Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Amendment No. 1 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 1, To List and Trade Shares of the WBI Tactical Rotation Shares Under NYSE Arca Equities Rule 8.600, 21916-21921 [2016-08422]
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21916
Federal Register / Vol. 81, No. 71 / Wednesday, April 13, 2016 / Notices
supports the FINRA proposal.’’
However, the commenter requested
additional information regarding the
definition of ‘‘algorithmic trading’’ and
requested that FINRA provide adequate
time for member firms to identify the
personnel who must register pursuant to
the proposal.22 The Commission notes
that FINRA will announce the effective
date of the proposed rule change in a
Regulatory Notice to be published no
later than 60 days following
Commission approval, and the effective
date will be no sooner than 180 days
following publication of the Regulatory
Notice but no later than 300 days
following Commission approval.23 The
Commission also notes that FINRA gave
a list of examples of what would be
included in the definition of an
algorithmic trading strategy.24 FINRA
further notes that what is considered an
‘‘algorithmic trading strategy’’ may
evolve as new trading strategies are
designed and developed.25 The
Commission also expects that FINRA
will provide more detailed guidance in
connection with the implementation of
the registration requirement.
asabaliauskas on DSK3SPTVN1PROD with NOTICES
IV. Discussion and Findings
After carefully considering the
proposed rule change and the comment
submitted the Commission finds that
the proposed rule change is consistent
with the requirements of the Act and the
rules and regulations thereunder
applicable to a national securities
association.26 In particular, the
Commission finds that the proposed
rule change is consistent with Section
15A(b)(6) of the Act,27 which requires,
among other things, that FINRA rules be
designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, and, in general, to protect
investors and the public interest. In
addition, the Commission finds that the
proposed rule change is consistent with
Section 15A(g)(3)(A) of the Act which
authorizes FINRA to examine and verify
the qualifications of an applicant to
become a member, and the natural
persons associated with such an
applicant, in accordance with
procedures established by FINRA’s
rules.28 The proposed rule change
requires associated persons primarily
22 Id.
23 See
24 See
Notice, supra note 3, at 9238.
Notice, supra note 3, at 9236.
25 Id.
26 In approving this proposed rule change, the
Commission has considered the proposed rule
change’s impact on efficiency, competition, and
capital formation. See 15 U.S.C. 78c(f).
27 15 U.S.C. 78o–3(b)(6).
28 15 U.S.C. 78o–3(g)(3)(A).
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responsible for the design, development
or significant modification of an
algorithmic trading strategy or
responsible for the day-to-day
supervision or direction of such
activities to register and meet a
minimum standard of knowledge
regarding the securities rules and
regulations applicable to the member
employing the algorithmic trading
strategy. The Commission notes that this
minimum standard of knowledge is
identical to the standard of knowledge
currently applicable to traditional
securities traders. The Commission
believes that improved education of
firm personnel may reduce the
problematic market conduct and
manipulative trading activities
identified by FINRA.29
V. Conclusion
It is therefore ordered pursuant to
Section 19(b)(2) of the Act 30 that the
proposed rule change (SR–FINRA–
2016–007), be and hereby is approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.31
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–08424 Filed 4–12–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–77549; File No. SR–
NYSEArca–2016–14]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of
Amendment No. 1 and Order Granting
Accelerated Approval of a Proposed
Rule Change, as Modified by
Amendment No. 1, To List and Trade
Shares of the WBI Tactical Rotation
Shares Under NYSE Arca Equities Rule
8.600
April 7, 2016.
I. Introduction
On February 3, 2016, 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 WBI Tactical Rotation
Shares (‘‘Fund’’) under NYSE Arca
29 See
Notice, supra note 3, at 9238–39.
U.S.C. 78s(b)(2).
31 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
30 15
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Equities Rule 8.600. The Commission
published notice of the proposed rule
change in the Federal Register on
February 23, 2016.3 The Commission
received no comments on the proposed
rule change. On March 28, 2016, the
Exchange filed Amendment No. 1 to the
proposed rule change.4 The Commission
is publishing this notice to solicit
comment on Amendment No. 1 to the
proposed rule change from interested
persons, and is approving the proposed
rule change, as modified by Amendment
No. 1, on an accelerated basis.
II. The Exchange’s Description of the
Proposal 5
The Exchange proposes to list and
trade the Shares under NYSE Arca
Equities Rule 8.600, which governs the
listing and trading of Managed Fund
Shares on the Exchange. The Shares will
be offered by the Absolute Shares Trust
(‘‘Trust’’), a statutory trust organized
under the laws of the State of Delaware
and registered with the Commission as
an open-end management investment
3 See Securities Exchange Act Release No. 77160
(February 17, 2016), 81 FR 9029.
4 In Amendment No. 1, which replaced the
original filing in its entirety, the Exchange: (1)
Clarified a reference to debt securities is to ‘‘Debt
Instruments,’’ as described in the filing; (2)
represented that, under normal market conditions,
the Fund will invest at least 75% of its corporate
debt securities that have at least $1,000,000 par
amount outstanding in developed countries or at
least $200,000,000 in emerging markets countries;
(3) stated that the Fund’s assets invested in Debt
Instruments would meet certain criteria for indexbased fixed-income ETFs contained in Exchange
Rule 5.2(j)(3), Commentary .02; (4) stated where
price information could be found for non-exchange
listed ADRs, RMBS, CMBS, ABS, and municipal
securities; (5) clarified that all statements and
representations made in the filing regarding the
description of the portfolio, limitations on portfolio
holdings or reference assets, or the applicability of
Exchange rules and surveillance procedures
constitute continued listing requirements for listing
the Shares on the Exchange; (6) stated that the
issuer has represented to the Exchange that it will
advise the Exchange of any failure by the Fund to
comply with the continued listing requirements,
and, pursuant to its obligations under Section
19(g)(1) of the Act, the Exchange will monitor for
compliance with the continued listing
requirements, and if the Fund is not in compliance
with the applicable listing requirements, the
Exchange will commence delisting procedures
under NYSE Arca Equities Rule 5.5(m); and (7)
made other clarifying and technical amendments.
Amendment No. 1 is available at: https://
www.sec.gov/comments/sr-nysearca-2016-14/
nysearca201614-1.pdf.
5 The Commission notes that additional
information regarding the Fund, the Trust (as
defined below), and the Shares, including
investment strategies, risks, creation and
redemption procedures, fees, portfolio holdings,
disclosure policies, calculation of net asset value
(‘‘NAV’’), distributions, and taxes, among other
things, can be found in Amendment No. 1 and the
Registration Statement, as applicable. See
Amendment No. 1, supra note 4, and Registration
Statement, infra note 6.
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Federal Register / Vol. 81, No. 71 / Wednesday, April 13, 2016 / Notices
company.6 Millington Securities, Inc.
(‘‘Adviser’’), a wholly-owned subsidiary
of WBI Trading Company, Inc., will be
the investment advisor to the Fund, and
WBI Investments, Inc. (‘‘Sub-Adviser’’),
an affiliate of WBI Trading Company,
Inc., will act as Sub-Adviser to the
Fund.7 U.S. Bancorp Fund Services,
LLC will serve as the administrator,
transfer agent, and index receipt agent.
U.S. Bank, National Association will
serve as the Fund’s custodian and
securities lending agent. Foreside Fund
Services, LLC will serve as the
distributor for the Fund on an agency
basis.
asabaliauskas on DSK3SPTVN1PROD with NOTICES
A. The Fund’s Principal Investments
According to the Exchange, the
Fund’s investment objective is to seek
long term capital appreciation while
also seeking to protect principal during
unfavorable market conditions.8
The Fund, under normal market
conditions,9 will seek to invest
6 The Trust is registered under the 1940 Act. On
August 24, 2015, the Trust filed with the
Commission a registration statement on Form N–
1A, and on November 6, 2015 filed an amendment
thereto, under the Securities Act of 1933 (15 U.S.C.
77a) (‘‘Securities Act’’) and the 1940 Act relating to
the Fund (File Nos. 333–192733 and 811–22917) (as
amended, the ‘‘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. 30543 (May 29, 2013) (File No.
812–13886) (‘‘Exemptive Order’’).
7 The Adviser is a registered broker-dealer and is
affiliated with a broker-dealer. The Sub-Adviser is
not registered as a broker-dealer but is affiliated
with a broker-dealer. In such capacity, the Adviser
and Sub-Adviser have implemented a firewall with
respect to their relevant personnel and their
respective broker-dealer affiliates regarding access
to information concerning the composition and/or
changes to a portfolio, and will be subject to
procedures designed to prevent the use and
dissemination of material non-public information
regarding such portfolio. In the event (a) the
Adviser becomes newly affiliated with a brokerdealer or Sub-Adviser becomes registered as a
broker-dealer or newly affiliated with a brokerdealer, as applicable, or (b) any new adviser or subadviser is a broker-dealer or becomes affiliated with
a broker-dealer, it will implement a fire wall with
respect to its personnel or such broker-dealer
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.
