[Federal Register Volume 81, Number 64 (Monday, April 4, 2016)]
[Notices]
[Pages 19255-19260]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-07511]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77463; File No. SR-NYSEArca-2015-107]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting 
Approval of Proposed Rule Change, as Modified by Amendment Nos. 1, 2, 
3, and 4 Thereto, To List and Trade Shares of the REX Gold Hedged S&P 
500 ETF and the REX Gold Hedged FTSE Emerging Markets ETF Under NYSE 
Arca Equities Rule 8.600

March 29, 2016.

I. Introduction

    On December 10, 2015, NYSE Arca, Inc. (``Exchange'') filed with the 
Securities and Exchange Commission (``Commission''), pursuant to 
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ 
and Rule 19b-4 thereunder,\2\ a proposed rule change to list and trade 
shares (``Shares'') of the REX Gold Hedged S&P 500 ETF and the REX Gold 
Hedged FTSE Emerging Markets ETF (individually, a ``Fund,'' and 
collectively, ``Funds''), which will be offered by Exchange Traded 
Concepts Trust (``Trust''). The proposed rule change was published for 
comment in the Federal Register on December 30, 2015.\3\ On January 15, 
2016, the Exchange submitted Amendment No. 1 to the proposed rule 
change.\4\ On January 27, 2016, the Exchange submitted Amendment No. 2 
to the proposed rule change.\5\ On February 11, 2016, the Exchange 
submitted Amendment No. 3 to the proposed rule change.\6\ On February 
12, 2016, pursuant to Section 19(b)(2) of the Act,\7\ the Commission 
designated a longer period within which to approve the proposed rule 
change, disapprove the proposed rule change, or institute proceedings 
to determine whether to disapprove the proposed rule change.\8\ On 
March 24, 2016, the Exchange submitted Amendment No. 4 to the proposed 
rule change.\9\ The Commission

[[Page 19256]]

received no comments on the proposed rule change. This order grants 
approval of the proposed rule change, as modified by Amendment Nos. 1, 
2, 3, and 4 thereto.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 76761 (December 23, 
2015), 80 FR 81564 (``Notice'').
    \4\ In Amendment No. 1, which replaced and superseded the 
original filing in its entirety, the Exchange clarified the Funds' 
direct and indirect principal and other investments; the 
determination of the value of certain underlying assets for purposes 
of the Funds' net asset value (``NAV'') calculation; and the 
availability of price information for certain underlying assets. 
Because Amendment No. 1 adds clarification to the proposal and does 
not materially alter the substance of the proposed rule change or 
raise unique or novel regulatory issues, Amendment No. 1 is not 
subject to notice and comment (Amendment No. 1 to the proposed rule 
change is available at: http://www.sec.gov/comments/sr-nysearca-2015-107/nysearca2015107-1.pdf).
    \5\ In Amendment No. 2, the Exchange made additional clarifying 
changes regarding the Funds' other investments; the availability of 
price information for certain underlying assets; and the 
dissemination of the Portfolio Indicative Value (as defined herein). 
Because Amendment No. 2 adds clarification to the proposal and does 
not materially alter the substance of the proposed rule change or 
raise unique or novel regulatory issues, Amendment No. 2 is not 
subject to notice and comment (Amendment No. 2 to the proposed rule 
change is available at: http://www.sec.gov/comments/sr-nysearca-2015-107/nysearca2015107-2.pdf).
    \6\ In Amendment No. 3, the Exchange expanded the application of 
the criteria for non-U.S. equity securities in the REX Gold Hedged 
FTSE Emerging Markets ETF portfolio so that they will apply on a 
continual basis. Because Amendment No. 3 does not materially alter 
the substance of the proposed rule change or raise unique or novel 
regulatory issues, Amendment No. 3 is not subject to notice and 
comment (Amendment No. 3 to the proposed rule change is available 
at: http://www.sec.gov/comments/sr-nysearca-2015-107/nysearca2015107-3.pdf).
    \7\ 15 U.S.C. 78s(b)(2).
    \8\ See Securities Exchange Act Release No. 77128, 81 FR 8557 
(February 19, 2016).
    \9\ In Amendment No. 4, the Exchange clarified that: (a) all 
statements and representations made in the proposal regarding the 
description of the portfolio, limitations on portfolio holdings or 
reference assets, or the applicability of Exchange rules and 
surveillance procedures shall constitute continued listing 
requirements for listing the Shares on the Exchange; (b) the issuer 
will advise the Exchange of any failure by the Funds to comply with 
the continued listing requirements; (c) pursuant to its obligations 
under Section 19(g)(1) of the Act, the Exchange will monitor for 
compliance with the continued listing requirements; and (d) if any 
Fund is not in compliance with the applicable listing requirements, 
the Exchange will commence delisting procedures under NYSE Arca 
Equities Rule 5.5(m). Because Amendment No. 4 does not materially 
alter the substance of the proposed rule change or raise unique or 
novel regulatory issues, Amendment No. 4 is not subject to notice 
and comment (Amendment No. 4 to the proposed rule change is 
available at: http://www.sec.gov/comments/sr-nysearca-2015-107/nysearca2015107-4.pdf).
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II. Exchange's Description of the Proposed Rule Change

