Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a Proposed Rule Change Regarding a Change to the Underlying Index of the Market Vectors Short High Yield Municipal Index ETF, 79392-79394 [2015-31932]
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79392
Federal Register / Vol. 80, No. 244 / Monday, December 21, 2015 / Notices
activities by completing a training
program.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
NFA did not publish the rule change
to the membership for comment. NFA
did not receive comment letters
concerning the rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The proposed rule change is not
effective because the CFTC has not yet
determined that review of the proposed
rule change is not necessary.
At any time within 60 days of the date
of effectiveness of the proposed rule
change, the Commission, after
consultation with the CFTC, may
summarily temporarily suspend the
proposed rule change and require that
the proposed rule change be refiled in
accordance with the provisions of
Section 19(b)(1) of the Exchange Act.
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:
mstockstill on DSK4VPTVN1PROD with NOTICES
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–
NFA–2015–01 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NFA–2015–01. 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
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those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
filing also will be available for
inspection and copying at the principal
office of NFA. 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–NFA–
2015–01, and should be submitted on or
before January 11, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.6
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015–31931 Filed 12–18–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–76645; File No. SR–
NYSEArca–2015–74]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Order Approving a
Proposed Rule Change Regarding a
Change to the Underlying Index of the
Market Vectors Short High Yield
Municipal Index ETF
December 15, 2015.
I. Introduction
On August 26, 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 (‘‘Exchange Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to reflect a change to the
reference index relating to the Market
Vectors Short High Yield Municipal
Index ETF (‘‘Fund’’). The Commission
published notice of the proposed rule
change in the Federal Register on
September 16, 2015.3 On October 16,
2015, the Commission designated a
longer period within which to approve
the proposed rule change, disapprove
the proposed rule change, or institute
6 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. 75888
(September 10, 2015), 80 FR 55701 (‘‘Notice’’).
1 15
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Fmt 4703
Sfmt 4703
proceedings to determine whether to
disapprove the proposed rule change.4
The Commission received no comments
on the proposal. This order approves the
proposed rule change.
II. The Exchange’s Description of the
Proposal
The Commission approved listing and
trading on the Exchange of shares
(‘‘Shares’’) of the Fund under NYSE
Arca Equities Rule 5.2(j)(3), which
governs the listing and trading of
Investment Company Units (‘‘Units’’).5
Currently, the Shares are listed and
traded on the Exchange. The Exchange
submitted this proposed rule change
because the underlying index will be
changed and the index as modified
would continue not to meet the
‘‘generic’’ listing requirement of
Commentary .02(a)(2) to NYSE Arca
Equities Rule 5.2(j)(3) in that, as of June
30, 2015, only 30.10% of the weight of
the Revised Index components had a
minimum original principal amount
outstanding of $100 million or more.6
The investment objective of the Fund
is to seek to replicate as closely as
possible, before fees and expenses, the
price and yield performance of the
Barclays Municipal High Yield Short
Duration Index (‘‘Short High Yield
Index’’ or ‘‘Index’’). The Fund is a series
of the Market Vectors ETF Trust. Van
Eck Associates Corporation is the
investment adviser and the
4 See Securities Exchange Act Release No. 76174,
80 FR 64027 (October 22, 2015). The Commission
determined that it was appropriate to designate a
longer period within which to take action on the
proposed rule change so that it has sufficient time
to consider the proposed rule change. Accordingly,
the Commission designated December 15, 2015 as
the date by which it should approve, disapprove,
or institute proceedings to determine whether to
disapprove the proposed rule change.
5 See Securities Exchange Act Release No. 71232
(January 3, 2014), 79 FR 1662 (January 9, 2014 (SR–
NYSEArca–2013–118) (order approving listing and
trading of shares of the Market Vectors Short High
Yield Municipal Index ETF) (‘‘Order’’). See also
Securities Exchange Act Release No. 70871
(November 14, 2013), 78 FR 69503 (November 19,
2013) (SR–NYSEArca–2013–118) (notice of
proposed rule change relating to listing and trading
of shares of the Market Vectors Short High Yield
Municipal Index ETF and, together with the Order,
the ‘‘Release’’). The Exchange submitted that
proposed rule change to permit listing and trading
of the Shares because the index underlying the
Fund did not meet all of the ‘‘generic’’ listing
requirements of Commentary .02(a) to NYSE Arca
Equities Rule 5.2(j)(3) that are applicable to the
listing of Units based on fixed income securities
indexes. More specifically, the Index met all of the
criteria except for those set forth in Commentary
.02(a)(2), which requires that components that in
the aggregate account for at least 75% of the weight
of the index or portfolio each shall have a minimum
original principal amount outstanding of $100
million or more.
