[Federal Register Volume 80, Number 149 (Tuesday, August 4, 2015)]
[Notices]
[Pages 46359-46362]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-18883]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75540; File No. SR-NYSEArca-2015-50]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Amendment No. 1 and Order Granting Accelerated Approval of a 
Proposed Rule Change, as Modified by Amendment No. 1, To List and Trade 
Shares of the Cambria Sovereign High Yield Bond ETF and the Cambria 
Value and Momentum ETF Under NYSE Arca Equities Rule 8.600

July 28, 2015.

I. Introduction

    On June 19, 2015, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to 
list and trade shares (``Shares'') of the Cambria Sovereign High Yield 
Bond ETF and the Cambria Value and Momentum ETF (each a ``Fund,'' and 
collectively ``Funds'') under NYSE Arca Equities Rule 8.600. The 
proposed rule change was published for comment in the Federal Register 
on July 2, 2015.\3\ On July 1, 2015, the Exchange filed Amendment No. 1 
to the proposed rule change.\4\ The Commission received no comments on 
the proposed rule change. The Commission is publishing this notice to 
solicit comments on Amendment No. 1 from interested persons, and is 
approving the proposed rule change, as modified by Amendment No. 1, on 
an accelerated basis.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 75311 (June 26, 
2015), 80 FR 38253 (``Notice'').
    \4\ In Amendment No. 1, the Exchange deletes references to 
investments that the Funds will not be utilizing and clarifies that 
U.S. exchange-listed and traded ADRs are included as ``Other 
Investments'' only with respect to the Cambria Sovereign High Yield 
Bond ETF. Amendment No. 1 is available at: http://www.sec.gov/comments/sr-nysearca-2015-50/nysearca201550.shtml.
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II. The Exchange's Description of the Proposed Rule Change \5\
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    \5\ The Commission notes that additional information regarding 
the Trust, the Fund, its investments, and the Shares, including 
investment strategies, risks, creation and redemption procedures, 
fees, portfolio holdings disclosure policies, calculation of net 
asset value (``NAV''), distributions, and taxes, among other things, 
can be found in the Notice and the Registration Statement, as 
applicable. See Notice, supra note 3, and Registration Statement, 
infra note 6.
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    The Exchange proposes to list and trade the Shares under NYSE Arca 
Equities Rule 8.600, which governs the listing and trading of Managed 
Fund Shares. The Shares will be offered by the Cambria ETF Trust 
(``Trust''), a Delaware statutory trust which is registered with the 
Commission as an open-end management investment company.\6\ Cambria 
Investment Management, L.P. (``Cambria'' or the ``Adviser'') will serve 
as the investment adviser of the Funds. SEI Investments Distribution 
Co. will be the principal underwriter and distributor of the Funds' 
Shares. SEI Investments Global Funds Services (``SEI GFS'') will serve 
as the accountant and administrator of the Funds. Brown Brothers 
Harriman & Co. will serve as the custodian and transfer agent of the 
Funds' assets.
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    \6\ The Exchange states that the Trust will be registered under 
the 1940 Act. According to the Exchange, on August 27, 2014, the 
Trust filed an amendment to the Trust's registration statement on 
Form N-1A under the Securities Act of 1933 (the ``1933 Act'') (15 
U.S.C. 77a), and under the 1940 Act relating to the Funds (File Nos. 
333-180879 and 811-22704) (the ``Registration Statement''). The 
Exchange states that the Commission has issued an order granting 
certain exemptive relief to the Trust under the 1940 Act. See 
Investment Company Act Release No. 30340 (File No. 812-13959) 
(January 4, 2013).
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Cambria Sovereign High Yield Bond ETF