    The Exchange proposes to list and trade Shares of the Funds under 
NYSE Arca Equities Rule 8.600, which governs the listing and trading of 
Managed Fund Shares on the Exchange. The Shares will be offered by the 
Trust,\10\ which is registered with the Commission as an investment 
company and has filed a registration statement on Form N-1A with the 
Commission.\11\ Exchange Traded Concepts, LLC will serve as the 
investment adviser to the Funds (``Adviser'').\12\ Vident Investment 
Advisory, LLC (``Sub-Adviser'') will serve as sub-adviser to the 
Funds.\13\ SEI Investments Distribution Co. will be the principal 
underwriter and distributor of the Funds' Shares. SEI Investments 
Global Funds Services will serve as the administrator, custodian, 
transfer agent, and fund accounting agent for the Funds.\14\
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    \10\ The Exchange represents that the Trust has obtained certain 
exemptive relief under the Investment Company Act of 1940 (``1940 
Act'').
    \11\ According to the Exchange, on October 9, 2015, the Trust 
filed with the Commission an amendment to its registration statement 
on Form N-1A under the Securities Act of 1933 and under the 1940 Act 
relating to the Funds (File Nos. 333-156529 and 811-22263) 
(``Registration Statement'').
    \12\ The Exchange represents that the Funds are subject to 
regulation under the Commodity Exchange Act and Commodity Futures 
Trading Commission (``CFTC'') rules as commodity pools. The Adviser 
is registered as a commodity pool operator, and the Funds will be 
operated in accordance with CFTC rules.
    \13\ The Exchange represents that the Adviser and Sub-Adviser 
are not registered as broker-dealers or affiliated with any broker-
dealers. In the event (a) the Adviser or Sub-Adviser becomes a 
registered 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, it will implement a fire 
wall with respect to its relevant personnel or its broker-dealer 
affiliate regarding access to information concerning the composition 
or changes to a portfolio, and will be subject to procedures 
designed to prevent the use and dissemination of material non-public 
information regarding such portfolio.
    \14\ The Commission notes that additional information regarding 
the Funds, the Trust, and the Shares, including investment 
strategies, risks, creation and redemption procedures, fees, 
portfolio holdings disclosure policies, calculation of NAV, 
distributions, and taxes, among other things, can be found in the 
Notice, the amendments, and the Registration Statement, as 
applicable. See Notice, Amendment Nos. 1-4, and Registration 
Statement, supra notes 3, 4, 5, 6, 9, and 11, respectively.
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A. Exchange's Description of the Funds' Principal Investments

