies holding primarily general partner or
managing member interests in MLPs, securities that
themselves own interests in MLPs (e.g., exchangetraded funds (‘‘ETFs’’), exchange-traded notes
(‘‘ETNs’’) and open-end and closed-end other
investment companies that invest in MLPs).
9 The term ‘‘normally’’ includes, but is not
limited to, the absence of extreme volatility or
trading halts in the equity markets or the financial
markets generally; operational issues causing
dissemination of inaccurate market information; or
force majeure type events such as systems failure,
natural or man-made disaster, act of God, armed
conflict, act of terrorism, riot or labor disruption or
any similar intervening circumstance. According to
the Registration Statement, the Fund may, from
time to time, take temporary defensive positions
that are inconsistent with its principal investment
strategies in an attempt to respond to adverse
market, economic, political or other conditions. In
such circumstances, the Fund may also hold up to
100% of its portfolio in cash and cash equivalent
positions. According to the Registration Statement,
when the Fund takes a temporary defensive
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not less than 80%) of its total assets in
exchange-traded securities of MLPs in
the energy infrastructure sector. The
Fund will focus on investing in MLPs
selected by the Sub-Adviser that trade
on the New York Stock Exchange
(‘‘NYSE’’) or the NASDAQ Stock Market
(‘‘Nasdaq’’) and that, as their principal
business, operate assets used in the
gathering, transporting, processing,
storing, refining, distributing, mining or
marketing of natural gas, natural gas
liquids, crude oil, refined petroleum
products or coal (collectively, ‘‘Energy
Products’’).
According to the Registration
Statement, the Fund will typically focus
on ‘‘midstream’’ MLPs which are MLPs
that collect, gather, process, transport
and store natural resources and their
byproducts (primarily crude oil, natural
gas and refined petroleum products),
generally without taking ownership of
the energy products.10
The Fund expects to typically invest
in a portfolio of between 25 to 50 MLPs,
however there is no limit on the number
of MLPs in which the Fund will
invest.11 The Sub-Adviser’s investment
decisions will be based on a variety of
quantitative, qualitative and relative
valuation factors. The Sub-Adviser will
typically evaluate potential investments
with respect to certain key variables that
the Sub-Adviser believes make a
business successful over time,
including, without limitation, a
company’s competitive position, its
perceived ability to earn a high return
on capital, the historical and projected
stability and reliability of its earnings
and cash flow, its anticipated ability to
generate cash in excess of its growth
needs and its access to additional
capital. The Sub-Adviser also expects to
utilize its personnel’s experience in
evaluating energy infrastructure
investments and long-term relationships
with energy industry participants to
help identify investment opportunities.
mstockstill on DSK4VPTVN1PROD with NOTICES
Other Fund Investments
According to the Registration
Statement, although the Fund will
normally invest not less than 80% of its
total assets as described above, the Fund
has flexibility to invest the remaining
20% of its assets in other types of
securities, including exchange-traded
position, it may not be able to achieve its
investment objective.
10 According to the Registration Statement,
Midstream MLPs may also operate ancillary
businesses, including the marketing of energy
products and logistical services related thereto, but
are typically not engaged in the mining, production
or distribution of energy products.
11 According to the Registration Statement, under
normal circumstances, the Fund will not invest
more than 15% of its total assets in any one issuer.
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Jkt 232001
equity securities of large, medium and
small capitalization companies, money
market mutual funds, ETFs and other
open-end and closed-end investment
companies unrelated to the energy
infrastructure sector, when the SubAdviser believes they offer more
attractive opportunities or to meet
liquidity, redemption or short-term
investing needs.
According to the Registration
Statement, the Fund may invest up to
20% of its total assets in securities
convertible into common stock.
Convertible securities eligible for
purchase by the Fund will be exchangetraded and include convertible bonds,
convertible preferred stocks, and
warrants. The Fund will not invest
directly in real estate, but may invest in
exchange-traded readily marketable
securities issued by companies that
invest in real estate or interests therein.
The Fund may also invest in readily
marketable interests in real estate
investment trusts.
According to the Registration
Statement, the Fund may invest in
money market instruments, foreign debt
or equity securities traded on U.S.
exchanges, in over-the-counter markets
or in the form of American Depositary
Receipts.
According to the Registration
Statement, the Fund may also use
leverage (including margin borrowing)
to the extent permitted by the 1940 Act.
However, the Fund’s investments will
not be used to seek performance that is
the multiple or inverse multiple (i.e.,
2Xs and 3Xs) of an index. The Fund
may also invest, or establish short
positions, in ETFs, exchange-traded
options or futures contracts in an effort
to hedge against market, interest rate or
commodity risks in the Fund’s portfolio.
General Limitations
The Fund may hold up to an aggregate
amount of 15% of its net assets in
illiquid assets (calculated at the time of
investment), including Rule 144A
securities deemed to be illiquid by the
Sub-Adviser.12 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,
12 According to the Registration Statement, in
determining the liquidity of the Fund’s
investments, the Sub-Adviser may consider various
factors including: (i) The frequency of trades and
quotations; (ii) the number of dealers and
prospective purchasers in the marketplace; (iii)
dealer undertakings to make a market; (iv) the
nature of the security (including any demand or
tender features); and (v) the nature of the
marketplace for trades (including the ability to
assign or offset the Fund’s rights and obligations
relating to the investment).
