[Federal Register Volume 81, Number 69 (Monday, April 11, 2016)]
[Notices]
[Pages 21420-21427]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-08182]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77522; File No. SR-NYSEArca-2015-125]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Amendment Nos. 1, 2, and 3 and Order Granting Accelerated Approval 
of a Proposed Rule Change, as Modified by Amendment Nos. 1, 2, and 3, 
To List and Trade Shares of RiverFront Dynamic Unconstrained Income ETF 
and RiverFront Dynamic Core Income ETF Under NYSE Arca Equities Rule 
8.600

April 5, 2016.

I. Introduction

    On December 15, 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'' or 
``Exchange Act'')\1\ and Rule 19b-4 thereunder,\2\ a proposed rule 
change to list and trade shares (``Shares'') of the following under 
NYSE Arca Equities Rule 8.600: RiverFront Dynamic Unconstrained Income 
ETF and RiverFront Dynamic Core Income ETF (each a ``Fund,'' and 
collectively, ``Funds''). The Commission published notice of the 
proposed rule change in the Federal Register on January 6, 2016.\3\ On 
January 19, 2016, and January 29, 2016, the Exchange submitted 
Amendment Nos. 1 and 2, respectively, to the proposed rule change.\4\ 
On February 19, 2016, pursuant to Section 19(b)(2) of the Act,\5\ the 
Commission designated a longer period within which to either approve 
the proposed rule change, disapprove the proposed rule change, or 
institute proceedings to determine whether to disapprove the proposed 
rule change.\6\ On April 1, 2016, the Exchange submitted Amendment No. 
3 to the proposed rule change.\7\ The Commission is publishing this 
notice to solicit comment on Amendment Nos. 1, 2, and 3 to the proposed 
rule change from interested persons and is approving the proposed rule 
change, as modified by Amendment Nos. 1, 2, and 3, on an accelerated 
basis.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 34-76798 (December 
30, 2015), 81 FR 526 (January 6, 2016) (NYSEArca-2015-125) 
(``Notice'').
    \4\ Amendment No. 1 replaced and superseded the original filing 
in its entirety. Amendment No. 1 is available at https://www.sec.gov/comments/sr-nysearca-2015-125/nysearca2015125.shtml. 
Amendment No. 2 replaced and superseded the original filing, as 
modified by Amendment No. 1, in its entirety. Amendment No. 2 is 
available at https://www.sec.gov/comments/sr-nysearca-2015-125/nysearca2015125.shtml.
    \5\ 15 U.S.C. 78s(b)(2).
    \6\ See Securities Exchange Act Release No. 77184, 81 FR 9532 
(February 25, 2016). The Commission designated April 5, 2016, as the 
date by which it should approve, disapprove, or institute 
proceedings to determine whether to disapprove the proposed rule 
change.
    \7\ In Amendment No. 3, the Exchange: (i) Revised the 
description of the Funds' portfolio construction and asset 
allocation methodology; (ii) clarified the percentage limitations on 
investments in the securities of issuers located in emerging markets 
for each Fund, and (iii) added representations that (a) all 
statements and representations made in the filing 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; and (b) 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 obligation under section 
19(g)(1) of the Exchange Act, the Exchange will, monitor for 
compliance with its continued listing requirements, and if the Funds 
are not in compliance with the applicable listing requirements, the 
Exchange will commence delisting procedures under the Exchange's 
rules. Amendment No. 3 is available at https://www.sec.gov/comments/sr-nysearca-2015-125/nysearca2015125-3.pdf.
---------------------------------------------------------------------------

II. The Exchange's Description of the Proposal \8\
---------------------------------------------------------------------------

    \8\ Additional information regarding the Trust (as defined 
herein), the Funds, 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 9.
---------------------------------------------------------------------------

    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 Funds are each a series of ALPS ETF Trust (``Trust''), 
a statutory trust organized under the laws of the State of Delaware and 
registered with the Commission as an open-end management investment 
company.\9\ The Funds will be managed by ALPS Advisors, Inc. 
(``Adviser''), and RiverFront Investment Group, LLC (``Sub-Adviser'') 
will be the investment sub-adviser for the Funds.\10\
---------------------------------------------------------------------------

    \9\ The Exchange states that the Trust is registered under the 
1940 Act. According to the Exchange, on September 1, 2015, the Trust 
filed with the Commission an amendment to its registration statement 
on Form N-1A under the Securities Act of 1933 (15 U.S.C. 77a) 
(``Securities Act'') and the 1940 Act relating to the Funds (File 
Nos. 333-148826 and 811-22175) (``Registration Statement''). The 
Exchange states that the Commission has issued an order granting 
certain exemptive relief to the Trust and the Adviser (as defined 
herein) under the 1940 Act. See Investment Company Act Release No. 
30553 (June 11, 2013) (File No. 812-13884) (``Exemptive Order''). 
The Exchange states that the Funds will be offered in reliance upon 
the Exemptive Order issued to the Trust and the Adviser.
    \10\ The Exchange states that neither the Adviser nor the Sub-
Adviser is registered as a broker-dealer. The Exchange states that 
each of the Adviser and Sub-Adviser is affiliated with a broker-
dealer and has implemented and will maintain a fire wall with 
respect to its broker-dealer affiliate regarding access to 
information concerning the composition of and/or changes to a Fund 
portfolio. In the event (a) the Adviser or Sub-Adviser becomes newly 
affiliated with a broker-dealer, or (b) any new adviser or sub-
adviser becomes affiliated with a broker-dealer, such adviser or 
sub-adviser 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 such portfolio.
---------------------------------------------------------------------------

A. RiverFront Dynamic Unconstrained Income ETF

1. Principal Investment Strategies
    The Exchange states that the investment objective of the Fund will 
be to seek total return with an emphasis on income as the source of 
that total return. Under normal circumstances, the Fund will invest at 
least 65% of its assets in the securities and financial instruments 
described below.\11\ The average maturity or duration of the Fund's 
portfolio of Fixed Income Securities (as described below) will vary 
based on the Sub-Adviser's assessment of economic and market 
conditions; however, the Sub-Adviser intends to manage the Fund's 
portfolio so that it has an average duration of between two and ten 
years, under normal circumstances.
---------------------------------------------------------------------------