6 The Exchange states that the other generic
listing criteria are satisfied. See Notice, supra note
3, 80 FR at 55703.
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Federal Register / Vol. 80, No. 244 / Monday, December 21, 2015 / Notices
administrator for the Fund. Van Eck
Securities Corporation is the Fund’s
distributor. The Bank of New York
Mellon is the custodian of the Fund’s
assets and provides transfer agency and
fund accounting services to the Fund.
mstockstill on DSK4VPTVN1PROD with NOTICES
A. The Current Index
The Index is a market-size-weighted
index composed of publicly traded
municipal bonds that cover the U.S.
dollar-denominated high-yield shortterm tax-exempt bond market. A
majority of the Index’s constituents are
from the revenue sector, with some
constituents being from the general
obligation sector. The revenue sector is
divided into industry sectors that
consist of, but may not be limited to,
electric, health care, transportation,
education, water and sewer, resource
recovery, leasing, and special tax. The
Index is calculated using a market-value
weighting methodology, provided that
the allocation to issuers from the
territories of the United States,
including: Puerto Rico, Guam, the U.S.
Virgin Islands, American Samoa and the
Northern Mariana Islands, each
individually does not exceed 8%.
B. The Revised Index
The Index Provider plans to revise the
Index methodology as follows. The
revised Short High Yield Index
(‘‘Revised Index’’) will have a targeted
40% weight in the Muni High Yield/
$100 Million Deal Size Index (reduced
from a 50% weight). In addition, the
Revised Index will have a 10% weight
in the Muni A-Rated Index, which
comprises investment grade
components, as described below. The
Revised Index will continue to have a
25% weight in the Muni High Yield/
Under $100 Million Deal Size Index and
a 25% weight in the Muni Baa-Rated/
$100 Million Deal Size Index, as
described in the Release.
The Revised Index will comprise four
total-return, market-size-weighted
benchmark indexes with target weights
as follows:
• 40% weight in Muni High Yield/
$100 Million Deal Size Index. To be
included in the Muni High Yield/$100
Million Deal Size Index, bonds must be
unrated or rated Ba1/BB+ or lower by at
least two of the following rating
agencies, if all three rate the bond:
Moody’s Investors Service, Inc.
(‘‘Moody’s’’), Standard & Poor’s, Inc.
(‘‘S&P’’), and Fitch, Inc. (‘‘Fitch’’). If
only two of the three agencies rate the
security, the lower rating is used to
determine index eligibility. If only one
of the three agencies rates a security, the
rating must be Ba1/BB+ or lower. Bonds
in the Muni High Yield/$100 Million
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79393
Deal Size Index must have an
outstanding par value of at least $3
million and be issued as part of a
transaction of at least $100 million.7
• 25% weight in Muni High Yield/
Under $100 Million Deal Size Index. To
be included in the Muni High Yield/
Under $100 Million Deal Size Index,
bonds must be unrated or rated Ba1/BB+
or lower by at least two of the following
rating agencies, if all three rate the
bond: Moody’s, S&P, and Fitch. If only
two of the three agencies rate the
security, the lower rating is used to
determine index eligibility. If only one
of the three agencies rates a security, the
rating must be Ba1/BB+ or lower. Bonds
in the Muni High Yield/Under $100
Million Deal Size Index must have an
outstanding par value of at least $3
million and be issued as part of a
transaction of under $100 million but
over $20 million.8
• 25% weight in Muni Baa-Rated/
$100 Million Deal Size Index. To be
included in the Muni Baa-Rated/$100
Million Deal Size Index, bonds must
have a Barclays credit-quality
classification between Baa1/BBB+ and
Baa3/BBB¥. Barclays credit-quality
classification is based on the three
rating agencies, Moody’s, S&P, and
Fitch. If two of the three agencies rate
the bond equivalently, then that rating
is used. If all three rate the bond
differently, the middle rating is used. If
only two of the three agencies rate the
security, the lower rating is used to
determine index eligibility. If only one
of the three agencies rates a security, the
rating must be Baa1/BBB+, Baa2/BBB,
or Baa3/BBB¥. The bonds must have an
outstanding par value of at least $7
million and be issued as part of a
transaction of at least $100 million.9
• 10% weight in Muni A-Rated Index.