8 The Sub-Adviser’s proprietary portfolio
selection process used for the Fund attempts to
identify investments that can provide consistent,
attractive returns net of expenses with potentially
less volatility and risk to capital than traditional
approaches, whatever market conditions may be.
9 The term ‘‘under normal market conditions’’
includes, but is not limited to, the absence of
extreme volatility or trading halts in the equity
markets or the financial markets generally;
operational issues causing dissemination of
inaccurate market information; or force majeure
type events such as systems failure, natural or manmade disaster, act of God, armed conflict, act of
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primarily (more than 50% of its total
assets) in the principal investments
discussed in this section. The Fund will
invest directly in equity securities, debt
instruments and ‘‘Financial
Instruments’’ (as described below) or
will invest in them indirectly by
investing in the equity securities of
other registered investment companies
(including exchange traded funds
(‘‘ETFs’’),10 mutual funds, unit
investment trusts, exchange-traded and
over-the counter (‘‘OTC’’) closed-end
funds (‘‘CEFs’’) and exchange-traded
and OTC business development
companies), equity securities of
exchange-traded pooled vehicles not
required to be registered under the 1940
Act and issuing equity securities
(‘‘ETPVs’’),11 exchange-traded notes
(‘‘ETNs’’),12 equity-linked notes
(‘‘ELNs’’),13 and index-linked
exchangeable notes (‘‘ILENs’’) 14
(collectively, ETFs, ETPVs, ETNs, ELNs
and ILENs are referred to as ‘‘exchange
traded products’’ or ‘‘ETPs,’’ and
collectively, ETFs, mutual funds, unit
investment trusts, CEFs, and business
development companies are referred to
as ‘‘Registered Funds’’).
The Fund may invest in the following
exchange-traded and OTC U.S. and
foreign equity securities (other than
non-exchange-traded investment
company securities): Common stocks,
preferred stocks, rights, warrants,
convertibles, master limited
partnerships (exchange-traded
businesses organized as partnerships
(‘‘MLPs’’)), Depositary Receipts (‘‘DRs’’,
as described below),15 and exchangeterrorism, riot or labor disruption or any similar
intervening circumstance.
10 For purposes of this filing, ETFs consist of
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). All ETFs will be
listed and traded in the U.S. on a national securities
exchange. While the Fund may invest in inverse
ETFs, the Fund will not invest in leveraged (e.g.,
2X, –2X, 3X or –3X) ETFs.
11 For purposes of this filing, the ‘‘exchangetraded pooled vehicles’’ or ‘‘ETPVs’’ consist of
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 Commodity Futures Trust Shares
(as described in NYSE Arca Equities Rule 8.204).
12 ETNs include Index-Linked Securities (as
described in NYSE Arca Equities Rule 5.2(j)(6)).
13 Equity Linked Notes are described in NYSE
Arca Equities Rule 5.2(j)(2).
14 Index-Linked Exchangeable Notes are
described in NYSE Arca Equities Rule 5.2(j)(4).
15 For purposes of this filing, DRs means the
following: American Depositary Receipts (‘‘ADRs’’),
American Depositary Shares (‘‘ADSs’’), European
Depositary Receipts (‘‘EDRs’’), Global Depositary
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21917
traded real estate investment trusts
(‘‘REITs’’).
As part of the Fund’s principal
investment strategy, up to 20% of the
Fund’s net assets may be invested in
exchange-traded or OTC ‘‘Financial
Instruments,’’ which are the following:
Foreign exchange forward contracts;
futures on equity securities, debt
securities (i.e., ‘‘Debt Securities’’
defined below), equity indices, fixed
income indices, commodity indices,
currencies, commodities, and interest
rates; exchange-traded and OTC options
on equity indices, currencies, and
equity and debt securities; exchangetraded and OTC options on futures
contracts; exchange-traded and OTC
interest rate swaps, cross-currency
swaps, total return swaps on fixed
income and equity securities, inflation
swaps and credit default swaps; and
options on such swaps (‘‘swaptions’’).16
Financial Instruments will be utilized in
connection with option strategies used
by the Fund, including writing (selling)
covered calls, buying puts, using
combinations of calls and puts, and
using combinations of calls and
combinations of put options (‘‘puts’’).
The Fund may also use options on
indices and on futures, such as by
writing a call on a futures contract.17
The Fund may enter cap, floor and
collar agreements as a part of its option
strategies.
As part of its principal investment
strategy, the Fund may invest in the
following types of debt securities (‘‘Debt
Instruments’’): Corporate debt
securities; 18 corporate debt securities
that are convertible into common stock
or interests; U.S. Government
securities; 19 debt securities of foreign
Receipts (‘‘GDRs’’) and International Depositary
Receipts (‘‘IDRs’’). ADSs are issued by depository
banks in the United States under an agreement with
the foreign issuer, and the entire issuance is called
an ADR and the individual shares are referred to as
ADSs. ADRs may be purchased through
‘‘sponsored’’ or ‘‘unsponsored’’ facilities. Not more
than 10% of the Fund’s assets will be invested in
non-exchange-listed ADRs.
16 Options on swaps are traded OTC. In the
future, in the event that there are exchange-traded
options on swaps, the Fund may invest in these
instruments.
17 The Fund may directly write call options on
stocks and stock indices if the calls are ‘‘covered’’
throughout the life of the option. The Fund may
also write and purchase puts.
18 Such corporate debt securities also include
debt securities sold pursuant to Rule 144A under
the Securities Act. Under normal market
conditions, the Fund will invest at least 75% of its
corporate debt securities in issuances that have at
least $100,000,000 par amount outstanding in
developed countries or at least $200,000,000 par
amount outstanding in emerging market countries.
19 The Fund may invest in U.S. Government
obligations and other quasi government related
obligations. Such obligations include Treasury bills,
E:\FR\FM\13APN1.SGM
Continued
13APN1
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Federal Register / Vol. 81, No. 71 / Wednesday, April 13, 2016 / Notices
asabaliauskas on DSK3SPTVN1PROD with NOTICES
issuers; sovereign debt securities;
repurchase agreements; municipal
securities; sovereign debt obligations;
obligations of international agencies or
supranational agencies; sovereign,
quasi-sovereign, supranational or local
authority debt obligations issued by
non-U.S. governments; Treasury
Inflation-Protected Securities; and zero
coupon bonds. Debt Instruments may be
of all maturities, from less than one year
to more than thirty years (if available).
Debt Instruments may be fixed, variable
or floating rate securities.20
The Fund may invest in and hold
cash or ‘‘Cash Equivalents’’ 21 as part of
certificates of indebtedness, notes and bonds, and
issues of such entities as the Government National
Mortgage Association, Federal Home Loan Banks,
Federal Intermediate Credit Banks, Federal Farm
Credit Banks, Federal Housing Administration,
Federal National Mortgage Association, Federal
Home Loan Mortgage Corporation, and the Student
Loan Marketing Association.
20 The Fund’s assets invested in Debt Instruments
will meet certain criteria for index-based, fixedincome ETFs contained in NYSE Arca Equities Rule
5.2(j)(3), Commentary .02. See NYSE Arca Equities
Rule 5.2(j)(3), Commentary .02 governing fixedincome-based Investment Company Units. The
requirements of Rule 5.2(j)(3), Commentary .02(a)
that will be met include the following: (i) The index
or portfolio must consist of ‘‘Fixed Income
Securities’’ as defined in Rule 5.2(j)(3), Commentary
.02(a)(1); (ii) components that in the aggregate
account for at least 75% of the weight of the index
or portfolio each must have a minimum original
principal amount outstanding of $100 million or
more; (iii) a component may be a convertible
security, but once the convertible security converts
to an underlying equity security, the component is
removed from the index or portfolio; (iv) no
component fixed income security (excluding
Treasury Securities) will represent more than 30%
of the weight of the index or portfolio, and the five
highest weighted component fixed-income
securities do not in the aggregate account for more
than 65% of the weight of the index or portfolio;
(v) an underlying index or portfolio (excluding
exempted securities) must include securities from
a minimum of 13 non-affiliated issuers; and (vi)
component securities that in aggregate account for
at least 90% of the weight of the index or portfolio
must be either (a) from issuers that are required to
file reports pursuant to Sections 13 and 15(d) of the
Act; (b) from issuers that have a worldwide market
value of its outstanding common equity held by
non-affiliates of $700 million or more; (c) from
issuers that have outstanding securities that are
notes, bonds, debentures, or evidence of
indebtedness having a total remaining principal
amount of at least
$1 billion; (d) exempted securities as defined in
Section 3(a)(12) of the Act; or (e) from issuers that
are a government of a foreign country or a political
subdivision of a foreign country.