    \11\ The term ``under normal circumstances'' includes, but is 
not limited to, the absence of extreme volatility or trading halts 
in the securities markets or the financial markets generally; 
circumstances under which a Fund's investments are made for 
temporary defensive purposes; 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 Exchange, the Fund's portfolio is constructed 
through a two-step process. The first step is setting the strategic 
allocation among different fixed income asset classes, with the 
objective being to construct an allocation that is designed to balance 
the probability of upside returns with

[[Page 21421]]

downside risks for investors with a five-year time horizon for their 
investments. The second step is tactically adjusting these allocations 
as market conditions warrant and determining security selection within 
those asset classes in order to maximize potential returns over time.
    The Exchange states that the strategic allocation across long-term, 
medium-term and short-term investment grade securities, long-term and 
short-term high yield securities, and emerging market debt is adjusted 
at least annually or as market conditions warrant and is determined by 
a quantitative methodology. This methodology models historical returns 
as a function of initial valuation conditions and creates estimates of 
potential returns and downside risks consistent with historical market 
behavior. The capital market assumptions produced by this methodology 
are then incorporated into a proprietary Mean Reversion Optimization 
(MRO) process to produce the model weighting for each of the major 
fixed income asset classes.
    The Fund will seek to achieve its investment objective by investing 
in a global portfolio of ``Fixed Income Securities'' (as described 
below) of various maturities, ratings, and currency denominations. The 
Fund intends to utilize various investment strategies in a broad array 
of fixed income sectors. The Fund will allocate its investments based 
upon the analysis of the Sub-Adviser of the pertinent economic and 
market conditions, as well as yield, maturity, credit and currency 
considerations.
    For purposes of this filing, Fixed Income Securities include the 
following: Corporate bonds, notes, and debentures; securities issued by 
the U.S. government or its agencies, instrumentalities, or sponsored 
corporations (including those not backed by the full faith and credit 
of the U.S. government); agency and non-agency mortgage-backed 
securities (``MBS'') and asset-backed securities (``ABS''); \12\ 
municipal securities; \13\ U.S. agency mortgage pass-through 
securities; \14\ convertible securities; \15\ preferred stocks; \16\ 
commercial instruments; \17\ variable or floating rate instruments and 
variable rate demand instruments; \18\ zero-coupon and pay-in-kind 
securities; \19\ bank instruments, including certificates of deposit, 
time deposits, and bankers' acceptances from U.S. banks; and 
participations in and assignments of bank loans or corporate loans, 
\20\ which loans include senior loans, syndicated bank loans, junior 
loans, bridge loans, unfunded commitments, revolving credit facilities, 
and participation interests.\21\
---------------------------------------------------------------------------

    \12\ The MBS in which a Fund may invest includes residential 
mortgage-backed securities (``RMBS''), collateralized mortgage 
obligations (``CMOs''), and commercial mortgage-backed securities 
(``CMBS''). The ABS in which the Fund may invest includes 
collateralized debt obligations (``CDOs''). CDOs include 
collateralized bond obligations (``CBOs''), collateralized loan 
obligations (``CLOs''), and other similarly structured securities. A 
CBO is a trust which is backed by a diversified pool of high-risk, 
below investment-grade, fixed income securities. A CLO is a trust 
typically collateralized by a pool of loans, which may include 
domestic and foreign senior secured loans, senior unsecured loans, 
and subordinate corporate loans, including loans that may be rated 
below investment grade or equivalent unrated loans. Specifically, 
the Exchange notes that such ABS are bonds backed by pools of loans 
or other receivables and are securitized by a wide variety of assets 
that are generally broken into three categories: consumer, 
commercial, and corporate. The consumer category includes credit 
card, auto loan, student loan, and timeshare loan ABS. The 
commercial category includes trade receivables, equipment leases, 
oil receivables, film receivables, rental cars, aircraft 
securitizations, ship and container securitizations, whole business 
securitizations, and diversified payment right securitizations. 
Corporate ABS includes cash flow collateralization loan obligations, 
collateralized by both middle market and broadly syndicated bank 
loans. ABS are issued through special purpose vehicles that are 
bankruptcy remote from the issuer of the collateral. The credit 
quality of an ABS tranche depends on the performance of the 
underlying assets and the structure. To protect ABS investors from 
the possibility that some borrowers could miss payments or even 
default on their loans, ABS includes various forms of credit 
enhancement.
    \13\ The municipal securities which each Fund may purchase 
include general obligation bonds and limited obligation bonds (or 
revenue bonds), including industrial development bonds issued 
pursuant to former federal tax law, and lease obligations.
    \14\ Each Fund will seek to obtain exposure to U.S. agency 
mortgage pass-through securities primarily through the use of ``to-
be-announced'' or ``TBA transactions.'' ``TBA'' refers to a commonly 
used mechanism for the forward settlement of U.S. agency mortgage 
pass-through securities, and not to a separate type of mortgage-
backed security. Most transactions in mortgage pass-through 
securities occur through the use of TBA transactions. TBA 
transactions generally are conducted in accordance with widely-
accepted guidelines which establish commonly observed terms and 
conditions for execution, settlement and delivery.
    \15\ Convertible securities include bonds, debentures, notes, 
preferred stocks, and other securities that may be converted into a 
prescribed amount of common stock or other equity securities at a 
specified price and time. The holder of convertible securities is 
entitled to receive interest paid or accrued on debt, or dividends 
paid or accrued on preferred stock, until the security matures or is 
converted.
    \16\ The preferred stocks in which each Fund may invest may be 
either exchange-traded or traded over-the-counter.
    \17\ Commercial instruments include commercial paper and other 
short-term corporate instruments.
    \18\ Variable or floating interest rates are readjusted on set 
dates (such as the last day of the month or calendar quarter) in the 
case of variable rates or whenever a specified interest rate change 
occurs in the case of a floating rate instrument. The terms of such 
demand instruments require payment of principal and accrued interest 
by the issuer, a guarantor and/or a liquidity provider. The Sub-
Adviser will monitor the pricing, quality and liquidity of the 
variable or floating rate securities held by the Fund.
    \19\ Zero-coupon or pay-in-kind securities are debt securities 
that do not make regular cash interest payments. Zero-coupon 
securities are sold at a deep discount to their face value. Pay-in-
kind securities pay interest through the issuance of additional 
securities.
    \20\ The Adviser expects that under normal market conditions, 
the Fund generally will seek to invest at least 80% of its corporate 
loan assets in issuances that have at least $100,000,000 par amount 
outstanding (if tied to developed countries) and at least 
$200,000,000 par amount outstanding (if tied to emerging market 
countries).
    \21\ Participation interests generally will be acquired from a 
commercial bank or other financial institution (a ``Lender'') or 
from other holders of a participation interest (a ``Participant''). 
The purchase of a participation interest either from a Lender or a 
Participant will not result in any direct contractual relationship 
with the borrowing company (the ``Borrower''). The Fund generally 
will have no right directly to enforce compliance by the Borrower 
with the terms of the credit agreement. Instead, the Fund will be 
required to rely on the Lender or the Participant that sold the 
participation interest, both for the enforcement of the Fund's 
rights against the Borrower and for the receipt and processing of 
payments due to the Fund under the loans. Under the terms of a 
participation interest, the Fund may be regarded as a member of the 
Participant, and thus the Fund is subject to the credit risk of both 
the Borrower and a Participant. Participation interests are 
generally subject to restrictions on resale.
---------------------------------------------------------------------------