(1) REX Gold Hedged S&P 500 ETF--Principal Investments
    This Fund will seek to outperform the total return performance of 
the S&P 500 Dynamic Gold Hedged Index (``S&P Benchmark'') \15\ by 
actively hedging the returns of the S&P 500 Index using gold futures. 
The Fund will seek to achieve its investment objective of outperforming 
the S&P Benchmark by providing exposure to a gold-hedged U.S. large-cap 
portfolio using a quantitative, rules-based strategy. The Fund will 
invest at least 80% of its assets (plus the amount of any borrowings 
for investment purposes) in (i) U.S. exchange-listed large-cap U.S. 
stocks; (ii) gold futures; (iii) exchange-traded funds (``ETFs'') \16\ 
and exchange-traded closed-end funds (together with ETFs, ``Underlying 
Funds'') that provide exposure to large-cap U.S. stocks; (iv) ETFs, 
commodity-related pooled vehicles,\17\ and exchange-traded notes 
(``ETNs'') \18\ that provide exposure to gold; and (v) futures that 
provide exposure to the S&P 500 Index. The Fund will not invest in non-
U.S. stocks. The Fund will seek to achieve a similar level of 
volatility as that of the S&P Benchmark, although there is no assurance 
it will do so. The Sub-Adviser will continuously monitor the Fund's 
holdings in order to enhance performance while still providing 
approximately equal notional exposure to equity securities and gold 
futures contracts.
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    \15\ According to the Exchange, the S&P Benchmark seeks to 
reflect the returns of a portfolio of S&P 500 stocks, hedged with a 
long gold futures overlay. Specifically, the S&P Benchmark measures 
the total return performance of a hypothetical portfolio consisting 
of securities that compose the S&P 500 Index, which measures the 
performance of the large-capitalization sector of the U.S. equity 
market, and a long position in gold futures contracts, the notional 
value of which is comparable to the value of the S&P Benchmark's 
equity component.
    \16\ For purposes of this filing, ETFs include Investment 
Company Units (as described in NYSE Arca Equities Rule 5.2(j)(3)); 
Portfolio Depository Receipts (as described in NYSE Arca Equities 
Rule 8.100); and Managed Fund Shares (as described in NYSE Arca 
Equities Rule 8.600). The Underlying Funds in which a Fund will 
invest all will be listed and traded on national securities 
exchanges. While the Funds may invest in inverse ETFs, the Funds 
will not invest in leveraged (e.g., 2X, -2X, 3X, or -3X) ETFs.
    \17\ For purposes of the filing, commodity-related pooled 
vehicles will mean: Equity Gold Shares (as described in NYSE Arca 
Equities Rule 5.2(j)(5)); Trust Issued Receipts (as described in 
NYSE Arca Equities Rule 8.200); Commodity-Based Trust Shares (as 
described in NYSE Arca Equities Rule 8.201); Commodity Index Trust 
Shares (as described in NYSE Arca Equities Rule 8.203); and Trust 
Units (as described in NYSE Arca Equities Rule 8.500).
    \18\ ETNs, which will be listed on a national securities 
exchange, are securities such as those described in NYSE Arca 
Equities Rule 5.2(j)(6). While the Funds may invest in inverse ETNs, 
the Funds will not invest in leveraged (e.g., 2X, -2X, 3X, or -3X) 
ETNs.
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    The Fund will not directly hold gold futures contracts, commodity-
related pooled vehicles, and options on commodity futures (as 
referenced below). Rather, the Fund expects to gain exposure to these 
instruments by investing up to 25% of its total assets, as measured at 
the end of every quarter of the Fund's taxable year, in a wholly-owned 
and controlled Cayman Islands subsidiary (``Subsidiary''). The 
Subsidiary will be advised by the Adviser, and the Fund's investment in 
the Subsidiary will primarily be intended to provide the Fund with 
exposure to the price of gold.
(2) REX Gold Hedged FTSE Emerging Markets ETF--Principal Investments
    This Fund will seek to outperform the total return performance of 
the FTSE Emerging Gold Overlay Index (``FTSE Benchmark'') \19\ by 
actively hedging a portfolio of emerging markets securities using gold 
futures. The Fund will seek to achieve its investment objective of 
outperforming the FTSE Benchmark by providing exposure to a gold-hedged 
emerging markets portfolio using a quantitative, rules-based strategy. 
The Fund will invest at least 80% of its assets (plus the amount of any 
borrowings for investment purposes) in (i) equity securities of 
emerging markets companies, as such companies are classified by the 
FTSE Benchmark (``Emerging Markets Securities''); \20\ (ii)

