Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change Relating to the Listing and Trading of Shares of the Natixis Seeyond International Minimum Volatility ETF Under NYSE Arca Equities Rule 8.600, 33291-33299 [2016-12242]
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Federal Register / Vol. 81, No. 101 / Wednesday, May 25, 2016 / Notices
19(b)(3)(A) of the Act 29 and Rule 19b–
4(f)(6) thereunder.30 Because the
proposed rule change does not: (i)
Significantly affect the protection of
investors or the public interest; (ii)
impose any significant burden on
competition; and (iii) become operative
prior to 30 days from the date on which
it was filed, or such shorter time as the
Commission may designate, if
consistent with the protection of
investors and the public interest, the
proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act and Rule 19b–4(f)(6)(iii)
thereunder.
A proposed rule change filed under
Rule 19b–4(f)(6) 31 normally does not
become operative prior to 30 days after
the date of the filing. However, pursuant
to Rule 19b4(f)(6)(iii),32 the Commission
may designate a shorter time if such
action is consistent with the protection
of investors and the public interest. The
Exchange has asked the Commission to
waive the 30-day operative delay so that
the proposal may become operative
immediately upon filing. The Exchange
believes that waiving the operative
delay would promote the protection of
investors and the public interest
because the proposed rule change
would reduce the potential for a Market
Order to trade at prices away from the
prevailing quote and at potentially
worse prices for the investor. Likewise,
the Exchange believes that eliminating
IOC and tick-sensitive instructions for
Market Orders, without delay, would be
consistent with the protection of
investors and the public interest
because these instructions are rarely
used and their elimination would
simplify the Exchange’s offering of order
types. The Commission believes that the
proposed rule change is consistent with
the protection of investors and the
public interest, because the proposal
would diminish the likelihood of
Market Orders trading at prices that
would be disadvantageous to investors,
and because it would simplify the
Exchange’s order types by eliminating
rarely used complex order functionality.
Accordingly, the Commission hereby
waives the 30-day operative delay and
29 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b4(f)(6)(iii) requires the Exchange to give the
Commission written notice of the Exchange’s intent
to file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied this requirement.
31 17 CFR 240.19b–4(f)(6).
32 17 CFR 240.19b–4(f)(6)(iii).
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30 17
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designates the proposal operative upon
filing.33
At any time within 60 days of the
filing of such proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
under Section 19(b)(2)(B) 34 of the Act to
determine whether the proposed rule
change should be approved or
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–
NYSEMKT–2016–54 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSEMKT–2016–54. 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
33 For purposes only of accelerating the operative
date of this proposal, the Commission has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. 15
U.S.C. 78c(f).
34 15 U.S.C. 78s(b)(2)(B).
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33291
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–
NYSEMKT–2016–54 and should be
submitted on or before June 15, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.35
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–12240 Filed 5–24–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–77861; File No. SR–
NYSEArca–2016–67]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of Proposed
Rule Change Relating to the Listing
and Trading of Shares of the Natixis
Seeyond International Minimum
Volatility ETF Under NYSE Arca
Equities Rule 8.600
May 19, 2016.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that on May 5,
2016, NYSE Arca, Inc. (‘‘NYSE Arca’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘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 Substance of
the Proposed Rule Change
The Exchange proposes to list and
trade shares of the Natixis Seeyond
International Minimum Volatility ETF
under NYSE Arca Equities Rule 8.600
(‘‘Managed Fund Shares). The proposed
rule change is available on the
Exchange’s Web site at www.nyse.com,
35 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
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Federal Register / Vol. 81, No. 101 / Wednesday, May 25, 2016 / Notices
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
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
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The Exchange proposes to list and
trade shares (’’Shares’’) of the following
under NYSE Arca Equities Rule 8.600,
which governs the listing and trading of
Managed Fund Shares: 4 Natixis
Seeyond International Minimum
Volatility ETF (‘‘Fund’’).5
The Shares will be offered by Natixis
ETF Trust (the ‘‘Trust’’), which is
registered with the Commission as an
open-end management investment
4 A Managed Fund Share is a security that
represents an interest in an investment company
registered under the Investment Company Act of
1940 (15 U.S.C. 80a–1) (‘‘1940 Act’’) organized as
an open-end investment company or similar entity
that invests in a portfolio of securities selected by
its investment adviser consistent with its
investment objectives and policies. In contrast, an
open-end investment company that issues
Investment Company Units, listed and traded on
the Exchange under NYSE Arca Equities Rule
5.2(j)(3), seeks to provide investment results that
correspond generally to the price and yield
performance of a specific foreign or domestic stock
index, fixed income securities index or combination
thereof.
5 The Commission has previously approved
listing and trading on the Exchange of a number of
actively managed funds under Rule 8.600. See, e.g.,
Securities Exchange Act Release Nos. 57801 (May
8, 2008), 73 FR 27878 (May 14, 2008) (SR–
NYSEArca–2008–31) (order approving Exchange
listing and trading of twelve actively-managed
funds of the WisdomTree Trust); 62502 (July 15,
2010), 75 FR 42471 (July 21, 2010) (SR–NYSEArca–
2010–57) (order approving listing and trading of
AdviserShares WCM/BNY Mellon Focused Growth
ADR ETF); 63076 (October 12, 2010), 75 FR 63874
(October 18, 2010) (SR–NYSEArca–2010–79) (order
approving listing and trading of Cambria Global
Tactical ETF); 71540 (February 12, 2014), 79 FR
9515 (February 19, 2014) (SR–NYSEArca–2013–
138) (order approving listing and trading of shares
of the iShares Enhanced International Large-Cap
ETF and iShares Enhanced International Small-Cap
ETF).
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company.6 NGAM Advisors, L.P. will
serve as the investment adviser and
administrator to the Fund (the
‘‘Adviser’’ or ‘‘Administrator’’). Natixis
Asset Management U.S., LLC (‘‘Natixis
AM US’’) will serve as the Fund’s subadviser (‘‘Sub-Adviser’’). State Street
Bank and Trust Company (the
‘‘Custodian’’ or ‘‘Transfer Agent’’) will
serve as custodian and transfer agent for
the Fund.
Commentary .06 to Rule 8.600
provides that, if the investment adviser
to the investment company issuing
Managed Fund Shares is affiliated with
a broker-dealer, such investment adviser
shall erect a ‘‘fire wall’’ between the
investment adviser and the brokerdealer with respect to access to
information concerning the composition
and/or changes to such investment
company portfolio. In addition,
Commentary .06 further requires that
personnel who make decisions on the
open-end fund’s portfolio composition
must be subject to procedures designed
to prevent the use and dissemination of
material nonpublic information
regarding the open-end fund’s
portfolio.7 Commentary .06 to Rule
8.600 is similar to Commentary .03(a)(i)
and (iii) to NYSE Arca Equities Rule
6 The Trust is registered under the 1940 Act. On
March 14, 2016, the Trust filed with the
Commission its initial registration statement on
Form N–1A under the Securities Act of 1933 (15
U.S.C. 77a) (‘‘Securities Act’’), and under the 1940
Act relating to the Fund (File Nos. 333–210156 and
811–23146) (‘‘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 the1940 Act. See Investment Company
Act Release No. 30654 (August 20, 2013) (File No.
812–13942–02) (‘‘Exemptive Order’’).
7 An investment adviser to an open-end fund is
required to be registered under the Investment
Advisers Act of 1940 (the ‘‘Advisers Act’’). As a
result, the Adviser and Sub-Adviser and their
related personnel are subject to the provisions of
Rule 204A–1 under the Advisers Act relating to
codes of ethics. This Rule requires investment
advisers to adopt a code of ethics that reflects the
fiduciary nature of the relationship to clients as
well as compliance with other applicable securities
laws. Accordingly, procedures designed to prevent
the communication and misuse of non-public
information by an investment adviser must be
consistent with Rule 204A–1 under the Advisers
Act. In addition, Rule 206(4)–7 under the Advisers
Act makes it unlawful for an investment adviser to
provide investment advice to clients unless such
investment adviser has (i) adopted and
implemented written policies and procedures
reasonably designed to prevent violation, by the
investment adviser and its supervised persons, of
the Advisers Act and the Commission rules adopted
thereunder; (ii) implemented, at a minimum, an
annual review regarding the adequacy of the
policies and procedures established pursuant to
subparagraph (i) above and the effectiveness of their
implementation; and (iii) designated an individual
(who is a supervised person) responsible for
administering the policies and procedures adopted
under subparagraph (i) above.
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5.2(j)(3); however, Commentary .06 in
connection with the establishment of a
‘‘fire wall’’ between the investment
adviser and the broker-dealer reflects
the applicable open-end fund’s
portfolio, not an underlying benchmark
index, as is the case with index-based
funds. The Adviser and Sub-Adviser are
not a registered broker-dealer but are
affiliated with a broker-dealer and have
implemented a ‘‘fire wall’’ with respect
to such broker-dealer regarding access to
information concerning the composition
and/or changes to the Fund’s portfolio.
In the event (a) the Adviser or any subadviser becomes registered as a brokerdealer or newly affiliated with a brokerdealer, or (b) any new adviser or subadviser is a registered broker-dealer or
becomes affiliated with a broker-dealer,
it will implement a fire wall with
respect to its relevant personnel or
broker-dealer affiliate regarding access
to information concerning the
composition and/or changes to the
portfolio, and will be subject to
procedures designed to prevent the use
and dissemination of material nonpublic information regarding such
portfolio.
Principal Investments
According to the Registration
Statement, the Fund will seek long-term
capital appreciation with less volatility
than international equity markets.
Under normal circumstances,8 the
Fund will invest primarily in non-U.S.
equity securities, which are the
following: Common stocks and
‘‘Depositary Receipts’’.9 The Fund may
8 The term ‘‘under normal circumstances’’
includes, but is not limited to, the absence of
extreme volatility or trading halts in the securities
markets or the financial markets generally;
circumstances under which the Fund’s investments
are made for temporary defensive purposes;
operational issues causing dissemination of
inaccurate market information; or force majeure
type events such as systems failure, natural or manmade disaster, act of God, armed conflict, act of
terrorism, riot or labor disruption or any similar
intervening circumstance.
9 Depositary Receipts are instruments issued by
banks that represent an interest in equity securities
held by arrangement with the bank. Depositary
receipts can be either ‘‘sponsored’’ or
‘‘unsponsored.’’ Sponsored depositary receipts are
issued by banks in cooperation with the issuer of
the underlying equity securities. Unsponsored
depositary receipts are arranged without
involvement by the issuer of the underlying equity
securities and, therefore, less information about the
issuer of the underlying equity securities may be
available and the price may be more volatile than
in the case of sponsored depositary receipts.
American Depositary Receipts (‘‘ADRs’’) are
depositary receipts that are bought and sold in the
United States and are typically issued by a U.S.
bank or trust company which evidence ownership
of underlying securities by a foreign corporation.
Investments in common stock of foreign
corporations may be in the form of ADRs and
Global Depositary Receipts (‘‘GDRs’’) (collectively
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invest in companies of any size and
typically will invest in a number of
different countries throughout the
world. The Fund’s investments may
include non-U.S. equity securities
traded ‘‘over-the-counter’’ (‘‘OTC’’) as
well as those traded on a U.S. or foreign
securities exchange. The portfolio may
also be exposed to currencies other than
the U.S. dollar.
