Which arXiv license to use for archiving an ACM CSUR journal? I would like to submit the preprint version of my ACM CSURjournal (used acmsmall format of acmart latex) to arXiv. As of now, the work is peer-reviewed twice ( passed one major and currently in its minor revision), thus, has not been accepted. 

Can anyone suggest an appropriate arXiv license that does not conflict with ACM 2017 authors' policy?
Unless you pay for author-pays Open Access, the only license that does not conflict with the ACM authors agreement is the nonexclusive distribution license. Depending on when you signed your copyright forms, submitting to ArXiv may not be allowed at all - it was only allowed starting with the revision in January, 2016.

Assuming you have the new version of the author rights, you will need to add a special text block into the paper that contains a set phrase and the DOI of the full, published article. You can get this version by adding the authorversion flag in LaTeX (\documentclass[acmsmall,authorversion]{acmart}) and adding the DOI to the relevant field of the LaTeX document. If you do not yet have a DOI, the situation is a bit more dicey, and I don't think there is a generally accepted way to upload this to ArXiv - either wait for the DOI, or just upload without it (ACM is not in the habit of suing authors, as far as I know).

Edit: I was just reminded that the paper is not yet accepted. In that case, the situation is both more and less complicated. Since you have not signed anything yet, you can, on principle, upload the paper under whatever license you choose. However, once you do sign the copyright transfer statement, the license compatibility issues above apply, so your best choice is to either budget now for the more than $2000 you usually pay for author-pays open access and submit under a creative commons license, or choose the limited license mentioned above.

The DOI issue does not apply, you can simply upload it as a preprint, with a note that it is under submission. Once the paper is accepted, you can update the preprint with the final version of the paper (the version you submit to ACM for the digital library that incorporates all feedback from the reviewers) and the DOI, as described above. Note that you are not allowed to just download the version from the ACM digital library and upload that PDF, you need to generate the ArXiv version yourself - but since ArXiv prefers it if you upload your LaTeX sources in any case (and will even enforce this as a strong requirement if it can tell that the PDF was generated by LaTeX), this should not be a problem.