To be included in the Muni A-Rated
Index, bonds must have a Barclays
credit-quality classification between A1/
A+ and A3/A¥. The Barclays creditquality classification is based on the
three rating agencies, Moody’s, S&P, and
Fitch. If two of the three agencies rate
the bond equivalently, then that rating
is used. If all three rate the bond
differently, the middle rating is used. If
only two of the three agencies rate the
security, the lower rating is used to
determine index eligibility. If only one
of the three agencies rates a security, the
rating must be A1/A+, A2/A, or A3/A¥.
The bonds must have an outstanding
par value of at least $7 million and be
issued as part of a transaction of at least
$75 million. Remarketed issues will not
be allowed in the benchmark. All bonds
must have a fixed rate, a dated-date (i.e.,
the date when interest begins to accrue)
after December 31, 1990, and a nominal
maturity of 1 to 12 years. Taxable
municipal bonds, bonds with floating
rates, and derivatives will be excluded
from the Revised Index.
The composition of the Revised Index
will be rebalanced monthly. Interest and
principal payments earned by the
component securities will be held in the
Revised Index without a reinvestment
return until month end, when they are
removed from the Revised Index.
Total returns will be calculated based
on the sum of price changes, gain/loss
on repayments of principal, and
coupons received or accrued, expressed
as a percentage of beginning market
value. The Revised Index will be
calculated and made available once a
day.
As of June 30, 2015, 69.73% of the
weight of the Revised Index components
was composed of individual maturities
that were part of an entire municipal
bond offering with a minimum original
principal amount outstanding of $100
million or more for all maturities of the
offering. In addition, the total dollar
amount outstanding of issues in the
Revised Index was approximately
$224.6 billion, and the average dollar
amount outstanding of issues in the
Index was approximately $23.7 million.
Further, the most heavily weighted
component represents 2.44% of the
weight of the Revised Index, and the
five most heavily weighted components
represent 9.47% of the weight of the
Revised Index.10
The Exchange believes that the
Revised Index is sufficiently broadbased to deter potential manipulation,
notwithstanding that the Revised Index
does not satisfy the criterion in NYSE
Arca Equities Rule 5.2(j)(3),
Commentary .02 (a)(2), because it is
composed of approximately 9,481 issues
and 900 unique issuers. The Exchange
also believes that the Revised Index
securities are sufficiently liquid to deter
potential manipulation in that a
substantial portion (69.73%) of the
7 As described in the Release, currently 50% of
the Index weight is in the Muni High Yield/$100
Million Deal Size Index.
8 The 25% weighting in the Muni High Yield/
Under $100 Million Deal Size Index is identical to
the weighting set forth in the Release.
9 The 25% weighting in the Muni Baa-Rated/$100
Million Deal Size Index is identical to the weighting
set forth in the Release.
10 Commentary .02(a)(4) to NYSE Arca Equities
Rule 5.2(j)(3) provides that no component fixedincome security (excluding Treasury Securities and
GSE Securities, as defined therein) shall represent
more than 30% of the weight of the index or
portfolio, and the five most heavily weighted
component fixed-income securities in the index or
portfolio shall not in the aggregate account for more
than 65% of the weight of the index or portfolio.
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Fmt 4703
Sfmt 4703
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Federal Register / Vol. 80, No. 244 / Monday, December 21, 2015 / Notices
Revised Index weight is composed of
maturities that are part of a minimum
original principal amount outstanding
of $100 million or more, and in view of
the substantial total dollar amount
outstanding and the average dollar
amount outstanding of Revised Index
issues, as referenced above. In addition,
the Exchange notes that the average
daily notional trading volume for
Revised Index components for the
period from June 30, 2014 to June 30,
2015 was approximately $323.6 million,
and the sum of the notional trading
volumes for the same period was $82.2
billion.
The Revised Index value, calculated
and disseminated at least once daily, as
well as the components of the Revised
Index and their percentage weighting,
will be available from major market data
vendors. In addition, the portfolio of
securities held by the Fund will be
disclosed daily on the Fund’s Web site
at www.marketvectorsetfs.com.