[[Page 19257]]

gold futures; (iii) Underlying Funds, ADRs, Global Depository Receipts 
(``GDRs''), American Depositary Shares (``ADS''), European Depositary 
Receipts (``EDRs''), and International Depository Receipts (``IDRs,'' 
and together with ADRs, GDRs, EDRs, and ADS, ``Depositary Receipts'') 
\21\ that provide exposure to Emerging Markets Securities; (iv) 
ETFs,\22\ commodity-related pooled vehicles,\23\ and ETNs \24\ that 
provide exposure to gold; and (v) futures that provide exposure to 
Emerging Markets Securities. The Fund will seek to achieve a similar 
level of volatility as that of the FTSE Benchmark, although there is no 
assurance it will do so. The Sub-Adviser will continuously monitor the 
Fund's holdings in order to enhance performance while still providing 
approximately equal notional exposure to equity securities and gold 
futures contracts.
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    \19\ The FTSE Benchmark seeks to reflect the returns of a 
portfolio of Emerging Markets Securities (as defined below), hedged 
with a long gold futures overlay. Specifically, the FTSE Benchmark 
measures the total return performance of a hypothetical portfolio 
consisting of Emerging Markets Securities and a long position in 
gold futures, the notional value of which is comparable to the value 
of the FTSE Benchmark's equity component.
    \20\ The non-U.S. equity securities in this Fund's portfolio 
will meet the following criteria on a continual basis: (1) non-U.S. 
equity securities each shall have a minimum market value of at least 
$100 million; (2) non-U.S. equity securities each shall have a 
minimum global monthly trading volume of 250,000 shares, or minimum 
global notional volume traded per month of $25,000,000, averaged 
over the last six months; (3) the most heavily weighted non-U.S. 
equity security shall not exceed 25% of the weight of the Fund's 
entire portfolio, and, to the extent applicable, the five most 
heavily weighted non-U.S. equity securities shall not exceed 60% of 
the weight of the Fund's entire portfolio; and (4) each non-U.S. 
equity security shall be listed and traded on an exchange that has 
last-sale reporting. For purposes of this filing, the term ``non-
U.S. equity securities'' includes the following: Common stocks and 
preferred securities of foreign corporations; warrants; convertible 
securities; master limited partnerships (``MLPs''); rights; and 
Depositary Receipts (as defined below, excluding Depositary Receipts 
that are registered under the Act and non-exchange-listed American 
Depositary Receipts (``ADRs'')).
    \21\ Non-exchange-listed ADRs will not exceed 10% of the Fund's 
net assets.
    \22\ See supra note 16.
    \23\ See supra note 17.
    \24\ See supra note 18.
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    The Fund will not directly hold gold futures contracts, commodity-
related pooled vehicles, and options on commodity futures (as 
referenced below). Rather, the Fund expects to gain exposure to these 
instruments by investing up to 25% of its total assets, as measured at 
the end of every quarter of the Fund's taxable year, in a wholly-owned 
and controlled Cayman Islands subsidiary (``Subsidiary''). The 
Subsidiary will be advised by the Adviser, and the Fund's investment in 
the Subsidiary will primarily be intended to provide the Fund with 
exposure to the price of gold.

