Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a Proposed Rule Change to List and Trade Shares of the iShares Interest Rate Hedged Corporate Bond ETF and iShares Interest Rate Hedged High Yield Bond ETF Under NYSE Arca Equities Rule 8.600, 27958-27961 [2014-11156]

Download as PDF 27958 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Notices 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 such 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–2014–45, and should be submitted on or before June 5, 2014. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.27 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2014–11157 Filed 5–14–14; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–72138; File No. SR– NYSEArca-2014–23] Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a Proposed Rule Change to List and Trade Shares of the iShares Interest Rate Hedged Corporate Bond ETF and iShares Interest Rate Hedged High Yield Bond ETF Under NYSE Arca Equities Rule 8.600 TKELLEY on DSK3SPTVN1PROD with NOTICES May 9, 2014. I. Introduction On March 19, 2014, NYSE Arca, Inc. (‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (‘‘Exchange Act’’) 2 and Rule 19b–4 thereunder,3 a proposed rule change to list and trade shares (‘‘Shares’’) of the iShares Interest 27 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 VerDate Mar<15>2010 18:18 May 14, 2014 Jkt 232001 Rate Hedged Corporate Bond ETF and iShares Interest Rate Hedged High Yield Bond ETF (each, a ‘‘Fund’’ and collectively, the ‘‘Funds’’). The proposed rule change was published for comment in the Federal Register on March 28, 2014.4 The Commission received no comments on the proposal. This order approves the proposed rule change. II. Description of the Proposed Rule Change The Exchange proposes to list and trade the Shares under NYSE Arca Equities Rule 8.600, which governs the listing and trading of Managed Fund Shares on the Exchange. The Shares will be offered by iShares U.S. ETF Trust (‘‘Trust’’). The Trust is registered with the Commission as an open-end management investment company.5 BlackRock Fund Advisors (‘‘BFA’’) will serve as the investment adviser to the Funds (‘‘Adviser’’). BlackRock Investments, LLC will be the principal distributor of the Funds’ Shares. State Street Bank and Trust Company will serve as the administrator, custodian, and transfer agent for the Funds. The Exchange represents that the Adviser is not registered as a broker-dealer, but is affiliated with multiple broker-dealers and has implemented a fire wall with respect to its broker-dealer affiliates regarding access to information concerning the composition of and changes to each Fund’s portfolio.6 4 See Securities Exchange Act Release No. 71778 (March 24, 2014), 79 FR 17585 (‘‘Notice’’). 5 The Trust is registered under the 1940 Act. On August 22, 2013, the Trust filed with the Commission post-effective amendments on Form N–1A under the Securities Act of 1933 (15 U.S.C. 77a) and under the 1940 Act relating to the iShares Interest Rate Hedged Corporate Bond ETF (the ‘‘Corporate Bond Registration Statement’’) and the iShares Interest Rate Hedged High Yield Bond ETF (the ‘‘High Yield Registration Statement’’ and together with the Corporate Bond Registration Statement, the ‘‘Registration Statements’’) (File Nos. 333–179904 and 811–22649). In addition, the Exchange states that the Commission has issued an order granting certain exemptive relief to the Trust under the 1940 Act. See Investment Company Act Release No. 29571 (File No. 812–13601) (‘‘Exemptive Order’’). 6 See Commentary .06 to NYSE Arca Equities Rule 8.600. The Exchange represents that in the event (a) the Adviser or any sub-adviser registers as a 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 its brokerdealer affiliate regarding access to information concerning the composition of or changes to a Fund’s portfolio, and will be subject to procedures designed to prevent the use and dissemination of material non-public information regarding a Fund’s portfolio. PO 00000 Frm 00122 Fmt 4703 Sfmt 4703 The Exchange has made the following representations and statements regarding the Funds.7 iShares Interest Rate Hedged Corporate Bond ETF The Fund will seek to mitigate the interest rate risk of a portfolio composed of U.S. dollar-denominated, investment grade corporate bonds. The Fund will seek to achieve its investment objective by investing, under normal circumstances,8 at least 80% of its net assets in U.S. dollar-denominated investment-grade bonds, in one or more investment companies (exchange-traded and non-exchange-traded funds) that principally invest in investment-grade bonds,9 in U.S. Treasury securities (or cash equivalents), and by taking short positions in U.S. Treasury futures and other interest rate futures contracts. The Fund will attempt to mitigate interest rate risk primarily through the use of U.S. Treasury futures contracts. The Fund may also take short positions in other interest rate futures contracts, including but not limited to, Eurodollar and Federal Funds futures. The Fund will invest only in futures contracts 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. iShares Interest Rate Hedged High Yield Bond ETF The Fund will seek to mitigate the interest rate risk of a portfolio composed of U.S. dollar-denominated, high yield corporate bonds. The Fund will seek to achieve its investment objective by investing, under normal circumstances, at least 80% of its net assets in U.S. dollar-denominated high yield corporate bonds, in one or more investment companies (exchange-traded and non7 Additional information regarding the Trust, the Funds, and the Shares, investment strategies, investment restrictions, risks, net asset value (‘‘NAV’’) calculation, creation and redemption procedures, fees, portfolio holdings, disclosure policies, distributions, and taxes, among other information, is included in the Notice and the Registration Statement, as applicable. See Notice and Registration Statement, supra notes 4 and 5, respectively. 8 The term ‘‘under normal circumstances’’ includes, but is not limited to, the absence of extreme volatility or trading halts in the equity markets or the financial markets generally; operational issues causing dissemination of inaccurate market information; or force majeure type events such as systems failure, natural or manmade disaster, act of God, armed conflict, act of terrorism, riot or labor disruption or any similar intervening circumstance. 