Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change Relating to a Change to the Underlying Index for the PowerShares Build America Bond Portfolio, 32371-32376 [2016-12016]

Download as PDF Federal Register / Vol. 81, No. 99 / Monday, May 23, 2016 / Notices Value, the Disclosed Portfolio, and quotation and last sale information for the Shares. The proposed rule change is designed to perfect the mechanism of a free and open market and, in general, to protect investors and the public interest in that it will facilitate the listing and trading of an additional type of activelymanaged exchange-traded product that will enhance competition among market participants, to the benefit of investors and the marketplace. As noted above, the Exchange has in place surveillance procedures that are adequate to properly monitor trading in the Shares in all trading sessions and to deter and detect violations of Exchange rules and applicable federal securities laws. In addition, as noted above, investors will have ready access to information regarding the Fund’s holdings, the Portfolio Indicative Value, the Disclosed Portfolio, and quotation and last sale information for the Shares. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purpose of the Act. The Exchange notes that the proposed rule change will facilitate the listing and trading of an additional type of actively-managed exchange-traded product that primarily holds equity securities and that will enhance competition among market participants, to the benefit of investors and the marketplace. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. sradovich on DSK3TPTVN1PROD with NOTICES III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) By order approve or disapprove the proposed rule change, or (B) institute proceedings to determine whether the proposed rule change should be disapproved. VerDate Sep<11>2014 18:25 May 20, 2016 Jkt 238001 IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.29 Robert W. Errett, Deputy Secretary. [FR Doc. 2016–12014 Filed 5–20–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION 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–2016–64 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–2016–64. 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–2016–64 and should be submitted on or before June 13, 2016. PO 00000 [Release No. 34–77849; File No. SR– NYSEArca–2016–62] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change Relating to a Change to the Underlying Index for the PowerShares Build America Bond Portfolio May 17, 2016. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on May 3, 2016, NYSE Arca, Inc. (the ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to: (1) Permit the continued listing and trading of shares of the PowerShares Build America Bond Portfolio (the ‘‘Fund’’) following a change to the index underlying the Fund, and (2) propose changes to the index underlying the Fund and the name of the Fund, as described below. The proposed rule change is available on the Exchange’s Web site at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received 29 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 Frm 00098 Fmt 4703 32371 Sfmt 4703 E:\FR\FM\23MYN1.SGM 23MYN1 32372 Federal Register / Vol. 81, No. 99 / Monday, May 23, 2016 / Notices on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change sradovich on DSK3TPTVN1PROD with NOTICES 1. Purpose The Exchange currently lists and trades shares (‘‘Shares’’) of the Fund 4 under NYSE Arca Equities Rule 5.2(j)(3), Commentary .02, which governs the listing and trading of Investment Company Units (‘‘Units’’) based on fixed income securities indexes.5 The Fund is a series of the PowerShares ExchangeTraded Fund Trust II (‘‘Trust’’).6 4 On February 26, 2016, the Trust filed a posteffective amendment on Form 485 under the Securities Act of 1933 (15 U.S.C. 77a) (‘‘1933 Act’’) to its registration statement on Form N–1A under the 1933 Act and the Investment Company Act of 1940 (‘‘1940 Act’’) (15 U.S.C. 80a–1) (File Nos. 333– 138490 and 811–21977) (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. 27841 (May 25, 2007) (File No. 812–13335) (‘‘Exemptive Order’’). 5 The PowerShares Build America Bond Portfolio was initially listed on the Exchange on November 17, 2009 pursuant to the generic listing criteria of Commentary .02 to NYSE Arca Equities Rule 5.2(j)(3). 6 The Commission previously has approved a proposed rule change relating to listing and trading on the Exchange of Units based on municipal bond indexes. See Securities Exchange Act Release Nos. 75376 (July 7, 2015), 80 FR 40113 (July 13, 2015) (SR–NYSEArca–2015–18) (order approving listing and trading of Vanguard Tax-Exempt Bond Index Fund under NYSE Arca Equities Rule 5.2(j)(3), Commentary .02); 71232 (January 3, 2014), 79 FR 1662 (January 9, 2014) (SR–NYSEArca–2013–118) (order approving listing and trading of Market Vectors Short High-Yield Municipal Index ETF under NYSE Arca Equities Rule 5.2(j)(3), Commentary .02); 63881 (February 9, 2011), 76 FR 9065 (February 16, 2011) (SR–NYSEArca–2010– 120) (order approving listing and trading of SPDR Nuveen S&P High Yield Municipal Bond ETF Fund under NYSE Arca Equities Rule 5.2(j)(3), Commentary .02); 67985 (October 4, 2012), 77 FR 61804 (October 11, 2012) (SR–NYSEArca–2012–92) (order approving proposed rule change relating to the listing and trading of iShares 2018 S&P AMTFree Municipal Series and iShares 2019 S&P AMTFree Municipal Series under NYSE Arca Equities Rule 5.2(j)(3), Commentary .02)); 75468 (July 16, 2015), 80 FR 43500 (July 22, 2015) (SR–NYSEArca– 2015–25) (order approving proposed rule change relating to the listing and trading of iShares iBonds Dec 2021 AMT Free Municipal Bond ETF and iShares iBonds Dec 2022 AMT-Free Municipal Bond ETF under NYSE Arca Equities Rule 5.2(j)(3), Commentary .02); 72464 (June 25, 2014), 79 FR 37373 (July 1, 2014) (SR–NYSEArca–2014–45) (order approving proposed rule change governing the continued listing and trading of Shares of the PowerShares Insured California Municipal Bond VerDate Sep<11>2014 18:25 May 20, 2016 Jkt 238001 Invesco PowerShares Capital Management LLC is the investment adviser (‘‘Adviser’’) for the Fund. Invesco Distributors, Inc. is the Fund’s distributor (‘‘Distributor’’). The Bank of New York Mellon is the administrator, custodian and fund accounting and transfer agent for the Fund. The Exchange is submitting this proposed rule change (1) to permit the continued listing and trading of Shares of the Fund following a change to the index underlying the Fund, and (2) to propose changes to the index underlying the Fund and the name of the Fund, as described below. The Fund seeks investment results that generally correspond to the price and yield (before fees and expenses) of The BofA Merrill Lynch Build America Bond Index (the ‘‘Build America Bond Index’’). The Fund generally invests at least 80% of its total assets in taxable municipal securities eligible to participate in the Build America Bond program created under the American Recovery and Reinvestment Act of 2009 or other legislation providing for the issuance of taxable municipal securities on which the issuer receives federal support of the interest paid (‘‘Build America Bonds’’) and that comprise the Build America Bond Index. The Build America Bond Index is designed to track the performance of U.S. dollardenominated investment grade taxable municipal debt publicly issued under the Build America Bond program by U.S. states and territories, and their political subdivisions, in the U.S. market. Qualifying securities must have a minimum amount outstanding of $1 million, at least 18 months remaining term to final maturity at the time of issuance and at least one year remaining term to final maturity, a fixed coupon schedule and an investment grade rating (based on an average of Moody’s Investors Services, Inc. (‘‘Moody’s’’), Standard & Poor’s, a division of The McGraw-Hill Company, Inc. (‘‘S&P’’) and Fitch Ratings, Inc. (‘‘Fitch’’). As described below, the Trust has proposed to change the index underlying the Fund to the BofA Merrill Lynch US Taxable Municipal Securities Plus Index (the ‘‘New Index’’) and to change the name of the Fund to PowerShares Taxable Municipal Bond Portfolio. The New Index does not meet the generic listing criteria of NYSE Arca Equities Rule 5.2(j)(3), as described below. The Exchange is submitting this proposed rule change to permit the Portfolio, PowerShares Insured National Municipal Bond Portfolio and PowerShares Insured New York Municipal Bond Portfolio under NYSE Arca Equities Rule 5.2(j)(3), Commentary .02). PO 00000 Frm 00099 Fmt 4703 Sfmt 4703 continued listing of the Fund. The New Index meets all of the requirements of the generic listing criteria of NYSE Arca Equities Rule 5.2(j)(3), except for those set forth in Commentary .02(a)(2).7 Specifically, as of February 4, 2016, approximately 60.51% of the New Index weight was composed of individual maturities of $100 million or more (determined at the time of issuance). Changes to Index Underlying the Fund As stated in the Registration Statement, the Fund currently has a non-fundamental policy to invest at least 80% of its net assets (plus the amount of any borrowings for investment purposes) in Build America Bonds. Moreover, as stated in the Registration Statement, the Fund complies with that non-fundamental policy because it also is required generally to invest at least 80% of the value of its total assets in the Build America Bonds that comprise the Build America Bond Index, in accordance with the terms of the relief set forth in the Trust’s Exemptive Order. However, in response to a changing market environment that includes a reduction in the number of Build America Bonds, the Adviser has proposed that the Fund’s underlying index be changed from one that is focused on Build America Bonds to one that is more broadly focused on taxable municipal debt in general, and which may include