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43803
and will consider taking appropriate
steps in order to maintain adequate
liquidity if, through a change in values,
net assets, or other circumstances, more
than 15% of the Fund’s net assets are
held in illiquid assets. Illiquid assets
include assets subject to contractual or
other restrictions on resale and other
instruments that lack readily available
markets as determined in accordance
with Commission staff guidance.13
The Fund may lend portfolio
securities in an amount equal to up to
33% of its total assets to broker-dealers,
major banks, or other recognized
domestic institutional borrowers of
securities which the Sub-Adviser has
determined are creditworthy under
guidelines established by the Board of
Trustees. The Fund may not lend
securities to any company affiliated
with the Sub-Adviser. Each loan of
securities will be collateralized by cash,
securities, or letters of credit. The Fund
might experience a loss if the borrower
defaults on the loan.
The Fund will not invest in swaps.
The Fund’s investments will be
consistent with its investment objective.
The Fund will not invest in
unsponsored ADRs. The Fund will
invest only in ADRs, futures and
options that are traded on an exchange
that is a member of the Intermarket
Surveillance Group (‘‘ISG’’) or with
which the Exchange has in place a
comprehensive surveillance sharing
agreement.
Creation and Redemption of Shares
According to the Registration
Statement, the Fund will issue and
redeem Shares on a continuous basis at
net asset value (‘‘NAV’’) in aggregations
of 50,000 Shares (‘‘Creation Units’’).
The consideration for purchase of a
Creation Unit of the Fund generally
consists of an in-kind deposit of a
designated portfolio of securities (the
‘‘Deposit Securities’’) per each Creation
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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Unit constituting a substantial
replication, or a representation, of the
securities included in the Fund’s
portfolio and an amount of cash (the
‘‘Cash Component’’). Together, the
Deposit Securities and the Cash
Component constitute the ‘‘Fund
Deposit,’’ which represents the
minimum initial and subsequent
investment amount for a Creation Unit
of the Fund.
The Cash Component is an amount
equal to the difference between the NAV
of the Shares (per Creation Unit) and the
market value of the Deposit Securities.
If the Cash Component is a positive
number (i.e., the NAV per Creation Unit
exceeds the market value of the Deposit
Securities), the Cash Component shall
be such positive amount. If the Cash
Component is a negative number (i.e.,
the NAV per Creation Unit is less than
the market value of the Deposit
Securities), the Cash Component shall
be such negative amount and the creator
will be entitled to receive cash from the
Fund in an amount equal to the Cash
Component. The Cash Component
serves the function of compensating for
any differences between the NAV per
Creation Unit and the market value of
the Deposit Securities.
The Administrator, through the
National Securities Clearing Corporation
(‘‘NSCC’’), makes available on each
business day, immediately prior to the
opening of business on the Exchange
(currently 9:30 a.m., Eastern Time), the
list of the names and the required
number of shares of each Deposit
Security to be included in the current
Fund Deposit (based on information at
the end of the previous business day) for
the Fund. Such Fund Deposit is
applicable in order to effect creations of
Creation Units of the Fund until such
time as the next-announced
composition of the Deposit Securities is
made available.
The identity and number of shares of
the Deposit Securities required for the
Fund Deposit for the Fund changes as
rebalancing adjustments and corporate
action events are reflected from time to
time by the portfolio managers with a
view to the investment objective of the
Fund. In addition, the Trust reserves the
right to permit or require the
substitution of an amount of cash to be
added to the Cash Component to replace
any Deposit Security which may not be
available. The Adviser represents that,
to the extent that cash is substituted to
replace any Deposit Security, such
transactions will be effected in the same
manner for all Authorized Participants.
In addition to the list of names and
numbers of securities constituting the
current Deposit Securities of the Fund
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Deposit, the Administrator, through the
NSCC, also makes available on each
business day, the estimated Cash
Component, effective through and
including the previous business day, per
outstanding Creation Unit of the Fund.
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
Trust, the Distributor and the
Administrator that governs transactions
in the Fund’s Creation Units. All orders
to create Creation Units must be
received by the Distributor no later than
the close of the regular trading session
on the Exchange (ordinarily 4:00 p.m.
Eastern Time) on the date such order is
placed in order for the creation of
Creation Units to be effected based on
the NAV of Shares of the Fund as next
determined on such date after receipt of
the order in proper form.
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
Distributor and the Fund through the
Administrator and only on a business
day. The Trust will not redeem Shares
in amounts less than Creation Units.
The redemption proceeds for a
Creation Unit generally will consist of
securities held by the Fund (the ‘‘Fund
Securities’’) (as announced on the
Fund’s Web site prior to the
commencement of trading on the
business day of the request for
redemption received in proper form)
plus cash in an amount equal to the
difference between the NAV of the
Shares being redeemed, as next
determined after a receipt of a request
in proper form, and the value of the
Fund Securities (the ‘‘Cash Redemption
Amount’’), less a redemption
transaction fee. In the event that the
Fund Securities have a value greater
than the NAV of the Shares, a
compensating cash payment equal to the
differential will be required to be made
by or through an Authorized Participant
by the redeeming shareholder.
The right of redemption may be
suspended or the date of payment
postponed with respect to the Fund
(1) for any period during which the
Exchange is closed (other than
customary weekend and holiday
closings); (2) for any period during
which trading on the Exchange is
suspended or restricted; (3) for any
period during which an emergency
PO 00000
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Fmt 4703
Sfmt 4703
exists as a result of which disposal of
the Shares of the Fund or determination
of the Shares’ NAV is not reasonably
practicable 14; or (4) in such other
circumstance as is permitted by the
Commission.
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.infracapmlp.com), as applicable.
Determination of Net Asset Value
According to the Registration
Statement, the NAV per Share for the
Fund will be computed by dividing the
value of the net assets of the Fund (i.e.,
the value of its total assets less total
liabilities) by the total number of Shares
outstanding, rounded to the nearest
cent. Expenses and fees, including the
management fee, will be accrued daily
and taken into account for purposes of
determining NAV. The NAV of the Fund
will be determined as of the close of the
regular trading session on the Exchange
(ordinarily 4:00 p.m., Eastern time) on
each day that the Exchange is open.