21 ‘‘Cash Equivalents’’ means: High-quality shortterm debt securities; money market instruments,
certificates of deposit issued by commercial banks
as well as savings banks or savings and loan
associations; bankers’ acceptances; time deposits;
and commercial paper and short-term notes rated at
the time of purchase ‘‘A–2’’ or higher by Standard
& Poor’s, ‘‘Prime-1’’ by Moody’s Investors Services
Inc., or similarly rated by another nationally
recognized statistical rating organization, or, if
unrated, will be determined by the Sub-Adviser to
be of comparable quality, as well as U.S.
Government obligations.
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17:41 Apr 12, 2016
Jkt 238001
the normal operation of its principal
investment strategy.
For investments in Registered Funds,
the Fund may invest in excess of the
limits contained in the 1940 Act.22
B. The Fund’s Other Investments
While the Fund, under normal market
conditions, will seek to invest primarily
(at least 50% of its total assets) in the
securities described above, the Fund
may invest as part of its non-principal
investment strategy (less than 50% of
the Fund’s assets) in short positions in
equity securities and in agency and nonagency residential mortgage-backed
securities (‘‘RMBS’’); agency and nonagency commercial mortgage-backed
securities (‘‘CMBS’’); and agency and
non-agency asset-backed securities
(‘‘ABS’’).
C. The Fund’s Investment Restrictions
The Fund may invest up to 40% of its
net assets in Debt Instruments rated
below investment grade.
The Fund will not invest more than
50% of its net assets in securities of
issuers in emerging markets, which
could consist of DRs, dollardenominated foreign securities or nonU.S. dollar denominated foreign
securities.
Investments in non-agency mortgage
and asset backed securities will be
limited to 20% of the Fund’s total assets
in the aggregate.
The Fund may invest up to 30% of its
total assets in securities denominated in
non-U.S. Dollars, but this limitation will
not apply to securities of non-U.S.
issuers that are denominated in U.S.
Dollars. The Fund may invest up to 50%
of the Fund’s principal investments in
the securities of issuers in emerging
markets.
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
securities deemed illiquid by the
Adviser. The Fund will monitor its
portfolio liquidity on an ongoing basis
to determine whether, in light of current
circumstances, an adequate level of
liquidity is being maintained, and will
consider taking appropriate steps in
order to maintain adequate liquidity if,
through a change in values, net assets,
or other circumstances, more than 15%
of the Fund’s net assets are held in
22 The Exchange states that the Commission has
granted exemptive relief to the Trust under Section
12(d)(1)(J) of the 1940 Act permitting the Fund to
operate as a ‘‘fund of funds’’ and invest in other
investment companies without complying with the
limitations set forth in Section 12(d)(1) of the 1940
Act, subject to certain terms and limitations that are
contained in the Exemptive Order.
PO 00000
Frm 00083
Fmt 4703
Sfmt 4703
illiquid assets. Illiquid assets include
securities subject to contractual or other
restrictions on resale and other
instruments that lack readily available
markets as determined in accordance
with Commission staff guidance.23
The Fund will be non-diversified
under the 1940 Act.24
The Fund’s investments will be
consistent with the Fund’s investment
objective and will not be used to
enhance leverage. That is, while the
Fund will be permitted to borrow as
permitted under the 1940 Act, the
Fund’s investments will not be used to
seek performance that is the multiple or
inverse multiple (i.e., 2Xs and 3Xs) of
the Fund’s primary broad-based
securities benchmark index (as defined
in Form N–1A).25
III. Discussion and Commission
Findings
After careful review, the Commission
finds that the Exchange’s proposal to list
and trade the Shares is consistent with
the Exchange Act and the rules and
regulations thereunder applicable to a
national securities exchange.26 In
particular, the Commission finds that
the proposed rule change, as modified
by Amendment No. 1, is consistent with
Section 6(b)(5) of the Exchange Act,27
which requires, among other things, that
the Exchange’s rules be designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, to remove
impediments to and perfect the
23 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. 31835
(September 22, 2015), discussions at footnotes 92
and 93; 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 1933 Act).
24 The diversification standard is set forth in
Section 5(b)(1) of the 1940 Act (15 U.S.C. 80e).
25 The Fund’s broad-based securities benchmark
index will be identified in a future amendment to
the Registration Statement following the Fund’s
first full calendar year of performance.
26 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).
27 15 U.S.C. 78f(b)(5).
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13APN1
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Federal Register / Vol. 81, No. 71 / Wednesday, April 13, 2016 / Notices
mechanism of a free and open market
and a national market system, and, in
general, to protect investors and the
public interest. The Commission also
finds that the proposal to list and trade
the Shares on the Exchange is consistent
with Section 11A(a)(1)(C)(iii) of the
Exchange Act,28 which sets forth the
finding of Congress that it is in the
public interest and appropriate for the
protection of investors and the
maintenance of fair and orderly markets
to assure the availability to brokers,
dealers, and investors of information
with respect to quotations for and
transactions in securities.
According to the Exchange, quotation
and last-sale information for the Shares,
and U.S. exchange-traded common
stocks, preferred stocks, rights,
warrants, convertibles, MLPs, DRs,
REITs, CEFs, ETFs, ETPs and ETNs will
be available via the Consolidated Tape
Association (‘‘CTA’’) high-speed line.
Intra-day price information for foreign
exchange-traded common stocks,
preferred stocks, rights, warrants,
convertibles, MLPs, DRs and REITs, will
be available from the applicable foreign
exchange and from major market data
vendors. Price information for OTC
common stocks, OTC CEFs, nonexchange listed ADRs, RMBS, CMBS,
ABS, and OTC Financial Instruments
will be available from major market data
vendors. Intra-day and closing price
information for exchange-traded
Financial Instruments will be available
from the applicable exchange and from
major market data vendors. In addition,
price information for U.S. exchangetraded options is available from the
Options Price Reporting Authority.
Intra-day price information for Cash
Equivalents will be available from major
market data vendors. Price information
for municipal securities is available
from the Municipal Securities
Rulemaking Board’s (‘‘MSRB’’)
Electronic Municipal Market Access
system.
In addition, the Portfolio Indicative
Value, as defined in NYSE Arca Equities
Rule 8.600 (c)(3), will be widely
disseminated by one or more major
market data vendors at least every 15
seconds during the Core Trading
Session.29 On each business day, before
commencement of trading in Shares in
the Core Trading Session on the
Exchange, the Fund will disclose on its
Web site the Disclosed Portfolio, as
defined in NYSE Arca Equities Rule
28 15
U.S.C. 78k–1(a)(1)(C)(iii).
it is the Exchange’s understanding
that several major market data vendors display and/
or make widely available Portfolio Indicative
Values taken from CTA or other data feeds.
29 Currently,
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8.600(c)(2), that will form the basis for
the Fund’s calculation of NAV at the
end of the business day.30
The NAV for the Shares will be
calculated after 4:00 p.m. Eastern Time
each trading day. A basket composition
file, which will include the security
names and share quantities required to
be delivered in exchange for Fund
Shares, together with estimates and
actual cash components, will be
publicly disseminated daily prior to the
opening of the New York Stock
Exchange via the National Securities
Clearing Corporation. Information
regarding market price and trading
volume for the Shares will be
continually available on a real-time
basis throughout the day on brokers’
computer screens and other electronic
services. The Web site for the Fund will
include a form of the prospectus for the
Fund and additional data relating to
NAV and other applicable quantitative
information.
The Commission further believes that
the proposal to list and trade the Shares
is reasonably designed to promote fair
disclosure of information that may be
necessary to price the Shares
appropriately and to prevent trading
when a reasonable degree of
transparency cannot be assured. The
Commission notes that the Exchange
will obtain a representation from the
issuer of the Shares that the NAV 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.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.32 Trading in the Shares also
30 On a daily basis, the Adviser 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, such as the
type of swap); the identity of the security,
commodity, index or other asset or instrument
underlying the holding, if any; for options, the
option strike price; 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.
The Fund’s disclosure of derivative positions in the
Disclosed Portfolio will include information that
market participants can use to value these positions
intraday.