Build America Bonds. Changing the Fund’s underlying index would require changing the nonfundamental policy set forth above; accordingly, before the Fund can change its underlying index, the Registration Statement states that the Fund’s board of trustees (the ‘‘Board’’) must approve the underlying index change, and the Fund must provide shareholders with sixty days written notice of the change. Thus, after this proposed rule change is approved, the Trust represents that it intends to seek to obtain Board approval and provide the requisite shareholder notice. Subject to that Board approval and shareholder notice, the Fund intends to change its underlying index to one that is composed of taxable municipal securities, including both Build America Bonds and non-Build America Bonds. Following such change, the proposed underlying index for the Fund will be the New Index. According to the Trust, the change in Fund’s underlying index is designed to 7 Commentary .02(a)(2) to NYSE Arca Equities Rule 5.2(j)(3) provides that components that in the aggregate account for at least 75% of the weight of the index or portfolio each shall have a minimum original principal amount outstanding of $100 million or more. E:\FR\FM\23MYN1.SGM 23MYN1 Federal Register / Vol. 81, No. 99 / Monday, May 23, 2016 / Notices enable the Fund to expand its range of investments in light of a diminishing supply of Build America Bonds; otherwise, there is no other change to the Fund’s investment strategies or objective. After such change, the Fund’s investment objective will be to seek investment results that generally correspond (before fees and expenses) to the price and yield of the New Index. In addition, the Fund will adopt a new non-fundamental investment policy to invest at least 80% of its net assets (plus borrowings for investment purposes) in taxable municipal securities. In addition, the Fund generally will invest at least 80% of its total assets in the securities that will compose the New Index, in accordance with the terms of the Trust’s Exemptive Order. However, the Fund may invest up to 20% of its total assets in securities not included in the New Index, in money market instruments, including repurchase agreements or other funds that invest exclusively in money market instruments (subject to applicable limitations under the 1940 Act or exemptions therefrom), convertible securities and structured notes (notes on which the amount of principal repayment and interest payments is based on the movement of one or more specified factors, such as the movement of a particular security or securities index), all to the extent that the Adviser believes investment in such instruments will facilitate the Fund’s ability to achieve its new investment objective. In addition, the Fund intends to change its name to PowerShares Taxable Municipal Bond Portfolio.8 sradovich on DSK3TPTVN1PROD with NOTICES Description of the New Index 9 The New Index tracks the performance of U.S. dollar denominated taxable municipal debt publicly issued by U.S. states and territories, and their political subdivisions, in the U.S. domestic market. Qualifying securities 8 The changes described herein with respect to use of the New Index will be effective upon: (1) Approval by the Trust’s Board; (2) shareholders’ receipt of sixty days written notice of the proposed change; and (3) completing a filing with the Commission of another amendment to the Trust’s Registration Statement, or a prospectus supplement reflecting these changes. The Adviser represents that the Adviser has managed and will continue to manage the Fund in the manner described in the Registration Statement and will not implement the changes described herein until this proposed rule change is operative. 9 The description of the New Index is based on information provided by Bank of America (‘‘BofA’’) Merrill Lynch. BofA Merrill Lynch is the ‘‘Index Provider’’ with respect to the Underlying Index and the New Index. The Index Provider is a brokerdealer and has implemented a firewall with respect to and will maintain procedures designed to prevent the use and dissemination of material nonpublic information regarding the New Index. VerDate Sep<11>2014 18:25 May 20, 2016 Jkt 238001 must be subject to U.S. federal taxes and must have at least 18 months to maturity at point of issuance, at least one year remaining term to final maturity, a fixed coupon schedule (including zero coupon bonds) and an investment grade rating (based on an average of Moody’s, S&P and Fitch). The call date on which a pre-refunded bond will be redeemed is used for purposes of determining qualification with respect to final maturity requirements. For Build America Bonds the minimum amount outstanding is $1 million, and only ‘‘direct pay’’ (i.e., a direct federal subsidy is paid to the issuer) securities qualify for inclusion. ‘‘Tax-Credit’’ (i.e., where the investor receives a tax credit on the interest payments) Build America Bonds are excluded. For all other securities, minimum size requirements vary based on the initial term to final maturity at time of issuance. Securities with an initial term to final maturity greater than or equal to one year and less than five years must have a current amount outstanding of at least $10 million. Securities with an initial term to final maturity greater than or equal to five years and less than ten years must have a current amount outstanding of at least $15 million. Securities with an initial term to final maturity of ten years or more must have a current amount outstanding of at least $25 million. Local bonds issued by U.S. territories within their jurisdictions that are tax exempt within the U.S. territory but not elsewhere are excluded from the New Index. All Rule 144A securities, both with and without registration rights, and securities in legal default are excluded from the New Index. New Index constituents are capitalization-weighted based on their current amount outstanding times the market price plus accrued interest. Accrued interest is calculated assuming next-day settlement. Cash flows from bond payments that are received during the month are retained in the index until the end of the month and then are removed as part of the rebalancing. Cash does not earn any reinvestment income while it is held in the New Index.10 The index is rebalanced on the last calendar day of the month, based on information available up to and including the third business day before the last business day of the month. No changes are made to constituent holdings other than on month end rebalancing dates. As of February 4, 2016, approximately 84.39% of the weight of the New Index 10 Information concerning constituent bond prices, timing and conventions is provided in the BofA Merrill Lynch Bond Index Guide, which can be accessed on Bloomberg (IND2[go], 4[go]) [sic]. PO 00000 Frm 00100 Fmt 4703 Sfmt 4703 32373 components was composed of individual maturities that were part of an entire municipal bond offering with a minimum original principal amount outstanding of $100 million or more for all maturities of the offering. In addition, as of February 4, 2016, the total dollar amount outstanding of issues in the New Index was approximately $281,589,346,769 and the average dollar amount outstanding of issues in the New Index was approximately $27,808,547. Further, the most heavily weighted component represents 2.27% of the weight of the Index and the five most heavily weighted components represent 6.33% of the weight of the New Index.11 Therefore, the Exchange believes that, notwithstanding that the New Index does not satisfy the criterion in NYSE Arca Equities Rule 5.2(j)(3), Commentary .02(a)(2), the New Index is sufficiently broad-based to deter potential manipulation, given that it is composed of approximately 10,126 issues and 1,811 unique issuers. In addition, the New Index securities are sufficiently liquid to deter manipulation in that a substantial portion (84.39%) of the New Index weight is composed of maturities that are part of a minimum original principal amount outstanding of $100 million or more for all the maturities of the offering, and in view of the substantial total dollar amount outstanding and the average dollar amount outstanding of New Index issues, as referenced above. All components of the New Index have at least an investment grade composite rating of BBB3 or higher (based on an average of S&P, Moody’s and Fitch). The Exchange represents that: (1) With respect to the New Index, except for Commentary .02(a)(2) to NYSE Arca Equities Rule 5.2(j)(3), the Shares of the New Index currently satisfy all of the generic listing standards under NYSE Arca Equities Rule 5.2(j)(3); (2) the continued listing standards under NYSE Arca Equities Rules 5.2(j)(3) and 5.5(g)(2) applicable to Units shall apply to the Shares of the Fund; and (3) the Trust is required to comply with Rule 10A–3 12 under the Act for the initial and continued listing of the Shares of the Fund. In addition, the Exchange 11 Commentary .02(a)(4) to NYSE Arca Equities Rule 5.2(j)(3) provides that no component fixedincome security (excluding Treasury Securities and GSE Securities, as defined therein) shall represent more than 30% of the weight of the index or portfolio, and the five most heavily weighted component fixed-income securities in the index or portfolio shall not in the aggregate account for more than 65% of the weight of the index or portfolio. 