Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 1, To List and Trade Shares of Fidelity Investment Grade Bond ETF; Fidelity Limited Term Bond ETF; and Fidelity Total Bond ETF Under NYSE Arca Equities Rule 8.600, 25908-25919 [2014-10358]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 79, Number 87 (Tuesday, May 6, 2014)]
[Notices]
[Pages 25908-25919]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-10358]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72064; File No. SR-NYSEArca-2014-46]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change, as Modified by Amendment No. 1, To List and 
Trade Shares of Fidelity Investment Grade Bond ETF; Fidelity Limited 
Term Bond ETF; and Fidelity Total Bond ETF Under NYSE Arca Equities 
Rule 8.600

May 1, 2014.
    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 April 16, 2014, NYSE Arca, Inc. (``Exchange'' or ``NYSE 
Arca'') 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 by the self-regulatory 
organization. On April 30, 2014, the Exchange filed Amendment No. 1 to 
the proposed rule change, which amended and replaced the proposed rule 
change in its entirety.\3\ The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See infra note 7.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to list and trade shares of the following 
under NYSE Arca Equities Rule 8.600 (``Managed Fund Shares''): Fidelity 
Investment Grade Bond ETF; Fidelity Limited Term Bond ETF; and Fidelity 
Total Bond ETF. The text of the proposed rule change is available on 
the Exchange's Web site at www.nyse.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to list and trade the shares (``Shares'') of 
the following under NYSE Arca Equities Rule 8.600, which governs the 
listing and trading of Managed Fund Shares: \4\ Fidelity Investment 
Grade Bond ETF; Fidelity Limited Term Bond ETF; and Fidelity Total Bond 
ETF (each, a ``Fund'' and collectively, the ``Funds'').\5\ The Funds 
are funds of Fidelity Merrimack Street Trust (``Trust''), a 
Massachusetts business trust.\6\
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    \4\ A Managed Fund Share is a security that represents an 
interest in an investment company registered under the Investment 
Company Act of 1940 (15 U.S.C. 80a-1) (``1940 Act'') organized as an 
open-end investment company or similar entity that invests in a 
portfolio of securities selected by its investment adviser 
consistent with its investment objectives and policies. In contrast, 
an open-end investment company that issues Investment Company Units, 
listed and traded on the Exchange under NYSE Arca Equities Rule 
5.2(j)(3), seeks to provide investment results that correspond 
generally to the price and yield performance of a specific foreign 
or domestic stock index, fixed income securities index or 
combination thereof.
    \5\ The Commission has previously approved the listing and 
trading on the Exchange of other actively managed funds under Rule 
8.600. See e.g., Securities Exchange Act Release Nos. 57801 (May 8, 
2008), 73 FR 27878 (May 14, 2008) (SR-NYSEArca-2008-31) (order 
approving Exchange listing and trading of twelve actively-managed 
funds of the WisdomTree Trust); 60981 (November 10, 2009), 74 FR 
59594 (November 18, 2009) (SR-NYSEArca-2009-79) (order approving 
Exchange listing and trading of five fixed income funds of the PIMCO 
ETF Trust); 66321 (February 3, 2012) 77 FR 6850 (February 9, 2012) 
(SR-NYSEArca-2011-95) (order approving Exchange listing and trading 
of PIMCO Total Return ETF); 66670 (March 28, 2012) 77 FR 20087 
(April 3, 2012) (SR-NYSEArca-2012-09) (order approving Exchange 
listing and trading of PIMCO Global Advantage Inflation-Linked Bond 
Strategy Fund).
    \6\ The Trust is registered under the 1940 Act. On April 17, 
2014, the Trust filed with the Commission an amendment to its 
registration statement on Form N-1A under the Securities Act of 1933 
(15 U.S.C. 77a) (``1933 Act'') and the 1940 Act relating to the 
Funds (File Nos. 333-186372 and 811-22796) (the ``Registration 
Statement''). The description of the operation of the Trust and the 
Funds herein is based, in part, on the Registration Statement. In 
addition, the Commission has issued an order granting certain 
exemptive relief to the Trust under the 1940 Act. See Investment 
Company Act Release No. 30513 (May 10, 2013) (``Exemptive Order'') 
(File No. 812-14104).
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    Fidelity Management & Research Company (``FMR'') will be the Funds' 
manager (``Manager''). Fidelity Investments Money Management, Inc. 
(``FIMM'') and other investment advisers, as described below, will 
serve as sub-advisers for the Funds (``Sub-Advisers''). FIMM will have 
day-to-day

[[Page 25909]]

responsibility for choosing investments for the Fidelity Investment 
Grade Bond ETF and Fidelity Limited Term Bond ETF. FMR Co., Inc. 
(``FMRC'') will serve as a sub-adviser for the Fidelity Total Bond ETF. 
FIMM and FMRC will each have day-to-day responsibility for choosing 
certain types of investments of foreign and domestic issuers for 
Fidelity Total Bond ETF. FIMM and FMRC are affiliates of FMR. Other 
investment advisers, which also are affiliates of FMR, will assist FMR 
with foreign investments, including Fidelity Management & Research 
(U.K.) Inc., Fidelity Management & Research (Hong Kong) Limited, and 
Fidelity Management & Research (Japan) Inc. Fidelity Distributors 
Corporation (``FDC'') will be the distributor for the Funds' Shares.\7\
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    \7\ This Amendment No. 1 to SR-NYSEArca-2014-46 replaces SR-
NYSEArca-2014-46 as originally filed and supersedes such filing in 
its entirety.
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    Commentary .06 to Rule 8.600 provides that, if the investment 
adviser to the investment company issuing Managed Fund Shares is 
affiliated with a broker-dealer, such investment adviser will erect a 
``fire wall'' between the investment adviser and the broker-dealer with 
respect to access to information concerning the composition and/or 
changes to such investment company portfolio.\8\ In addition, 
Commentary .06 further requires that personnel who make decisions on an 
open-end fund's portfolio composition must be subject to procedures 
designed to prevent the use and dissemination of material nonpublic 
information regarding the open-end fund's portfolio. The Manager and 
the Sub-Advisers are not broker-dealers but are affiliated with one or 
more broker-dealers and have each implemented a fire wall with respect 
to such broker-dealers regarding access to information concerning the 
composition and/or changes to the portfolios, and will be subject to 
procedures designed to prevent the use and dissemination of material 
non-public information regarding the portfolios. In the event (a) the 
Manager or any of the Sub-Advisers becomes a registered broker-dealer 
or 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 broker-dealer affiliate regarding 
access to information concerning the composition and/or changes to the 
portfolio, and will be subject to procedures designed to prevent the 
use and dissemination of material non-public information regarding such 
portfolio.
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    \8\ An investment adviser to an open-end fund is required to be 
registered under the Investment Advisers Act of 1940 (the ``Advisers 
Act''). As a result, the Manager and the Sub-Advisers, and their 
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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Fidelity Investment Grade Bond ETF
    According to the Registration Statement, Fidelity Investment Grade 
Bond ETF will seek a high level of current income.
    FMR will normally \9\ invest at least 80% of the Fund's assets in 
investment-grade debt securities (those of medium and high 
quality).\10\ The debt securities in which the Fund may invest are 
corporate debt securities; \11\ U.S. Government securities; \12\ 
repurchase agreements and reverse repurchase agreements; \13\ money 
market securities; mortgage and other asset-backed securities; \14\ 
loans; \15\ loan participations and loan assignments and other 
evidences of indebtedness, including

[[Page 25910]]