31 See NYSE Arca Equities Rule 8.600(d)(1)(B).
32 These may include: (1) The extent to which
trading is not occurring in the securities or the
financial instruments constituting the Disclosed
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Sfmt 4703
21919
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. The Exchange
represents that it has a general policy
prohibiting the distribution of material,
non-public information by its
employees. The Adviser is a registered
broker-dealer and is affiliated with a
broker-dealer, and the Sub-Adviser is
not registered as a broker-dealer but is
affiliated with a broker-dealer. In such
capacity, the Adviser and Sub-Adviser
have implemented a firewall with
respect to their relevant personnel and
their respective broker-dealer affiliates
regarding access to information
concerning the composition and/or
changes to a portfolio, and will be
subject to procedures designed to
prevent the use and dissemination of
material non-public information
regarding such portfolio.33 Further, the
Commission notes that the Reporting
Authority that provides the Disclosed
Portfolio of the Fund must 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 portfolio.34
Prior to the commencement of
trading, the Exchange will inform its
Equity Trading Permit Holders (‘‘ETP
Holders’’) in an Information Bulletin
(‘‘Bulletin’’) of the special
characteristics and risks associated with
trading the Shares. 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, or
by regulatory staff of the Exchange,
which are designed to detect violations
of Exchange rules and applicable federal
securities laws.35
The Exchange represents that it 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. In support of this proposal,
the Exchange has also made the
following representations:
Portfolio of the Fund; or (2) whether other unusual
conditions or circumstances detrimental to the
maintenance of a fair and orderly market are
present.
33 See supra note 7. The Exchange represents that
an investment adviser to an open-end fund is
required to be registered under the Investment
Advisers Act of 1940.
34 See NYSE Arca Equities Rule 8.600(d)(2)(B)(ii).
35 The Exchange states that 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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asabaliauskas on DSK3SPTVN1PROD with NOTICES
(1) The Shares will conform to the
initial and continued listing criteria
under NYSE Arca Equities Rule 8.600.
(2) The Exchange has appropriate
rules to facilitate transactions in the
Shares during all trading sessions.
(3) Trading in the Shares will be
subject to the existing trading
surveillances, administered by
regulatory staff of the Exchange, or
FINRA on behalf of the Exchange,
which are designed to detect violations
of Exchange rules and applicable federal
securities laws, and these procedures
are adequate to properly monitor
Exchange trading of the Shares in all
trading sessions and to deter and detect
violations of Exchange rules and federal
securities laws applicable to trading on
the Exchange.
(4) The Exchange has represented that
all statements and representations made
in this filing regarding (a) the
description of the portfolio, (b)
limitations on portfolio holdings or
reference assets, or (c) the applicability
of Exchange rules and surveillance
procedures shall constitute continued
listing requirements for listing the
Shares on the Exchange. The issuer has
represented to the Exchange that it will
advise the Exchange of any failure by
the Fund to comply with the continued
listing requirements, and, pursuant to
its obligations under Section 19(g)(1) of
the Act, the Exchange will monitor for
compliance with the continued listing
requirements.36 If the Fund is not in
compliance with the applicable listing
requirements, the Exchange will
commence delisting procedures under
NYSE Arca Equities Rule 5.5(m).
(5) FINRA, on behalf of the Exchange,
and regulatory staff of the Exchange,
will communicate as needed regarding
trading in the Shares, certain exchangetraded options and futures, certain
exchange-traded equities (including
ETFs, ETPs. ETNs, CEFs, certain
common stocks and certain REITs) with
other markets or other entities that are
members of the Intermarket
36 The Commission notes that certain other
proposals for the listing and trading of managed
fund shares include a representation that the
exchange will ‘‘surveil’’ for compliance with the
continued listing requirements. See, e.g., Notice of
Filing of Amendment No. 2, and Order Granting
Accelerated Approval of a Proposed Rule Change,
as Modified by Amendment No. 2, to List and Trade
Shares of the SPDR DoubleLine Short Duration
Total Return Tactical ETF of the SSgA Active Trust,
available at: https://www.sec.gov/rules/sro/bats/
2016/34-77499.pdf. In the context of this
representation, it is the Commission’s view that
‘‘monitor’’ and ‘‘surveil’’ both mean ongoing
oversight of the Fund’s compliance with the
continued listing requirements. Therefore, the
Commission does not view ‘‘monitor’’ as a more or
less stringent obligation than ‘‘surveil’’ with respect
to the continued listing requirements.
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17:41 Apr 12, 2016
Jkt 238001
Surveillance Group (‘‘ISG’’),37 and
FINRA and regulatory staff of the
Exchange may obtain trading
information regarding trading in the
Shares, certain exchange-traded options
and futures, certain exchange-traded
equities (including ETFs, ETPs. ETNs,
CEFs, certain common stocks and
certain REITs) from such markets or
entities. In addition, the Exchange may
obtain information regarding trading in
the Shares, certain exchange-traded
options and futures, certain exchangetraded equities (including ETFs, ETPs.
ETNs, CEFs, certain common stocks and
certain REITs) from markets or other
entities that are members of ISG or with
which the Exchange has in place a
comprehensive surveillance sharing
agreement. 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. FINRA also can
access data obtained from the MSRB
relating to municipal bond trading
activity for surveillance purposes in
connection with trading in the Shares.
(6) Prior to the commencement of
trading of the Shares, the Exchange will
inform its ETP Holders in a Bulletin of
the special characteristics and risks
associated with trading the Shares. The
Bulletin will discuss the following: (a)
The procedures for purchases and
redemptions of Shares in creation units
(and that Shares are not individually
redeemable); (b) NYSE Arca Equities
Rule 9.2(a), which imposes a duty of
due diligence on its ETP Holders to
learn the essential facts relating to every
customer prior to trading the Shares; (c)
the risks involved in trading the Shares
during the Opening and Late Trading
Sessions when an updated Portfolio
Indicative Value will not be calculated
or publicly disseminated; (d) how
information regarding the Portfolio
Indicative Value and the Disclosed
Portfolio is disseminated; (e) the
requirement that ETP Holders deliver a
prospectus to investors purchasing
newly issued Shares prior to or
concurrently with the confirmation of a
transaction; and (f) trading information.
(7) For initial and continued listing,
the Fund will be in compliance with
Rule 10A–3 under the Exchange Act,38
as provided by NYSE Arca Equities Rule
5.3.
37 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.
38 17 CFR 240.10A–3.
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Frm 00085
Fmt 4703
Sfmt 4703
(8) A minimum of 100,000 Shares for
the Fund will be outstanding at the
commencement of trading on the
Exchange.
(9) While the Fund may invest in
inverse ETFs, the Fund will not invest
in leveraged (e.g., 2X, –2X, 3X or –3X)
ETFs.
(10) Not more than 10% of the net
assets of the Fund in the aggregate
invested in futures contracts or
exchange-traded options contracts shall
consist of futures contracts or exchangetraded options contracts whose
principal market is not a member of ISG
or is a market with which the Exchange
does not have a comprehensive
surveillance sharing agreement.
(11) Under normal market conditions,
the Fund will invest at least 75% of its
corporate debt securities in issuances
that have at least $100,000,000 par
amount outstanding in developed
countries or at least $200,000,000 par
amount outstanding in emerging market
countries.
(12) The Fund may not invest more
than 30% of its total assets in securities
denominated in non-U.S. Dollars, but
this limitation will not apply to
securities of non-U.S. issuers that are
denominated in U.S. Dollars.
(13) The Fund may not invest more
than 40% of its net assets in Debt
Instruments rated below investment
grade (also known as ‘‘junk bonds’’).
(14) The Fund will not invest more
than 50% of its net assets in securities
of issuers in emerging markets, which
could consist of DRs, dollardenominated foreign securities or nonU.S. dollar denominated foreign
securities.
(15) Investments in non-agency
mortgage and asset backed securities
will be limited to 20% of the Fund’s
total assets in the aggregate.
(16) The Fund may not invest more
than 50% of the Fund’s principal
investments in the securities of issuers
in emerging markets.
(17) 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 securities deemed illiquid by the
Adviser, in accordance with
Commission staff guidance.
(18) The Fund’s investments will be
consistent with the Fund’s investment
objective and will not be used to
enhance leverage. That is, while the
Fund will be permitted to borrow as
permitted under the 1940 Act, the
Fund’s investments will not be used to
seek performance that is the multiple or
inverse multiple (i.e., 2Xs and 3Xs) of
the Fund’s primary broad-based
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13APN1
Federal Register / Vol. 81, No. 71 / Wednesday, April 13, 2016 / Notices
securities benchmark index (as defined
in Form N–1A).
This approval order is based on all of
the Exchange’s representations,
including those set forth above and in
the Amendment No. 1. The Commission
notes that the Fund and the Shares must
comply with the requirements of NYSE
Arca Equities Rule 8.600 to be initially
and continuously listed and traded on
the Exchange.