12 17 CFR 240.10A–3. E:\FR\FM\23MYN1.SGM 23MYN1 32374 Federal Register / Vol. 81, No. 99 / Monday, May 23, 2016 / Notices represents that the Shares of the Fund will comply with all other requirements applicable to Units including, but not limited to, requirements relating to the dissemination of key information such as the value of the New Index and the applicable Intraday Indicative Value (‘‘IIV’’),13 rules governing the trading of equity securities, trading hours, trading halts, surveillance, information barriers and the Information Bulletin to Equity Trading Permit Holders (‘‘ETP Holders’’), as set forth in Exchange rules applicable to Units and prior Commission orders approving the generic listing rules applicable to the listing and trading of Units.14 The current value of the New Index is widely disseminated by one or more major market data vendors at least once per day, as required by NYSE Arca Equities Rule 5.2(j)(3), Commentary .02(b)(ii). The IIV for Shares of the Fund is disseminated by one or more major market data vendors, updated at least every 15 seconds during the Exchange’s Core Trading Session, as required by NYSE Arca Equities Rule 5.2(j)(3), Commentary .02(c). The components and percentage weightings of the New Index are also available from major market data vendors. In addition, the portfolio of securities held by the Fund is disclosed daily on the Fund’s Web site at www.invescopowershares.com. sradovich on DSK3TPTVN1PROD with NOTICES 2. Statutory Basis The basis under the Act for this proposed rule change is the requirement under Section 6(b)(5) 15 that an exchange have rules that are designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to, and perfect the mechanism of a free and open market and, in general, to protect investors and the public interest. The Exchange believes that the proposed rule change is designed to prevent fraudulent and manipulative 13 The IIV will be widely disseminated by one or more major market data vendors at least every 15 seconds during the Exchange’s Core Trading Session of 9:30 a.m. to 4:00 p.m., Eastern time. Currently, it is the Exchange’s understanding that several major market data vendors display and/or make widely available IIVs taken from the Consolidated Tape Association (‘‘CTA’’) or other data feeds. 14 See, e.g., Securities Exchange Act Release Nos. 55783 (May 17, 2007), 72 FR 29194 (May 24, 2007) (SR–NYSEArca–2007–36) (order approving NYSE Arca generic listing standards for Units based on a fixed income index); 44551 (July 12, 2001), 66 FR 37716 (July 19, 2001) (SR–PCX–2001–14) (order approving generic listing standards for Units and Portfolio Depositary Receipts); 41983 (October 6, 1999), 64 FR 56008 (October 15, 1999) (SR–PCX– 98–29) (order approving rules for listing and trading of Units). 15 15 U.S.C. 78f(b)(5). VerDate Sep<11>2014 18:25 May 20, 2016 Jkt 238001 acts and practices in that the Shares will be listed and traded on the Exchange pursuant to the initial and continued listing criteria in NYSE Arca Equities Rule 5.2(j)(3). The Exchange represents that trading in the Shares will be subject to the existing trading surveillances, administered by the Exchange or the Financial Industry Regulatory Authority (‘‘FINRA’’) on behalf of the Exchange, which are designed to detect violations of Exchange rules and federal securities laws applicable to trading on the Exchange.16 The Exchange represents that these procedures are adequate to properly monitor Exchange trading of the Shares in all trading sessions and to deter and detect violations of Exchange rules and federal securities laws applicable to trading on the Exchange. The Exchange or FINRA, on behalf of the Exchange, will communicate as needed regarding trading in the Shares with other markets that are members of the Intermarket Surveillance Group (‘‘ISG’’). In addition, the Exchange will communicate as needed regarding trading in the Shares with other markets that are members of the ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. The Index Provider is a broker-dealer and has implemented a firewall and will maintain procedures designed to prevent the use and dissemination of material non-public information regarding the New Index. As discussed above, the Exchange believes that the New Index is sufficiently broad-based to deter potential manipulation. As of February 4, 2016, approximately 84.39% of the weight of the New Index components was composed of individual maturities that were part of an entire municipal bond offering with a minimum original principal amount outstanding of $100 million or more for all maturities of the offering. In addition, as of February 4, 2016, the total dollar amount outstanding of issues in the New Index was approximately $281,589,346,769 and the average dollar amount outstanding of issues in the Index was approximately $27,808,547. Further, the most heavily weighted component represents 2.27% of the weight of the New Index and the five most heavily weighted components represent 6.33% of the weight of the New Index.17 16 FINRA conducts cross-market surveillances on behalf of the Exchange pursuant to a regulatory services agreement. The Exchange is responsible for FINRA’s performance under this regulatory services agreement. 17 Commentary .02(a)(4) to NYSE Arca Equities Rule 5.2(j)(3) provides that no component fixedincome security (excluding Treasury Securities and GSE Securities, as defined therein) shall represent PO 00000 Frm 00101 Fmt 4703 Sfmt 4703 Therefore, the Exchange believes that, notwithstanding that the New Index does not satisfy the criterion in NYSE Arca Equities Rule 5.2(j)(3), Commentary .02(a)(2), the Index is sufficiently broad-based to deter potential manipulation, given that it is composed of approximately 10,126 issues and 1,811 unique issuers. In addition, the New Index securities are sufficiently liquid to deter manipulation in that a substantial portion (84.39%) of the New Index weight is composed of maturities that are part of a minimum original principal amount outstanding of $100 million or more for all the maturities of the offering, and in view of the substantial total dollar amount outstanding and the average dollar amount outstanding of New Index issues, as referenced above. The New Index value, calculated and disseminated at least once daily, as well as the components of the Index and their percentage weightings, will be available from major market data vendors. In addition, the portfolio of securities held by the Fund will be disclosed on the Fund’s Web site. The IIV for Shares of the Fund will be disseminated by one or more major market data vendors, updated at least every 15 seconds during the Exchange’s Core Trading Session. The proposed rule change is designed to promote just and equitable principles of trade and to protect investors and the public interest in that a large amount of information is publicly available regarding the Fund and the Shares, thereby promoting market transparency. The Fund’s portfolio holdings will be disclosed on the Fund’s Web site daily after the close of trading on the Exchange and prior to the opening of trading on the Exchange the following day. Moreover, the IIV for Shares of the Fund will be widely disseminated by one or more major market data vendors at least every 15 seconds during the Exchange’s Core Trading Session. The current value of the New Index will be disseminated by one or more major market data vendors at least once per day. Information regarding market price and trading volume of the Shares will be continually available on a real-time basis throughout the day on brokers’ computer screens and other electronic services, and quotation and last sale information will be available via the CTA high-speed line. The Web site for the Fund will include the prospectus for the Fund and additional data relating to more than 30% of the weight of the index or portfolio, and the five most heavily weighted component fixed-income securities in the index or portfolio shall not in the aggregate account for more than 65% of the weight of the index or portfolio. E:\FR\FM\23MYN1.SGM 23MYN1 sradovich on DSK3TPTVN1PROD with NOTICES Federal Register / Vol. 81, No. 99 / Monday, May 23, 2016 / Notices net asset value (‘‘NAV’’) and other applicable quantitative information. Moreover, prior to the commencement of trading, the Exchange will inform its ETP Holders in an Information Bulletin of the special characteristics and risks associated with trading the Shares. If the Exchange becomes aware that the NAV is not being disseminated to all market participants at the same time, it will halt trading in the Shares until such time as the NAV is available to all market participants. With respect to trading halts, the Exchange may consider all relevant factors in exercising its discretion to halt or suspend trading in the Shares of the Fund. 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. If the applicable IIV, and the New Index value are not being disseminated as required, the Corporation may halt trading during the day in which the interruption to the dissemination of the IIV or New Index value occurs. If the interruption to the dissemination of the IIV or New Index value persists past the trading day in which it occurred, the Corporation will halt trading. Trading in Shares of the Fund will be halted if the circuit breaker parameters in NYSE Arca Equities Rule 7.12 have been reached or because of market conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable, and trading in the Shares will be subject to NYSE Arca Equities Rule 7.34, which sets forth circumstances under which Shares of the Fund may be halted. In addition, investors will have ready access to information regarding the applicable IIV, and quotation and last sale information for the Shares. Trade price and other information relating to municipal bonds is available through the Municipal Securities Rulemaking Board’s Electronic Municipal Market Access (‘‘EMMA’’) system. All statements and representations made in this filing regarding (a) the description of the Fund’s 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 Adviser 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. If the Fund is not in compliance with the VerDate Sep<11>2014 18:25 May 20, 2016 Jkt 238001 applicable listing requirements, the Exchange will commence delisting procedures under NYSE Arca Rule 5.5(m). The proposed rule change is designed to perfect the mechanism of a free and open market and, in general, to protect investors and the public interest in that it will facilitate the continued listing and trading of exchange-traded products that principally hold municipal bonds and that will enhance competition among market participants, to the benefit of investors and the marketplace. The Exchange has in place surveillance procedures relating to trading in the Shares and may obtain information via ISG from other exchanges that are members of ISG or with which the Exchange has entered into a comprehensive surveillance sharing agreement. In addition, investors will have ready access to information regarding the IIV and quotation and last sale information for the Shares. