[Federal Register Volume 78, Number 64 (Wednesday, April 3, 2013)]
[Notices]
[Pages 20162-20164]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-07723]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69251; File No. SR-NYSEArca-2013-14]
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a
Proposed Rule Change, as Modified by Amendment No. 1, Relating to
Listing and Trading of Shares of the Cambria Shareholder Yield ETF
Pursuant to NYSE Arca Equities Rule 8.600
March 28, 2013.
I. Introduction
On January 31, 2013, NYSE Arca, Inc. (``Exchange'' or ``NYSE
Arca'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) \1\ of the Securities
Exchange Act of 1934 (``Exchange Act'') \2\ and Rule 19b-4
thereunder,\3\ a proposed rule change to list and trade shares
(``Shares'') of the Cambria Shareholder Yield ETF (``Fund'') under NYSE
Arca Equities Rule 8.600. On February 13, 2013, the Exchange filed
Amendment No. 1 to the proposed rule change.\4\ The proposed rule
change was published for comment in the Federal Register on February
21, 2013.\5\ The Commission received no comments on the proposal. This
order approves the proposed rule change, as modified by Amendment No.
1.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
\4\ In Amendment No. 1, the Exchange: (1) made technical changes
to the proposed rule change to clarify how the net asset value of
the Cambria Shareholder Yield ETF would be calculated; and (2)
stated that quotation and last-sale information for many securities
held by the Cambria Shareholder Yield ETF would be available via the
Consolidated Tape Association high speed line.
\5\ See Securities Exchange Act Release No. 68930 (February 14,
2013), 78 FR 12110 (``Notice'').
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II. Description of the Proposed Rule Change
The Exchange proposes to list and trade Shares of the Fund under
NYSE Arca Equities Rule 8.600, which governs the listing and trading of
Managed Fund Shares \6\ on the Exchange. The Shares of the Fund will be
offered by Cambria ETF Trust (``Trust''). The Trust will be registered
with the Commission under the 1940 Act as an open-end management
investment company.\7\ Cambria Investment Management, L.P. will serve
as the investment adviser to the Fund (``Adviser'').\8\ SEI Investments
Distribution Co. (``Distributor'') will be the principal underwriter
and distributor of the Fund's Shares. SEI Investments Global Funds
Services (``Administrator'') will serve as administrator for the Fund.
Brown Brothers Harriman & Co. will serve as the custodian and transfer
agent for the Fund (``Custodian'' and ``Transfer Agent,''
respectively). The Exchange represents that the Shares will conform to
the initial and continued listing criteria under NYSE Arca Equities
Rule 8.600 and that the Fund will be in compliance with Rule 10A-3
under the Exchange Act,\9\ as provided by NYSE Arca Equities Rule 5.3.
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\6\ 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.
\7\ On July 6, 2012, the Trust filed an amendment to the Trust's
registration statement on Form N-1A under the Securities Act of 1933
(``1933 Act'') (15 U.S.C. 77a), and under the 1940 Act relating to
the Fund (File Nos. 333-180879 and 811-22704) (``Registration
Statement''). The Trust also filed an Amended and Restated
Application for an Order under Section 6(c) of the 1940 Act for
exemptions from various provisions of the 1940 Act and rules
thereunder (File No. 812-13959), dated November 13, 2012
(``Exemptive Application''). The Commission has issued an order
granting certain exemptive relief to the Trust under the 1940 Act.
See Investment Company Act Release No. 30340 (January 4, 2013)
(``Exemptive Order''). The Exchange states that investments made by
the Fund will comply with the conditions set forth in the Exemptive
Application and the Exemptive Order. See Notice, supra note 5, 78 FR
at 12110 n.7.
\8\ The Exchange states that the Advisor is not affiliated with
any broker-dealer and, in the event that (a) the Adviser or any sub-
adviser becomes newly affiliated with a broker-dealer, or (b) any
new adviser or sub-adviser becomes affiliated with a broker-dealer,
it will implement a fire wall with respect to such broker-dealer
regarding access to information concerning the composition of and/or
changes to the portfolio, and will be subject to procedures designed
to prevent the use and dissemination of material non-public
information regarding the portfolio. See Notice, supra note 5, 78 FR
at 12111.