letters of credit, revolving credit facilities and other standby 
financing commitments; structured securities; \16\ stripped securities; 
\17\ municipal securities; sovereign debt obligations; \18\ obligations 
of international agencies or supranational entities; and other 
securities believed to have debt-like characteristics, including hybrid 
securities,\19\ which may offer characteristics similar to those of a 
bond security such as stated maturity and preference over equity in 
bankruptcy (collectively, ``Debt Securities'').\20\
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    \9\ The term ``normally'' as used herein includes, but is not 
limited to, the absence of adverse market, economic, political or 
other conditions, including 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. According to the Registration Statement, however, each 
Fund reserves the right to invest without limitation in investment-
grade money market or short-term debt instruments for temporary, 
defensive purposes.
    \10\ According to the Registration Statement, investment-grade 
debt securities include all types of debt instruments that are of 
medium and high-quality. An investment-grade rating means the 
security or issuer is rated investment-grade by a credit rating 
agency registered as a nationally recognized statistical rating 
organization with the Commission (for example, Moody's Investors 
Service, Inc.), or is unrated but considered to be of equivalent 
quality by the relevant Fund's Manager or Sub-Adviser.
    \11\ According to the Manager, corporate debt securities are 
bonds and other debt securities issued by corporations and other 
business structures.
    \12\ According to the Manager, U.S. Government securities are 
high-quality securities issued or guaranteed by the U.S. Treasury or 
by an agency or instrumentality of the U.S. Government. U.S. 
Government securities may be backed by the full faith and credit of 
the U.S. Treasury, the right to borrow from the U.S. Treasury, or 
the agency or instrumentality issuing or guaranteeing the security. 
Certain issuers of U.S. Government securities, including the Federal 
National Mortgage Association (``Fannie Mae''), the Federal Home 
Loan Mortgage Corporation (``Freddie Mac''), and the Federal Home 
Loan Banks, are sponsored or chartered by Congress but their 
securities are neither issued nor guaranteed by the U.S. Treasury. 
U.S. Government securities include mortgage and other asset-backed 
securities.
    \13\ According to the Registration Statement, a repurchase 
agreement is an agreement to buy a security at one price and a 
simultaneous agreement to sell it back at an agreed-upon price. 
Investment-grade debt securities include repurchase agreements 
collateralized by U.S. Government securities as well as repurchase 
agreements collateralized by equity securities, non-investment-grade 
debt, and all other instruments in which a Fund can perfect a 
security interest, provided the repurchase agreement counterparty 
has an investment-grade rating. In a reverse repurchase agreement, a 
fund sells a security to another party, such as a bank or broker-
dealer, in return for cash and agrees to repurchase that security at 
an agreed-upon price and time. According to the Registration 
Statement, the Funds may engage in repurchase agreement transactions 
and enter into reverse repurchase agreements with parties whose 
creditworthiness has been reviewed and found satisfactory by the 
Manager.
    \14\ According to the Registration Statement, asset-backed 
securities represent interests in pools of mortgages, loans, 
receivables, or other assets. Each Fund may invest in privately 
issued asset-backed securities. According to the Manager, each Fund 
may invest up to 20% of its total assets in mortgage-backed 
securities or in other asset-backed securities, although this 20% 
limitation will not apply to U.S. Government securities. According 
to the Registration Statement, the Funds may invest in mortgage 
securities, which are issued by government and non-government 
entities such as banks, mortgage lenders, or other institutions. A 
mortgage security is an obligation of the issuer backed by a 
mortgage or pool of mortgages or a direct interest in an underlying 
pool of mortgages. Some mortgage securities, such as collateralized 
mortgage obligations (or ``CMOs''), make payments of both principal 
and interest at a range of specified intervals; others make 
semiannual interest payments at a predetermined rate and repay 
principal at maturity (like a typical bond). Mortgage securities are 
based on different types of mortgages, including those on commercial 
real estate or residential properties. Fannie Maes and Freddie Macs 
are pass-through securities issued by Fannie Mae and Freddie Mac, 
respectively. Fannie Mae and Freddie Mac, which guarantee payment of 
interest and repayment of principal on Fannie Maes and Freddie Macs, 
respectively, are federally chartered corporations supervised by the 
U.S. Government that act as governmental instrumentalities under 
authority granted by Congress. Fannie Mae and Freddie Mac are 
authorized to borrow from the U.S. Treasury to meet their 
obligations. Fannie Maes and Freddie Macs are not backed by the full 
faith and credit of the U.S. Government. According to the 
Registration Statement, to earn additional income for the Funds, FMR 
may use a trading strategy that involves selling (or buying) 
mortgage securities and simultaneously agreeing to purchase (or 
sell) mortgage securities on a later date at a set price.
    \15\ According to the Registration Statement, the Funds may 
acquire loans by buying an assignment of all or a portion of the 
loan from a lender or by purchasing a loan participation from a 
lender or other purchaser of a participation.
    \16\ According to the Registration Statement, structured 
securities (also called ``structured notes''), are derivative debt 
securities, the interest rate on or principal of which is determined 
by an unrelated indicator. The Funds may invest in ``indexed 
securities,'' which are instruments whose prices are indexed to the 
prices of other securities, securities indexes, or other financial 
indicators.
    \17\ According to the Registration Statement, the Funds may 
invest in stripped securities, which are the separate income or 
principal components of a debt security. Stripped mortgage 
securities are created when the interest and principal components of 
a mortgage security are separated and sold as individual securities.
    \18\ According to the Manager, sovereign debt obligations are 
issued or guaranteed by foreign governments or their agencies, 
including debt of developing countries. Sovereign debt may be in the 
form of conventional securities or other types of debt instruments 
such as loans or loan participations.
    \19\ According to the Manager, a hybrid security generally 
combines both debt and equity characteristics. A common type of 
hybrid security is a convertible bond that has features of a debt 
security, until a certain date or triggering event, at which point 
the security may be converted into an equity security. A hybrid 
security may also be a warrant, convertible security, certificate of 
deposit or other evidence of indebtedness.
    \20\ According to the Manager, Debt Securities may be fixed, 
variable or floating rate securities. Variable rate securities 
provide for a specific periodic adjustment in the interest rate, 
while floating rate securities have interest rates that change 
whenever there is a change in a designated benchmark rate or the 
issuer's credit quality, sometimes subject to a cap or floor on such 
rate. Some variable or floating rate securities are structured with 
put features that permit holders to demand payment of the unpaid 
principal balance plus accrued interest from the issuers or certain 
financial intermediaries. In addition, Debt Securities may include 
zero coupon bonds. Investments in Debt Securities may have a 
leveraging effect on a Fund.
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    According to the Registration Statement, the Fund may hold 
uninvested cash or may invest it in cash equivalents such as repurchase 
agreements, shares of short-term bond exchange traded funds registered 
under the 1940 Act (``ETFs''),\21\ mutual funds or money market funds, 
including Fidelity central funds (special types of investment vehicles 
created by Fidelity for use by the Fidelity funds and other advisory 
clients).\22\
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    \21\ For purposes of this filing, ETFs, which will be listed on 
a national securities exchange, include the following: Investment 
Company Units (as described in NYSE Arca Equities Rule 5.2(j)(3); 
Portfolio Depositary Receipts (as described in NYSE Arca Equities 
Rule 8.100); and Managed Fund Shares (as described in NYSE Arca 
Equities Rule 8.600).
    \22\ According to the Manager, it is currently expected that the 
Funds will only invest in Fidelity central funds that are money 
market funds.
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    According to the Registration Statement, FMR will use the Barclays 
U.S. Aggregate Bond Index (the ``Aggregate Index'') as a guide in 
structuring the Fund and selecting its investments. FMR will manage the 
Fund to have similar overall interest rate risk to the Aggregate Index.
    According to the Registration Statement, FMR will consider other 
factors when selecting the Fund's investments, including the credit 
quality of the issuer, security-specific features, current valuation 
relative to alternatives in the market, short-term trading 
opportunities resulting from market inefficiencies, and potential 
future valuation. In managing the Fund's exposure to various risks, 
including interest rate risk, FMR will consider, among other things, 
the market's overall risk characteristics, the market's current pricing 
of those risks, information on the Fund's competitive universe and 
internal views of potential future market conditions.
    According to the Registration Statement, FMR will allocate the 
Fund's assets among different market sectors (for example, corporate, 
asset-backed, or government securities) and different maturities based 
on its view of the relative value of each sector or maturity.
    According to the Registration Statement, FMR may invest the Fund's 
assets in Debt Securities of foreign issuers in addition to securities 
of domestic issuers.\23\
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    \23\ The Fund's holdings are generally expected to be U.S. 
dollar denominated.
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Fidelity Limited Term Bond ETF
    According to the Registration Statement, the Fidelity Limited Term 
Bond ETF will seek to provide a high rate of income.
    FMR normally \24\ will invest at least 80% of the Fund's assets in 
investment-grade Debt Securities (those of medium and high 
quality).\25\
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    \24\ See, supra note 9.
    \25\ See, supra note 10.
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    According to the Registration Statement, the Fund may hold 
uninvested cash or may invest it in cash equivalents such as repurchase 
agreements, shares of short-term bond ETFs, mutual funds or money 
market funds, including Fidelity central funds (special types of 
investment vehicles created by Fidelity for use by the Fidelity funds 
and other advisory clients).\26\
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    \26\ See, supra note 22.
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    According to the Registration Statement, FMR will use the Fidelity 
Limited Term Composite Index (the ``Composite Index'') as a guide in 
structuring the Fund and selecting its investments. FMR will manage the 
Fund to have similar overall interest rate risk to the Composite Index.
    According to the Registration Statement, FMR will consider other 
factors when selecting the Fund's investments, including the credit 
quality of the issuer, security-specific features, current valuation 
relative to alternatives in the market, short-term trading 
opportunities resulting from market inefficiencies, and potential 
future valuation. In managing the Fund's exposure to various risks, 
including interest rate risk, FMR will consider, among other things, 
the market's overall risk characteristics, the market's current pricing 
of those risks, information on the Fund's competitive universe and 
internal views of potential future market conditions.
    According to the Registration Statement, in addition, the Fund will 
normally maintain a dollar-weighted average maturity between two and 
five years. In determining a security's maturity for purposes of 
calculating the Fund's average maturity, an estimate of the average 
time for its principal to be paid may be used.
    According to the Registration Statement, FMR will allocate the 
Fund's assets among different market sectors (for example, corporate, 
asset-backed, or government securities) and different maturities based 
on its view of the relative value of each sector or maturity.
    According to the Registration Statement, FMR may invest the Fund's 
assets in Debt Securities of foreign issuers in addition to securities 
of domestic issuers.\27\
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    \27\ See, supra note 23.
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Fidelity Total Bond ETF
    According to the Registration Statement, Fidelity Total Bond ETF 
will seek a high level of current income.
    FMR normally \28\ will invest at least 80% of the Fund's assets in 
Debt Securities. FMR will allocate the Fund's assets across investment-
grade, high yield, and emerging market Debt Securities. FMR may invest 
up to 20% of the Fund's assets in lower-quality Debt Securities.\29\
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    \28\ See, supra note 9.
    \29\ According to the Registration Statement, lower-quality debt 
securities are those of less than investment-grade quality, also 
referred to as high yield debt securities. Emerging market 
securities may be investment-grade or less than investment-grade 
quality. See, supra note 10.