    The Exchange states that, under normal market conditions,\7\ at 
least 80% of the value of the Fund's net assets (plus borrowings for 
investment purposes) will be invested in sovereign and quasi-sovereign 
high yield bonds (commonly known as ``junk bonds''). For the purposes 
of this policy, sovereign and quasi-sovereign high yield bonds include 
exchange-traded funds (``ETFs'') \8\ and exchange-traded notes 
(``ETNs'') \9\ that invest in or have exposure to such bonds. The Fund 
will invest in emerging and developed countries, including countries 
located in the G-20 and other countries. Sovereign bonds include debt 
securities issued by a national government, instrumentality or 
political sub-division. Quasi-sovereign bonds include debt securities 
issued by a supra-national government or a state-owned enterprise or 
agency. The sovereign and quasi-sovereign bonds that the Fund will 
invest in may be denominated in local and foreign currencies. The Fund 
may invest in securities of any duration or maturity. The Exchange 
states that the Fund may invest up to 20% of its net assets in money 
market instruments or other high quality debt securities, cash or cash 
equivalents, or ETFs and ETNs that invest in, or provide exposure to, 
such instruments or securities.
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    \7\ The term ``under normal market conditions'' includes, but is 
not limited to, the absence of extreme volatility or trading halts 
in the equity markets or the financial markets generally; 
operational issues causing dissemination of inaccurate market 
information; or force majeure type events such as systems failure, 
natural or man-made disaster, act of God, armed conflict, act of 
terrorism, riot or labor disruption or any similar intervening 
circumstance.
    \8\ For purposes of this filing, the term ``ETFs'' includes 
Investment Company Units (as described in NYSE Arca Equities Rule 
5.2(j)(3)); Portfolio Depositary Receipts (as described in NYSE Arca 
Equities Rule 8.100); and Managed Fund Shares (as described in NYSE 
Arca Equities Rule 8.600). All ETFs will be listed and traded in the 
U.S. on a national securities exchange. While the Funds may invest 
in inverse ETFs, the Funds will not invest in leveraged (e.g., 2X, -
2X, 3X or -3X) ETFs.
    \9\ For purposes of this filing, the term ``ETNs'' includes 
Index-Linked Securities (as described in NYSE Arca Equities Rule 
5.2(j)(6)). All ETNs will be listed and traded in the U.S. on a 
national securities exchange. The Funds will not invest in leveraged 
(e.g., 2X, -2X, 3X or -3X) ETNs.
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Cambria Value and Momentum ETF

    The Exchange states that, under normal market conditions, at least 
80% of the value of the Fund's net assets will be invested in U.S. 
exchange-listed equity securities that are undervalued according to 
various valuation metrics.
    In attempting to avoid overvalued and downtrending markets, the 
Fund may use U.S. exchange-traded stock index futures or options 
thereon, or take short positions in ETFs to attempt to hedge the long 
equity portfolio during times when Cambria believes that the U.S. 
equity market is overvalued from a valuation standpoint, or Cambria's 
models identify unfavorable trends and momentum in the U.S. equity 
market. The Fund may hedge up to 100% of the value of the Fund's long 
portfolio using these strategies. During certain periods, including to 
collateralize the Fund's investments in futures contracts, the Fund may 
invest up to 20% of the value

[[Page 46360]]

of its net assets in U.S. dollar and non-U.S. dollar denominated money 
market instruments or other high quality debt securities, or ETFs that 
invest in these instruments. The Fund may invest in securities of 
companies in any industry, and will limit the maximum allocation to any 
particular sector.