IV. Solicitation of Comments on
Amendment No. 1
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether Amendment No. 1 to
the proposed rule change is consistent
with the Act. Comments may be
submitted by any of the following
methods:
asabaliauskas on DSK3SPTVN1PROD with NOTICES
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number SR–NYSEArca–2016–14 on the
subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSEArca–2016–14. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
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17:41 Apr 12, 2016
Jkt 238001
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–2016–14 and should be
submitted on or before May 4, 2016.
V. Accelerated Approval of the
Proposed Rule Change, as Modified by
Amendment No. 1
The Commission finds good cause to
approve the proposed rule change, as
modified by Amendment No. 1, prior to
the thirtieth day after the date of
publication of Amendment No. 1 in the
Federal Register. The additional
information in Amendment No. 1,
among other things, helped the
Commission to evaluate the Shares’
susceptibility to manipulation and the
Exchange’s ability to investigate
possible manipulative activity.
Accordingly, the Commission finds
good cause for approving the proposed
rule change, as modified by Amendment
No. 1, on an accelerated basis, pursuant
to Section 19(b)(2) of the Act.39
VI. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Exchange Act,40
that the proposed rule change (SR–
NYSEArca–2016–14), as modified by
Amendment No. 1 thereto, be, and it
hereby is, approved on an accelerated
basis.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.41
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–08422 Filed 4–12–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–77552; File No. SR–
NASDAQ–2016–053]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend
Rules 7015(g)(1) and 7034
April 7, 2016.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on April 6,
2016, The NASDAQ Stock Market LLC
39 15
U.S.C. 78s(b)(2).
40 15 U.S.C. 78s(b)(2).
41 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
PO 00000
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21921
(‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III, below, which Items have been
prepared by the Exchange. 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 the Substance
of the Proposed Rule Change
The Exchange proposes to amend
Access Services fees at Rule 7015(g)(1)
to reduce the fee assessed for MITCH
Wave Ports located at Mahwah, NJ. The
Exchange is also proposing to amend
Rule 7034 to: (i) Reduce monthly fees
assessed for NYSE Equities market data
connectivity; and (ii) make technical
changes to the description of market
data connectivity options under the
rule. While these amendments are
effective upon filing, the Exchange has
designated the proposed amendments to
be operative on April 1, 2016.3
The text of the proposed rule change
is available on the Exchange’s Web site
at https://nasdaq.cchwallstreet.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
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of the proposed rule
change is to reduce certain fees under
Rules 7015 and 7034, and to make
technical changes to the description of
market data connectivity options under
Rule 7034.
3 The Commission notes that the substance of this
filing is identical to the substance of SR–NASDAQ–
2016–047, which was filed March 29, 2016, and
withdrawn on April 6, 2016. This filing replaced
SR–NASDAQ–2016–047, thus, the fee changes were
effective upon filing but have been operative since
April 1, 2016.
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]]>Agencies
[Federal Register Volume 81, Number 71 (Wednesday, April 13, 2016)]
[Notices]
[Pages 21916-21921]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-08422]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-77549; File No. SR-NYSEArca-2016-14]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Amendment No. 1 and Order Granting Accelerated Approval of a
Proposed Rule Change, as Modified by Amendment No. 1, To List and Trade
Shares of the WBI Tactical Rotation Shares Under NYSE Arca Equities
Rule 8.600
April 7, 2016.
I. Introduction
On February 3, 2016, 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 WBI Tactical
Rotation Shares (``Fund'') under NYSE Arca Equities Rule 8.600. The
Commission published notice of the proposed rule change in the Federal
Register on February 23, 2016.\3\ The Commission received no comments
on the proposed rule change. On March 28, 2016, the Exchange filed
Amendment No. 1 to the proposed rule change.\4\ The Commission is
publishing this notice to solicit comment on Amendment No. 1 to the
proposed rule change from interested persons, and is approving the
proposed rule change, as modified by Amendment No. 1, on an accelerated
basis.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 77160 (February 17,
2016), 81 FR 9029.
\4\ In Amendment No. 1, which replaced the original filing in
its entirety, the Exchange: (1) Clarified a reference to debt
securities is to ``Debt Instruments,'' as described in the filing;
(2) represented that, under normal market conditions, the Fund will
invest at least 75% of its corporate debt securities that have at
least $1,000,000 par amount outstanding in developed countries or at
least $200,000,000 in emerging markets countries; (3) stated that
the Fund's assets invested in Debt Instruments would meet certain
criteria for index-based fixed-income ETFs contained in Exchange
Rule 5.2(j)(3), Commentary .02; (4) stated where price information
could be found for non-exchange listed ADRs, RMBS, CMBS, ABS, and
municipal securities; (5) clarified that all statements and
representations made in the filing regarding the description of the
portfolio, limitations on portfolio holdings or reference assets, or
the applicability of Exchange rules and surveillance procedures
constitute continued listing requirements for listing the Shares on
the Exchange; (6) stated that the issuer has represented to the
Exchange that it will advise the Exchange of any failure by the Fund
to comply with the continued listing requirements, and, pursuant to
its obligations under Section 19(g)(1) of the Act, the Exchange will
monitor for compliance with the continued listing requirements, and
if the Fund is not in compliance with the applicable listing
requirements, the Exchange will commence delisting procedures under
NYSE Arca Equities Rule 5.5(m); and (7) made other clarifying and
technical amendments. Amendment No. 1 is available at: https://www.sec.gov/comments/sr-nysearca-2016-14/nysearca201614-1.pdf.
---------------------------------------------------------------------------
II. The Exchange's Description of the Proposal 5
---------------------------------------------------------------------------
\5\ The Commission notes that additional information regarding
the Fund, the Trust (as defined below), and the Shares, including
investment strategies, risks, creation and redemption procedures,
fees, portfolio holdings, disclosure policies, calculation of net
asset value (``NAV''), distributions, and taxes, among other things,
can be found in Amendment No. 1 and the Registration Statement, as
applicable. See Amendment No. 1, supra note 4, and Registration
Statement, infra note 6.
---------------------------------------------------------------------------
The Exchange proposes to list and trade the Shares under NYSE Arca
Equities Rule 8.600, which governs the listing and trading of Managed
Fund Shares on the Exchange. The Shares will be offered by the Absolute
Shares Trust (``Trust''), a statutory trust organized under the laws of
the State of Delaware and registered with the Commission as an open-end
management investment
[[Page 21917]]
company.\6\ Millington Securities, Inc. (``Adviser''), a wholly-owned
subsidiary of WBI Trading Company, Inc., will be the investment advisor
to the Fund, and WBI Investments, Inc. (``Sub-Adviser''), an affiliate
of WBI Trading Company, Inc., will act as Sub-Adviser to the Fund.\7\
U.S. Bancorp Fund Services, LLC will serve as the administrator,
transfer agent, and index receipt agent. U.S. Bank, National
Association will serve as the Fund's custodian and securities lending
agent. Foreside Fund Services, LLC will serve as the distributor for
the Fund on an agency basis.
---------------------------------------------------------------------------
\6\ The Trust is registered under the 1940 Act. On August 24,
2015, the Trust filed with the Commission a registration statement
on Form N-1A, and on November 6, 2015 filed an amendment thereto,
under the Securities Act of 1933 (15 U.S.C. 77a) (``Securities
Act'') and the 1940 Act relating to the Fund (File Nos. 333-192733
and 811-22917) (as amended, the ``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.
30543 (May 29, 2013) (File No. 812-13886) (``Exemptive Order'').
\7\ The Adviser is a registered broker-dealer and is affiliated
with a broker-dealer. The Sub-Adviser is not registered as a broker-
dealer but is affiliated with a broker-dealer. In such capacity, the
Adviser and Sub-Adviser have implemented a firewall with respect to
their relevant personnel and their respective broker-dealer
affiliates regarding access to information concerning the
composition and/or changes to a portfolio, and will be subject to
procedures designed to prevent the use and dissemination of material
non-public information regarding such portfolio. In the event (a)
the Adviser becomes newly affiliated with a broker-dealer or Sub-
Adviser becomes registered as a broker-dealer or newly affiliated
with a broker-dealer, as applicable, or (b) any new adviser or sub-
adviser is a broker-dealer or becomes affiliated with a broker-
dealer, it will implement a fire wall with respect to its personnel
or such broker-dealer 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.