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[[Page 25911]]

    According to the Registration Statement, the Fund may hold 
uninvested cash or may invest it in cash equivalents such as repurchase 
agreements, shares of short-term bond ETFs mutual funds or money market 
funds, including Fidelity central funds (special types of investment 
vehicles created by Fidelity for use by the Fidelity funds and other 
advisory clients).\30\
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    \30\ See, supra note 22.
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    According to the Registration Statement, FMR will use the Barclays 
U.S. Universal Bond Index (the ``Universal Index'') as a guide in 
structuring the Fund and selecting its investments. FMR will use the 
Universal Index as a guide in allocating the Fund's assets across the 
investment-grade, high yield, and emerging market asset classes. FMR 
will manage the Fund to have similar overall interest rate risk to the 
Universal Index.
    According to the Registration Statement, FMR will consider other 
factors when selecting the Fund's investments, including the credit 
quality of the issuer, security-specific features, current valuation 
relative to alternatives in the market, short-term trading 
opportunities resulting from market inefficiencies, and potential 
future valuation. In managing the Fund's exposure to various risks, 
including interest rate risk, FMR will consider, among other things, 
the market's overall risk characteristics, the market's current pricing 
of those risks, information on the Fund's competitive universe and 
internal views of potential future market conditions.
    According to the Registration Statement, FMR may invest the Fund's 
assets in Debt Securities of foreign issuers in addition to securities 
of domestic issuers.\31\
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    \31\ The Fund's holdings may be U.S. dollar denominated and non-
dollar denominated.
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    According to the Registration Statement, FMR will allocate the 
Fund's assets among different asset classes using the composition of 
the Universal Index as a guide, and among different market sectors (for 
example, corporate, asset-backed, or government securities) and 
different maturities based on its view of the relative value of each 
sector or maturity.
    According to the Registration Statement, in selecting foreign debt 
securities, FMR's analysis will also consider the credit, currency, and 
economic risks associated with the security and the country of its 
issuer. FMR may also consider an issuer's potential for success in 
light of its current financial condition, its industry position, and 
economic and market conditions.
Other Investments
    While, as described above, FMR normally \32\ will invest at least 
80% of assets of the Fidelity Investment Grade Bond ETF and Fidelity 
Limited Term Bond ETF in investment-grade Debt Securities, and FMR 
normally will invest at least 80% of assets of the Fidelity Total Bond 
ETF in Debt Securities, FMR may invest up to 20% of a Fund's assets in 
other securities and financial instruments, as summarized below.
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    \32\ See, supra note 9.
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    According to the Registration Statement, the Funds may invest in 
securities of other investment companies, including, in addition to the 
short-term bond ETFs described above, shares of ETFs, closed-end 
investment companies (which include business development companies), 
unit investment trusts, and open-end investment companies. In addition, 
the Funds may invest in other exchange-traded products (``ETPs'') such 
as commodity pools, or other entities that are traded on an 
exchange.\33\
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    \33\ For purposes of this filing, ETPs include 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); and Trust Units (as described in NYSE Arca 
Equities Rule 8.500).
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    According to the Registration Statement, the Funds may invest in 
inverse ETFs (also called ``short ETFs'' or ``bear ETFs''), shares of 
which are expected to increase in value as the value of the underlying 
benchmark decreases.
    According to the Registration Statement, the Funds also may invest 
in leveraged and inverse leveraged ETFs, which seek to deliver 
multiples or inverse multiples of the performance of an index or other 
benchmark they track and use derivatives in an effort to amplify the 
returns of the underlying index or benchmark.
    According to the Registration Statement, the Funds may invest in 
exchange traded notes (``ETNs''), which are a type of senior, 
unsecured, unsubordinated debt security issued by financial 
institutions that combines aspects of both bonds and ETFs.\34\ An ETN's 
returns are based on the performance of a market index or other 
reference asset minus fees and expenses. The Funds may invest in 
leveraged ETNs.
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    \34\ ETNs are securities such as those described in NYSE Arca 
Equities Rule 5.2(j)(6).
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    According to the Registration Statement, the Funds may invest in 
American Depositary Receipts (``ADRs'') as well as other ``hybrid'' 
forms of ADRs, including European Depositary Receipts (``EDRs'') and 
Global Depositary Receipts (``GDRs''), which are certificates 
evidencing ownership of shares of a foreign issuer.\35\ These 
certificates are issued by depository banks and generally trade on an 
established market in the United States or elsewhere. The underlying 
shares are held in trust by a custodian bank or similar financial 
institution in the issuer's home country. The depository bank may not 
have physical custody of the underlying securities at all times and may 
charge fees for various services, including forwarding dividends and 
interest and corporate actions. ADRs are alternatives to directly 
purchasing the underlying foreign securities in their national markets 
and currencies.
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    \35\ The Funds will invest only in ADRs, EDRs and GDRs that are 
traded on an exchange that is a member of the Intermarket 
Surveillance Group (``ISG'') or with which the Exchange has in place 
a comprehensive surveillance sharing agreement. See, infra note 63.
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    In addition to the investment-grade Debt Securities described 
above, Fidelity Investment Grade Bond ETF and Fidelity Limited Term 
Bond ETF may invest in lower-quality Debt Securities.\36\ FMR may 
invest up to 10% of the Fidelity Investment Grade Bond ETF's assets in 
lower-quality Debt Securities. Lower-quality Debt Securities include 
all types of debt instruments that have poor protection with respect to 
the payment of interest and repayment of principal, or may be in 
default.
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    \36\ See, supra note 29. As noted above, Fidelity Total Bond ETF 
may invest in Debt Securities, including lower-quality debt 
securities.
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    According to the Manager, in addition to the investment grade 
repurchase agreements described above, Investment Grade Bond ETF and 
Limited Term Bond ETF may invest in repurchase agreements 
collateralized by U.S. Government securities as well as repurchase 
agreements collateralized by equity securities, non-investment-grade 
debt, and all other instruments in which a Fund can perfect a security 
interest, with repurchase agreement counterparties that do not have an 
investment-grade rating.
    According to the Registration Statement, the Funds may invest in

[[Page 25912]]

preferred securities.\37\ Preferred securities may take the form of 
preferred stock and represent an equity or ownership interest in an 
issuer that pays dividends at a specified rate and that has precedence 
over common stock in the payment of dividends. In the event an issuer 
is liquidated or declares bankruptcy, the claims of owners of bonds 
take precedence over the claims of those who own preferred and common 
stock.
---------------------------------------------------------------------------

    \37\ According to the Manager, a Fund may invest in exchange-
listed or non-exchange-listed preferred securities.
---------------------------------------------------------------------------

    According to the Registration Statement, the Funds may invest in 
real estate investment trusts (``REITs'').\38\ REITs issue debt 
securities to fund the purchase and/or development of commercial 
properties.
---------------------------------------------------------------------------

    \38\ According to the Manager, each Fund may invest in exchange-
listed or non-exchange-listed REITs.
---------------------------------------------------------------------------