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purpose of the Act. The Exchange notes that the proposed rule change will facilitate the continued listing and trading of an exchange-traded product that holds municipal securities and will enhance competition among market participants, to the benefit of investors and the marketplace. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (a) By order approve or disapprove such proposed rule change; or (b) institute proceedings to determine whether the proposed rule change should be disapproved. PO 00000 Frm 00102 Fmt 4703 Sfmt 4703 32375 IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NYSEArca–2016–62 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-2016–62. 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–2016–62 and should be submitted on or before June 13, 2016. E:\FR\FM\23MYN1.SGM 23MYN1 32376 Federal Register / Vol. 81, No. 99 / Monday, May 23, 2016 / Notices For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.18 Robert W. Errett, Deputy Secretary. institutes proceedings under Section 19(b)(2)(B) of the Act 6 to determine whether to approve or disapprove the proposed rule change, as modified by Amendment No. 1 thereto. [FR Doc. 2016–12016 Filed 5–20–16; 8:45 am] I. Summary of the Exchange’s Description of the Proposed Rule Change The Exchange proposes to adopt new NYSE Arca Equities Rule 8.900, which would govern the listing and trading of ‘‘Managed Portfolio Shares.’’ 7 The Exchange also proposes to list and trade the Shares of the following funds under proposed NYSE Arca Equities Rule 8.900: (1) Precidian U.S. Managed Volatility Fund; (2) Precidian Strategic Value; (3) Precidian Large Cap Value; (4) Precidian Focused Dividend Strategy; (5) Precidian U.S. Large Cap Growth; (6) Precidian U.S. Core Equity; (7) Precidian U.S. Mid Cap Growth; (8) Precidian Total Return; (9) Precidian High Dividend Yield; (10) Precidian Small Cap Dividend Value; (11) Precidian Multi-factor Small Cap Core; (12) Precidian Multi-factor Small Cap Growth; (13) Precidian Large Cap Core Plus 130/30; (14) Precidian Mid Cap Core Plus 130/30; and (15) Precidian Small Cap Core Plus 130/30 (each a ‘‘Fund,’’ and collectively the ‘‘Funds’’). In addition, the Exchange proposes to amend NYSE Arca Equities Rule 7.34 (Trading Sessions), which relates to securities traded on the Exchange during the Core Trading Session, to add a reference to proposed NYSE Arca Equities Rule 8.900. BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–77845; File No. SR– NYSEArca–2016–08] Self-Regulatory Organizations; NYSE Arca, Inc.; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change, as Modified by Amendment No. 1 Thereto, To Adopt NYSE Arca Equities Rule 8.900 To Permit Listing and Trading of Managed Portfolio Shares and To Permit Listing and Trading of Shares of Fifteen Issues of the Precidian ETFs Trust May 17, 2016. On January 27, 2016, NYSE Arca, Inc. (‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to: (1) Adopt NYSE Arca Equities Rule 8.900; and (2) approve the listing and trading of shares (‘‘Shares’’) of fifteen issues of the Precidian ETFs Trust (‘‘Trust’’). The proposed rule change was published for comment in the Federal Register on February 18, 2016.3 On March 9, 2016, the Exchange filed Amendment No. 1 to the proposed rule change.4 The Commission has received four comments on the proposed rule change.5 This order 18 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Securities Exchange Act Release No. 76944 (Feb. 11, 2016), 81 FR 8269 (‘‘Notice’’). 4 In Amendment No. 1 to the proposed rule change, the Exchange corrected the citations to the Trust’s Form N–1A and Exemptive Application, which were misstated in the proposal. Because Amendment No. 1 is technical in nature and does not materially alter the substance of the proposed rule change or raise any novel regulatory issues, it is not subject to notice and comment. Amendment No. 1 to the proposed rule change is available on the Commission’s Web site at: https://www.sec.gov/ comments/sr-nysearca-2016-08/nysearca2016081.pdf. 5 See Letter from Gary L. Gastineau, President, ETF Consultants.com, Inc., to Brent J. Fields, Secretary, Commission, dated Mar. 10, 2016 (‘‘Gastineau Letter’’); Letter from David Nadig (Mar. 31, 2016) (‘‘Nadig Letter’’); Letter from Andrew M. Gross, Jr. (Apr. 5, 2016) (‘‘Gross Letter’’); Letter from Andrew M. Gross, Jr. (Apr. 5, 2016) (‘‘Gross Letter’’); Letter from Joseph A. Sullivan, Chairman and Chief Executive Officer, Legg Mason Global sradovich on DSK3TPTVN1PROD with NOTICES 1 15 VerDate Sep<11>2014 18:25 May 20, 2016 Jkt 238001 A. Key Features of Managed Portfolio Shares While Investment Companies issuing Managed Portfolio Shares would be actively-managed, and in that respect would be similar to those issuing Asset Management, to Mary Jo White, Chair, Commission (Apr. 15, 2016) (‘‘Sullivan Letter’’). The comment letters are available on the Commission’s Web site at: https://www.sec.gov/ comments/sr-nysearca-2016-08/ nysearca201608.shtml. 6 15 U.S.C. 78s(b)(2)(B). 7 Proposed NYSE Arca Equities Rule 8.900(c)(1) defines the term ‘‘Managed Portfolio Share’’ as a security that (a) is issued by a registered investment company organized as an open-end management investment company (‘‘Investment Company’’) or similar entity, that invests in a portfolio of securities selected by the Investment Company’s investment adviser consistent with the Investment Company’s investment objectives and policies; and (b) when aggregated in a number of shares equal to a Redemption Unit (as defined herein) or multiples thereof, may be redeemed at the request of an authorized participant (as defined in the Investment Company’s Form N–1A filed with the Commission), which authorized participant will be paid though a confidential account established for its benefit a portfolio of securities and/or cash with a value equal to the next determined net asset value (‘‘NAV’’). PO 00000 Frm 00103 Fmt 4703 Sfmt 4703 Managed Fund Shares,8 Managed Portfolio Shares would differ from Managed Fund Shares in the following respects. • First, issues of Managed Fund Shares are required to disseminate their ‘‘Disclosed Portfolio’’ at least once daily.9 By contrast, the portfolio for an issue of Managed Portfolio Shares would be disclosed only quarterly. • Second, in connection with the redemption of shares in ‘‘Redemption Unit’’ size (as described below), the delivery of any portfolio securities in kind would only be effected through a ‘‘Confidential Account’’ (as described below) for the benefit of the redeeming authorized participant without disclosing the identity of the securities to the authorized participant. • Third, for each series of Managed Portfolio Shares, a Verified Intraday Indicative Value (‘‘VIIV’’) would be disseminated by one or more major market-data vendors every second during the Exchange’s Core Trading Session (normally, 9:30 a.m. to 4:00 p.m., Eastern Time (‘‘E.T.’’)).10 The Exchange states that dissemination of the VIIV will allow investors to determine the estimated intra-day value of the underlying portfolio of a series of Managed Portfolio Shares and will provide a close estimate of that value throughout the trading day.11 B. Arbitrage of Managed Portfolio Shares The Exchange asserts that market makers will be able to make efficient and liquid markets priced near the VIIV even without daily disclosure of a 8 Managed Fund Shares are shares of activelymanaged Investment Companies listed and traded under NYSE Arca Equities Rule 8.600. 9 NYSE Arca Equities Rule 8.600(c)(2) defines the term ‘‘Disclosed Portfolio’’ as the identities and quantities of the securities and other assets held by the Investment Company that will form the basis for the Investment Company’s calculation of net asset value at the end of the business day. NYSE Arca Equities Rule 8.600(d)(2)(B)(i) requires that, for Managed Fund Shares, the Disclosed Portfolio will be disseminated at least once daily and will be made available to all market participants at the same time. 10 Proposed NYSE Arca Equities Rule 8.900(c)(2) defines the VIIV as the estimated indicative value of a Managed Portfolio Share based on all of the issuer’s holdings as of the close of business on the prior business day, priced and disseminated in one second intervals, and subject to validation by a pricing verification agent of the Investment Company that is responsible for comparing multiple independent pricing sources to establish the accuracy of the VIIV. The specific methodology for calculating the VIIV will be disclosed on each Fund’s Web site. 11 According to the Exchange, the VIIV should not be viewed as a ‘‘real-time’’ update of the NAV per Share of each Fund, because the VIIV may not be calculated in the same manner as the NAV, which will be computed once a day, generally at the end of the business day. E:\FR\FM\23MYN1.SGM 23MYN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 81, Number 99 (Monday, May 23, 2016)]
[Notices]
[Pages 32371-32376]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-12016]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77849; File No. SR-NYSEArca-2016-62]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Relating to a Change to the Underlying Index 
for the PowerShares Build America Bond Portfolio