9 Initially, the Fund intends to invest a substantial portion of its assets in the iShares iBoxx $ Investment Grade Corporate Bond ETF (the ‘‘Underlying Corporate Bond Fund’’). E:\FR\FM\15MYN1.SGM 15MYN1 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Notices TKELLEY on DSK3SPTVN1PROD with NOTICES exchange-traded funds) that principally invest in high yield bonds, in U.S. Treasury securities (or cash equivalents),10 and by taking short positions in U.S. Treasury futures and other interest rate futures contracts. The Fund will attempt to mitigate interest rate risk primarily through the use of U.S. Treasury futures contracts. The Fund may also take short positions in other interest rate futures contracts, including but not limited to, Eurodollar and Federal Funds futures. The Fund will invest only in futures contracts that are traded on an exchange that is a member of the ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. Other Investments While each Fund, under normal circumstances, will invest at least 80% of its net assets in its investments as described above, a Fund may directly invest in certain other investments, as described below. Each Fund may invest in repurchase and reverse repurchase agreements. A repurchase agreement is an instrument under which the purchaser (i.e., a Fund or an Underlying Fund) acquires the security and the seller agrees, at the time of the sale, to repurchase the security at a mutually agreed upon time and price, thereby determining the yield during the purchaser’s holding period. Reverse repurchase agreements involve the sale of securities with an agreement to repurchase the securities at an agreed-upon price, date and interest payment and have the characteristics of borrowing. Each Fund may invest in money market instruments on an ongoing basis to provide liquidity or for other reasons. Money market instruments are generally short-term investments that may include but are not limited to: (i) Shares of money market funds (including those advised by BFA or otherwise affiliated with BFA); (ii) obligations issued or guaranteed by the U.S. government, its agencies or instrumentalities (including government-sponsored enterprises); (iii) negotiable certificates of deposit, bankers’ acceptances, fixed-time deposits and other obligations of U.S. and non-U.S. banks (including non-U.S. branches) and similar institutions; (iv) commercial paper rated, at the date of purchase, ‘‘Prime-1’’ by Moody’s® Investors Service, Inc., ‘‘F–1’’ by Fitch Inc., or ‘‘A–1’’ by Standard & Poor’s®, or 10 Initially, the Fund intends to invest a substantial portion of its assets in the iShares iBoxx $ High Yield Corporate Bond ETF (the ‘‘Underlying High Yield Bond Fund’’ and together with the Underlying Corporate Bond Fund, the ‘‘Underlying Funds’’). VerDate Mar<15>2010 18:18 May 14, 2014 Jkt 232001 if unrated, of comparable quality as determined by BFA; (v) non-convertible corporate debt securities (e.g., bonds and debentures) with remaining maturities at the date of purchase of not more than 397 days and that satisfy the rating requirements set forth in Rule 2a– 7 under the 1940 Act; and (vi) shortterm U.S. dollar-denominated obligations of non-U.S. banks (including U.S. branches) that, in the opinion of BFA, are of comparable quality to obligations of U.S. banks which may be purchased by a Fund. Any of these instruments may be purchased on a current or forward-settled basis. Time deposits are non-negotiable deposits maintained in banking institutions for specified periods of time at stated interest rates. Each Fund may invest in options that are traded on a U.S. or non-U.S. exchange and that reference U.S. Treasury securities. To the extent that a Fund invests in options, not more than 10% of such investment would be in options whose principal trading market is not a member of ISG or is a market with which the Exchange does not have a comprehensive surveillance sharing agreement. Each Fund or the Underlying Funds may invest in debt securities of non-U.S. issuers and may invest in privatelyissued debt securities. III. Discussion and Commission Findings After careful review, the Commission finds that the Exchange’s proposal to list and trade the Shares is consistent with the Exchange Act and the rules and regulations thereunder applicable to a national securities exchange.11 In particular, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Exchange Act,12 which requires, among other things, that the Exchange’s rules be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. The Commission notes that the Funds and the Shares must comply with the requirements of NYSE Arca Equities Rule 8.600 to be listed and traded on the Exchange. The Commission finds that the proposal to list and trade the Shares on 11 In approving this proposed rule change, the Commission has considered the proposed rule’s impact on efficiency, competition and capital formation. See 15 U.S.C. 78c(f). 12 15 U.S.C. 78f(b)(5). PO 00000 Frm 00123 Fmt 4703 Sfmt 4703 27959 the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the Exchange Act,13 which sets forth Congress’ finding that it is in the public interest and appropriate for the protection of investors and the maintenance of fair and orderly markets to assure the availability to brokers, dealers, and investors of information with respect to quotations for and transactions in securities. Quotation and last-sale information for the Shares and the shares of the Underlying Funds and any ETFs held by each Fund will be available via the Consolidated Tape Association high-speed line, quotation and last sale information for exchangelisted options contracts will be available via the Options Price Reporting Authority. The intra-day, closing and settlement prices of exchange-traded portfolio assets, including investment companies, money market instruments, futures and options will be readily available from the securities exchanges and futures exchanges trading such securities and futures, as the case may be, automated quotation systems, published or other public sources, or on-line information services such as Bloomberg or Reuters. Such price information on fixed income portfolio securities, including money market instruments, and other Fund assets traded in over-the-counter markets including bonds and money market instruments is available from major broker-dealer firms or market data vendors, as well as from automated quotation systems, published or other public sources, or online information services. Information regarding market price and trading volume of the Shares will be continually available on a realtime basis throughout the day on brokers’ computer screens and other electronic services.14 NYSE Arca expects that 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.15 The Indicative Optimized Portfolio Value (‘‘IOPV’’), which is the Portfolio Indicative Value as defined in NYSE Arca Equities Rule 8.600(c)(3), will be widely disseminated at least every 15 seconds during the Core Trading Session by one or more major market data vendors.16 The net asset value 13 15 U.S.C. 78k–1(a)(1)(C)(iii). id. 15 See id. at 17590. 