Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 1, Relating to the Listing and Trading of Shares of Newfleet Multi-Sector Unconstrained Bond ETF under NYSE Arca Equities Rule 8.600, 36372-36380 [2015-15455]
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36372
Federal Register / Vol. 80, No. 121 / Wednesday, June 24, 2015 / Notices
the securities were acquired, (2) the
identity of the underwriting syndicate’s
members, (3) the terms of the purchase,
and (4) the information or materials
upon which the determinations of the
Board of the Unaffiliated Investment
Company were made.
8. Prior to its investment in shares of
an Unaffiliated Investment Company in
excess of the limit set forth in section
12(d)(1)(A)(i) of the Act, the Fund of
Funds and the Unaffiliated Investment
Company will execute a Participation
Agreement stating, without limitation,
that their Boards and their investment
advisers understand the terms and
conditions of the order and agree to
fulfill their responsibilities under the
order. At the time of its investment in
shares of an Unaffiliated Investment
Company in excess of the limit set forth
in section 12(d)(1)(A)(i), a Fund of
Funds will notify the Unaffiliated
Investment Company of the investment.
At such time, the Fund of Funds will
also transmit to the Unaffiliated
Investment Company a list of the names
of each Fund of Funds Affiliate and
Underwriting Affiliate. The Fund of
Funds will notify the Unaffiliated
Investment Company of any changes to
the list as soon as reasonably practicable
after a change occurs. The Unaffiliated
Investment Company and the Fund of
Funds will maintain and preserve a
copy of the order, the Participation
Agreement, and the list with any
updated information for the duration of
the investment and for a period of not
less than six years thereafter, the first
two years in an easily accessible place.
9. Before approving any advisory
contract under section 15 of the Act, the
Board of each Fund of Funds, including
a majority of the Independent Trustees,
shall find that the advisory fees charged
under the advisory contract are based on
services provided that are in addition to,
rather than duplicative of, services
provided under the advisory contract(s)
of any Underlying Fund in which the
Fund of Funds may invest. Such
finding, and the basis upon which the
finding was made, will be recorded fully
in the minute books of the appropriate
Fund of Funds.
10. The Adviser will waive fees
otherwise payable to it by a Fund of
Funds in an amount at least equal to any
compensation (including fees received
pursuant to any plan adopted by an
Unaffiliated Investment Company
pursuant to rule 12b–1 under the Act)
received from an Unaffiliated Fund by
the Adviser, or an affiliated person of
the Adviser, other than any advisory
fees paid to the Adviser or its affiliated
person by the Unaffiliated Investment
Company, in connection with the
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investment by the Fund of Funds in the
Unaffiliated Fund. Any Sub-Adviser
will waive fees otherwise payable to the
Sub-Adviser, directly or indirectly, by
the Fund of Funds in an amount at least
equal to any compensation received by
the Sub-Adviser, or an affiliated person
of the Sub-Adviser, from an Unaffiliated
Fund, other than any advisory fees paid
to the Sub-Adviser or its affiliated
person by the Unaffiliated Investment
Company, in connection with the
investment by the Fund of Funds in the
Unaffiliated Fund made at the direction
of the Sub-Adviser. In the event that the
Sub-Adviser waives fees, the benefit of
the waiver will be passed through to the
Fund of Funds.
11. Any sales charges and/or service
fees charged with respect to shares of a
Fund of Funds will not exceed the
limits applicable to funds of funds set
forth in NASD Conduct Rule 2830.
12. No Underlying Fund will acquire
securities of any other investment
company or company relying on section
3(c)(1) or 3(c)(7) of the Act, in excess of
the limits contained in section
12(d)(1)(A) of the Act, except to the
extent that such Underlying Fund: (a)
Acquires such securities in compliance
with section 12(d)(1)(E) of the Act and
either is an Affiliated Fund or is in the
same ‘‘group of investment companies’’
as its corresponding master fund; (b)
receives securities of another
investment company as a dividend or as
a result of a plan of reorganization of a
company (other than a plan devised for
the purpose of evading section 12(d)(1)
of the Act); or (c) acquires (or is deemed
to have acquired) securities of another
investment company pursuant to
exemptive relief from the Commission
permitting such Underlying Fund to: (i)
Acquire securities of one or more
investment companies for short-term
cash management purposes or (ii)
engage in inter-fund borrowing and
lending transactions.
B. Other Investments by Section
12(d)(1)(G) Funds of Funds
Applicants agree that the order
granting the requested relief to permit
Section 12(d)(1)(G) Funds of Funds to
invest in Other Investments shall be
subject to the following condition:
1. Applicants will comply with all
provisions of rule 12d1–2 under the Act,
except for paragraph (a)(2) to the extent
that it restricts any Section 12(d)(1)(G)
Fund of Funds from investing in Other
Investments as described in the
application.
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For the Commission, by the Division of
Investment Management, pursuant to
delegated authority.
Brent J. Fields,
Secretary.
[FR Doc. 2015–15450 Filed 6–23–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–75247; File No. SR–
NYSEArca–2015–42]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of Proposed
Rule Change, as Modified by
Amendment No. 1, Relating to the
Listing and Trading of Shares of
Newfleet Multi-Sector Unconstrained
Bond ETF under NYSE Arca Equities
Rule 8.600
June 18, 2015.
Pursuant to section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on June 5,
2015, NYSE Arca, Inc. (the ‘‘Exchange’’
or ‘‘NYSE Arca’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the self-regulatory organization. On
June 15, 2015, NYSE Arca filed
Amendment No. 1 to the proposed rule
change.4 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
The Exchange proposes to list and
trade shares of the following under
NYSE Arca Equities Rule 8.600
(‘‘Managed Fund Shares’’): Newfleet
Multi-Sector Unconstrained 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
1 15
U.S.C.78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
4 Amendment No. 1 replaces and supersedes the
filing in its entirety.
2 15
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Federal Register / Vol. 80, No. 121 / Wednesday, June 24, 2015 / Notices
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 the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
tkelley on DSK3SPTVN1PROD with NOTICES
The Exchange proposes to list and
trade shares (‘‘Shares’’) of the following
under NYSE Arca Equities Rule 8.600,
which governs the listing and trading of
Managed Fund Shares: 5 Newfleet MultiSector Unconstrained Bond ETF,6 a
series of the ETFis Series Trust I
(‘‘Trust’’).7
The investment adviser to the Fund
will be Etfis Capital LLC. (the
‘‘Adviser’’). The Fund’s Sub-Adviser
will be Newfleet Asset Management LLC
(‘‘Sub-Adviser’’). ETF Issuer Solutions
Inc. will serve as the Fund’s operational
administrator. ETF Distributors LLC will
serve as the distributor (the
5 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.
6 The Commission has approved listing and
trading on the Exchange of a number of actively
managed funds under Rule 8.600. See, e.g.,
Securities Exchange Act Release Nos. 69591 (May
16, 2013), 78 FR 30372 (May 22, 2013) (SR–
NYSEArca–2013–33) (order approving Exchange
listing and trading of International Bear ETF); 69061
(March 7, 2013), 78 FR 15990 (March 13, 2013) (SR–
NYSEArca–2013–01) (order approving Exchange
listing and trading of Newfleet Multi-Sector Income
ETF); and 67277 (June 27, 2012), 77 FR 39554 (July
3, 2012) (SR–NYSEArca–2012–39) (order approving
Exchange listing and trading of the Global Alpha &
Beta ETF).
7 The Trust is registered under the 1940 Act. On
January 26, 2015, the Trust filed with the
Commission an amendment to its registration
statement on Form N–1A under the Securities Act
of 1933 (15 U.S.C. 77a) (‘‘Securities Act’’), and
under the 1940 Act relating to the Fund (File Nos.
333–187668 and 811–22819) (‘‘Registration
Statement’’). The description of the operation of the
Trust and the Fund 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. 30607
(July 23, 2013) (File No. 812–14080) (‘‘Exemptive
Order’’).
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‘‘Distributor’’) of Fund Shares on an
agency basis.8
The Bank of New York Mellon (the
‘‘Administrator’’) will serve as the
administrator, custodian, transfer agent
and fund accounting agent for the Fund.
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
shall erect a ‘‘fire wall’’ between the
investment adviser and the brokerdealer with respect to access to
information concerning the composition
and/or changes to such investment
company portfolio.9 In addition,
Commentary .06 further requires that
personnel who make decisions on the
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 Adviser and Sub-Adviser are not
registered as broker-dealers but each is
affiliated with one or more brokerdealers and has implemented and will
maintain a fire wall with respect to each
such broker-dealer affiliate regarding
access to information concerning the
composition and/or changes to the
portfolio. In the event (a) the Adviser or
Sub-Adviser become registered brokerdealers or newly affiliated with a
broker-dealer, or (b) any new adviser or
sub-adviser is a registered broker-dealer
or becomes affiliated with a brokerdealer, it will implement a fire wall
with respect to its relevant personnel or
8 This Amendment No. 1 to SR–NYSEArca–
201[5]–42 replaces SR–NYSEArca–201[5]–42 as
originally filed and supersedes such filing in its
entirety.
9 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 Adviser and Sub-Adviser 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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36373
its 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 nonpublic information regarding such
portfolio.
Description of the Fund
Principal Investments
According to the Registration
Statement, the Fund will, under normal
market conditions,10 invest at least
eighty percent (80%) of the Fund’s net
assets in fixed income securities, across
all sectors of the fixed income market,
and in U.S. Treasury futures. The Fund
may invest across the credit rating
spectrum, which includes securities
rated below investment grade by a
nationally recognized statistical rating
organization (‘‘NRSRO’’). The Fund also
may invest in unrated securities. The
Fund has no target duration for its
investment portfolio and the Fund’s
portfolio managers may target shorter or
longer durations in response to their
view of the fixed income markets
generally or any sector thereof.
The Fund’s investment objective will
seek to provide a high level of current
income and, secondarily, capital
appreciation. According to the
Registration Statement, the Fund will
apply a time-tested approach to credit
research to capitalize on opportunities
across undervalued areas of the bond
market. According to the Registration
Statement, under normal market
conditions, the Sub-Adviser will seek to
select securities using a sector rotation
approach and seek to adjust the
proportion of Fund investments in
various sectors and sub-sectors in an
effort to obtain higher relative returns.
The Fund’s investable assets will
typically be allocated among various
sectors and sub-sectors of the fixed
income market using a top-down,
relative value approach that looks at
factors such as yield and spreads,
supply and demand, investment
environment, and sector fundamentals.
