Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting Approval of Proposed Rule Change to List and Trade Shares of the SPDR SSgA Ultra Short Term Bond ETF; SPDR SSgA Conservative Ultra Short Term Bond ETF; and SPDR SSgA Aggressive Ultra Short Term Bond ETF under NYSE Arca Equities Rule 8.600, 56256-56261 [2013-22166]
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Federal Register / Vol. 78, No. 177 / Thursday, September 12, 2013 / Notices
post all comments on the Commission’s
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–ISE–
2013–47 and should be submitted on or
before October 3, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–22163 Filed 9–11–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–70342; File No. SR–
NYSEArca-2013–71]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Order Granting Approval of
Proposed Rule Change to List and
Trade Shares of the SPDR SSgA Ultra
Short Term Bond ETF; SPDR SSgA
Conservative Ultra Short Term Bond
ETF; and SPDR SSgA Aggressive Ultra
Short Term Bond ETF under NYSE
Arca Equities Rule 8.600
tkelley on DSK3SPTVN1PROD with NOTICES
September 6, 2013.
I. Introduction
On July 9, 2013, NYSE Arca, Inc.
(‘‘Exchange’’ or ‘‘NYSE Arca’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’ or
‘‘Exchange Act’’) 1 and Rule 19b–4
15 17
1 15
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
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thereunder,2 a proposed rule change to
list and trade shares (‘‘Shares’’) of the
SPDR SSgA Ultra Short Term Bond ETF;
SPDR SSgA Conservative Ultra Short
Term Bond ETF; and SPDR SSgA
Aggressive Ultra Short Term Bond ETF
(each a ‘‘Fund’’ and collectively,
‘‘Funds’’) under NYSE Arca Equities
Rule 8.600. The proposed rule change
was published for comment in the
Federal Register on July 24, 2013.3 The
Commission received no comments on
the proposed rule change. This order
grants approval of the proposed rule
change.
II. 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 SSgA Active ETF Trust
(‘‘Trust’’), which is organized as a
Massachusetts business trust and is
registered with the Commission as an
open-end management investment
company.4 The investment adviser to
the Funds will be SSgA Funds
Management, Inc. (‘‘Adviser’’). State
Street Global Markets, LLC
(‘‘Distributor’’) will be the principal
underwriter and distributor of the
Funds’ Shares. State Street Bank and
Trust Company (‘‘Administrator,’’
‘‘Custodian,’’ or ‘‘Transfer Agent’’) will
serve as administrator, custodian, and
transfer agent for the Funds.
The Exchange states that the Adviser
is not a broker-dealer but is affiliated
with a broker-dealer and has
implemented a fire wall with respect to
its broker-dealer affiliate regarding
access to information concerning the
composition of and changes to the
Funds’ portfolio.5
2 17
CFR 240.19b–4.
Securities Exchange Act Release No. 70005
(July 18, 2013), 78 FR 44609 (‘‘Notice’’).
4 The Trust is registered under the Investment
Company Act of 1940 (‘‘1940 Act’’). On August 2,
2012, the Trust filed with the Commission an
amendment to its registration statement on Form N–
1A under the Securities Act of 1933 (‘‘Securities
Act’’) and the 1940 Act relating to the Funds (File
Nos. 333–173276 and 811–22542) (‘‘Registration
Statement’’). The Commission has issued an order
granting certain exemptive relief to the Trust under
the 1940 Act. See Investment Company Act Release
No. 29524 (December 13, 2010) (File No. 812–
13487) (‘‘Exemptive Order’’).
5 See NYSE Arca Equities Rule 8.600,
Commentary .06. In the event (a) the Adviser or any
sub-adviser becomes newly affiliated with a brokerdealer, 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 of and changes to a portfolio, and
will be subject to procedures designed to prevent
3 See
PO 00000
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SPDR SSgA Ultra Short Term Bond ETF
The SPDR SSgA Ultra Short Term
Bond ETF will seek to provide current
income consistent with preservation of
capital and daily liquidity through short
duration high quality investments.
Under normal circumstances,6 the Fund
will invest all of its assets in the SSgA
Ultra Short Term Bond Portfolio (‘‘Bond
Portfolio’’), a separate series of the SSgA
Master Trust with an identical
investment objective as the Fund. As a
result, the Fund will invest indirectly
through the Bond Portfolio.
The Adviser will invest, under normal
circumstances, at least 80% of the Bond
Portfolio’s net assets (plus the amount of
borrowings for investment purposes) in
a diversified portfolio of U.S. dollardenominated investment grade fixed
income securities. The Bond Portfolio
primarily will invest in investment
grade fixed income securities that are
rated a minimum of the lowest A rating
by any Nationally Recognized Statistical
Ratings Organization (‘‘NRSRO’’), or, if
unrated, determined by the management
team (who are employees of the
Adviser) to be of equivalent quality.7
The Bond Portfolio will invest in fixed
and floating rate securities of varying
maturities,8 such as corporate
obligations (including commercial paper
of U.S. and foreign entities, master
demand notes (subject to the 15%
illiquid securities limit), and medium
term notes); government bonds
(including U.S. Treasury Bills, notes,
and bonds); agency securities, including
U.S. government agency securities, and
non-U.S. sovereign and supranational
debt; privately-issued securities (which,
the use and dissemination of material non-public
information regarding such portfolio.
6 The term ‘‘under normal circumstances’’
includes, but is not limited to, the absence of
extreme volatility or trading halts in the fixed
income markets or the financial markets generally;
operational issues causing dissemination of
inaccurate market information; or force majeure
type events such as systems failure, natural or manmade disaster, act of God, armed conflict, act of
terrorism, riot or labor disruption, or any similar
intervening circumstance.
7 According to the Adviser, the Adviser may
determine that unrated securities are of ‘‘equivalent
quality’’ based on such credit quality factors that it
deems appropriate, which may include, among
other things, performing an analysis similar, to the
extent possible, to that performed by an NRSRO
when rating similar securities and issuers. In
making such a determination, the Adviser may
consider internal analyses and risk ratings, third
party research and analysis, and other sources of
information, as deemed appropriate by the Adviser.
8 A floating rate security provides for the
automatic adjustment of its interest rate whenever
a specified interest rate changes. Interest rates on
these securities are ordinarily tied to, and are a
percentage of, a widely recognized interest rate,
such as the yield on 90-day U.S. Treasury bills or
the prime rate of a specified bank. These rates may
change as often as twice daily.
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for example, can be Rule 144A
securities); asset-backed and mortgagebacked securities; and money market
instruments (including U.S. and foreign
bank time deposits, certificates of
deposit, and banker’s acceptances).
Under normal circumstances, the
effective duration of the Bond Portfolio
is expected to be between three and
nine months. 9 In addition, the Bond
Portfolio expects to maintain a weighted
average maturity between six and
eighteen months.10 For the purposes of
determining the Bond Portfolio’s
weighted average maturity, a security’s
final maturity date or, for amortizing
securities such as asset-backed and
mortgage-backed securities, its weighted
average life will be used for calculation
purposes.
SPDR SSgA Conservative Ultra Short
Term Bond ETF
tkelley on DSK3SPTVN1PROD with NOTICES
The SPDR SSgA Conservative Ultra
Short Term Bond ETF will seek to
provide current income consistent with
preservation of capital and daily
liquidity through short duration high
quality investments with the avoidance
of excessive portfolio volatility.
Under normal circumstances, the
Fund will invest all of its assets in the
SSgA Conservative Ultra Short Term
Bond Portfolio (‘‘Conservative
Portfolio’’), a separate series of the SSgA
Master Trust with an identical
investment objective as the Fund. As a
result, the Fund will invest indirectly
through the Conservative Portfolio.
The Adviser will invest, under normal
circumstances, at least 80% of the
Conservative Portfolio’s net assets (plus
the amount of borrowings for
investment purposes) in a diversified
portfolio of U.S. dollar-denominated
investment grade fixed income
securities. The Conservative Portfolio
primarily will invest in investment
grade fixed income securities that are
rated a minimum of the lowest A rating
by any NRSRO, or, if unrated,
determined by the portfolio
management team (who are employees
of the Adviser) to be of equivalent
quality, determined as described
above.11 The Conservative Portfolio will
invest in fixed and floating rate
securities of varying maturities, such as
corporate obligations (including
9 Effective duration is a measure of the Bond
Portfolio’s price sensitivity to changes in yields or
interest rates. Duration will be a distinguishing
factor among the Funds, and each of the Funds’
respective portfolios will have different effective
durations, as described below.
10 Weighted average maturity is a U.S. dollarweighted average of the remaining term to maturity
of the underlying securities in the Bond Portfolio.
11 See note 7, supra.
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56257
commercial paper of U.S. and foreign
entities, master demand notes (subject
to the 15% illiquid securities limit), and
medium term notes); government bonds
(including U.S. Treasury Bills, notes,
and bonds); agency securities; privatelyissued securities (which, for example,
can be Rule 144A securities); assetbacked and mortgage-backed securities;
and money market instruments
(including U.S. and foreign bank time
deposits, certificates of deposit, and
banker’s acceptances).
Under normal circumstances, the
effective duration of the Conservative
Portfolio is expected to be four months
or less. In addition, the Conservative
Portfolio expects to maintain a weighted
average maturity between six and
eighteen months. For the purposes of
determining the Conservative Portfolio’s
weighted average maturity, a security’s
final maturity date or, for amortizing
securities such as asset-backed and
mortgage-backed securities, its weighted
average life will be used for calculation
purposes.
of U.S. and foreign entities, master
demand notes (subject to the 15%
illiquid securities limit), and medium
term notes); government bonds
(including U.S. Treasury Bills, notes,
and bonds); agency securities; privatelyissued securities (which, for example,
can be Rule 144A securities); assetbacked and mortgage-backed securities;
and money market instruments
(including U.S. and foreign bank time
deposits, certificates of deposit, and
banker’s acceptances).