16 See Notice, supra note 4, 79 FR at 17590. The IOPV calculations will be estimates of the value of a Fund’s NAV per Share using market data converted into U.S. dollars at the current currency rates. The IOPV price will be based on quotes and 14 See E:\FR\FM\15MYN1.SGM Continued 15MYN1 27960 Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Notices TKELLEY on DSK3SPTVN1PROD with NOTICES (‘‘NAV’’) of each Fund normally will be determined once each business day, generally as of the regularly scheduled close of business of the New York Stock Exchange (‘‘NYSE’’) (normally 4:00 p.m., Eastern time) on each day that the NYSE is open for trading.17 The Funds’ Web site will include a form of the prospectus for each Fund and additional quantitative information updated on a daily basis, including, (1) the prior business day’s reported closing price, NAV, and mid-point of the bid/ask spread at the time of calculation of such NAV (‘‘Bid/Ask Price’’),18 and a calculation of the premium and discount of the Bid/Ask Price against the NAV, and (2) data in chart format displaying the frequency distribution of discounts and premiums of the daily Bid/Ask Price against the NAV, within appropriate ranges, for each of the four previous calendar quarters.19 Further, the Commission believes that the proposal to list and trade the Shares is reasonably designed to promote fair disclosure of information that may be necessary to price the Shares appropriately and to prevent trading when a reasonable degree of transparency cannot be assured. On each business day, before commencement of trading in Shares in the Core Trading Session on the Exchange, each Fund will disclose on its Web site the Disclosed Portfolio, as defined in NYSE Arca Equities Rule 8.600(c)(2), that will form the basis for such Fund’s calculation of NAV at the end of the business day.20 The Commission notes that the Exchange will obtain a representation from the closing prices from the securities’ local market and may not reflect events that occur subsequent to the local market’s close. The quotations of certain Fund holdings may not be updated during U.S. trading hours if such holdings do not trade in the United States. See id. 17 See id. at 17589. 18 The Bid/Ask Price of a Fund 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 a Fund’s NAV. The records relating to Bid/Ask Prices will be retained by the Funds and their service providers. See id. 19 See id. 20 See id at 17589. On a daily basis, each Fund will disclose for each portfolio security or other financial instrument of the Fund the following information on the Fund’s Web site: ticker symbol (if applicable), name of security or financial instrument, number of shares (if applicable) and dollar value of 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. Under accounting procedures to be followed by the Fund, trades made on the prior business day (‘‘T’’) will be booked and reflected in NAV on the current business day (‘‘T+1’’). Accordingly, the Funds 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. See id. VerDate Mar<15>2010 18:18 May 14, 2014 Jkt 232001 issuer of the Shares that the NAV per Share of each Fund will be calculated daily and that the NAV and the Disclosed Portfolio will be made available to all market participants at the same time.21 In addition, a basket composition file, which will include the security names and share quantities required to be delivered in exchange for each Fund’s Shares, together with estimates and actual cash components, will be publicly disseminated daily prior to the opening of the New York Stock Exchange via the National Securities Clearing Corporation.22 The basket will represent one Creation Unit of Shares of the Fund. Further, the Commission notes that the Reporting Authority that provides the Disclosed Portfolio must implement and maintain, or be subject to, procedures designed to prevent the use and dissemination of material non-public information regarding the actual components of the portfolio.23 The Exchange represents that the Adviser is affiliated with multiple broker-dealers and has implemented a fire wall with respect to such broker-dealers regarding access to information concerning the composition and/or changes to a portfolio, and will be subject to procedures designed to prevent the use and dissemination of material non-public information regarding the portfolio.24 The Exchange has a general policy prohibiting the distribution of material, non-public information by its employees. With respect to trading halts, the Exchange may consider all relevant factors in exercising its discretion to halt or suspend trading in the Shares of the Funds.25 Trading in Shares of a Fund will be halted if the circuit breaker parameters in NYSE Arca Equities Rule 7.12 have been reached. Trading also may be halted because of market conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable. 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 a 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. If the IOPV is not being disseminated as required, the 21 See id. at 17588. id. at 17589. 23 See NYSE Arca Equities Rule 8.600(d)(2)(B)(ii). 24 See supra note 6 and accompanying text. 25 See NYSE Arca Equities Rule 7.12. 22 See PO 00000 Frm 00124 Fmt 4703 Sfmt 4703 Exchange may halt trading during the day in which the interruption occurs; if the interruption persists past the day in which it occurred, the Exchange will halt trading no later than the beginning of the trading day following the interruption.26 The Exchange will consider the suspension of trading in or removal from listing of the Shares if the IOPV is no longer calculated or available or the Disclosed Portfolio is not made available to all market participants at the same time.27 The Exchange has represented that the Shares are deemed to be equity securities, thus rendering trading in the Shares subject to the Exchange’s rules governing the trading of equity securities.28 In support of this proposal, the Exchange has made additional representations, including: (1) The Shares will conform to the initial and continuing listing criteria under NYSE Arca Equities Rule 8.600. (2) The Exchange’s surveillance procedures are adequate to properly monitor Exchange trading of the Shares in all trading sessions and to deter and detect violations of Exchange rules and applicable federal securities laws.29 (3) The Financial Industry Regulatory Authority (‘‘FINRA’’), on behalf of the Exchange, will communicate as needed regarding trading in the Shares as well as underlying equity securities, futures, and options contracts held by the Funds with other markets that are members of the ISG and FINRA, on behalf of the Exchange, may obtain trading information regarding trading in the Shares as well as underlying equity securities and futures from such markets and other entities. In addition, the Exchange may obtain information regarding trading in the Shares as well as underlying equity securities, futures, and options contracts held by the Funds from markets and other entities that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement.30 In addition, FINRA, on behalf of the Exchange, is able to access, as needed, trade information for certain fixed income instruments reported to FINRA’s Trade Reporting and Compliance Engine. (4) The Exchange has appropriate rules to facilitate transactions in the Shares during all trading sessions. 