When building and managing the
Fund’s portfolio, the Sub-Adviser will
employ both quantitative and
qualitative factors in an effort to identify
securities that demonstrate lower
volatility and, in combination with
other securities, reduce the Fund’s
overall volatility relative to the
developed international equity market.
In assessing the following three
quantitative factors, the Sub-Adviser
will consider both long and short term
time horizons that it believes will
enable the Fund to reduce overall
volatility: (1) The volatility of each
individual equity security; (2) the
correlation of each individual equity
security to all other equity securities in
the Fund’s investment universe, as
defined by international developed
market equities; and (3) the weight of
each equity security within the
portfolio.
Through a qualitative assessment the
Sub-Adviser will review a range of
factors including company specific risks
as well as overall portfolio construction
and implementation considerations.
Taken together, the quantitative and
qualitative process seeks to generate
returns while lowering overall portfolio
volatility.
The Sub-Adviser will construct the
Fund’s portfolio using a three step
process, described below. The SubAdviser first will conduct a preliminary
review of the equity securities within
the investment universe, as defined by
international developed market equities.
Developed markets are economies that
the Adviser believes are generally
recognized to be fully developed
markets, as measured by gross national
‘‘Depositary Receipts’’). Depositary Receipts are
receipts, typically issued by a bank or trust
company, which evidence ownership of underlying
securities issued by a foreign corporation. For
ADRs, the depository is typically a U.S. financial
institution and the underlying securities are issued
by a foreign issuer. For other Depositary Receipts,
the depository may be a foreign or a U.S. entity, and
the underlying securities may have a foreign or a
U.S. issuer. Depositary Receipts will not necessarily
be denominated in the same currency as their
underlying securities. Generally, ADRs, in
registered form, are designed for use in the U.S.
securities market. GDRs are tradable both in the
United States and in Europe and are designed for
use throughout the world. Not more than 10% of
the Fund’s assets will be invested in non-exchangelisted ADRs.
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20:19 May 24, 2016
Jkt 238001
income, financial market capitalization
and/or other factors. This initial filtering
is designed to exclude dual listings and
eliminate stocks that the Sub-Adviser
believes have insufficient history,
liquidity and country-specific risk, such
as corporate actions, mergers or
acquisitions.
In seeking to minimize the overall
volatility of the Fund, the Sub-Adviser
will construct a portfolio that is
systematically guided by proprietary
quantitative analysis, which makes an
assessment of historical volatilities and
correlations within the investment
universe and then estimates which
combination of such stocks has the
potential to display the lowest overall
portfolio volatility.
The Sub-Adviser then will actively
manage the portfolio by continuously
monitoring for changes in volatility,
liquidity and individual risk factors
with the goal of avoiding detrimental
risk concentration. The Sub-Adviser
may sell a security when it believes that
a security has acquired substantial
exposure to a specific risk factor.
Other Investments
While the Fund, under normal
circumstances, will invest primarily
(more than 50% of its assets) in nonU.S. equity securities, as described
above, the Fund will invest its
remaining assets in the securities and
financial instruments described below.
The Fund may invest in certificates of
deposit (certificates representing the
obligation of a bank to repay funds
deposited with it for a specified period
of time), time deposits (non-negotiable
deposits maintained in a bank for a
specified period of time up to seven
days at a stated interest rate), and
bankers’ acceptances (credit instruments
evidencing the obligation of a bank to
pay a draft drawn on it by a customer).
The Fund also may purchase U.S.
dollar-denominated obligations issued
by foreign branches of domestic banks
or foreign branches of foreign banks
(‘‘Eurodollar’’ obligations) and domestic
branches of foreign banks (‘‘Yankee
dollar’’ obligations).
The Fund may invest in the following
U.S. government securities: U.S.
Treasury Bills; U.S. Treasury Notes and
Bonds; U.S. Treasury Floating Rate
Notes; and Treasury Inflation-Protected
Securities (‘‘TIPS’’).
The Fund may invest in other
investment companies, including
exchange-traded funds (‘‘ETFs’’).10
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
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33293
Investments in investment companies
are typically subject to limitations
prescribed by the 1940 Act.
The Fund may invest in preferred
stock traded on a U.S. or foreign
exchange or OTC.
The Fund may invest in U.S. or
foreign exchange-traded real estate
investment trusts (‘‘REITs’’), which are
pooled investment vehicles that invest
primarily in either real estate or real
estate-related loans.
The Fund may invest in registered
closed-end investment companies that
invest in foreign securities.
The Fund may invest in foreign debt
securities. Foreign debt securities may
include securities of issuers organized
or headquartered outside the U.S. as
well as obligations of supranational
entities. The non-U.S. securities in
which the Fund may invest, all or a
portion of which may be non-U.S.
dollar-denominated, may include,
among other investments: (i) Debt
obligations issued or guaranteed by nonU.S. national, provincial, state,
municipal or other governments or by
their agencies or instrumentalities,
including ‘‘Brady Bonds’’; (ii) debt
obligations of supranational entities;
(iii) debt obligations of the U.S.
government issued in non-dollar
securities; (iv) debt obligations and
other fixed-income securities of foreign
corporate issuers; and (v) non-U.S.
dollar-denominated securities of U.S.
corporate issuers.
The Fund may engage in foreign
currency transactions for both hedging
and investment purposes. Foreign
securities in the Fund’s portfolio may be
denominated in foreign currencies or
traded in securities markets in which
settlements are made in foreign
currencies.
To protect against a change in the
foreign currency exchange rate between
the date on which the Fund contracts to
purchase or sell a security and the
settlement date for the purchase or sale,
to gain exposure to one or more foreign
currencies or to ‘‘lock in’’ the equivalent
of a dividend or interest payment in
another currency, the Fund might
purchase or sell a foreign currency on a
spot (i.e., cash) basis at the prevailing
spot rate.
The Fund may enter into repurchase
agreements.
The Fund may invest in money
market instruments. Money market
instruments are high-quality, short-term
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.
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mstockstill on DSK3G9T082PROD with NOTICES
securities. The Fund’s money market
investments at the time of purchase
(other than U.S. government securities
and repurchase agreements relating
thereto) generally will be rated at the
time of purchase in the two highest
short-term rating categories as rated by
a major credit agency or, if unrated, will
be of comparable quality as determined
by the Sub-Adviser. The Fund may
invest in instruments of lesser quality
and do not have any minimum credit
quality restriction.
The Fund may invest in U.S. equity
securities (other than Depositary
Receipts) that are traded on a U.S.
exchange or OTC.
To reduce the risk of changes in
interest rates and securities prices, the
Fund may purchase securities on a
forward commitment or when-issued or
delayed delivery basis, which means
delivery and payment take place a
number of days after the date of the
commitment to purchase.
Net Asset Value
According to the Registration
Statement, a Share’s NAV will be
determined at the close of regular
trading on the New York Stock
Exchange (‘‘NYSE’’) on the days the
NYSE is open for trading, normally at
4:00 p.m., Eastern time. Fund securities
and other investments for which market
quotations are readily available will be
valued at market value. The Fund may
use independent pricing services
recommended by the Adviser and
approved by the Board of Trustees to
obtain market quotations.
Fund securities and other investments
will be valued at market value based on
market quotations obtained or
determined by independent pricing
services recommended by the Adviser
and approved by the Board of Trustees.
Fund securities and other investments
for which market quotations are not
readily available, or which are deemed
to be unreliable by the Adviser, will be
valued at fair value as determined in
good faith by the Adviser pursuant to
procedures approved by the Board of
Trustees, as described below. Market
value will be determined as follows:
Exchange-listed equity securities will
be valued at the last sale price quoted
on the exchange where they are traded
most extensively or, if there is no
reported sale during the day, the closing
bid quotation. Securities traded on the
NASDAQ Global Select Market,
NASDAQ Global Market and NASDAQ
Capital Market are valued at the
NASDAQ Official Closing Price
(‘‘NOCP’’), or if lacking an NOCP, at the
most recent bid quotations on the
applicable NASDAQ Market. OTC
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20:19 May 24, 2016
Jkt 238001
equity securities will be valued at the
last sale price quoted in the market
where they are traded most extensively
or, if there is no reported sale during the
day, the closing bid quotation as
reported by an independent pricing
service. If there is no sale price or
closing bid quotation available unlisted
equity securities will be valued using
evaluated bids furnished by an
independent pricing service, if
available. In some foreign markets, an
official close price and a last sale price
may be available from the foreign
exchange or market. In those cases, the
official close price is used. Valuations
from foreign markets are subject to the
Fund’s fair value policies described
below.
Eurodollar obligations, Yankee dollar
obligations, U.S. government securities,
money market instruments, repurchase
agreements, foreign debt securities,
certificates of deposit, time deposits,
and bankers’ acceptances, will be
valued based on evaluated bids
furnished to the Fund by an
independent pricing service using
market information, transactions for
comparable securities and various
relationships between securities, if
available, or bid prices obtained from
broker-dealers.
Foreign denominated assets and
liabilities will be translated into U.S.
dollars based upon foreign exchange
rates supplied by an independent
pricing service. Fund securities and
other investments for which market
quotations are not readily available will
be valued at fair value as determined in
good faith by the Adviser pursuant to
procedures approved by the Board of
Trustees. The Fund may also value
securities and other investments at fair
value in other circumstances such as
when extraordinary events occur after
the close of a foreign market but prior
to the close of the NYSE. This may
include situations relating to a single
issuer (such as a declaration of
bankruptcy or a delisting of the issuer’s
security from the primary market on
which it has traded) as well as events
affecting the securities markets in
general (such as market disruptions or
closings and significant fluctuations in
U.S. and/or foreign markets).
Fair value pricing may require
subjective determinations about the
value of a security, and fair values used
to determine the Fund’s NAV may differ
from quoted or published prices, or
from prices that are used by others, for
the same securities. In addition, the use
of fair value pricing may not always
result in adjustments to the prices of
securities held by the Fund. Valuations
for securities traded in the OTC market
PO 00000
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may be based on factors such as market
information, transactions for
comparable securities, and various
relationships between securities or bid
prices obtained from broker-dealers.
Evaluated prices from an independent
pricing service may require subjective
determinations and may be different
than actual market prices or prices
provided by other pricing services.
Trading in some of the portfolio
securities or other investments of the
Fund takes place in various markets
outside the United States on days and
at times other than when the NYSE is
open for trading. Therefore, the
calculation of the Fund’s NAV does not
take place at the same time as the prices
of many of its portfolio securities or
other investments are determined, and
the value of the Fund’s portfolio may
change on days when the Fund is not
open for business and its shares may not
be purchased or redeemed.
Investment company securities that
are not exchange-traded will be valued
at NAV.
Creation and Redemption of Shares
According to the Registration
Statement, Shares of the Fund will be
‘‘created’’ at NAV by market makers,
large investors and institutions only in
block-size ‘‘Creation Units’’ of 50,000
Shares or multiples thereof. The size of
a Creation Unit is subject to change.
Each ‘‘creator’’ or ‘‘Authorized
Participant’’ will enter into an
authorized participant agreement with
the Fund’s distributor.
A creation transaction, which is
subject to acceptance by the Fund’s
distributor, generally takes place when
an Authorized Participant deposits into
the Fund a designated portfolio of
securities (including any portion of such
securities for which cash may be
substituted) and a specified amount of
cash approximating the holdings of the
Fund in exchange for a specified
number of creation units.