Under normal circumstances, the
effective duration of the Aggressive
Portfolio is expected to be between six
and twelve months. In addition, the
Aggressive Portfolio expects to maintain
a weighted average maturity between
1.5 and 2.5 years. For the purposes of
determining the Aggressive Portfolio’s
weighted average maturity, a security’s
final maturity date or, for amortizing
securities such as asset-backed and
mortgage-backed securities, its weighted
average life will be used for calculation
purposes.
SPDR SSgA Aggressive Ultra Short Term
Bond ETF
The SPDR SSgA Aggressive Ultra
Short Term Bond ETF will seek to
maximize income consistent with
preservation of capital through short
duration high quality investments.
Under normal circumstances, the
Fund will invest all of its assets in the
SSgA Aggressive Ultra Short Term Bond
Portfolio (‘‘Aggressive Portfolio’’ and,
together with the Bond Portfolio and the
Conservative Portfolio, collectively,
‘‘Portfolios’’), a separate series of the
SSgA Master Trust with an identical
investment objective as the Fund. As a
result, the Fund will invest indirectly
through the Aggressive Portfolio.
The Adviser will invest, under normal
circumstances, at least 80% of the
Aggressive Portfolio’s net assets (plus
the amount of borrowings for
investment purposes) in a diversified
portfolio of U.S. dollar-denominated
investment grade fixed income
securities. The Aggressive Portfolio
primarily will invest in investment
grade fixed income securities that are
rated a minimum of the lowest BBB
rating by any NRSRO or, if unrated,
determined by the portfolio
management team (who are employees
of the Adviser) to be of equivalent
quality, determined as described
above.12
The Aggressive Portfolio will invest in
fixed and floating rate securities of
varying maturities, such as corporate
obligations (including commercial paper
Principal Investments
Each Portfolio will invest in bonds,
including zero coupon bonds,13 fixed
rate bonds,14 and ‘‘floating-rate’’ or
‘‘variable-rate’’ bonds.15 In addition,
each Portfolio may invest in U.S. and
non-U.S. corporate bonds, which will be
denominated in U.S. dollars.
Each Portfolio may invest in
collateralized loan obligations (‘‘CLOs’’)
to the extent they meet the minimum
NRSRO rating requirement described
12 See
PO 00000
note 7, supra.
Frm 00056
Fmt 4703
Sfmt 4703
13 A zero coupon bond pays no interest to its
holder during its life. The value of a zero coupon
bond to a fund consists of the difference between
such bond’s face value at the time of maturity and
the price for which it was acquired, which may be
an amount significantly less than its face value
(sometimes referred to as a ‘‘deep discount’’ price).
14 The value of a fixed rate bond usually rises
when market interest rates fall, and falls when
market interest rates rise. Accordingly, a fixed rate
bond’s yield (income as a percent of the bond’s
current value) may differ from its coupon rate as its
value rises or falls. Fixed rate bonds generally are
also subject to inflation risk, which is the risk that
the value of the bond or income from the bond will
be worth less in the future as inflation decreases the
value of money. This could mean that, as inflation
increases, the ‘‘real’’ value of the assets of a fund
holding fixed rate bonds can decline, as can the
value of the fund’s distributions.
15 Variable rate securities are instruments issued
or guaranteed by entities such as (1) the U.S.
Government, or an agency or instrumentality
thereof, (2) corporations, (3) financial institutions,
(4) insurance companies or (5) trusts that have a
rate of interest subject to adjustment at regular
intervals but less frequently than annually. A
variable rate security provides for the automatic
establishment of a new interest rate on set dates.
Variable rate obligations whose interest is
readjusted no less frequently than annually will be
deemed to have a maturity equal to the period
remaining until the next readjustment of the
interest rate.
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tkelley on DSK3SPTVN1PROD with NOTICES
above for each Portfolio. While the
assets underlying CLOs are typically
‘‘Senior Loans,’’16 the assets may also
include (i) unsecured loans, (ii) other
debt securities that are rated below
investment grade, (iii) debt tranches of
other CLOs,17 and (iv) equity securities
incidental to investments in Senior
Loans.
Each Portfolio may invest in sovereign
debt, which will be denominated in U.S.
dollars, and in U.S. Government
obligations. U.S. Government
obligations include securities issued or
guaranteed as to principal and interest
by the U.S. Government or its agencies
or instrumentalities.18 The Portfolios
16 A Senior Loan is an advance or commitment of
funds made by one or more banks or similar
financial institutions, including the Portfolios, to
one or more corporations, partnerships or other
business entities and typically pays interest at a
floating or adjusting rate that is determined
periodically at a designated premium above a base
lending rate, most commonly the London-Interbank
Offered Rate (‘‘LIBOR’’). A Senior Loan is
considered senior to all other unsecured claims
against the borrower, senior to or pari passu with
all other secured claims, meaning that in the event
of a bankruptcy the Senior Loan, together with
other first lien claims, are entitled to be the first to
be repaid out of proceeds of the assets securing the
loans, before other existing claims or interests
receive repayment. However, in bankruptcy
proceedings, there may be other claims, such as
taxes or additional advances, that take precedence.
Senior Loans consist generally of obligations of
companies and other entities (collectively,
‘‘borrowers’’) incurred for the purpose of
reorganizing the assets and liabilities of a borrower;
acquiring another company; taking over control of
a company (leveraged buyout); temporary
refinancing; or financing internal growth or other
general business purposes. Senior Loans are often
obligations of borrowers who have incurred a
significant percentage of debt compared to equity
issued and thus are highly leveraged.
17 When investing in CLOs, each Portfolio will
not invest in equity tranches, which are the lowest
tranche. However, each Portfolio may invest in
lower debt tranches of CLOs, which typically
experience a lower recovery, greater risk of loss or
deferral or non-payment of interest than more
senior debt tranches of the CLO. In addition, each
Portfolio intends to invest in CLOs consisting
primarily of individual Senior Loans of borrowers
and not repackaged CLO obligations from other
high risk pools. The underlying Senior Loans
purchased by CLOs are generally performing at the
time of purchase but may become non-performing,
distressed, or defaulted. CLOs with underlying
assets of non-performing, distressed, or defaulted
loans are not contemplated to constitute a
significant portion of a Portfolio’s investments in
CLOs. The key feature of the CLO structure is the
prioritization of the cash flows from a pool of debt
securities among the several classes of the CLO. The
SPV is a company founded solely for the purpose
of securitizing payment claims arising out of this
diversified asset pool. On this basis, marketable
securities are issued by the SPV, which, due to the
diversification of the underlying risk, generally
represent a lower level of risk than the original
assets. The redemption of the securities issued by
the SPV typically takes place at maturity out of the
cash flow generated by the collected claims.
18 One type of U.S. Government obligation, U.S.
Treasury obligations, are backed by the full faith
and credit of the U.S. Treasury and differ only in
their interest rates, maturities, and times of
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may invest in asset-backed and
commercial mortgaged-backed
securities.19 The percentage limitation
of investments in asset backed and
commercial mortgage-backed securities
for the Bond Portfolio, the Conservative
Portfolio, and the Aggressive Portfolio
will be 50%, 35%, and 65%,
respectively. The percentage limitation
of an investment in each single
structured collateral type of asset
backed and commercial mortgagebacked securities for the Bond Portfolio,
the Conservative Portfolio, and the
Aggressive Portfolio will be 15%, 20%,
and 25%, respectively. Non-agency
residential mortgage-backed and
commercial mortgage-backed
investments each will be limited to 10%
for each of the Portfolios.
Each Portfolio may invest a
substantial portion of its assets in U.S.
agency mortgage pass-through
securities. Each Portfolio may invest in
restricted securities.20 Each Portfolio
may invest in short-term instruments,
including money market instruments,
repurchase agreements, cash, and cash
equivalents, on an ongoing basis to
provide liquidity or for other reasons.
Money market instruments are generally
short-term investments that may include
but are not limited to: (i) shares of
money market funds (including those
advised by the Adviser); (ii) obligations
issued or guaranteed by the U.S.
government or its agencies or
instrumentalities (including
issuance. U.S. Treasury bills have initial maturities
of one-year or less; U.S. Treasury notes have initial
maturities of one to ten years; and U.S. Treasury
bonds generally have initial maturities of greater
than ten years.
Other U.S. Government obligations are issued or
guaranteed by agencies or instrumentalities of the
U.S. Government including, but not limited to,
Federal National Mortgage Association (‘‘Fannie
Mae’’), the Government National Mortgage
Association (‘‘Ginnie Mae’’), the Small Business
Administration, the Federal Farm Credit
Administration, the Federal Home Loan Mortgage
Corporation (‘‘Freddie Mac’’), the Federal Home
Loan Banks (‘‘FHLB’’), Banks for Cooperatives
(including the Central Bank for Cooperatives), the
Federal Land Banks, the Federal Intermediate
Credit Banks, the Tennessee Valley Authority, the
Export-Import Bank of the United States, the
Commodity Credit Corporation, the Federal
Financing Bank, the Student Loan Marketing
Association, the National Credit Union
Administration, and the Federal Agricultural
Mortgage Corporation (‘‘Farmer Mac’’).