Exchange-traded securities will be
valued at market closing price or, if no
sale has occurred, at the last quoted bid
price on the primary exchange on which
they are traded. Price information for
exchange-traded securities, including
equity securities of MLPs and large,
medium and small capitalization
companies, ETFs, ETNs, ADRs,
convertible securities and options will
be taken from the exchange where the
security is primarily traded.
Futures will be valued at the
settlement price determined by the
applicable exchange.
Investment company securities,
including money market mutual funds
and open-end and closed-end
investment companies, will be valued at
NAV, utilizing pricing services.
In computing the Fund’s NAV, the
value of the Fund’s portfolio holdings is
based on such holdings’ closing price on
local markets when available. When a
portfolio holding’s market price is not
readily available or does not otherwise
accurately reflect the fair value of such
security, the Fund will use such
holding’s fair value as determined in
good faith in accordance with the
Fund’s fair value pricing procedures,
which will be approved by the Board of
14 Pursuant to NYSE Arca Equities Rule 7.34(a)(5),
trading in the Shares will be halted if the Fund’s
NAV is not disseminated to all market participants
at the same time.
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Federal Register / Vol. 79, No. 144 / Monday, July 28, 2014 / Notices
mstockstill on DSK4VPTVN1PROD with NOTICES
Trustees. Fair value pricing may be
used, for example, in situations where
(i) portfolio holdings, such as holdings
with small capitalizations, are so thinly
traded that there have been no
transactions for that portfolio holding
over an extended period of time; (ii) an
event occurs after the close of the
exchange on which a portfolio holding
is principally traded that is likely to
change the value of the portfolio
holding prior to the Fund’s NAV
calculation; (iii) the exchange on which
the portfolio holding is principally
traded closes early; or (iv) trading of the
particular portfolio holding is halted
during the day and does not resume
prior to the Fund’s NAV calculation. In
addition, the Fund may fair value
foreign equity portfolio holdings each
day the Fund calculates its NAV.
Accordingly, the Fund’s NAV may
reflect certain portfolio holdings’ fair
values rather than their market prices.
In valuing non-exchange traded
securities, the Fund will first use
publicly-available pricing sources,
including Bloomberg, IDC, and Reuters.
Non-exchange traded securities will
only be fair valued if their market prices
are not readily available.
To the extent the assets of the Fund
are invested in the other open-end
investment companies that are
registered under the 1940 Act, the
Fund’s NAV is calculated based upon
the NAVs reported by such registered
open-end investment companies, and
the prospectuses for these companies
explain the circumstances under which
they will use fair value pricing and the
effects of using fair value pricing.
Availability of Information
The Fund’s Web site
(www.infracapmlp.com), which will be
publicly available prior to the public
offering of Shares, will include a form
of the prospectus for the Fund 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’’),15 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
15 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.
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17:53 Jul 25, 2014
Jkt 232001
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.16
On a daily basis, the Adviser will
disclose for each portfolio security or
other financial instrument of the Fund
the following information on the Fund’s
Web site: ticker symbol, CUSIP number
or other identifier, if any; a description
of the holding (including the type of
holding); the identity of the security,
commodity, index or other asset or
instrument underlying the holding, if
any; for options, the option strike price;
quantity held (as measured by, for
example, par value, notional value or
number of shares, contracts or units);
maturity date, if any; coupon rate, if
any; effective date, if any; market value
of the holding; and the percentage
weighting of the holding in the Fund’s
portfolio. The Web site information will
be publicly available at no charge.
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 will be published daily in
the financial section of newspapers.
16 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.
PO 00000
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43805
Quotation and last sale information
for the Shares and any underlying
securities that are exchange-listed,
including equity securities of MLPs and
large, medium and small capitalization
companies, ETFs, ETNs, ADRs and
convertible securities will be available
via the Consolidated Tape Association
(‘‘CTA’’) high-speed line. Information
relating to futures will be available from
the exchange on which such futures are
traded. Information relating to
exchange-traded options will be
available via the Options Price
Reporting Authority. Information for
investment companies, including
money market mutual funds and openend and closed-end investment
companies, will be available from
publicly-available pricing souces [sic],
including Bloomberg, IDC and Reuters.
In addition, the Indicative Optimized
Portfolio Value (‘‘IOPV’’),17 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.18
The IOPV will be calculated by an
independent third party calculator and
will be calculated based on the same
portfolio holdings disclosed on the
Fund’s Web site.
The 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
17 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.
18 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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Federal Register / Vol. 79, No. 144 / Monday, July 28, 2014 / Notices
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.
mstockstill on DSK4VPTVN1PROD with NOTICES
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.19 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
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.
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 20
under the Act, as provided by NYSE
Arca Equities Rule 5.3. A minimum of
100,000 Shares for the Fund will be
19 See NYSE Arca Equities Rule 7.12,
Commentary .04.
20 17 CFR 240.10A–3.
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17:53 Jul 25, 2014
Jkt 232001
outstanding at the commencement of
trading on the Exchange. 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 as
defined in NYSE Arca Equities Rule
8.600(c)(2) will be made available to all
market participants at the same time.
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.21 The Exchange
represents that these procedures are
adequate to properly monitor Exchange
trading of the Shares in all trading
sessions and to deter and detect
violations of Exchange rules and
applicable federal securities laws.
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 and exchangetraded securities held by the Fund with
other markets that are members of the
ISG and FINRA, on behalf of the
Exchange, may obtain trading
information regarding trading in the
Shares and exchange-traded securities
held by the Fund from such markets or
other entities. In addition, the Exchange
may obtain information regarding
trading in the Shares and exchangetraded securities held by the Fund from
markets and other entities that are
members of ISG or with which the
Exchange has in place a comprehensive
surveillance sharing agreement.22
In addition, the Exchange also has a
general policy prohibiting the
distribution of material, non-public
information by its employees.