May 17, 2016.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on May 3, 2016, NYSE Arca, Inc. (the ``Exchange'' or ``NYSE 
Arca'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to: (1) Permit the continued listing and 
trading of shares of the PowerShares Build America Bond Portfolio (the 
``Fund'') following a change to the index underlying the Fund, and (2) 
propose changes to the index underlying the Fund and the name of the 
Fund, as described below. The proposed rule change is available on the 
Exchange's Web site at www.nyse.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.

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

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received

[[Page 32372]]

on the proposed rule change. The text of those statements may be 
examined at the places specified in Item IV below. The Exchange has 
prepared summaries, set forth in sections A, B, and C below, of the 
most significant parts of such statements.

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

1. Purpose
    The Exchange currently lists and trades shares (``Shares'') of the 
Fund \4\ under NYSE Arca Equities Rule 5.2(j)(3), Commentary .02, which 
governs the listing and trading of Investment Company Units (``Units'') 
based on fixed income securities indexes.\5\ The Fund is a series of 
the PowerShares Exchange-Traded Fund Trust II (``Trust'').\6\
---------------------------------------------------------------------------

    \4\ On February 26, 2016, the Trust filed a post-effective 
amendment on Form 485 under the Securities Act of 1933 (15 U.S.C. 
77a) (``1933 Act'') to its registration statement on Form N-1A under 
the 1933 Act and the Investment Company Act of 1940 (``1940 Act'') 
(15 U.S.C. 80a-1) (File Nos. 333-138490 and 811-21977) (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. 27841 (May 25, 2007) (File No. 
812-13335) (``Exemptive Order'').
    \5\ The PowerShares Build America Bond Portfolio was initially 
listed on the Exchange on November 17, 2009 pursuant to the generic 
listing criteria of Commentary .02 to NYSE Arca Equities Rule 
5.2(j)(3).
    \6\ The Commission previously has approved a proposed rule 
change relating to listing and trading on the Exchange of Units 
based on municipal bond indexes. See Securities Exchange Act Release 
Nos. 75376 (July 7, 2015), 80 FR 40113 (July 13, 2015) (SR-NYSEArca-
2015-18) (order approving listing and trading of Vanguard Tax-Exempt 
Bond Index Fund under NYSE Arca Equities Rule 5.2(j)(3), Commentary 
.02); 71232 (January 3, 2014), 79 FR 1662 (January 9, 2014) (SR-
NYSEArca-2013-118) (order approving listing and trading of Market 
Vectors Short High-Yield Municipal Index ETF under NYSE Arca 
Equities Rule 5.2(j)(3), Commentary .02); 63881 (February 9, 2011), 
76 FR 9065 (February 16, 2011) (SR-NYSEArca-2010-120) (order 
approving listing and trading of SPDR Nuveen S&P High Yield 
Municipal Bond ETF Fund under NYSE Arca Equities Rule 5.2(j)(3), 
Commentary .02); 67985 (October 4, 2012), 77 FR 61804 (October 11, 
2012) (SR-NYSEArca-2012-92) (order approving proposed rule change 
relating to the listing and trading of iShares 2018 S&P AMT-Free 
Municipal Series and iShares 2019 S&P AMT-Free Municipal Series 
under NYSE Arca Equities Rule 5.2(j)(3), Commentary .02)); 75468 
(July 16, 2015), 80 FR 43500 (July 22, 2015) (SR-NYSEArca-2015-25) 
(order approving proposed rule change relating to the listing and 
trading of iShares iBonds Dec 2021 AMT Free Municipal Bond ETF and 
iShares iBonds Dec 2022 AMT-Free Municipal Bond ETF under NYSE Arca 
Equities Rule 5.2(j)(3), Commentary .02); 72464 (June 25, 2014), 79 
FR 37373 (July 1, 2014) (SR-NYSEArca-2014-45) (order approving 
proposed rule change governing the continued listing and trading of 
Shares of the PowerShares Insured California Municipal Bond 
Portfolio, PowerShares Insured National Municipal Bond Portfolio and 
PowerShares Insured New York Municipal Bond Portfolio under NYSE 
Arca Equities Rule 5.2(j)(3), Commentary .02).
---------------------------------------------------------------------------