19 Asset-backed securities are securities backed by
installment contracts, credit-card receivables, or
other assets. Commercial mortgage-backed
securities are securities backed by commercial real
estate properties. Both asset-backed and commercial
mortgage-backed securities represent interests in
‘‘pools’’ of assets in which payments of both
interest and principal on the securities are made on
a regular basis.
20 Restricted securities are securities that are not
registered under the Securities Act, but which can
be offered and sold to ‘‘qualified institutional
buyers’’ under Rule 144A under the Securities Act.
PO 00000
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government-sponsored enterprises); (iii)
negotiable certificates of deposit,
banker’s acceptances, fixed time
deposits and other obligations of U.S.
and foreign banks (including foreign
branches) and similar institutions; (iv)
commercial paper rated at the date of
purchase ‘‘Prime-1’’ by Moody’s or ‘‘A–
1’’ by S&P, or if unrated, of comparable
quality as determined by the Adviser;21
(v) non-convertible corporate debt
securities (e.g., bonds and debentures)
that have remaining maturities at the
date of purchase of not more than 397
days and that satisfy the rating
requirements set forth in Rule 2a-7
under the 1940 Act; and (vi) short-term
U.S. dollar-denominated obligations of
foreign banks (including U.S. branches)
that, in the opinion of the Adviser, are
of comparable quality to obligations of
U.S. banks that may be purchased by a
Portfolio.
The Funds are actively-managed and
are not tied to an index. The Exchange
notes, however, that each Fund’s
Portfolio will meet certain criteria for
index-based, fixed income exchangetraded funds contained in NYSEArca
Equities Rule 5.2(j)(3), Commentary
.02.22
Other Investments
The following are additional possible
investments of each Portfolio that are
not included under the 80% investment
policies described above for each Fund.
Each Portfolio may invest in the
securities of other investment
companies, including money market
funds and closed-end funds, exchange
traded products (‘‘ETPs’’),23 including
21 Commercial paper consists of short-term
promissory notes issued by banks, corporations,
and other entities to finance short-term credit
needs. These securities generally are discounted but
sometimes may be interest bearing.
22 See NYSE Arca Equities Rule 5.2(j)(3),
Commentary .02 governing fixed income based
Investment Company Units. Each of the Funds’
Portfolios will meet the following requirements of
Rule 5.2(j)(3), Commentary .02(a): (i) Components
that in the aggregate account for at least 75% of the
weight of the index or portfolio must each have a
minimum original principal amount outstanding of
$100 million or more (Rule 5.2(j)(3),
Commentary.02(a)(2)); (ii) no component fixedincome security (excluding Treasury Securities and
government-sponsored entity securities) will
represent more than 30% of the weight of the index
or portfolio, and the five highest weighted
component fixed-income securities will not in the
aggregate account for more than 65% of the weight
of the index or portfolio (Rule 5.2(j)(3),
Commentary.02(a)(4)); and (iii) an underlying index
or portfolio (excluding exempted securities) must
include securities from a minimum of 13 nonaffiliated issuers (Rule 5.2(j)(3),
Commentary.02(a)(5)).
23 For each of the Funds, ETPs include
Investment Company Units (as described in NYSE
Arca Equities Rule 5.2(j)(3)); Index-Linked
Securities (as described in NYSE Arca Equities Rule
5.2(j)(6)); Portfolio Depositary Receipts (as
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exchange-traded funds registered under
the 1940 Act that seek to track the
performance of a market index
(‘‘Underlying ETFs’’) and exchange
traded notes (‘‘ETNs’’).24
Each Portfolio may invest in one or
more ETPs that are qualified publicly
traded partnerships (‘‘QPTPs’’) and
whose principal activities are the
buying and selling of commodities or
options, futures, or forwards with
respect to commodities.25 Additionally,
each Portfolio may invest in preferred
securities, convertible securities, high
yield debt securities, and Variable Rate
Demand Obligations.
The Portfolios may invest in inflationprotected public obligations, commonly
known as ‘‘TIPS,’’ of the U.S. Treasury,
as well as TIPS of major governments
and emerging market countries,
excluding the United States. Each
Portfolio may invest a portion of its
assets in Build America Bonds. The
Build America Bond program allows
state and local governments to issue
taxable bonds for capital projects and to
receive a direct federal subsidy payment
from the Treasury Department for a
portion of their borrowing costs.26
Further, the Portfolios may seek to
obtain exposure to U.S. agency mortgage
pass-through securities through the use
of ‘‘to-be-announced’’ or ‘‘TBA
transactions.’’ ‘‘TBA’’ refers to a
commonly used mechanism for the
described in NYSE Arca Equities Rule 8.100); 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); Currency Trust Shares (as described in
NYSE Arca Equities Rule 8.202); Commodity Index
Trust Shares (as described in NYSE Arca Equities
Rule 8.203); Trust Units (as described in NYSE Arca
Equities Rule 8.500); Managed Fund Shares (as
described in NYSE Arca Equities Rule 8.600), and
closed-end funds. The ETPs all will be listed and
traded in the U.S. on registered exchanges. While
a Fund may invest in inverse ETPs, a Fund will not
invest in leveraged (e.g., 2X or 3X) or leveraged
inverse ETPs.
24 ETNs are debt obligations of investment banks;
they are traded on exchanges and their returns are
linked to the performance of reference assets,
including market indexes. In addition to trading
ETNs on exchanges, investors may redeem ETNs
directly with the issuer on a weekly basis, typically
in a minimum amount of 50,000 units, or hold the
ETNs until maturity.
25 Examples of such entities are the PowerShares
DB Energy Fund, PowerShares DB Oil Fund,
PowerShares DB Precious Metals Fund,
PowerShares DB Gold Fund, PowerShares DB Silver
Fund, PowerShares DB Base Metals Fund, and
PowerShares DB Agriculture Fund, which are listed
and traded on the Exchange pursuant to NYSE Arca
Equities Rule 8.200.
26 Issuance of Build America Bonds ceased on
December 31, 2010. The Build America Bonds
outstanding continue to be eligible for the federal
interest rate subsidy, which continues for the life
of the Build America Bonds; however, no bonds
issued following expiration of the Build America
Bond program are eligible for the federal tax
subsidy.
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forward settlement of U.S. agency
mortgage pass-through securities, and
not to a separate type of mortgagebacked security. Most transactions in
mortgage pass-through securities occur
through the use of TBA transactions.
Each Portfolio may invest in
repurchase agreements with commercial
banks, brokers, or dealers to generate
income from its excess cash balances.
Additionally, each Portfolio may invest
in sovereign debt, which may be
denominated in local currencies. Each
Portfolio may also invest in foreign
currency transactions on a spot (cash)
basis and currency forwards for hedging
or trade settlement purposes.
Each Portfolio may enter into reverse
repurchase agreements, which involve
the sale of securities with an agreement
to repurchase the securities at an
agreed-upon price, date, and interest
payment and which have the
characteristics of borrowing.
Each Portfolio may hold up to an
aggregate amount of 15% of its net
assets in illiquid securities (calculated
at the time of investment), including
Rule 144A securities deemed illiquid by
the Adviser, master demand notes,
privately-issued securities (which, for
example, can be Rule 144A securities),
loans, and loan participations. Each
Portfolio 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 each Fund’s (indirectly through its
respective Portfolio) net assets are held
in illiquid securities. Illiquid securities
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.27
Each Portfolio will be classified as a
‘‘non-diversified’’ investment company
under the 1940 Act and will not
concentrate its investments in any
particular industry or sector. The
Portfolios intend to qualify for and to
27 The Exchange represents that the Trust’s Board
of Trustees (‘‘Board’’) has delegated the
responsibility for determining the liquidity of Rule
144A restricted securities that a Portfolio may
invest in to the Adviser. 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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elect treatment as a separate regulated
investment company under Subchapter
M of the Internal Revenue Code.
In extreme situations or market
conditions,28 a Fund may (either
directly or through the corresponding
Portfolio) temporarily depart from its
normal investment policies and
strategies provided that the alternative
is consistent with the Fund’s investment
objective and is in the best interest of
the Fund. For example, a Portfolio may
hold a higher than normal proportion of
its assets in cash in times of extreme
market stress.
Except for ETPs that may hold nonU.S. equity issues, the Funds and the
Portfolios will not otherwise invest in
non-U.S equity issues. Neither the
Funds nor the Portfolios will invest in
options contracts, futures contracts, or
swap agreements.
Master-Feeder Structure of the Funds
The Funds are intended to be
managed in a ‘‘master-feeder’’ structure
under which each Fund invests
substantially all of its assets in a
corresponding Portfolio (i.e., ‘‘master
fund’’), which is a separate mutual fund
registered under the 1940 Act that has
an identical investment objective. As a
result, each Fund (i.e., ‘‘feeder fund’’)
has an indirect interest in all of the
securities and other assets owned by the
corresponding Portfolio. Because of this
indirect interest, each Fund’s
investment returns should be the same
as those of the corresponding Portfolio,
adjusted for the expenses of the Fund.
In extraordinary instances, each Fund
reserves the right to make direct
investments in securities.