26 See NYSE Arca Equities Rule 8.600(d)(2)(D). NYSE Arca Equities Rule 8.600(d)(2)(C)(ii). 28 See id. 29 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. 30 For a list of the current members of ISG, see www.isgportal.org. 27 See E:\FR\FM\15MYN1.SGM 15MYN1 TKELLEY on DSK3SPTVN1PROD with NOTICES Federal Register / Vol. 79, No. 94 / Thursday, May 15, 2014 / Notices (5) Prior to the commencement of trading, the Exchange will inform its Equity Trading Permit Holders (‘‘ETP Holders’’) in an Information Bulletin of the special characteristics and risks associated with trading the Shares. Specifically, the Information Bulletin will discuss the following: (a) The procedures for purchases and redemptions of Shares in Creation Unit Aggregations and that Shares are not individually redeemable; (b) NYSE Arca Equities Rule 9.2(a), which imposes a duty of due diligence on its ETP Holders to learn the essential facts relating to every customer prior to trading the Shares; (c) the risks involved in trading the Shares during the Opening and Late Trading Sessions when an updated IOPV will not be calculated or publicly disseminated; (d) how information regarding the IOPV is disseminated; (e) the requirement that ETP Holders deliver a prospectus to investors purchasing newly issued Shares prior to or concurrently with the confirmation of a transaction; and (f) trading information. (6) For initial and continued listing, the Funds will be in compliance with Rule 10A–3 under the Exchange Act,31 as provided by NYSE Arca Equities Rule 5.3.32 (7) Each Fund’s investments will be consistent with its investment objective. (8) 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 Adviser. 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. (9) A minimum of 100,000 Shares for each Fund will be outstanding at the commencement of trading on the Exchange. This order is based on all of the Exchange’s representations, including those set forth above and in the Notice. For the foregoing reasons, the Commission finds that the proposed rule change is consistent with the Exchange Act. 31 17 CFR 240.10A–3. Notice, supra note 4, 79 FR at 17588. 32 See VerDate Mar<15>2010 18:18 May 14, 2014 Jkt 232001 IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Exchange Act,33 that the proposed rule change (SR– NYSEArca–2014–23), be, and it hereby is, approved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.34 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2014–11156 Filed 5–14–14; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–72142; File No. SR– NASDAQ–2014–052] 27961 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 Exchange 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 these 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 aspects of such statements. Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Extend the Pilot Program Relating to the Elimination of SPY Position Limits A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change May 9, 2014. The purpose of the proposed rule change is to amend the Supplementary Material at the end of Chapter III, Section 7 (Position Limits) to extend the current pilot which expires on May 12, 2014 for an additional fourteen (14) month time period to July 12, 2015 (‘‘Extended Pilot’’). This filing does not propose any substantive changes to the SPY Pilot Program. In proposing to extend the SPY Pilot Program, the Exchange reaffirms its consideration of several factors that supported the original proposal of the SPY Pilot Program, including (1) the availability of economically equivalent products and their respective position limits; (2) the liquidity of the option and the underlying security; (3) the market capitalization of the underlying security and the related index; (4) the reporting of large positions and requirements surrounding margin; and (5) the potential for market on close volatility. The Exchange submitted a report to the Commission on May 8, 2014, which report reflects, during the time period from January 2014 through April 2014, the trading of standardized SPY options with no position limits consistent with option exchange provisions.4 The report is being prepared in the manner specified in NASDAQ’s initial rule 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 May 8, 2014, The NASDAQ Stock Market LLC (‘‘NASDAQ’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I and II, below, which Items have been prepared by NASDAQ. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change NASDAQ proposes to extend for another fourteen (14) month time period the pilot program to eliminate position limits for options on the SPDR® S&P 500® exchange-traded fund (‘‘SPY ETF’’ or ‘‘SPY’’),3 which list and trade under the symbol SPY (‘‘SPY Pilot Program’’). The text of the proposed rule change is available on the Exchange’s Web site at https:// www.nasdaq.cchwallstreet.com, at the principal office of the Exchange, and at 33 15 U.S.C. 78s(b)(2). CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 ‘‘SPDR®,’’ ‘‘Standard & Poor’s®,’’ ‘‘S&P®,’’ ‘‘S&P 500®,’’ and ‘‘Standard & Poor’s 500’’ are registered trademarks of Standard & Poor’s Financial Services LLC. The SPY ETF represents ownership in the SPDR S&P 500 Trust, a unit investment trust that generally corresponds to the price and yield performance of the SPDR S&P 500 Index. 34 17 PO 00000 Frm 00125 Fmt 4703 Sfmt 4703 1. Purpose 4 See Securities Exchange Act Release No. 71231 (January 2, 2014), 79 FR 1402 (January 8, 2014) (SR– FINRA–2013–55) (notice of filing and immediate effectiveness of proposed rule change having the effect of eliminating position limits on standardized options on SPY). E:\FR\FM\15MYN1.SGM 15MYN1