    According to the Registration Statement, the Funds may invest in 
restricted securities, which are subject to legal restrictions on their 
sale. Restricted securities generally can be sold in privately 
negotiated transactions, pursuant to an exemption from registration 
under the 1933 Act, or in a registered public offering.
    As described in the Registration Statement, FMR may make 
investments in derivatives,\39\ regardless of whether the Fund may own 
the asset, instrument, currency, or components of the index underlying 
the derivative, as well as forward-settling securities,\40\ as 
applicable. The Funds' derivative investments may be on Debt 
Securities, interest rates, currencies, and related indexes. Depending 
on FMR's outlook and market conditions, FMR may engage, as applicable, 
in these transactions to increase or decrease a Fund's exposure to 
changing security prices, interest rates, credit qualities, foreign 
exchange rates, or other factors that affect security values, or to 
gain or reduce exposure to an asset, instrument, currency, or index. 
Currency-related derivatives include foreign exchange (``FX'') 
transactions such as FX forwards, non-deliverable forwards, and cross-
currency FX trades (``Currency-related Derivatives'').
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    \39\ According to the Registration Statement, derivatives are 
investments whose values are tied to an underlying asset, 
instrument, currency or index. The derivatives in which the Funds 
may invest are futures (both long and short positions), options 
(including options on futures and swaps), forwards, and swaps 
(including interest rate swaps (exchanging a floating rate for a 
fixed rate)), total return swaps (exchanging a floating rate for the 
total return of an index, security, or other instrument or 
investment) and credit default swaps (buying or selling credit 
default protection). Investments in derivatives may have a 
leveraging effect on a Fund. Not more than 10% of the net assets of 
a Fund in the aggregate shall consist of futures contracts or 
exchange-traded options contracts whose principal market is not a 
member of ISG or is a market with which the Exchange does not have a 
comprehensive surveillance sharing agreement.
    \40\ According to the Registration Statement, forward-settling 
securities involve a commitment to purchase or sell specific 
securities when issued, or at a predetermined price or yield. When a 
Fund does not already own or have the right to obtain securities 
equivalent in kind and amount, a commitment to sell securities is 
equivalent to a short sale. Payment and delivery take place after 
the customary settlement period.
---------------------------------------------------------------------------

    According to the Registration Statement, the Funds may conduct 
foreign currency transactions on a spot (i.e., cash) or forward basis 
(i.e., by entering into forward contracts to purchase or sell foreign 
currencies). Forward contracts are customized transactions that require 
a specific amount of a currency to be delivered at a specific exchange 
rate on a specific date or range of dates in the future. Forward 
contracts are generally traded in an interbank market directly between 
currency traders (usually large commercial banks) and their customers. 
The parties to a forward contract may agree to offset or terminate the 
contract before its maturity, or may hold the contract to maturity and 
complete the contemplated currency exchange.
    According to the Registration Statement, the Funds may utilize 
certain currency management strategies involving forward contracts, as 
described below. The Funds may also use swap agreements, indexed 
securities, and options and futures contracts relating to foreign 
currencies for the same purposes. Forward contracts not calling for 
physical delivery of the underlying instrument will be settled through 
cash payments rather than through delivery of the underlying currency.
    According to the Registration Statement, forward contracts may be 
used as a ``settlement hedge'' or ``transaction hedge'' designed to 
protect a Fund against an adverse change in foreign currency values 
between the date a security denominated in a foreign currency is 
purchased or sold and the date on which payment is made or received. 
Entering into a forward contract for the purchase or sale of the amount 
of foreign currency involved in an underlying security transaction for 
a fixed amount of U.S. dollars ``locks in'' the U.S. dollar price of 
the security. Forward contracts to purchase or sell a foreign currency 
may also be used to protect a Fund in anticipation of future purchases 
or sales of securities denominated in foreign currency, even if the 
specific investments have not yet been selected.
    According to the Registration Statement, the Funds may also use 
forward contracts to hedge against a decline in the value of existing 
investments denominated in a foreign currency. The Funds also may enter 
into forward contracts to shift its investment exposure from one 
currency into another. This may include shifting exposure from U.S. 
dollars to a foreign currency, or from one foreign currency to another 
foreign currency. This type of strategy, sometimes known as a ``cross-
hedge,'' will tend to reduce or eliminate exposure to the currency that 
is sold, and increase exposure to the currency that is purchased, much 
as if a Fund had sold a security denominated in one currency and 
purchased an equivalent security denominated in another.\41\
---------------------------------------------------------------------------

    \41\ According to the Registration Statement, each Fund may 
cross-hedge its U.S. dollar exposure in order to achieve a 
representative weighted mix of the major currencies in its benchmark 
index and/or to cover an underweight country or region exposure in 
its portfolio. Cross-hedges protect against losses resulting from a 
decline in the hedged currency, but will cause a Fund to assume the 
risk of fluctuations in the value of the currency it purchases.
---------------------------------------------------------------------------

    According to the Registration Statement, the Funds may invest in 
options and futures relating to foreign currencies.\42\ Currency 
futures contracts are similar to forward currency exchange contracts, 
except that they are traded on exchanges (and have margin requirements) 
and are standardized as to contract size and delivery date. Most 
currency futures contracts call for payment or delivery in U.S. 
dollars. The underlying instrument of a currency option may be a 
foreign currency, which generally is purchased or delivered in exchange 
for U.S. dollars, or may be a futures contract. The purchaser of a 
currency call obtains the right to purchase the underlying currency, 
and the purchaser of a currency put obtains the right to sell the 
underlying currency.
---------------------------------------------------------------------------

    \42\ The Funds' investments in foreign currency options will be 
exchange traded.
---------------------------------------------------------------------------

    According to the Registration Statement, each Fund may invest in 
futures.\43\
---------------------------------------------------------------------------

    \43\ According to the Registration Statement, in purchasing a 
futures contract, the buyer agrees to purchase a specified 
underlying instrument at a specified future date. In selling a 
futures contract, the seller agrees to sell a specified underlying 
instrument at a specified date. Futures contracts are standardized, 
exchange-traded contracts and the price at which the purchase and 
sale will take place is fixed when the buyer and seller enter into 
the contract. Some currently available futures contracts are based 
on specific securities or baskets of securities, some are based on 
commodities or commodities indexes (for funds that seek commodities 
exposure), and some are based on indexes of securities prices 
(including foreign indexes for funds that seek foreign exposure) or 
rates. In addition, some currently available futures contracts are 
based on Eurodollars. Positions in Eurodollar futures reflect market 
expectations of forward levels of three-month London Interbank 
Offered Rate (LIBOR) rates.

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[[Page 25913]]

    According to the Registration Statement, the Funds may invest in 
U.S. exchange-traded as well as over-the-counter (``OTC'') options. 
Unlike exchange-traded options, which are standardized with respect to 
the underlying instrument, expiration date, contract size, and strike 
price, the terms of OTC options generally are established through 
negotiation with the other party to the option contract. The OTC 
options in which the Funds may invest will have various types of 
underlying instruments, including currencies, specific assets or 
securities, baskets of assets or securities, indexes of securities or 
commodities prices, and futures contracts (including commodity futures 
contracts).
    According to the Registration Statement, the Funds may also buy and 
sell options on swaps (swaptions), which are generally options on 
interest rate swaps. An option on a swap gives a party the right (but 
not the obligation) to enter into a new swap agreement or to extend, 
shorten, cancel or modify an existing contract at a specific date in 
the future in exchange for a premium.
    According to the Registration Statement, the Funds may hold swap 
agreements.\44\ Swap agreements can take many different forms and are 
known by a variety of names, including interest rate swaps (where the 
parties exchange a floating rate for a fixed rate), asset swaps (e.g., 
where parties combine the purchase or sale of a bond with an interest 
rate swap), total return swaps, and credit default swaps.
---------------------------------------------------------------------------

    \44\ According to the Registration Statement, swap agreements 
are two-party contracts entered into primarily by institutional 
investors. Cleared swaps are transacted through futures commission 
merchants that are members of central clearinghouses with the 
clearinghouse serving as a central counterparty similar to 
transactions in futures contracts. In a standard ``swap'' 
transaction, two parties agree to exchange one or more payments 
based, for example, on the returns (or differentials in rates of 
return) earned or realized on particular predetermined investments 
or instruments (such as securities, commodities, indexes, or other 
financial or economic interests). A portion of each Fund's holdings 
of swap agreements may consist of cleared swaps. The underlier of a 
cleared swap will depend on the product being cleared. For a cleared 
interest rate swap, as with previously uncleared interest rate 
swaps, the underlier will be a designated interest rate indicator. 
According to the Registration Statement, to limit the counterparty 
risk involved in swap agreements, a Fund will enter into swap 
agreements only with counterparties that meet certain standards of 
creditworthiness.
---------------------------------------------------------------------------

    According to the Registration Statement, a total return swap is a 
contract whereby one party agrees to make a series of payments to 
another party based on the change in the market value of the assets 
underlying such contract (which can include a security or other 
instrument, commodity, index or baskets thereof) during the specified 
period. In exchange, the other party to the contract agrees to make a 
series of payments calculated by reference to an interest rate and/or 
some other agreed-upon amount (including the change in market value of 
other underlying assets). A Fund may use total return swaps to gain 
exposure to an asset without owning it or taking physical custody of 
it.
    According to the Registration Statement, in a credit default swap, 
the credit default protection buyer makes periodic payments, known as 
premiums, to the credit default protection seller. In return the credit 
default protection seller will make a payment to the credit default 
protection buyer upon the occurrence of a specified credit event. A 
credit default swap can refer to a single issuer or asset, a basket of 
issuers or assets or index of assets, each known as the reference 
entity or underlying asset.
    According to the Registration Statement, the Funds may engage in 
transactions with financial institutions that are, or may be considered 
to be, ``affiliated persons'' of the Funds under the 1940 Act. These 
transactions may involve repurchase agreements with custodian banks; 
short-term obligations of, and repurchase agreements with, the 50 
largest U.S. banks (measured by deposits); municipal securities; U.S. 
Government securities with affiliated financial institutions that are 
primary dealers in these securities; short-term currency transactions; 
and short-term borrowings. In accordance with exemptive orders issued 
by the Commission, each Fund's Board of Trustees has established and 
periodically reviews procedures applicable to transactions involving 
affiliated financial institutions.
Limitations on Investments
    Each Fund may hold up to an aggregate amount of 15% of its net 
assets in illiquid assets (calculated at the time of investment), 
including Rule 144A securities deemed illiquid by the Manager or Sub-
Advisers.\45\ Each Fund will monitor its portfolio liquidity on an 
ongoing basis to determine whether, in light of current circumstances, 
an adequate level of liquidity is being maintained, and will consider 
taking appropriate steps in order to maintain adequate liquidity if, 
through a change in values, net assets, or other circumstances, more 
than 15% of the Fund's net assets are held in illiquid assets. Illiquid 
assets include assets subject to contractual or other restrictions on 
resale and other instruments that lack readily available markets as 
determined in accordance with Commission staff guidance.\46\
---------------------------------------------------------------------------

