Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Reflect a Change to the Benchmark Index Applicable to the WisdomTree Managed Futures Strategy Fund, 36357-36361 [2016-13212]
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Federal Register / Vol. 81, No. 108 / Monday, June 6, 2016 / Notices
material at facilities located within their
borders.
The Federal Reports Elimination and
Sunset Act of 1995 (Public Law 104–68)
requires that the NRC report AOs to
Congress annually. The full report,
NUREG–0090, Volume 38, ‘‘Report to
Congress on Abnormal Occurrences:
Fiscal Year 2015,’’ is available
electronically at the NRC’s Web site at
https://www.nrc.gov/reading-rm/doccollections/nuregs/staff/, and in
ADAMS under Accession No.
ML16145A026.
Dated at Rockville, Maryland, this 26th day
of May, 2016.
For the Nuclear Regulatory Commission.
Richard J. Laufer,
Acting, Secretary of the Commission.
[FR Doc. 2016–13274 Filed 6–3–16; 8:45 am]
BILLING CODE 7590–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–77950; File No. SR–NYSE–
2016–30]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Designation of a Longer Period for
Commission Action on a Proposed
Rule Change Amending the Definition
of ‘‘Block’’ for Purposes of Rule 72(d)
and the Size of a Proposed Cross
Transaction Eligible for the Cross
Function in Rule 76
the Commission shall either approve the
proposed rule change, disapprove the
proposed rule change, or institute
proceedings to determine whether the
proposed rule change should be
disapproved. The 45th day after
publication of the notice for this
proposed rule change is June 13, 2016.
The Commission is extending this 45day time period.
The Commission finds that it is
appropriate to designate a longer period
within which to take action on the
proposed rule change so that it has
sufficient time to consider the proposed
rule change. Accordingly, the
Commission, pursuant to Section
19(b)(2) of the Act,5 designates July 28,
2016, as the date by which the
Commission should either approve or
disapprove or institute proceedings to
determine whether to disapprove the
proposed rule change (File Number SR–
NYSE–2016–30).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.6
Brent J. Fields,
Secretary.
[FR Doc. 2016–13210 Filed 6–3–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–77952; File No. SR–
NYSEArca–2016–83]
sradovich on DSK3TPTVN1PROD with NOTICES
May 31, 2016.
On April 12, 2016, New York Stock
Exchange LLC (‘‘Exchange’’ or ‘‘NYSE’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to amend its rules relating to
pre-opening indications and opening
procedures. The proposed rule change
was published for comment in the
Federal Register on April 29, 2016.3
The Commission has received no
comments on the proposed rule change.
Section 19(b)(2) of the Act 4 provides
that, within 45 days of the publication
of notice of the filing of a proposed rule
change, or within such longer period up
to 90 days as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or as to which the
self-regulatory organization consents,
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Reflect a Change to
the Benchmark Index Applicable to the
WisdomTree Managed Futures
Strategy Fund
May 31, 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 27,
2016, NYSE Arca, Inc. (the ‘‘Exchange’’
or ‘‘NYSE Arca’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the self-regulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
1 15
5 15
2 17
6 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 77701
(Apr. 25, 2016), 81 FR 25748.
4 15 U.S.C. 78s(b)(2).
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U.S.C. 78s(b)(2).
CFR 200.30–3(a)(31).
1 15 U.S.C.78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
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36357
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 benchmark index
applicable to the WisdomTree Managed
Futures Strategy Fund. 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.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Commission previously approved
the listing and trading of the shares
(‘‘Shares’’) of the Fund on the Exchange
under NYSE Arca Equities Rule 8.600,4
which governs the listing and trading of
‘‘Managed Fund Shares,’’ on the
Exchange.5 The Fund is an activelymanaged exchange traded fund.
WisdomTree Asset Management, Inc.
(‘‘WisdomTree Asset Management’’) is
the investment adviser (‘‘Adviser’’) to
the Fund. WisdomTree Investments,
Inc. (‘‘WisdomTree Investments’’) is the
4 NYSE Arca Equities Rule 8.600 (c)(1) provides
that, among other criteria, 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)
(‘‘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 See Securities Exchange Act Release No. 63598
(December 22, 2010), 75 FR 82106 (December 29,
2010)(SR–NYSEArca–2010–98) (‘‘Prior Order’’). See
also Securities Exchange Act Release No. 63292
(November 9, 2010), 75 FR 70319 (November 17,
2010) (‘‘Prior Notice’’, and with the Prior Order, the
‘‘Prior Releases’’).