21 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.
22 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.
PO 00000
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Fmt 4703
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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)23 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 affiliated with a broker-dealer
23 15
E:\FR\FM\28JYN1.SGM
U.S.C. 78f(b)(5).
28JYN1
mstockstill on DSK4VPTVN1PROD with NOTICES
Federal Register / Vol. 79, No. 144 / Monday, July 28, 2014 / Notices
and has implemented a fire wall with
respect to such broker-dealer regarding
access to information concerning the
composition and/or changes to the
portfolio, and will be subject to
procedures designed to prevent the use
and dissemination of material nonpublic information regarding the
portfolio. In the event (a) the Adviser or
the Sub-Adviser becomes newly
affiliated with a broker-dealer, or (b) any
new adviser or sub-adviser is a
registered broker-dealer or becomes
affiliated with a broker-dealer, they will
implement a ‘‘fire wall’’ with respect to
their relevant personnel or broker-dealer
affiliate 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. The Fund will invest
only in ADRs, futures and options that
are traded on an exchange that is a
member of the ISG or with which the
Exchange has in place a comprehensive
surveillance sharing agreement. The
Fund may invest up to 15% of its net
assets in illiquid assets (calculated at
the time of investment), including Rule
144A securities deemed illiquid by the
Sub-Adviser.
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 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
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17:53 Jul 25, 2014
Jkt 232001
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
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’s
investments will be consistent with its
investment objective.
B. 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.
PO 00000
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43807
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
the 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 Number SR–
NYSEArca–2014–79 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSEArca–2014–79. 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
Internet 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
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Federal Register / Vol. 79, No. 144 / Monday, July 28, 2014 / Notices
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 Number SR–
NYSEArca–2014–79, and should be
submitted on or before August 18, 2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–17639 Filed 7–25–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–72654; File No. SR–
NASDAQ–2014–034]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Order
Instituting Proceedings To Determine
Whether To Disapprove a Proposed
Rule Change Relating to Proposed
Changes To Remove From the
Exchange Rules Fee Provisions
Regarding Re-Transmission of ‘‘ThirdParty Data’’
July 22, 2014.
mstockstill on DSK4VPTVN1PROD with NOTICES
I. Introduction
On April 7, 2014, The NASDAQ Stock
Market LLC (‘‘NASDAQ’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
remove from its rules all provisions
relating to the market data feeds that
NASDAQ receives from other registered
exchanges and other non-NASDAQ
sources and then re-transmits to its colocated firms, including the provisions
setting fees for providing this market
data to its co-located firms. The
proposed rule change was published for
comment in the Federal Register on
24 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
VerDate Mar<15>2010
17:53 Jul 25, 2014
Jkt 232001
April 28, 2014.3 The Commission
received no comments on the proposal.
On June 5, 2014, the Commission
extended the time to act on the proposal
until July 25, 2014. This order institutes
proceedings under Section 19(b)(2)(B) of
the Act 4 to determine whether to
disapprove the proposed rule change.
II. Description of the Proposal
NASDAQ offers co-location services
for clients at its co-location facility.
NASDAQ Rule 7034 lists the services
and the fees provided under its colocation program, which include cabinet
space, electric power, installation and
use of cables, and connectivity to
various affiliated market centers.
NASDAQ Rule 7034 also offers colocated clients connectivity to market
data feeds from a variety of sources and
lists the fees for these market data feeds.
The current proposal would remove
from NASDAQ’s rules the provisions
relating to all third-party market data
feeds (i.e., all market data feeds other
than NASDAQ’s own market data feeds)
that NASDAQ makes available to colocated member firms. NASDAQ does
not propose to cease offering third-party
data feeds to its co-located clients or to
cease assessing the associated fees; it
simply proposes to eliminate these
offerings and fees from the NASDAQ
rulebook.
NASDAQ argues that this proposed
change is consistent with the Act
because third-party data feeds are not a
‘‘facility’’ of the Exchange.5 As
described in the Notice,6 NASDAQ
argues that the third-party data it
provides to its co-located member firms
are facilities of the exchanges that
originally produce the data, not a
facility of an exchange that receives and
distributes the data as a voluntary
service to its member firms.
III. Proceedings To Determine Whether
To Disapprove SR–NASDAQ–2014–034
and Grounds for Disapproval Under
Consideration
The Commission is instituting
proceedings pursuant to Section
19(b)(2)(B) of the Act 7 to determine
whether the proposal should be
disapproved. Institution of such
proceedings is appropriate at this time
in view of the legal and policy issues
raised by the proposals. Institution of
disapproval proceedings does not
3 See Securities Exchange Act Release No. 71990
(Apr. 22, 2014), 79 FR 23389 (‘‘Notice’’).
4 15 U.S.C. 78s(b)(2)(B).
5 See Section 3(a)(2) of the Act, 15 U.S.C.
78c(a)(2) (defining the term ‘‘facility’’ as applied to
an exchange).
6 See, supra, n.3.
7 15 U.S.C. 78s(b)(2)(B).
PO 00000
Frm 00103
Fmt 4703
Sfmt 4703
indicate that the Commission has
reached any conclusions with respect to
any of the issues involved. Rather, as
described in greater detail below, the
Commission seeks and encourages
interested persons to provide additional
comment on the proposal.