Similarly, Shares can be redeemed
only in Creation Units, generally for a
designated portfolio of securities
(including any portion of such securities
for which cash may be substituted) held
by the Fund and a specified amount of
cash. Except when aggregated in
Creation Units, Shares will not be
redeemable by the Fund.
The prices at which creations and
redemptions occur are based on the next
calculation of NAV after a creation or
redemption order is received in an
acceptable form under the Authorized
Participant agreement.
Only an Authorized Participant may
create or redeem creation units directly
with the Fund.
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Federal Register / Vol. 81, No. 101 / Wednesday, May 25, 2016 / Notices
Creations and redemptions must be
made through a firm that is either a
member of the Continuous Net
Settlement System of the National
Securities Clearing Corporation or a
DTC participant and has executed an
agreement with the Fund’s distributor
with respect to creations and
redemptions of Creation Units.
The consideration for purchase of
Creation Units generally will consist of
Deposit Securities and the Cash
Component, which will generally
correspond pro rata, to the extent
practicable, to the Fund securities, or, as
permitted by the Fund, the Cash
Deposit. Together, the Deposit
Securities and the Cash Component or,
alternatively, the Cash Deposit,
constitute the ‘‘Fund Deposit,’’ which
represents the minimum initial and
subsequent investment amount for a
Creation Unit of the Fund. The portfolio
of securities required may, in certain
limited circumstances, be different than
the portfolio of securities the Fund will
deliver upon redemption of Fund
Shares.
The function of the Cash Component
is to compensate for any differences
between the NAV per Creation Unit and
the ‘‘Deposit Amount’’ (as defined
below). The Cash Component would be
an amount equal to the difference
between the NAV of the shares (per
Creation Unit) and the ‘‘Deposit
Amount,’’ which is an amount equal to
the market value of the Deposit
Securities. If the Cash Component is a
positive number (the NAV per Creation
Unit exceeds the Deposit Amount), the
Authorized Participant will deliver the
Cash Component. If the Cash
Component is a negative number (the
NAV per Creation Unit is less than the
Deposit Amount), the Authorized
Participant will receive the Cash
Component. Computation of the Cash
Component excludes any stamp duty or
other similar fees and expenses payable
upon transfer of beneficial ownership of
the Deposit Securities, which shall be
the sole responsibility of the Authorized
Participant. The Cash Component may
also include a ‘‘Dividend Equivalent
Payment,’’ which enables the Fund to
make a complete distribution of
dividends on the next dividend
payment date. State Street Bank and
Trust Company, through the National
Securities Clearing Corporation
(‘‘NSCC’’), will make available on each
business day, prior to the opening of
business (subject to amendments) on the
Exchange (currently 9:30 a.m., Eastern
time), the identity and the required
number of each Deposit Security and
the amount of the Cash Component to
be included in the current Fund Deposit
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(based on information at the end of the
previous business day).
Shares may be redeemed only in
Creation Units at their NAV next
determined after receipt of a redemption
request in proper form on a business
day and only through a Participating
Party or DTC Participant who has
executed a Participant Agreement. State
Street, through the NSCC, will make
available immediately prior to the
opening of business on the Exchange
(currently 9:30 a.m., Eastern time) on
each business day, the identity of the
Fund’s securities and/or an amount of
cash that will be applicable (subject to
possible amendment or correction) to
redemption requests received in proper
form on that day. All orders are subject
to acceptance by the Transfer Agent.
The Fund’s securities received on
redemption will generally correspond
pro rata, to the extent practicable, to
such Fund’s securities. The Fund’s
securities received on redemption
(‘‘Fund Securities’’) may not be
identical to Deposit Securities that are
applicable to creations of Creation
Units.
Unless cash only redemptions are
available or specified for the Fund, the
redemption proceeds for a Creation Unit
will generally consist of Fund
Securities—as announced on the
business day of the request for a
redemption order received in proper
form—plus cash in an amount equal to
the difference between the NAV of the
shares being redeemed, as next
determined after a receipt of a request
in proper form, and the value of the
Fund Securities, less the redemption
transaction fee and variable fees
described below.11 Notwithstanding the
foregoing, the Trust will substitute a
‘‘cash-in-lieu’’ amount to replace any
Fund Security that is a non-deliverable
instrument. The Trust may permit a
‘‘cash-in-lieu’’ amount for any reason at
the Trust’s sole discretion but is not
required to do so. The amount of cash
paid out in such cases will be
equivalent to the value of the
instrument listed as a Fund Security. In
the event that the Fund Securities have
a value greater than the NAV of the
shares, a compensating cash payment
equal to the difference.
The right of redemption may be
suspended or the date of payment
postponed with respect to the Fund: (i)
For any period during which the
Exchange is closed (other than
customary weekend and holiday
11 The Adviser represents that, to the extent the
Trust effects the creation or redemption of Shares
in cash, such transactions will be effected in the
same manner for all Authorized Participants.
PO 00000
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33295
closings); (ii) for any period during
which trading on the Exchange is
suspended or restricted; (iii) for any
period during which an emergency
exists as a result of which disposal by
the Fund of securities it owns or
determination of the Fund’s NAV is not
reasonably practicable; or (iv) in such
other circumstances as permitted by the
Commission.
Investment Restrictions
As a temporary defensive measure,
the Fund may hold any portion of its
assets in cash (U.S. dollars, foreign
currencies or multinational currency
units) and/or invest in money market
instruments or high-quality debt
securities as it deems appropriate.
The Fund intends to maintain the
required level of diversification and
otherwise conduct its operations so as to
qualify as a ‘‘regulated investment
company’’ for purposes of the Internal
Revenue Code of 1986.12
The Fund may hold up to an aggregate
amount of 15% of its net assets in
illiquid assets (calculated at the time of
investment). 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.13
The Fund will not invest in options,
futures or swaps.
The Fund’s investments will be
consistent with the Fund’s investment
objective and will not be used to
12 26
U.S.C. 851.
Commission has stated that long-standing
Commission guidelines have required open-end
funds to hold no more than 15% of their net assets
in illiquid securities and other illiquid assets. See
Investment Company Act Release No. 28193 (March
11, 2008), 73 FR 14618 (March 18, 2008), footnote
34. See also, Investment Company Act Release No.
5847 (October 21, 1969), 35 FR 19989 (December
31, 1970) (Statement Regarding ‘‘Restricted
Securities’’); Investment Company Act Release No.
18612 (March 12, 1992), 57 FR 9828 (March 20,
1992) (Revisions of Guidelines to Form N–1A). A
fund’s portfolio security is illiquid if it cannot be
disposed of in the ordinary course of business
within seven days at approximately the value
ascribed to it by the fund. See Investment Company
Act Release No. 14983 (March 12, 1986), 51 FR
9773 (March 21, 1986) (adopting amendments to
Rule 2a–7 under the 1940 Act); Investment
Company Act Release No. 17452 (April 23, 1990),
55 FR 17933 (April 30, 1990) (adopting Rule 144A
under the 1933 Act).
13 The
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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).14
Availability of Information
mstockstill on DSK3G9T082PROD with NOTICES
The Fund’s Web site, which will be
publicly available prior to the public
offering of Shares, will include a form
of the prospectus for the Fund that may
be downloaded. The Fund’s Web site
will include additional quantitative
information updated on a daily basis,
including, for the Fund (1) daily trading
volume, the prior business day’s
reported closing price, NAV and midpoint of the bid/ask spread at the time
of calculation of such NAV (the ‘‘Bid/
Ask Price’’),15 and a calculation of the
premium and discount of the Bid/Ask
Price against the NAV, and (2) data in
chart format displaying the frequency
distribution of discounts and premiums
of the daily Bid/Ask Price against the
NAV, within appropriate ranges, for
each of the four previous calendar
quarters. On each business day, before
commencement of trading in Shares in
the Core Trading Session on the
Exchange, the Fund 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.16
On a daily basis, the Fund will
disclose for each portfolio security or
other financial instrument of the Fund
the following information on the Fund’s
Web site: Ticker symbol (if applicable),
name of security and financial
instrument, number of shares and dollar
value of financial instruments held in
the portfolio, and percentage weighting
of the security and financial instrument
in the portfolio. The Web site
information will be publicly available at
no charge.
14 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.
15 The Bid/Ask Price of Shares of the Fund will
be determined using the midpoint of the highest bid
and the lowest offer on the Exchange as of the time
of calculation of the Fund’s NAV. The records
relating to Bid/Ask Prices will be retained by the
Fund and their service providers.
16 Under accounting procedures followed by the
Fund, trades made on the prior business day (‘‘T’’)
will be booked and reflected in NAV on the current
business day (‘‘T + 1’’). Accordingly, the Fund will
be able to disclose at the beginning of the business
day the portfolio that will form the basis for the
NAV calculation at the end of the business day.
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20:19 May 24, 2016
Jkt 238001
In addition, a basket composition file,
which includes the security names and
share quantities required to be delivered
in exchange for the Fund’s Shares,
together with estimates and actual cash
components, will be publicly
disseminated daily prior to the opening
of the NYSE via NSCC. The basket
represents one Creation Unit of the
Fund.
In order to provide additional
information regarding the indicative
value of Shares of the Fund, the
Exchange or a market data vendor will
disseminate every 15 seconds through
the facilities of the Consolidated Tape
Association, or through other widely
disseminated means, an updated IIV for
the Fund as calculated by an
information provider or market data
vendor.
The Fund’s IIV will be based on the
current market value of the Fund’s
portfolio holdings that will form the
basis of the Fund’s calculation of NAV
at the end of the business day as
disclosed on the Fund’s Web site prior
to the business day’s commencement of
trading.
Investors can also obtain the Trust’s
Statement of Additional Information
(‘‘SAI’’), the Fund’s Shareholder
Reports, and the Trust’s Form N–CSR
and Form N–SAR, filed twice a year.
The Trust’s SAI and Shareholder
Reports are available free upon request
from the Trust, and those documents
and the Form N–CSR and Form N–SAR
may be viewed on-screen or
downloaded from the Commission’s
Web site at www.sec.gov. Information
regarding market price and trading
volume of the Shares will be continually
available on a real-time basis throughout
the day on brokers’ computer screens
and other electronic services.
Information regarding the previous
day’s closing price and trading volume
information for the Shares will be
published daily in the financial section
of newspapers. Quotation and last sale
information for the Shares will be
available via the Consolidated Tape
Association (‘‘CTA’’) high-speed line.
With respect to U.S. exchange-listed
equity securities, the intra-day, closing
and settlement prices of common stocks
and exchange-traded equity securities
(including shares of preferred securities,
closed-end funds, REITs and U.S.
exchange-listed Depositary Receipts)
will be readily available from the
national securities exchanges trading
such securities, automated quotation
systems, published or other public
sources, or on-line information services
such as Bloomberg or Reuters. With
respect to non-U.S. exchange-listed
equity securities, intra-day, closing and
PO 00000
Frm 00099
Fmt 4703
Sfmt 4703
settlement prices of common stocks and
other equity securities (including shares
of preferred securities, and non-U.S.