B. Exchange's Description of the Funds' Other Investments

    While each Fund will invest at least 80% of its net assets in the 
securities and financial instruments described above, each Fund may 
invest its remaining assets in the securities and financial instruments 
described below.
    In addition to the exchange-traded equity securities described 
above for the Funds, the Funds may invest in the following exchange-
traded equity securities: exchange-traded common stock (other than 
large-cap U.S. stocks or Emerging Markets Securities, respectively, for 
the respective Funds); exchange-traded preferred stock; exchange-traded 
warrants; exchange-traded MLPs; exchange-traded rights; and exchange-
traded convertible securities.
    In addition to the futures transactions described above, the Funds 
may engage in other index, commodity, and currency futures 
transactions, and may engage in exchange-traded options transactions on 
such futures. The Funds may use futures contracts and related options 
for bona fide hedging; to offset changes in the value of securities 
held or expected to be acquired or be disposed of; to gain exposure to 
a particular market, index, or instrument; or for other risk management 
purposes. The Funds also may purchase and write exchange-traded and 
over-the-counter put and call options on securities, securities 
indices, and currencies. A Fund may purchase put and call options on 
securities to protect against a decline in the market value of the 
securities in its portfolio or to anticipate an increase in the market 
value of securities that a Fund may seek to purchase in the future.
    The Funds may invest in restricted (Rule 144A) securities.
    Each Fund will also invest in cash and cash equivalents \25\ to 
collateralize its exposure to futures contracts and for investment 
purposes. Each Fund may enter into repurchase agreements with financial 
institutions, and each Fund may enter into reverse repurchase 
agreements as part of a Fund's investment strategy. In addition, the 
Funds may invest in U.S. government securities, namely, U.S. Treasury 
obligations,\26\ U.S. government agency securities, and U.S. Treasury 
zero-coupon bonds (``Fixed Income Instruments'').
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    \25\ For purposes of this filing, cash equivalents include 
short-term instruments (instruments with maturities of less than 3 
months) of the following types: (i) U.S. Government securities, 
including bills, notes, and bonds differing as to maturity and rates 
of interest, which are either issued or guaranteed by the U.S. 
Treasury or by U.S. Government agencies or instrumentalities; (ii) 
certificates of deposit issued against funds deposited in a bank or 
savings and loan association; (iii) bankers' acceptances; (iv) 
repurchase agreements and reverse repurchase agreements; (v) bank 
time deposits; (vi) commercial paper; and (vii) money market funds.
    \26\ U.S. Treasury obligations consist of bills, notes, and 
bonds issued by the U.S. Treasury and separately traded interest and 
principal component parts of such obligations that are transferable 
through the federal book-entry system known as Separately Traded 
Registered Interest and Principal Securities and Treasury Receipts.
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    The Funds will invest in the securities of other investment 
companies, including the Underlying Funds, to the extent that such an 
investment would be consistent with the requirements of Section 
12(d)(1) of the 1940 Act, or any rule, regulation, or order of the 
Commission or interpretation thereof.

C. Exchange's Description of the Funds' Subsidiaries

    According to the Exchange, each Fund will achieve commodities 
exposure through investment in its respective Subsidiary. Such 
investment may not exceed 25% of a Fund's total assets, as measured at 
the end of every quarter of a Fund's taxable year. Each Subsidiary will 
invest in gold futures contracts, commodity-related pooled vehicles, 
options on commodity futures, and other investments (cash, cash 
equivalents, and Fixed Income Instruments with less than one year to 
maturity) intended to serve as margin or collateral or otherwise 
support the Subsidiary's derivatives positions. Unlike a Fund, the 
Subsidiary may invest without limitation in commodity futures and may 
use leveraged investment techniques. The Subsidiaries otherwise are 
subject to the same general investment policies and restrictions as the 
Funds.\27\
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    \27\ According to the Exchange, the Subsidiaries are not 
registered under the 1940 Act. As an investor in its Subsidiary, 
each Fund, as the Subsidiary's sole shareholder, would not have the 
protections offered to investors in registered investment companies. 
However, because a Fund would wholly own and control the Subsidiary, 
and a Fund and its Subsidiary would be managed by the Adviser, it is 
unlikely that the Subsidiary would take action contrary to the 
interests of a Fund or a Fund's shareholders. A Fund's Board of 
Trustees has oversight responsibility for the investment activities 
of the Fund, including its investments in its Subsidiary, and the 
Fund's role as the sole shareholder of its Subsidiary. Also, in 
managing a Subsidiary's portfolio, the Adviser and Sub-Adviser would 
be subject to the same investment restrictions and operational 
guidelines that apply to the management of a Fund.
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D. Exchange's Description of the Funds' Investment Restrictions

    Each Fund may invest 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 illiquid by the Adviser,\28\ 
consistent with Commission

[[Page 19258]]

guidance. Each 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 a Fund's net assets are invested in illiquid assets. 
Illiquid assets include securities subject to contractual or other 
restrictions on resale and other instruments that lack readily 
available markets as determined in accordance with Commission staff 
guidance.
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    \28\ In reaching liquidity decisions, the Adviser may consider 
the following factors: the frequency of trades and quotes for the 
security; the number of dealers wishing to purchase or sell the 
security and the number of other potential purchasers; dealer 
undertakings to make a market in the security; and the nature of the 
security and the nature of the marketplace in which it trades (e.g., 
the time needed to dispose of the security, the method of soliciting 
offers, and the mechanics of transfer).
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    Each Fund will concentrate its investments (i.e., hold 25% or more 
of its total assets) in a particular industry or group of industries to 
approximately the same extent that the respective benchmark 
concentrates in an industry or group of industries, and each Fund will 
be classified as a non-diversified investment company under the 1940 
Act.
    Each Fund will seek to qualify for treatment as a Regulated 
Investment Company under the Internal Revenue Code.
    Each Fund's investments will be consistent with its investment 
objective and will not be used to enhance leverage.