Agencies

[Federal Register Volume 79, Number 94 (Thursday, May 15, 2014)]
[Notices]
[Pages 27958-27961]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-11156]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72138; File No. SR-NYSEArca-2014-23]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a 
Proposed Rule Change to List and Trade Shares of the iShares Interest 
Rate Hedged Corporate Bond ETF and iShares Interest Rate Hedged High 
Yield Bond ETF Under NYSE Arca Equities Rule 8.600

May 9, 2014.

I. Introduction

    On March 19, 2014, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 1934 
(``Exchange Act'') \2\ and Rule 19b-4 thereunder,\3\ a proposed rule 
change to list and trade shares (``Shares'') of the iShares Interest 
Rate Hedged Corporate Bond ETF and iShares Interest Rate Hedged High 
Yield Bond ETF (each, a ``Fund'' and collectively, the ``Funds''). The 
proposed rule change was published for comment in the Federal Register 
on March 28, 2014.\4\ The Commission received no comments on the 
proposal. This order approves the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
    \4\ See Securities Exchange Act Release No. 71778 (March 24, 
2014), 79 FR 17585 (``Notice'').
---------------------------------------------------------------------------

II. Description of the Proposed Rule Change

    The Exchange proposes to list and trade the Shares under NYSE Arca 
Equities Rule 8.600, which governs the listing and trading of Managed 
Fund Shares on the Exchange. The Shares will be offered by iShares U.S. 
ETF Trust (``Trust''). The Trust is registered with the Commission as 
an open-end management investment company.\5\ BlackRock Fund Advisors 
(``BFA'') will serve as the investment adviser to the Funds 
(``Adviser''). BlackRock Investments, LLC will be the principal 
distributor of the Funds' Shares. State Street Bank and Trust Company 
will serve as the administrator, custodian, and transfer agent for the 
Funds. The Exchange represents that the Adviser is not registered as a 
broker-dealer, but is affiliated with multiple broker-dealers and has 
implemented a fire wall with respect to its broker-dealer affiliates 
regarding access to information concerning the composition of and 
changes to each Fund's portfolio.\6\
---------------------------------------------------------------------------

    \5\ The Trust is registered under the 1940 Act. On August 22, 
2013, the Trust filed with the Commission post-effective amendments 
on Form N-1A under the Securities Act of 1933 (15 U.S.C. 77a) and 
under the 1940 Act relating to the iShares Interest Rate Hedged 
Corporate Bond ETF (the ``Corporate Bond Registration Statement'') 
and the iShares Interest Rate Hedged High Yield Bond ETF (the ``High 
Yield Registration Statement'' and together with the Corporate Bond 
Registration Statement, the ``Registration Statements'') (File Nos. 
333-179904 and 811-22649). In addition, the Exchange states that the 
Commission has issued an order granting certain exemptive relief to 
the Trust under the 1940 Act. See Investment Company Act Release No. 
29571 (File No. 812-13601) (``Exemptive Order'').
    \6\ See Commentary .06 to NYSE Arca Equities Rule 8.600. The 
Exchange represents that in the event (a) the Adviser or any sub-
adviser registers as a 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 its broker-dealer affiliate regarding access to information 
concerning the composition of or changes to a Fund's portfolio, and 
will be subject to procedures designed to prevent the use and 
dissemination of material non-public information regarding a Fund's 
portfolio.
---------------------------------------------------------------------------

    The Exchange has made the following representations and statements 
regarding the Funds.\7\
---------------------------------------------------------------------------

    \7\ Additional information regarding the Trust, the Funds, and 
the Shares, investment strategies, investment restrictions, risks, 
net asset value (``NAV'') calculation, creation and redemption 
procedures, fees, portfolio holdings, disclosure policies, 
distributions, and taxes, among other information, is included in 
the Notice and the Registration Statement, as applicable. See Notice 
and Registration Statement, supra notes 4 and 5, respectively.
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 iShares Interest Rate Hedged Corporate Bond ETF

    The Fund will seek to mitigate the interest rate risk of a 
portfolio composed of U.S. dollar-denominated, investment grade 
corporate bonds. The Fund will seek to achieve its investment objective 
by investing, under normal circumstances,\8\ at least 80% of its net 
assets in U.S. dollar-denominated investment-grade bonds, in one or 
more investment companies (exchange-traded and non-exchange-traded 
funds) that principally invest in investment-grade bonds,\9\ in U.S. 
Treasury securities (or cash equivalents), and by taking short 
positions in U.S. Treasury futures and other interest rate futures 
contracts.
---------------------------------------------------------------------------