Pursuant to Section 19(b)(2)(B),8 the
Commission is providing notice of the
grounds for disapproval under
consideration. NASDAQ’s proposal, if
approved, would allow a national
securities exchange to offer third-party
market data (e.g., the proprietary data
feeds of other exchanges in the National
Market System) to member firms that
are co-located on the exchange’s
premises at its trading facilities, and to
charge fees for that market data, without
Commission oversight through the
proposed rule change process. An
exchange’s provision of third-party
market data feeds to co-located clients
appears to be an integral feature of its
co-location program, and co-location
programs are subject to the rule filing
process. The Commission believes that
permitting exchanges to provide thirdparty data feeds to co-located clients
without subjecting the offerings and
associated fees to review through the
Rule 19b–4 process presents a novel
issue that warrants further
consideration.
Accordingly, the Commission is
instituting proceedings to allow for
additional analysis of, and input from
commenters with respect to, the
proposed rule change’s consistency with
Section 3(a)(2) of the Act, which defines
the term ‘‘facility’’ when used with
respect to an exchange to include its
premises, tangible or intangible property
whether on the premises or not, any
right to the use of such premises or
property or any service thereof for the
purpose of effecting or reporting a
transaction on an exchange (including,
among other things, any system of
communication to or from the exchange,
by ticker or otherwise, maintained by or
with the consent of the exchange), and
any right of the exchange to the use of
any property or service; Section 6(b)(1)
of the Act, which requires that a
national securities exchange be so
organized and have the capacity to be
able to carry out the purposes of the Act;
Section 6(b)(4) of the Act, which
requires that the rules of an exchange
provide for the equitable allocation of
reasonable dues, fees, and other charges
among its members and issuers and
other persons using its facilities; Section
6(b)(5) of the Act, which requires that
the rules of an exchange be designed to
prevent fraudulent and manipulative
8 See
E:\FR\FM\28JYN1.SGM
id.
28JYN1
]]>Agencies
[Federal Register Volume 79, Number 144 (Monday, July 28, 2014)]
[Notices]
[Pages 43801-43808]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-17639]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72651; File No. SR-NYSEArca-2014-79]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change Proposing To List and Trade Shares of InfraCap
Active MLP ETF Under NYSE Arca Equities Rule 8.600
July 22, 2014.
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 July 9, 2014, 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. 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.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The Exchange proposes to list and trade shares of the following
under NYSE Arca Equities Rule 8.600 (``Managed Fund Shares''): InfraCap
Active MLP ETF. The text of the proposed rule change is available on
the
[[Page 43802]]
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
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 \4\ on the Exchange:
InfraCap Active MLP ETF (the ``Fund'').\5\ The Shares of the Fund will
be offered by ETFis Series Trust I (the ``Trust''). The Trust will be
registered with the Securities and Exchange Commission (``Commission'')
as an open-end management investment company.\6\ Etfis Capital LLC will
serve as the investment adviser to the Fund (the ``Adviser''). ETF
Distributors LLC (the ``Distributor'') will be the principal
distributor of the Fund's Shares. Infrastructure Capital Advisors, LLC
(the ``Sub-Adviser'') will serve as sub-adviser for the Fund. The Bank
of New York Mellon will serve as the administrator, accountant,
custodian and transfer agent for the Fund (``Administrator,''
``Accountant,'' ``Custodian'' and ``Transfer Agent,'' respectively).
---------------------------------------------------------------------------
\4\ 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.
\5\ 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).
\6\ The Trust is registered under the 1940 Act. On February 26,
2014, the Trust filed a post-effective amendment to its 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. 333-187668 and 811-22819) (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. 812-14080), dated
June 19, 2013 (``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. 30607 (July 23,
2013) (``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.\7\ Commentary .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 and
Sub-Adviser are not registered as a broker-dealer; however the Adviser
(but not the Sub-Adviser) is affiliated with a broker-dealer and has
implemented a fire wall with respect to such broker-dealer regarding
access to information concerning the composition 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. In the event (a) the Adviser or any sub-adviser registers as
a broker-dealer or becomes newly affiliated with a broker-dealer, or
(b) any new adviser or sub-adviser is a registered broker-dealer or
becomes affiliated with a broker-dealer, they will implement a fire
wall with respect to their relevant personnel or broker-dealer
affiliate regarding access to information concerning the composition
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 such portfolio.
---------------------------------------------------------------------------
\7\ 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 Sub-Adviser and their related
personnel are subject to the provisions of Rule 204A-1 under the
Advisers Act relating to codes of ethics. This Rule requires
investment advisers to adopt a code of ethics that reflects the
fiduciary nature of the relationship to clients as well as
compliance with other applicable securities laws. Accordingly,
procedures designed to prevent the communication and misuse of non-
public information by an investment adviser must be consistent with
Rule 204A-1 under the Advisers Act. In addition, Rule 206(4)-7 under
the Advisers Act makes it unlawful for an investment adviser to
provide investment advice to clients unless such investment adviser
has (i) adopted and implemented written policies and procedures
reasonably designed to prevent violation, by the investment adviser
and its supervised persons, of the Advisers Act and the Commission
rules adopted thereunder; (ii) implemented, at a minimum, an annual
review regarding the adequacy of the policies and procedures
established pursuant to subparagraph (i) above and the effectiveness
of their implementation; and (iii) designated an individual (who is
a supervised person) responsible for administering the policies and
procedures adopted under subparagraph (i) above.
---------------------------------------------------------------------------
Principal Fund Investments
According to the Registration Statement, the Fund seeks total
return primarily through investments in equity securities of publicly-
traded master limited partnerships and limited liability companies
taxed as partnerships (``MLPs'').\8\ The Fund will seek to achieve its
investment objective by normally \9\ investing up to 100% (but
[[Page 43803]]
not less than 80%) of its total assets in exchange-traded securities of
MLPs in the energy infrastructure sector. The Fund will focus on
investing in MLPs selected by the Sub-Adviser that trade on the New
York Stock Exchange (``NYSE'') or the NASDAQ Stock Market (``Nasdaq'')
and that, as their principal business, operate assets used in the
gathering, transporting, processing, storing, refining, distributing,
mining or marketing of natural gas, natural gas liquids, crude oil,
refined petroleum products or coal (collectively, ``Energy Products'').