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 Act and 
the rules and regulations thereunder applicable to a national 
securities exchange.\29\ In particular, the Commission finds that the 
proposed rule change, as modified by Amendment Nos. 1, 2, 3, and 4, is 
consistent with Section 6(b)(5) of the Act,\30\ which requires, among 
other things, that the Exchange's rules be designed to promote just and 
equitable principles of trade, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest.
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    \29\ 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).
    \30\ 15 U.S.C. 78f(b)(5).
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    The Commission also finds that the proposal to list and trade the 
Shares on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of 
the Act,\31\ 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.
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    \31\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    Quotation and last-sale information for the Shares will be 
available via the Consolidated Tape Association (``CTA'') high-speed 
line. 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.\32\ On each business day, before commencement of trading in 
the Shares in the Core Trading Session on the Exchange, the Funds' Web 
site will disclose the Disclosed Portfolio \33\ that will form the 
basis for each Fund's NAV calculation at the end of the business 
day.\34\ The Funds' Web site will also include a form of the prospectus 
for the Funds and additional data relating to NAV and other applicable 
quantitative information. 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. Pricing information 
regarding each asset class in which a Fund will invest will generally 
be available through nationally recognized data service providers 
through subscription agreements. Quotation and last-sale information 
for the Underlying Funds, ETNs, and other U.S. exchange-traded 
equities, will be available via the CTA high-speed line, and, for 
equity securities that are U.S. exchange-listed, will be available from 
the national securities exchange on which they are listed. With respect 
to non-U.S. exchange-listed equity securities, intra-day, closing, and 
settlement prices of common stocks and other equity securities 
(including shares of preferred securities and non-U.S. Depositary 
Receipts) will be available from the foreign exchanges on which such 
securities trade, as well as from major market data vendors. Price 
information for money market funds will be available from the 
investment company's Web site and from market data vendors. Price 
information relating to cash, cash equivalents (other than money market 
funds), futures, options, options on futures, Depositary Receipts, Rule 
144A securities, repurchase agreements, reverse repurchase agreements, 
the S&P Benchmark, and the FTSE Benchmark will be available from major 
market data vendors. Information relating to futures and exchange-
traded options on futures also will be available from the exchange on 
which such instruments are traded, and information relating to U.S. 
exchange-traded options will be available via the Options Price 
Reporting Authority.

[[Page 19259]]