    \8\ The term ``under normal circumstances'' includes, but is not 
limited to, the absence of extreme volatility or trading halts in 
the equity 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.
    \9\ Initially, the Fund intends to invest a substantial portion 
of its assets in the iShares iBoxx $ Investment Grade Corporate Bond 
ETF (the ``Underlying Corporate Bond Fund'').
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    The Fund will attempt to mitigate interest rate risk primarily 
through the use of U.S. Treasury futures contracts. The Fund may also 
take short positions in other interest rate futures contracts, 
including but not limited to, Eurodollar and Federal Funds futures. The 
Fund will invest only in futures contracts 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.

iShares Interest Rate Hedged High Yield Bond ETF

    The Fund will seek to mitigate the interest rate risk of a 
portfolio composed of U.S. dollar-denominated, high yield corporate 
bonds. The Fund will seek to achieve its investment objective by 
investing, under normal circumstances, at least 80% of its net assets 
in U.S. dollar-denominated high yield corporate bonds, in one or more 
investment companies (exchange-traded and non-

[[Page 27959]]

exchange-traded funds) that principally invest in high yield bonds, in 
U.S. Treasury securities (or cash equivalents),\10\ and by taking short 
positions in U.S. Treasury futures and other interest rate futures 
contracts.
---------------------------------------------------------------------------

    \10\ Initially, the Fund intends to invest a substantial portion 
of its assets in the iShares iBoxx $ High Yield Corporate Bond ETF 
(the ``Underlying High Yield Bond Fund'' and together with the 
Underlying Corporate Bond Fund, the ``Underlying Funds'').
---------------------------------------------------------------------------

    The Fund will attempt to mitigate interest rate risk primarily 
through the use of U.S. Treasury futures contracts. The Fund may also 
take short positions in other interest rate futures contracts, 
including but not limited to, Eurodollar and Federal Funds futures. The 
Fund will invest only in futures contracts that are traded on an 
exchange that is a member of the ISG or with which the Exchange has in 
place a comprehensive surveillance sharing agreement.

Other Investments

    While each Fund, under normal circumstances, will invest at least 
80% of its net assets in its investments as described above, a Fund may 
directly invest in certain other investments, as described below.
    Each Fund may invest in repurchase and reverse repurchase 
agreements. A repurchase agreement is an instrument under which the 
purchaser (i.e., a Fund or an Underlying Fund) acquires the security 
and the seller agrees, at the time of the sale, to repurchase the 
security at a mutually agreed upon time and price, thereby determining 
the yield during the purchaser's holding period. Reverse repurchase 
agreements involve the sale of securities with an agreement to 
repurchase the securities at an agreed-upon price, date and interest 
payment and have the characteristics of borrowing.
    Each Fund may invest in money market instruments on an ongoing 
basis to provide liquidity or for other reasons. Money market 
instruments are generally short-term investments that may include but 
are not limited to: (i) Shares of money market funds (including those 
advised by BFA or otherwise affiliated with BFA); (ii) obligations 
issued or guaranteed by the U.S. government, its agencies or 
instrumentalities (including government-sponsored enterprises); (iii) 
negotiable certificates of deposit, bankers' acceptances, fixed-time 
deposits and other obligations of U.S. and non-U.S. banks (including 
non-U.S. branches) and similar institutions; (iv) commercial paper 
rated, at the date of purchase, ``Prime-1'' by Moody's[supreg] 
Investors Service, Inc., ``F-1'' by Fitch Inc., or ``A-1'' by Standard 
& Poor's[supreg], or if unrated, of comparable quality as determined by 
BFA; (v) non-convertible corporate debt securities (e.g., bonds and 
debentures) with remaining maturities at the date of purchase of not 
more than 397 days and that satisfy the rating requirements set forth 
in Rule 2a-7 under the 1940 Act; and (vi) short-term U.S. dollar-
denominated obligations of non-U.S. banks (including U.S. branches) 
that, in the opinion of BFA, are of comparable quality to obligations 
of U.S. banks which may be purchased by a Fund. Any of these 
instruments may be purchased on a current or forward-settled basis. 
Time deposits are non-negotiable deposits maintained in banking 
institutions for specified periods of time at stated interest rates.
    Each Fund may invest in options that are traded on a U.S. or non-
U.S. exchange and that reference U.S. Treasury securities. To the 
extent that a Fund invests in options, not more than 10% of such 
investment would be in options whose principal trading market is not a 
member of ISG or is a market with which the Exchange does not have a 
comprehensive surveillance sharing agreement.
    Each Fund or the Underlying Funds may invest in debt securities of 
non-U.S. issuers and may invest in privately-issued debt securities.