Depositary Receipts), will be available
from the foreign exchanges on which
such securities trade as well as from
major market data vendors. Pricing
information regarding each asset class in
which the Fund will invest will
generally be available through
nationally recognized data service
providers through subscription
arrangements. Quotation information
from brokers and dealers or pricing
services will be available for Eurodollar
obligations, Yankee dollar obligations,
U.S. government securities, repurchase
agreements, money market instruments,
foreign debt securities, certificates of
deposit, time deposits, and bankers’
acceptances; unsponsored Depositary
Receipts; and spot currency transactions
held by the Fund. In addition, IIV,17
which is the Portfolio Indicative Value
as defined in NYSE Arca Equities Rule
8.600 (c)(3), will be widely
disseminated at least every 15 seconds
during the Exchange’s Core Trading
Session by one or more major market
data vendors.18 The dissemination of
the IIV, together with the Disclosed
Portfolio, will allow investors to
determine the value of the underlying
portfolio of the Fund on a daily basis
and to provide a close estimate of that
value throughout the trading day.
Trading Halts
With respect to trading halts, the
Exchange may consider all relevant
factors in exercising its discretion to
halt or suspend trading in the Shares of
the Fund.19 Trading in Shares of the
Fund will be halted if the circuit breaker
parameters in NYSE Arca Equities Rule
7.12 have been reached. Trading also
may be halted because of market
conditions or for reasons that, in the
view of the Exchange, make trading in
the Shares inadvisable. These may
include: (1) The extent to which trading
is not occurring in the securities and/or
the financial instruments comprising
the Disclosed Portfolio of the Fund; or
(2) whether other unusual conditions or
17 The IIV calculation will be an estimate of the
value of the Fund’s NAV per Share using market
data converted into U.S. dollars at the current
currency rates. The IIV price will be based on
quotes and closing prices from the securities’ local
market and may not reflect events that occur
subsequent to the local market’s close. Premiums
and discounts between the IIV and the market price
of the Shares may occur. This should not be viewed
as a ‘‘real-time’’ update of the NAV per Share of the
Fund, which will be calculated only once a day.
18 Currently, it is the Exchange’s understanding
that several major market data vendors display and/
or make widely available IIVs taken from CTA or
other data feeds.
19 See NYSE Arca Equities Rule 7.12.
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circumstances detrimental to the
maintenance of a fair and orderly
market are present. Trading in the
Shares will be subject to NYSE Arca
Equities Rule 8.600(d)(2)(D), which sets
forth circumstances under which Shares
of the Fund may be halted.
mstockstill on DSK3G9T082PROD with NOTICES
Trading Rules
The Exchange deems the Shares to be
equity securities, thus rendering trading
in the Shares subject to the Exchange’s
existing rules governing the trading of
equity securities. Shares will trade on
the NYSE Arca Marketplace from 4:00
a.m. to 8:00 p.m. Eastern time in
accordance with NYSE Arca Equities
Rule 7.34 (Opening, Core, and Late
Trading Sessions). The Exchange has
appropriate rules to facilitate
transactions in the Shares during all
trading sessions. As provided in NYSE
Arca Equities Rule 7.6, Commentary .03,
the minimum price variation (‘‘MPV’’)
for quoting and entry of orders in equity
securities traded on the NYSE Arca
Marketplace is $0.01, with the exception
of securities that are priced less than
$1.00 for which the MPV for order entry
is $0.0001.
The Shares will conform to the initial
and continued listing criteria under
NYSE Arca Equities Rule 8.600. The
Exchange represents that, for initial
and/or continued listing, the Fund will
be in compliance with Rule 10A–3 20
under the Act, as provided by NYSE
Arca Equities Rule 5.3. A minimum of
100,000 Shares for the Fund will be
outstanding at the commencement of
trading on the Exchange. The Exchange
will obtain a representation from the
issuer of the Shares that the NAV per
Share will be calculated daily and that
the NAV and the Disclosed Portfolio
will be made available to all market
participants at the same time.
Surveillance
The Exchange represents that trading
in the Shares will be subject to the
existing trading surveillances,
administered by the Exchange or
Financial Industry Regulatory Authority
(‘‘FINRA’’) on behalf of the Exchange,
which are designed to detect violations
of Exchange rules and applicable federal
securities laws.21 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
20 17
CFR 240.10A–3.
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.
21 FINRA
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20:19 May 24, 2016
Jkt 238001
securities laws applicable to trading on
the Exchange.
The surveillances referred to above
generally focus on detecting securities
trading outside their normal patterns,
which could be indicative of
manipulative or other violative activity.
When such situations are detected,
surveillance analysis follows and
investigations are opened, where
appropriate, to review the behavior of
all relevant parties for all relevant
trading violations.
The Exchange or FINRA, on behalf of
the Exchange, will communicate as
needed regarding trading in the Shares
and certain exchange-traded securities
underlying the Shares with other
markets and other entities that are
members of the Intermarket
Surveillance Group (‘‘ISG’’), and the
Exchange or FINRA, on behalf of the
Exchange, may obtain trading
information regarding trading in the
Shares and certain exchange-traded
securities underlying the Shares from
such markets and other entities. In
addition, the Exchange may obtain
information regarding trading in the
Shares and certain exchange-traded
securities underlying the Shares from
markets and other entities that are
members of ISG or with which the
Exchange has in place a comprehensive
surveillance sharing agreement.22 The
Exchange is able to access from FINRA,
as needed, trade information for certain
fixed income securities held by the
Fund reported to FINRA’s Trade
Reporting and Compliance Engine
(‘‘TRACE’’).
Not more than 10% of the net assets
of the Fund in the aggregate invested in
equity securities (other than nonexchange-traded investment company
securities) shall consist of equity
securities whose principal market is not
a member of the ISG or is a market with
which the Exchange does not have a
comprehensive surveillance sharing
agreement.
In addition, the Exchange also has a
general policy prohibiting the
distribution of material, non-public
information by its employees.
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
22 For a list of the current members of ISG, see
www.isgportal.org. The Exchange notes that not all
components of the Disclosed Portfolio for the Fund
may trade on markets that are members of ISG or
with which the Exchange has in place a
comprehensive surveillance sharing agreement.
PO 00000
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33297
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. 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).
Information Bulletin
Prior to the commencement of
trading, the Exchange will inform its
Equity Trading Permit Holders in an
Information Bulletin (‘‘Bulletin’’) of the
special characteristics and risks
associated with trading the Shares.
Specifically, the Bulletin will discuss
the following: (1) The procedures for
purchases and redemptions of Shares in
Creation Unit aggregations (and that
Shares are not individually redeemable);
(2) NYSE Arca Equities Rule 9.2(a),
which imposes a duty of due diligence
on its Equity Trading Permit Holders to
learn the essential facts relating to every
customer prior to trading the Shares; (3)
the risks involved in trading the Shares
during the Opening and Late Trading
Sessions when an updated Portfolio
Indicative Value will not be calculated
or publicly disseminated; (4) how
information regarding the Portfolio
Indicative Value and the Disclosed
Portfolio is disseminated; (5) the
requirement that Equity Trading Permit
Holders deliver a prospectus to
investors purchasing newly issued
Shares prior to or concurrently with the
confirmation of a transaction; and (6)
trading information.
In addition, the Bulletin will
reference that the Fund is subject to
various fees and expenses described in
the Registration Statement. The Bulletin
will discuss any exemptive, no-action,
and interpretive relief granted by the
Commission from any rules under the
Act. The Bulletin will also disclose that
the NAV for the Shares will be
calculated after 4:00 p.m. Eastern time
each trading day.
2. Statutory Basis
The basis under the Act for this
proposed rule change is the requirement
under Section 6(b)(5) 23 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
23 15
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U.S.C. 78f(b)(5).
25MYN1
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impediments to, and perfect the
mechanism of a free and open market
and, in general, to protect investors and
the public interest.
The Exchange believes that the
proposed rule change is designed to
prevent fraudulent and manipulative
acts and practices in that the Shares will
be listed and traded on the Exchange
pursuant to the initial and continued
listing criteria in NYSE Arca Equities
Rule 8.600. The Exchange has in place
surveillance procedures that are
adequate to properly monitor trading in
the Shares in all trading sessions and to
deter and detect violations of Exchange
rules and applicable federal securities
laws. The Adviser has implemented a
‘‘fire wall’’ with respect to its affiliated
broker-dealer regarding access to
information concerning the composition
and/or changes to the Fund’s portfolio.
The Exchange or FINRA, on behalf of
the Exchange, will communicate as
needed regarding trading in the Shares
and certain exchange-traded securities
underlying the Shares with other
markets and other entities that are
members of the ISG, and the Exchange
or FINRA, on behalf of the Exchange,
may obtain trading information
regarding trading in the Shares and
certain exchange-traded securities
underlying the Shares from such
markets and other entities. In addition,
the Exchange may obtain information
regarding trading in the Shares and
certain exchange-traded securities
underlying the Shares from markets and
other entities that are members of ISG or
with which the Exchange has in place
a CSSA. The Exchange is able to access
from FINRA, as needed, trade
information for certain fixed income
securities held by the Fund reported to
FINRA’s TRACE. The Fund may hold
up to an aggregate amount of 15% of its
net assets in illiquid assets (calculated
at the time of investment. The Fund will
not invest in options, futures or swaps.
The Fund’s investments will be
consistent with its investment objective
and will not be used to enhance
leverage.
The proposed rule change is designed
to promote just and equitable principles
of trade and to protect investors and the
public interest in that the Exchange will
obtain a representation from the issuer
of the Shares that the NAV per Share
will be calculated daily and that the
NAV and the Disclosed Portfolio will be
made available to all market
participants at the same time. In
addition, a large amount of information
is publicly available regarding the Fund
and the Shares, thereby promoting
market transparency. The Fund’s
portfolio holdings will be disclosed on
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20:19 May 24, 2016
Jkt 238001
its 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 will be
widely disseminated by one or more
major market data vendors at least every
15 seconds during the Exchange’s Core
Trading Session. Not more than 10% of
the net assets of the Fund in the
aggregate invested in equity securities
(other than non-exchange-traded
investment company securities) shall
consist of equity securities whose
principal market is not a member of the
ISG or is a market with which the
Exchange does not have a
comprehensive surveillance sharing
agreement. 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 that
will form the basis for the Fund’s
calculation of NAV at the end of the
business 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 a form of
the prospectus for the Fund and
additional data relating to NAV and
other applicable quantitative
information. Moreover, prior to the
commencement of trading, the Exchange
will inform its Equity Trading Permit
Holders in an Information Bulletin of
the special characteristics and risks
associated with trading the Shares.
Trading in Shares of the Fund will be
halted if the circuit breaker parameters
in NYSE Arca Equities Rule 7.12 have
been reached or because of market
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 8.600(d)(2)(D), which sets
forth circumstances under which Shares
of the Fund may be halted. The intraday, closing and settlement prices of the
portfolio securities are also readily
available from the national securities
exchanges trading such securities,
automated quotation systems, published
or other public sources, or on-line
information services. In addition, as
noted above, investors will have ready
access to information regarding the
Fund’s holdings, the IIV, the Disclosed
Portfolio, and quotation and last sale
information for the Shares.
The proposed rule change is designed
to perfect the mechanism of a free and
open market and, in general, to protect
PO 00000
Frm 00101
Fmt 4703
Sfmt 4703
investors and the public interest in that
it will facilitate the listing and trading
of an additional type of activelymanaged exchange-traded product that
will enhance competition among market
participants, to the benefit of investors
and the marketplace. As noted above,
the Exchange has in place surveillance
procedures relating to trading in the
Shares and may obtain information via
ISG from other exchanges that are
members of ISG or with which the
Exchange has entered into a
comprehensive surveillance sharing
agreement. In addition, as noted above,
investors will have ready access to
information regarding the Fund’s
holdings, the IIV, the Disclosed
Portfolio, and quotation and last sale
information for the Shares.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purpose of the Act. The Exchange
notes that the proposed rule change will
facilitate the listing and trading of an
actively-managed exchange-traded
product that will principally hold non
U.S. 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.