The Exchange represents that: (1)
Except for Commentary .02(a)(2) to
NYSE Arca Equities Rule 5.2(j)(3), the
Shares currently satisfy all of the
generic listing standards under NYSE
Arca Equities Rule 5.2(j)(3); (2) the
continued listing standards under NYSE
Arca Equities Rules 5.2(j)(3) and
5.5(g)(2) applicable to Units shall apply
to the Shares; and (3) the Trust is
required to comply with Rule 10A–3
under the Act 11 for the initial and
continued listing of the Shares. In
addition, the Exchange represents that
the Shares will comply with all other
requirements applicable to Units
including, but not limited to,
requirements relating to the
dissemination of key information such
as the value of the Revised Index and
the applicable Intraday Indicative Value
(‘‘IIV’’); 12 rules governing the trading of
equity securities, trading hours, trading
halts, surveillance, and the Information
Bulletin to Equity Trading Permit
Holders (‘‘ETP Holders’’), as set forth in
Exchange rules applicable to Units; and
prior Commission orders approving the
generic listing rules applicable to the
listing and trading of Units.13
11 17
CFR 240.10A–3.
IIV will be widely disseminated by one or
more major market data vendors at least every 15
seconds during the Exchange’s Core Trading
Session of 9:30 a.m. to 4:00 p.m., Eastern time.
Currently, it is the Exchange’s understanding that
several major market data vendors display or make
widely available IIVs taken from the Consolidated
Tape Association or other data feeds.
13 See, e.g., Securities Exchange Act Release Nos.
55783 (May 17, 2007), 72 FR 29194 (May 24, 2007)
(SR–NYSEArca–2007–36) (order approving NYSE
Arca generic listing standards for Units based on a
fixed income index); 44551 (July 12, 2001), 66 FR
37716 (July 19, 2001) (SR–PCX–2001–14) (order
mstockstill on DSK4VPTVN1PROD with NOTICES
12 The
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17:38 Dec 18, 2015
Jkt 238001
The value of the Revised Index will be
widely disseminated by one or more
major market data vendors at least once
per day, as required by NYSE Arca
Equities Rule 5.2(j)(3), Commentary
.02(b)(ii). The IIV for the Shares will be
disseminated by one or more major
market data vendors, updated at least
every 15 seconds during the Exchange’s
Core Trading Session, as required by
NYSE Arca Equities Rule 5.2(j)(3),
Commentary .02(c).
III. Discussion and Commission
Findings
After careful review, the Commission
finds that the Exchange’s proposal to
permit the Fund to track the Revised
Index is consistent with the Exchange
Act and the rules and regulations
thereunder applicable to a national
securities exchange.14 In particular, the
Commission finds that the proposed
rule change is consistent with section
6(b)(5) of the Exchange Act,15 which
requires, among other things, that the
Exchange’s rules be designed to promote
just and equitable principles of trade, to
remove impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, to protect investors and the
public interest.
The Commission believes that the
Revised Index is unlikely to be more
susceptible to manipulation than the
existing Index. The weight of the
Revised Index components with a
minimum original principal amount
outstanding of $100 million or more was
30.10% as of June 30, 2015,16 which is
heavier than the weight of such
components in the Index as of
November 27, 2012.17 Additionally, the
number of components and the number
of unique issuers is greater for the
Revised Index than for the Index.18
Further, the average daily notional
trading volume was much greater for
approving generic listing standards for Units and
Portfolio Depositary Receipts); 41983 (October 6,
1999), 64 FR 56008 (October 15, 1999) (SR–PCX–
98–29) (order approving rules for listing and trading
of Units).
14 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
15 15 U.S.C. 78f(b)(5).
16 See Notice, supra note 3, 80 FR at 55703.
17 See Order, supra note 4, 79 FR at 1663–4 (‘‘only
15.66% of the weight of the Index components, as
of November 27, 2012, had a minimum original
principal amount outstanding of $100 million or
more’’).
18 As of June 30, 2015, the Revised Index was
composed of 9,481 issues and 900 unique issuers.
See Notice, supra note 3, 80 FR at 55704. As of
November 27, 2012, the Index was composed of
1,935 issues and 530 unique issuers. See Order,
supra note 4, 79 FR at 1664.
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Frm 00093
Fmt 4703
Sfmt 4703
Revised Index components than for
Index components.19
The Commission notes that the
Exchange represents that: (1) The Shares
and the Revised Index satisfy all of the
requirements for generic listing
standards under NYSE Arca Equities
Rule 5.2(j)(3) except for Commentary
.02(a)(2) to NYSE Arca Equities Rule
5.2(j)(3); and (2) except as noted, all
other representations made in support
of the Release remain unchanged.
For the foregoing reasons, the
Commission finds that the proposed
rule change is consistent with section
6(b)(5) of the Exchange Act 20 and the
rules and regulations thereunder
applicable to a national securities
exchange.