    \45\ According to the Manager, each Fund does not currently 
intend to purchase any asset if, as a result, more than 10% of its 
net assets would be invested in assets that are deemed to be 
illiquid because they are subject to legal or contractual 
restrictions on resale or because they cannot be sold or disposed of 
in the ordinary course of business at approximately the prices at 
which they are valued. For purposes of a Fund's illiquid assets 
limitation discussed above, if through a change in values, net 
assets, or other circumstances, the Fund were in a position where 
more than 10% of its net assets were invested in illiquid assets, it 
would consider appropriate steps to protect liquidity. According to 
the Registration Statement, various factors may be considered in 
determining the liquidity of the Fund's investments, including: (1) 
The frequency of trades and quotes for the asset; (2) the number of 
dealers wishing to purchase or sell the asset and the number of 
other potential purchasers; (3) dealer undertakings to make a market 
in the asset; and (4) the nature of the asset and the nature of the 
marketplace in which it trades (including any demand, put or tender 
features, the mechanics and other requirements for transfer, any 
letters of credit or other credit enhancement features, any ratings, 
the number of holders, the method of soliciting offers, the time 
required to dispose of the security, and the ability to assign or 
offset the rights and obligations of the asset).
    \46\ The Commission has stated that long-standing Commission 
guidelines have required open-end funds to hold no more than 15% of 
their net assets in illiquid securities and other illiquid assets. 
See Investment Company Act Release No. 28193 (March 11, 2008), 73 FR 
14618 (March 18, 2008), footnote 34. See also, Investment Company 
Act Release No. 5847 (October 21, 1969), 35 FR 19989 (December 31, 
1970) (Statement Regarding ``Restricted Securities''); Investment 
Company Act Release No. 18612 (March 12, 1992), 57 FR 9828 (March 
20, 1992) (Revisions of Guidelines to Form N-1A). A fund's portfolio 
security is illiquid if it cannot be disposed of in the ordinary 
course of business within seven days at approximately the value 
ascribed to it by the fund. See Investment Company Act Release No. 
14983 (March 12, 1986), 51 FR 9773 (March 21, 1986) (adopting 
amendments to Rule 2a-7 under the 1940 Act); Investment Company Act 
Release No. 17452 (April 23, 1990), 55 FR 17933 (April 30, 1990) 
(adopting Rule 144A under the Securities Act of 1933).
---------------------------------------------------------------------------

    According to the Registration Statement, each Fund may not with 
respect to 75% of the Fund's total assets, purchase the securities of 
any issuer (other than securities issued or guaranteed by the U.S. 
Government or any of its agencies or instrumentalities, or securities 
of other investment companies) if, as a result, (a) more than 5% of the 
Fund's total assets would be invested in the securities of that issuer, 
or (b) the Fund would hold more than 10% of the outstanding voting 
securities of that issuer.\47\
---------------------------------------------------------------------------

    \47\ The diversification standard is set forth in Section 
5(b)(1) of the 1940 Act.
---------------------------------------------------------------------------

    According to the Registration Statement, each Fund may not purchase 
the securities of any issuer (other than securities issued or 
guaranteed by the U.S. Government or any of its agencies

[[Page 25914]]

or instrumentalities) if, as a result, more than 25% of the Fund's 
total assets would be invested in the securities of companies whose 
principal business activities are in the same industry.\48\
---------------------------------------------------------------------------

    \48\ See Form N-1A, Item 9. The Commission has taken the 
position that a fund is concentrated if it invests more than 25% of 
the value of its total assets in any one industry. See, e.g., 
Investment Company Act Release No. 9011 (October 30, 1975), 40 FR 
54241 (November 21, 1975). According to the Registration Statement, 
for purposes of each Fund's concentration limitation discussed 
above, with respect to any investment in repurchase agreements 
collateralized by U.S. Government securities, FMR will look through 
to the U.S. Government securities. For purposes of each Fund's 
concentration limitation discussed above, FMR may analyze the 
characteristics of a particular issuer and security and assign an 
industry or sector classification consistent with those 
characteristics in the event that the third-party classification 
provider used by FMR does not assign a classification.
---------------------------------------------------------------------------

    According to the Registration Statement, the Trust, on behalf of 
the Funds, has filed with the National Futures Association a notice 
claiming an exclusion from the definition of the term ``commodity pool 
operator'' (``CPO'') under the Commodity Exchange Act, as amended, and 
the rules of the Commodity Futures Trading Commission (``CFTC'') 
promulgated thereunder, with respect to the Funds' operation. 
Accordingly, neither the Funds nor their Manager is subject to 
registration or regulation as a commodity pool or a CPO. However, the 
CFTC has adopted certain rule amendments that significantly affect the 
continued availability of this exclusion, and may subject advisers to 
funds to regulation by the CFTC. Neither the Manager nor any of the 
Sub-Advisers currently expects to register as a CPO of the Funds. 
However, there is no certainty that a fund or its adviser will be able 
to rely on an exclusion in the future as the fund's investments change 
over time. A fund may determine not to use investment strategies that 
trigger additional CFTC regulation or may determine to operate subject 
to CFTC regulation, if applicable. If the Fund or FMR operates subject 
to CFTC regulation, it may incur additional expenses.
    Any foreign equity securities in which a Fund may invest will be 
limited to securities that trade in markets that are members of ISG, 
which includes all U.S. national securities exchanges and certain 
foreign exchanges, or are parties to a comprehensive surveillance 
sharing agreement with the Exchange.\49\
---------------------------------------------------------------------------

    \49\ See, infra ``Surveillance''.
---------------------------------------------------------------------------

    According to the Registration Statement, each Fund intends to 
qualify annually and to elect to be treated as a regulated investment 
company (``RIC'') under the Internal Revenue Code.\50\
---------------------------------------------------------------------------

    \50\ 26 U.S.C. 851.
---------------------------------------------------------------------------

Net Asset Value
    According to the Registration Statement, each Fund's net asset 
value (``NAV'') will be the value of a single Share. The NAV of a Fund 
will be computed by adding the value of the Fund's investments, cash, 
and other assets, subtracting its liabilities, and dividing the result 
by the number of Shares outstanding.
    The value of a Fund's Shares bought and sold in the secondary 
market will be driven by market price. The price of these Shares, like 
the price of all traded securities, will be subject to factors such as 
supply and demand, as well as the current value of the portfolio 
securities held by the Fund. Secondary market Shares, available for 
purchase or sale on an intraday basis, do not have a fixed relationship 
either to the previous day's NAV or to the current day's NAV. Prices in 
the secondary market, therefore, may be below, at, or above the most 
recently calculated NAV of such Shares.
    According to the Registration Statement, the Board of Trustees has 
delegated day-to-day valuation oversight responsibilities to FMR. FMR 
has established the FMR Fair Value Committee (``FMR Committee'') to 
fulfill these oversight responsibilities.
    Generally, portfolio securities and assets held by a Fund will be 
valued as follows:
    In computing each Fund's NAV, such Fund's Debt Securities 
(including defaulted debt \51\ but excluding exchange-traded 
convertible securities); restricted securities; OTC-traded REITs; OTC-
traded preferred securities; and forward-settling securities 
(collectively, ``OTC-Traded Securities'') will be valued based on price 
quotations obtained from a broker-dealer who makes markets in such 
securities or other equivalent indications of value provided by a 
third-party pricing service. Any such third-party pricing service may 
use a variety of methodologies to value some or all of such securities 
to determine the market price. For example, the prices of securities 
with characteristics similar to those held by a Fund may be used to 
assist with the pricing process. In addition, the pricing service may 
use proprietary pricing models. A Fund's OTC-Traded Securities will 
generally be valued at bid prices. In certain cases, some of a Fund's 
OTC-Traded Securities may be valued at the mean between the last 
available bid and ask prices.\52\
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    \51\ According to the Manager, when a bond defaults and goes 
into bankruptcy, a market often continues to exist for the bond 
(normally at a steep discount to its face value). Buyers typically 
value the defaulted bond based on expected restructuring outcomes or 
liquidation distributions. Market quotations provided by broker-
dealers or pricing services reflect these market indicators.
    \52\ For example, foreign bonds for which a current bid price 
was not available would be valued at the mean between the last 
available bid and ask prices.
---------------------------------------------------------------------------