The Adviser will manage the
investments of each Portfolio. Under the
master-feeder arrangement, and
pursuant to an Investment Advisory
Agreement between the Adviser and the
Trust, investment advisory fees charged
at the Portfolio level are deducted from
the advisory fees charged at the Fund
level. This arrangement avoids a
‘‘layering’’ of fees, i.e., a Fund’s total
annual operating expenses would be no
higher as a result of investing in a
master-feeder arrangement than they
would be if the Fund pursued its
investment objectives directly. In
addition, each Fund may discontinue
investing through the master-feeder
28 Such situations and conditions include, but are
not limited to, trading halts in the fixed income
markets or disruptions in the financial markets
generally; operational issues causing dissemination
of inaccurate market information; or force majeure
type events such as systems failure, natural or manmade disaster, act of God, armed conflict, act of
terrorism, riot or labor disruption, or any similar
intervening circumstance.
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Federal Register / Vol. 78, No. 177 / Thursday, September 12, 2013 / Notices
arrangement and pursue its investment
objectives directly if the Trust’s Board
determines that doing so would be in
the best interests of shareholders.
III. Discussion and Commission’s
Findings
After careful review, the Commission
finds that the proposed rule change is
consistent with the requirements of
Section 6 of the Act 29 and the rules and
regulations thereunder applicable to a
national securities exchange.30 In
particular, the Commission finds that
the proposed rule change is consistent
with Section 6(b)(5) of the Act,31 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 foster cooperation
and coordination with persons engaged
in facilitating transactions in securities,
to remove impediments to and perfect
the mechanism of a free and open
market and a national market system,
and, in general, to protect investors and
the public interest. The Commission
notes that the Shares of the Funds must
comply with the requirements of NYSE
Arca Equities Rule 8.600 to be listed and
traded on the Exchange.
The Commission finds that the
proposal to list and trade the Shares on
the Exchange is consistent with Section
11A(a)(1)(C)(iii) of the Act,32 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. Quotation
and last-sale information for the Shares
will be available via the Consolidated
Tape Association (‘‘CTA’’) high-speed
line. In addition, an indicative
optimized portfolio value, which is the
Portfolio Indicative Value as defined in
NYSE Arca Equities Rule 8.600(c)(3),
relating to each Fund will be widely
disseminated every 15 seconds during
the Core Trading Session by one or more
major market data vendors.33 On each
business day, before commencement of
trading in Shares in the Core Trading
Session on the Exchange, the Adviser
29 15
U.S.C. 78f.
approving this proposed rule change, the
Commission notes that it has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
31 15 U.S.C. 78f(b)(5).
32 15 U.S.C. 78k–1(a)(1)(C)(iii).
33 According to the Exchange, several major
market data vendors widely disseminate or make
widely available Portfolio Indicative Values taken
from CTA or other data feeds.
tkelley on DSK3SPTVN1PROD with NOTICES
30 In
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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 Funds’ calculation
of NAV at the end of the business day.34
The NAV of a Fund will be determined
once each business day, normally as of
the closing of the regular trading session
on the New York Stock Exchange
(normally 4:00 p.m. Eastern Time). A
basket composition file, which will
include the security names and share
quantities, if applicable, required to be
delivered in exchange for a Fund’s
Shares, together with estimates and
actual cash components, will be
publicly disseminated daily prior to the
opening of the New York Stock
Exchange via National Securities
Clearing Corporation. Information
regarding market price and trading
volume of the Shares will be continually
available on a real-time basis throughout
the day on brokers’ computer screens
and other electronic services.
Information regarding the previous
day’s closing price and trading volume
information for the Shares will be
published daily in the financial section
of newspapers. The intra-day, closing,
and settlement prices of the Portfolio
securities and other assets will also be
readily available from the national
securities exchanges trading those
securities, automated quotation systems,
published or other public sources, or
on-line information services such as
Bloomberg or Reuters. The Funds’ Web
site will include a form of the
prospectus for the Funds 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 for
each Fund will be calculated daily and
that the NAV and the Disclosed
Portfolio will be made available to all
market participants at the same time.35
In addition, trading in Shares of the
34 On a daily basis, the Adviser will disclose for
each portfolio security and other financial
instrument of the Funds and of the Portfolios the
following information on the Funds’ Web site:
Ticker symbol (if applicable); name of security and
financial instrument; number of shares, if
applicable, or dollar value of financial instruments
and securities held in the portfolio; and percentage
weighting of the security and financial instrument
in the portfolio. The Web site information will be
publicly available at no charge.
35 See NYSE Arca Equities Rule 8.600(d)(1)(B).
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Funds 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 may halt trading in the Shares
if trading is not occurring in the
securities or the financial instruments
constituting the Disclosed Portfolio of
the Funds, or if other unusual
conditions or circumstances detrimental
to the maintenance of a fair and orderly
market are present.36 Further, the
Commission notes that the Reporting
Authority that provides the Disclosed
Portfolio must implement and maintain,
or be subject to, procedures designed to
prevent the use and dissemination of
material, non-public information
regarding the actual components of the
portfolio.37 The Commission also notes
that the Financial Industry Regulatory
Authority (‘‘FINRA’’) on behalf of the
Exchange,38 will communicate as
needed regarding trading in the Shares
with other markets that are members of
the Intermarket Surveillance Group
(‘‘ISG’’) or with which the Exchange has
in place a comprehensive surveillance
sharing agreement. The Exchange states
that it has a general policy prohibiting
the distribution of material, non-public
information by its employees. 39 The
Exchange also states that the Adviser is
affiliated with a broker-dealer, and the
Adviser has implemented a fire wall
with respect to its broker-dealer affiliate
regarding access to information
concerning the composition of and
changes to the portfolio.40
36 See NYSE Arca Equities Rule 8.600(d)(2)(C)
(providing additional considerations for the
suspension of trading in or removal from listing of
Managed Fund Shares on the Exchange). With
respect to trading halts, the Exchange may consider
all relevant factors in exercising its discretion to
halt or suspend trading in the Shares of the Fund.
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.
37 See NYSE Arca Equities Rule 8.600(d)(2)(B)(ii).
38 The Exchange states that, while FINRA surveils
trading on the Exchange pursuant to a regulatory
services agreement, the Exchange is responsible for
FINRA’s performance under this regulatory services
agreement.
39 The SSgA Master Trust’s Pricing and
Investment Committee has implemented procedures
designed to prevent the use and dissemination of
material, non-public information regarding the
Portfolios and the Funds.
40 See supra note 4. 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 its related personnel
are 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
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tkelley on DSK3SPTVN1PROD with NOTICES
The Exchange represents that the
Shares are deemed to be equity
securities, thus rendering trading in the
Shares subject to the Exchange’s
existing rules governing the trading of
equity securities. In support of this
proposal, the Exchange has made
representations, including:
(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) The Exchange represents that
trading in the Shares will be subject to
the existing trading surveillances,
administered by FINRA on behalf of the
Exchange, which are designed to detect
violations of Exchange rules and
applicable federal securities laws and
that these procedures are adequate to
properly monitor Exchange trading of
the Shares in all trading sessions and to
deter and detect violations of Exchange
rules and applicable federal securities
laws.
(4) Prior to the commencement of
trading, the Exchange will inform its
Equity Trading Permit Holders in an
Information Bulletin of the special
characteristics and risks associated with
trading the Shares. Specifically, the
Information Bulletin will discuss the
following: (a) The procedures for
purchases and redemptions of Shares in
Creation 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
Equity Trading Permit Holders to learn
the essential facts relating to every
customer prior to trading the Shares; (c)
the risks involved in trading the Shares
during the Opening and Late Trading
Sessions when an updated Portfolio
Indicative Value will not be calculated
or publicly disseminated; (d) how
information regarding the Portfolio
Indicative Value will be disseminated;
(e) the requirement that Equity Trading
Permit Holders deliver a prospectus to
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
violation, 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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19:54 Sep 11, 2013
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investors purchasing newly issued
Shares prior to or concurrently with the
confirmation of a transaction; and (f)
trading information.
(5) For initial and continued listing,
the Funds will be in compliance with
Rule 10A–3 under the Exchange Act,41
as provided by NYSE Arca Equities Rule
5.3.
(6) All equity securities held by the
Funds or Portfolios, including shares of
ETPs, will trade on U.S. national
securities exchanges, all of which are
members of ISG.
(7) For each of the Portfolios, the
Adviser will invest, under normal
circumstances, at least 80% of each
Portfolio’s net assets in a diversified
portfolio of U.S. dollar-denominated
investment grade fixed income
securities. The Bond Portfolio and the
Conservative Portfolio primarily will
invest in investment grade fixed income
securities that are rated a minimum of
the lowest A rating by any NRSRO (and
for the Aggressive Portfolio, a minimum
of the lowest BBB rating by any
NRSRO), or, if unrated, determined by
the Adviser to be of equivalent quality.
(8) Each Fund’s Portfolio will meet
certain criteria for index-based fixed
income exchange-traded funds
contained in NYSEArca Equities Rule
5.2(j)(3), Commentary .02.42
(9) Except for ETPs that may hold
non-U.S. equity issues, the Funds and
the Portfolios will not otherwise invest
in non-U.S. equity issues. Neither the
Funds nor the Portfolios will invest in
options contracts, futures contracts, or
swap agreements. The Funds’
investments will be consistent with its
respective investment objective and will
not be used to enhance leverage.
(10) Non-agency residential mortgagebacked and commercial mortgagebacked investments each will be limited
to 10% for each of the Portfolios.
(11) The Fund may hold up to an
aggregate amount of 15% of its net
assets in illiquid securities (calculated
at the time of investment), including
Rule 144A securities deemed illiquid by
the Adviser, master demand notes, other
privately issued securities, loans, and
loan participations.
(12) A minimum of 100,000 Shares for
each Fund will be outstanding at the
commencement of trading on the
Exchange.
This approval order is based on all of
the Exchange’s representations and
description of the Funds, including
those set forth above and in the Notice.