IV. Conclusion
It is therefore ordered, pursuant to
section 19(b)(2) of the Exchange Act,21
that the proposed rule change (SR–
NYSEArca–2015–74), be, and it hereby
is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.22
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015–31932 Filed 12–18–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–76657; File No. SR–Phlx–
2015–104]
Self-Regulatory Organizations;
NASDAQ OMX PHLX LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Delete Rule
108
December 15, 2015.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on December
9, 2015, NASDAQ OMX PHLX LLC
(‘‘Phlx’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I, II,
19 Between June 30, 2014, and June 30, 2015, the
average daily notional trading volume for Revised
Index components was approximately $323.6
million. See Notice, supra note 3, 80 FR at 55704.
The average daily notional trading volume for Index
components between October 31, 2011, and October
31, 2012 was $2,839,895. See Securities Exchange
Act Release No. 71232, supra note 4, 78 FR at
69505.
20 15 U.S.C. 78f(b)(5).
21 15 U.S.C. 78s(b)(2).
22 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
E:\FR\FM\21DEN1.SGM
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]]>Agencies
[Federal Register Volume 80, Number 244 (Monday, December 21, 2015)]
[Notices]
[Pages 79392-79394]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-31932]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-76645; File No. SR-NYSEArca-2015-74]
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a
Proposed Rule Change Regarding a Change to the Underlying Index of the
Market Vectors Short High Yield Municipal Index ETF
December 15, 2015.
I. Introduction
On August 26, 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 (``Exchange
Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to
reflect a change to the reference index relating to the Market Vectors
Short High Yield Municipal Index ETF (``Fund''). The Commission
published notice of the proposed rule change in the Federal Register on
September 16, 2015.\3\ On October 16, 2015, the Commission designated a
longer period within which to approve the proposed rule change,
disapprove the proposed rule change, or institute proceedings to
determine whether to disapprove the proposed rule change.\4\ The
Commission received no comments on the proposal. This order approves
the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 75888 (September 10,
2015), 80 FR 55701 (``Notice'').
\4\ See Securities Exchange Act Release No. 76174, 80 FR 64027
(October 22, 2015). The Commission determined that it was
appropriate to designate a longer period within which to take action
on the proposed rule change so that it has sufficient time to
consider the proposed rule change. Accordingly, the Commission
designated December 15, 2015 as the date by which it should approve,
disapprove, or institute proceedings to determine whether to
disapprove the proposed rule change.
---------------------------------------------------------------------------
II. The Exchange's Description of the Proposal
The Commission approved listing and trading on the Exchange of
shares (``Shares'') of the Fund under NYSE Arca Equities Rule
5.2(j)(3), which governs the listing and trading of Investment Company
Units (``Units'').\5\ Currently, the Shares are listed and traded on
the Exchange. The Exchange submitted this proposed rule change because
the underlying index will be changed and the index as modified would
continue not to meet the ``generic'' listing requirement of Commentary
.02(a)(2) to NYSE Arca Equities Rule 5.2(j)(3) in that, as of June 30,
2015, only 30.10% of the weight of the Revised Index components had a
minimum original principal amount outstanding of $100 million or
more.\6\
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 71232 (January 3,
2014), 79 FR 1662 (January 9, 2014 (SR-NYSEArca-2013-118) (order
approving listing and trading of shares of the Market Vectors Short
High Yield Municipal Index ETF) (``Order''). See also Securities
Exchange Act Release No. 70871 (November 14, 2013), 78 FR 69503
(November 19, 2013) (SR-NYSEArca-2013-118) (notice of proposed rule
change relating to listing and trading of shares of the Market
Vectors Short High Yield Municipal Index ETF and, together with the
Order, the ``Release''). The Exchange submitted that proposed rule
change to permit listing and trading of the Shares because the index
underlying the Fund did not meet all of the ``generic'' listing
requirements of Commentary .02(a) to NYSE Arca Equities Rule
5.2(j)(3) that are applicable to the listing of Units based on fixed
income securities indexes. More specifically, the Index met all of
the criteria except for those set forth in Commentary .02(a)(2),
which requires that components that in the aggregate account for at
least 75% of the weight of the index or portfolio each shall have a
minimum original principal amount outstanding of $100 million or
more.
\6\ The Exchange states that the other generic listing criteria
are satisfied. See Notice, supra note 3, 80 FR at 55703.