    The Fund may purchase Fixed Income Securities issued by U.S. or 
foreign corporations \22\ or financial institutions.
---------------------------------------------------------------------------

    \22\ The Fund will invest only in securities that the Adviser or 
Sub-Adviser deems to be sufficiently liquid. While corporate debt 
securities tied to developed market countries generally must have 
$100 million or more par amount outstanding and significant par 
value traded to be considered as an eligible investment, at least 
75% of issues of such corporate debt held by the Fund will have $100 
million or more par amount outstanding. While corporate debt 
securities tied to emerging market countries generally must have 
$200 million or more par amount outstanding and significant par 
value traded to be considered as an eligible investment, at least 
75% of issues of such corporate debt held by the Fund will have $200 
million or more par amount outstanding.
---------------------------------------------------------------------------

    The Fund may purchase securities issued or guaranteed by the U.S. 
or foreign governments (including foreign states, provinces, and 
municipalities) or their agencies and instrumentalities or issued or 
guaranteed by international organizations designated or supported

[[Page 21422]]

by multiple government entities to promote economic reconstruction or 
development.
    The Fund may invest in MBS issued or guaranteed by federal agencies 
and/or U.S. government sponsored instrumentalities, such as the 
Government National Mortgage Administration (``Ginnie Mae''), the 
Federal Housing Administration (``FHA''), the Federal National Mortgage 
Association (``Fannie Mae''), and the Federal Home Loan Mortgage 
Corporation (``Freddie Mac''). The MBS in which the Fund may invest 
will be either pass-through securities or CMOs and may be TBA 
transactions.\23\
---------------------------------------------------------------------------

    \23\ Pass-through securities represent a right to receive 
principal and interest payments collected on a pool of mortgages, 
which are passed through to security holders. CMOs are created by 
dividing the principal and interest payments collected on a pool of 
mortgages into several revenue streams (tranches) with different 
priority rights to portions of the underlying mortgage payments. The 
Fund will not invest in CMO tranches which represent a right to 
receive interest only (``IOs''), principal only (``POs'') or an 
amount that remains after other floating-rate tranches are paid (an 
inverse floater).
---------------------------------------------------------------------------

    The Fund may purchase or sell securities on a when-issued,\24\ 
delayed delivery, or forward commitment basis, and may enter into 
repurchase and reverse repurchase agreements.\25\
---------------------------------------------------------------------------

    \24\ Purchasing securities on a ``when-issued'' basis means that 
the date for delivery of and payment for the securities is not fixed 
at the date of purchase, but is set after the securities are issued. 
The payment obligation and, if applicable, the interest rate that 
will be received on the securities are fixed at the time the buyer 
enters into the commitment. The Fund will only make commitments to 
purchase such securities with the intention of actually acquiring 
such securities, but the Fund may sell these securities before the 
settlement date if it is deemed advisable.
    \25\ Repurchase agreements are agreements pursuant to which 
securities are acquired by the Fund from a third party with the 
understanding that they will be repurchased by the seller at a fixed 
price on an agreed date. These agreements may be made with respect 
to any of the portfolio securities in which the Fund is authorized 
to invest. Repurchase agreements may be characterized as loans 
secured by the underlying securities. Reverse repurchase agreements 
involve the sale of securities with an agreement to repurchase the 
securities at an agreed-upon price, date and interest payment and 
have the characteristics of borrowing. The securities purchased with 
the funds obtained from the agreement and securities collateralizing 
the agreement will have maturity dates no later than the repayment 
date.
---------------------------------------------------------------------------

    The Fund may invest in exchange-traded funds (``ETFs'') \26\ and/or 
exchange-traded closed-end funds that invest in Fixed Income 
Securities.
---------------------------------------------------------------------------

    \26\ For purposes of this filing, ETFs consist of 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. The Funds will not invest in 
leveraged or leveraged inverse ETFs.
---------------------------------------------------------------------------