\9\ 17 CFR 240.10A-3.
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The Fund seeks income and capital appreciation with an emphasis on
income from investments in the U.S. equity market. The Fund will seek
to achieve its investment objective by investing primarily in equity
securities, including the common stock of U.S. companies, that exhibit
strong cash flows, as reflected by their payment of dividends to
shareholders and their return of capital to shareholders in other
forms, such as through net stock buybacks, net debt paydown, mergers,
acquisitions, and other forms of reinvestment in the business. The Fund
may obtain a limited amount of foreign and emerging markets exposure
through investments in depositary receipts, including American
Depositary Receipts (``ADRs'') and Global Depositary Receipts
(``GDRs''). The Fund will not invest in non-U.S. equity securities
other than through ADRs and GDRs. The Fund will not invest in options,
futures, or swaps. The Fund's investments will be consistent with its
respective investment objective and will not be used to enhance
leverage.
Cambria will utilize a quantitative model to identify which
securities the Fund might purchase and sell and opportune times for
purchases and sales. While the Fund will invest in approximately 100 of
the top equity securities as determined by their shareholder yield, the
quantity of holdings in the Fund will be based on a number of factors,
including the asset size of the Fund and the number of companies that
satisfy the Adviser's quantitative measurements at any one time. The
Fund's portfolio will be rebalanced to the Adviser's internal target
allocations, developed pursuant to the Adviser's strategy described
above, at least quarterly.
Additional information regarding the Fund; the Shares; the Fund's
investment objective, strategies, methodology, and restrictions; the
Adviser; the distributor; the administrator; the custodian; the
transfer agent; risks; fees and expenses; creations and redemptions of
Shares; availability of information; trading rules and halts; and
surveillance procedures, among other things, can be found in the
Registration Statement and in the Notice, as applicable.\10\
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\10\ See supra notes 5 and 7.
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III. Discussion and Commission Findings
After careful review, the Commission finds that the Exchange's
proposal to list and trade the Shares is consistent with the Exchange
Act and the rules and regulations thereunder applicable to a national
securities exchange.\11\ In particular, the Commission finds that the
proposed rule change is consistent with Section 6(b)(5) of the Exchange
Act,\12\ which requires, among other things, that the Exchange's rules
be designed to promote just and equitable principles of trade, to
remove impediments to and perfect the mechanism of a free and open
market and a national market system, and, in
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general, to protect investors and the public interest.
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\11\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition and
capital formation. See 15 U.S.C. 78c(f).
\12\ 15 U.S.C. 78f(b)(5).
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The Commission finds that the proposal to list and trade the Shares
on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the
Exchange Act, which sets forth Congress' finding that it is in the
public interest and appropriate for the protection of investors and the
maintenance of fair and orderly markets to assure the availability to
brokers, dealers, and investors of information with respect to
quotations for and transactions in securities. Quotation and last-sale
information for the Shares and many securities held by the Fund will be
available via the Consolidated Tape Association high-speed line, and
the Exchange will disseminate the Portfolio Indicative Value (``PIV'')
at least every 15 seconds during the Core Trading Session through one
or more major market data vendors.\13\ 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 (``Bid/Ask Price''),\14\ 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.\15\ 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.\16\ NYSE Arca expects that 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.\17\
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\13\ See Notice, supra note 5, 78 FR at 12114.
\14\ 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.
\15\ See Notice, supra note 5, 78 FR at 12114.
\16\ See id.
\17\ See id.