    Debt securities with remaining maturities of sixty days or less for 
which market quotations and information furnished by a pricing service 
are not readily available will be valued at amortized cost, which 
approximates current value.
    Exchange traded equity securities, including ETFs, ETPs, ETNs, 
ADRs, EDRs, and GDRs, as well as exchange-traded REITs, exchange-traded 
preferred securities, and exchange-traded convertible securities, will 
be valued at market value, which will generally be determined using the 
last reported official closing or last trading price on the exchange or 
market on which the security is primarily traded at the time of 
valuation or, if no sale has occurred, at the last quoted bid price on 
the primary market or exchange on which they are traded.
    Investment company securities (other than ETFs), including money 
market funds, central funds, closed end investment companies, unit 
investment trusts and open-end investment companies will be valued at 
NAV.
    Futures contracts will be valued at the settlement or closing price 
determined by the applicable exchange. Exchange-traded option 
contracts, including options on futures and swaps, will be valued at 
their most recent sale price. If no such sales are reported, these 
contracts will be valued at their most recent bid price. In certain 
cases, some of a Fund's exchange-traded derivative securities may be 
valued at the mean between the last available bid and ask prices.
    OTC-traded derivative instruments, including OTC-traded options, 
swaps, forwards and Currency-related Derivatives, will normally be 
valued on the basis of quotes obtained from a third party broker-dealer 
who makes markets in such instruments or on the basis of quotes 
obtained from an independent third-party pricing service. A Fund's OTC-
traded derivative instruments will generally be valued at bid prices. 
Certain OTC-traded derivative instruments, such as interest rate swaps 
and credit default swaps, will be valued at the mean price.
    Prices described above will be obtained from pricing services that 
have been approved by the Board of Trustees. A number of independent 
third party pricing services are available and the Funds may use more 
than one of these services. A Fund may also discontinue

[[Page 25915]]

the use of any pricing service at any time. FMR will engage in 
oversight activities with respect to the Funds' pricing services, which 
include, among other things, testing the prices provided by pricing 
services prior to calculation of the Funds' NAV, conducting periodic 
due diligence meetings, and periodically reviewing the methodologies 
and inputs used by these services.
    Foreign securities and instruments will be valued in their local 
currency following the methodologies described above. Foreign 
securities, instruments and currencies will be translated to U.S. 
dollars, based on foreign currency exchange rate quotations supplied by 
a pricing service as of the close of the New York Stock Exchange 
(``NYSE''), which will use a proprietary model to determine the 
exchange rate.
    Forward foreign currency exchange contracts will be valued at an 
interpolated rate based on days to maturity between the closest 
preceding and subsequent settlement period. Such interpolated rates are 
derived from foreign currency exchange rate quotations reported by an 
independent third-party pricing service.
    Other portfolio securities and assets for which market quotations, 
official closing prices, or information furnished by a pricing service 
are not readily available or, in the opinion of the FMR Committee, are 
deemed unreliable will be fair valued in good faith by the FMR 
Committee in accordance with applicable fair value pricing policies. 
For example, if, in the opinion of the FMR Committee, a security's 
value has been materially affected by events occurring before a Fund's 
pricing time but after the close of the exchange or market on which the 
security is principally traded, that security will be fair valued in 
good faith by the FMR Committee in accordance with applicable fair 
value pricing policies. In fair valuing a security, the FMR Committee 
may consider factors including price movements in futures contracts and 
ADRs, market and trading trends, the bid/ask quotes of brokers, and 
off-exchange institutional trading.
Creation and Redemption of Shares
    According to the Registration Statement, each Fund will issue and 
redeem Shares on a continuous basis at NAV per Share in aggregations of 
a specified number of Shares called ``Creation Units.'' Creation Units 
generally will be issued in exchange for portfolio securities and/or 
cash. Shares will trade in the secondary market at market prices that 
may differ from the Shares' NAV. Shares will not be individually 
redeemable, but will be redeemable only in Creation Unit aggregations, 
and in exchange for portfolio securities and/or cash. A Creation Unit 
of a Fund initially will consist of a block of 50,000 Shares. The size 
of a Creation Unit is subject to change. Shareholders who are not 
``Authorized Participants'' (as defined below) will not be able to 
purchase or redeem Shares directly with or from a Fund.
    Purchases and redemptions of Creation Units may be made in whole or 
in part on a cash basis, rather than in-kind, under the circumstances 
set forth in the Exemptive Order.\53\
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    \53\ For example, Authorized Participants will be permitted to 
deposit or receive (as applicable) cash in lieu of some or all of 
the Deposit Securities or Fund Securities, respectively, if such 
securities are not eligible for transfer through either the NSCC or 
DTC process.
---------------------------------------------------------------------------

    The Trust will issue and redeem Shares of the Funds only in 
Creation Units on a continuous basis through FDC, without a sales load, 
at its NAV next determined after receipt, on any business day, of an 
order in proper form. To be eligible to place orders to purchase or 
redeem a Creation Unit of a Fund an entity must be an Authorized 
Participant which is either (i) a ``Participating Party,'' i.e., 
broker-dealer or other participant in the clearing process through the 
Continuous Net Settlement System of the National Securities Clearing 
Corporation (``NSCC''), a clearing agency that is registered with the 
Commission (the ``Clearing Process''); or (ii) a Depository Trust 
Company (``DTC'') participant, and, in each case, must have executed an 
agreement with FDC with respect to creations and redemptions of 
Creation Units (``Participant Agreement''). All Shares of the Funds, 
however created, will be entered on the records of DTC in the name of 
Cede & Co. for the account of a DTC participant.
    The consideration for purchase of a Creation Unit generally will 
consist of an in-kind deposit of a designated portfolio of securities 
(``Deposit Securities'') together with a deposit of a specified cash 
payment (``Cash Component'') computed as described herein. 
Alternatively, a Fund may issue and redeem Creation Units in exchange 
for a specified all-cash payment (``Cash Deposit''). Together, the 
Deposit Securities and the Cash Component or, alternatively, the Cash 
Deposit, will constitute the ``Portfolio Deposit,'' which represents 
the minimum initial and subsequent investment amount for a Creation 
Unit. In the event a Fund requires Deposit Securities and a Cash 
Component in consideration for purchasing a Creation Unit, the function 
of the Cash Component is to compensate for any differences between the 
NAV per Creation Unit and the Deposit Amount (as defined below). The 
Cash Component would be an amount equal to the difference between the 
NAV of the Shares (per Creation Unit) and the ``Deposit Amount,'' which 
is an amount equal to the market value of the Deposit Securities. A 
fixed transaction fee is applicable to each purchase of Creation Units, 
and an additional variable transaction fee may apply under certain 
circumstances.\54\
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    \54\ An additional variable transaction charge will be imposed 
for purchases effected outside the Clearing Process, which would 
include purchases of Creation Units for cash and in-kind purchases 
where the investor is allowed to substitute cash in lieu of 
depositing a portion of the Deposit Securities.
---------------------------------------------------------------------------

    Each Fund will make available through the NSCC on each business 
day, prior to the opening of trading on the NYSE (currently 9:30 a.m. 
Eastern time), the list of the names and the required number of shares 
of each Deposit Security and the amount of the Cash Component (or Cash 
Deposit) to be included in the current Portfolio Deposit (based on 
information at the end of the previous business day) for the Fund. Such 
Portfolio Deposit will be applicable, subject to any adjustments as 
described below, in order to effect purchases of Creation Units until 
such time as the next-announced Portfolio Deposit composition is made 
available.
    Shares may be redeemed only in Creation Units at their NAV next 
determined after receipt of a redemption request in proper form by the 
relevant Fund through the transfer agent and only on a business day 
through an Authorized Participant that has entered into a Participant 
Agreement. FMR, through NSCC, will make available immediately prior to 
the opening of trading on NYSE (currently 9:30 a.m. Eastern time) on 
each business day, the identity of the basket of securities (``Fund 
Securities'') that will be applicable (subject to possible amendment or 
correction) to redemption requests received in proper form (as defined 
below) on that day.
    All orders to purchase Creation Units of a Fund must be received by 
FDC or its agent no later than the closing time of regular trading 
hours on the NYSE (ordinarily 4:00 p.m. Eastern time), or one hour 
prior to the closing time (ordinarily 3:00 p.m. Eastern time) in the 
case of nonconforming orders,\55\ in

[[Page 25916]]

each case on the date such order is placed in order for the creation of 
Creation Units to be effected based on the NAV of shares of the 
applicable Fund as next determined on such date after receipt of the 
order in proper form.
---------------------------------------------------------------------------