Intra-day and closing price information from brokers and dealers or 
independent pricing services will be available for Fixed Income 
Instruments.
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    \32\ According to the Exchange, several major market data 
vendors display or make widely available Portfolio Indicative Values 
taken from CTA or other data feeds.
    \33\ The term ``Disclosed Portfolio'' is defined in NYSE Arca 
Equities Rule 8.600(c)(2). On a daily basis, the Funds will also 
disclose on the Funds' Web site the following information regarding 
each portfolio holding of a Fund and its respective Subsidiary, 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); 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.
    \34\ The NAV for the Shares will be calculated after 4:00 p.m. 
Eastern Time each trading day. According to the Exchange, in 
computing a Fund's NAV, a Fund's securities holdings will be valued 
based on their last readily available market price. Price 
information on exchange-listed securities, including common stocks, 
preferred stocks, warrants, convertible securities, MLPs, rights, 
Underlying Funds, ETNs, Depositary Receipts, and commodity-related 
pooled vehicles in which a Fund invests, will be taken from the 
exchange where the security is primarily traded. Other portfolio 
securities and assets for which market quotations are not readily 
available or determined to not represent the current fair value will 
be valued based on fair value as determined in good faith by the 
Sub-Adviser in accordance with procedures adopted by the Board. 
Futures contracts and exchange-traded options on futures will be 
valued at the settlement or closing price determined by the 
applicable exchange. Exchange-traded options contracts will be 
valued at their most recent sale price. Over-the-counter options 
normally will be valued on the basis of quotes obtained from a 
third-party broker-dealer who makes markets in such securities or on 
the basis of quotes obtained from a third-party pricing service. 
Cash and cash equivalents (with the exception of money market funds) 
may be valued at market values, as furnished by recognized dealers 
in such securities or assets. Cash equivalents (with the exception 
of money market funds) also may be valued on the basis of 
information furnished by an independent pricing service that uses a 
valuation matrix which incorporates both dealer-supplied valuations 
and electronic data processing techniques. Shares of money market 
funds held by each Fund will be valued at their respective NAVs. 
Fixed Income Instruments, Rule 144A securities, repurchase 
agreements, and reverse repurchase agreements will generally be 
valued at bid prices received from independent pricing services as 
of the announced closing time for trading in fixed-income 
instruments in the respective market. Non-exchange-traded ADRs will 
be valued at the last quoted mid-price on the primary market on 
which they are traded.
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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 Exchange will obtain a representation from the issuer of 
the Shares of each 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. Trading in Shares of each 
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.\35\ Moreover, 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 Funds may be halted. The Exchange represents that it has a general 
policy prohibiting the distribution of material, non-public information 
by its employees, and that neither the Adviser nor the Sub-Adviser is a 
broker-dealer or affiliated with a broker-dealer.\36\ The Exchange also 
represents that, the Adviser, as the Reporting Authority, will 
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 a Fund's portfolio.
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    \35\ These may include: (1) The extent to which trading is not 
occurring in the securities or the financial instruments 
constituting the Disclosed Portfolio of the Funds; or (2) whether 
other unusual conditions or circumstances detrimental to the 
maintenance of a fair and orderly market are present.
    \36\ See supra note 13 and accompanying text. According to the 
Exchange, an investment adviser to an open-end fund is required to 
be registered under the Investment Advisers Act of 1940 (``Advisers 
Act''). As a result, the Adviser and Sub-Adviser and their related 
personnel will be 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 violations, 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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    The Exchange represents that it deems the Shares to be equity 
securities, thus rendering trading in the Shares subject to the 
Exchange's existing rules governing the trading of equity securities. 
In support of this proposal, the Exchange has made the following 
representations:
    (1) The Shares will conform to the initial and continued listing 
criteria under NYSE Arca Equities Rule 8.600.
    (2) The Exchange has appropriate rules to facilitate transactions 
in the Shares during all trading sessions.
    (3) Trading in the Shares will be subject to the existing trading 
surveillances, which 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.\37\
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    \37\ The Exchange states that the Financial Industry Regulatory 
Authority (``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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    (4) The regulatory staff of the Exchange or FINRA, on behalf of the 
Exchange, will communicate as needed regarding trading in the Shares, 
certain exchange-listed equity securities, certain futures, certain 
options on futures, and certain exchange-traded options with other 
markets and other entities that are members of the Intermarket 
Surveillance Group (``ISG''), and FINRA, on behalf of the Exchange, may 
obtain information regarding trading in such securities and financial 
instruments from such markets and other entities. In addition, the 
regulatory staff of the Exchange may obtain information regarding 
trading in such securities and financial instruments from markets and 
other entities that are members of ISG or with which the Exchange has 
in place a comprehensive surveillance sharing agreement. FINRA, on 
behalf of the Exchange, also is able to access, as needed, trade 
information for certain fixed income securities held by a Fund reported 
to FINRA's Trade Reporting and Compliance Engine.
    (5) Not more than 10% of the net assets of a Fund in the aggregate 
invested in futures contracts or options contracts shall consist of 
futures contracts or options contracts whose principal market is not a 
member of ISG or is a market with which the Exchange does not have a 
comprehensive surveillance sharing agreement.
    (6) Prior to the commencement of trading of the Shares, the 
Exchange will inform its ETP Holders in a Bulletin of the special 
characteristics and risks associated with trading the Shares. The 
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 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 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 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.
    (7) For initial and continued listing, the Funds will be in 
compliance with Rule 10A-3 under the Act,\38\ as provided by NYSE Arca 
Equities Rule 5.3.
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    \38\ 17 CFR 240.10A-3.
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    (8) The REX Gold Hedged S&P 500 ETF will not invest in non-U.S. 
stocks.
    (9) The non-U.S. equity securities in the REX Gold Hedged FTSE 
Emerging Markets ETF portfolio will meet the following criteria on a 
continual basis: (i) Non-U.S. equity securities each shall have a 
minimum market value of at least $100 million; (ii) non-U.S. equity 
securities each shall have a minimum global monthly trading volume of 
250,000 shares, or minimum global notional volume traded per month of 
$25,000,000, averaged over the last six months; (iii) the most heavily 
weighted non-U.S. equity security shall not exceed 25% of the weight of 
the Fund's entire portfolio, and, to the extent applicable, the five 
most heavily weighted non-U.S. equity securities shall not exceed 60% 
of the weight of the Fund's entire portfolio; and (iv) each non-U.S. 
equity security shall be listed and traded on an exchange that has 
last-sale reporting. In addition, non-exchange-listed ADRs will not 
exceed 10% of this Fund's net assets.
    (10) While a Fund may invest in inverse ETFs and ETNs, a Fund will 
not invest in leveraged (e.g., 2X, -2X, 3X or -3X) ETFs and ETNs.