    The Fund may invest without limitation in U.S. dollar-denominated 
securities of foreign issuers in developed markets. The Fund can invest 
up to 50% of its assets in non-dollar-denominated securities. The Fund 
can invest up to 50% of its assets in the securities of issuers located 
in emerging markets (either US dollar-denominated or non-dollar-
denominated). The Sub-Adviser may attempt to reduce currency risk by 
entering into contracts with banks, brokers, or dealers to purchase or 
sell securities or foreign currencies at a future date (``forward 
contracts'').\27\
---------------------------------------------------------------------------

    \27\ A foreign currency forward contract is a negotiated 
agreement between the contracting parties to exchange a specified 
amount of currency at a specified future time at a specified rate. 
The rate can be higher or lower than the spot rate between the 
currencies that are the subject of the contract.
---------------------------------------------------------------------------

    The Fund may enter into cleared and over-the-counter (``OTC'') 
total return swap agreements that effectively bundle the purchase of 
foreign bonds and the hedging of foreign currency into a single 
transaction.\28\
---------------------------------------------------------------------------

    \28\ See ``The Funds' Use of Derivatives,'' Section II. D. 
infra.
---------------------------------------------------------------------------

    The Fund may invest in securities that are offered pursuant to Rule 
144A under the Securities Act.
    The Fund may also use leverage to the extent permitted under the 
1940 Act by entering into reverse repurchase agreements and borrowing 
transactions (principally lines of credit) for investment purposes. The 
Fund's exposure to reverse repurchase agreements will be covered by 
securities having a value equal to or greater than such commitments. 
The Exchange represents that, under the 1940 Act, reverse repurchase 
agreements are considered borrowings. Although there is no limit on the 
percentage of Fund assets that can be used in connection with reverse 
repurchase agreements, the Fund does not expect to engage, under normal 
circumstances, in reverse repurchase agreements with respect to more 
than 33\1/3\% of its assets.
2. Other Investments
    While the Fund will, under normal circumstances, invest at least 
65% of its assets in the securities and financial instruments described 
above, the Fund may invest its remaining assets in the securities and 
financial instruments described below.
    The Fund may invest in money market instruments, including other 
funds which invest exclusively in money market instruments. The Fund 
may invest in structured notes (notes on which the amount of principal 
repayment and interest payments are based on the movement of one or 
more specified factors, such as the movement of a particular bond or 
bond index). In addition to the types of forward contracts and swaps 
discussed above, the Fund may invest in other types of forward 
contracts and swaps, as well as options and futures contracts (as 
discussed below), each based on fixed-income securities, currencies, or 
indexes of fixed-income securities or currencies.\29\
---------------------------------------------------------------------------

    \29\ See ``The Funds' Use of Derivatives,'' Section II. D. 
infra.
---------------------------------------------------------------------------

    The Fund may invest up to 5% of its assets in U.S. exchange-traded 
equity securities (excluding ETFs and closed-end funds).

B. RiverFront Dynamic Core Income ETF

1. Principal Investment Strategies
    The Exchange states that the investment objective of the Fund will 
be to seek total return with an emphasis on income as the source of 
that total return. Under normal circumstances, the Fund will invest at 
least 65% of its assets in the securities and financial instruments 
described below.\30\ The average maturity or duration of the Fund's 
portfolio of Fixed Income Securities will vary based on the Sub-
Adviser's assessment of economic and market conditions; however, the 
Sub-Adviser intends to manage the Fund's portfolio so that it has an 
average duration of between two and eight years, under normal 
circumstances.
---------------------------------------------------------------------------

    \30\ See note 11, supra.
---------------------------------------------------------------------------

    The Fund's portfolio is constructed through a two-step process. The 
first step is setting the strategic allocation among different fixed 
income asset classes, with the objective being to construct an 
allocation that is designed to balance the probability of upside 
returns with downside risks for investors with a five-year time horizon 
for their investments. The second step is tactically adjusting these 
allocations as market conditions warrant and determining security 
selection within those asset classes in order to maximize potential 
returns over time.
    The strategic allocation across long-term, medium-term and short-
term investment grade securities, long-term and short-term high yield 
securities and emerging market debt is adjusted at least annually or as 
market conditions warrant and is determined by a quantitative 
methodology. This methodology models historical returns as a function 
of initial valuation conditions and creates estimates of potential 
returns and downside risks consistent with historical market behavior. 
The capital market assumptions produced by this methodology are then 
incorporated into

[[Page 21423]]

a proprietary Mean Reversion Optimization (MRO) process to produce the 
model weighting for each of the major fixed income asset classes.
    The Fund will seek to achieve its investment objective by investing 
in a global portfolio of Fixed Income Securities (as described above) 
\31\ of various maturities, ratings, and currency denominations. The 
Fund intends to utilize various investment strategies in a broad array 
of fixed income sectors. The Fund will allocate its investments based 
upon the analysis of the Sub-Adviser of the pertinent economic and 
market conditions, as well as yield, maturity, credit, and currency 
considerations.
---------------------------------------------------------------------------

    \31\ See supra Section II.A.1. See also supra notes 12-21 and 
accompanying text.
---------------------------------------------------------------------------

    The Fund may purchase Fixed Income Securities issued by U.S. or 
foreign corporations \32\ or financial institutions.
---------------------------------------------------------------------------

    \32\ See note 22, supra.
---------------------------------------------------------------------------

    The Fund may purchase securities issued or guaranteed by the U.S. 
or foreign governments (including foreign states, provinces, and 
municipalities) or their agencies and instrumentalities or issued or 
guaranteed by international organizations designated or supported by 
multiple government entities to promote economic reconstruction or 
development.
    The Fund may invest in MBS issued or guaranteed by federal agencies 
and/or U.S. government sponsored instrumentalities, such as Ginnie Mae, 
the FHA, Fannie Mae, and Freddie Mac. The MBS in which the Fund may 
invest will be either pass-through securities or CMOs and may be TBA 
transactions.\33\
---------------------------------------------------------------------------

    \33\ See note 23, supra.
---------------------------------------------------------------------------