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 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.
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.
E:\FR\FM\25MYN1.SGM
25MYN1
Federal Register / Vol. 81, No. 101 / Wednesday, May 25, 2016 / Notices
Comments may be submitted by any of
the following methods:
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–2016–67 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.
mstockstill on DSK3G9T082PROD with NOTICES
All submissions should refer to File
Number SR–NYSEArca–2016–67. 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
offices of the Exchange and on its
Internet Web site at www.nyse.com. All
comments received will be posted
without change; the Commission does
not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly. All
submissions should refer to File
Number SR–NYSEArca–2016–67, and
should be submitted on or before June
15, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
Robert W. Errett,
Deputy Secretary.
[Release No. 34–77858; File No. SR–
NYSEArca–2016–66]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Reflecting a Change to
the Means of Achieving the Investment
Objective With Respect to the
AdvisorShares EquityPro ETF
May 19, 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 5,
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 reflect a
change to the means of achieving the
investment objective with respect to the
AdvisorShares EquityPro ETF. Shares of
the AdvisorShares EquityPro ETF are
currently listed and traded on the
Exchange. 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
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.
[FR Doc. 2016–12242 Filed 5–24–16; 8:45 am]
BILLING CODE 8011–01–P
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
24 17
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
20:19 May 24, 2016
Jkt 238001
PO 00000
Frm 00102
Fmt 4703
Sfmt 4703
33299
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Commission has approved listing
and trading on the Exchange of shares
(‘‘Shares’’) of the AdvisorShares
EquityPro ETF (formerly, the Global
Alpha & Beta ETF) (‘‘Fund’’), a series of
AdvisorShares Trust (‘‘Trust’’) 4 under
NYSE Arca Equities Rule 8.600, which
governs the listing and trading of
Managed Fund Shares. Shares of the
Fund are currently listed and traded on
the Exchange.
The Shares are offered by the Trust,
which is registered with the
Commission as an open-end
management investment company.5 The
investment advisor to the Fund is
AdvisorShares Investments, LLC (the
‘‘Adviser’’). The sub-adviser for the
Fund is Elements Financial, PLC (the
‘‘Sub-Adviser’’). Neither the Adviser nor
the Sub-Adviser is a registered brokerdealer or is affiliated with a brokerdealer.
In this proposed rule change, the
Exchange proposes to reflect a change to
the means the Adviser will utilize to
implement the Fund’s investment
objective to permit investments in U.S.
exchange-traded futures contracts, as
described below.
The First Prior Release stated that the
Fund’s investment objective is longterm capital growth. The First Prior
Release further stated that the Fund will
not invest in options contracts, futures
contracts, or swap agreements. The
Second Prior Release stated that the
Fund may invest up to 10% of the
Fund’s net assets in the following types
of options: U.S. exchange-listed index
4 See Securities Exchange Act Release Nos. 67277
(June 27, 2012), 77 FR 39554 (July 3, 2012) (SR–
NYSEArca–2012–39) (‘‘Prior Order’’); 66973 (May
11, 2012), 77 FR 29429 (May 17, 2012) (SR–
NYSEArca–2012–39) (‘‘Prior Notice,’’ and together
with the Prior Order, the ‘‘First Prior Release’’). See
also Securities Exchange Act Release No. 72436
(June 19, 2014), 79 FR 36118 (June 25, 2014) (SR–
NYSEArca–2014–70) (‘‘Second Prior Release’’)
(notice of effectiveness of proposed rule change
regarding the Fund’s use of certain U.S. exchangelisted options).
5 The Trust is registered under the Investment
Company Act of 1940 (15 U.S.C. 80a–1). On
November 1, 2015, the Trust filed with the
Commission an amendment to its registration
statement on Form N–1A under the Securities Act
of 1933 (15 U.S.C. 77a), and under the 1940 Act
relating to the Fund (File Nos. 333–157876 and
811–22110) (‘‘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. 29291) (May 28, 2010) (File No.
812–13677) (‘‘Exemptive Order’’).
E:\FR\FM\25MYN1.SGM
25MYN1
]]>Agencies
[Federal Register Volume 81, Number 101 (Wednesday, May 25, 2016)]
[Notices]
[Pages 33291-33299]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-12242]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-77861; File No. SR-NYSEArca-2016-67]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change Relating to the Listing and Trading of Shares
of the Natixis Seeyond International Minimum Volatility ETF Under NYSE
Arca Equities Rule 8.600
May 19, 2016.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that on May 5, 2016, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'')
filed with the Securities and Exchange Commission (``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.
---------------------------------------------------------------------------
\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 list and trade shares of the Natixis
Seeyond International Minimum Volatility ETF under NYSE Arca Equities
Rule 8.600 (``Managed Fund Shares). The proposed rule change is
available on the Exchange's Web site at www.nyse.com,
[[Page 33292]]
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 on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to list and trade shares (''Shares'') of the
following under NYSE Arca Equities Rule 8.600, which governs the
listing and trading of Managed Fund Shares: \4\ Natixis Seeyond
International Minimum Volatility ETF (``Fund'').\5\
---------------------------------------------------------------------------
\4\ A Managed Fund Share is a security that represents an
interest in an investment company registered under the Investment
Company Act of 1940 (15 U.S.C. 80a-1) (``1940 Act'') organized as an
open-end investment company or similar entity that invests in a
portfolio of securities selected by its investment adviser
consistent with its investment objectives and policies. In contrast,
an open-end investment company that issues Investment Company Units,
listed and traded on the Exchange under NYSE Arca Equities Rule
5.2(j)(3), seeks to provide investment results that correspond
generally to the price and yield performance of a specific foreign
or domestic stock index, fixed income securities index or
combination thereof.
\5\ The Commission has previously approved listing and trading
on the Exchange of a number of actively managed funds under Rule
8.600. See, e.g., Securities Exchange Act Release Nos. 57801 (May 8,
2008), 73 FR 27878 (May 14, 2008) (SR-NYSEArca-2008-31) (order
approving Exchange listing and trading of twelve actively-managed
funds of the WisdomTree Trust); 62502 (July 15, 2010), 75 FR 42471
(July 21, 2010) (SR-NYSEArca-2010-57) (order approving listing and
trading of AdviserShares WCM/BNY Mellon Focused Growth ADR ETF);
63076 (October 12, 2010), 75 FR 63874 (October 18, 2010) (SR-
NYSEArca-2010-79) (order approving listing and trading of Cambria
Global Tactical ETF); 71540 (February 12, 2014), 79 FR 9515
(February 19, 2014) (SR-NYSEArca-2013-138) (order approving listing
and trading of shares of the iShares Enhanced International Large-
Cap ETF and iShares Enhanced International Small-Cap ETF).
---------------------------------------------------------------------------
The Shares will be offered by Natixis ETF Trust (the ``Trust''),
which is registered with the Commission as an open-end management
investment company.\6\ NGAM Advisors, L.P. will serve as the investment
adviser and administrator to the Fund (the ``Adviser'' or
``Administrator''). Natixis Asset Management U.S., LLC (``Natixis AM
US'') will serve as the Fund's sub-adviser (``Sub-Adviser''). State
Street Bank and Trust Company (the ``Custodian'' or ``Transfer Agent'')
will serve as custodian and transfer agent for the Fund.
---------------------------------------------------------------------------
\6\ The Trust is registered under the 1940 Act. On March 14,
2016, the Trust filed with the Commission its initial registration
statement on Form N-1A under the Securities Act of 1933 (15 U.S.C.
77a) (``Securities Act''), and under the 1940 Act relating to the
Fund (File Nos. 333-210156 and 811-23146) (``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 the1940 Act. See Investment
Company Act Release No. 30654 (August 20, 2013) (File No. 812-13942-
02) (``Exemptive Order'').
---------------------------------------------------------------------------
Commentary .06 to Rule 8.600 provides that, if the investment
adviser to the investment company issuing Managed Fund Shares is
affiliated with a broker-dealer, such investment adviser shall erect a
``fire wall'' between the investment adviser and the broker-dealer with
respect to access to information concerning the composition and/or
changes to such investment company portfolio. In addition, Commentary
.06 further requires that personnel who make decisions on the open-end
fund's portfolio composition must be subject to procedures designed to
prevent the use and dissemination of material nonpublic information
regarding the open-end fund's portfolio.\7\ Commentary .06 to Rule
8.600 is similar to Commentary .03(a)(i) and (iii) to NYSE Arca
Equities Rule 5.2(j)(3); however, Commentary .06 in connection with the
establishment of a ``fire wall'' between the investment adviser and the
broker-dealer reflects the applicable open-end fund's portfolio, not an
underlying benchmark index, as is the case with index-based funds. The
Adviser and Sub-Adviser are not a registered broker-dealer but are
affiliated with a broker-dealer and have implemented a ``fire wall''
with respect to such broker-dealer regarding access to information
concerning the composition and/or changes to the Fund's portfolio. In
the event (a) the Adviser or any sub-adviser becomes registered as a
broker-dealer or newly affiliated with a broker-dealer, or (b) any new
adviser or sub-adviser is a registered broker-dealer or becomes
affiliated with a broker-dealer, it will implement a fire wall with
respect to its relevant personnel or broker-dealer affiliate regarding
access to information concerning the composition and/or changes to the
portfolio, and will be subject to procedures designed to prevent the
use and dissemination of material non-public information regarding such
portfolio.
---------------------------------------------------------------------------
\7\ An investment adviser to an open-end fund is required to be
registered under the Investment Advisers Act of 1940 (the ``Advisers
Act''). As a result, the Adviser and Sub-Adviser and their related
personnel are subject to the provisions of Rule 204A-1 under the
Advisers Act relating to codes of ethics. This Rule requires
investment advisers to adopt a code of ethics that reflects the
fiduciary nature of the relationship to clients as well as
compliance with other applicable securities laws. Accordingly,
procedures designed to prevent the communication and misuse of non-
public information by an investment adviser must be consistent with
Rule 204A-1 under the Advisers Act. In addition, Rule 206(4)-7 under
the Advisers Act makes it unlawful for an investment adviser to
provide investment advice to clients unless such investment adviser
has (i) adopted and implemented written policies and procedures
reasonably designed to prevent violation, by the investment adviser
and its supervised persons, of the Advisers Act and the Commission
rules adopted thereunder; (ii) implemented, at a minimum, an annual
review regarding the adequacy of the policies and procedures
established pursuant to subparagraph (i) above and the effectiveness
of their implementation; and (iii) designated an individual (who is
a supervised person) responsible for administering the policies and
procedures adopted under subparagraph (i) above.
---------------------------------------------------------------------------
Principal Investments
According to the Registration Statement, the Fund will seek long-
term capital appreciation with less volatility than international
equity markets.
Under normal circumstances,\8\ the Fund will invest primarily in
non-U.S. equity securities, which are the following: Common stocks and
``Depositary Receipts''.\9\ The Fund may
[[Page 33293]]
invest in companies of any size and typically will invest in a number
of different countries throughout the world. The Fund's investments may
include non-U.S. equity securities traded ``over-the-counter''
(``OTC'') as well as those traded on a U.S. or foreign securities
exchange. The portfolio may also be exposed to currencies other than
the U.S. dollar.