Other Investments

    According to the Exchange, while each Fund, under normal market 
conditions, will invest at least 80% of the value of its net assets 
(plus borrowings for investment purposes) in the securities and other 
assets described above, each Fund may invest its remaining assets in 
the securities and financial instruments described below.
    A Fund may invest a portion of its assets in cash or cash items 
pending other investments or to maintain liquid assets required in 
connection with some of a Fund's investments. A Fund may invest in 
corporate debt securities. A Fund may invest in commercial paper, 
master notes and other short-term corporate instruments that are 
denominated in U.S. dollars. A Fund may invest in the following types 
of debt securities in addition to those described above as principal 
investments: Securities issued or guaranteed by the U.S. Government, 
its agencies, instrumentalities, and political subdivisions; securities 
issued or guaranteed by foreign governments, their authorities, 
agencies, instrumentalities and political subdivisions; securities 
issued or guaranteed by supra-national agencies; corporate debt 
securities; time deposits; notes; inflation-indexed securities; and 
repurchase agreements; indexed bonds; and zero coupon securities.\10\ 
The Cambria Sovereign High Yield Bond ETF may gain exposure to foreign 
securities by purchasing U.S. exchange-listed and traded American 
Depositary Receipts (``ADRs'') and each of the Funds may gain exposure 
to foreign securities by purchasing exchange-traded European Depositary 
Receipts (``EDRs'') and Global Depositary Receipts (``GDRs'', together 
with ADRs and EDRs, ``Depositary Receipts'').\11\ The Cambria Sovereign 
High Yield Bond ETF may enter into forward foreign currency contracts.
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    \10\ The debt and other fixed income securities in which a Fund 
may invest include fixed and floating rate securities of any 
maturity.
    \11\ See Amendment No. 1, supra note 4. The Exchange states that 
not more than 10% of the net assets of a Fund in the aggregate 
invested in exchange-traded equity securities shall consist of 
equity securities whose principal market is not a member of the 
Intermarket Surveillance Group (``ISG'') or party to a comprehensive 
surveillance sharing agreement (``CSSA'') with the Exchange. See 
Notice, supra note 3, 80 FR at 38255.
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III. Discussion and Commission's Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of Section 6 of the Act \12\ 
and the rules and regulations thereunder applicable to a national 
securities exchange.\13\ In particular, the Commission finds that the 
proposed rule change is consistent with Section 6(b)(5) of the Act,\14\ 
which requires, among other things, that the Exchange's rules be 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general, to protect investors and the public 
interest. The Commission notes that the Funds and the Shares must 
comply with the requirements of NYSE Arca Equities Rule 8.600 for the 
Shares to be listed and traded on the Exchange.
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    \12\ 15 U.S.C. 78f.
    \13\ In approving this proposed rule change, the Commission 
notes that it has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
    \14\ 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 
Act,\15\ which sets forth Congress's 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. According to the 
Exchange, quotation and last-sale information for the Shares and equity 
portfolio holdings of the Funds that are U.S. exchange listed, 
including common stocks, preferred stocks, ETFs, ETNs, Depositary 
Receipts, and real estate investment trusts (``REITs''), will be 
available via the Consolidated Tape Association high-speed line. In 
addition, the Intraday Indicative Value (``IIV''), 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.\16\ On each business day, before commencement of trading in 
Shares in the Core Trading Session (as defined in NYSE Arca Equities 
Rule 7.34(a)(2)), each Fund will disclose on its Web site the Disclosed 
Portfolio (as defined in NYSE Arca Equities Rule 8.600(c)(2)) that will 
form the basis for such Fund's calculation of NAV at the end of the 
business day.\17\ The NAV of each Fund will be calculated each business 
day by SEI GFS as of the close of regular trading on the NYSE, 
generally 4:00 p.m., Eastern Time on each day that the NYSE is open. A 
basket composition file, which will include the security names and 
share quantities required to be delivered in exchange for each Fund's 
shares, together with estimates and actual cash components, will be 
publicly disseminated daily prior to the opening of the New York Stock 
Exchange via the National Securities Clearing Corporation. Information 
regarding market price and trading volume of the Shares will be 
continually available on a real-time basis throughout the day on 
brokers' computer screens and other electronic services. Information 
regarding the previous day's closing price and trading volume 
information for the Shares will be published daily in the financial 
section of newspapers. The Web site for the Funds will include a form 
of the prospectus for the Funds and additional data relating to NAV and 
other applicable quantitative information.
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    \15\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \16\ According to the Exchange, the IIV does not necessarily 
reflect the precise composition of the current portfolio of 
securities held by a Fund at a particular point in time. The IIV 
should not be viewed as a ``real-time'' update of the NAV of a Fund 
because the approximate value may not be calculated in the same 
manner as the NAV. The quotations for certain investments may not be 
updated during U.S. trading hours if such holdings do not trade in 
the U.S., except such quotations may be updated to reflect currency 
fluctuations.
    \17\ On a daily basis, the Funds will disclose on their Web site 
the following information for each Fund regarding their portfolio 
holdings, as applicable to the type of holding: ticker symbol, CUSIP 
number or other identifier, if any; a description of the holding 
(including the type of holding, such as the type of swap); the 
identity of the security, commodity, index or other asset or 
instrument underlying the holding, if any; for options, the option 
strike price; quantity held (as measured by, for example, par value, 
notional value or number of shares, contracts or units); maturity 
date, if any; coupon rate, if any; effective date, if any; market 
value of the holding; and the percentage weighting of the holding in 
a Fund's portfolio. The Web site information will be publicly 
available at no charge.
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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 Commission notes that the Exchange will obtain a 
representation from the issuer of the Shares that the NAV per Share 
will be calculated daily and that the NAV and the Disclosed Portfolio