[[Page 19260]]

    (11) Each Fund will achieve commodities exposure through investment 
in a Subsidiary, and such investment may not exceed 25% of a Fund's 
total assets, as measured at the end of every quarter of a Fund's 
taxable year.
    (12) Each Fund may invest 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 illiquid by the Adviser, 
consistent with Commission guidance.
    (13) A minimum of 100,000 Shares for each Fund will be outstanding 
at the commencement of trading on the Exchange.

The Exchange represents that all statements and representations made in 
the filing regarding (a) the description of the portfolio, (b) 
limitations on portfolio holdings or reference assets, or (c) the 
applicability of Exchange rules and surveillance procedures constitute 
continued listing requirements for listing the Shares on the Exchange. 
In addition, the issuer has represented to the Exchange that it will 
advise the Exchange of any failure by the Funds to comply with the 
continued listing requirements, and, pursuant to its obligations under 
Section 19(g)(1) of the Act, the Exchange will monitor for compliance 
with the continued listing requirements.\39\ If a Fund is not in 
compliance with the applicable listing requirements, the Exchange will 
commence delisting procedures under NYSE Arca Equities Rule 5.5(m). 
This approval order is based on all of the Exchange's representations, 
including those set forth above, in the Notice, and in Amendment Nos. 
1, 2, 3, and 4 to the proposed rule change. The Commission notes that 
the Funds and the Shares must comply with the requirements of NYSE Arca 
Equities Rule 8.600, including those set forth in this proposed rule 
change, to be listed and traded on the Exchange on an initial and 
continuing basis.
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    \39\ The Commission notes that certain other proposals for the 
listing and trading of managed fund shares include a representation 
that the exchange will ``surveil'' for compliance with the continued 
listing requirements. See, e.g., Amendment No. 2 to SR-BATS-2016-04, 
available at: http://www.sec.gov/comments/sr-bats-2016-04/bats201604-2.pdf. In the context of this representation, it is the 
Commission's view that ``monitor'' and ``surveil'' both mean ongoing 
oversight of the Fund's compliance with the continued listing 
requirements. Therefore, the Commission does not view ``monitor'' as 
a more or less stringent obligation than ``surveil'' with respect to 
the continued listing requirements.
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    For the foregoing reasons, the Commission finds that the proposed 
rule change, as modified by Amendment Nos. 1, 2, 3, and 4 thereto, is 
consistent with Section 6(b)(5) of the Act \40\ and Section 
11A(a)(1)(C)(iii) of the Act \41\ and the rules and regulations 
thereunder applicable to a national securities exchange.
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    \40\ 15 U.S.C. 78f(b)(5).
    \41\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\42\ that the proposed rule change (SR-NYSEArca-2015-107), as 
modified by Amendment Nos. 1, 2, 3, and 4 thereto, be, and it hereby 
is, approved.
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    \42\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\43\
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    \43\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-07511 Filed 4-1-16; 8:45 am]
 BILLING CODE 8011-01-P