---------------------------------------------------------------------------
\8\ According to the Registration Statement, the Fund may invest
in MLP units, securities of companies holding primarily general
partner or managing member interests in MLPs, securities that
themselves own interests in MLPs (e.g., exchange-traded funds
(``ETFs''), exchange-traded notes (``ETNs'') and open-end and
closed-end other investment companies that invest in MLPs).
\9\ The term ``normally'' includes, but is not limited to, the
absence of extreme volatility or trading halts in the equity markets
or the financial markets generally; operational issues causing
dissemination of inaccurate market information; or force majeure
type events such as systems failure, natural or man-made disaster,
act of God, armed conflict, act of terrorism, riot or labor
disruption or any similar intervening circumstance. According to the
Registration Statement, the Fund may, from time to time, take
temporary defensive positions that are inconsistent with its
principal investment strategies in an attempt to respond to adverse
market, economic, political or other conditions. In such
circumstances, the Fund may also hold up to 100% of its portfolio in
cash and cash equivalent positions. According to the Registration
Statement, when the Fund takes a temporary defensive position, it
may not be able to achieve its investment objective.
---------------------------------------------------------------------------
According to the Registration Statement, the Fund will typically
focus on ``midstream'' MLPs which are MLPs that collect, gather,
process, transport and store natural resources and their byproducts
(primarily crude oil, natural gas and refined petroleum products),
generally without taking ownership of the energy products.\10\
---------------------------------------------------------------------------
\10\ According to the Registration Statement, Midstream MLPs may
also operate ancillary businesses, including the marketing of energy
products and logistical services related thereto, but are typically
not engaged in the mining, production or distribution of energy
products.
---------------------------------------------------------------------------
The Fund expects to typically invest in a portfolio of between 25
to 50 MLPs, however there is no limit on the number of MLPs in which
the Fund will invest.\11\ The Sub-Adviser's investment decisions will
be based on a variety of quantitative, qualitative and relative
valuation factors. The Sub-Adviser will typically evaluate potential
investments with respect to certain key variables that the Sub-Adviser
believes make a business successful over time, including, without
limitation, a company's competitive position, its perceived ability to
earn a high return on capital, the historical and projected stability
and reliability of its earnings and cash flow, its anticipated ability
to generate cash in excess of its growth needs and its access to
additional capital. The Sub-Adviser also expects to utilize its
personnel's experience in evaluating energy infrastructure investments
and long-term relationships with energy industry participants to help
identify investment opportunities.
---------------------------------------------------------------------------
\11\ According to the Registration Statement, under normal
circumstances, the Fund will not invest more than 15% of its total
assets in any one issuer.
---------------------------------------------------------------------------
Other Fund Investments
According to the Registration Statement, although the Fund will
normally invest not less than 80% of its total assets as described
above, the Fund has flexibility to invest the remaining 20% of its
assets in other types of securities, including exchange-traded equity
securities of large, medium and small capitalization companies, money
market mutual funds, ETFs and other open-end and closed-end investment
companies unrelated to the energy infrastructure sector, when the Sub-
Adviser believes they offer more attractive opportunities or to meet
liquidity, redemption or short-term investing needs.
According to the Registration Statement, the Fund may invest up to
20% of its total assets in securities convertible into common stock.
Convertible securities eligible for purchase by the Fund will be
exchange-traded and include convertible bonds, convertible preferred
stocks, and warrants. The Fund will not invest directly in real estate,
but may invest in exchange-traded readily marketable securities issued
by companies that invest in real estate or interests therein. The Fund
may also invest in readily marketable interests in real estate
investment trusts.
According to the Registration Statement, the Fund may invest in
money market instruments, foreign debt or equity securities traded on
U.S. exchanges, in over-the-counter markets or in the form of American
Depositary Receipts.
According to the Registration Statement, the Fund may also use
leverage (including margin borrowing) to the extent permitted by the
1940 Act. However, the Fund's investments will not be used to seek
performance that is the multiple or inverse multiple (i.e., 2Xs and
3Xs) of an index. The Fund may also invest, or establish short
positions, in ETFs, exchange-traded options or futures contracts in an
effort to hedge against market, interest rate or commodity risks in the
Fund's portfolio.
General Limitations
The Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid assets (calculated at the time of investment),
including Rule 144A securities deemed to be illiquid by the Sub-
Adviser.\12\ The Fund will monitor its portfolio liquidity on an
ongoing basis to determine whether, in light of current circumstances,
an adequate level of liquidity is being maintained, and will consider
taking appropriate steps in order to maintain adequate liquidity if,
through a change in values, net assets, or other circumstances, more
than 15% of the Fund's net assets are held in illiquid assets. Illiquid
assets include assets subject to contractual or other restrictions on
resale and other instruments that lack readily available markets as
determined in accordance with Commission staff guidance.\13\
---------------------------------------------------------------------------
\12\ According to the Registration Statement, in determining the
liquidity of the Fund's investments, the Sub-Adviser may consider
various factors including: (i) The frequency of trades and
quotations; (ii) the number of dealers and prospective purchasers in
the marketplace; (iii) dealer undertakings to make a market; (iv)
the nature of the security (including any demand or tender
features); and (v) the nature of the marketplace for trades
(including the ability to assign or offset the Fund's rights and
obligations relating to the investment).
\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).