---------------------------------------------------------------------------
\8\ The term ``under normal circumstances'' includes, but is not
limited to, the absence of extreme volatility or trading halts in
the securities markets or the financial markets generally;
circumstances under which the Fund's investments are made for
temporary defensive purposes; operational issues causing
dissemination of inaccurate market information; or force majeure
type events such as systems failure, natural or man-made disaster,
act of God, armed conflict, act of terrorism, riot or labor
disruption or any similar intervening circumstance.
\9\ Depositary Receipts are instruments issued by banks that
represent an interest in equity securities held by arrangement with
the bank. Depositary receipts can be either ``sponsored'' or
``unsponsored.'' Sponsored depositary receipts are issued by banks
in cooperation with the issuer of the underlying equity securities.
Unsponsored depositary receipts are arranged without involvement by
the issuer of the underlying equity securities and, therefore, less
information about the issuer of the underlying equity securities may
be available and the price may be more volatile than in the case of
sponsored depositary receipts. American Depositary Receipts
(``ADRs'') are depositary receipts that are bought and sold in the
United States and are typically issued by a U.S. bank or trust
company which evidence ownership of underlying securities by a
foreign corporation. Investments in common stock of foreign
corporations may be in the form of ADRs and Global Depositary
Receipts (``GDRs'') (collectively ``Depositary Receipts'').
Depositary Receipts are receipts, typically issued by a bank or
trust company, which evidence ownership of underlying securities
issued by a foreign corporation. For ADRs, the depository is
typically a U.S. financial institution and the underlying securities
are issued by a foreign issuer. For other Depositary Receipts, the
depository may be a foreign or a U.S. entity, and the underlying
securities may have a foreign or a U.S. issuer. Depositary Receipts
will not necessarily be denominated in the same currency as their
underlying securities. Generally, ADRs, in registered form, are
designed for use in the U.S. securities market. GDRs are tradable
both in the United States and in Europe and are designed for use
throughout the world. Not more than 10% of the Fund's assets will be
invested in non-exchange-listed ADRs.
---------------------------------------------------------------------------
When building and managing the Fund's portfolio, the Sub-Adviser
will employ both quantitative and qualitative factors in an effort to
identify securities that demonstrate lower volatility and, in
combination with other securities, reduce the Fund's overall volatility
relative to the developed international equity market. In assessing the
following three quantitative factors, the Sub-Adviser will consider
both long and short term time horizons that it believes will enable the
Fund to reduce overall volatility: (1) The volatility of each
individual equity security; (2) the correlation of each individual
equity security to all other equity securities in the Fund's investment
universe, as defined by international developed market equities; and
(3) the weight of each equity security within the portfolio.
Through a qualitative assessment the Sub-Adviser will review a
range of factors including company specific risks as well as overall
portfolio construction and implementation considerations. Taken
together, the quantitative and qualitative process seeks to generate
returns while lowering overall portfolio volatility.
The Sub-Adviser will construct the Fund's portfolio using a three
step process, described below. The Sub-Adviser first will conduct a
preliminary review of the equity securities within the investment
universe, as defined by international developed market equities.
Developed markets are economies that the Adviser believes are generally
recognized to be fully developed markets, as measured by gross national
income, financial market capitalization and/or other factors. This
initial filtering is designed to exclude dual listings and eliminate
stocks that the Sub-Adviser believes have insufficient history,
liquidity and country-specific risk, such as corporate actions, mergers
or acquisitions.
In seeking to minimize the overall volatility of the Fund, the Sub-
Adviser will construct a portfolio that is systematically guided by
proprietary quantitative analysis, which makes an assessment of
historical volatilities and correlations within the investment universe
and then estimates which combination of such stocks has the potential
to display the lowest overall portfolio volatility.
The Sub-Adviser then will actively manage the portfolio by
continuously monitoring for changes in volatility, liquidity and
individual risk factors with the goal of avoiding detrimental risk
concentration. The Sub-Adviser may sell a security when it believes
that a security has acquired substantial exposure to a specific risk
factor.
Other Investments
While the Fund, under normal circumstances, will invest primarily
(more than 50% of its assets) in non-U.S. equity securities, as
described above, the Fund will invest its remaining assets in the
securities and financial instruments described below.
The Fund may invest in certificates of deposit (certificates
representing the obligation of a bank to repay funds deposited with it
for a specified period of time), time deposits (non-negotiable deposits
maintained in a bank for a specified period of time up to seven days at
a stated interest rate), and bankers' acceptances (credit instruments
evidencing the obligation of a bank to pay a draft drawn on it by a
customer).
The Fund also may purchase U.S. dollar-denominated obligations
issued by foreign branches of domestic banks or foreign branches of
foreign banks (``Eurodollar'' obligations) and domestic branches of
foreign banks (``Yankee dollar'' obligations).
The Fund may invest in the following U.S. government securities:
U.S. Treasury Bills; U.S. Treasury Notes and Bonds; U.S. Treasury
Floating Rate Notes; and Treasury Inflation-Protected Securities
(``TIPS'').
The Fund may invest in other investment companies, including
exchange-traded funds (``ETFs'').\10\ Investments in investment
companies are typically subject to limitations prescribed by the 1940
Act.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
The Fund may invest in preferred stock traded on a U.S. or foreign
exchange or OTC.
The Fund may invest in U.S. or foreign exchange-traded real estate
investment trusts (``REITs''), which are pooled investment vehicles
that invest primarily in either real estate or real estate-related
loans.
The Fund may invest in registered closed-end investment companies
that invest in foreign securities.
The Fund may invest in foreign debt securities. Foreign debt
securities may include securities of issuers organized or headquartered
outside the U.S. as well as obligations of supranational entities. The
non-U.S. securities in which the Fund may invest, all or a portion of
which may be non-U.S. dollar-denominated, may include, among other
investments: (i) Debt obligations issued or guaranteed by non-U.S.
national, provincial, state, municipal or other governments or by their
agencies or instrumentalities, including ``Brady Bonds''; (ii) debt
obligations of supranational entities; (iii) debt obligations of the
U.S. government issued in non-dollar securities; (iv) debt obligations
and other fixed-income securities of foreign corporate issuers; and (v)
non-U.S. dollar-denominated securities of U.S. corporate issuers.
The Fund may engage in foreign currency transactions for both
hedging and investment purposes. Foreign securities in the Fund's
portfolio may be denominated in foreign currencies or traded in
securities markets in which settlements are made in foreign currencies.
To protect against a change in the foreign currency exchange rate
between the date on which the Fund contracts to purchase or sell a
security and the settlement date for the purchase or sale, to gain
exposure to one or more foreign currencies or to ``lock in'' the
equivalent of a dividend or interest payment in another currency, the
Fund might purchase or sell a foreign currency on a spot (i.e., cash)
basis at the prevailing spot rate.
The Fund may enter into repurchase agreements.
The Fund may invest in money market instruments. Money market
instruments are high-quality, short-term
[[Page 33294]]
securities. The Fund's money market investments at the time of purchase
(other than U.S. government securities and repurchase agreements
relating thereto) generally will be rated at the time of purchase in
the two highest short-term rating categories as rated by a major credit
agency or, if unrated, will be of comparable quality as determined by
the Sub-Adviser. The Fund may invest in instruments of lesser quality
and do not have any minimum credit quality restriction.
The Fund may invest in U.S. equity securities (other than
Depositary Receipts) that are traded on a U.S. exchange or OTC.
To reduce the risk of changes in interest rates and securities
prices, the Fund may purchase securities on a forward commitment or
when-issued or delayed delivery basis, which means delivery and payment
take place a number of days after the date of the commitment to
purchase.
Net Asset Value
According to the Registration Statement, a Share's NAV will be
determined at the close of regular trading on the New York Stock
Exchange (``NYSE'') on the days the NYSE is open for trading, normally
at 4:00 p.m., Eastern time. Fund securities and other investments for
which market quotations are readily available will be valued at market
value. The Fund may use independent pricing services recommended by the
Adviser and approved by the Board of Trustees to obtain market
quotations.
Fund securities and other investments will be valued at market
value based on market quotations obtained or determined by independent
pricing services recommended by the Adviser and approved by the Board
of Trustees. Fund securities and other investments for which market
quotations are not readily available, or which are deemed to be
unreliable by the Adviser, will be valued at fair value as determined
in good faith by the Adviser pursuant to procedures approved by the
Board of Trustees, as described below. Market value will be determined
as follows:
Exchange-listed equity securities will be valued at the last sale
price quoted on the exchange where they are traded most extensively or,
if there is no reported sale during the day, the closing bid quotation.
Securities traded on the NASDAQ Global Select Market, NASDAQ Global
Market and NASDAQ Capital Market are valued at the NASDAQ Official
Closing Price (``NOCP''), or if lacking an NOCP, at the most recent bid
quotations on the applicable NASDAQ Market. OTC equity securities will
be valued at the last sale price quoted in the market where they are
traded most extensively or, if there is no reported sale during the
day, the closing bid quotation as reported by an independent pricing
service. If there is no sale price or closing bid quotation available
unlisted equity securities will be valued using evaluated bids
furnished by an independent pricing service, if available. In some
foreign markets, an official close price and a last sale price may be
available from the foreign exchange or market. In those cases, the
official close price is used. Valuations from foreign markets are
subject to the Fund's fair value policies described below.
Eurodollar obligations, Yankee dollar obligations, U.S. government
securities, money market instruments, repurchase agreements, foreign
debt securities, certificates of deposit, time deposits, and bankers'
acceptances, will be valued based on evaluated bids furnished to the
Fund by an independent pricing service using market information,
transactions for comparable securities and various relationships
between securities, if available, or bid prices obtained from broker-
dealers.
Foreign denominated assets and liabilities will be translated into
U.S. dollars based upon foreign exchange rates supplied by an
independent pricing service. Fund securities and other investments for
which market quotations are not readily available will be valued at
fair value as determined in good faith by the Adviser pursuant to
procedures approved by the Board of Trustees. The Fund may also value
securities and other investments at fair value in other circumstances
such as when extraordinary events occur after the close of a foreign
market but prior to the close of the NYSE. This may include situations
relating to a single issuer (such as a declaration of bankruptcy or a
delisting of the issuer's security from the primary market on which it
has traded) as well as events affecting the securities markets in
general (such as market disruptions or closings and significant
fluctuations in U.S. and/or foreign markets).
Fair value pricing may require subjective determinations about the
value of a security, and fair values used to determine the Fund's NAV
may differ from quoted or published prices, or from prices that are
used by others, for the same securities. In addition, the use of fair
value pricing may not always result in adjustments to the prices of
securities held by the Fund. Valuations for securities traded in the
OTC market may be based on factors such as market information,
transactions for comparable securities, and various relationships
between securities or bid prices obtained from broker-dealers.
Evaluated prices from an independent pricing service may require
subjective determinations and may be different than actual market
prices or prices provided by other pricing services.
Trading in some of the portfolio securities or other investments of
the Fund takes place in various markets outside the United States on
days and at times other than when the NYSE is open for trading.
Therefore, the calculation of the Fund's NAV does not take place at the
same time as the prices of many of its portfolio securities or other
investments are determined, and the value of the Fund's portfolio may
change on days when the Fund is not open for business and its shares
may not be purchased or redeemed.
Investment company securities that are not exchange-traded will be
valued at NAV.