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sradovich on DSK3TPTVN1PROD with NOTICES
parent company of WisdomTree Asset
Management. Mellon Capital
Management Corporation (‘‘Mellon’’ or
‘‘Sub-Adviser’’) serves as the subadviser for the Fund. State Street Bank
and Trust Company is the administrator,
custodian and transfer agent for the
Fund. Foreside Fund Services, LLC
(‘‘Distributor’’) serves as distributor for
the Fund.6 The Shares are offered by the
Trust, which is registered with the
Commission as an investment
company.7
The Prior Releases stated that the
Adviser would manage the Fund using
a strategy designed to correspond to the
performance of the Diversified Trends
IndicatorTM (‘‘Original Benchmark’’). In
this proposed rule change, the Exchange
proposes to reflect a change to the
benchmark index applicable to the
Fund. The new benchmark will be the
WisdomTree Managed Futures Index
(‘‘New Benchmark,’’ and together with
the Original Benchmark, the
‘‘Benchmarks’’), a proprietary index
developed by WisdomTree
Investments.8 Upon implementation of
the proposed rule change, the Adviser
will manage the Fund using a strategy
designed to correspond to the
performance of the New Benchmark.
The Adviser anticipates investing Fund
assets through the Sub-Adviser based on
the New Benchmark on or around June
30, 2016.
The Adviser believes that it is in the
best interest of the Fund and its
shareholders to replace the Original
Benchmark with the New Benchmark
6 The Prior Releases identified The Bank of New
York Mellon as the administrator, custodian and
transfer agent for the Fund and ALPS Distributors,
Inc. as the distributor for the Fund.
7 The Trust is registered under the 1940 Act. The
Trust intends to file a prospectus supplement with
the Commission or a post-effective amendment to
its registration statement on Form N–1A under the
Securities Act of 1933 (15 U.S.C. 77a) (‘‘Securities
Act’’) and under the 1940 Act relating to the Fund
(File Nos. 333–132380 and 811–21864) (the
‘‘Registration Statement’’), to reflect the changes in
this proposed rule change upon effectiveness of
such proposed rule change. The descriptions of the
operation of the Trust and the Fund will be
reflected in any such filing. 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. 28471
(October 27, 2008) (File No. 812–13458)
(‘‘Exemptive Order’’). Investments by the Fund will
comply with the conditions in the Exemptive
Order. Share [sic] of the Fund are currently listed
and traded on the Exchange in compliance with all
original and continued listing standards of the
Exchange and requirements of the Prior Releases.
8 The changes described herein will be effected
contingent upon filing of a prospectus supplement
or upon effectiveness of the Trust’s most recent
post-effective amendment to its Registration
Statement. See note 7, supra. The Adviser
represents that the Adviser will not implement the
changes described herein until the instant proposed
rule change is operative.
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while keeping the Fund’s asset exposure
and investment strategies similar, and
without changing the Fund’s investment
objective. The Adviser believes that the
New Benchmark will serve to optimize
the Fund’s investment strategy, while
seeking to provide enhanced riskadjusted returns over time.
Description of the Shares, the
Benchmark and the Fund
According to the Prior Releases, the
WisdomTree Managed Futures Strategy
Fund seeks to provide investors with
positive total returns in rising or falling
markets that are not directly correlated
to broad market equity or fixed income
returns. The Fund is currently managed
using a quantitative, rules-based strategy
designed to provide returns that
correspond to the performance of the
Original Benchmark. The Original
Benchmark is a widely used indicator
designed to capture the economic
benefit derived from rising or declining
price trends in commodity, currency,
and U.S. Treasury futures markets.
Under this proposed rule change, the
Exchange seeks to permit the Fund to be
managed using a different, quantitative,
rules-based strategy, described below,
that is designed to provide returns that
correspond to the New Benchmark. The
New Benchmark is a proprietary index,
developed and owned by WisdomTree
Investments that is also designed to
capture the economic benefit derived
from rising or declining price trends in
commodity, currency, and U.S. Treasury
futures markets.
Differences between the Original
Benchmark and the New Benchmark are
described below.