The Sub-Adviser will then typically
10 The term ‘‘under normal market conditions’’
includes, but is not limited to, the absence of
extreme volatility or trading halts in the fixed
income markets or the financial markets generally;
operational issues causing dissemination of
inaccurate market information; or force majeure
type events such as systems failure, natural or manmade disaster, act of God, armed conflict, act of
terrorism, riot or labor disruption or any similar
intervening circumstance. In the absence of normal
market conditions, the Fund may invest 100% of its
total assets, without limitation, in cash or cash
equivalents. The Fund may be invested in this
manner for extended periods depending on the SubAdviser’s assessment of market conditions.
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tkelley on DSK3SPTVN1PROD with NOTICES
select particular investments using a
bottom-up, fundamental research-driven
analysis that includes assessment of
credit risk, company management,
issuer capital structure, technical
market conditions, and valuations. The
Sub-Adviser will select securities it
believes offer the best potential to
achieve the Fund’s investment objective
of providing a relatively high level of
current income, and secondarily, capital
appreciation.
The Sub-Adviser will seek to provide
diversification by allocating the Fund’s
investments among various sectors of
the fixed income markets (as described
below), including corporate investmentgrade, corporate high-yield, non-agency
commercial mortgage-backed securities
(‘‘CMBS’’), agency and non-agency
residential mortgage-backed securities
(‘‘RMBS’’), non-U.S. dollar securities,
emerging market high-yield securities,
and asset-backed securities (‘‘ABS’’).
The Fund may invest in the following
fixed income securities:
• Securities issued or guaranteed as
to principal and interest by the U.S.
Government, its agencies, authorities or
instrumentalities, including, without
limitation, collateralized mortgage
obligations (‘‘CMOs’’), real estate
mortgage investment conduits
(‘‘REMICs’’) and other pass-through
securities;
• Non-agency 11 CMBS, agency and
non-agency RMBS, and other ABS,
including equipment trust certificates; 12
• Yankee bonds; 13
• Loan assignments, including senior
and junior bank loans (generally with
floating rates); 14
• Corporate bonds; and
• Taxable municipal bonds and taxexempt municipal bonds.
11 ‘‘Non-agency’’ securities are financial
instruments that have been issued by an entity that
is not a government-sponsored agency, such as the
Federal National Mortgage Association, Federal
Home Loan Mortgage Corporation, Federal Home
Loan Banks, or the Government National Mortgage
Association.
12 The Fund may invest up to 20% of its net
assets in the aggregate in non-agency CMBS, RMBS
and ABS. The liquidity of any such security will be
a factor in the selection of any such security.
13 Yankee bonds are denominated in U.S. dollars,
registered in accordance with the Securities Act and
publicly issued in the U.S. by foreign banks and
corporations.
14 The Fund may invest in loan assignments,
including senior and junior bank loans, rated C or
higher by an NRSRO or is unrated but considered
to be of comparable quality by the Adviser or SubAdviser. The Fund will not invest in loan
assignments that are in default at time of purchase.
The Fund will only invest in U.S. dollardenominated loan assignments. In addition, for
investment purposes, a bank loan must have a par
amount outstanding of U.S. $150 million or greater
at the time it is originally issued. The Fund may
invest up to 20% of its net assets in junior bank
loans.
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The Fund represents that the portfolio
generally will include a minimum of 13
non-affiliated issuers of debt securities.
The Fund will only purchase
performing securities and not distressed
debt.15
The Fund may invest in securities of
U.S. or non-U.S. issuers of any maturity
or credit quality rating. The Fund
generally will consider a security to be
‘‘investment grade’’ if it is rated within
the four highest rating categories of a
NRSRO or, if unrated, it is determined
to be of comparable quality by the SubAdviser (pursuant to procedures
reviewed and approved by the Trust’s
Board of Trustees (‘‘Board’’)). Securities
that are not determined to be investment
grade are considered below investment
grade. There is no limitation to the
Fund’s holdings in below investment
grade securities or non-U.S. issuers (as
measured by country of risk).
The fixed income securities
referenced above may be issued by
foreign issuers, including foreign
governments and their political
subdivisions and issuers located in
emerging markets countries.16
The fixed income securities
referenced above may be short-term
securities of U.S. and non-U.S. issuers.
The Fund has no target duration for
its investment portfolio and the Fund’s
portfolio managers may target shorter or
longer durations in response to their
view of the fixed income markets
generally or any sector thereof. Duration
measures the interest rate sensitivity of
a fixed income security by assessing and
weighting the present value of the
security’s payment pattern. Generally,
the longer the maturity, the greater the
duration and, therefore, the greater
effect interest rate changes have on the
price of the security.
The Sub-Adviser will seek to adjust (i)
the proportion of Fund investments
primarily in the sectors described above,
and (ii) the selections within sectors to
obtain higher relative returns. The SubAdviser will regularly review the Fund’s
portfolio construction, endeavoring to
minimize risk exposure by closely
monitoring portfolio characteristics
such as sector concentration and
portfolio duration and by investing no
more than 5% of the Fund’s total assets
in securities of any single issuer
15 Distressed debt is debt that is currently in
default and is not expected to pay the current
coupon.
16 The Adviser expects that under normal market
conditions, the Fund will seek to invest at least
75% of its corporate bond assets in issuances that
have at least $100,000,000 par amount outstanding
in developed countries and at least $200,000,000
par amount outstanding in emerging market
countries.
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(excluding the U.S. government, its
agencies, authorities or
instrumentalities).
The Fund may invest in U.S. Treasury
futures contracts traded on U.S. futures
exchanges in an attempt to protect the
Fund’s current or intended investments
from broad fluctuations in securities
prices.17
Other Investments
While the Fund, under normal market
conditions, will invest at least eighty
percent (80%) of its assets in fixed
income securities and financial
instruments, as described above, the
Fund may invest its remaining assets in
other assets and financial instruments,
as described below.
The Fund may hold the following
exchange-traded equity securities:
common stocks, preferred stocks,
warrants, convertible securities, unit
investment trusts, master limited
partnerships, real estate investment
trusts (‘‘REITs’’), exchange-traded funds
(‘‘ETFs’’) 18 and exchange-traded notes
(‘‘ETNs’’).19
The Fund will purchase such equity
securities traded in the U.S. on
registered exchanges.
To gain exposure to the performance
of foreign issuers, the Fund may invest
in the following types of equity
securities: American Depositary
Receipts (‘‘ADRs’’), ‘‘ordinary shares,’’
and ‘‘New York shares’’ (each of which
is issued and traded in the U.S.); and
Global Depositary Receipts (‘‘GDRs’’),
European Depositary Receipts (‘‘EDRs’’),
and International Depositary Receipts
(‘‘IDRs’’), which are traded on foreign
exchanges (all of the foregoing financial
instruments collectively referred to as
‘‘Equity Financial Instruments’’).20
17 In instances involving the purchase of futures
contracts, the Fund will deposit in a segregated
account with its custodian an amount of cash, cash
equivalents and/or appropriate securities equal to
the cost of such futures contracts, to the extent that
such deposits are required under the 1940 Act.
18 The ETFs in which the Fund may invest will
be registered under the 1940 Act and include
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). Such ETFs all will
be listed and traded in the U.S. on registered
exchanges. The Fund may invest in inverse ETFs,
leveraged ETFs and inverse leveraged ETFs (e.g., 2X
or 3X).
19 ETNs, also called index-linked securities as
would be listed, for example, under NYSE Arca
Equities Rule 5.2(j)(6), are senior, unsecured,
unsubordinated debt securities issued by an
underwriting bank that are designed to provide
returns that are linked to a particular benchmark
less investor fees. The Fund will not invest in
leveraged ETNs and inverse leveraged ETNs (e.g.,
2X or 3X).
20 ADRs are U.S. dollar denominated receipts
typically issued by U.S. banks and trust companies
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Federal Register / Vol. 80, No. 121 / Wednesday, June 24, 2015 / Notices
tkelley on DSK3SPTVN1PROD with NOTICES
With respect to its exchange-traded
equity securities investments, the Fund
will normally invest in equity securities
that are listed and traded on a U.S.
exchange or in markets that are
members of the Intermarket
Surveillance Group (‘‘ISG’’) or parties to
a comprehensive surveillance sharing
agreement with the Exchange. In any
case, not more than 10% of the net
assets of the Fund in the aggregate
invested in exchange-traded equity
securities will consist of equity
securities whose principal market is not
a member of ISG or a market with which
the Exchange does not have a
comprehensive surveillance sharing
agreement.
The Fund may invest in, to the extent
permitted by section 12(d)(1) of the
1940 Act and the rules thereunder,21
other affiliated and unaffiliated funds,
such as open-end or closed-end
management investment companies
(‘‘closed-end funds’’), including other
ETFs.
The Fund also may invest in the
securities of other investment
companies in compliance with section
12(d)(1)(E), (F) and (G) of the 1940 Act
and the rules thereunder.22
The Fund may invest in the exchange
traded securities of pooled vehicles that
are not investment companies and, thus,
not required to comply with the
provisions of the 1940 Act. Such pooled
vehicles would be required to comply
with the provisions of other federal
securities laws, such as the Securities
Act. These pooled vehicles typically
hold commodities, such as gold or oil,
that evidence ownership of underlying securities
issued by a foreign issuer. The underlying securities
may not necessarily be denominated in the same
currency as the securities into which they may be
converted. The underlying securities are held in
trust by a custodian bank or similar financial
institution in the issuer’s home country. The
depositary 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. The Fund may invest in sponsored or
unsponsored ADRs; however, non-exchange listed
ADRs will not exceed 10% of the Fund’s net assets.
Ordinary shares are shares of foreign issuers that are
traded abroad and on a U.S. exchange. New York
shares are shares that a foreign issuer has allocated
for trading in the U.S. ADRs, ordinary shares, and
New York shares all may be purchased with and
sold for U.S. dollars, which protects the Fund from
foreign settlement risks. GDRs, EDRs, and IDRs are
similar to ADRs in that they are certificates
evidencing ownership of shares of a foreign issuer;
however, GDRs, EDRs, and IDRs may be issued in
bearer form and denominated in other currencies,
and are generally designed for use in specific or
multiple securities markets outside the U.S. EDRs,
for example, are designed for use in European
securities markets while GDRs are designed for use
throughout the world.
21 15 U.S.C. 80a–12(d)(1).
22 15 U.S.C. 80a–12(d)(1)(E),(F) and (G).