---------------------------------------------------------------------------
The investment objective of the Fund is to seek to replicate as
closely as possible, before fees and expenses, the price and yield
performance of the Barclays Municipal High Yield Short Duration Index
(``Short High Yield Index'' or ``Index''). The Fund is a series of the
Market Vectors ETF Trust. Van Eck Associates Corporation is the
investment adviser and the
[[Page 79393]]
administrator for the Fund. Van Eck Securities Corporation is the
Fund's distributor. The Bank of New York Mellon is the custodian of the
Fund's assets and provides transfer agency and fund accounting services
to the Fund.
A. The Current Index
The Index is a market-size-weighted index composed of publicly
traded municipal bonds that cover the U.S. dollar-denominated high-
yield short-term tax-exempt bond market. A majority of the Index's
constituents are from the revenue sector, with some constituents being
from the general obligation sector. The revenue sector is divided into
industry sectors that consist of, but may not be limited to, electric,
health care, transportation, education, water and sewer, resource
recovery, leasing, and special tax. The Index is calculated using a
market-value weighting methodology, provided that the allocation to
issuers from the territories of the United States, including: Puerto
Rico, Guam, the U.S. Virgin Islands, American Samoa and the Northern
Mariana Islands, each individually does not exceed 8%.
B. The Revised Index
The Index Provider plans to revise the Index methodology as
follows. The revised Short High Yield Index (``Revised Index'') will
have a targeted 40% weight in the Muni High Yield/$100 Million Deal
Size Index (reduced from a 50% weight). In addition, the Revised Index
will have a 10% weight in the Muni A-Rated Index, which comprises
investment grade components, as described below. The Revised Index will
continue to have a 25% weight in the Muni High Yield/Under $100 Million
Deal Size Index and a 25% weight in the Muni Baa-Rated/$100 Million
Deal Size Index, as described in the Release.
The Revised Index will comprise four total-return, market-size-
weighted benchmark indexes with target weights as follows:
40% weight in Muni High Yield/$100 Million Deal Size
Index. To be included in the Muni High Yield/$100 Million Deal Size
Index, bonds must be unrated or rated Ba1/BB+ or lower by at least two
of the following rating agencies, if all three rate the bond: Moody's
Investors Service, Inc. (``Moody's''), Standard & Poor's, Inc.
(``S&P''), and Fitch, Inc. (``Fitch''). If only two of the three
agencies rate the security, the lower rating is used to determine index
eligibility. If only one of the three agencies rates a security, the
rating must be Ba1/BB+ or lower. Bonds in the Muni High Yield/$100
Million Deal Size Index must have an outstanding par value of at least
$3 million and be issued as part of a transaction of at least $100
million.\7\
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\7\ As described in the Release, currently 50% of the Index
weight is in the Muni High Yield/$100 Million Deal Size Index.
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25% weight in Muni High Yield/Under $100 Million Deal Size
Index. To be included in the Muni High Yield/Under $100 Million Deal
Size Index, bonds must be unrated or rated Ba1/BB+ or lower by at least
two of the following rating agencies, if all three rate the bond:
Moody's, S&P, and Fitch. If only two of the three agencies rate the
security, the lower rating is used to determine index eligibility. If
only one of the three agencies rates a security, the rating must be
Ba1/BB+ or lower. Bonds in the Muni High Yield/Under $100 Million Deal
Size Index must have an outstanding par value of at least $3 million
and be issued as part of a transaction of under $100 million but over
$20 million.\8\
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\8\ The 25% weighting in the Muni High Yield/Under $100 Million
Deal Size Index is identical to the weighting set forth in the
Release.
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25% weight in Muni Baa-Rated/$100 Million Deal Size Index.
To be included in the Muni Baa-Rated/$100 Million Deal Size Index,
bonds must have a Barclays credit-quality classification between Baa1/
BBB+ and Baa3/BBB-. Barclays credit-quality classification is based on
the three rating agencies, Moody's, S&P, and Fitch. If two of the three
agencies rate the bond equivalently, then that rating is used. If all
three rate the bond differently, the middle rating is used. If only two
of the three agencies rate the security, the lower rating is used to
determine index eligibility. If only one of the three agencies rates a
security, the rating must be Baa1/BBB+, Baa2/BBB, or Baa3/BBB-. The
bonds must have an outstanding par value of at least $7 million and be
issued as part of a transaction of at least $100 million.\9\
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\9\ The 25% weighting in the Muni Baa-Rated/$100 Million Deal
Size Index is identical to the weighting set forth in the Release.