---------------------------------------------------------------------------
The Fund may lend portfolio securities in an amount equal to up to
33% of its total assets to broker-dealers, major banks, or other
recognized domestic institutional borrowers of securities which the
Sub-Adviser has determined are creditworthy under guidelines
established by the Board of Trustees. The Fund may not lend securities
to any company affiliated with the Sub-Adviser. Each loan of securities
will be collateralized by cash, securities, or letters of credit. The
Fund might experience a loss if the borrower defaults on the loan.
The Fund will not invest in swaps. The Fund's investments will be
consistent with its investment objective.
The Fund will not invest in unsponsored ADRs. The Fund will invest
only in ADRs, futures and options that are traded on an exchange that
is a member of the Intermarket Surveillance Group (``ISG'') or with
which the Exchange has in place a comprehensive surveillance sharing
agreement.
Creation and Redemption of Shares
According to the Registration Statement, the Fund will issue and
redeem Shares on a continuous basis at net asset value (``NAV'') in
aggregations of 50,000 Shares (``Creation Units'').
The consideration for purchase of a Creation Unit of the Fund
generally consists of an in-kind deposit of a designated portfolio of
securities (the ``Deposit Securities'') per each Creation
[[Page 43804]]
Unit constituting a substantial replication, or a representation, of
the securities included in the Fund's portfolio and an amount of cash
(the ``Cash Component''). Together, the Deposit Securities and the Cash
Component constitute the ``Fund Deposit,'' which represents the minimum
initial and subsequent investment amount for a Creation Unit of the
Fund.
The Cash Component is an amount equal to the difference between the
NAV of the Shares (per Creation Unit) and the market value of the
Deposit Securities. If the Cash Component is a positive number (i.e.,
the NAV per Creation Unit exceeds the market value of the Deposit
Securities), the Cash Component shall be such positive amount. If the
Cash Component is a negative number (i.e., the NAV per Creation Unit is
less than the market value of the Deposit Securities), the Cash
Component shall be such negative amount and the creator will be
entitled to receive cash from the Fund in an amount equal to the Cash
Component. The Cash Component serves the function of compensating for
any differences between the NAV per Creation Unit and the market value
of the Deposit Securities.
The Administrator, through the National Securities Clearing
Corporation (``NSCC''), makes available on each business day,
immediately prior to the opening of business on the Exchange (currently
9:30 a.m., Eastern Time), the list of the names and the required number
of shares of each Deposit Security to be included in the current Fund
Deposit (based on information at the end of the previous business day)
for the Fund. Such Fund Deposit is applicable in order to effect
creations of Creation Units of the Fund until such time as the next-
announced composition of the Deposit Securities is made available.
The identity and number of shares of the Deposit Securities
required for the Fund Deposit for the Fund changes as rebalancing
adjustments and corporate action events are reflected from time to time
by the portfolio managers with a view to the investment objective of
the Fund. In addition, the Trust reserves the right to permit or
require the substitution of an amount of cash to be added to the Cash
Component to replace any Deposit Security which may not be available.
The Adviser represents that, to the extent that cash is substituted to
replace any Deposit Security, such transactions will be effected in the
same manner for all Authorized Participants. In addition to the list of
names and numbers of securities constituting the current Deposit
Securities of the Fund Deposit, the Administrator, through the NSCC,
also makes available on each business day, the estimated Cash
Component, effective through and including the previous business day,
per outstanding Creation Unit of the Fund.
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 Trust, the Distributor and the Administrator that
governs transactions in the Fund's Creation Units. All orders to create
Creation Units must be received by the Distributor no later than the
close of the regular trading session on the Exchange (ordinarily 4:00
p.m. Eastern Time) on the date such order is placed in order for the
creation of Creation Units to be effected based on the NAV of Shares of
the Fund as next determined on such date after receipt of the order in
proper form.
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 Distributor and the Fund through the Administrator and only on a
business day. The Trust will not redeem Shares in amounts less than
Creation Units.
The redemption proceeds for a Creation Unit generally will consist
of securities held by the Fund (the ``Fund Securities'') (as announced
on the Fund's Web site prior to the commencement of trading on the
business day of the request for redemption received in proper form)
plus cash in an amount equal to the difference between the NAV of the
Shares being redeemed, as next determined after a receipt of a request
in proper form, and the value of the Fund Securities (the ``Cash
Redemption Amount''), less a redemption transaction fee. In the event
that the Fund Securities have a value greater than the NAV of the
Shares, a compensating cash payment equal to the differential will be
required to be made by or through an Authorized Participant by the
redeeming shareholder.
The right of redemption may be suspended or the date of payment
postponed with respect to the Fund (1) for any period during which the
Exchange is closed (other than customary weekend and holiday closings);
(2) for any period during which trading on the Exchange is suspended or
restricted; (3) for any period during which an emergency exists as a
result of which disposal of the Shares of the Fund or determination of
the Shares' NAV is not reasonably practicable \14\; or (4) in such
other circumstance as is permitted by the Commission.
---------------------------------------------------------------------------
\14\ Pursuant to NYSE Arca Equities Rule 7.34(a)(5), trading in
the Shares will be halted if the Fund's NAV is not disseminated to
all market participants at the same time.
---------------------------------------------------------------------------
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.infracapmlp.com), as
applicable.
Determination of Net Asset Value
According to the Registration Statement, the NAV per Share for the
Fund will be computed by dividing the value of the net assets of the
Fund (i.e., the value of its total assets less total liabilities) by
the total number of Shares outstanding, rounded to the nearest cent.
Expenses and fees, including the management fee, will be accrued daily
and taken into account for purposes of determining NAV. The NAV of the
Fund will be determined as of the close of the regular trading session
on the Exchange (ordinarily 4:00 p.m., Eastern time) on each day that
the Exchange is open.