    Invesco PowerShares Capital Management LLC is the investment 
adviser (``Adviser'') for the Fund. Invesco Distributors, Inc. is the 
Fund's distributor (``Distributor''). The Bank of New York Mellon is 
the administrator, custodian and fund accounting and transfer agent for 
the Fund.
    The Exchange is submitting this proposed rule change (1) to permit 
the continued listing and trading of Shares of the Fund following a 
change to the index underlying the Fund, and (2) to propose changes to 
the index underlying the Fund and the name of the Fund, as described 
below.
    The Fund seeks investment results that generally correspond to the 
price and yield (before fees and expenses) of The BofA Merrill Lynch 
Build America Bond Index (the ``Build America Bond Index''). The Fund 
generally invests at least 80% of its total assets in taxable municipal 
securities eligible to participate in the Build America Bond program 
created under the American Recovery and Reinvestment Act of 2009 or 
other legislation providing for the issuance of taxable municipal 
securities on which the issuer receives federal support of the interest 
paid (``Build America Bonds'') and that comprise the Build America Bond 
Index. The Build America Bond Index is designed to track the 
performance of U.S. dollar-denominated investment grade taxable 
municipal debt publicly issued under the Build America Bond program by 
U.S. states and territories, and their political subdivisions, in the 
U.S. market. Qualifying securities must have a minimum amount 
outstanding of $1 million, at least 18 months remaining term to final 
maturity at the time of issuance and at least one year remaining term 
to final maturity, a fixed coupon schedule and an investment grade 
rating (based on an average of Moody's Investors Services, Inc. 
(``Moody's''), Standard & Poor's, a division of The McGraw-Hill 
Company, Inc. (``S&P'') and Fitch Ratings, Inc. (``Fitch'').
    As described below, the Trust has proposed to change the index 
underlying the Fund to the BofA Merrill Lynch US Taxable Municipal 
Securities Plus Index (the ``New Index'') and to change the name of the 
Fund to PowerShares Taxable Municipal Bond Portfolio. The New Index 
does not meet the generic listing criteria of NYSE Arca Equities Rule 
5.2(j)(3), as described below. The Exchange is submitting this proposed 
rule change to permit the continued listing of the Fund. The New Index 
meets all of the requirements of the generic listing criteria of NYSE 
Arca Equities Rule 5.2(j)(3), except for those set forth in Commentary 
.02(a)(2).\7\ Specifically, as of February 4, 2016, approximately 
60.51% of the New Index weight was composed of individual maturities of 
$100 million or more (determined at the time of issuance).
---------------------------------------------------------------------------

    \7\ Commentary .02(a)(2) to NYSE Arca Equities Rule 5.2(j)(3) 
provides that components that in the aggregate account for at least 
75% of the weight of the index or portfolio each shall have a 
minimum original principal amount outstanding of $100 million or 
more.
---------------------------------------------------------------------------

Changes to Index Underlying the Fund
    As stated in the Registration Statement, the Fund currently has a 
non-fundamental policy to invest at least 80% of its net assets (plus 
the amount of any borrowings for investment purposes) in Build America 
Bonds. Moreover, as stated in the Registration Statement, the Fund 
complies with that non-fundamental policy because it also is required 
generally to invest at least 80% of the value of its total assets in 
the Build America Bonds that comprise the Build America Bond Index, in 
accordance with the terms of the relief set forth in the Trust's 
Exemptive Order.
    However, in response to a changing market environment that includes 
a reduction in the number of Build America Bonds, the Adviser has 
proposed that the Fund's underlying index be changed from one that is 
focused on Build America Bonds to one that is more broadly focused on 
taxable municipal debt in general, and which may include Build America 
Bonds. Changing the Fund's underlying index would require changing the 
non-fundamental policy set forth above; accordingly, before the Fund 
can change its underlying index, the Registration Statement states that 
the Fund's board of trustees (the ``Board'') must approve the 
underlying index change, and the Fund must provide shareholders with 
sixty days written notice of the change.
    Thus, after this proposed rule change is approved, the Trust 
represents that it intends to seek to obtain Board approval and provide 
the requisite shareholder notice. Subject to that Board approval and 
shareholder notice, the Fund intends to change its underlying index to 
one that is composed of taxable municipal securities, including both 
Build America Bonds and non-Build America Bonds. Following such change, 
the proposed underlying index for the Fund will be the New Index.
    According to the Trust, the change in Fund's underlying index is 
designed to

[[Page 32373]]

enable the Fund to expand its range of investments in light of a 
diminishing supply of Build America Bonds; otherwise, there is no other 
change to the Fund's investment strategies or objective. After such 
change, the Fund's investment objective will be to seek investment 
results that generally correspond (before fees and expenses) to the 
price and yield of the New Index.
    In addition, the Fund will adopt a new non-fundamental investment 
policy to invest at least 80% of its net assets (plus borrowings for 
investment purposes) in taxable municipal securities. In addition, the 
Fund generally will invest at least 80% of its total assets in the 
securities that will compose the New Index, in accordance with the 
terms of the Trust's Exemptive Order. However, the Fund may invest up 
to 20% of its total assets in securities not included in the New Index, 
in money market instruments, including repurchase agreements or other 
funds that invest exclusively in money market instruments (subject to 
applicable limitations under the 1940 Act or exemptions therefrom), 
convertible securities and structured notes (notes on which the amount 
of principal repayment and interest payments is based on the movement 
of one or more specified factors, such as the movement of a particular 
security or securities index), all to the extent that the Adviser 
believes investment in such instruments will facilitate the Fund's 
ability to achieve its new investment objective. In addition, the Fund 
intends to change its name to PowerShares Taxable Municipal Bond 
Portfolio.\8\
---------------------------------------------------------------------------

    \8\ The changes described herein with respect to use of the New 
Index will be effective upon: (1) Approval by the Trust's Board; (2) 
shareholders' receipt of sixty days written notice of the proposed 
change; and (3) completing a filing with the Commission of another 
amendment to the Trust's Registration Statement, or a prospectus 
supplement reflecting these changes. The Adviser represents that the 
Adviser has managed and will continue to manage the Fund in the 
manner described in the Registration Statement and will not 
implement the changes described herein until this proposed rule 
change is operative.
---------------------------------------------------------------------------