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10% weight in Muni A-Rated Index. To be included in the
Muni A-Rated Index, bonds must have a Barclays credit-quality
classification between A1/A+ and A3/A-. The Barclays credit-quality
classification is based on the three rating agencies, Moody's, S&P, and
Fitch. If two of the three agencies rate the bond equivalently, then
that rating is used. If all three rate the bond differently, the middle
rating is used. If only two of the three agencies rate the security,
the lower rating is used to determine index eligibility. If only one of
the three agencies rates a security, the rating must be A1/A+, A2/A, or
A3/A-. The bonds must have an outstanding par value of at least $7
million and be issued as part of a transaction of at least $75 million.
Remarketed issues will not be allowed in the benchmark. All bonds must
have a fixed rate, a dated-date (i.e., the date when interest begins to
accrue) after December 31, 1990, and a nominal maturity of 1 to 12
years. Taxable municipal bonds, bonds with floating rates, and
derivatives will be excluded from the Revised Index.
The composition of the Revised Index will be rebalanced monthly.
Interest and principal payments earned by the component securities will
be held in the Revised Index without a reinvestment return until month
end, when they are removed from the Revised Index.
Total returns will be calculated based on the sum of price changes,
gain/loss on repayments of principal, and coupons received or accrued,
expressed as a percentage of beginning market value. The Revised Index
will be calculated and made available once a day.
As of June 30, 2015, 69.73% of the weight of the Revised Index
components was composed of individual maturities that were part of an
entire municipal bond offering with a minimum original principal amount
outstanding of $100 million or more for all maturities of the offering.
In addition, the total dollar amount outstanding of issues in the
Revised Index was approximately $224.6 billion, and the average dollar
amount outstanding of issues in the Index was approximately $23.7
million. Further, the most heavily weighted component represents 2.44%
of the weight of the Revised Index, and the five most heavily weighted
components represent 9.47% of the weight of the Revised Index.\10\
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\10\ Commentary .02(a)(4) to NYSE Arca Equities Rule 5.2(j)(3)
provides that no component fixed-income security (excluding Treasury
Securities and GSE Securities, as defined therein) shall represent
more than 30% of the weight of the index or portfolio, and the five
most heavily weighted component fixed-income securities in the index
or portfolio shall not in the aggregate account for more than 65% of
the weight of the index or portfolio.
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The Exchange believes that the Revised Index is sufficiently broad-
based to deter potential manipulation, notwithstanding that the Revised
Index does not satisfy the criterion in NYSE Arca Equities Rule
5.2(j)(3), Commentary .02 (a)(2), because it is composed of
approximately 9,481 issues and 900 unique issuers. The Exchange also
believes that the Revised Index securities are sufficiently liquid to
deter potential manipulation in that a substantial portion (69.73%) of
the
[[Page 79394]]
Revised Index weight is composed of maturities that are part of a
minimum original principal amount outstanding of $100 million or more,
and in view of the substantial total dollar amount outstanding and the
average dollar amount outstanding of Revised Index issues, as
referenced above. In addition, the Exchange notes that the average
daily notional trading volume for Revised Index components for the
period from June 30, 2014 to June 30, 2015 was approximately $323.6
million, and the sum of the notional trading volumes for the same
period was $82.2 billion.
The Revised Index value, calculated and disseminated at least once
daily, as well as the components of the Revised Index and their
percentage weighting, will be available from major market data vendors.
In addition, the portfolio of securities held by the Fund will be
disclosed daily on the Fund's Web site at www.marketvectorsetfs.com.
The Exchange represents that: (1) Except for Commentary .02(a)(2)
to NYSE Arca Equities Rule 5.2(j)(3), the Shares currently satisfy all
of the generic listing standards under NYSE Arca Equities Rule
5.2(j)(3); (2) the continued listing standards under NYSE Arca Equities
Rules 5.2(j)(3) and 5.5(g)(2) applicable to Units shall apply to the
Shares; and (3) the Trust is required to comply with Rule 10A-3 under
the Act \11\ for the initial and continued listing of the Shares. In
addition, the Exchange represents that the Shares will comply with all
other requirements applicable to Units including, but not limited to,
requirements relating to the dissemination of key information such as
the value of the Revised Index and the applicable Intraday Indicative
Value (``IIV''); \12\ rules governing the trading of equity securities,
trading hours, trading halts, surveillance, and the Information
Bulletin to Equity Trading Permit Holders (``ETP Holders''), as set
forth in Exchange rules applicable to Units; and prior Commission
orders approving the generic listing rules applicable to the listing
and trading of Units.\13\
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\11\ 17 CFR 240.10A-3.