[[Page 46361]]

will be made available to all market participants at the same time.\18\ 
In addition, 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 a Fund may be halted. The Exchange may halt trading in 
the Shares if trading is not occurring in the securities and/or the 
financial instruments constituting the Disclosed Portfolio of a Fund, 
or if other unusual conditions or circumstances detrimental to the 
maintenance of a fair and orderly market are present.\19\ Further, the 
Commission notes that the Reporting Authority that provides the 
Disclosed Portfolio of each Fund must implement and maintain, or be 
subject to, procedures designed to prevent the use and dissemination of 
material, non-public information regarding the actual components of the 
portfolio.\20\ The Commission notes that the Financial Industry 
Regulatory Authority (``FINRA''), on behalf of the Exchange,\21\ will 
communicate as needed regarding trading in the Shares and any 
underlying common stocks, preferred stocks, Depositary Receipts, REITs, 
ETFs, ETNs, futures and options on futures with other markets and other 
entities that are members of the Intermarket Surveillance Group. FINRA, 
on behalf of the Exchange, may obtain trading information regarding 
trading in the Shares, ETFs, ETNs, futures and options on futures from 
such markets and other entities. In addition, the Exchange may obtain 
information regarding trading in the Shares, common stocks, preferred 
stocks, Depositary Receipts, REITs, ETFs, ETNs, futures and options on 
futures from markets and other entities that are members of ISG or with 
which the Exchange has in place a comprehensive surveillance sharing 
agreement. The Exchange states that it has a general policy prohibiting 
the distribution of material, non-public information by its employees. 
The Exchange also states that the Adviser is not registered as a 
broker-dealer or affiliated with a broker-dealer. In the event (a) the 
Adviser or any sub-adviser becomes registered as a broker-dealer or 
newly affiliated with a broker-dealer, or (b) any new adviser or sub-
adviser is a registered broker-dealer or becomes affiliated with a 
broker-dealer, the Exchange states that the Adviser will implement a 
fire wall with respect to its 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.
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    \18\ See NYSE Arca Equities Rule 8.600(d)(1)(B).
    \19\ See NYSE Arca Equities Rule 8.600(d)(2)(C) (providing 
additional considerations for the suspension of trading in or 
removal from listing of Managed Fund Shares on the Exchange). With 
respect to trading halts, the Exchange may consider all relevant 
factors in exercising its discretion to halt or suspend trading in 
the Shares of each Fund. Trading in Shares of a 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.
    \20\ See NYSE Arca Equities Rule 8.600(d)(2)(B)(ii).
    \21\ The Exchange states that, while FINRA surveils trading on 
the Exchange pursuant to a regulatory services agreement, the 
Exchange is responsible for FINRA's performance under this 
regulatory services agreement.
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    The Exchange represents that the Shares are deemed to be equity 
securities, thus rendering trading in the Shares subject to the 
Exchange's existing rules governing the trading of equity securities.
    In support of this proposal, the Exchange has made additional 
representations, including:
    (1) The Shares of each Fund will conform to the initial and 
continued listing criteria under NYSE Arca Equities Rule 8.600.
    (2) The Exchange has appropriate rules to facilitate transactions 
in the Shares during all trading sessions.
    (3) Trading in the Shares will be subject to the existing trading 
surveillances, administered by FINRA on behalf of the Exchange, which 
are designed to detect violations of Exchange rules and applicable 
federal securities laws and these procedures are adequate to properly 
monitor Exchange trading of the Shares in all trading sessions and to 
deter and detect violations of Exchange rules and federal securities 
laws applicable to trading on the Exchange.
    (4) Prior to the commencement of trading, the Exchange will inform 
its Equity Trading Permit Holders in an Information Bulletin of the 
special characteristics and risks associated with trading the Shares. 
Specifically, the Information Bulletin will discuss the following: (a) 
the procedures for purchases and redemptions of Shares in Creation Unit 
aggregations (and that Shares are not individually redeemable); (b) 
NYSE Arca Equities Rule 9.2(a), which imposes a duty of due diligence 
on its Equity Trading Permit Holders to learn the essential facts 
relating to every customer prior to trading the Shares; (c) the risks 
involved in trading the Shares during the Opening and Late Trading 
Sessions when an updated Portfolio Indicative Value will not be 
calculated or publicly disseminated; (d) how information regarding the 
Portfolio Indicative Value and the Disclosed Portfolio is disseminated; 
(e) the requirement that Equity Trading Permit Holders deliver a 
prospectus to investors purchasing newly issued Shares prior to or 
concurrently with the confirmation of a transaction; and (f) trading 
information.
    (5) For initial and/or continued listing, the Funds will be in 
compliance with Rule 10A-3 under the Act,\22\ as provided by NYSE Arca 
Equities Rule 5.3.
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    \22\ 17 CFR 240.10A-3.
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    (6) A minimum of 100,000 Shares of each Fund will be outstanding at 
the commencement of trading on the Exchange.
    (7) Not more than 10% of the net assets of a Fund in the aggregate 
invested in exchange-traded equity securities shall consist of equity 
securities whose principal market is not a member of the ISG or party 
to a CSSA with the Exchange.