---------------------------------------------------------------------------
A. The Fund's Principal Investments
According to the Exchange, the Fund's investment objective is to
seek long term capital appreciation while also seeking to protect
principal during unfavorable market conditions.\8\
---------------------------------------------------------------------------
\8\ The Sub-Adviser's proprietary portfolio selection process
used for the Fund attempts to identify investments that can provide
consistent, attractive returns net of expenses with potentially less
volatility and risk to capital than traditional approaches, whatever
market conditions may be.
---------------------------------------------------------------------------
The Fund, under normal market conditions,\9\ will seek to invest
primarily (more than 50% of its total assets) in the principal
investments discussed in this section. The Fund will invest directly in
equity securities, debt instruments and ``Financial Instruments'' (as
described below) or will invest in them indirectly by investing in the
equity securities of other registered investment companies (including
exchange traded funds (``ETFs''),\10\ mutual funds, unit investment
trusts, exchange-traded and over-the counter (``OTC'') closed-end funds
(``CEFs'') and exchange-traded and OTC business development companies),
equity securities of exchange-traded pooled vehicles not required to be
registered under the 1940 Act and issuing equity securities
(``ETPVs''),\11\ exchange-traded notes (``ETNs''),\12\ equity-linked
notes (``ELNs''),\13\ and index-linked exchangeable notes (``ILENs'')
\14\ (collectively, ETFs, ETPVs, ETNs, ELNs and ILENs are referred to
as ``exchange traded products'' or ``ETPs,'' and collectively, ETFs,
mutual funds, unit investment trusts, CEFs, and business development
companies are referred to as ``Registered Funds'').
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\9\ The term ``under normal market conditions'' includes, but is
not limited to, the absence of extreme volatility or trading halts
in the equity markets or the financial markets generally;
operational issues causing dissemination of inaccurate market
information; or force majeure type events such as systems failure,
natural or man-made disaster, act of God, armed conflict, act of
terrorism, riot or labor disruption or any similar intervening
circumstance.
\10\ For purposes of this filing, ETFs consist of 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). All ETFs will be listed and traded in the U.S.
on a national securities exchange. While the Fund may invest in
inverse ETFs, the Fund will not invest in leveraged (e.g., 2X, -2X,
3X or -3X) ETFs.
\11\ For purposes of this filing, the ``exchange-traded pooled
vehicles'' or ``ETPVs'' consist of 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 Commodity Futures Trust Shares (as described in
NYSE Arca Equities Rule 8.204).
\12\ ETNs include Index-Linked Securities (as described in NYSE
Arca Equities Rule 5.2(j)(6)).
\13\ Equity Linked Notes are described in NYSE Arca Equities
Rule 5.2(j)(2).
\14\ Index-Linked Exchangeable Notes are described in NYSE Arca
Equities Rule 5.2(j)(4).
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The Fund may invest in the following exchange-traded and OTC U.S.
and foreign equity securities (other than non-exchange-traded
investment company securities): Common stocks, preferred stocks,
rights, warrants, convertibles, master limited partnerships (exchange-
traded businesses organized as partnerships (``MLPs'')), Depositary
Receipts (``DRs'', as described below),\15\ and exchange-traded real
estate investment trusts (``REITs'').
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\15\ For purposes of this filing, DRs means the following:
American Depositary Receipts (``ADRs''), American Depositary Shares
(``ADSs''), European Depositary Receipts (``EDRs''), Global
Depositary Receipts (``GDRs'') and International Depositary Receipts
(``IDRs''). ADSs are issued by depository banks in the United States
under an agreement with the foreign issuer, and the entire issuance
is called an ADR and the individual shares are referred to as ADSs.
ADRs may be purchased through ``sponsored'' or ``unsponsored''
facilities. Not more than 10% of the Fund's assets will be invested
in non-exchange-listed ADRs.
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As part of the Fund's principal investment strategy, up to 20% of
the Fund's net assets may be invested in exchange-traded or OTC
``Financial Instruments,'' which are the following: Foreign exchange
forward contracts; futures on equity securities, debt securities (i.e.,
``Debt Securities'' defined below), equity indices, fixed income
indices, commodity indices, currencies, commodities, and interest
rates; exchange-traded and OTC options on equity indices, currencies,
and equity and debt securities; exchange-traded and OTC options on
futures contracts; exchange-traded and OTC interest rate swaps, cross-
currency swaps, total return swaps on fixed income and equity
securities, inflation swaps and credit default swaps; and options on
such swaps (``swaptions'').\16\ Financial Instruments will be utilized
in connection with option strategies used by the Fund, including
writing (selling) covered calls, buying puts, using combinations of
calls and puts, and using combinations of calls and combinations of put
options (``puts''). The Fund may also use options on indices and on
futures, such as by writing a call on a futures contract.\17\ The Fund
may enter cap, floor and collar agreements as a part of its option
strategies.
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\16\ Options on swaps are traded OTC. In the future, in the
event that there are exchange-traded options on swaps, the Fund may
invest in these instruments.
\17\ The Fund may directly write call options on stocks and
stock indices if the calls are ``covered'' throughout the life of
the option. The Fund may also write and purchase puts.
---------------------------------------------------------------------------
As part of its principal investment strategy, the Fund may invest
in the following types of debt securities (``Debt Instruments''):
Corporate debt securities; \18\ corporate debt securities that are
convertible into common stock or interests; U.S. Government securities;
\19\ debt securities of foreign
[[Page 21918]]
issuers; sovereign debt securities; repurchase agreements; municipal
securities; sovereign debt obligations; obligations of international
agencies or supranational agencies; sovereign, quasi-sovereign,
supranational or local authority debt obligations issued by non-U.S.
governments; Treasury Inflation-Protected Securities; and zero coupon
bonds. Debt Instruments may be of all maturities, from less than one
year to more than thirty years (if available). Debt Instruments may be
fixed, variable or floating rate securities.\20\
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\18\ Such corporate debt securities also include debt securities
sold pursuant to Rule 144A under the Securities Act. Under normal
market conditions, the Fund will invest at least 75% of its
corporate debt securities in issuances that have at least
$100,000,000 par amount outstanding in developed countries or at
least $200,000,000 par amount outstanding in emerging market
countries.
\19\ The Fund may invest in U.S. Government obligations and
other quasi government related obligations. Such obligations include
Treasury bills, certificates of indebtedness, notes and bonds, and
issues of such entities as the Government National Mortgage
Association, Federal Home Loan Banks, Federal Intermediate Credit
Banks, Federal Farm Credit Banks, Federal Housing Administration,
Federal National Mortgage Association, Federal Home Loan Mortgage
Corporation, and the Student Loan Marketing Association.
\20\ The Fund's assets invested in Debt Instruments will meet
certain criteria for index-based, fixed-income ETFs contained in
NYSE Arca Equities Rule 5.2(j)(3), Commentary .02. See NYSE Arca
Equities Rule 5.2(j)(3), Commentary .02 governing fixed-income-based
Investment Company Units. The requirements of Rule 5.2(j)(3),
Commentary .02(a) that will be met include the following: (i) The
index or portfolio must consist of ``Fixed Income Securities'' as
defined in Rule 5.2(j)(3), Commentary .02(a)(1); (ii) components
that in the aggregate account for at least 75% of the weight of the
index or portfolio each must have a minimum original principal
amount outstanding of $100 million or more; (iii) a component may be
a convertible security, but once the convertible security converts
to an underlying equity security, the component is removed from the
index or portfolio; (iv) no component fixed income security
(excluding Treasury Securities) will represent more than 30% of the
weight of the index or portfolio, and the five highest weighted
component fixed-income securities do not in the aggregate account
for more than 65% of the weight of the index or portfolio; (v) an
underlying index or portfolio (excluding exempted securities) must
include securities from a minimum of 13 non-affiliated issuers; and
(vi) component securities that in aggregate account for at least 90%
of the weight of the index or portfolio must be either (a) from
issuers that are required to file reports pursuant to Sections 13
and 15(d) of the Act; (b) from issuers that have a worldwide market
value of its outstanding common equity held by non-affiliates of
$700 million or more; (c) from issuers that have outstanding
securities that are notes, bonds, debentures, or evidence of
indebtedness having a total remaining principal amount of at least
$1 billion; (d) exempted securities as defined in Section 3(a)(12)
of the Act; or (e) from issuers that are a government of a foreign
country or a political subdivision of a foreign country.
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The Fund may invest in and hold cash or ``Cash Equivalents'' \21\
as part of the normal operation of its principal investment strategy.
---------------------------------------------------------------------------
\21\ ``Cash Equivalents'' means: High-quality short-term debt
securities; money market instruments, certificates of deposit issued
by commercial banks as well as savings banks or savings and loan
associations; bankers' acceptances; time deposits; and commercial
paper and short-term notes rated at the time of purchase ``A-2'' or
higher by Standard & Poor's, ``Prime-1'' by Moody's Investors
Services Inc., or similarly rated by another nationally recognized
statistical rating organization, or, if unrated, will be determined
by the Sub-Adviser to be of comparable quality, as well as U.S.