For the foregoing reasons, the
Commission finds that the proposed
41 17
CFR 240.10A–3.
note 22, supra.
42 See
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56261
rule change is consistent with Section
6(b)(5) of the Act 43 and the rules and
regulations thereunder applicable to a
national securities exchange.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,44 that the
proposed rule change (SR–NYSEArca2013–71) be, and it hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.45
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–22166 Filed 9–11–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–70336; File No. SR–CME–
2013–13)
Self-Regulatory Organizations;
Chicago Mercantile Exchange Inc.;
Notice of Filing and Immediate
Effectiveness of Proposed Rule
Change Regarding Enhancements to
CME’s Price Quality Auction Process
for CDS Index Products
September 6, 2013.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on August
23, 2013, Chicago Mercantile Exchange
Inc. (‘‘CME’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II and III
below, which Items have been prepared
primarily by CME. CME filed the
proposal pursuant to Section
19(b)(3)(A)(iii) 3 of the Act, and Rule
19b–4(f)(4)(ii) thereunder,4 so that the
proposal was effective upon filing with
the Commission. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
CME is filing proposed rules changes
that are limited to its business as a
derivatives clearing organization. More
specifically, the proposed rule changes
would make amendments to its rules
43 15
U.S.C. 78f(b)(5).
U.S.C. 78s(b)(2).
45 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(iii).
4 17 CFR 240.19b–4(f)(4)(ii).
44 15
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]]>Agencies
[Federal Register Volume 78, Number 177 (Thursday, September 12, 2013)]
[Notices]
[Pages 56256-56261]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-22166]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-70342; File No. SR-NYSEArca-2013-71]
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting
Approval of Proposed Rule Change to List and Trade Shares of the SPDR
SSgA Ultra Short Term Bond ETF; SPDR SSgA Conservative Ultra Short Term
Bond ETF; and SPDR SSgA Aggressive Ultra Short Term Bond ETF under NYSE
Arca Equities Rule 8.600
September 6, 2013.
I. Introduction
On July 9, 2013, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'')
filed with the Securities and Exchange Commission (``Commission''),
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to list and trade shares (``Shares'') of the SPDR
SSgA Ultra Short Term Bond ETF; SPDR SSgA Conservative Ultra Short Term
Bond ETF; and SPDR SSgA Aggressive Ultra Short Term Bond ETF (each a
``Fund'' and collectively, ``Funds'') under NYSE Arca Equities Rule
8.600. The proposed rule change was published for comment in the
Federal Register on July 24, 2013.\3\ The Commission received no
comments on the proposed rule change. This order grants approval of the
proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 70005 (July 18,
2013), 78 FR 44609 (``Notice'').
---------------------------------------------------------------------------
II. 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 SSgA
Active ETF Trust (``Trust''), which is organized as a Massachusetts
business trust and is registered with the Commission as an open-end
management investment company.\4\ The investment adviser to the Funds
will be SSgA Funds Management, Inc. (``Adviser''). State Street Global
Markets, LLC (``Distributor'') will be the principal underwriter and
distributor of the Funds' Shares. State Street Bank and Trust Company
(``Administrator,'' ``Custodian,'' or ``Transfer Agent'') will serve as
administrator, custodian, and transfer agent for the Funds.
---------------------------------------------------------------------------
\4\ The Trust is registered under the Investment Company Act of
1940 (``1940 Act''). On August 2, 2012, the Trust filed with the
Commission an amendment to its registration statement on Form N-1A
under the Securities Act of 1933 (``Securities Act'') and the 1940
Act relating to the Funds (File Nos. 333-173276 and 811-22542)
(``Registration Statement''). The Commission has issued an order
granting certain exemptive relief to the Trust under the 1940 Act.
See Investment Company Act Release No. 29524 (December 13, 2010)
(File No. 812-13487) (``Exemptive Order'').
---------------------------------------------------------------------------
The Exchange states that the Adviser is not a broker-dealer but is
affiliated with a broker-dealer and has implemented a fire wall with
respect to its broker-dealer affiliate regarding access to information
concerning the composition of and changes to the Funds' portfolio.\5\
---------------------------------------------------------------------------
\5\ See NYSE Arca Equities Rule 8.600, Commentary .06. In the
event (a) the Adviser or any sub-adviser becomes 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 of and 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.
---------------------------------------------------------------------------
SPDR SSgA Ultra Short Term Bond ETF
The SPDR SSgA Ultra Short Term Bond ETF will seek to provide
current income consistent with preservation of capital and daily
liquidity through short duration high quality investments. Under normal
circumstances,\6\ the Fund will invest all of its assets in the SSgA
Ultra Short Term Bond Portfolio (``Bond Portfolio''), a separate series
of the SSgA Master Trust with an identical investment objective as the
Fund. As a result, the Fund will invest indirectly through the Bond
Portfolio.
---------------------------------------------------------------------------
\6\ The term ``under normal circumstances'' includes, but is not
limited to, the absence of extreme volatility or trading halts in
the fixed income markets or the financial markets generally;
operational issues causing dissemination of inaccurate market
information; or force majeure type events such as systems failure,
natural or man-made disaster, act of God, armed conflict, act of
terrorism, riot or labor disruption, or any similar intervening
circumstance.
---------------------------------------------------------------------------
The Adviser will invest, under normal circumstances, at least 80%
of the Bond Portfolio's net assets (plus the amount of borrowings for
investment purposes) in a diversified portfolio of U.S. dollar-
denominated investment grade fixed income securities. The Bond
Portfolio primarily will invest in investment grade fixed income
securities that are rated a minimum of the lowest A rating by any
Nationally Recognized Statistical Ratings Organization (``NRSRO''), or,
if unrated, determined by the management team (who are employees of the
Adviser) to be of equivalent quality.\7\ The Bond Portfolio will invest
in fixed and floating rate securities of varying maturities,\8\ such as
corporate obligations (including commercial paper of U.S. and foreign
entities, master demand notes (subject to the 15% illiquid securities
limit), and medium term notes); government bonds (including U.S.
Treasury Bills, notes, and bonds); agency securities, including U.S.
government agency securities, and non-U.S. sovereign and supranational
debt; privately-issued securities (which,
[[Page 56257]]
for example, can be Rule 144A securities); asset-backed and mortgage-
backed securities; and money market instruments (including U.S. and
foreign bank time deposits, certificates of deposit, and banker's
acceptances). Under normal circumstances, the effective duration of the
Bond Portfolio is expected to be between three and nine months. \9\ In
addition, the Bond Portfolio expects to maintain a weighted average
maturity between six and eighteen months.\10\ For the purposes of
determining the Bond Portfolio's weighted average maturity, a
security's final maturity date or, for amortizing securities such as
asset-backed and mortgage-backed securities, its weighted average life
will be used for calculation purposes.
---------------------------------------------------------------------------
\7\ According to the Adviser, the Adviser may determine that
unrated securities are of ``equivalent quality'' based on such
credit quality factors that it deems appropriate, which may include,
among other things, performing an analysis similar, to the extent
possible, to that performed by an NRSRO when rating similar
securities and issuers. In making such a determination, the Adviser
may consider internal analyses and risk ratings, third party
research and analysis, and other sources of information, as deemed
appropriate by the Adviser.
\8\ A floating rate security provides for the automatic
adjustment of its interest rate whenever a specified interest rate
changes. Interest rates on these securities are ordinarily tied to,
and are a percentage of, a widely recognized interest rate, such as
the yield on 90-day U.S. Treasury bills or the prime rate of a
specified bank. These rates may change as often as twice daily.
\9\ Effective duration is a measure of the Bond Portfolio's
price sensitivity to changes in yields or interest rates. Duration
will be a distinguishing factor among the Funds, and each of the
Funds' respective portfolios will have different effective
durations, as described below.
\10\ Weighted average maturity is a U.S. dollar-weighted average
of the remaining term to maturity of the underlying securities in
the Bond Portfolio.
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SPDR SSgA Conservative Ultra Short Term Bond ETF
The SPDR SSgA Conservative Ultra Short Term Bond ETF will seek to
provide current income consistent with preservation of capital and
daily liquidity through short duration high quality investments with
the avoidance of excessive portfolio volatility.
Under normal circumstances, the Fund will invest all of its assets
in the SSgA Conservative Ultra Short Term Bond Portfolio
(``Conservative Portfolio''), a separate series of the SSgA Master
Trust with an identical investment objective as the Fund. As a result,
the Fund will invest indirectly through the Conservative Portfolio.
The Adviser will invest, under normal circumstances, at least 80%
of the Conservative Portfolio's net assets (plus the amount of
borrowings for investment purposes) in a diversified portfolio of U.S.
dollar-denominated investment grade fixed income securities. The
Conservative Portfolio primarily will invest in investment grade fixed
income securities that are rated a minimum of the lowest A rating by
any NRSRO, or, if unrated, determined by the portfolio management team
(who are employees of the Adviser) to be of equivalent quality,
determined as described above.\11\ The Conservative Portfolio will
invest in fixed and floating rate securities of varying maturities,
such as corporate obligations (including commercial paper of U.S. and
foreign entities, master demand notes (subject to the 15% illiquid
securities limit), and medium term notes); government bonds (including
U.S. Treasury Bills, notes, and bonds); agency securities; privately-
issued securities (which, for example, can be Rule 144A securities);
asset-backed and mortgage-backed securities; and money market
instruments (including U.S. and foreign bank time deposits,
certificates of deposit, and banker's acceptances).