The Benchmarks
The Original Benchmark is a rulesbased indicator designed to capture
rising and falling price trends in the
commodity, currency and U.S. Treasury
futures markets through long and short
positions on U.S. listed futures
contracts. The Original Benchmark
consists of U.S. listed futures contracts
on 16 tangible commodities and 8
financial futures. The 16 commodity
futures contracts are: Light crude oil,
natural gas, RBOB gas (‘‘Gasoline’’),
heating oil, soybeans, corn, wheat, gold,
silver, copper, live cattle, lean hogs,
coffee, cocoa, cotton and sugar. The 8
financial futures contracts are: the
Australian dollar (‘‘AUD’’), British
pound sterling (‘‘GBP’’), Canadian dollar
(‘‘CAD’’), Euro (‘‘EUR’’), Japanese yen
(‘‘JPY’’), Swiss franc (‘‘CHF’’), 10-year
U.S. Treasury note and 30-year U.S.
Treasury bond. Each contract is
sometimes referred to as a ‘‘Component’’
of the Original Benchmark.
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The New Benchmark also is a rulesbased indicator designed to capture
rising and falling price trends in the
commodity, currency and U.S. Treasury
futures markets through long and short
positions on U.S. listed futures
contracts. The New Benchmark consists
of U.S. listed futures contracts on 16
tangible commodities and 8 financial
futures. The 16 commodity futures
contracts are: Light crude oil, natural
gas, Gasoline, heating oil, soybeans,
corn, wheat, gold, silver, copper, live
cattle, lean hogs, coffee, cocoa, cotton
and sugar. The 8 financial futures
contracts are: the AUD, GBP, CAD, EUR,
JPY, CHF, 10-year U.S. Treasury note
and 30-year U.S. Treasury bond. Each
contract is sometimes referred to as a
‘‘Component’’ of the New Benchmark.
(1) Asset Treatment
Under the Original Benchmark,
Components that are similar in nature
(such as gas and oil or gold and silver)
are aggregated into ‘‘Sectors.’’ There are
nine commodity Sectors in the Original
Benchmark: Energy (light crude oil,
natural gas, Gasoline, and heating oil),
Grains (soybeans, corn), Precious Metals
(gold and silver), Industrial Metals
(copper), Livestock (live cattle, lean
hogs), Coffee, Cocoa, Cotton, and Sugar.
Each financial futures contract is
considered to be its own Sector. As a
result, there are eight financial Sectors
in the Original Benchmark: The AUD,
GBP, CAD, EUR, JPY, CHF, 10-year U.S.
Treasury note and 30-year U.S. Treasury
bond.
Under the New Benchmark, there are
no Sectors, but rather each of the 24
Components is treated separately for
weighting and long, short or flat
position determinations. The twenty
Components with the lowest 36-month
rolling volatility are included. All
Components may be long, short or flat,
except for Energy futures (i.e., light
crude oil, natural gas, Gasoline and
heating oil), which are held either long
or flat.
(2) Weighting Methodology
Within the Original Benchmark,
Components may be positioned as long
or short, except that the Energy Sector
and its Components may never be
positioned short. The Original
Benchmark’s methodology provides
that, due to significant levels of
continuous consumption, limited
reserves and other factors, the Energy
Sector can only be long or flat (i.e., no
exposure).
At the beginning of each calendar year
and month, the Original Benchmark is
weighted evenly (i.e., 50/50) between
commodity futures contracts and
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financial futures contracts. If the Energy
Sector is flat, financial futures represent
approximately 61.5% of the weight of
the original Benchmark and commodity
futures represent approximately 38.5%
of weighting of the Original Benchmark.
When Energy is long, financial futures
and commodity futures each represent
50% of the weight of the Original
Benchmark.
If the Energy Sector is flat then the
weighting of the other Sectors and
Components within the Benchmark is
increased on a pro-rata basis.9 As a
result, at the beginning of each calendar
year and month, if Energy is flat,
financial futures will represent
approximately 61.5% of the weight of
the Original Benchmark and
commodities will represent
approximately 38.5% of the weight of
the Original Benchmark.
At the beginning of each calendar year
and month, each Component and Sector
within the Original Benchmark also has
a ‘‘Base Weight,’’ depending on whether
the Energy Sector is long or flat. If the
Energy Sector is flat, then the Base
Weight of the other Sectors and
Components within the Original
Benchmark is increased on a pro-rata
basis. Commodity Sector weights are
based on, but not exactly proportional
to, historical world production levels.