Government obligations.
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For investments in Registered Funds, the Fund may invest in excess
of the limits contained in the 1940 Act.\22\
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\22\ The Exchange states that the Commission has granted
exemptive relief to the Trust under Section 12(d)(1)(J) of the 1940
Act permitting the Fund to operate as a ``fund of funds'' and invest
in other investment companies without complying with the limitations
set forth in Section 12(d)(1) of the 1940 Act, subject to certain
terms and limitations that are contained in the Exemptive Order.
---------------------------------------------------------------------------
B. The Fund's Other Investments
While the Fund, under normal market conditions, will seek to invest
primarily (at least 50% of its total assets) in the securities
described above, the Fund may invest as part of its non-principal
investment strategy (less than 50% of the Fund's assets) in short
positions in equity securities and in agency and non-agency residential
mortgage-backed securities (``RMBS''); agency and non-agency commercial
mortgage-backed securities (``CMBS''); and agency and non-agency asset-
backed securities (``ABS'').
C. The Fund's Investment Restrictions
The Fund may invest up to 40% of its net assets in Debt Instruments
rated below investment grade.
The Fund will not invest more than 50% of its net assets in
securities of issuers in emerging markets, which could consist of DRs,
dollar-denominated foreign securities or non-U.S. dollar denominated
foreign securities.
Investments in non-agency mortgage and asset backed securities will
be limited to 20% of the Fund's total assets in the aggregate.
The Fund may invest up to 30% of its total assets in securities
denominated in non-U.S. Dollars, but this limitation will not apply to
securities of non-U.S. issuers that are denominated in U.S. Dollars.
The Fund may invest up to 50% of the Fund's principal investments in
the securities of issuers in emerging markets.
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 securities deemed illiquid by the Adviser. The Fund
will monitor its portfolio liquidity on an ongoing basis to determine
whether, in light of current circumstances, an adequate level of
liquidity is being maintained, and will consider taking appropriate
steps in order to maintain adequate liquidity if, through a change in
values, net assets, or other circumstances, more than 15% of the Fund's
net assets are held in illiquid assets. Illiquid assets include
securities subject to contractual or other restrictions on resale and
other instruments that lack readily available markets as determined in
accordance with Commission staff guidance.\23\
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\23\ 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. 31835 (September 22, 2015),
discussions at footnotes 92 and 93; 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
1933 Act).
---------------------------------------------------------------------------
The Fund will be non-diversified under the 1940 Act.\24\
---------------------------------------------------------------------------
\24\ The diversification standard is set forth in Section
5(b)(1) of the 1940 Act (15 U.S.C. 80e).
---------------------------------------------------------------------------
The Fund's investments will be consistent with the Fund's
investment objective and will not be used to enhance leverage. That is,
while the Fund will be permitted to borrow as permitted under the 1940
Act, the Fund's investments will not be used to seek performance that
is the multiple or inverse multiple (i.e., 2Xs and 3Xs) of the Fund's
primary broad-based securities benchmark index (as defined in Form N-
1A).\25\
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\25\ The Fund's broad-based securities benchmark index will be
identified in a future amendment to the Registration Statement
following the Fund's first full calendar year of performance.
---------------------------------------------------------------------------
III. Discussion and Commission Findings
After careful review, the Commission finds that the Exchange's
proposal to list and trade the Shares is consistent with the Exchange
Act and the rules and regulations thereunder applicable to a national
securities exchange.\26\ In particular, the Commission finds that the
proposed rule change, as modified by Amendment No. 1, is consistent
with Section 6(b)(5) of the Exchange Act,\27\ which requires, among
other things, that the Exchange's rules be designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, to remove impediments to and perfect the
[[Page 21919]]
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest. The
Commission also finds that the proposal to list and trade the Shares on
the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the
Exchange Act,\28\ which sets forth the finding of Congress that it is
in the public interest and appropriate for the protection of investors
and the maintenance of fair and orderly markets to assure the
availability to brokers, dealers, and investors of information with
respect to quotations for and transactions in securities.
---------------------------------------------------------------------------
\26\ 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).
\27\ 15 U.S.C. 78f(b)(5).
\28\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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According to the Exchange, quotation and last-sale information for
the Shares, and U.S. exchange-traded common stocks, preferred stocks,
rights, warrants, convertibles, MLPs, DRs, REITs, CEFs, ETFs, ETPs and
ETNs will be available via the Consolidated Tape Association (``CTA'')
high-speed line. Intra-day price information for foreign exchange-
traded common stocks, preferred stocks, rights, warrants, convertibles,
MLPs, DRs and REITs, will be available from the applicable foreign
exchange and from major market data vendors. Price information for OTC
common stocks, OTC CEFs, non-exchange listed ADRs, RMBS, CMBS, ABS, and
OTC Financial Instruments will be available from major market data
vendors. Intra-day and closing price information for exchange-traded
Financial Instruments will be available from the applicable exchange
and from major market data vendors. In addition, price information for
U.S. exchange-traded options is available from the Options Price
Reporting Authority. Intra-day price information for Cash Equivalents
will be available from major market data vendors. Price information for
municipal securities is available from the Municipal Securities
Rulemaking Board's (``MSRB'') Electronic Municipal Market Access
system.
In addition, the Portfolio Indicative Value, as defined in NYSE
Arca Equities Rule 8.600 (c)(3), will be widely disseminated by one or
more major market data vendors at least every 15 seconds during the
Core Trading Session.\29\ On each business day, before commencement of
trading in Shares in the Core Trading Session on the Exchange, the Fund
will disclose on its Web site the Disclosed Portfolio, as defined in
NYSE Arca Equities Rule 8.600(c)(2), that will form the basis for the
Fund's calculation of NAV at the end of the business day.\30\
---------------------------------------------------------------------------
\29\ Currently, it is the Exchange's understanding that several
major market data vendors display and/or make widely available
Portfolio Indicative Values taken from CTA or other data feeds.
\30\ On a daily basis, the Adviser 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, such as the type of swap); the identity of the
security, commodity, index or other asset or instrument underlying
the holding, if any; for options, the option strike price; 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.
The Fund's disclosure of derivative positions in the Disclosed
Portfolio will include information that market participants can use
to value these positions intraday.
---------------------------------------------------------------------------
The NAV for the Shares will be calculated after 4:00 p.m. Eastern
Time each trading day. A basket composition file, which will include
the security names and share quantities required to be delivered in
exchange for Fund Shares, together with estimates and actual cash
components, will be publicly disseminated daily prior to the opening of
the New York Stock Exchange via the National Securities Clearing
Corporation. Information regarding market price and trading volume for
the Shares will be continually available on a real-time basis
throughout the day on brokers' computer screens and other electronic
services. The Web site for the Fund will include a form of the
prospectus for the Fund and additional data relating to NAV and other
applicable quantitative information.
The Commission further believes that the proposal to list and trade
the Shares is reasonably designed to promote fair disclosure of
information that may be necessary to price the Shares appropriately and
to prevent trading when a reasonable degree of transparency cannot be
assured. The Commission notes that the Exchange will obtain a
representation from the issuer of the Shares that the NAV 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.\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.\32\
Trading in the Shares also 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. The Exchange represents that it has a general
policy prohibiting the distribution of material, non-public information
by its employees. The Adviser is a registered broker-dealer and is
affiliated with a broker-dealer, and the Sub-Adviser is not registered
as a broker-dealer but is affiliated with a broker-dealer. In such
capacity, the Adviser and Sub-Adviser have implemented a firewall with
respect to their relevant personnel and their respective broker-dealer
affiliates regarding access to information concerning the composition
and/or changes to a portfolio, and will be subject to procedures
designed to prevent the use and dissemination of material non-public
information regarding such portfolio.\33\ Further, the Commission notes
that the Reporting Authority that provides the Disclosed Portfolio of
the Fund must implement and maintain, or be subject to, procedures
designed to prevent the use and dissemination of material, non-public
information regarding the actual components of the portfolio.\34\
---------------------------------------------------------------------------
\31\ See NYSE Arca Equities Rule 8.600(d)(1)(B).
\32\ These may include: (1) The extent to which trading is not
occurring in the securities or the financial instruments
constituting 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.
\33\ See supra note 7. The Exchange represents that an
investment adviser to an open-end fund is required to be registered
under the Investment Advisers Act of 1940.
\34\ See NYSE Arca Equities Rule 8.600(d)(2)(B)(ii).