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The Commission further believes that the proposal to list and trade
the Shares is reasonably designed to promote fair disclosure of
information that may be necessary to price the Shares appropriately and
to prevent trading when a reasonable degree of transparency cannot be
assured. The Fund will make available on its Web site on each business
day before commencement of the Core Trading Session the Disclosed
Portfolio that will form the basis for the Fund's calculation of NAV at
the end of the business day.\18\ The Commission notes that the Exchange
will obtain a representation from the Fund 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.\19\ In
addition, the basket composition file will be publicly disseminated
daily prior to the opening of the NYSE via NSCC. Further, if the PIV is
not being disseminated as required, the Exchange may halt trading
during the day in which the interruption occurs; if the interruption
persists past the day in which it occurred, the Exchange will halt
trading no later than the beginning of the trading day following the
interruption.\20\ Further, the Commission notes that the Reporting
Authority that provides the Disclosed Portfolio must implement and
maintain, or be subject to, procedures designed to prevent the use and
dissemination of material non-public information regarding the actual
components of the portfolio.\21\ Finally, the Exchange states that, on
its behalf, the Financial Industry Regulatory Authority will
communicate as needed regarding trading in the Shares with other
markets that are members of the Intermarket Surveillance Group or with
which the Exchange has in place a comprehensive surveillance sharing
agreement.\22\
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\18\ See id. 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. See id.
\19\ See id. at 12112.
\20\ See NYSE Arca Equities Rule 8.600(d)(2)(D). Trading in the
Shares may also 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 composing the Disclosed
Portfolio and/or the financial instruments of the Fund; or (2)
whether other unusual conditions or circumstances detrimental to the
maintenance of a fair and orderly market are present. See Notice,
supra note 5, 78 FR at 12114.
\21\ See NYSE Arca Equities Rule 8.600(d)(2)(B)(ii).
\22\ See Notice, supra note 5, 78 FR at 12115.
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The Exchange has represented that the Shares are equity securities
subject to the Exchange's rules governing the trading of equity
securities.\23\ In support of this proposal, the Exchange has made
representations, including:
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\23\ See id. at 12114.
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(1) The Shares will conform to the initial and continuing listing
criteria under NYSE Arca Equities Rule 8.600.
(2) The Exchange's surveillance 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.
(3) The Exchange has appropriate rules to facilitate transactions
in the Shares during all trading sessions.
(4) Prior to the commencement of trading, the Exchange will inform
its Equity Trading Permit Holders (``ETP Holders'') in an Information
Bulletin of the special characteristics and risks associated with
trading the Shares. Specifically, the Information Bulletin will discuss
the following: (a) The procedures for purchases and redemptions of
Shares and that Shares are not individually redeemable; (b) 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; (c) the risks involved in trading the Shares
during the Opening and Late Trading Sessions when an updated PIV will
not be calculated or publicly disseminated; (d) how information
regarding the PIV is disseminated; (e) 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 (f)
trading information.
(5) For initial and continued listing, the Fund will be in
compliance with Rule 10A-3 under the Exchange Act,\24\ as provided by
NYSE Arca Equities Rule 5.3.\25\
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\24\ 17 CFR 240.10A-3.
\25\ See Notice, supra note 5, 78 FR at 12112.
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(6) The Fund will not invest in non-U.S. equity securities other
than through ADRs and GDRs.
(7) The Fund will not invest in options, futures or swaps.
(8) The Fund's investments will be consistent with its respective
investment objective and will not be used to enhance leverage.
(9) The Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid securities (calculated at the time of investment),
including Rule 144A securities.
(10) The Fund will not loan its securities if, as a result, the
aggregate amount of all outstanding securities loans by the Fund
exceeds 33 \1/3\% of its total assets (including the market value of
collateral received).
(11) A minimum of 100,000 Shares for the Fund will be outstanding
at the
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commencement of trading on the Exchange.
This order is based on the Exchange's representations.
For the forgoing reasons, the Commission believes the Exchange's
proposal to list and trade the Shares is consistent with the Exchange
Act.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Exchange Act,\26\ that the proposed rule change (SR-NYSEArca-2013-14),
as modified by Amendment No. 1, be, and it hereby is, approved.
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\26\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\27\
Kevin M. O'Neill,
Deputy Secretary.
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\27\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2013-07723 Filed 4-2-13; 8:45 am]
BILLING CODE 8011-01-P