    The Fund may purchase or sell securities on a when-issued,\34\ 
delayed delivery, or forward commitment basis, and may enter into 
repurchase and reverse repurchase agreements.\35\
---------------------------------------------------------------------------

    \34\ See note 24, supra.
    \35\ See note 25, supra.
---------------------------------------------------------------------------

    The Fund may invest in ETFs \36\ and/or exchange-traded closed-end 
funds which invest in Fixed Income Securities.
---------------------------------------------------------------------------

    \36\ See note 26, supra.
---------------------------------------------------------------------------

    The Fund may invest without limitation in U.S. dollar-denominated 
securities of foreign issuers in developed markets. The Fund can invest 
up to 10% of its assets in non-dollar denominated securities. The Fund 
can invest up to 10% of its assets in the securities of issuers located 
in emerging markets (either US dollar-denominated or non-dollar-
denominated). The Sub-Adviser may attempt to reduce currency risk by 
entering into forward contracts.\37\
---------------------------------------------------------------------------

    \37\ See note 27, supra.
---------------------------------------------------------------------------

    The Fund may enter into cleared and OTC total return swap 
agreements that effectively bundle the purchase of foreign bonds and 
the hedging of foreign currency into a single transaction.\38\
---------------------------------------------------------------------------

    \38\ See ``The Funds' Use of Derivatives,'' Section II.D. infra.
---------------------------------------------------------------------------

    The Fund may invest in securities that are offered pursuant to Rule 
144A under the Securities Act.
    The Fund may also use leverage to the extent permitted under the 
1940 Act by entering into reverse repurchase agreements and borrowing 
transactions (principally lines of credit) for investment purposes. The 
Fund's exposure to reverse repurchase agreements will be covered by 
securities having a value equal to or greater than such commitments. 
The Exchange represents that, under the 1940 Act, reverse repurchase 
agreements are considered borrowings. Although there is no limit on the 
percentage of Fund assets that can be used in connection with reverse 
repurchase agreements, the Fund does not expect to engage, under normal 
circumstances, in reverse repurchase agreements with respect to more 
than 33 1/3% of its assets.
2. Other Investments
    While the Fund will, under normal circumstances, invest at least 
65% of its assets in the securities and financial instruments described 
above, the Fund may invest its remaining assets in the securities and 
financial instruments described below.
    The Fund may invest in money market instruments, including other 
funds which invest exclusively in money market instruments. The Fund 
may invest in structured notes. In addition to the types of forward 
contracts and swaps discussed above, the Fund may invest in other types 
of forward contracts and swaps, as well as options and futures 
contracts (as described below), each based on fixed-income securities, 
currencies, or indexes of fixed-income securities or currencies.\39\
---------------------------------------------------------------------------

    \39\ See ``The Funds' Use of Derivatives,'' Section II.D. infra.
---------------------------------------------------------------------------

    The Fund may invest up to 5% of its assets in U.S. exchange-traded 
equity securities (excluding ETFs and closed-end funds).

C. Investment Restrictions for Each Fund

    Each Fund's portfolio holdings that in the aggregate account for at 
least 75% of the weight of the applicable portfolio each shall have a 
minimum original principal amount outstanding of $100 million or more. 
No fixed-income security (excluding Treasury Securities and GSE 
Securities) \40\ held by a Fund shall represent more than 30% of the 
weight of a Fund's portfolio, and the five most heavily weighted fixed-
income securities in a Fund's portfolio shall not in the aggregate 
account for more than 65% of the weight of the portfolio. Each Fund's 
portfolio (excluding one consisting entirely of exempted securities) 
must include a minimum of 13 non-affiliated issuers.
---------------------------------------------------------------------------

    \40\ The terms ``Treasury Securities'' and ``GSE Securities'' 
are defined in NYSEArca Equities Rule 5.2(j)(3), Commentary. 02.
---------------------------------------------------------------------------

    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 securities that are offered pursuant to Rule 144A under the 
Securities Act, ABS and MBS issued by private entities, loans, and loan 
commitments deemed illiquid by the Sub-Adviser. A 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 held 
in illiquid assets.\41\ 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.
---------------------------------------------------------------------------

    \41\ In reaching liquidity decisions with respect to Rule 144A 
securities, the Sub-Adviser may consider the following factors: the 
frequency of trades and quotes for the security; the number of 
dealers willing 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).
---------------------------------------------------------------------------

    The Funds intend to qualify for and to elect to be treated as 
separate regulated investment companies under Subchapter M of the 
Internal Revenue Code.
    A Fund may invest up to 20% of its total assets in the aggregate in 
MBS (which may include CMBS) or ABS issued or guaranteed by private 
entities. The liquidity of such securities will be a substantial factor 
in a Fund's security selection process. Such holdings will be subject 
to the respective limitations on a Fund's investments in illiquid 
assets and high yield securities.
    A Fund may invest up to 20% of its total assets, in the aggregate, 
in syndicated bank loans, junior loans, bridge loans, unfunded 
commitments,

[[Page 21424]]

revolving credit facilities, participation interests, and structured 
notes. Such holdings will be subject to the respective limitations on a 
Fund's investments in illiquid assets and high yield securities. The 
liquidity of such securities will be a substantial factor in a Fund's 
security selection process.
    The RiverFront Dynamic Unconstrained Income ETF may invest entirely 
in high yield securities (``junk bonds''). The Sub-Adviser will 
consider the credit ratings assigned by nationally recognized 
statistical rating organizations (``NRSROs'') as one of several factors 
in its independent credit analysis of issuers.
    The RiverFront Dynamic Core Income ETF may invest up to 15% of its 
total assets in Fixed Income Securities that are rated below investment 
grade by NRSROs, or unrated securities that the Sub-Adviser believes 
are of comparable quality. The Sub-Adviser will consider the credit 
ratings assigned by NRSROs as one of several factors in its independent 
credit analysis of issuers.
    The Funds will not invest in non-U.S. equity securities.
    A Fund's investments will be consistent with a Fund's investment 
objective and will not be used to enhance leverage. That is, while a 
Fund will be permitted to borrow as permitted under the 1940 Act, a 
Fund's investments will not be used to seek performance that is the 
multiple or inverse multiple (i.e., 2Xs and 3Xs) of a Fund's primary 
broad-based securities benchmark index (as defined in Form N-1A).\42\
---------------------------------------------------------------------------