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\11\ See note 7, supra.
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Under normal circumstances, the effective duration of the
Conservative Portfolio is expected to be four months or less. In
addition, the Conservative Portfolio expects to maintain a weighted
average maturity between six and eighteen months. For the purposes of
determining the Conservative Portfolio's weighted average maturity, a
security's final maturity date or, for amortizing securities such as
asset-backed and mortgage-backed securities, its weighted average life
will be used for calculation purposes.
SPDR SSgA Aggressive Ultra Short Term Bond ETF
The SPDR SSgA Aggressive Ultra Short Term Bond ETF will seek to
maximize income consistent with preservation of capital through short
duration high quality investments.
Under normal circumstances, the Fund will invest all of its assets
in the SSgA Aggressive Ultra Short Term Bond Portfolio (``Aggressive
Portfolio'' and, together with the Bond Portfolio and the Conservative
Portfolio, collectively, ``Portfolios''), a separate series of the SSgA
Master Trust with an identical investment objective as the Fund. As a
result, the Fund will invest indirectly through the Aggressive
Portfolio.
The Adviser will invest, under normal circumstances, at least 80%
of the Aggressive Portfolio's net assets (plus the amount of borrowings
for investment purposes) in a diversified portfolio of U.S. dollar-
denominated investment grade fixed income securities. The Aggressive
Portfolio primarily will invest in investment grade fixed income
securities that are rated a minimum of the lowest BBB rating by any
NRSRO or, if unrated, determined by the portfolio management team (who
are employees of the Adviser) to be of equivalent quality, determined
as described above.\12\
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\12\ See note 7, supra.
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The Aggressive Portfolio will invest in fixed and floating rate
securities of varying maturities, such as corporate obligations
(including commercial paper of U.S. and foreign entities, master demand
notes (subject to the 15% illiquid securities limit), and medium term
notes); government bonds (including U.S. Treasury Bills, notes, and
bonds); agency securities; privately-issued securities (which, for
example, can be Rule 144A securities); asset-backed and mortgage-backed
securities; and money market instruments (including U.S. and foreign
bank time deposits, certificates of deposit, and banker's acceptances).
Under normal circumstances, the effective duration of the
Aggressive Portfolio is expected to be between six and twelve months.
In addition, the Aggressive Portfolio expects to maintain a weighted
average maturity between 1.5 and 2.5 years. For the purposes of
determining the Aggressive Portfolio's weighted average maturity, a
security's final maturity date or, for amortizing securities such as
asset-backed and mortgage-backed securities, its weighted average life
will be used for calculation purposes.
Principal Investments
Each Portfolio will invest in bonds, including zero coupon
bonds,\13\ fixed rate bonds,\14\ and ``floating-rate'' or ``variable-
rate'' bonds.\15\ In addition, each Portfolio may invest in U.S. and
non-U.S. corporate bonds, which will be denominated in U.S. dollars.
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\13\ A zero coupon bond pays no interest to its holder during
its life. The value of a zero coupon bond to a fund consists of the
difference between such bond's face value at the time of maturity
and the price for which it was acquired, which may be an amount
significantly less than its face value (sometimes referred to as a
``deep discount'' price).
\14\ The value of a fixed rate bond usually rises when market
interest rates fall, and falls when market interest rates rise.
Accordingly, a fixed rate bond's yield (income as a percent of the
bond's current value) may differ from its coupon rate as its value
rises or falls. Fixed rate bonds generally are also subject to
inflation risk, which is the risk that the value of the bond or
income from the bond will be worth less in the future as inflation
decreases the value of money. This could mean that, as inflation
increases, the ``real'' value of the assets of a fund holding fixed
rate bonds can decline, as can the value of the fund's
distributions.
\15\ Variable rate securities are instruments issued or
guaranteed by entities such as (1) the U.S. Government, or an agency
or instrumentality thereof, (2) corporations, (3) financial
institutions, (4) insurance companies or (5) trusts that have a rate
of interest subject to adjustment at regular intervals but less
frequently than annually. A variable rate security provides for the
automatic establishment of a new interest rate on set dates.
Variable rate obligations whose interest is readjusted no less
frequently than annually will be deemed to have a maturity equal to
the period remaining until the next readjustment of the interest
rate.
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Each Portfolio may invest in collateralized loan obligations
(``CLOs'') to the extent they meet the minimum NRSRO rating requirement
described
[[Page 56258]]
above for each Portfolio. While the assets underlying CLOs are
typically ``Senior Loans,''\16\ the assets may also include (i)
unsecured loans, (ii) other debt securities that are rated below
investment grade, (iii) debt tranches of other CLOs,\17\ and (iv)
equity securities incidental to investments in Senior Loans.
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\16\ A Senior Loan is an advance or commitment of funds made by
one or more banks or similar financial institutions, including the
Portfolios, to one or more corporations, partnerships or other
business entities and typically pays interest at a floating or
adjusting rate that is determined periodically at a designated
premium above a base lending rate, most commonly the London-
Interbank Offered Rate (``LIBOR''). A Senior Loan is considered
senior to all other unsecured claims against the borrower, senior to
or pari passu with all other secured claims, meaning that in the
event of a bankruptcy the Senior Loan, together with other first
lien claims, are entitled to be the first to be repaid out of
proceeds of the assets securing the loans, before other existing
claims or interests receive repayment. However, in bankruptcy
proceedings, there may be other claims, such as taxes or additional
advances, that take precedence. Senior Loans consist generally of
obligations of companies and other entities (collectively,
``borrowers'') incurred for the purpose of reorganizing the assets
and liabilities of a borrower; acquiring another company; taking
over control of a company (leveraged buyout); temporary refinancing;
or financing internal growth or other general business purposes.
Senior Loans are often obligations of borrowers who have incurred a
significant percentage of debt compared to equity issued and thus
are highly leveraged.
\17\ When investing in CLOs, each Portfolio will not invest in
equity tranches, which are the lowest tranche. However, each
Portfolio may invest in lower debt tranches of CLOs, which typically
experience a lower recovery, greater risk of loss or deferral or
non-payment of interest than more senior debt tranches of the CLO.
In addition, each Portfolio intends to invest in CLOs consisting
primarily of individual Senior Loans of borrowers and not repackaged
CLO obligations from other high risk pools. The underlying Senior
Loans purchased by CLOs are generally performing at the time of
purchase but may become non-performing, distressed, or defaulted.
CLOs with underlying assets of non-performing, distressed, or
defaulted loans are not contemplated to constitute a significant
portion of a Portfolio's investments in CLOs. The key feature of the
CLO structure is the prioritization of the cash flows from a pool of
debt securities among the several classes of the CLO. The SPV is a
company founded solely for the purpose of securitizing payment
claims arising out of this diversified asset pool. On this basis,
marketable securities are issued by the SPV, which, due to the
diversification of the underlying risk, generally represent a lower
level of risk than the original assets. The redemption of the
securities issued by the SPV typically takes place at maturity out
of the cash flow generated by the collected claims.
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Each Portfolio may invest in sovereign debt, which will be
denominated in U.S. dollars, and in U.S. Government obligations. U.S.
Government obligations include securities issued or guaranteed as to
principal and interest by the U.S. Government or its agencies or
instrumentalities.\18\ The Portfolios may invest in asset-backed and
commercial mortgaged-backed securities.\19\ The percentage limitation
of investments in asset backed and commercial mortgage-backed
securities for the Bond Portfolio, the Conservative Portfolio, and the
Aggressive Portfolio will be 50%, 35%, and 65%, respectively. The
percentage limitation of an investment in each single structured
collateral type of asset backed and commercial mortgage-backed
securities for the Bond Portfolio, the Conservative Portfolio, and the
Aggressive Portfolio will be 15%, 20%, and 25%, respectively. Non-
agency residential mortgage-backed and commercial mortgage-backed
investments each will be limited to 10% for each of the Portfolios.
---------------------------------------------------------------------------
\18\ One type of U.S. Government obligation, U.S. Treasury
obligations, are backed by the full faith and credit of the U.S.
Treasury and differ only in their interest rates, maturities, and
times of issuance. U.S. Treasury bills have initial maturities of
one-year or less; U.S. Treasury notes have initial maturities of one
to ten years; and U.S. Treasury bonds generally have initial
maturities of greater than ten years.
Other U.S. Government obligations are issued or guaranteed by
agencies or instrumentalities of the U.S. Government including, but
not limited to, Federal National Mortgage Association (``Fannie
Mae''), the Government National Mortgage Association (``Ginnie
Mae''), the Small Business Administration, the Federal Farm Credit
Administration, the Federal Home Loan Mortgage Corporation
(``Freddie Mac''), the Federal Home Loan Banks (``FHLB''), Banks for
Cooperatives (including the Central Bank for Cooperatives), the
Federal Land Banks, the Federal Intermediate Credit Banks, the
Tennessee Valley Authority, the Export-Import Bank of the United
States, the Commodity Credit Corporation, the Federal Financing
Bank, the Student Loan Marketing Association, the National Credit
Union Administration, and the Federal Agricultural Mortgage
Corporation (``Farmer Mac'').
\19\ Asset-backed securities are securities backed by
installment contracts, credit-card receivables, or other assets.
Commercial mortgage-backed securities are securities backed by
commercial real estate properties. Both asset-backed and commercial
mortgage-backed securities represent interests in ``pools'' of
assets in which payments of both interest and principal on the
securities are made on a regular basis.