Description of the New Index \9\
---------------------------------------------------------------------------

    \9\ The description of the New Index is based on information 
provided by Bank of America (``BofA'') Merrill Lynch. BofA Merrill 
Lynch is the ``Index Provider'' with respect to the Underlying Index 
and the New Index. The Index Provider is a broker-dealer and has 
implemented a firewall with respect to and will maintain procedures 
designed to prevent the use and dissemination of material non-public 
information regarding the New Index.
---------------------------------------------------------------------------

    The New Index tracks the performance of U.S. dollar denominated 
taxable municipal debt publicly issued by U.S. states and territories, 
and their political subdivisions, in the U.S. domestic market. 
Qualifying securities must be subject to U.S. federal taxes and must 
have at least 18 months to maturity at point of issuance, at least one 
year remaining term to final maturity, a fixed coupon schedule 
(including zero coupon bonds) and an investment grade rating (based on 
an average of Moody's, S&P and Fitch). The call date on which a pre-
refunded bond will be redeemed is used for purposes of determining 
qualification with respect to final maturity requirements. For Build 
America Bonds the minimum amount outstanding is $1 million, and only 
``direct pay'' (i.e., a direct federal subsidy is paid to the issuer) 
securities qualify for inclusion. ``Tax-Credit'' (i.e., where the 
investor receives a tax credit on the interest payments) Build America 
Bonds are excluded. For all other securities, minimum size requirements 
vary based on the initial term to final maturity at time of issuance. 
Securities with an initial term to final maturity greater than or equal 
to one year and less than five years must have a current amount 
outstanding of at least $10 million. Securities with an initial term to 
final maturity greater than or equal to five years and less than ten 
years must have a current amount outstanding of at least $15 million. 
Securities with an initial term to final maturity of ten years or more 
must have a current amount outstanding of at least $25 million. Local 
bonds issued by U.S. territories within their jurisdictions that are 
tax exempt within the U.S. territory but not elsewhere are excluded 
from the New Index. All Rule 144A securities, both with and without 
registration rights, and securities in legal default are excluded from 
the New Index. New Index constituents are capitalization-weighted based 
on their current amount outstanding times the market price plus accrued 
interest. Accrued interest is calculated assuming next-day settlement. 
Cash flows from bond payments that are received during the month are 
retained in the index until the end of the month and then are removed 
as part of the rebalancing. Cash does not earn any reinvestment income 
while it is held in the New Index.\10\ The index is rebalanced on the 
last calendar day of the month, based on information available up to 
and including the third business day before the last business day of 
the month. No changes are made to constituent holdings other than on 
month end rebalancing dates.
---------------------------------------------------------------------------

    \10\ Information concerning constituent bond prices, timing and 
conventions is provided in the BofA Merrill Lynch Bond Index Guide, 
which can be accessed on Bloomberg (IND2[go], 4[go]) [sic].
---------------------------------------------------------------------------

    As of February 4, 2016, approximately 84.39% of the weight of the 
New Index components was composed of individual maturities that were 
part of an entire municipal bond offering with a minimum original 
principal amount outstanding of $100 million or more for all maturities 
of the offering. In addition, as of February 4, 2016, the total dollar 
amount outstanding of issues in the New Index was approximately 
$281,589,346,769 and the average dollar amount outstanding of issues in 
the New Index was approximately $27,808,547. Further, the most heavily 
weighted component represents 2.27% of the weight of the Index and the 
five most heavily weighted components represent 6.33% of the weight of 
the New Index.\11\ Therefore, the Exchange believes that, 
notwithstanding that the New Index does not satisfy the criterion in 
NYSE Arca Equities Rule 5.2(j)(3), Commentary .02(a)(2), the New Index 
is sufficiently broad-based to deter potential manipulation, given that 
it is composed of approximately 10,126 issues and 1,811 unique issuers. 
In addition, the New Index securities are sufficiently liquid to deter 
manipulation in that a substantial portion (84.39%) of the New Index 
weight is composed of maturities that are part of a minimum original 
principal amount outstanding of $100 million or more for all the 
maturities of the offering, and in view of the substantial total dollar 
amount outstanding and the average dollar amount outstanding of New 
Index issues, as referenced above.
---------------------------------------------------------------------------

    \11\ Commentary .02(a)(4) to NYSE Arca Equities Rule 5.2(j)(3) 
provides that no component fixed-income security (excluding Treasury 
Securities and GSE Securities, as defined therein) shall represent 
more than 30% of the weight of the index or portfolio, and the five 
most heavily weighted component fixed-income securities in the index 
or portfolio shall not in the aggregate account for more than 65% of 
the weight of the index or portfolio.
---------------------------------------------------------------------------

    All components of the New Index have at least an investment grade 
composite rating of BBB3 or higher (based on an average of S&P, Moody's 
and Fitch).
    The Exchange represents that: (1) With respect to the New Index, 
except for Commentary .02(a)(2) to NYSE Arca Equities Rule 5.2(j)(3), 
the Shares of the New Index currently satisfy all of the generic 
listing standards under NYSE Arca Equities Rule 5.2(j)(3); (2) the 
continued listing standards under NYSE Arca Equities Rules 5.2(j)(3) 
and 5.5(g)(2) applicable to Units shall apply to the Shares of the 
Fund; and (3) the Trust is required to comply with Rule 10A-3 \12\ 
under the Act for the initial and continued listing of the Shares of 
the Fund. In addition, the Exchange

[[Page 32374]]

represents that the Shares of the Fund will comply with all other 
requirements applicable to Units including, but not limited to, 
requirements relating to the dissemination of key information such as 
the value of the New Index and the applicable Intraday Indicative Value 
(``IIV''),\13\ rules governing the trading of equity securities, 
trading hours, trading halts, surveillance, information barriers and 
the Information Bulletin to Equity Trading Permit Holders (``ETP 
Holders''), as set forth in Exchange rules applicable to Units and 
prior Commission orders approving the generic listing rules applicable 
to the listing and trading of Units.\14\
---------------------------------------------------------------------------

    \12\ 17 CFR 240.10A-3.
    \13\ The IIV will be widely disseminated by one or more major 
market data vendors at least every 15 seconds during the Exchange's 
Core Trading Session of 9:30 a.m. to 4:00 p.m., Eastern time. 
Currently, it is the Exchange's understanding that several major 
market data vendors display and/or make widely available IIVs taken 
from the Consolidated Tape Association (``CTA'') or other data 
feeds.
    \14\ See, e.g., Securities Exchange Act Release Nos. 55783 (May 
17, 2007), 72 FR 29194 (May 24, 2007) (SR-NYSEArca-2007-36) (order 
approving NYSE Arca generic listing standards for Units based on a 
fixed income index); 44551 (July 12, 2001), 66 FR 37716 (July 19, 
2001) (SR-PCX-2001-14) (order approving generic listing standards 
for Units and Portfolio Depositary Receipts); 41983 (October 6, 
1999), 64 FR 56008 (October 15, 1999) (SR-PCX-98-29) (order 
approving rules for listing and trading of Units).
---------------------------------------------------------------------------