Creation and Redemption of Shares
According to the Registration Statement, Shares of the Fund will be
``created'' at NAV by market makers, large investors and institutions
only in block-size ``Creation Units'' of 50,000 Shares or multiples
thereof. The size of a Creation Unit is subject to change. Each
``creator'' or ``Authorized Participant'' will enter into an authorized
participant agreement with the Fund's distributor.
A creation transaction, which is subject to acceptance by the
Fund's distributor, generally takes place when an Authorized
Participant deposits into the Fund a designated portfolio of securities
(including any portion of such securities for which cash may be
substituted) and a specified amount of cash approximating the holdings
of the Fund in exchange for a specified number of creation units.
Similarly, Shares can be redeemed only in Creation Units, generally
for a designated portfolio of securities (including any portion of such
securities for which cash may be substituted) held by the Fund and a
specified amount of cash. Except when aggregated in Creation Units,
Shares will not be redeemable by the Fund.
The prices at which creations and redemptions occur are based on
the next calculation of NAV after a creation or redemption order is
received in an acceptable form under the Authorized Participant
agreement.
Only an Authorized Participant may create or redeem creation units
directly with the Fund.
[[Page 33295]]
Creations and redemptions must be made through a firm that is
either a member of the Continuous Net Settlement System of the National
Securities Clearing Corporation or a DTC participant and has executed
an agreement with the Fund's distributor with respect to creations and
redemptions of Creation Units.
The consideration for purchase of Creation Units generally will
consist of Deposit Securities and the Cash Component, which will
generally correspond pro rata, to the extent practicable, to the Fund
securities, or, as permitted by the Fund, the Cash Deposit. Together,
the Deposit Securities and the Cash Component or, alternatively, the
Cash Deposit, constitute the ``Fund Deposit,'' which represents the
minimum initial and subsequent investment amount for a Creation Unit of
the Fund. The portfolio of securities required may, in certain limited
circumstances, be different than the portfolio of securities the Fund
will deliver upon redemption of Fund Shares.
The function of the Cash Component is to compensate for any
differences between the NAV per Creation Unit and the ``Deposit
Amount'' (as defined below). The Cash Component would be an amount
equal to the difference between the NAV of the shares (per Creation
Unit) and the ``Deposit Amount,'' which is an amount equal to the
market value of the Deposit Securities. If the Cash Component is a
positive number (the NAV per Creation Unit exceeds the Deposit Amount),
the Authorized Participant will deliver the Cash Component. If the Cash
Component is a negative number (the NAV per Creation Unit is less than
the Deposit Amount), the Authorized Participant will receive the Cash
Component. Computation of the Cash Component excludes any stamp duty or
other similar fees and expenses payable upon transfer of beneficial
ownership of the Deposit Securities, which shall be the sole
responsibility of the Authorized Participant. The Cash Component may
also include a ``Dividend Equivalent Payment,'' which enables the Fund
to make a complete distribution of dividends on the next dividend
payment date. State Street Bank and Trust Company, through the National
Securities Clearing Corporation (``NSCC''), will make available on each
business day, prior to the opening of business (subject to amendments)
on the Exchange (currently 9:30 a.m., Eastern time), the identity and
the required number of each Deposit Security and the amount of the Cash
Component to be included in the current Fund Deposit (based on
information at the end of the previous business day).
Shares may be redeemed only in Creation Units at their NAV next
determined after receipt of a redemption request in proper form on a
business day and only through a Participating Party or DTC Participant
who has executed a Participant Agreement. State Street, through the
NSCC, will make available immediately prior to the opening of business
on the Exchange (currently 9:30 a.m., Eastern time) on each business
day, the identity of the Fund's securities and/or an amount of cash
that will be applicable (subject to possible amendment or correction)
to redemption requests received in proper form on that day. All orders
are subject to acceptance by the Transfer Agent. The Fund's securities
received on redemption will generally correspond pro rata, to the
extent practicable, to such Fund's securities. The Fund's securities
received on redemption (``Fund Securities'') may not be identical to
Deposit Securities that are applicable to creations of Creation Units.
Unless cash only redemptions are available or specified for the
Fund, the redemption proceeds for a Creation Unit will generally
consist of Fund Securities--as announced on the business day of the
request for a redemption order received in proper form--plus cash in an
amount equal to the difference between the NAV of the shares being
redeemed, as next determined after a receipt of a request in proper
form, and the value of the Fund Securities, less the redemption
transaction fee and variable fees described below.\11\ Notwithstanding
the foregoing, the Trust will substitute a ``cash-in-lieu'' amount to
replace any Fund Security that is a non-deliverable instrument. The
Trust may permit a ``cash-in-lieu'' amount for any reason at the
Trust's sole discretion but is not required to do so. The amount of
cash paid out in such cases will be equivalent to the value of the
instrument listed as a Fund Security. In the event that the Fund
Securities have a value greater than the NAV of the shares, a
compensating cash payment equal to the difference.
---------------------------------------------------------------------------
\11\ The Adviser represents that, to the extent the Trust
effects the creation or redemption of Shares in cash, such
transactions will be effected in the same manner for all Authorized
Participants.
---------------------------------------------------------------------------
The right of redemption may be suspended or the date of payment
postponed with respect to the Fund: (i) For any period during which the
Exchange is closed (other than customary weekend and holiday closings);
(ii) for any period during which trading on the Exchange is suspended
or restricted; (iii) for any period during which an emergency exists as
a result of which disposal by the Fund of securities it owns or
determination of the Fund's NAV is not reasonably practicable; or (iv)
in such other circumstances as permitted by the Commission.
Investment Restrictions
As a temporary defensive measure, the Fund may hold any portion of
its assets in cash (U.S. dollars, foreign currencies or multinational
currency units) and/or invest in money market instruments or high-
quality debt securities as it deems appropriate.
The Fund intends to maintain the required level of diversification
and otherwise conduct its operations so as to qualify as a ``regulated
investment company'' for purposes of the Internal Revenue Code of
1986.\12\
---------------------------------------------------------------------------
\12\ 26 U.S.C. 851.
---------------------------------------------------------------------------
The Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid assets (calculated at the time of investment). 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.\13\
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\13\ The Commission has stated that long-standing Commission
guidelines have required open-end funds to hold no more than 15% of
their net assets in illiquid securities and other illiquid assets.
See Investment Company Act Release No. 28193 (March 11, 2008), 73 FR
14618 (March 18, 2008), footnote 34. See also, Investment Company
Act Release No. 5847 (October 21, 1969), 35 FR 19989 (December 31,
1970) (Statement Regarding ``Restricted Securities''); Investment
Company Act Release No. 18612 (March 12, 1992), 57 FR 9828 (March
20, 1992) (Revisions of Guidelines to Form N-1A). A fund's portfolio
security is illiquid if it cannot be disposed of in the ordinary
course of business within seven days at approximately the value
ascribed to it by the fund. See Investment Company Act Release No.
14983 (March 12, 1986), 51 FR 9773 (March 21, 1986) (adopting
amendments to Rule 2a-7 under the 1940 Act); Investment Company Act
Release No. 17452 (April 23, 1990), 55 FR 17933 (April 30, 1990)
(adopting Rule 144A under the 1933 Act).
---------------------------------------------------------------------------
The Fund will not invest in options, futures or swaps.
The Fund's investments will be consistent with the Fund's
investment objective and will not be used to
[[Page 33296]]
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).\14\
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\14\ 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.
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Availability of Information
The Fund's Web site, which will be publicly available prior to the
public offering of Shares, will include a form of the prospectus for
the Fund that may be downloaded. The Fund's Web site will include
additional quantitative information updated on a daily basis,
including, for the Fund (1) daily trading volume, the prior business
day's reported closing price, NAV and mid-point of the bid/ask spread
at the time of calculation of such NAV (the ``Bid/Ask Price''),\15\ and
a calculation of the premium and discount of the Bid/Ask Price against
the NAV, and (2) data in chart format displaying the frequency
distribution of discounts and premiums of the daily Bid/Ask Price
against the NAV, within appropriate ranges, for each of the four
previous calendar quarters. On each business day, before commencement
of trading in Shares in the Core Trading Session on the Exchange, the
Fund 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.\16\
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\15\ The Bid/Ask Price of Shares of the Fund will be determined
using the midpoint of the highest bid and the lowest offer on the
Exchange as of the time of calculation of the Fund's NAV. The
records relating to Bid/Ask Prices will be retained by the Fund and
their service providers.
\16\ Under accounting procedures followed by the Fund, trades
made on the prior business day (``T'') will be booked and reflected
in NAV on the current business day (``T + 1''). Accordingly, the
Fund will be able to disclose at the beginning of the business day
the portfolio that will form the basis for the NAV calculation at
the end of the business day.
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On a daily basis, the Fund will disclose for each portfolio
security or other financial instrument of the Fund the following
information on the Fund's Web site: Ticker symbol (if applicable), name
of security and financial instrument, number of shares and dollar value
of financial instruments held in the portfolio, and percentage
weighting of the security and financial instrument in the portfolio.
The Web site information will be publicly available at no charge.
In addition, a basket composition file, which includes the security
names and share quantities required to be delivered in exchange for the
Fund's Shares, together with estimates and actual cash components, will
be publicly disseminated daily prior to the opening of the NYSE via
NSCC. The basket represents one Creation Unit of the Fund.
In order to provide additional information regarding the indicative
value of Shares of the Fund, the Exchange or a market data vendor will
disseminate every 15 seconds through the facilities of the Consolidated
Tape Association, or through other widely disseminated means, an
updated IIV for the Fund as calculated by an information provider or
market data vendor.
The Fund's IIV will be based on the current market value of the
Fund's portfolio holdings that will form the basis of the Fund's
calculation of NAV at the end of the business day as disclosed on the
Fund's Web site prior to the business day's commencement of trading.
Investors can also obtain the Trust's Statement of Additional
Information (``SAI''), the Fund's Shareholder Reports, and the Trust's
Form N-CSR and Form N-SAR, filed twice a year. The Trust's SAI and
Shareholder Reports are available free upon request from the Trust, and
those documents and the Form N-CSR and Form N-SAR may be viewed on-
screen or downloaded from the Commission's Web site at www.sec.gov.
Information regarding market price and trading volume of the Shares
will be continually available on a real-time basis throughout the day
on brokers' computer screens and other electronic services. Information
regarding the previous day's closing price and trading volume
information for the Shares will be published daily in the financial
section of newspapers. Quotation and last sale information for the
Shares will be available via the Consolidated Tape Association
(``CTA'') high-speed line. With respect to U.S. exchange-listed equity
securities, the intra-day, closing and settlement prices of common
stocks and exchange-traded equity securities (including shares of
preferred securities, closed-end funds, REITs and U.S. exchange-listed
Depositary Receipts) will be readily available from the national
securities exchanges trading such securities, automated quotation
systems, published or other public sources, or on-line information
services such as Bloomberg or Reuters. With respect to non-U.S.
exchange-listed equity securities, intra-day, closing and settlement
prices of common stocks and other equity securities (including shares
of preferred securities, and non-U.S. Depositary Receipts), will be
available from the foreign exchanges on which such securities trade as
well as from major market data vendors. Pricing information regarding
each asset class in which the Fund will invest will generally be
available through nationally recognized data service providers through
subscription arrangements. Quotation information from brokers and
dealers or pricing services will be available for Eurodollar
obligations, Yankee dollar obligations, U.S. government securities,
repurchase agreements, money market instruments, foreign debt
securities, certificates of deposit, time deposits, and bankers'
acceptances; unsponsored Depositary Receipts; and spot currency
transactions held by the Fund. In addition, IIV,\17\ which is the
Portfolio Indicative Value as defined in NYSE Arca Equities Rule 8.600
(c)(3), will be widely disseminated at least every 15 seconds during
the Exchange's Core Trading Session by one or more major market data
vendors.\18\ The dissemination of the IIV, together with the Disclosed
Portfolio, will allow investors to determine the value of the
underlying portfolio of the Fund on a daily basis and to provide a
close estimate of that value throughout the trading day.