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currency, or other property that is itself
not a security.23
Investment Restrictions
The 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 fixed
income securities and bank loans, that
are deemed illiquid by the Adviser,
consistent with Commission guidance.24
Thus, only those Rule 144A securities
and bank loans, that are deemed illiquid
by the Adviser would be included in the
limitation of 15% of net assets in
illiquid assets.25
The Adviser has represented that it
will invest generally in loan
assignments, including bank loans, that
it deems highly liquid, with readily
available prices.
The Fund will not invest in options
contracts or swap agreements.
The Fund will seek to qualify for
treatment as a regulated investment
company under the Internal Revenue
Code of 1986.26
23 Exchange-traded pooled investment vehicles
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).
24 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).
25 Rule 144A securities and loan assignments,
including bank loans, are subject to the Fund’s 15%
limitation on holdings in illiquid assets only if
deemed illiquid by the Adviser. In reaching
liquidity decisions relating to Rule 144A securities
and loan assignments, the Adviser may consider the
following factors: the frequency of trades and
quotes for the security; the number of dealers
wishing to purchase or sell the security and the
number of other potential purchasers; dealer
undertakings to make a market in the security; and
the nature of the security and the nature of the
marketplace trades (e.g., the time needed to dispose
of the security, the method of soliciting offers, and
the mechanics of transfer.) The Adviser represents
that the Adviser and the Board will continue to
evaluate each 144A security and loan assignment
based on the Fund’s valuation procedures to
oversee liquidity and valuation concerns.
26 26 U.S.C. 851.
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36375
The Fund’s investments will be
consistent with its investment objective
and will not be used to provide multiple
returns of a benchmark or to produce
leveraged returns.
Creation and Redemption of Shares
The Trust will issue and sell Shares
of the Fund only in ‘‘Creation Units’’ on
a continuous basis through the
Distributor, at their NAV next
determined after receipt, on any
business day, for an order received in
proper form. All orders to create
Creation Units must be placed for one
or more Creation Unit size aggregations
of Shares (50,000 Shares per Creation
Unit). The Creation Unit size is subject
to change.
The consideration for purchase of a
Creation Unit of the Fund generally will
consist of an in-kind deposit of ‘‘Deposit
Securities’’ for each Creation Unit
constituting a substantial replication, or
a representation, of the securities
included in the Fund’s portfolio and a
‘‘Cash Component’’ computed as
described below. Together, the Deposit
Securities and the Cash Component
constitute the ‘‘Fund Deposit’’, which
represents the minimum initial and
subsequent investment amount for a
Creation Unit of the Fund. The Cash
Component is an amount equal to the
difference between the NAV of the
Shares (per Creation Unit) and the
market value of the Deposit Securities.
If the Cash Component is a positive
number (i.e., the NAV per Creation Unit
exceeds the market value of the Deposit
Securities), the Cash Component will be
such positive amount. If the Cash
Component is a negative number (i.e.,
the NAV per Creation Unit is less than
the market value of the Deposit
Securities), the Cash Component will be
such negative amount, and the creator
will be entitled to receive cash from the
Fund in an amount equal to the Cash
Component. The Cash Component
serves the function of compensating for
any differences between the NAV per
Creation Unit and the market value of
the Deposit Securities.
The Administrator, through the
National Securities Clearing Corporation
(‘‘NSCC’’), will make available on each
business day, immediately prior to the
opening of business on the Exchange
(currently 9:30 a.m., Eastern Time), the
list of the names and the required
number of Shares of each Deposit
Security to be included in the current
Fund Deposit (based on information at
the end of the previous business day) for
the Fund. Such Fund Deposit will be
applicable, subject to any adjustments
as described below, in order to effect
creations of Creation Units of the Fund
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until such time as the next-announced
composition of the Deposit Securities is
made available.
The identity and number of Shares of
the Deposit Securities required for the
Fund Deposit for the Fund will change
as rebalancing adjustments and
corporate action events are reflected
from time to time by the Sub-Adviser
with a view to the investment objective
of the Fund. In addition, the Trust
reserves the right to permit or require
the substitution of an amount of cash—
i.e., a ‘‘cash in lieu’’ amount—to be
added to the Cash Component to replace
any Deposit Security that may not be
available in sufficient quantity for
delivery, that may not be eligible for
transfer or that may not be eligible for
trading by an ‘‘Authorized Participant’’
(as described below) or the investor for
which it is acting.
In addition to the list of names and
numbers of securities constituting the
current Deposit Securities of the Fund
Deposit, the Administrator, through
NSCC, also will make available on each
business day the estimated Cash
Component, effective through and
including the previous business day, per
outstanding Creation Unit of the Fund.
Procedures for Creation of Creation
Units
To be eligible to place orders to create
a Creation Unit of the Fund, an entity
must be (i) a ‘‘Participating Party’’, i.e.,
a broker-dealer or other participant in
the clearing process through the
Continuous Net Settlement System of
NSCC (the ‘‘Clearing Process’’) or a
clearing agency that is registered with
the Commission, or (ii) a Depositary
Trust Company (‘‘DTC’’) Participant (see
‘‘Book Entry Only System’’) and, in each
case, must have executed an agreement
with the Trust, the Distributor and the
Administrator with respect to creations
and redemptions of Creation Units
(‘‘Participant Agreement’’). A
Participating Party and DTC Participant
are collectively referred to as an
‘‘Authorized Participant’’.
All orders to create Creation Units
must be received by the Distributor no
later than the close of the regular trading
session on the Exchange (ordinarily 4:00
p.m. Eastern Time) (‘‘Closing Time’’), in
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 Fund as next
determined on such date after receipt of
the order in proper form.
Redemption of Creation Units
Shares may be redeemed only in
Creation Units at their NAV next
determined after receipt of a redemption
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Jkt 235001
request in proper form by the
Distributor and the Fund through the
Administrator and only on a business
day.
With respect to the Fund, the
Administrator, through NSCC, will
make available immediately prior to the
opening of business on the Exchange
(currently 9:30 a.m., Eastern Time) on
each business day, the Deposit
Securities that will be applicable
(subject to possible amendment or
correction) to redemption requests
received in proper form on that day.
Deposit Securities received on
redemption may not be identical to
Deposit Securities which are applicable
to creations of Creation Units.
Unless cash redemptions are available
or specified for the Fund, the
redemption proceeds for a Creation Unit
generally consist of Deposit Securities,
as announced by the Administrator 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 a request
in proper form, and the value of the
Deposit Securities (the ‘‘Cash
Redemption Amount’’), less a
redemption transaction fee. In the event
that the Deposit Securities have a value
greater than the NAV of the Shares, a
compensating cash payment equal to the
differential is required to be made by or
through an Authorized Participant by
the redeeming shareholder.
If it is not possible to effect deliveries
of the Deposit Securities, the Trust may
in its discretion exercise its option to
redeem such shares in cash, and the
redeeming Beneficial Owner will be
required to receive its redemption
proceeds in cash. In addition, an
investor may request a redemption in
cash which the Fund may, in its sole
discretion, permit.27 In either case, the
investor will receive a cash payment
equal to the NAV of its Shares based on
the NAV of Shares of the Fund next
determined after the redemption request
is received in proper form (minus a
redemption transaction fee and
additional charge for requested cash
redemptions specified above, to offset
the Trust’s brokerage and other
transaction costs associated with the
disposition of Deposit Securities). The
Fund may also, in its sole discretion,
upon request of a shareholder, provide
such redeemer a portfolio of securities
which differs from the exact
27 The Adviser represents that, to the extent the
Trust effects the redemption of Shares in cash, such
transactions will be effected in the same manner for
all Authorized Participants.
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composition of the Deposit Securities
but does not differ in NAV.
The right of redemption may be
suspended or the date of payment
postponed with respect to the Fund (1)
for any period during which the
Exchange is closed (other than
customary weekend and holiday
closings); (2) for any period during
which trading on the Exchange is
suspended or restricted; (3) for any
period during which an emergency
exists as a result of which disposal of
the Shares of the Fund or determination
of the Shares’ NAV is not reasonably
practicable; or (4) in such other
circumstance as is permitted by the
Commission.
Net Asset Value
The NAV of the Shares for the Fund
will be equal to the Fund’s total assets
minus the Fund’s total liabilities
divided by the total number of Shares
outstanding. Interest and investment
income on the Trust’s assets will accrue
daily and will be included in the Fund’s
total assets. Expenses and fees
(including investment advisory,
management, administration and
distribution fees, if any) will accrue
daily and will be included in the Fund’s
total liabilities.
The pricing and valuation of portfolio
securities will be determined in good
faith in accordance with procedures
approved by, and under the direction of,
the Board. In determining the value of
the Fund’s assets, portfolio securities
will generally be valued at market using
quotations from the primary market in
which they are traded. The Fund
normally will use third party pricing
services to obtain market quotations.
Securities and assets for which market
quotations are not readily available or
which cannot be accurately valued
using the Fund’s normal pricing
procedures will be valued by the Trust’s
Fair Value Pricing Committee at fair
value as determined in good faith under
policies approved by the Trust’s Board.
Fair value pricing may be used, for
example, in situations where (i)
portfolio securities, such as securities
with small capitalizations, are so thinly
traded that there have been no
transactions for that security over an
extended period of time; (ii) an event
occurs after the close of the exchange on
which a portfolio security is principally
traded that is likely to change the value
of the portfolio security prior to the
Fund’s NAV calculation; (iii) the
exchange on which the portfolio
security is principally traded closes
early; or (iv) trading of the particular
portfolio security is halted during the
day and does not resume prior to the
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Fund’s NAV calculation. Pursuant to
policies adopted by the Board, the
Adviser will consult with BNY Mellon
and the Sub-Adviser on a regular basis
regarding the need for fair value pricing.
The Fund’s policies regarding fair value
pricing are intended to result in a
calculation of the Fund’s NAV that
fairly reflects portfolio security values
as of the time of pricing. A portfolio
security’s ‘‘fair value’’ price may differ
from the price next available for that
portfolio security using the Fund’s
normal pricing procedures, and the fair
value price may differ substantially
from the price at which the security may
ultimately be traded or sold. The Board
will monitor and evaluate the Fund’s
use of fair value pricing, and
periodically reviews the results of any
fair valuation under the Trust’s policies.
The NAV will be determined as of the
close of regular trading on the Exchange,
normally 4:00 p.m. Eastern time, on
each day that the Exchange is open for
business.
In computing the Fund’s NAV, the
Fund’s securities holdings will be
valued based on their last readily
available market price.
Exchange-traded equity 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. If market prices
are unavailable or the Fund believes
that they are unreliable, or when the
value of a security has been materially
affected by events occurring after the
relevant market closes, the Fund will
price those securities at fair value as
determined in good faith using methods
approved by the Trust’s Board.