    The current value of the New Index is widely disseminated by one or 
more major market data vendors at least once per day, as required by 
NYSE Arca Equities Rule 5.2(j)(3), Commentary .02(b)(ii). The IIV for 
Shares of the Fund is disseminated by one or more major market data 
vendors, updated at least every 15 seconds during the Exchange's Core 
Trading Session, as required by NYSE Arca Equities Rule 5.2(j)(3), 
Commentary .02(c). The components and percentage weightings of the New 
Index are also available from major market data vendors. In addition, 
the portfolio of securities held by the Fund is disclosed daily on the 
Fund's Web site at www.invescopowershares.com.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \15\ that an exchange have rules that 
are designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to remove 
impediments to, and perfect the mechanism of a free and open market 
and, in general, to protect investors and the public interest.
---------------------------------------------------------------------------

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

    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares will be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria in NYSE Arca Equities Rule 
5.2(j)(3). The Exchange represents that trading in the Shares will be 
subject to the existing trading surveillances, administered by the 
Exchange or the Financial Industry Regulatory Authority (``FINRA'') on 
behalf of the Exchange, which are designed to detect violations of 
Exchange rules and federal securities laws applicable to trading on the 
Exchange.\16\ The Exchange represents that these procedures are 
adequate to properly monitor Exchange trading of the Shares in all 
trading sessions and to deter and detect violations of Exchange rules 
and federal securities laws applicable to trading on the Exchange. The 
Exchange or FINRA, on behalf of the Exchange, will communicate as 
needed regarding trading in the Shares with other markets that are 
members of the Intermarket Surveillance Group (``ISG''). In addition, 
the Exchange will communicate as needed regarding trading in the Shares 
with other markets that are members of the ISG or with which the 
Exchange has in place a comprehensive surveillance sharing agreement. 
The Index Provider is a broker-dealer and has implemented a firewall 
and will maintain procedures designed to prevent the use and 
dissemination of material non-public information regarding the New 
Index.
---------------------------------------------------------------------------

    \16\ FINRA conducts cross-market surveillances on behalf of the 
Exchange pursuant to a regulatory services agreement. The Exchange 
is responsible for FINRA's performance under this regulatory 
services agreement.
---------------------------------------------------------------------------

    As discussed above, the Exchange believes that the New Index is 
sufficiently broad-based to deter potential manipulation. As of 
February 4, 2016, approximately 84.39% of the weight of the New Index 
components was composed of individual maturities that were part of an 
entire municipal bond offering with a minimum original principal amount 
outstanding of $100 million or more for all maturities of the offering. 
In addition, as of February 4, 2016, the total dollar amount 
outstanding of issues in the New Index was approximately 
$281,589,346,769 and the average dollar amount outstanding of issues in 
the Index was approximately $27,808,547. Further, the most heavily 
weighted component represents 2.27% of the weight of the New Index and 
the five most heavily weighted components represent 6.33% of the weight 
of the New Index.\17\ Therefore, the Exchange believes that, 
notwithstanding that the New Index does not satisfy the criterion in 
NYSE Arca Equities Rule 5.2(j)(3), Commentary .02(a)(2), the Index is 
sufficiently broad-based to deter potential manipulation, given that it 
is composed of approximately 10,126 issues and 1,811 unique issuers. In 
addition, the New Index securities are sufficiently liquid to deter 
manipulation in that a substantial portion (84.39%) of the New Index 
weight is composed of maturities that are part of a minimum original 
principal amount outstanding of $100 million or more for all the 
maturities of the offering, and in view of the substantial total dollar 
amount outstanding and the average dollar amount outstanding of New 
Index issues, as referenced above.
---------------------------------------------------------------------------

    \17\ Commentary .02(a)(4) to NYSE Arca Equities Rule 5.2(j)(3) 
provides that no component fixed-income security (excluding Treasury 
Securities and GSE Securities, as defined therein) shall represent 
more than 30% of the weight of the index or portfolio, and the five 
most heavily weighted component fixed-income securities in the index 
or portfolio shall not in the aggregate account for more than 65% of 
the weight of the index or portfolio.
---------------------------------------------------------------------------

    The New Index value, calculated and disseminated at least once 
daily, as well as the components of the Index and their percentage 
weightings, will be available from major market data vendors. In 
addition, the portfolio of securities held by the Fund will be 
disclosed on the Fund's Web site. The IIV for Shares of the Fund will 
be disseminated by one or more major market data vendors, updated at 
least every 15 seconds during the Exchange's Core Trading Session.
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest in 
that a large amount of information is publicly available regarding the 
Fund and the Shares, thereby promoting market transparency. The Fund's 
portfolio holdings will be disclosed on the Fund's Web site daily after 
the close of trading on the Exchange and prior to the opening of 
trading on the Exchange the following day. Moreover, the IIV for Shares 
of the Fund will be widely disseminated by one or more major market 
data vendors at least every 15 seconds during the Exchange's Core 
Trading Session. The current value of the New Index will be 
disseminated by one or more major market data vendors at least once per 
day. Information regarding market price and trading volume of the 
Shares will be continually available on a real-time basis throughout 
the day on brokers' computer screens and other electronic services, and 
quotation and last sale information will be available via the CTA high-
speed line. The Web site for the Fund will include the prospectus for 
the Fund and additional data relating to

[[Page 32375]]

net asset value (``NAV'') and other applicable quantitative 
information. Moreover, prior to the commencement of trading, the 
Exchange will inform its ETP Holders in an Information Bulletin of the 
special characteristics and risks associated with trading the Shares. 
If the Exchange becomes aware that the NAV is not being disseminated to 
all market participants at the same time, it will halt trading in the 
Shares until such time as the NAV is available to all market 
participants. With respect to trading halts, the Exchange may consider 
all relevant factors in exercising its discretion to halt or suspend 
trading in the Shares of the Fund. 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. If the applicable IIV, and the 
New Index value are not being disseminated as required, the Corporation 
may halt trading during the day in which the interruption to the 
dissemination of the IIV or New Index value occurs. If the interruption 
to the dissemination of the IIV or New Index value persists past the 
trading day in which it occurred, the Corporation will halt trading. 
Trading in Shares of the Fund will be halted if the circuit breaker 
parameters in NYSE Arca Equities Rule 7.12 have been reached or because 
of market conditions or for reasons that, in the view of the Exchange, 
make trading in the Shares inadvisable, and trading in the Shares will 
be subject to NYSE Arca Equities Rule 7.34, which sets forth 
circumstances under which Shares of the Fund may be halted. In 
addition, investors will have ready access to information regarding the 
applicable IIV, and quotation and last sale information for the Shares. 
Trade price and other information relating to municipal bonds is 
available through the Municipal Securities Rulemaking Board's 
Electronic Municipal Market Access (``EMMA'') system.
    All statements and representations made in this filing regarding 
(a) the description of the Fund's 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 
Adviser 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. If the Fund is not in compliance with 
the applicable listing requirements, the Exchange will commence 
delisting procedures under NYSE Arca Rule 5.5(m).
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the continued listing and 
trading of exchange-traded products that principally hold municipal 
bonds and that will enhance competition among market participants, to 
the benefit of investors and the marketplace. The Exchange has in place 
surveillance procedures relating to trading in the Shares and may 
obtain information via ISG from other exchanges that are members of ISG 
or with which the Exchange has entered into a comprehensive 
surveillance sharing agreement. In addition, investors will have ready 
access to information regarding the IIV and quotation and last sale 
information for the Shares.

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

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

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

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

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

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

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2016-62 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-2016-62. 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-2016-62 and should 
be submitted on or before June 13, 2016.


[[Page 32376]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
---------------------------------------------------------------------------

    \18\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-12016 Filed 5-20-16; 8:45 am]
BILLING CODE 8011-01-P

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.