    \42\ A Fund's broad-based securities benchmark index will be 
identified in a future amendment to the Registration Statement 
following a Fund's first full calendar year of performance.
---------------------------------------------------------------------------

D. The Funds' Use of Derivatives

    According to the Exchange, each Fund proposes to seek certain 
exposures through derivative transactions. Subject to the investment 
restrictions described above, with respect to each Fund, derivative 
instruments may include foreign exchange forward contracts; exchange-
traded futures on fixed income securities, currencies, and indices of 
fixed income securities or currencies; exchange-traded and OTC options; 
exchange-traded and OTC options on futures contracts; exchange-traded 
and OTC interest rate swaps, cross-currency swaps, total return swaps, 
inflation swaps, and credit default swaps; and options on such swaps 
(``swaptions'').\43\ A Fund may, but is not required to, use derivative 
instruments for risk management purposes or as part of its investment 
strategies.\44\ The Exchange states that a Fund may also engage in 
derivative transactions for speculative purposes to enhance total 
return, to seek to hedge against fluctuations in securities prices, 
interest rates or currency rates, to change the effective duration of 
its portfolio, to manage certain investment risks, and/or as a 
substitute for the purchase or sale of securities or currencies.
---------------------------------------------------------------------------

    \43\ Options on swaps are traded OTC. In the future, in the 
event that there are exchange-traded options on swaps, a Fund may 
invest in these instruments.
    \44\ A Fund will seek, where possible, to use counterparties 
whose financial status is such that the risk of default is reduced; 
however, the risk of losses resulting from default is still 
possible. The Sub-Adviser will monitor the financial standing of 
counterparties on an ongoing basis. This monitoring may include 
information provided by credit agencies, as well as the Sub-
Adviser's credit analysts and other team members who evaluate 
approved counterparties using various methods of analysis, including 
but not limited to earnings updates, the counterparty's reputation, 
the Sub-Adviser's past experience with the broker-dealer, market 
levels for the counterparty's debt and equity, the counterparty's 
liquidity and its share of market participation.
---------------------------------------------------------------------------

    The Exchange states that investments in derivative instruments will 
be made in accordance with the 1940 Act and consistent with a Fund's 
investment objective and policies. As described further below, a Fund 
will typically use derivative instruments as a substitute for taking a 
position in the underlying asset and/or as part of a strategy designed 
to reduce exposure to other risks, such as currency risk. A Fund may 
also use derivative instruments to enhance returns. To limit the 
potential risk associated with such transactions, the Exchange states 
that a Fund will segregate or ``earmark'' assets determined to be 
liquid by the Sub-Adviser in accordance with procedures established by 
a Fund's Board of Trustees (the ``Board'') and in accordance with the 
1940 Act (or, as permitted by applicable regulation, enter into certain 
offsetting positions) to cover its obligations under derivative 
instruments. These procedures have been adopted consistent with Section 
18 of the 1940 Act and related Commission guidance. In addition, the 
Exchange states that a Fund will include appropriate risk disclosure in 
its offering documents, including leveraging risk.\45\
---------------------------------------------------------------------------

    \45\ Leveraging risk is the risk that certain transactions of a 
Fund, including a Fund's use of derivatives, may give rise to 
leverage, causing a Fund to be more volatile than if it had not been 
leveraged. To mitigate leveraging risk, the Sub-Adviser will 
segregate or ``earmark'' liquid assets or otherwise cover the 
transactions that may give rise to such risk.
---------------------------------------------------------------------------

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.\46\ In particular, the Commission finds that the 
proposed rule change, as modified by Amendment Nos. 1, 2, and 3, is 
consistent with Section 6(b)(5) of the Exchange Act,\47\ 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 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 
Exchange Act,\48\ which sets forth the finding of Congress 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.
---------------------------------------------------------------------------

    \46\ 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).
    \47\ 15 U.S.C. 78f(b)(5).
    \48\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
---------------------------------------------------------------------------

    According to the Exchange, quotation and last sale information will 
be available via the Consolidated Tape Association (``CTA'') high-speed 
line for the Shares and for U.S. exchange-traded common stocks, ETFs, 
and closed-end funds. Price information for exchange-traded derivative 
instruments will be available from the applicable exchange and from 
major market data vendors. Price information for currency spot and 
forward rates, swaps, money market instruments, repurchase agreements, 
reverse repurchase agreements, OTC options, structured notes, 
syndicated bank loans, junior loans, bridge loans, unfunded 
commitments, revolving credit facilities, participation interests and 
OTC derivative instruments will be available from major market data 
vendors. Intra-day and closing price information for exchange-traded 
options and futures will be available from the applicable exchange and 
from major market data vendors. In addition, price information for U.S. 
exchange-traded options is available from the Options

[[Page 21425]]

Price Reporting Authority. Quotation information from brokers and 
dealers or independent pricing services will be available for Fixed 
Income Securities. One source of price information for municipal 
securities is the Electronic Municipal Market Access (``EMMA''), which 
is administered by the Municipal Securities Rulemaking Board.
    In addition, the Portfolio Indicative Value, as defined in NYSE 
Arca Equities Rule 8.600(c)(3), will be widely disseminated by one or 
more major market data vendors at least every 15 seconds during the 
Core Trading Session.\49\ On each business day, before commencement of 
trading in Shares in the Core Trading Session on the Exchange, 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 the 
Fund's calculation of NAV at the end of the business day.\50\
---------------------------------------------------------------------------