Unsponsored ADRs, which are traded
OTC, will be valued on the basis of the
market closing price on the exchange
where the stock of the foreign issuer that
underlies the ADR is listed. Investment
company securities (other than ETFs),
including mutual funds and closed end
funds will be valued at net asset value.
Currency spot rates will be taken from
major market data vendors and will
generally be determined as of the close
of trading of the New York Stock
Exchange. Futures contracts will
generally be valued at the settlement
price of the relevant exchange. In
computing the Fund’s net asset value
per Share, Rule 144A fixed income
securities will be valued based on price
quotations and other equivalent
indications of value provided by a third
party pricing service.
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Jkt 235001
Corporate debt securities, bank loans,
non-agency CMBS, agency and nonagency RMBS, non-U.S. dollar
securities, emerging market high-yield
securities, investment-grade bonds,
ABS, municipal bonds, CMOs, REMICs,
junk bonds, equipment trust certificates,
and money market instruments
generally trade in the OTC market rather
than on a securities exchange. The Fund
will generally value these portfolio
securities by relying on independent
pricing services. The Fund’s pricing
services will use valuation models or
matrix pricing to determine current
value. In general, pricing services use
information with respect to comparable
bond and note transactions, quotations
from bond dealers or by reference to
other securities that are considered
comparable in such characteristics as
rating, interest rate, maturity date,
option adjusted spread models,
prepayment projections, interest rate
spreads and yield curves.
Foreign exchange rates will be priced
using 4:00 p.m. Eastern Time mean
prices from major market data vendors.
Availability of Information
The Fund’s Web site
(www.newfleet.com), which will be
publicly available prior to the public
offering of Shares, will include a form
of the prospectus for the Fund that may
be downloaded. The Fund’s Web site
will include additional quantitative
information updated on a daily basis,
including, for the Fund, (1) daily trading
volume, the prior business day’s
reported closing price, NAV and midpoint of the bid/ask spread at the time
of calculation of such NAV (the ‘‘Bid/
Ask Price’’),28 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. On each business day, before
commencement of trading in Shares in
the Core Trading Session on the
Exchange, the Fund’s Web site will
disclose the Disclosed Portfolio that will
form the basis for the Fund’s calculation
of NAV at the end of the business day.29
28 The Bid/Ask Price of the 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 the
Fund and its service providers.
29 Under accounting procedures 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 Fund will
be able to disclose at the beginning of the business
PO 00000
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36377
The Fund will disclose on the Fund’s
Web site the following information
regarding each portfolio holding, as
applicable to the type of holding: Ticker
symbol, CUSIP number or other
identifier, if any; a description of the
holding (including the type of holding);
the identity of the security, commodity,
index or other asset or instrument
underlying the holding, if any; quantity
held (as measured by, for example, par
value, notional value or number of
shares, contracts or units); maturity
date, if any; coupon rate, if any;
effective date, if any; market value of the
holding; and the percentage weighting
of the holding in the Fund’s portfolio.
The Web site information will be
publicly available at no charge.
In addition, a basket composition file,
which includes the security names and
share quantities, if applicable, required
to be delivered in exchange for the
Fund’s Shares, together with estimates
and actual cash components, will be
publicly disseminated daily prior to the
opening of the Exchange via the NSCC.
The basket represents one Creation Unit
of the Fund. The NAV of Shares of the
Fund will normally be determined as of
the close of the regular trading session
on the Exchange (ordinarily 4:00 p.m.
Eastern Time) on each business day.
Authorized participants may refer to the
basket composition file for information
regarding securities and financial
instruments that may comprise the
Fund’s basket on a given day.
The approximate value of the Fund’s
investments on a per-Share basis, the
Indicative Intra-Day Value (‘‘IIV’’), will
be disseminated every 15 seconds
during the Exchange Core Trading
Session. The IIV should not be viewed
as a ‘‘real-time’’ update of NAV because
the IIV will be calculated by an
independent third party and may not be
calculated in the exact same manner as
NAV, which will be computed daily.
The IIV for the Fund will be
calculated during hours of trading on
the Exchange by dividing the
‘‘Estimated Fund Value’’ as of the time
of the calculation by the total number of
outstanding Shares. ‘‘Estimated Fund
Value’’ is the sum of the estimated
amount of cash held in the Fund’s
portfolio, the estimated amount of
accrued interest owing to the Fund and
the estimated value of the securities
held in the Fund’s portfolio, minus the
estimated amount of the Fund’s
liabilities. The IIV will be calculated
based on the same portfolio holdings
disclosed on the Fund’s Web site. In
determining the estimated value for
day the portfolio that will form the basis for the
NAV calculation at the end of the business day.
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each of the component securities, the
IIV will use last sale, market prices or
other methods that would be considered
appropriate for pricing equity securities
held by registered investment
companies.
Investors can also obtain the Trust’s
Statement of Additional Information
(‘‘SAI’’), the Fund’s shareholder reports,
and its Form N–CSR and Form N–SAR,
filed twice a year. The Trust’s SAI and
Shareholder Reports will be available
free upon request from the Trust, and
those documents and the Form N–CSR
and Form N–SAR may be viewed onscreen 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 the underlying U.S.
exchange-traded equity securities will
be available via the Consolidated Tape
Association (‘‘CTA’’) high-speed line,
and from the national securities
exchange on which they are listed. Price
information regarding exchange-traded
equity securities and futures contracts
held by the Fund will be available from
the exchanges trading such assets.
Quotation information from brokers
and dealers or pricing services will be
available for unsponsored ADRs; fixed
income securities; bank loans; U.S.
Treasury securities; other obligations
issued or guaranteed by U.S.
government agencies and
instrumentalities; bank obligations;
short-term securities; money market
instruments; ABS; MBS; CMBS; RMBS;
CMOs; shares of mutual funds;
corporate debt securities; and
convertible securities. Price information
for investment company securities
(other than ETFs and exchange-traded
closed end funds) will be available from
the investment company’s Web site and
from market data vendors. Pricing
information regarding each asset class in
which the Fund will invest will
generally be available through
nationally recognized data service
providers through subscription
agreements. Foreign exchange prices are
available from major market data
vendors. Intra-day and closing price
information for Rule 144A fixed income
securities and loan assignments will be
available from major market data
vendors.
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Jkt 235001
In addition, the IIV, (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.30 The
dissemination of the IIV, together with
the Disclosed Portfolio, will allow
investors to determine the value of the
underlying portfolio of the Fund on a
daily basis and will provide a close
estimate of that value throughout the
trading day.
Additional information regarding the
Trust and the Shares, including
investment strategies, risks, creation and
redemption procedures, fees, portfolio
holdings disclosure policies,
distributions and taxes is included in
the Registration Statement.
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
the Fund.31 Trading in Shares of the
Fund will be halted if the circuit breaker
parameters in NYSE Arca Equities Rule
7.12 have been reached. Trading also
may be halted because of market
conditions or for reasons that, in the
view of the Exchange, make trading in
the Shares inadvisable. 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 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 the Fund may be halted.
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 a.m.
to 8 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,
30 Currently, it is the Exchange’s understanding
that several major market data vendors display and/
or make widely available IIVs taken from CTA or
other data feeds.
31 See NYSE Arca Equities Rule 7.12,
Commentary .04.
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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.
Consistent with NYSE Arca Equities
Rule 8.600(d)(2)(B)(ii), the Adviser will
implement and maintain, or be subject
to, procedures designed to prevent the
use and dissemination of material nonpublic information regarding the actual
components of the Fund’s portfolio. The
Exchange represents that, for initial
and/or continued listing, the Fund will
be in compliance with Rule 10A–3 32
under the Act, as provided by NYSE
Arca Equities Rule 5.3. A minimum of
100,000 Shares 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 will be
calculated daily and that the NAV and
the Disclosed Portfolio 33 as defined in
NYSE Arca Equities Rule 8.600(c)(2)
will be made available to all market
participants at the same time. The
Fund’s investments will be consistent
with the Fund’s investment objective
and will not be used to enhance
leverage.
Additional information regarding the
Trust, Fund, and Shares, including
investment strategies, risks, creation and
redemption procedures, fees, portfolio
holdings, disclosure policies,
distributions and taxes, availability of
information, trading rules and halts, and
surveillance procedures, among other
things, can be found in the Registration
Statement.
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. 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
32 17
CFR 240.10A–3.
term ‘‘Disclosed Portfolio’’ is defined in
NYSE Arca Equities Rule 8.600(c)(2).
33 The
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securities laws applicable to trading on
the Exchange.34
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.35
FINRA, on behalf of the Exchange,
will communicate as needed regarding
trading in the Shares, exchange-traded
equity securities and futures contracts
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, exchange-traded
equity securities and futures contracts
from such markets and other entities. In
addition, the Exchange may obtain
information regarding trading in the
Shares, exchange-traded equity
securities and futures contracts 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 Fund
reported to FINRA’s Trade Reporting
and Compliance Engine (‘‘TRACE’’).
In addition, the Exchange also has a
general policy prohibiting the
distribution of material, non-public
information by its employees.
tkelley on DSK3SPTVN1PROD with NOTICES
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)
34 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.
35 For a list of the current members of ISG, see
www.isgportal.org. The Exchange notes that not all
components of the Disclosed Portfolio 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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16:43 Jun 23, 2015
Jkt 235001
the risks involved in trading the Shares
during the Opening and Late Trading
Sessions when an updated IIV will not
be calculated or publicly disseminated;
(4) how information regarding the IIV
and the Disclosed Portfolio 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 Fund is 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) 36 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.
The Exchange believes that the
proposed rule change is designed to
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 applicable federal securities
laws. FINRA, on behalf of the Exchange,
will communicate as needed regarding
trading in the Shares, exchange-traded
equity securities and futures contracts
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, exchange-traded
equity securities and futures contracts
from such markets and other entities. In
addition, the Exchange may obtain
information regarding trading in the
Shares, exchange-traded equity
securities and futures contracts from
markets and other entities that are
members of ISG or with which the
Exchange has in place a comprehensive
36 15
PO 00000
U.S.C. 78f(b)(5).
Frm 00064
Fmt 4703
Sfmt 4703
36379
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 Fund
reported to TRACE. The Fund may
invest up to 20% of its net assets in the
aggregate in non-agency CMBS, RMBS
and ABS. The Fund may invest up to
20% of its assets in junior bank loans.