Exchange-traded securities will be valued at market closing price
or, if no sale has occurred, at the last quoted bid price on the
primary exchange on which they are traded. Price information for
exchange-traded securities, including equity securities of MLPs and
large, medium and small capitalization companies, ETFs, ETNs, ADRs,
convertible securities and options will be taken from the exchange
where the security is primarily traded.
Futures will be valued at the settlement price determined by the
applicable exchange.
Investment company securities, including money market mutual funds
and open-end and closed-end investment companies, will be valued at
NAV, utilizing pricing services.
In computing the Fund's NAV, the value of the Fund's portfolio
holdings is based on such holdings' closing price on local markets when
available. When a portfolio holding's market price is not readily
available or does not otherwise accurately reflect the fair value of
such security, the Fund will use such holding's fair value as
determined in good faith in accordance with the Fund's fair value
pricing procedures, which will be approved by the Board of
[[Page 43805]]
Trustees. Fair value pricing may be used, for example, in situations
where (i) portfolio holdings, such as holdings with small
capitalizations, are so thinly traded that there have been no
transactions for that portfolio holding over an extended period of
time; (ii) an event occurs after the close of the exchange on which a
portfolio holding is principally traded that is likely to change the
value of the portfolio holding prior to the Fund's NAV calculation;
(iii) the exchange on which the portfolio holding is principally traded
closes early; or (iv) trading of the particular portfolio holding is
halted during the day and does not resume prior to the Fund's NAV
calculation. In addition, the Fund may fair value foreign equity
portfolio holdings each day the Fund calculates its NAV. Accordingly,
the Fund's NAV may reflect certain portfolio holdings' fair values
rather than their market prices.
In valuing non-exchange traded securities, the Fund will first use
publicly-available pricing sources, including Bloomberg, IDC, and
Reuters. Non-exchange traded securities will only be fair valued if
their market prices are not readily available.
To the extent the assets of the Fund are invested in the other
open-end investment companies that are registered under the 1940 Act,
the Fund's NAV is calculated based upon the NAVs reported by such
registered open-end investment companies, and the prospectuses for
these companies explain the circumstances under which they will use
fair value pricing and the effects of using fair value pricing.
Availability of Information
The Fund's Web site (www.infracapmlp.com), which will be publicly
available prior to the public offering of Shares, will include a form
of the prospectus for the Fund 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''),\15\ 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.\16\
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\15\ 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.
\16\ 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, CUSIP number or
other identifier, if any; a description of the holding (including the
type of holding); the identity of the security, commodity, index or
other asset or instrument underlying the holding, if any; for options,
the option strike price; quantity held (as measured by, for example,
par value, notional value or number of shares, contracts or units);
maturity date, if any; coupon rate, if any; effective date, if any;
market value of the holding; and the percentage weighting of the
holding in the Fund's portfolio. The Web site information will be
publicly available at no charge.
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 will be published daily in the financial
section of newspapers.
Quotation and last sale information for the Shares and any
underlying securities that are exchange-listed, including equity
securities of MLPs and large, medium and small capitalization
companies, ETFs, ETNs, ADRs and convertible securities will be
available via the Consolidated Tape Association (``CTA'') high-speed
line. Information relating to futures will be available from the
exchange on which such futures are traded. Information relating to
exchange-traded options will be available via the Options Price
Reporting Authority. Information for investment companies, including
money market mutual funds and open-end and closed-end investment
companies, will be available from publicly-available pricing souces
[sic], including Bloomberg, IDC and Reuters. In addition, the
Indicative Optimized Portfolio Value (``IOPV''),\17\ 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.\18\
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\17\ 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.
\18\ 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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The IOPV will be calculated by an independent third party
calculator and will be calculated based on the same portfolio holdings
disclosed on the Fund's Web site.
The 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
[[Page 43806]]
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.\19\ 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 may be halted.
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\19\ 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.
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 \20\ 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 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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\20\ 17 CFR 240.10A-3.
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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.\21\ The Exchange represents that
these procedures are adequate to properly monitor Exchange trading of
the Shares in all trading sessions and to deter and detect violations
of Exchange rules and applicable federal securities laws.
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\21\ 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 and exchange-traded securities held by
the Fund with other markets that are members of the ISG and FINRA, on
behalf of the Exchange, may obtain trading information regarding
trading in the Shares and exchange-traded securities held by the Fund
from such markets or other entities. In addition, the Exchange may
obtain information regarding trading in the Shares and exchange-traded
securities held by the Fund from markets and other entities that are
members of ISG or with which the Exchange has in place a comprehensive
surveillance sharing agreement.\22\
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\22\ 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)\23\ 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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\23\ 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 affiliated with a broker-dealer
[[Page 43807]]
and has implemented a fire wall with respect to such broker-dealer
regarding access to information concerning the composition 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. In the event (a) the Adviser or the Sub-
Adviser becomes newly affiliated with a broker-dealer, or (b) any new
adviser or sub-adviser is a registered broker-dealer or becomes
affiliated with a broker-dealer, they will implement a ``fire wall''
with respect to their relevant personnel or broker-dealer affiliate
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. The Fund will invest only in ADRs,
futures and options that are traded on an exchange that is a member of
the ISG or with which the Exchange has in place a comprehensive
surveillance sharing agreement. The Fund may invest up to 15% of its
net assets in illiquid assets (calculated at the time of investment),
including Rule 144A securities deemed illiquid by the Sub-Adviser.
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 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 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's investments will be consistent with its investment objective.
B. 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 the 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 Number SR-NYSEArca-2014-79 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2014-79. 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 Internet 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
[[Page 43808]]
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 Number SR-NYSEArca-2014-79, and should
be submitted on or before August 18, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
Kevin M. O'Neill,
Deputy Secretary.
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\24\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2014-17639 Filed 7-25-14; 8:45 am]
BILLING CODE 8011-01-P