Commodity Sectors that have higher
historical production levels are
weighted higher in the Original
Benchmark. Weightings of the financial
futures Sectors are based on, but not
directly proportional to, historical gross
domestic product (‘‘GDP’’). Larger
economic regions (i.e., Europe as
measured by the Euro) should get a
higher weighting than smaller regions
(i.e., Australia as measured by AUD).10
Under the New Benchmark, the 20
Components with the lowest realized 36
month rolling volatility will be
9 To arrive at the Sector weightings when Energy
is flat, divide the Sector Base Weight by one minus
the Energy Sector Base Weight (i.e., Sector Base
Weight/1—0.1875)).
10 The Adviser represents that, as of March 31,
2016, the Fund’s investment in the Components of
the Original Benchmark are as follows: (i) Silver,
corn, wheat and coffee were not selected into the
portfolio for April (Nominal exposure, 0.00%) due
to their high realized volatilities, and (ii) although
selected into the portfolio, crude oil, natural gas,
heating oil and Gasoline were not given any weight
(nominal exposure, 0.00%) as short positions in
those commodities were not allowed. The selected
commodities were given equal nominal weight
(6.25%): Copper, soybeans, cocoa, lean hogs, CHF
and CAD were not fully invested due to lack of total
conviction based on the Composite Momentum
Signal methodology. Only 2⁄3 of the nominal
exposure was invested into their respective futures
contract (effective weight: 4.17%). Gold, sugar,
cotton, live cattle, EUR, JPY, GBP, AUD, 30-year
Treasury bond and 10-year Treasury note were fully
invested (effective weight: 6.25%).
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Jkt 238001
included.11 If Energy futures are flat,
then Energy assets will be excluded.
The remaining assets will be weighted
equally prior to the ‘‘Composite
Momentum Signal’’ (described below)
being applied.
The New Benchmark determines a
Composite Momentum Signal for each
asset, based on the 3-month, 6-month,
and 12-month returns (each, a ‘‘Signal’’)
for the asset, based on its rolling
schedule. If the return is positive, the
New Benchmark will assign positive
one (+1) to it; if the return is negative,
the New Benchmark will assign a
negative one (¥1) to it. The three
Signals are aggregated by the New
Benchmark, and if all signals are in the
same direction, the Fund will invest the
assigned weight. Otherwise, the Fund
will invest two-thirds of the assigned
weight. The direction of the trade (i.e.,
long or short) will be based on the
direction of the majority of the
Signals.12
(3) Rebalancing
The weight of each Component and
Sector in the Original Benchmark
changes throughout each month based
upon performance. At the end of each
11 The Adviser represents that the commodity
futures contracts included in the New Benchmark
(and therefore anticipated to be included in the
Fund) are heavily traded and are based on some of
the world’s most liquid and actively-traded
commodities. According to the Adviser, as of
January 1, 2016, the 3-month average daily trading
volume (‘‘ADTV’’) of the commodity futures
contracts representing Components in the New
Benchmark were as follows: Crude oil:
$20,402,707,680; natural gas: $3,613,649,760);
heating oil: $2,489,853,660; Gasoline:
$3,367,039,200; copper: $434,060,000; sugar:
$707,097,600; cotton: $285,940,000; wheat:
$1,085,637,500; corn: $3,619,192,500; soybeans:
$3,826,910,000; gold: $14,866,492,080; silver:
$3,122,181,600; cocoa: $429,350,900; coffee:
$452,838,750; live cattle: $1,786,550,000; and lean
hogs: $437,824,000.
The listed financial futures contracts included in
the New Benchmark (and therefore anticipated to be
included in the Fund) are heavily traded and
represent six of the world’s most liquid and
actively-traded currencies (as well as the U.S. dollar
through futures on 30-year Treasury bonds and 10year Treasury notes). According to the Adviser, as
of January 1, 2016, the 3-month ADTV of the
financial futures contracts representing
Components in the New Benchmark were as
follows: EUR: $33,014,630,700; AUD:
$7,428,685,500; CAD: $6,686,911,000; GBP:
$8,644,461,188; CHF: $9,904,476,250; 10-year
Treasury note: $148,389,752,565; and 30-year
Treasury bond: $38,918,903,603.
12 The current weighting of the New Benchmark
as of January 1, 2016, is as follows. Silver, corn,
wheat and coffee were not selected due to high
volatility. The Energy group is flat as Signals
indicate a short position. The weight of the Energy
group is therefore proportionately assigned to the
included assets. Each of copper, gold, soybeans,
sugar, cotton, cocoa, live cattle, lean hogs, EUR,
JPY, GBP, CHF, AUD, CAD, 30-year Treasury bond,
and 10-year Treasury note futures were therefore
weighted at 6.25%.