The Fund may not purchase or hold
illiquid assets if, in the aggregate, more
than 15% of its net assets would be
invested in illiquid assets. The Adviser
and Sub-Adviser are not registered as
broker-dealers but are affiliated with
two broker-dealers and have
implemented and will maintain a fire
wall with respect to each such brokerdealer affiliate regarding access to
information concerning the composition
and/or changes to the portfolio.
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 Fund
and the Shares, thereby promoting
market transparency. Quotation and last
sale information for the Shares and the
underlying U.S. exchange-traded equity
securities will be available via the CTA
high-speed line, and from the national
securities exchange on which they are
listed. The Fund will disclose on the
Fund’s Web site the following
information regarding each portfolio
holding, as applicable to the type of
holding: ticker symbol, CUSIP number
or other identifier, if any; a description
of the holding (including the type of
holding); the identity of the security,
commodity, index or other asset or
instrument underlying the holding, if
any; quantity held (as measured by, for
example, par value, notional value or
number of shares, contracts or units);
maturity date, if any; coupon rate, if
any; effective date, if any; market value
of the holding; and the percentage
weighting of the holding in the Fund’s
portfolio. Moreover, prior to the
commencement of trading, the Exchange
will inform its Equity Trading Permit
Holders in an Information Bulletin of
the special characteristics and risks
associated with trading the Shares.
Trading in Shares of the Fund will be
halted if the circuit breaker parameters
in NYSE Arca Equities Rule 7.12 have
been reached or because of market
E:\FR\FM\24JNN1.SGM
24JNN1
36380
Federal Register / Vol. 80, No. 121 / Wednesday, June 24, 2015 / Notices
conditions or for reasons that, in the
view of the Exchange, make trading in
the Shares inadvisable. 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 the Fund may be halted. In addition,
as noted above, investors will have
ready access to information regarding
the Fund’s holdings, the IIV, 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 an additional type of activelymanaged 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 the Fund’s
holdings, the IIV, 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 an
additional type of actively-managed
exchange-traded product that will
enhance competition among market
participants, to the benefit of investors
and the marketplace.
tkelley on DSK3SPTVN1PROD with NOTICES
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 such longer period up to 90
days after publication (i) as the
Commission may designate if it finds
such longer period to be appropriate
and publishes its reasons for so finding
VerDate Sep<11>2014
16:43 Jun 23, 2015
Jkt 235001
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–2015–42 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSEArca–2015–42. 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 Section, 100 F Street, NE.,
Washington, DC 20549 on official
business days between 10:00 a.m. and
3:00 p.m. Copies of the filing will also
be available for inspection and copying
at the NYSE’s principal office and on its
Internet Web site at www.nyse.com. All
comments received will be posted
without change; the Commission does
not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly. All
submissions should refer to File
Number SR–NYSEArca–2015–42 and
PO 00000
Frm 00065
Fmt 4703
Sfmt 4703
should be submitted on or before July
15, 2015.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.37
Brent J. Fields,
Secretary.
[FR Doc. 2015–15455 Filed 6–23–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–75244; File No. SR–
NYSEArca-2015–23]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Order Granting Approval of
Proposed Rule Change, as Modified by
Amendment Nos. 1 and 3 Thereto,
Relating to the Listing and Trading of
Shares of the ALPS Enhanced Put
Write Strategy ETF Under NYSE Arca
Equities Rule 8.600
June 18, 2015.
I. Introduction
On April 15, 2015, NYSE Arca, Inc.
(‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’), pursuant to section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’ or ‘‘Exchange Act’’) 1 and
Rule 19b–4 thereunder,2 a proposed rule
change to list and trade shares
(‘‘Shares’’) of the ALPS Enhanced Put
Write Strategy ETF (‘‘Fund’’) under
NYSE Arca Equities Rule 8.600, which
governs the listing and trading of
Managed Fund Shares. The proposed
rule change was published for comment
in the Federal Register on May 5, 2015.3
On May 12, 2015, the Exchange filed
Amendment No. 1 to the proposed rule
change.4 On May 19, 2015, the
Exchange filed Amendment No. 2 to the
proposed rule change, but withdrew
that amendment on May 20, 2015.5 On
May 20, 2015, the Exchange filed
Amendment No. 3 to the proposed rule
change.6 The Commission received no
37 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 74839
(Apr. 29, 2015), 80 FR 25729 (‘‘Notice’’).
4 Amendment No. 1 to the proposed rule change
replaced and superseded the original filing in its
entirety.
5 The Exchange withdrew Amendment No. 2 to
the proposed rule change due to certain errors.
6 Amendment No. 3 to the proposed rule change
corrected typographical errors and clarified that any
futures and options on futures utilized by the Fund
will be U.S. exchange-traded futures contracts on
the S&P 500 Index and U.S. exchange-traded
options on futures contracts on the S&P 500 Index.
Amendment Nos. 1 and 3 are available at: https://
www.sec.gov/comments/sr-nysearca-2015–23/
nysearca201523.shtml.
1 15
E:\FR\FM\24JNN1.SGM
24JNN1
]]>Agencies
[Federal Register Volume 80, Number 121 (Wednesday, June 24, 2015)]
[Notices]
[Pages 36372-36380]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-15455]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-75247; File No. SR-NYSEArca-2015-42]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change, as Modified by Amendment No. 1, Relating to
the Listing and Trading of Shares of Newfleet Multi-Sector
Unconstrained Bond ETF under NYSE Arca Equities Rule 8.600
June 18, 2015.
Pursuant to section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on June 5, 2015, NYSE Arca, Inc. (the ``Exchange'' or
``NYSE Arca'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the self-regulatory
organization. On June 15, 2015, NYSE Arca filed Amendment No. 1 to the
proposed rule change.\4\ The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C.78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
\4\ Amendment No. 1 replaces and supersedes the filing in its
entirety.
---------------------------------------------------------------------------
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''): Newfleet
Multi-Sector Unconstrained 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
[[Page 36373]]
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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to list and trade shares (``Shares'') of the
following under NYSE Arca Equities Rule 8.600, which governs the
listing and trading of Managed Fund Shares: \5\ Newfleet Multi-Sector
Unconstrained Bond ETF,\6\ a series of the ETFis Series Trust I
(``Trust'').\7\
---------------------------------------------------------------------------
\5\ 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.
\6\ The Commission has approved listing and trading on the
Exchange of a number of actively managed funds under Rule 8.600.
See, e.g., Securities Exchange Act Release Nos. 69591 (May 16,
2013), 78 FR 30372 (May 22, 2013) (SR-NYSEArca-2013-33) (order
approving Exchange listing and trading of International Bear ETF);
69061 (March 7, 2013), 78 FR 15990 (March 13, 2013) (SR-NYSEArca-
2013-01) (order approving Exchange listing and trading of Newfleet
Multi-Sector Income ETF); and 67277 (June 27, 2012), 77 FR 39554
(July 3, 2012) (SR-NYSEArca-2012-39) (order approving Exchange
listing and trading of the Global Alpha & Beta ETF).
\7\ The Trust is registered under the 1940 Act. On January 26,
2015, the Trust filed with the Commission an amendment to its
registration statement on Form N-1A under the Securities Act of 1933
(15 U.S.C. 77a) (``Securities Act''), and under the 1940 Act
relating to the Fund (File Nos. 333-187668 and 811-22819)
(``Registration Statement''). The description of the operation of
the Trust and the Fund 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. 30607 (July 23, 2013) (File No.
812-14080) (``Exemptive Order'').
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The investment adviser to the Fund will be Etfis Capital LLC. (the
``Adviser''). The Fund's Sub-Adviser will be Newfleet Asset Management
LLC (``Sub-Adviser''). ETF Issuer Solutions Inc. will serve as the
Fund's operational administrator. ETF Distributors LLC will serve as
the distributor (the ``Distributor'') of Fund Shares on an agency
basis.\8\
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\8\ This Amendment No. 1 to SR-NYSEArca-201[5]-42 replaces SR-
NYSEArca-201[5]-42 as originally filed and supersedes such filing in
its entirety.
---------------------------------------------------------------------------
The Bank of New York Mellon (the ``Administrator'') will serve as
the administrator, custodian, transfer agent and fund accounting agent
for the Fund.
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 shall 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.\9\ In addition,
Commentary .06 further requires that personnel who make decisions on
the 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 Adviser and
Sub-Adviser are not registered as broker-dealers but each is affiliated
with one or more broker-dealers and has implemented and will maintain a
fire wall with respect to each such broker-dealer affiliate regarding
access to information concerning the composition and/or changes to the
portfolio. In the event (a) the Adviser or Sub-Adviser become
registered broker-dealers or 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 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.
---------------------------------------------------------------------------
\9\ 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 Adviser and Sub-Adviser 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.
---------------------------------------------------------------------------
Description of the Fund
Principal Investments
According to the Registration Statement, the Fund will, under
normal market conditions,\10\ invest at least eighty percent (80%) of
the Fund's net assets in fixed income securities, across all sectors of
the fixed income market, and in U.S. Treasury futures. The Fund may
invest across the credit rating spectrum, which includes securities
rated below investment grade by a nationally recognized statistical
rating organization (``NRSRO''). The Fund also may invest in unrated
securities. The Fund has no target duration for its investment
portfolio and the Fund's portfolio managers may target shorter or
longer durations in response to their view of the fixed income markets
generally or any sector thereof.
---------------------------------------------------------------------------
\10\ The term ``under normal market conditions'' includes, but
is not limited to, the absence of extreme volatility or trading
halts in the fixed income markets or the financial markets
generally; operational issues causing dissemination of inaccurate
market information; or force majeure type events such as systems
failure, natural or man-made disaster, act of God, armed conflict,
act of terrorism, riot or labor disruption or any similar
intervening circumstance. In the absence of normal market
conditions, the Fund may invest 100% of its total assets, without
limitation, in cash or cash equivalents. The Fund may be invested in
this manner for extended periods depending on the Sub-Adviser's
assessment of market conditions.
---------------------------------------------------------------------------
The Fund's investment objective will seek to provide a high level
of current income and, secondarily, capital appreciation. According to
the Registration Statement, the Fund will apply a time-tested approach
to credit research to capitalize on opportunities across undervalued
areas of the bond market. According to the Registration Statement,
under normal market conditions, the Sub-Adviser will seek to select
securities using a sector rotation approach and seek to adjust the
proportion of Fund investments in various sectors and sub-sectors in an
effort to obtain higher relative returns.