    \49\ Currently, it is the Exchange's understanding that several 
major market data vendors display and/or make widely available 
Portfolio Indicative Values taken from CTA or other data feeds.
    \50\ On a daily basis, the Adviser or Sub-Adviser will disclose 
on the Funds' Web site the following information regarding each 
portfolio holding, 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 each Fund's portfolio. The Web site information will be 
publicly available at no charge. The Funds' disclosure of derivative 
positions in the Disclosed Portfolio will include information that 
market participants can use to value these positions intraday.
---------------------------------------------------------------------------

    The NAV for the Shares will be calculated as of the close of the 
regular trading session on the New York Stock Exchange (``NYSE'') 
(ordinarily 4:00 p.m., Eastern Time) on each day that such exchange 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 NYSE via the 
National Securities Clearing Corporation. Information regarding market 
price and trading volume for 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 each Fund and 
additional data relating to NAV and other applicable quantitative 
information.
    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 
for each Fund will be made available to all market participants at the 
same time.\51\
---------------------------------------------------------------------------

    \51\ See NYSE Arca Equities Rule 8.600(d)(1)(B).
---------------------------------------------------------------------------

    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.\52\ 
Trading in the Shares also 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.
---------------------------------------------------------------------------

    \52\ These may include: (1) The extent to which trading is not 
occurring in the securities or the financial instruments 
constituting the Disclosed Portfolio of a Fund; or (2) whether other 
unusual conditions or circumstances detrimental to the maintenance 
of a fair and orderly market are present.
---------------------------------------------------------------------------

    The Exchange represents that it has a general policy prohibiting 
the distribution of material, non-public information by its employees. 
Each of the Adviser and the Sub-Adviser is affiliated with a broker-
dealer and has implemented and will maintain a fire wall with respect 
to its broker-dealer affiliate regarding access to information 
concerning the composition and/or changes to a Fund portfolio.\53\ 
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.\54\
---------------------------------------------------------------------------

    \53\ See supra note 10. The Exchange represents that an 
investment adviser to an open-end fund is required to be registered 
under the Investment Advisers Act of 1940.
    \54\ See NYSE Arca Equities Rule 8.600(d)(2)(B)(ii).
---------------------------------------------------------------------------

    Prior to the commencement of trading, the Exchange will inform its 
Equity Trading Permit Holders (``ETP Holders'') in an Information 
Bulletin (``Bulletin'') of the special characteristics and risks 
associated with trading the Shares. 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, or regulatory staff of 
the Exchange, which are designed to detect violations of Exchange rules 
and applicable federal securities laws.\55\
---------------------------------------------------------------------------

    \55\ The Exchange states that 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.
---------------------------------------------------------------------------

    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 also made the following 
representations:

    (1) The Shares will conform to the initial and continued listing 
criteria under NYSE Arca Equities Rule 8.600.
    (2) All statements and representations made in this 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 shall constitute 
continued listing requirements for listing the Shares on the 
Exchange.
    (3) 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 Exchange Act, the Exchange will 
monitor \56\ for compliance with the continued listing requirements. 
If the Funds are not in compliance with the applicable listing 
requirements, the Exchange will commence delisting procedures under 
NYSEArca Equities Rule 5.5(m).
---------------------------------------------------------------------------

    \56\ 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.
---------------------------------------------------------------------------

    (4) The Exchange has appropriate rules to facilitate 
transactions in the Shares during all trading sessions.
    (5) Trading in the Shares will be subject to the existing 
trading surveillances, administered FINRA on behalf of the Exchange, 
or regulatory staff 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

[[Page 21426]]

Exchange rules and federal securities laws applicable to trading on 
the Exchange.
    (6) FINRA, on behalf of the Exchange, or regulatory staff of the 
Exchange, will communicate as needed regarding trading in the 
Shares, certain exchange-traded options and futures, and certain 
exchange-traded equities (including ETFs and closed-end funds) with 
other markets or other entities that are members of the Intermarket 
Surveillance Group (``ISG''), and FINRA or regulatory staff of the 
Exchange may obtain trading information regarding trading in the 
Shares, certain exchange-traded options and futures, and certain 
exchange-traded equities from such markets or entities. In addition, 
the Exchange may obtain information regarding trading in the Shares, 
certain exchange-traded options and futures, and certain exchange-
traded equities from markets or 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, is 
able to access, as needed, trade information for certain Fixed 
Income Securities held by the Funds reported to FINRA's Trade 
Reporting and Compliance Engine.
    (7) 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 units (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 Intra-
day Indicative Value (``IIV'') (which is the Portfolio Indicative 
Value as defined in NYSE Arca Equities Rule 8.600(c)(3)) will not be 
calculated or publicly disseminated; (d) how information regarding 
the IIV 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.
    (8) For initial and continued listing, each Fund will be in 
compliance with Rule 10A-3 under the Act,\57\ as provided by NYSE 
Arca Equities Rule 5.3.
---------------------------------------------------------------------------