This approval order is based on all of the Exchange's representations.

    For the foregoing reasons, the Commission finds that the proposed 
rule change, as modified by Amendment No. 1, is consistent with Section 
6(b)(5) of the Act \23\ and the rules and regulations thereunder 
applicable to a national securities exchange.
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    \23\ 15 U.S.C. 78f(b)(5).
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IV. Solicitation of Comments on Amendment No. 1

    Interested persons are invited to submit written data, views, and 
arguments concerning whether Amendment No. 1 is consistent with the 
Act. Comments may be submitted by any of the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSEArca-2015-50 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-2015-50. 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

[[Page 46362]]

Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the 
submission, all subsequent amendments, all written statements with 
respect to the proposed rule change that are filed with the Commission, 
and all written communications relating to the proposed rule change 
between the Commission and any person, other than those that may be 
withheld from the public in accordance with the provisions of 5 U.S.C. 
552, will be available for Web site viewing and printing in the 
Commission's Public Reference Room, 100 F Street NE., Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the 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-2015-50 and should 
be submitted on or before August 25, 2015.

V. Accelerated Approval of Proposed Rule Change as Modified by 
Amendment No. 1

    The Commission finds good cause to approve the proposed rule 
change, as modified by Amendment No. 1, prior to the thirtieth day 
after the date of publication of notice in the Federal Register. 
Amendment No. 1 supplements the proposed rule change by deleting 
references to investments that the Funds will not be utilizing and 
clarifies that U.S. Exchange-listed and traded ADRs are included as 
``Other Investments'' only with respect to the Cambria Sovereign High 
Yield Bond ETF. The Commission believes that this additional 
information provides clarity about the Funds' permitted investments. 
Accordingly, the Commission finds good cause, pursuant to Section 
19(b)(2) of the Act,\24\ to approve the proposed rule change, as 
modified by Amendment No. 1, on an accelerated basis.
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    \24\ 15 U.S.C. 78s(b)(2).
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VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\25\ that the proposed rule change (SR-NYSEArca-2015-50), as 
modified by Amendment No. 1, be, and it hereby is, approved on an 
accelerated basis.
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    \25\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
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    \26\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-18883 Filed 8-3-15; 8:45 am]
BILLING CODE 8011-01-P