The Fund's investable assets will typically be allocated among
various sectors and sub-sectors of the fixed income market using a top-
down, relative value approach that looks at factors such as yield and
spreads, supply and demand, investment environment, and sector
fundamentals. The Sub-Adviser will then typically
[[Page 36374]]
select particular investments using a bottom-up, fundamental research-
driven analysis that includes assessment of credit risk, company
management, issuer capital structure, technical market conditions, and
valuations. The Sub-Adviser will select securities it believes offer
the best potential to achieve the Fund's investment objective of
providing a relatively high level of current income, and secondarily,
capital appreciation.
The Sub-Adviser will seek to provide diversification by allocating
the Fund's investments among various sectors of the fixed income
markets (as described below), including corporate investment-grade,
corporate high-yield, non-agency commercial mortgage-backed securities
(``CMBS''), agency and non-agency residential mortgage-backed
securities (``RMBS''), non-U.S. dollar securities, emerging market
high-yield securities, and asset-backed securities (``ABS'').
The Fund may invest in the following fixed income securities:
Securities issued or guaranteed as to principal and
interest by the U.S. Government, its agencies, authorities or
instrumentalities, including, without limitation, collateralized
mortgage obligations (``CMOs''), real estate mortgage investment
conduits (``REMICs'') and other pass-through securities;
Non-agency \11\ CMBS, agency and non-agency RMBS, and
other ABS, including equipment trust certificates; \12\
---------------------------------------------------------------------------
\11\ ``Non-agency'' securities are financial instruments that
have been issued by an entity that is not a government-sponsored
agency, such as the Federal National Mortgage Association, Federal
Home Loan Mortgage Corporation, Federal Home Loan Banks, or the
Government National Mortgage Association.
\12\ The Fund may invest up to 20% of its net assets in the
aggregate in non-agency CMBS, RMBS and ABS. The liquidity of any
such security will be a factor in the selection of any such
security.
---------------------------------------------------------------------------
Yankee bonds; \13\
---------------------------------------------------------------------------
\13\ Yankee bonds are denominated in U.S. dollars, registered in
accordance with the Securities Act and publicly issued in the U.S.
by foreign banks and corporations.
---------------------------------------------------------------------------
Loan assignments, including senior and junior bank loans
(generally with floating rates); \14\
---------------------------------------------------------------------------
\14\ The Fund may invest in loan assignments, including senior
and junior bank loans, rated C or higher by an NRSRO or is unrated
but considered to be of comparable quality by the Adviser or Sub-
Adviser. The Fund will not invest in loan assignments that are in
default at time of purchase. The Fund will only invest in U.S.
dollar-denominated loan assignments. In addition, for investment
purposes, a bank loan must have a par amount outstanding of U.S.
$150 million or greater at the time it is originally issued. The
Fund may invest up to 20% of its net assets in junior bank loans.
---------------------------------------------------------------------------
Corporate bonds; and
Taxable municipal bonds and tax-exempt municipal bonds.
The Fund represents that the portfolio generally will include a
minimum of 13 non-affiliated issuers of debt securities. The Fund will
only purchase performing securities and not distressed debt.\15\
---------------------------------------------------------------------------
\15\ Distressed debt is debt that is currently in default and is
not expected to pay the current coupon.
---------------------------------------------------------------------------
The Fund may invest in securities of U.S. or non-U.S. issuers of
any maturity or credit quality rating. The Fund generally will consider
a security to be ``investment grade'' if it is rated within the four
highest rating categories of a NRSRO or, if unrated, it is determined
to be of comparable quality by the Sub-Adviser (pursuant to procedures
reviewed and approved by the Trust's Board of Trustees (``Board'')).
Securities that are not determined to be investment grade are
considered below investment grade. There is no limitation to the Fund's
holdings in below investment grade securities or non-U.S. issuers (as
measured by country of risk).
The fixed income securities referenced above may be issued by
foreign issuers, including foreign governments and their political
subdivisions and issuers located in emerging markets countries.\16\
---------------------------------------------------------------------------
\16\ The Adviser expects that under normal market conditions,
the Fund will seek to invest at least 75% of its corporate bond
assets in issuances that have at least $100,000,000 par amount
outstanding in developed countries and at least $200,000,000 par
amount outstanding in emerging market countries.
---------------------------------------------------------------------------
The fixed income securities referenced above may be short-term
securities of U.S. and non-U.S. issuers.
The Fund has no target duration for its investment portfolio and
the Fund's portfolio managers may target shorter or longer durations in
response to their view of the fixed income markets generally or any
sector thereof. Duration measures the interest rate sensitivity of a
fixed income security by assessing and weighting the present value of
the security's payment pattern. Generally, the longer the maturity, the
greater the duration and, therefore, the greater effect interest rate
changes have on the price of the security.
The Sub-Adviser will seek to adjust (i) the proportion of Fund
investments primarily in the sectors described above, and (ii) the
selections within sectors to obtain higher relative returns. The Sub-
Adviser will regularly review the Fund's portfolio construction,
endeavoring to minimize risk exposure by closely monitoring portfolio
characteristics such as sector concentration and portfolio duration and
by investing no more than 5% of the Fund's total assets in securities
of any single issuer (excluding the U.S. government, its agencies,
authorities or instrumentalities).
The Fund may invest in U.S. Treasury futures contracts traded on
U.S. futures exchanges in an attempt to protect the Fund's current or
intended investments from broad fluctuations in securities prices.\17\
---------------------------------------------------------------------------
\17\ In instances involving the purchase of futures contracts,
the Fund will deposit in a segregated account with its custodian an
amount of cash, cash equivalents and/or appropriate securities equal
to the cost of such futures contracts, to the extent that such
deposits are required under the 1940 Act.
---------------------------------------------------------------------------
Other Investments
While the Fund, under normal market conditions, will invest at
least eighty percent (80%) of its assets in fixed income securities and
financial instruments, as described above, the Fund may invest its
remaining assets in other assets and financial instruments, as
described below.
The Fund may hold the following exchange-traded equity securities:
common stocks, preferred stocks, warrants, convertible securities, unit
investment trusts, master limited partnerships, real estate investment
trusts (``REITs''), exchange-traded funds (``ETFs'') \18\ and exchange-
traded notes (``ETNs'').\19\
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\18\ The ETFs in which the Fund may invest will be registered
under the 1940 Act and include 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). Such ETFs all will be listed and traded in the U.S. on
registered exchanges. The Fund may invest in inverse ETFs, leveraged
ETFs and inverse leveraged ETFs (e.g., 2X or 3X).
\19\ ETNs, also called index-linked securities as would be
listed, for example, under NYSE Arca Equities Rule 5.2(j)(6), are
senior, unsecured, unsubordinated debt securities issued by an
underwriting bank that are designed to provide returns that are
linked to a particular benchmark less investor fees. The Fund will
not invest in leveraged ETNs and inverse leveraged ETNs (e.g., 2X or
3X).
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The Fund will purchase such equity securities traded in the U.S. on
registered exchanges.
To gain exposure to the performance of foreign issuers, the Fund
may invest in the following types of equity securities: American
Depositary Receipts (``ADRs''), ``ordinary shares,'' and ``New York
shares'' (each of which is issued and traded in the U.S.); and Global
Depositary Receipts (``GDRs''), European Depositary Receipts
(``EDRs''), and International Depositary Receipts (``IDRs''), which are
traded on foreign exchanges (all of the foregoing financial instruments
collectively referred to as ``Equity Financial Instruments'').\20\
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\20\ ADRs are U.S. dollar denominated receipts typically issued
by U.S. banks and trust companies that evidence ownership of
underlying securities issued by a foreign issuer. The underlying
securities may not necessarily be denominated in the same currency
as the securities into which they may be converted. The underlying
securities are held in trust by a custodian bank or similar
financial institution in the issuer's home country. The depositary
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. The Fund
may invest in sponsored or unsponsored ADRs; however, non-exchange
listed ADRs will not exceed 10% of the Fund's net assets. Ordinary
shares are shares of foreign issuers that are traded abroad and on a
U.S. exchange. New York shares are shares that a foreign issuer has
allocated for trading in the U.S. ADRs, ordinary shares, and New
York shares all may be purchased with and sold for U.S. dollars,
which protects the Fund from foreign settlement risks. GDRs, EDRs,
and IDRs are similar to ADRs in that they are certificates
evidencing ownership of shares of a foreign issuer; however, GDRs,
EDRs, and IDRs may be issued in bearer form and denominated in other
currencies, and are generally designed for use in specific or
multiple securities markets outside the U.S. EDRs, for example, are
designed for use in European securities markets while GDRs are
designed for use throughout the world.
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[[Page 36375]]
With respect to its exchange-traded equity securities investments,
the Fund will normally invest in equity securities that are listed and
traded on a U.S. exchange or in markets that are members of the
Intermarket Surveillance Group (``ISG'') or parties to a comprehensive
surveillance sharing agreement with the Exchange. In any case, not more
than 10% of the net assets of the Fund in the aggregate invested in
exchange-traded equity securities will consist of equity securities
whose principal market is not a member of ISG or a market with which
the Exchange does not have a comprehensive surveillance sharing
agreement.
The Fund may invest in, to the extent permitted by section 12(d)(1)
of the 1940 Act and the rules thereunder,\21\ other affiliated and
unaffiliated funds, such as open-end or closed-end management
investment companies (``closed-end funds''), including other ETFs.
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\21\ 15 U.S.C. 80a-12(d)(1).
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The Fund also may invest in the securities of other investment
companies in compliance with section 12(d)(1)(E), (F) and (G) of the
1940 Act and the rules thereunder.\22\
---------------------------------------------------------------------------
\22\ 15 U.S.C. 80a-12(d)(1)(E),(F) and (G).
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The Fund may invest in the exchange traded securities of pooled
vehicles that are not investment companies and, thus, not required to
comply with the provisions of the 1940 Act. Such pooled vehicles would
be required to comply with the provisions of other federal securities
laws, such as the Securities Act. These pooled vehicles typically hold
commodities, such as gold or oil, currency, or other property that is
itself not a security.\23\
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\23\ Exchange-traded pooled investment vehicles 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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Investment Restrictions
The 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 fixed income securities and bank loans, that are
deemed illiquid by the Adviser, consistent with Commission
guidance.\24\ Thus, only those Rule 144A securities and bank loans,
that are deemed illiquid by the Adviser would be included in the
limitation of 15% of net assets in illiquid assets.\25\
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\24\ 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).