III. Discussion and Commission Findings

    After careful review, the Commission finds that the Exchange's 
proposal to list and trade the Shares is consistent with the Exchange 
Act and the rules and regulations thereunder applicable to a national 
securities exchange.\11\ In particular, the Commission finds that the 
proposed rule change is consistent with Section 6(b)(5) of the Exchange 
Act,\12\ which requires, among other things, that the Exchange's rules 
be designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system, and, in general, to protect investors and the 
public interest. The Commission notes that the Funds and the Shares 
must comply with the requirements of NYSE Arca Equities Rule 8.600 to 
be listed and traded on the Exchange.
---------------------------------------------------------------------------

    \11\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition and 
capital formation. See 15 U.S.C. 78c(f).
    \12\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Commission finds that the proposal to list and trade the Shares 
on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the 
Exchange Act,\13\ which sets forth Congress' finding that it is in the 
public interest and appropriate for the protection of investors and the 
maintenance of fair and orderly markets to assure the availability to 
brokers, dealers, and investors of information with respect to 
quotations for and transactions in securities. Quotation and last-sale 
information for the Shares and the shares of the Underlying Funds and 
any ETFs held by each Fund will be available via the Consolidated Tape 
Association high-speed line, quotation and last sale information for 
exchange-listed options contracts will be available via the Options 
Price Reporting Authority. The intra-day, closing and settlement prices 
of exchange-traded portfolio assets, including investment companies, 
money market instruments, futures and options will be readily available 
from the securities exchanges and futures exchanges trading such 
securities and futures, as the case may be, automated quotation 
systems, published or other public sources, or on-line information 
services such as Bloomberg or Reuters. Such price information on fixed 
income portfolio securities, including money market instruments, and 
other Fund assets traded in over-the-counter markets including bonds 
and money market instruments is available from major broker-dealer 
firms or market data vendors, as well as from automated quotation 
systems, published or other public sources, or online information 
services. 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.\14\ 
NYSE Arca expects that 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.\15\
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \14\ See id.
    \15\ See id. at 17590.
---------------------------------------------------------------------------

    The Indicative Optimized Portfolio Value (``IOPV''), which is the 
Portfolio Indicative Value as defined in NYSE Arca Equities Rule 
8.600(c)(3), will be widely disseminated at least every 15 seconds 
during the Core Trading Session by one or more major market data 
vendors.\16\ The net asset value

[[Page 27960]]

(``NAV'') of each Fund normally will be determined once each business 
day, generally as of the regularly scheduled close of business of the 
New York Stock Exchange (``NYSE'') (normally 4:00 p.m., Eastern time) 
on each day that the NYSE is open for trading.\17\ The Funds' Web site 
will include a form of the prospectus for each Fund and additional 
quantitative information updated on a daily basis, including, (1) the 
prior business day's reported closing price, NAV, and mid-point of the 
bid/ask spread at the time of calculation of such NAV (``Bid/Ask 
Price''),\18\ and a calculation of the premium and discount of the Bid/
Ask Price against the NAV, and (2) data in chart format displaying the 
frequency distribution of discounts and premiums of the daily Bid/Ask 
Price against the NAV, within appropriate ranges, for each of the four 
previous calendar quarters.\19\
---------------------------------------------------------------------------

    \16\ See Notice, supra note 4, 79 FR at 17590. The IOPV 
calculations will be estimates of the value of a Fund's NAV per 
Share using market data converted into U.S. dollars at the current 
currency rates. The IOPV price will be based on quotes and closing 
prices from the securities' local market and may not reflect events 
that occur subsequent to the local market's close. The quotations of 
certain Fund holdings may not be updated during U.S. trading hours 
if such holdings do not trade in the United States. See id.
    \17\ See id. at 17589.
    \18\ The Bid/Ask Price of a Fund 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 a Fund's NAV. The records relating to 
Bid/Ask Prices will be retained by the Funds and their service 
providers. See id.
    \19\ See id.
---------------------------------------------------------------------------

    Further, the Commission believes that the proposal to list and 
trade the Shares is reasonably designed to promote fair disclosure of 
information that may be necessary to price the Shares appropriately and 
to prevent trading when a reasonable degree of transparency cannot be 
assured. On each business day, before commencement of trading in Shares 
in the Core Trading Session on the Exchange, each Fund will disclose on 
its Web site the Disclosed Portfolio, as defined in NYSE Arca Equities 
Rule 8.600(c)(2), that will form the basis for such Fund's calculation 
of NAV at the end of the business day.\20\ The Commission notes that 
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 will be made available to all 
market participants at the same time.\21\ In addition, a basket 
composition file, which will include the security names and share 
quantities required to be delivered in exchange for each Fund's Shares, 
together with estimates and actual cash components, will be publicly 
disseminated daily prior to the opening of the New York Stock Exchange 
via the National Securities Clearing Corporation.\22\ The basket will 
represent one Creation Unit of Shares of the Fund. Further, the 
Commission notes that the Reporting Authority that provides the 
Disclosed Portfolio must implement and maintain, or be subject to, 
procedures designed to prevent the use and dissemination of material 
non-public information regarding the actual components of the 
portfolio.\23\ The Exchange represents that the Adviser is affiliated 
with multiple broker-dealers and has implemented a fire wall with 
respect to such broker-dealers regarding access to information 
concerning the composition and/or changes to a portfolio, and will be 
subject to procedures designed to prevent the use and dissemination of 
material non-public information regarding the portfolio.\24\ The 
Exchange has a general policy prohibiting the distribution of material, 
non-public information by its employees.
---------------------------------------------------------------------------