---------------------------------------------------------------------------
Each Portfolio may invest a substantial portion of its assets in
U.S. agency mortgage pass-through securities. Each Portfolio may invest
in restricted securities.\20\ Each Portfolio may invest in short-term
instruments, including money market instruments, repurchase agreements,
cash, and cash equivalents, on an ongoing basis to provide liquidity or
for other reasons. Money market instruments are generally short-term
investments that may include but are not limited to: (i) shares of
money market funds (including those advised by the Adviser); (ii)
obligations issued or guaranteed by the U.S. government or its agencies
or instrumentalities (including government-sponsored enterprises);
(iii) negotiable certificates of deposit, banker's acceptances, fixed
time deposits and other obligations of U.S. and foreign banks
(including foreign branches) and similar institutions; (iv) commercial
paper rated at the date of purchase ``Prime-1'' by Moody's or ``A-1''
by S&P, or if unrated, of comparable quality as determined by the
Adviser;\21\ (v) non-convertible corporate debt securities (e.g., bonds
and debentures) that have remaining maturities at the date of purchase
of not more than 397 days and that satisfy the rating requirements set
forth in Rule 2a-7 under the 1940 Act; and (vi) short-term U.S. dollar-
denominated obligations of foreign banks (including U.S. branches)
that, in the opinion of the Adviser, are of comparable quality to
obligations of U.S. banks that may be purchased by a Portfolio.
---------------------------------------------------------------------------
\20\ Restricted securities are securities that are not
registered under the Securities Act, but which can be offered and
sold to ``qualified institutional buyers'' under Rule 144A under the
Securities Act.
\21\ Commercial paper consists of short-term promissory notes
issued by banks, corporations, and other entities to finance short-
term credit needs. These securities generally are discounted but
sometimes may be interest bearing.
---------------------------------------------------------------------------
The Funds are actively-managed and are not tied to an index. The
Exchange notes, however, that each Fund's Portfolio will meet certain
criteria for index-based, fixed income exchange-traded funds contained
in NYSEArca Equities Rule 5.2(j)(3), Commentary .02.\22\
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\22\ See NYSE Arca Equities Rule 5.2(j)(3), Commentary .02
governing fixed income based Investment Company Units. Each of the
Funds' Portfolios will meet the following requirements of Rule
5.2(j)(3), Commentary .02(a): (i) Components that in the aggregate
account for at least 75% of the weight of the index or portfolio
must each have a minimum original principal amount outstanding of
$100 million or more (Rule 5.2(j)(3), Commentary.02(a)(2)); (ii) no
component fixed-income security (excluding Treasury Securities and
government-sponsored entity securities) will represent more than 30%
of the weight of the index or portfolio, and the five highest
weighted component fixed-income securities will not in the aggregate
account for more than 65% of the weight of the index or portfolio
(Rule 5.2(j)(3), Commentary.02(a)(4)); and (iii) an underlying index
or portfolio (excluding exempted securities) must include securities
from a minimum of 13 non-affiliated issuers (Rule 5.2(j)(3),
Commentary.02(a)(5)).
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Other Investments
The following are additional possible investments of each Portfolio
that are not included under the 80% investment policies described above
for each Fund.
Each Portfolio may invest in the securities of other investment
companies, including money market funds and closed-end funds, exchange
traded products (``ETPs''),\23\ including
[[Page 56259]]
exchange-traded funds registered under the 1940 Act that seek to track
the performance of a market index (``Underlying ETFs'') and exchange
traded notes (``ETNs'').\24\
---------------------------------------------------------------------------
\23\ For each of the Funds, ETPs include Investment Company
Units (as described in NYSE Arca Equities Rule 5.2(j)(3)); Index-
Linked Securities (as described in NYSE Arca Equities Rule
5.2(j)(6)); Portfolio Depositary Receipts (as described in NYSE Arca
Equities Rule 8.100); 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); Currency Trust Shares
(as described in NYSE Arca Equities Rule 8.202); Commodity Index
Trust Shares (as described in NYSE Arca Equities Rule 8.203); Trust
Units (as described in NYSE Arca Equities Rule 8.500); Managed Fund
Shares (as described in NYSE Arca Equities Rule 8.600), and closed-
end funds. The ETPs all will be listed and traded in the U.S. on
registered exchanges. While a Fund may invest in inverse ETPs, a
Fund will not invest in leveraged (e.g., 2X or 3X) or leveraged
inverse ETPs.
\24\ ETNs are debt obligations of investment banks; they are
traded on exchanges and their returns are linked to the performance
of reference assets, including market indexes. In addition to
trading ETNs on exchanges, investors may redeem ETNs directly with
the issuer on a weekly basis, typically in a minimum amount of
50,000 units, or hold the ETNs until maturity.
---------------------------------------------------------------------------
Each Portfolio may invest in one or more ETPs that are qualified
publicly traded partnerships (``QPTPs'') and whose principal activities
are the buying and selling of commodities or options, futures, or
forwards with respect to commodities.\25\ Additionally, each Portfolio
may invest in preferred securities, convertible securities, high yield
debt securities, and Variable Rate Demand Obligations.
---------------------------------------------------------------------------
\25\ Examples of such entities are the PowerShares DB Energy
Fund, PowerShares DB Oil Fund, PowerShares DB Precious Metals Fund,
PowerShares DB Gold Fund, PowerShares DB Silver Fund, PowerShares DB
Base Metals Fund, and PowerShares DB Agriculture Fund, which are
listed and traded on the Exchange pursuant to NYSE Arca Equities
Rule 8.200.
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The Portfolios may invest in inflation-protected public
obligations, commonly known as ``TIPS,'' of the U.S. Treasury, as well
as TIPS of major governments and emerging market countries, excluding
the United States. Each Portfolio may invest a portion of its assets in
Build America Bonds. The Build America Bond program allows state and
local governments to issue taxable bonds for capital projects and to
receive a direct federal subsidy payment from the Treasury Department
for a portion of their borrowing costs.\26\
---------------------------------------------------------------------------
\26\ Issuance of Build America Bonds ceased on December 31,
2010. The Build America Bonds outstanding continue to be eligible
for the federal interest rate subsidy, which continues for the life
of the Build America Bonds; however, no bonds issued following
expiration of the Build America Bond program are eligible for the
federal tax subsidy.
---------------------------------------------------------------------------
Further, the Portfolios may seek to obtain exposure to U.S. agency
mortgage pass-through securities 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.
Each Portfolio may invest in repurchase agreements with commercial
banks, brokers, or dealers to generate income from its excess cash
balances. Additionally, each Portfolio may invest in sovereign debt,
which may be denominated in local currencies. Each Portfolio may also
invest in foreign currency transactions on a spot (cash) basis and
currency forwards for hedging or trade settlement purposes.
Each Portfolio may enter into reverse repurchase agreements, which
involve the sale of securities with an agreement to repurchase the
securities at an agreed-upon price, date, and interest payment and
which have the characteristics of borrowing.
Each Portfolio may hold up to an aggregate amount of 15% of its net
assets in illiquid securities (calculated at the time of investment),
including Rule 144A securities deemed illiquid by the Adviser, master
demand notes, privately-issued securities (which, for example, can be
Rule 144A securities), loans, and loan participations. Each Portfolio
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 each
Fund's (indirectly through its respective Portfolio) net assets are
held in illiquid securities. Illiquid securities 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.\27\
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\27\ The Exchange represents that the Trust's Board of Trustees
(``Board'') has delegated the responsibility for determining the
liquidity of Rule 144A restricted securities that a Portfolio may
invest in to the Adviser. 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 Portfolio will be classified as a ``non-diversified''
investment company under the 1940 Act and will not concentrate its
investments in any particular industry or sector. The Portfolios intend
to qualify for and to elect treatment as a separate regulated
investment company under Subchapter M of the Internal Revenue Code.
In extreme situations or market conditions,\28\ a Fund may (either
directly or through the corresponding Portfolio) temporarily depart
from its normal investment policies and strategies provided that the
alternative is consistent with the Fund's investment objective and is
in the best interest of the Fund. For example, a Portfolio may hold a
higher than normal proportion of its assets in cash in times of extreme
market stress.
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\28\ Such situations and conditions include, but are not limited
to, trading halts in the fixed income markets or disruptions in the
financial markets generally; operational issues causing
dissemination of inaccurate market information; or force majeure
type events such as systems failure, natural or man-made disaster,
act of God, armed conflict, act of terrorism, riot or labor
disruption, or any similar intervening circumstance.
---------------------------------------------------------------------------
Except for ETPs that may hold non-U.S. equity issues, the Funds and
the Portfolios will not otherwise invest in non-U.S equity issues.
Neither the Funds nor the Portfolios will invest in options contracts,
futures contracts, or swap agreements.
Master-Feeder Structure of the Funds
The Funds are intended to be managed in a ``master-feeder''
structure under which each Fund invests substantially all of its assets
in a corresponding Portfolio (i.e., ``master fund''), which is a
separate mutual fund registered under the 1940 Act that has an
identical investment objective. As a result, each Fund (i.e., ``feeder
fund'') has an indirect interest in all of the securities and other
assets owned by the corresponding Portfolio. Because of this indirect
interest, each Fund's investment returns should be the same as those of
the corresponding Portfolio, adjusted for the expenses of the Fund. In
extraordinary instances, each Fund reserves the right to make direct
investments in securities.