\25\ Rule 144A securities and loan assignments, including bank
loans, are subject to the Fund's 15% limitation on holdings in
illiquid assets only if deemed illiquid by the Adviser. In reaching
liquidity decisions relating to Rule 144A securities and loan
assignments, the Adviser may consider the following factors: the
frequency of trades and quotes for the security; the number of
dealers wishing to purchase or sell the security and the number of
other potential purchasers; dealer undertakings to make a market in
the security; and the nature of the security and the nature of the
marketplace trades (e.g., the time needed to dispose of the
security, the method of soliciting offers, and the mechanics of
transfer.) The Adviser represents that the Adviser and the Board
will continue to evaluate each 144A security and loan assignment
based on the Fund's valuation procedures to oversee liquidity and
valuation concerns.
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The Adviser has represented that it will invest generally in loan
assignments, including bank loans, that it deems highly liquid, with
readily available prices.
The Fund will not invest in options contracts or swap agreements.
The Fund will seek to qualify for treatment as a regulated
investment company under the Internal Revenue Code of 1986.\26\
---------------------------------------------------------------------------
\26\ 26 U.S.C. 851.
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The Fund's investments will be consistent with its investment
objective and will not be used to provide multiple returns of a
benchmark or to produce leveraged returns.
Creation and Redemption of Shares
The Trust will issue and sell Shares of the Fund only in ``Creation
Units'' on a continuous basis through the Distributor, at their NAV
next determined after receipt, on any business day, for an order
received in proper form. All orders to create Creation Units must be
placed for one or more Creation Unit size aggregations of Shares
(50,000 Shares per Creation Unit). The Creation Unit size is subject to
change.
The consideration for purchase of a Creation Unit of the Fund
generally will consist of an in-kind deposit of ``Deposit Securities''
for each Creation Unit constituting a substantial replication, or a
representation, of the securities included in the Fund's portfolio and
a ``Cash Component'' computed as described below. Together, the Deposit
Securities and the Cash Component constitute the ``Fund Deposit'',
which represents the minimum initial and subsequent investment amount
for a Creation Unit of the Fund. The Cash Component is an amount equal
to the difference between the NAV of the Shares (per Creation Unit) and
the market value of the Deposit Securities. If the Cash Component is a
positive number (i.e., the NAV per Creation Unit exceeds the market
value of the Deposit Securities), the Cash Component will be such
positive amount. If the Cash Component is a negative number (i.e., the
NAV per Creation Unit is less than the market value of the Deposit
Securities), the Cash Component will be such negative amount, and the
creator will be entitled to receive cash from the Fund in an amount
equal to the Cash Component. The Cash Component serves the function of
compensating for any differences between the NAV per Creation Unit and
the market value of the Deposit Securities.
The Administrator, through the National Securities Clearing
Corporation (``NSCC''), will make available on each business day,
immediately prior to the opening of business on the Exchange (currently
9:30 a.m., Eastern Time), the list of the names and the required number
of Shares of each Deposit Security to be included in the current Fund
Deposit (based on information at the end of the previous business day)
for the Fund. Such Fund Deposit will be applicable, subject to any
adjustments as described below, in order to effect creations of
Creation Units of the Fund
[[Page 36376]]
until such time as the next-announced composition of the Deposit
Securities is made available.
The identity and number of Shares of the Deposit Securities
required for the Fund Deposit for the Fund will change as rebalancing
adjustments and corporate action events are reflected from time to time
by the Sub-Adviser with a view to the investment objective of the Fund.
In addition, the Trust reserves the right to permit or require the
substitution of an amount of cash--i.e., a ``cash in lieu'' amount--to
be added to the Cash Component to replace any Deposit Security that may
not be available in sufficient quantity for delivery, that may not be
eligible for transfer or that may not be eligible for trading by an
``Authorized Participant'' (as described below) or the investor for
which it is acting.
In addition to the list of names and numbers of securities
constituting the current Deposit Securities of the Fund Deposit, the
Administrator, through NSCC, also will make available on each business
day the estimated Cash Component, effective through and including the
previous business day, per outstanding Creation Unit of the Fund.
Procedures for Creation of Creation Units
To be eligible to place orders to create a Creation Unit of the
Fund, an entity must be (i) a ``Participating Party'', i.e., a broker-
dealer or other participant in the clearing process through the
Continuous Net Settlement System of NSCC (the ``Clearing Process'') or
a clearing agency that is registered with the Commission, or (ii) a
Depositary Trust Company (``DTC'') Participant (see ``Book Entry Only
System'') and, in each case, must have executed an agreement with the
Trust, the Distributor and the Administrator with respect to creations
and redemptions of Creation Units (``Participant Agreement''). A
Participating Party and DTC Participant are collectively referred to as
an ``Authorized Participant''.
All orders to create Creation Units must be received by the
Distributor no later than the close of the regular trading session on
the Exchange (ordinarily 4:00 p.m. Eastern Time) (``Closing Time''), in
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 Fund as
next determined on such date after receipt of the order in proper form.
Redemption of Creation Units
Shares may be redeemed only in Creation Units at their NAV next
determined after receipt of a redemption request in proper form by the
Distributor and the Fund through the Administrator and only on a
business day.
With respect to the Fund, the Administrator, through NSCC, will
make available immediately prior to the opening of business on the
Exchange (currently 9:30 a.m., Eastern Time) on each business day, the
Deposit Securities that will be applicable (subject to possible
amendment or correction) to redemption requests received in proper form
on that day. Deposit Securities received on redemption may not be
identical to Deposit Securities which are applicable to creations of
Creation Units.
Unless cash redemptions are available or specified for the Fund,
the redemption proceeds for a Creation Unit generally consist of
Deposit Securities, as announced by the Administrator 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 a request in proper
form, and the value of the Deposit Securities (the ``Cash Redemption
Amount''), less a redemption transaction fee. In the event that the
Deposit Securities have a value greater than the NAV of the Shares, a
compensating cash payment equal to the differential is required to be
made by or through an Authorized Participant by the redeeming
shareholder.
If it is not possible to effect deliveries of the Deposit
Securities, the Trust may in its discretion exercise its option to
redeem such shares in cash, and the redeeming Beneficial Owner will be
required to receive its redemption proceeds in cash. In addition, an
investor may request a redemption in cash which the Fund may, in its
sole discretion, permit.\27\ In either case, the investor will receive
a cash payment equal to the NAV of its Shares based on the NAV of
Shares of the Fund next determined after the redemption request is
received in proper form (minus a redemption transaction fee and
additional charge for requested cash redemptions specified above, to
offset the Trust's brokerage and other transaction costs associated
with the disposition of Deposit Securities). The Fund may also, in its
sole discretion, upon request of a shareholder, provide such redeemer a
portfolio of securities which differs from the exact composition of the
Deposit Securities but does not differ in NAV.
---------------------------------------------------------------------------
\27\ The Adviser represents that, to the extent the Trust
effects the redemption of Shares in cash, such transactions will be
effected in the same manner for all Authorized Participants.
---------------------------------------------------------------------------
The right of redemption may be suspended or the date of payment
postponed with respect to the Fund (1) for any period during which the
Exchange is closed (other than customary weekend and holiday closings);
(2) for any period during which trading on the Exchange is suspended or
restricted; (3) for any period during which an emergency exists as a
result of which disposal of the Shares of the Fund or determination of
the Shares' NAV is not reasonably practicable; or (4) in such other
circumstance as is permitted by the Commission.
Net Asset Value
The NAV of the Shares for the Fund will be equal to the Fund's
total assets minus the Fund's total liabilities divided by the total
number of Shares outstanding. Interest and investment income on the
Trust's assets will accrue daily and will be included in the Fund's
total assets. Expenses and fees (including investment advisory,
management, administration and distribution fees, if any) will accrue
daily and will be included in the Fund's total liabilities.
The pricing and valuation of portfolio securities will be
determined in good faith in accordance with procedures approved by, and
under the direction of, the Board. In determining the value of the
Fund's assets, portfolio securities will generally be valued at market
using quotations from the primary market in which they are traded. The
Fund normally will use third party pricing services to obtain market
quotations.
Securities and assets for which market quotations are not readily
available or which cannot be accurately valued using the Fund's normal
pricing procedures will be valued by the Trust's Fair Value Pricing
Committee at fair value as determined in good faith under policies
approved by the Trust's Board. Fair value pricing may be used, for
example, in situations where (i) portfolio securities, such as
securities with small capitalizations, are so thinly traded that there
have been no transactions for that security over an extended period of
time; (ii) an event occurs after the close of the exchange on which a
portfolio security is principally traded that is likely to change the
value of the portfolio security prior to the Fund's NAV calculation;
(iii) the exchange on which the portfolio security is principally
traded closes early; or (iv) trading of the particular portfolio
security is halted during the day and does not resume prior to the
[[Page 36377]]
Fund's NAV calculation. Pursuant to policies adopted by the Board, the
Adviser will consult with BNY Mellon and the Sub-Adviser on a regular
basis regarding the need for fair value pricing. The Fund's policies
regarding fair value pricing are intended to result in a calculation of
the Fund's NAV that fairly reflects portfolio security values as of the
time of pricing. A portfolio security's ``fair value'' price may differ
from the price next available for that portfolio security using the
Fund's normal pricing procedures, and the fair value price may differ
substantially from the price at which the security may ultimately be
traded or sold. The Board will monitor and evaluate the Fund's use of
fair value pricing, and periodically reviews the results of any fair
valuation under the Trust's policies.
The NAV will be determined as of the close of regular trading on
the Exchange, normally 4:00 p.m. Eastern time, on each day that the
Exchange is open for business.
In computing the Fund's NAV, the Fund's securities holdings will be
valued based on their last readily available market price.
Exchange-traded equity 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. If market prices are unavailable or
the Fund believes that they are unreliable, or when the value of a
security has been materially affected by events occurring after the
relevant market closes, the Fund will price those securities at fair
value as determined in good faith using methods approved by the Trust's
Board.
Unsponsored ADRs, which are traded OTC, will be valued on the basis
of the market closing price on the exchange where the stock of the
foreign issuer that underlies the ADR is listed. Investment company
securities (other than ETFs), including mutual funds and closed end
funds will be valued at net asset value.
Currency spot rates will be taken from major market data vendors
and will generally be determined as of the close of trading of the New
York Stock Exchange. Futures contracts will generally be valued at the
settlement price of the relevant exchange. In computing the Fund's net
asset value per Share, Rule 144A fixed income securities will be valued
based on price quotations and other equivalent indications of value
provided by a third party pricing service.
Corporate debt securities, bank loans, non-agency CMBS, agency and
non-agency RMBS, non-U.S. dollar securities, emerging market high-yield
securities, investment-grade bonds, ABS, municipal bonds, CMOs, REMICs,
junk bonds, equipment trust certificates, and money market instruments
generally trade in the OTC market rather than on a securities exchange.