    \20\ See id at 17589. On a daily basis, each Fund will disclose 
for each portfolio security or other financial instrument of the 
Fund the following information on the Fund's Web site: ticker symbol 
(if applicable), name of security or financial instrument, number of 
shares (if applicable) and dollar value of 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. Under 
accounting procedures to be followed by the Fund, trades made on the 
prior business day (``T'') will be booked and reflected in NAV on 
the current business day (``T+1''). Accordingly, the Funds 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. See id.
    \21\ See id. at 17588.
    \22\ See id. at 17589.
    \23\ See NYSE Arca Equities Rule 8.600(d)(2)(B)(ii).
    \24\ See supra note 6 and accompanying text.
---------------------------------------------------------------------------

    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares of the Funds.\25\ Trading in Shares of a Fund 
will be halted if the circuit breaker parameters in NYSE Arca Equities 
Rule 7.12 have been reached. Trading also may be halted because of 
market conditions or for reasons that, in the view of the Exchange, 
make trading in the Shares inadvisable. 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 a 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. If the IOPV is not being disseminated as required, the Exchange 
may halt trading during the day in which the interruption occurs; if 
the interruption persists past the day in which it occurred, the 
Exchange will halt trading no later than the beginning of the trading 
day following the interruption.\26\ The Exchange will consider the 
suspension of trading in or removal from listing of the Shares if the 
IOPV is no longer calculated or available or the Disclosed Portfolio is 
not made available to all market participants at the same time.\27\
---------------------------------------------------------------------------

    \25\ See NYSE Arca Equities Rule 7.12.
    \26\ See NYSE Arca Equities Rule 8.600(d)(2)(D).
    \27\ See NYSE Arca Equities Rule 8.600(d)(2)(C)(ii).
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    The Exchange has represented that the Shares are deemed to be 
equity securities, thus rendering trading in the Shares subject to the 
Exchange's rules governing the trading of equity securities.\28\ In 
support of this proposal, the Exchange has made additional 
representations, including:
---------------------------------------------------------------------------

    \28\ See id.
---------------------------------------------------------------------------

    (1) The Shares will conform to the initial and continuing listing 
criteria under NYSE Arca Equities Rule 8.600.
    (2) The Exchange's surveillance procedures are adequate to properly 
monitor Exchange trading of the Shares in all trading sessions and to 
deter and detect violations of Exchange rules and applicable federal 
securities laws.\29\
---------------------------------------------------------------------------

    \29\ 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.
---------------------------------------------------------------------------

    (3) The Financial Industry Regulatory Authority (``FINRA''), on 
behalf of the Exchange, will communicate as needed regarding trading in 
the Shares as well as underlying equity securities, futures, and 
options contracts held by the Funds with other markets that are members 
of the ISG and FINRA, on behalf of the Exchange, may obtain trading 
information regarding trading in the Shares as well as underlying 
equity securities and futures from such markets and other entities. In 
addition, the Exchange may obtain information regarding trading in the 
Shares as well as underlying equity securities, futures, and options 
contracts held by the Funds from markets and other entities that are 
members of ISG or with which the Exchange has in place a comprehensive 
surveillance sharing agreement.\30\ In addition, FINRA, on behalf of 
the Exchange, is able to access, as needed, trade information for 
certain fixed income instruments reported to FINRA's Trade Reporting 
and Compliance Engine.
---------------------------------------------------------------------------

    \30\ For a list of the current members of ISG, see 
www.isgportal.org.
---------------------------------------------------------------------------

    (4) The Exchange has appropriate rules to facilitate transactions 
in the Shares during all trading sessions.

[[Page 27961]]

    (5) Prior to the commencement of trading, the Exchange will inform 
its Equity Trading Permit Holders (``ETP Holders'') in an Information 
Bulletin of the special characteristics and risks associated with 
trading the Shares. Specifically, the Information Bulletin will discuss 
the following: (a) The procedures for purchases and redemptions of 
Shares in Creation Unit Aggregations and that Shares are not 
individually redeemable; (b) NYSE Arca Equities Rule 9.2(a), which 
imposes a duty of due diligence on its ETP Holders to learn the 
essential facts relating to every customer prior to trading the Shares; 
(c) the risks involved in trading the Shares during the Opening and 
Late Trading Sessions when an updated IOPV will not be calculated or 
publicly disseminated; (d) how information regarding the IOPV is 
disseminated; (e) the requirement that ETP Holders deliver a prospectus 
to investors purchasing newly issued Shares prior to or concurrently 
with the confirmation of a transaction; and (f) trading information.
    (6) For initial and continued listing, the Funds will be in 
compliance with Rule 10A-3 under the Exchange Act,\31\ as provided by 
NYSE Arca Equities Rule 5.3.\32\
---------------------------------------------------------------------------

    \31\ 17 CFR 240.10A-3.
    \32\ See Notice, supra note 4, 79 FR at 17588.
---------------------------------------------------------------------------

    (7) Each Fund's investments will be consistent with its investment 
objective.
    (8) 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 Adviser. 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.
    (9) A minimum of 100,000 Shares for each Fund will be outstanding 
at the commencement of trading on the Exchange.
    This order is based on all of the Exchange's representations, 
including those set forth above and in the Notice.
    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with the Exchange Act.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Exchange Act,\33\ that the proposed rule change (SR-NYSEArca-2014-23), 
be, and it hereby is, approved.
---------------------------------------------------------------------------

    \33\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\34\
---------------------------------------------------------------------------

    \34\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-11156 Filed 5-14-14; 8:45 am]
BILLING CODE 8011-01-P
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