    \55\ A nonconforming order may be placed by an Authorized 
Participant in the event that a Fund permits the substitution of an 
amount of cash to be added to the Cash Component to replace any 
Deposit Security. The Funds reserve the right to permit the 
substitution of an amount of cash (i.e., a cash in lieu amount) to 
replace any Deposit Security which may, among other reasons, not be 
available in sufficient quantity for delivery, not be eligible for 
transfer through the systems of DTC, the Federal Reserve System or 
the clearing process, not be permitted to be re-registered in the 
name of the Trust as a result of an in-kind purchase order pursuant 
to local law or market convention, restricted under the securities 
laws or which may not be eligible for trading by an Authorized 
Participant or the investor for which it is acting.
---------------------------------------------------------------------------

    The redemption proceeds for a Creation Unit generally will consist 
of an in-kind transfer of Fund Securities--as announced by a Fund on 
the business day of the request for redemption received in proper 
form--plus cash in an amount equal to the difference between the NAV of 
the Shares being redeemed, as next determined after a receipt of the 
request in proper form, and the value of the Fund Securities (``Cash 
Redemption Amount''), less a redemption transaction fee and any 
applicable variable fee. In the event that the Fund Securities have a 
value greater than the NAV of the Shares being redeemed, a compensating 
cash payment to the relevant Fund equal to the differential plus the 
applicable redemption transaction fee will be required to be made by or 
through an Authorized Participant by the redeeming shareholder. 
Notwithstanding the foregoing, the Funds will substitute a cash-in-lieu 
amount to replace any Fund Security that is a non-deliverable 
instrument. Non-deliverable instruments will be part of the Cash 
Component.
    An order to redeem Creation Units will be deemed received by a Fund 
on the transmittal date if such order is received in proper form by the 
transfer agent not later than 4:00 p.m. Eastern time (or one hour prior 
to the closing time (ordinarily 3:00 p.m. Eastern time) for 
nonconforming orders) on such transmittal date and other applicable 
requirements are met.
    The right of redemption may be suspended or the date of payment 
postponed with respect to a Fund (i) for any period during which the 
NYSE is closed (other than customary weekend and holiday closings); 
(ii) for any period during which trading on the NYSE is suspended or 
restricted; (iii) for any period during which an emergency exists as a 
result of which disposal of the Shares or determination of the relevant 
Fund's NAV is not reasonably practicable; or (iv) in such other 
circumstances as is permitted by the Commission.
Availability of Information
    The Trust's Web site (www.fidelity.com), which will be publicly 
available, will include a form of the prospectus for each of the Funds 
that may be downloaded. The Trust's Web site will include additional 
quantitative information updated on a daily basis, including, on a per 
Share basis for each Fund, the prior business day's NAV and the market 
closing price or, if that is unavailable, the mid-point of the bid/ask 
spread at the time of calculation of such NAV (the ``Bid/Ask 
Price''),\56\ and a calculation of the premium or discount of the 
market closing price or, if that is unavailable, the Bid/Ask Price 
against the NAV. On each business day, before commencement of trading 
in Shares in the ``Core Trading Session'' (9:30 a.m. Eastern time to 
4:00 p.m. Eastern time) on the Exchange, each Fund will disclose on the 
Trust's Web site the Disclosed Portfolio as defined in NYSE Arca 
Equities Rule 8.600(c)(2) that will form the basis for that Fund's 
calculation of NAV at the end of the business day.\57\
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    \56\ The Bid/Ask Price of each Fund's Shares will be determined 
using the mid-point of the highest bid and the lowest offer on the 
Exchange as of the time of calculation of the Fund's NAV. The 
records relating to Bid/Ask Prices will be retained by each Fund or 
its service providers.
    \57\ Under accounting procedures followed by the Funds, trades 
made on the prior business day (``T'') will be booked and reflected 
in NAV on the current business day (``T+1''). Accordingly, each Fund 
will be able to disclose at the beginning of the business day the 
portfolio that will form the basis for the NAV calculation at the 
end of the business day.
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    On a daily basis, each Fund will disclose for each portfolio 
security and other financial instrument of the Fund the following 
information: ticker symbol (if applicable), name of security or 
financial instrument, number of shares (if applicable) and dollar value 
of each of the securities and financial instruments 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.
    Investors can also obtain the Trust's Statement of Additional 
Information (``SAI''), each Fund's Shareholder Reports, and its Form N-
CSR and Form N-SAR, filed twice a year. The Trust's SAI and Shareholder 
Reports are available free upon request from the Trust, and those 
documents and the Form N-CSR and Form N-SAR may be viewed on-screen or 
downloaded from the Commission's Web site at www.sec.gov. 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.
    Quotation and last sale information for the Shares and underlying 
securities that are U.S. exchange listed, including ETFs, ETPs, ETNs, 
ADRs, EDRs, GDRs, exchange-traded REITs, exchange-traded preferred 
securities and exchange-traded convertible securities, will be 
available via the Consolidated Tape Association (``CTA'') high-speed 
line. Quotation and last sale information for such U.S. exchange-listed 
securities as well as futures will be available from the exchange on 
which they are listed. Quotation and last sale information for 
exchange-listed options will be available via the Options Price 
Reporting Authority.
    Quotation information for OTC-Traded Securities, OTC-traded 
derivative securities (such as options, swaps, forwards and Currency-
related Derivatives), and investment company securities (excluding 
ETFs), may be obtained from brokers and dealers who make markets in 
such securities or through nationally recognized pricing services 
through subscription agreements. The U.S. dollar value of foreign 
securities, instruments and currencies can be derived by using foreign 
currency exchange rate quotations obtained from nationally recognized 
pricing services.
    In addition, the Portfolio Indicative Value, as defined in NYSE 
Arca Equities Rule 8.600(c)(3), will be widely disseminated by one or 
more major market data vendors at least every 15 seconds during the 
Core Trading Session.\58\ The dissemination of the Portfolio Indicative 
Value, together with the Disclosed Portfolio, will allow investors to 
determine the approximate value of the underlying portfolio of each 
Fund on a daily basis and will provide a close estimate of that value 
throughout the trading day.
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    \58\ Currently, it is the Exchange's understanding that several 
major market data vendors display and/or make widely available 
Portfolio Indicative Values taken from the CTA or other data feeds.
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Trading Halts
    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 a Fund.\59\ Trading in Shares of a Fund

[[Page 25917]]

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. These may include: (1) The 
extent to which trading is not occurring in the securities and/or the 
financial instruments comprising the Disclosed Portfolio of the 
relevant Fund; or (2) whether other unusual conditions or circumstances 
detrimental to the maintenance of a fair and orderly market are 
present. Trading in the Shares will be subject to NYSE Arca Equities 
Rule 8.600(d)(2)(D), which sets forth circumstances under which Shares 
of a Fund may be halted.
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    \59\ See NYSE Arca Equities Rule 7.12.
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Trading Rules
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. Shares will trade on 
the NYSE Arca Marketplace from 4:00 a.m. to 8:00 p.m. Eastern time in 
accordance with NYSE Arca Equities Rule 7.34 (Opening, Core, and Late 
Trading Sessions). The Exchange has appropriate rules to facilitate 
transactions in the Shares during all trading sessions. As provided in 
NYSE Arca Equities Rule 7.6, Commentary .03, the minimum price 
variation (``MPV'') for quoting and entry of orders in equity 
securities traded on the NYSE Arca Marketplace is $0.01, with the 
exception of securities that are priced less than $1.00 for which the 
MPV for order entry is $0.0001.
    The Shares will conform to the initial and continued listing 
criteria under NYSE Arca Equities Rule 8.600. The Exchange represents 
that, for initial and/or continued listing, each Fund will be in 
compliance with Rule 10A-3 \60\ under the Act, as provided by NYSE Arca 
Equities Rule 5.3. A minimum of 100,000 Shares of each Fund will be 
outstanding at the commencement of trading on the Exchange. The 
Exchange will obtain a representation from the issuer of the Shares 
that the NAV per Share of each Fund will be calculated daily and that 
the NAV and the Disclosed Portfolio \61\ of each Fund will be made 
available to all market participants at the same time.
---------------------------------------------------------------------------