The Fund will generally value these portfolio securities by relying on
independent pricing services. The Fund's pricing services will use
valuation models or matrix pricing to determine current value. In
general, pricing services use information with respect to comparable
bond and note transactions, quotations from bond dealers or by
reference to other securities that are considered comparable in such
characteristics as rating, interest rate, maturity date, option
adjusted spread models, prepayment projections, interest rate spreads
and yield curves.
Foreign exchange rates will be priced using 4:00 p.m. Eastern Time
mean prices from major market data vendors.
Availability of Information
The Fund's Web site (www.newfleet.com), which will be publicly
available prior to the public offering of Shares, will include a form
of the prospectus for the Fund that may be downloaded. The Fund's Web
site will include additional quantitative information updated on a
daily basis, including, for the Fund, (1) daily trading volume, 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 (the ``Bid/Ask
Price''),\28\ 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. On each business day, before commencement
of trading in Shares in the Core Trading Session on the Exchange, the
Fund's Web site will disclose the Disclosed Portfolio that will form
the basis for the Fund's calculation of NAV at the end of the business
day.\29\
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\28\ The Bid/Ask Price of the 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 the Fund and
its service providers.
\29\ Under accounting procedures 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 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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The Fund will disclose on the Fund's Web site the following
information regarding each portfolio holding, as applicable to the type
of holding: Ticker symbol, CUSIP number or other identifier, if any; a
description of the holding (including the type of holding); the
identity of the security, commodity, index or other asset or instrument
underlying the holding, if any; quantity held (as measured by, for
example, par value, notional value or number of shares, contracts or
units); maturity date, if any; coupon rate, if any; effective date, if
any; market value of the holding; and the percentage weighting of the
holding in the Fund's portfolio. The Web site information will be
publicly available at no charge.
In addition, a basket composition file, which includes the security
names and share quantities, if applicable, required to be delivered in
exchange for the Fund's Shares, together with estimates and actual cash
components, will be publicly disseminated daily prior to the opening of
the Exchange via the NSCC. The basket represents one Creation Unit of
the Fund. The NAV of Shares of the Fund will normally be determined as
of the close of the regular trading session on the Exchange (ordinarily
4:00 p.m. Eastern Time) on each business day. Authorized participants
may refer to the basket composition file for information regarding
securities and financial instruments that may comprise the Fund's
basket on a given day.
The approximate value of the Fund's investments on a per-Share
basis, the Indicative Intra-Day Value (``IIV''), will be disseminated
every 15 seconds during the Exchange Core Trading Session. The IIV
should not be viewed as a ``real-time'' update of NAV because the IIV
will be calculated by an independent third party and may not be
calculated in the exact same manner as NAV, which will be computed
daily.
The IIV for the Fund will be calculated during hours of trading on
the Exchange by dividing the ``Estimated Fund Value'' as of the time of
the calculation by the total number of outstanding Shares. ``Estimated
Fund Value'' is the sum of the estimated amount of cash held in the
Fund's portfolio, the estimated amount of accrued interest owing to the
Fund and the estimated value of the securities held in the Fund's
portfolio, minus the estimated amount of the Fund's liabilities. The
IIV will be calculated based on the same portfolio holdings disclosed
on the Fund's Web site. In determining the estimated value for
[[Page 36378]]
each of the component securities, the IIV will use last sale, market
prices or other methods that would be considered appropriate for
pricing equity securities held by registered investment companies.
Investors can also obtain the Trust's Statement of Additional
Information (``SAI''), the Fund's shareholder reports, and its Form N-
CSR and Form N-SAR, filed twice a year. The Trust's SAI and Shareholder
Reports will be 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 the
underlying U.S. exchange-traded equity securities will be available via
the Consolidated Tape Association (``CTA'') high-speed line, and from
the national securities exchange on which they are listed. Price
information regarding exchange-traded equity securities and futures
contracts held by the Fund will be available from the exchanges trading
such assets.
Quotation information from brokers and dealers or pricing services
will be available for unsponsored ADRs; fixed income securities; bank
loans; U.S. Treasury securities; other obligations issued or guaranteed
by U.S. government agencies and instrumentalities; bank obligations;
short-term securities; money market instruments; ABS; MBS; CMBS; RMBS;
CMOs; shares of mutual funds; corporate debt securities; and
convertible securities. Price information for investment company
securities (other than ETFs and exchange-traded closed end funds) will
be available from the investment company's Web site and from market
data vendors. Pricing information regarding each asset class in which
the Fund will invest will generally be available through nationally
recognized data service providers through subscription agreements.
Foreign exchange prices are available from major market data vendors.
Intra-day and closing price information for Rule 144A fixed income
securities and loan assignments will be available from major market
data vendors.
In addition, the IIV, (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.\30\ The dissemination of the
IIV, together with the Disclosed Portfolio, will allow investors to
determine the value of the underlying portfolio of the Fund on a daily
basis and will provide a close estimate of that value throughout the
trading day.
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\30\ Currently, it is the Exchange's understanding that several
major market data vendors display and/or make widely available IIVs
taken from CTA or other data feeds.
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Additional information regarding the Trust and the Shares,
including investment strategies, risks, creation and redemption
procedures, fees, portfolio holdings disclosure policies, distributions
and taxes is included in the Registration Statement.
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 the Fund.\31\ Trading in Shares of the Fund
will be halted if the circuit breaker parameters in NYSE Arca Equities
Rule 7.12 have been reached. Trading also may be halted because of
market conditions or for reasons that, in the view of the Exchange,
make trading in the Shares inadvisable. 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 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 the Fund may be
halted.
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\31\ See NYSE Arca Equities Rule 7.12, Commentary .04.
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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 a.m. to 8 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. Consistent with NYSE Arca
Equities Rule 8.600(d)(2)(B)(ii), the Adviser will 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 Fund's portfolio. The Exchange represents that, for
initial and/or continued listing, the Fund will be in compliance with
Rule 10A-3 \32\ under the Act, as provided by NYSE Arca Equities Rule
5.3. A minimum of 100,000 Shares 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
will be calculated daily and that the NAV and the Disclosed Portfolio
\33\ as defined in NYSE Arca Equities Rule 8.600(c)(2) will be made
available to all market participants at the same time. The Fund's
investments will be consistent with the Fund's investment objective and
will not be used to enhance leverage.
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\32\ 17 CFR 240.10A-3.
\33\ The term ``Disclosed Portfolio'' is defined in NYSE Arca
Equities Rule 8.600(c)(2).
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Additional information regarding the Trust, Fund, and Shares,
including investment strategies, risks, creation and redemption
procedures, fees, portfolio holdings, disclosure policies,
distributions and taxes, availability of information, trading rules and
halts, and surveillance procedures, among other things, can be found in
the Registration Statement.
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. 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
[[Page 36379]]
securities laws applicable to trading on the Exchange.\34\
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\34\ 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.\35\
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\35\ For a list of the current members of ISG, see
www.isgportal.org. The Exchange notes that not all components of the
Disclosed Portfolio 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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FINRA, on behalf of the Exchange, will communicate as needed
regarding trading in the Shares, exchange-traded equity securities and
futures contracts 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, exchange-traded
equity securities and futures contracts from such markets and other
entities. In addition, the Exchange may obtain information regarding
trading in the Shares, exchange-traded equity securities and futures
contracts 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 Fund reported to FINRA's Trade Reporting and
Compliance Engine (``TRACE'').
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 IIV will not be calculated or publicly
disseminated; (4) how information regarding the IIV and the Disclosed
Portfolio 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 Fund is 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) \36\ 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.
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\36\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposed rule change is designed to
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
applicable federal securities laws. FINRA, on behalf of the Exchange,
will communicate as needed regarding trading in the Shares, exchange-
traded equity securities and futures contracts 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, exchange-traded equity securities and futures contracts from
such markets and other entities. In addition, the Exchange may obtain
information regarding trading in the Shares, exchange-traded equity
securities and futures contracts 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 Fund reported to TRACE.
The Fund may invest up to 20% of its net assets in the aggregate in
non-agency CMBS, RMBS and ABS. The Fund may invest up to 20% of its
assets in junior bank loans. The Fund may not purchase or hold illiquid
assets if, in the aggregate, more than 15% of its net assets would be
invested in illiquid assets. The Adviser and Sub-Adviser are not
registered as broker-dealers but are affiliated with two broker-dealers
and have implemented and will maintain a fire wall with respect to each
such broker-dealer affiliate regarding access to information concerning
the composition and/or changes to the portfolio.
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 Fund and the Shares,
thereby promoting market transparency. Quotation and last sale
information for the Shares and the underlying U.S. exchange-traded
equity securities will be available via the CTA high-speed line, and
from the national securities exchange on which they are listed. The
Fund will disclose on the Fund's Web site the following information
regarding each portfolio holding, as applicable to the type of holding:
ticker symbol, CUSIP number or other identifier, if any; a description
of the holding (including the type of holding); the identity of the
security, commodity, index or other asset or instrument underlying the
holding, if any; quantity held (as measured by, for example, par value,
notional value or number of shares, contracts or units); maturity date,
if any; coupon rate, if any; effective date, if any; market value of
the holding; and the percentage weighting of the holding in the Fund's
portfolio. Moreover, prior to the commencement of trading, the Exchange
will inform its Equity Trading Permit Holders in an Information
Bulletin of the special characteristics and risks associated with
trading the Shares. Trading in Shares of the Fund will be halted if the
circuit breaker parameters in NYSE Arca Equities Rule 7.12 have been
reached or because of market
[[Page 36380]]
conditions or for reasons that, in the view of the Exchange, make
trading in the Shares inadvisable. 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 the Fund may be halted. In
addition, as noted above, investors will have ready access to
information regarding the Fund's holdings, the IIV, 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
an additional type 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 the Fund's holdings,
the IIV, 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 an
additional type of actively-managed exchange-traded product that will
enhance competition among market participants, to the benefit of
investors and the marketplace.
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 such longer period up to 90 days after publication
(i) as the Commission may designate 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-2015-42 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2015-42. 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 Section, 100 F Street,
NE., Washington, DC 20549 on official business days between 10:00 a.m.
and 3:00 p.m. Copies of the filing will also be available for
inspection and copying at the NYSE's principal office and on its
Internet Web site at www.nyse.com. All comments received will be posted
without change; the Commission does not edit personal identifying
information from submissions. You should submit only information that
you wish to make available publicly. All submissions should refer to
File Number SR-NYSEArca-2015-42 and should be submitted on or before
July 15, 2015.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\37\
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\37\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-15455 Filed 6-23-15; 8:45 am]
BILLING CODE 8011-01-P