    \57\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------

    (9) A minimum of 100,000 Shares of each Fund will be outstanding 
at the commencement of trading on the Exchange.
    (10) The Funds will not invest in non-U.S. equity securities. 
All ETFs that the Funds will invest in will be listed and traded in 
the U.S. on a national securities exchange. The Funds will not 
invest in leveraged or leveraged inverse ETFs.
    (11) 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 exchange-traded 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.
    (12) Each Fund's portfolio holdings that in the aggregate 
account for at least 75% of the weight of the applicable portfolio 
each shall have a minimum original principal amount outstanding of 
$100 million or more. No fixed-income security (excluding Treasury 
Securities and GSE Securities) held by a Fund shall represent more 
than 30% of the weight of the Fund's portfolio, and the five most 
heavily weighted fixed-income securities in the Fund's portfolio 
shall not in the aggregate account for more than 65% of the weight 
of the portfolio. Each Fund's portfolio (excluding one consisting 
entirely of exempted securities) must include a minimum of 13 non-
affiliated issuers.
    (13) At least 75% of issues of corporate debt securities tied to 
developed market countries held by a Fund will have $100 million or 
more par amount outstanding and at least 75% of issues of corporate 
debt securities tied to emerging market countries held by a Fund 
will have $200 million or more par amount outstanding.
    (14) Under normal market conditions, each Fund generally will 
seek to invest at least 80% of its corporate loan assets in 
issuances that have at least $100,000,000 par amount outstanding (if 
tied to developed countries) and at least $200,000,000 par amount 
outstanding (if tied to emerging market countries).
    (15) Each Fund may invest up to 20% of its total assets in the 
aggregate in MBS (which may include CMBS) or ABS issued or 
guaranteed by private entities. The liquidity of such securities 
will be a substantial factor in a Fund's security selection process. 
Such holdings would be subject to the respective limitations on a 
Fund's investments in illiquid assets and high yield securities.
    (16) Each Fund may invest up to 20% of its total assets, in the 
aggregate, in syndicated bank loans, junior loans, bridge loans, 
unfunded commitments, revolving credit facilities, participation 
interests, and structured notes. Such holdings would be subject to 
the respective limitations on a Fund's investments in illiquid 
assets and high yield securities. The liquidity of such securities 
will be a substantial factor in a Fund's security selection process.
    (17) 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 securities that are offered pursuant to Rule 
144A under the Securities Act, ABS and MBS issued by private 
entities, loans and loan commitments deemed illiquid by the Sub-
Adviser.
    (18) The RiverFront Dynamic Unconstrained Income ETF can invest 
up to 50% of its assets in the securities of issuers located in 
emerging markets. The RiverFront Dynamic Core Income ETF can invest 
up to 10% of its assets in the securities of issuers located in 
emerging markets.
    (19) The RiverFront Dynamic Core Income ETF may invest up to 15% 
of its total assets in Fixed Income Securities that are rated below 
investment grade by NRSROs, or unrated securities that the Sub-
Adviser believes are of comparable quality.
    (20) A Fund's investments will be consistent with a Fund's 
investment objective and will not be used to enhance leverage. That 
is, while a Fund will be permitted to borrow as permitted under the 
1940 Act, a Fund's investments will not be used to seek performance 
that is the multiple or inverse multiple (i.e., 2Xs and 3Xs) of a 
Fund's primary broad-based securities benchmark index (as defined in 
Form N-1A).
    (21) Investments in derivative instruments will be made in 
accordance with the 1940 Act and consistent with a Fund's investment 
objective and policies. To limit the potential risk associated with 
such transactions, a Fund will segregate or ``earmark'' assets 
determined to be liquid by the Sub-Adviser in accordance with 
procedures established by a Fund's Board of Trustees and in 
accordance with the 1940 Act (or, as permitted by applicable 
regulation, enter into certain offsetting positions) to cover its 
obligations under derivative instruments. In addition, a Fund will 
include appropriate risk disclosure in its offering documents, 
including leveraging risk. To mitigate leveraging risk, the Sub-
Adviser will segregate or ``earmark'' liquid assets or otherwise 
cover the transactions that may give rise to such risk.

    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, and 3. The Commission notes that the Funds and the 
Shares must comply with the requirements of NYSE Arca Equities Rule 
8.600 to be initially and continuously listed and traded on the 
Exchange.

IV. Solicitation of Comments on Amendment Nos. 1, 2, and 3

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether Amendment Nos. 1, 
2, and 3 to the proposed rule change are 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-2015-125 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-2015-125. 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 21427]]

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-2015-125 and should 
be submitted on or before May 2, 2016.

V. Accelerated Approval of Proposed Rule Change, as Modified by 
Amendment Nos. 1, 2, and 3

    The Commission finds good cause to approve the proposed rule 
change, as modified by Amendment Nos. 1, 2, and 3, prior to the 30th 
day after the date of publication of notice of Amendment Nos. 1, 2, and 
3 in the Federal Register. Amendment Nos. 1, 2, and 3 revised the 
proposed rule change by: (1) Clarifying that each Fund will invest at 
least 65% of its assets in the securities and financial instruments 
described under the headings ``Principal Investments;'' (2) clarifying 
the portfolio construction and asset allocation methodology of the 
Funds; (3) further defining the characteristics of the Fixed Income 
Instruments in which the Funds may invest; (4) modifying the investment 
restrictions of each Fund; (5) clarifying how certain investments will 
be valued for computing each Fund's NAV; (6) describing where price 
information can be obtained for certain investments of the Funds; and 
(7) providing additional representations relating to the continued 
listing requirements for listing the Shares on the Exchange, including 
issuer notification requirements if a Fund fails to comply with such 
continued listing requirements, and Exchange surveillance obligations 
relating to such continued listing requirements.
    Amendment Nos. 1, 2, and 3 supplement the proposed rule change by, 
among other things, clarifying the scope of the Funds' permitted 
investments and investment restrictions and providing additional 
information about the availability of pricing information for the 
Funds' underlying assets. They also help the Commission evaluate 
whether the listing and trading of the Shares of the Funds would be 
consistent with the protection of investors and the public interest.
    Accordingly, the Commission finds good cause, pursuant to Section 
19(b)(2) of the Act,\58\ to approve the proposed rule change, as 
modified by Amendment Nos. 1, 2, and 3 on an accelerated basis.
---------------------------------------------------------------------------

    \58\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

VI. Conclusion

    It Is Therefore Ordered, pursuant to Section 19(b)(2) of the 
Exchange Act,\59\ that the proposed rule change (SR-NYSEArca-2015-125), 
as modified by Amendment Nos. 1, 2, and 3 thereto, be, and it hereby 
is, approved on an accelerated basis.
---------------------------------------------------------------------------

    \59\ 15 U.S.C. 78s(b)(2).
    \60\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\60\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-08182 Filed 4-8-16; 8:45 am]
 BILLING CODE 8011-01-P