---------------------------------------------------------------------------
Prior to the commencement of trading, the Exchange will inform its
Equity Trading Permit Holders (``ETP Holders'') in an Information
Bulletin (``Bulletin'') of the special characteristics and risks
associated with trading the Shares. 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, or by regulatory staff
of the Exchange, which are designed to detect violations of Exchange
rules and applicable federal securities laws.\35\
---------------------------------------------------------------------------
\35\ The Exchange states that 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.
---------------------------------------------------------------------------
The Exchange represents that it 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.
In support of this proposal, the Exchange has also made the following
representations:
[[Page 21920]]
(1) The Shares will conform to the initial and continued listing
criteria under NYSE Arca Equities Rule 8.600.
(2) The Exchange has appropriate rules to facilitate transactions
in the Shares during all trading sessions.
(3) Trading in the Shares will be subject to the existing trading
surveillances, administered by regulatory staff of the Exchange, or
FINRA on behalf of the Exchange, which are designed to detect
violations of Exchange rules and applicable federal securities laws,
and these procedures are adequate to properly monitor Exchange trading
of the Shares in all trading sessions and to deter and detect
violations of Exchange rules and federal securities laws applicable to
trading on the Exchange.
(4) The Exchange has represented that all statements and
representations made in this filing regarding (a) the description of
the portfolio, (b) limitations on portfolio holdings or reference
assets, or (c) the applicability of Exchange rules and surveillance
procedures shall constitute continued listing requirements for listing
the Shares on the Exchange. The issuer has represented to the Exchange
that it will advise the Exchange of any failure by the Fund to comply
with the continued listing requirements, and, pursuant to its
obligations under Section 19(g)(1) of the Act, the Exchange will
monitor for compliance with the continued listing requirements.\36\ If
the Fund is not in compliance with the applicable listing requirements,
the Exchange will commence delisting procedures under NYSE Arca
Equities Rule 5.5(m).
---------------------------------------------------------------------------
\36\ The Commission notes that certain other proposals for the
listing and trading of managed fund shares include a representation
that the exchange will ``surveil'' for compliance with the continued
listing requirements. See, e.g., Notice of Filing of Amendment No.
2, and Order Granting Accelerated Approval of a Proposed Rule
Change, as Modified by Amendment No. 2, to List and Trade Shares of
the SPDR DoubleLine Short Duration Total Return Tactical ETF of the
SSgA Active Trust, available at: https://www.sec.gov/rules/sro/bats/2016/34-77499.pdf. In the context of this representation, it is the
Commission's view that ``monitor'' and ``surveil'' both mean ongoing
oversight of the Fund's compliance with the continued listing
requirements. Therefore, the Commission does not view ``monitor'' as
a more or less stringent obligation than ``surveil'' with respect to
the continued listing requirements.
---------------------------------------------------------------------------
(5) FINRA, on behalf of the Exchange, and regulatory staff of the
Exchange, will communicate as needed regarding trading in the Shares,
certain exchange-traded options and futures, certain exchange-traded
equities (including ETFs, ETPs. ETNs, CEFs, certain common stocks and
certain REITs) with other markets or other entities that are members of
the Intermarket Surveillance Group (``ISG''),\37\ and FINRA and
regulatory staff of the Exchange may obtain trading information
regarding trading in the Shares, certain exchange-traded options and
futures, certain exchange-traded equities (including ETFs, ETPs. ETNs,
CEFs, certain common stocks and certain REITs) from such markets or
entities. In addition, the Exchange may obtain information regarding
trading in the Shares, certain exchange-traded options and futures,
certain exchange-traded equities (including ETFs, ETPs. ETNs, CEFs,
certain common stocks and certain REITs) from markets or other entities
that are members of ISG or with which the Exchange has in place a
comprehensive surveillance sharing agreement. 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. FINRA also can access data obtained
from the MSRB relating to municipal bond trading activity for
surveillance purposes in connection with trading in the Shares.
---------------------------------------------------------------------------
\37\ 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.
---------------------------------------------------------------------------
(6) Prior to the commencement of trading of the Shares, the
Exchange will inform its ETP Holders in a Bulletin of the special
characteristics and risks associated with trading the Shares. The
Bulletin will discuss the following: (a) The procedures for purchases
and redemptions of Shares in creation units (and that Shares are not
individually redeemable); (b) NYSE Arca Equities Rule 9.2(a), which
imposes a duty of due diligence on its ETP Holders to learn the
essential facts relating to every customer prior to trading the Shares;
(c) the risks involved in trading the Shares during the Opening and
Late Trading Sessions when an updated Portfolio Indicative Value will
not be calculated or publicly disseminated; (d) how information
regarding the Portfolio Indicative Value and the Disclosed Portfolio is
disseminated; (e) the requirement that ETP Holders deliver a prospectus
to investors purchasing newly issued Shares prior to or concurrently
with the confirmation of a transaction; and (f) trading information.
(7) For initial and continued listing, the Fund will be in
compliance with Rule 10A-3 under the Exchange Act,\38\ as provided by
NYSE Arca Equities Rule 5.3.
---------------------------------------------------------------------------
\38\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------
(8) A minimum of 100,000 Shares for the Fund will be outstanding at
the commencement of trading on the Exchange.
(9) While the Fund may invest in inverse ETFs, the Fund will not
invest in leveraged (e.g., 2X, -2X, 3X or -3X) ETFs.
(10) Not more than 10% of the net assets of the Fund in the
aggregate invested in futures contracts or exchange-traded options
contracts shall consist of futures contracts or exchange-traded options
contracts whose principal market is not a member of ISG or is a market
with which the Exchange does not have a comprehensive surveillance
sharing agreement.
(11) Under normal market conditions, the Fund will invest at least
75% of its corporate debt securities in issuances that have at least
$100,000,000 par amount outstanding in developed countries or at least
$200,000,000 par amount outstanding in emerging market countries.
(12) The Fund may not invest more than 30% of its total assets in
securities denominated in non-U.S. Dollars, but this limitation will
not apply to securities of non-U.S. issuers that are denominated in
U.S. Dollars.
(13) The Fund may not invest more than 40% of its net assets in
Debt Instruments rated below investment grade (also known as ``junk
bonds'').
(14) The Fund will not invest more than 50% of its net assets in
securities of issuers in emerging markets, which could consist of DRs,
dollar-denominated foreign securities or non-U.S. dollar denominated
foreign securities.
(15) Investments in non-agency mortgage and asset backed securities
will be limited to 20% of the Fund's total assets in the aggregate.
(16) The Fund may not invest more than 50% of the Fund's principal
investments in the securities of issuers in emerging markets.
(17) 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 securities deemed illiquid by the Adviser, in
accordance with Commission staff guidance.
(18) The Fund's investments will be consistent with the Fund's
investment objective and will not be used to enhance leverage. That is,
while the Fund will be permitted to borrow as permitted under the 1940
Act, the Fund's investments will not be used to seek performance that
is the multiple or inverse multiple (i.e., 2Xs and 3Xs) of the Fund's
primary broad-based
[[Page 21921]]
securities benchmark index (as defined in Form N-1A).
This approval order is based on all of the Exchange's
representations, including those set forth above and in the Amendment
No. 1. The Commission notes that the Fund and the Shares must comply
with the requirements of NYSE Arca Equities Rule 8.600 to be initially
and continuously listed and traded on the Exchange.
IV. Solicitation of Comments on Amendment No. 1
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether Amendment No. 1
to 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-2016-14 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2016-14. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549 on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSEArca-2016-14 and should
be submitted on or before May 4, 2016.
V. Accelerated Approval of the Proposed Rule Change, as Modified by
Amendment No. 1
The Commission finds good cause to approve the proposed rule
change, as modified by Amendment No. 1, prior to the thirtieth day
after the date of publication of Amendment No. 1 in the Federal
Register. The additional information in Amendment No. 1, among other
things, helped the Commission to evaluate the Shares' susceptibility to
manipulation and the Exchange's ability to investigate possible
manipulative activity. Accordingly, the Commission finds good cause for
approving the proposed rule change, as modified by Amendment No. 1, on
an accelerated basis, pursuant to Section 19(b)(2) of the Act.\39\
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\39\ 15 U.S.C. 78s(b)(2).
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VI. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Exchange Act,\40\ that the proposed rule change (SR-NYSEArca-2016-14),
as modified by Amendment No. 1 thereto, be, and it hereby is, approved
on an accelerated basis.
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\40\ 15 U.S.C. 78s(b)(2).
\41\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\41\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-08422 Filed 4-12-16; 8:45 am]
BILLING CODE 8011-01-P