    \60\ 17 CFR 240.10A-3.
    \61\ The term ``Disclosed Portfolio'' is defined in NYSE Arca 
Equities Rule 8.600(c)(2).
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Surveillance
    The Exchange represents that trading in the Shares will be subject 
to the existing trading surveillances, administered by the Financial 
Industry Regulatory Authority (``FINRA'') on behalf of the Exchange, 
which are designed to detect violations of Exchange rules and 
applicable federal securities laws.\62\ The Exchange represents 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 federal securities laws applicable to trading on 
the Exchange.
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    \62\ FINRA surveils trading on the Exchange pursuant to a 
regulatory services agreement. The Exchange is responsible for 
FINRA's performance under this regulatory services agreement.
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    The surveillances referred to above generally focus on detecting 
securities trading outside their normal patterns, which could be 
indicative of manipulative or other violative activity. When such 
situations are detected, surveillance analysis follows and 
investigations are opened, where appropriate, to review the behavior of 
all relevant parties for all relevant trading violations.
    FINRA, on behalf of the Exchange, will communicate as needed 
regarding trading in the Shares and underlying exchange-traded options, 
futures, exchange-traded equity securities (including ADRs, EDRs, and 
GDRs), and other exchange-traded instruments with other markets and 
other entities that are members of the ISG and FINRA, on behalf of the 
Exchange, may obtain trading information regarding trading in the 
Shares and underlying exchange-traded options, futures, exchange-traded 
equity securities (including ADRs, EDRs, and GDRs), and other exchange-
traded instruments from such markets and other entities. In addition, 
the Exchange may obtain information regarding trading in the Shares and 
underlying exchange-traded options, futures, exchange traded-equity 
securities (including ADRs, EDRs, and GDRs), and other exchange-traded 
instruments from markets and other entities that are members of ISG or 
with which the Exchange has in place a comprehensive surveillance 
sharing agreement.\63\ In addition, FINRA, on behalf of the Exchange, 
is able to access, as needed, trade information for certain fixed 
income securities held by the Funds reported to FINRA's Trade Reporting 
and Compliance Engine (``TRACE'').
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    \63\ For a list of the current members of ISG, see 
www.isgportal.org. The Exchange notes that not all components of the 
Disclosed Portfolio for the Funds may trade on markets that are 
members of ISG or with which the Exchange has in place a 
comprehensive surveillance sharing agreement.
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    Not more than 10% of the net assets of a Fund in the aggregate 
shall consist of futures contracts or exchange-traded options contracts 
whose principal market is not a member of ISG or is a market with which 
the Exchange does not have a comprehensive surveillance sharing 
agreement.
    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its 
Equity Trading Permit Holders in an Information Bulletin (``Bulletin'') 
of the special characteristics and risks associated with trading the 
Shares. Specifically, the Bulletin will discuss the following: (1) The 
procedures for purchases and redemptions of Shares in Creation Unit 
aggregations (and that Shares are not individually redeemable); (2) 
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; (3) 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; (4) how information regarding the 
Portfolio Indicative Value is disseminated; (5) 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 (6) trading information.
    In addition, the Bulletin will reference that the Funds are subject 
to various fees and expenses described in the Registration Statement. 
The Bulletin will discuss any exemptive, no-action, and interpretive 
relief granted by the Commission from any rules under the Act. The 
Bulletin will also disclose that the NAV for the Shares will be 
calculated after 4:00 p.m. Eastern time each trading day.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \64\ that an exchange have rules that 
are designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to remove 
impediments to, and perfect the mechanism of a free and open market 
and, in general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \64\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is designed to

[[Page 25918]]

prevent fraudulent and manipulative acts and practices in that the 
Shares will be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria in NYSE Arca Equities Rule 
8.600. The Exchange has in place surveillance procedures that are 
adequate to properly monitor trading in the Shares in all trading 
sessions and to deter and detect violations of Exchange rules and 
federal securities laws applicable to trading on the Exchange. FINRA, 
on behalf of the Exchange, will communicate as needed regarding trading 
in the Shares and underlying exchange-traded options, futures, 
exchange-traded equity securities (including ADRs, EDRs, and GDRs), and 
other exchange-traded instruments with other markets and other entities 
that are members of the ISG and FINRA, on behalf of the Exchange, may 
obtain trading information regarding trading in the Shares and 
underlying exchange-traded options, futures, exchange-traded equity 
securities (including ADRs, EDRs, and GDRs), and other exchange-traded 
instruments from such markets and other entities. In addition, the 
Exchange may obtain information regarding trading in the Shares and 
underlying exchange-traded options, futures, equity securities 
(including ADRs, EDRs, and GDRs), and other exchange-traded instruments 
from markets and other entities that are members of ISG or with which 
the Exchange has in place a comprehensive surveillance sharing 
agreement. In addition, FINRA, on behalf of the Exchange, is able to 
access, as needed, trade information for certain fixed income 
securities held by the Funds reported to TRACE. The Manager and the 
Sub-Advisers are not broker-dealers but are affiliated with one or more 
broker-dealers and have each implemented a fire wall with respect to 
such broker-dealers regarding access to information concerning the 
composition and/or changes to the portfolios, and will be subject to 
procedures designed to prevent the use and dissemination of material 
non-public information regarding the portfolios. Each Fund may hold up 
to an aggregate amount of 15% of its net assets in illiquid assets 
(calculated at the time of investment), including Rule 144A securities 
deemed illiquid by the Manager or Sub-Advisers.\65\ Any foreign equity 
securities in which a Fund may invest will be limited to securities 
that trade in markets that are members of ISG or are parties to a 
comprehensive surveillance sharing agreement with the Exchange. The 
Funds will invest only in ADRs, EDRs and GDRs that are traded on an 
exchange that is a member of ISG or with which the Exchange has in 
place a comprehensive surveillance sharing agreement. Not more than 10% 
of the net assets of a Fund in the aggregate shall consist of futures 
contracts or exchange-traded options contracts whose principal market 
is not a member of ISG or is a market with which the Exchange does not 
have a comprehensive surveillance sharing agreement.
---------------------------------------------------------------------------

    \65\ See, supra notes 45 and 46, and accompanying text.
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    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest in 
that the Exchange will obtain a representation from the issuer of the 
Shares that the NAV per Share will be calculated daily and that the NAV 
and the Disclosed Portfolio will be made available to all market 
participants at the same time. In addition, a large amount of 
information is publicly available regarding the Funds and the Shares, 
thereby promoting market transparency. Quotation and last sale 
information for the Shares and underlying securities that are U.S. 
exchange listed, including ETFs, ETPs, ETNs, ADRs, EDRs, GDRs, 
exchange-traded REITs, exchange-traded preferred securities, and 
exchange-traded convertible securities, will be available via the CTA 
high-speed line. Quotation and last sale information for such U.S. 
exchange-listed securities as well as futures will be available from 
the exchange on which they are listed. Quotation and last sale 
information for exchange-listed options will be available via the 
Options Price Reporting Authority. Quotation information from brokers 
and dealers or pricing services will be available for Debt Securities; 
restricted securities; OTC-traded REITs; OTC-traded preferred 
securities; OTC-traded derivative securities, including options, swaps, 
and Currency-related Derivatives; forwards; and investment company 
securities (other than ETFs). Moreover, the Portfolio Indicative Value 
will be widely disseminated by one or more major market data vendors at 
least every 15 seconds during the Exchange's Core Trading Session. On 
each business day, before commencement of trading in Shares in the Core 
Trading Session on the Exchange, each Fund will disclose on the Trust's 
Web site the Disclosed Portfolio that will form the basis for the 
Fund's calculation of NAV at the end of the business day. The Trust's 
Web site will include a form of the prospectus for the Funds and 
additional data relating to NAV and other applicable quantitative 
information. Moreover, prior to the commencement of trading, the 
Exchange will inform its Exchange Traded [sic] Permit Holders in an 
Information Bulletin of the special characteristics and risks 
associated with trading the Shares. Trading in Shares of a Fund will be 
halted if the circuit breaker parameters in NYSE Arca Equities Rule 
7.12 have been reached or because of market conditions or for reasons 
that, in the view of the Exchange, make trading in the Shares 
inadvisable, and trading in the Shares will be subject to NYSE Arca 
Equities Rule 8.600(d)(2)(D), which sets forth circumstances under 
which Shares of a Fund may be halted. In addition, as noted above, 
investors will have ready access to information regarding each Fund's 
holdings, the Portfolio Indicative Value, the Disclosed Portfolio, and 
quotation and last sale information for the Shares.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
additional types of actively-managed exchange-traded product that will 
enhance competition among market participants, to the benefit of 
investors and the marketplace. As noted above, the Exchange has in 
place surveillance procedures relating to trading in the Shares and may 
obtain information via ISG from other exchanges that are members of ISG 
or with which the Exchange has entered into a comprehensive 
surveillance sharing agreement. In addition, as noted above, investors 
will have ready access to information regarding each Fund's holdings, 
the Portfolio Indicative Value, the Disclosed Portfolio, and quotation 
and last sale information for the Shares.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purpose of the Act. The Exchange notes that the 
proposed rule change will facilitate the listing and trading of 
additional actively-managed exchange-traded products that will enhance 
competition among market participants, to the benefit of investors and 
the marketplace.

[[Page 25919]]

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2014-46 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
    All submissions should refer to File Number SR-NYSEArca-2014-46. 
This file number should be included on the subject line if email is 
used. To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for Web site 
viewing and printing in the Commission's Public Reference Room, 100 F 
Street NE., Washington, DC 20549, on official business days between the 
hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be 
available for inspection and copying at the principal office of the 
Exchange. All comments received will be posted without change; the 
Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
NYSEArca-2014-46 and should be submitted on or before May 27, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\66\
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    \66\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-10358 Filed 5-5-14; 8:45 am]
BILLING CODE 8011-01-P