\12\ The IIV will be widely disseminated by one or more major
market data vendors at least every 15 seconds during the Exchange's
Core Trading Session of 9:30 a.m. to 4:00 p.m., Eastern time.
Currently, it is the Exchange's understanding that several major
market data vendors display or make widely available IIVs taken from
the Consolidated Tape Association or other data feeds.
\13\ See, e.g., Securities Exchange Act Release Nos. 55783 (May
17, 2007), 72 FR 29194 (May 24, 2007) (SR-NYSEArca-2007-36) (order
approving NYSE Arca generic listing standards for Units based on a
fixed income index); 44551 (July 12, 2001), 66 FR 37716 (July 19,
2001) (SR-PCX-2001-14) (order approving generic listing standards
for Units and Portfolio Depositary Receipts); 41983 (October 6,
1999), 64 FR 56008 (October 15, 1999) (SR-PCX-98-29) (order
approving rules for listing and trading of Units).
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The value of the Revised Index will be widely disseminated by one
or more major market data vendors at least once per day, as required by
NYSE Arca Equities Rule 5.2(j)(3), Commentary .02(b)(ii). The IIV for
the Shares will be disseminated by one or more major market data
vendors, updated at least every 15 seconds during the Exchange's Core
Trading Session, as required by NYSE Arca Equities Rule 5.2(j)(3),
Commentary .02(c).
III. Discussion and Commission Findings
After careful review, the Commission finds that the Exchange's
proposal to permit the Fund to track the Revised Index is consistent
with the Exchange Act and the rules and regulations thereunder
applicable to a national securities exchange.\14\ In particular, the
Commission finds that the proposed rule change is consistent with
section 6(b)(5) of the Exchange Act,\15\ which requires, among other
things, that the Exchange's rules be designed to promote just and
equitable principles of trade, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest.
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\14\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\15\ 15 U.S.C. 78f(b)(5).
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The Commission believes that the Revised Index is unlikely to be
more susceptible to manipulation than the existing Index. The weight of
the Revised Index components with a minimum original principal amount
outstanding of $100 million or more was 30.10% as of June 30, 2015,\16\
which is heavier than the weight of such components in the Index as of
November 27, 2012.\17\ Additionally, the number of components and the
number of unique issuers is greater for the Revised Index than for the
Index.\18\ Further, the average daily notional trading volume was much
greater for Revised Index components than for Index components.\19\
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\16\ See Notice, supra note 3, 80 FR at 55703.
\17\ See Order, supra note 4, 79 FR at 1663-4 (``only 15.66% of
the weight of the Index components, as of November 27, 2012, had a
minimum original principal amount outstanding of $100 million or
more'').
\18\ As of June 30, 2015, the Revised Index was composed of
9,481 issues and 900 unique issuers. See Notice, supra note 3, 80 FR
at 55704. As of November 27, 2012, the Index was composed of 1,935
issues and 530 unique issuers. See Order, supra note 4, 79 FR at
1664.
\19\ Between June 30, 2014, and June 30, 2015, the average daily
notional trading volume for Revised Index components was
approximately $323.6 million. See Notice, supra note 3, 80 FR at
55704. The average daily notional trading volume for Index
components between October 31, 2011, and October 31, 2012 was
$2,839,895. See Securities Exchange Act Release No. 71232, supra
note 4, 78 FR at 69505.
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The Commission notes that the Exchange represents that: (1) The
Shares and the Revised Index satisfy all of the requirements for
generic listing standards under NYSE Arca Equities Rule 5.2(j)(3)
except for Commentary .02(a)(2) to NYSE Arca Equities Rule 5.2(j)(3);
and (2) except as noted, all other representations made in support of
the Release remain unchanged.
For the foregoing reasons, the Commission finds that the proposed
rule change is consistent with section 6(b)(5) of the Exchange Act \20\
and the rules and regulations thereunder applicable to a national
securities exchange.
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\20\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion
It is therefore ordered, pursuant to section 19(b)(2) of the
Exchange Act,\21\ that the proposed rule change (SR-NYSEArca-2015-74),
be, and it hereby is, approved.
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\21\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
Robert W. Errett,
Deputy Secretary.
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\22\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2015-31932 Filed 12-18-15; 8:45 am]
BILLING CODE 8011-01-P