---------------------------------------------------------------------------
\17\ The IIV calculation will be an estimate of the value of the
Fund's NAV per Share using market data converted into U.S. dollars
at the current currency rates. The IIV price will be based on quotes
and closing prices from the securities' local market and may not
reflect events that occur subsequent to the local market's close.
Premiums and discounts between the IIV and the market price of the
Shares may occur. This should not be viewed as a ``real-time''
update of the NAV per Share of the Fund, which will be calculated
only once a day.
\18\ Currently, it is the Exchange's understanding that several
major market data vendors display and/or make widely available IIVs
taken from CTA or other data feeds.
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Trading Halts
With respect to trading halts, the Exchange may consider all
relevant factors in exercising its discretion to halt or suspend
trading in the Shares of the Fund.\19\ Trading in Shares of the Fund
will be halted if the circuit breaker parameters in NYSE Arca Equities
Rule 7.12 have been reached. Trading also may be halted because of
market conditions or for reasons that, in the view of the Exchange,
make trading in the Shares inadvisable. These may include: (1) The
extent to which trading is not occurring in the securities and/or the
financial instruments comprising the Disclosed Portfolio of the Fund;
or (2) whether other unusual conditions or
[[Page 33297]]
circumstances detrimental to the maintenance of a fair and orderly
market are present. Trading in the Shares will be subject to NYSE Arca
Equities Rule 8.600(d)(2)(D), which sets forth circumstances under
which Shares of the Fund may be halted.
---------------------------------------------------------------------------
\19\ See NYSE Arca Equities Rule 7.12.
---------------------------------------------------------------------------
Trading Rules
The Exchange deems the Shares to be equity securities, thus
rendering trading in the Shares subject to the Exchange's existing
rules governing the trading of equity securities. Shares will trade on
the NYSE Arca Marketplace from 4:00 a.m. to 8:00 p.m. Eastern time in
accordance with NYSE Arca Equities Rule 7.34 (Opening, Core, and Late
Trading Sessions). The Exchange has appropriate rules to facilitate
transactions in the Shares during all trading sessions. As provided in
NYSE Arca Equities Rule 7.6, Commentary .03, the minimum price
variation (``MPV'') for quoting and entry of orders in equity
securities traded on the NYSE Arca Marketplace is $0.01, with the
exception of securities that are priced less than $1.00 for which the
MPV for order entry is $0.0001.
The Shares will conform to the initial and continued listing
criteria under NYSE Arca Equities Rule 8.600. The Exchange represents
that, for initial and/or continued listing, the Fund will be in
compliance with Rule 10A-3 \20\ under the Act, as provided by NYSE Arca
Equities Rule 5.3. A minimum of 100,000 Shares for the Fund will be
outstanding at the commencement of trading on the Exchange. The
Exchange will obtain a representation from the issuer of the Shares
that the NAV per Share will be calculated daily and that the NAV and
the Disclosed Portfolio will be made available to all market
participants at the same time.
---------------------------------------------------------------------------
\20\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------
Surveillance
The Exchange represents that trading in the Shares will be subject
to the existing trading surveillances, administered by the Exchange or
Financial Industry Regulatory Authority (``FINRA'') on behalf of the
Exchange, which are designed to detect violations of Exchange rules and
applicable federal securities laws.\21\ 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.
---------------------------------------------------------------------------
\21\ 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.
---------------------------------------------------------------------------
The surveillances referred to above generally focus on detecting
securities trading outside their normal patterns, which could be
indicative of manipulative or other violative activity. When such
situations are detected, surveillance analysis follows and
investigations are opened, where appropriate, to review the behavior of
all relevant parties for all relevant trading violations.
The Exchange or FINRA, on behalf of the Exchange, will communicate
as needed regarding trading in the Shares and certain exchange-traded
securities underlying the Shares with other markets and other entities
that are members of the Intermarket Surveillance Group (``ISG''), and
the Exchange or FINRA, on behalf of the Exchange, may obtain trading
information regarding trading in the Shares and certain exchange-traded
securities underlying the Shares from such markets and other entities.
In addition, the Exchange may obtain information regarding trading in
the Shares and certain exchange-traded securities underlying the Shares
from markets and other entities that are members of ISG or with which
the Exchange has in place a comprehensive surveillance sharing
agreement.\22\ The Exchange is able to access from FINRA, as needed,
trade information for certain fixed income securities held by the Fund
reported to FINRA's Trade Reporting and Compliance Engine (``TRACE'').
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\22\ For a list of the current members of ISG, see
www.isgportal.org. The Exchange notes that not all components of the
Disclosed Portfolio for the Fund may trade on markets that are
members of ISG or with which the Exchange has in place a
comprehensive surveillance sharing agreement.
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Not more than 10% of the net assets of the Fund in the aggregate
invested in equity securities (other than non-exchange-traded
investment company securities) shall consist of equity securities whose
principal market is not a member of the ISG or is a market with which
the Exchange does not have a comprehensive surveillance sharing
agreement.
In addition, the Exchange also has a general policy prohibiting the
distribution of material, non-public information by its employees.
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. 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).
Information Bulletin
Prior to the commencement of trading, the Exchange will inform its
Equity Trading Permit Holders in an Information Bulletin (``Bulletin'')
of the special characteristics and risks associated with trading the
Shares. Specifically, the Bulletin will discuss the following: (1) The
procedures for purchases and redemptions of Shares in Creation Unit
aggregations (and that Shares are not individually redeemable); (2)
NYSE Arca Equities Rule 9.2(a), which imposes a duty of due diligence
on its Equity Trading Permit Holders to learn the essential facts
relating to every customer prior to trading the Shares; (3) the risks
involved in trading the Shares during the Opening and Late Trading
Sessions when an updated Portfolio Indicative Value will not be
calculated or publicly disseminated; (4) how information regarding the
Portfolio Indicative Value and the Disclosed Portfolio is disseminated;
(5) the requirement that Equity Trading Permit Holders deliver a
prospectus to investors purchasing newly issued Shares prior to or
concurrently with the confirmation of a transaction; and (6) trading
information.
In addition, the Bulletin will reference that the Fund is subject
to various fees and expenses described in the Registration Statement.
The Bulletin will discuss any exemptive, no-action, and interpretive
relief granted by the Commission from any rules under the Act. The
Bulletin will also disclose that the NAV for the Shares will be
calculated after 4:00 p.m. Eastern time each trading day.
2. Statutory Basis
The basis under the Act for this proposed rule change is the
requirement under Section 6(b)(5) \23\ 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
[[Page 33298]]
impediments to, and perfect the mechanism of a free and open market
and, in general, to protect investors and the public interest.
---------------------------------------------------------------------------
\23\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposed rule change is designed to
prevent fraudulent and manipulative acts and practices in that the
Shares will be listed and traded on the Exchange pursuant to the
initial and continued listing criteria in NYSE Arca Equities Rule
8.600. The Exchange has in place surveillance procedures that are
adequate to properly monitor trading in the Shares in all trading
sessions and to deter and detect violations of Exchange rules and
applicable federal securities laws. The Adviser has implemented a
``fire wall'' with respect to its affiliated broker-dealer regarding
access to information concerning the composition and/or changes to the
Fund's portfolio. The Exchange or FINRA, on behalf of the Exchange,
will communicate as needed regarding trading in the Shares and certain
exchange-traded securities underlying the Shares with other markets and
other entities that are members of the ISG, and the Exchange or FINRA,
on behalf of the Exchange, may obtain trading information regarding
trading in the Shares and certain exchange-traded securities underlying
the Shares from such markets and other entities. In addition, the
Exchange may obtain information regarding trading in the Shares and
certain exchange-traded securities underlying the Shares from markets
and other entities that are members of ISG or with which the Exchange
has in place a CSSA. The Exchange is able to access from FINRA, as
needed, trade information for certain fixed income securities held by
the Fund reported to FINRA's TRACE. The Fund may hold up to an
aggregate amount of 15% of its net assets in illiquid assets
(calculated at the time of investment. The Fund will not invest in
options, futures or swaps. The Fund's investments will be consistent
with its investment objective and will not be used to enhance leverage.
The proposed rule change is designed to promote just and equitable
principles of trade and to protect investors and the public interest in
that the Exchange will obtain a representation from the issuer of the
Shares that the NAV per Share will be calculated daily and that the NAV
and the Disclosed Portfolio will be made available to all market
participants at the same time. In addition, a large amount of
information is publicly available regarding the Fund and the Shares,
thereby promoting market transparency. The Fund's portfolio holdings
will be disclosed on its 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 will be widely disseminated by one or
more major market data vendors at least every 15 seconds during the
Exchange's Core Trading Session. Not more than 10% of the net assets of
the Fund in the aggregate invested in equity securities (other than
non-exchange-traded investment company securities) shall consist of
equity securities whose principal market is not a member of the ISG or
is a market with which the Exchange does not have a comprehensive
surveillance sharing agreement. 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 that will form the basis for the Fund's calculation of NAV at
the end of the business 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 a form of the prospectus for the Fund and additional data
relating to NAV and other applicable quantitative information.
Moreover, prior to the commencement of trading, the Exchange will
inform its Equity Trading Permit Holders in an Information Bulletin of
the special characteristics and risks associated with trading the
Shares. Trading in Shares of the Fund will be halted if the circuit
breaker parameters in NYSE Arca Equities Rule 7.12 have been reached or
because of market 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 8.600(d)(2)(D), which
sets forth circumstances under which Shares of the Fund may be halted.
The intra-day, closing and settlement prices of the portfolio
securities are also readily available from the national securities
exchanges trading such securities, automated quotation systems,
published or other public sources, or on-line information services. In
addition, as noted above, investors will have ready access to
information regarding the Fund's holdings, the IIV, the Disclosed
Portfolio, and quotation and last sale information for the Shares.
The proposed rule change is designed to perfect the mechanism of a
free and open market and, in general, to protect investors and the
public interest in that it will facilitate the listing and trading of
an additional type of actively-managed exchange-traded product that
will enhance competition among market participants, to the benefit of
investors and the marketplace. As noted above, the Exchange has in
place surveillance procedures relating to trading in the Shares and may
obtain information via ISG from other exchanges that are members of ISG
or with which the Exchange has entered into a comprehensive
surveillance sharing agreement. In addition, as noted above, investors
will have ready access to information regarding the Fund's holdings,
the IIV, the Disclosed Portfolio, and quotation and last sale
information for the Shares.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purpose of the Act. The Exchange notes that the
proposed rule change will facilitate the listing and trading of an
actively-managed exchange-traded product that will principally hold non
U.S. 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.
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 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.
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.
[[Page 33299]]
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-2016-67 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-2016-67. 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 offices of the Exchange and
on its Internet Web site at www.nyse.com. All comments received will be
posted without change; the Commission does not edit personal
identifying information from submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NYSEArca-2016-67, and should be
submitted on or before June 15, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
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\24\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-12242 Filed 5-24-16; 8:45 am]
BILLING CODE 8011-01-P