The Adviser will manage the investments of each Portfolio. Under
the master-feeder arrangement, and pursuant to an Investment Advisory
Agreement between the Adviser and the Trust, investment advisory fees
charged at the Portfolio level are deducted from the advisory fees
charged at the Fund level. This arrangement avoids a ``layering'' of
fees, i.e., a Fund's total annual operating expenses would be no higher
as a result of investing in a master-feeder arrangement than they would
be if the Fund pursued its investment objectives directly. In addition,
each Fund may discontinue investing through the master-feeder
[[Page 56260]]
arrangement and pursue its investment objectives directly if the
Trust's Board determines that doing so would be in the best interests
of shareholders.
III. Discussion and Commission's Findings
After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of Section 6 of the Act \29\
and the rules and regulations thereunder applicable to a national
securities exchange.\30\ In particular, the Commission finds that the
proposed rule change is consistent with Section 6(b)(5) of the Act,\31\
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 foster cooperation
and coordination with persons engaged in facilitating transactions in
securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general, to
protect investors and the public interest. The Commission notes that
the Shares of the Funds must comply with the requirements of NYSE Arca
Equities Rule 8.600 to be listed and traded on the Exchange.
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\29\ 15 U.S.C. 78f.
\30\ In approving this proposed rule change, the Commission
notes that it has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
\31\ 15 U.S.C. 78f(b)(5).
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The Commission finds that the proposal to list and trade the Shares
on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the
Act,\32\ 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. Quotation and last-
sale information for the Shares will be available via the Consolidated
Tape Association (``CTA'') high-speed line. In addition, an indicative
optimized portfolio value, which is the Portfolio Indicative Value as
defined in NYSE Arca Equities Rule 8.600(c)(3), relating to each Fund
will be widely disseminated every 15 seconds during the Core Trading
Session by one or more major market data vendors.\33\ On each business
day, before commencement of trading in Shares in the Core Trading
Session on the Exchange, the Adviser 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 Funds' calculation of NAV at the end
of the business day.\34\ The NAV of a Fund will be determined once each
business day, normally as of the closing of the regular trading session
on the New York Stock Exchange (normally 4:00 p.m. Eastern Time). A
basket composition file, which will include the security names and
share quantities, if applicable, required to be delivered in exchange
for a Fund's Shares, together with estimates and actual cash
components, will be publicly disseminated daily prior to the opening of
the New York Stock Exchange via National Securities Clearing
Corporation. Information regarding market price and trading volume of
the Shares will be continually available on a real-time basis
throughout the day on brokers' computer screens and other electronic
services. Information regarding the previous day's closing price and
trading volume information for the Shares will be published daily in
the financial section of newspapers. The intra-day, closing, and
settlement prices of the Portfolio securities and other assets will
also be readily available from the national securities exchanges
trading those securities, automated quotation systems, published or
other public sources, or on-line information services such as Bloomberg
or Reuters. The Funds' Web site will include a form of the prospectus
for the Funds and additional data relating to NAV and other applicable
quantitative information.
---------------------------------------------------------------------------
\32\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
\33\ According to the Exchange, several major market data
vendors widely disseminate or make widely available Portfolio
Indicative Values taken from CTA or other data feeds.
\34\ On a daily basis, the Adviser will disclose for each
portfolio security and other financial instrument of the Funds and
of the Portfolios the following information on the Funds' Web site:
Ticker symbol (if applicable); name of security and financial
instrument; number of shares, if applicable, or dollar value of
financial instruments and securities held in the portfolio; and
percentage weighting of the security and financial instrument in the
portfolio. The Web site information will be publicly available at no
charge.
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The Commission further believes that the proposal to list and trade
the Shares is reasonably designed to promote fair disclosure of
information that may be necessary to price the Shares appropriately and
to prevent trading when a reasonable degree of transparency cannot be
assured. The Commission notes that the Exchange will obtain a
representation from the issuer of the Shares that the NAV for each Fund
will be calculated daily and that the NAV and the Disclosed Portfolio
will be made available to all market participants at the same time.\35\
In addition, trading in Shares of the Funds 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 may halt trading
in the Shares if trading is not occurring in the securities or the
financial instruments constituting the Disclosed Portfolio of the
Funds, or if other unusual conditions or circumstances detrimental to
the maintenance of a fair and orderly market are present.\36\ Further,
the Commission notes that the Reporting Authority that provides the
Disclosed Portfolio must implement and maintain, or be subject to,
procedures designed to prevent the use and dissemination of material,
non-public information regarding the actual components of the
portfolio.\37\ The Commission also notes that the Financial Industry
Regulatory Authority (``FINRA'') on behalf of the Exchange,\38\ will
communicate as needed regarding trading in the Shares with other
markets that are members of the Intermarket Surveillance Group
(``ISG'') or with which the Exchange has in place a comprehensive
surveillance sharing agreement. The Exchange states that it has a
general policy prohibiting the distribution of material, non-public
information by its employees. \39\ The Exchange also states that the
Adviser is affiliated with a broker-dealer, and the Adviser has
implemented a fire wall with respect to its broker-dealer affiliate
regarding access to information concerning the composition of and
changes to the portfolio.\40\
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\35\ See NYSE Arca Equities Rule 8.600(d)(1)(B).
\36\ See NYSE Arca Equities Rule 8.600(d)(2)(C) (providing
additional considerations for the suspension of trading in or
removal from listing of Managed Fund Shares on the Exchange). With
respect to trading halts, the Exchange may consider all relevant
factors in exercising its discretion to halt or suspend trading in
the Shares of the Fund. 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.
\37\ See NYSE Arca Equities Rule 8.600(d)(2)(B)(ii).
\38\ The Exchange states that, while FINRA surveils trading on
the Exchange pursuant to a regulatory services agreement, the
Exchange is responsible for FINRA's performance under this
regulatory services agreement.
\39\ The SSgA Master Trust's Pricing and Investment Committee
has implemented procedures designed to prevent the use and
dissemination of material, non-public information regarding the
Portfolios and the Funds.
\40\ See supra note 4. 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 its related
personnel are 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 violation, 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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[[Page 56261]]
The Exchange represents that the Shares are deemed to be equity
securities, thus rendering trading in the Shares subject to the
Exchange's existing rules governing the trading of equity securities.
In support of this proposal, the Exchange has made representations,
including:
(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) The Exchange represents that trading in the Shares will be
subject to the existing trading surveillances, administered by FINRA on
behalf of the Exchange, which are designed to detect violations of
Exchange rules and applicable federal securities laws and that these
procedures are adequate to properly monitor Exchange trading of the
Shares in all trading sessions and to deter and detect violations of
Exchange rules and applicable federal securities laws.
(4) Prior to the commencement of trading, the Exchange will inform
its Equity Trading Permit Holders in an Information Bulletin of the
special characteristics and risks associated with trading the Shares.
Specifically, the Information Bulletin will discuss the following: (a)
The procedures for purchases and redemptions of Shares in Creation
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
Equity Trading Permit Holders to learn the essential facts relating to
every customer prior to trading the Shares; (c) the risks involved in
trading the Shares during the Opening and Late Trading Sessions when an
updated Portfolio Indicative Value will not be calculated or publicly
disseminated; (d) how information regarding the Portfolio Indicative
Value will be disseminated; (e) the requirement that Equity Trading
Permit Holders deliver a prospectus to investors purchasing newly
issued Shares prior to or concurrently with the confirmation of a
transaction; and (f) trading information.
(5) For initial and continued listing, the Funds will be in
compliance with Rule 10A-3 under the Exchange Act,\41\ as provided by
NYSE Arca Equities Rule 5.3.
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\41\ 17 CFR 240.10A-3.
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(6) All equity securities held by the Funds or Portfolios,
including shares of ETPs, will trade on U.S. national securities
exchanges, all of which are members of ISG.
(7) For each of the Portfolios, the Adviser will invest, under
normal circumstances, at least 80% of each Portfolio's net assets in a
diversified portfolio of U.S. dollar-denominated investment grade fixed
income securities. The Bond Portfolio and the Conservative Portfolio
primarily will invest in investment grade fixed income securities that
are rated a minimum of the lowest A rating by any NRSRO (and for the
Aggressive Portfolio, a minimum of the lowest BBB rating by any NRSRO),
or, if unrated, determined by the Adviser to be of equivalent quality.
(8) Each Fund's Portfolio will meet certain criteria for index-
based fixed income exchange-traded funds contained in NYSEArca Equities
Rule 5.2(j)(3), Commentary .02.\42\
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\42\ See note 22, supra.
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(9) Except for ETPs that may hold non-U.S. equity issues, the Funds
and the Portfolios will not otherwise invest in non-U.S. equity issues.
Neither the Funds nor the Portfolios will invest in options contracts,
futures contracts, or swap agreements. The Funds' investments will be
consistent with its respective investment objective and will not be
used to enhance leverage.
(10) Non-agency residential mortgage-backed and commercial
mortgage-backed investments each will be limited to 10% for each of the
Portfolios.
(11) The Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid securities (calculated at the time of investment),
including Rule 144A securities deemed illiquid by the Adviser, master
demand notes, other privately issued securities, loans, and loan
participations.
(12) A minimum of 100,000 Shares for each Fund will be outstanding
at the commencement of trading on the Exchange.
This approval order is based on all of the Exchange's representations
and description of the Funds, including those set forth above and in
the Notice.
For the foregoing reasons, the Commission finds that the proposed
rule change is consistent with Section 6(b)(5) of the Act \43\ and the
rules and regulations thereunder applicable to a national securities
exchange.
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\43\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\44\ that the proposed rule change (SR-NYSEArca-2013-71) be, and it
hereby is, approved.
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\44\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\45\
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\45\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-22166 Filed 9-11-13; 8:45 am]
BILLING CODE 8011-01-P