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36359
month, each Sector is reset back to its
applicable Base Weight depending on
whether the Energy Sector is long or
flat. Within Sectors that have multiple
Components, the weight of each
Component relative to the others is
allowed to fluctuate throughout the year
and Component weights are reset back
to their respective Base Weights only at
year-end.
Under the New Benchmark, each
month, the 20 assets with the lowest 36month volatility on a rolling basis are
included. If an asset within the Energy
group is short, the value of that asset is
flat and allocated proportionately to the
included assets. Weighing is then
determined as discussed above.
(4) Long/Short/Flat Determination
As stated in the Prior Releases, in
order to capture both rising and falling
price trends, at the end of each month
each Sector in the Original Benchmark
(other than the Energy Sector) is
positioned as either ‘‘long’’ or ‘‘short.’’
This determination is made using an
algorithm that compares the Sector’s
monthly return to the Sector’s historic
weighted moving average returns. If the
Sector’s returns are above its moving
average returns, the Sector is positioned
as ‘‘long’’ throughout the following
month. If the Sector’s returns are below
its moving average, the Sector is
positioned as ‘‘short’’ throughout the
following month (with the exception of
the Energy Sector, which would be
positioned flat). All Components within
a Sector are held in the same direction.
The value of a Sector and the value of
the Original Benchmark should increase
if a long position increases in value or
if a short position decreases in value.
For example, if a Sector is long in the
Original Benchmark and the value of its
Components goes up intra-month, the
return of the Sector (and therefore the
Original Benchmark) should increase. If
a Sector is short in the Original
Benchmark, and the value of its
Components goes down intra-month,
the return of the Sector (and therefore
the Original Benchmark) should
increase.
Under the New Benchmark, the Fund
will be rebalanced each month based on
the Composite Momentum Signal
framework described above. Just as
under the Original Benchmark, the New
Benchmark should increase if a long
position increases in value or if a short
position decreases in value. For
example, if a Component is long in the
New Benchmark and its value goes up
intra-month, the return of the
Component (and therefore the New
Benchmark) should increase. If a
Component is short in the New
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Benchmark, and its value goes down
intra-month, the return of the
Component (and therefore the New
Benchmark) should increase.13
The Adviser represents that the SubAdviser will continue to invest the
Fund in the same assets as are contained
in the Prior Releases and will remain
subject to, and invest the Fund assets,
in accordance [sic] all of the other
requirements and limitations identified
in the Prior Releases. As a condition to
continued listing and trading Shares of
the Fund on the Exchange, the Fund
will continue to comply with all initial
and continued listing requirements
under NYSE Arca Rule 8.600.
Except for the changes noted above,
all other facts presented and
representations made in the Prior
Releases are unchanged.
2. Statutory Basis
The basis under the Exchange Act for
this proposed rule change is the
requirement under Section 6(b)(5)14 that
an exchange have rules that are
designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, to remove impediments to, and
perfect the mechanism of a free and
open market and, in general, to protect
investors and the public interest. The
Exchange believes that the proposed
rule change is designed to prevent
fraudulent and manipulative acts and
practices. The Adviser is changing the
representation that it will seek
investment returns that correspond to
the Original Benchmark to that it will
seek investment returns that correspond
to the New Benchmark.
The Adviser represents that there is
no change to the Fund’s investment
objective or to the securities or other
assets identified in the Prior Releases
that the Fund utilizes in seeking to
achieve its investment objective. The
Fund’s use of such securities and other
assets will remain subject to all
requirements and applicable limitations
identified in the Prior Releases. As a
condition to the continued listing and
trading of the Shares on the Exchange,
the Fund will continue to comply with
all initial and continued listing
requirements under NYSE Arca Rule
8.600.
The proposed rule change is designed
to promote just and equitable principles
of trade and to protect investors and the
13 Because the New Benchmark does not classify
Components into Sectors, the above explanation of
the impact of changes in the value of long or short
assets in the New Benchmark is discussed with
respect to Components, rather than with respect to
Sectors.
14 15 U.S.C. 78f(b)(5).
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Jkt 238001
public interest in that the Adviser
represents that there is no change to the
Fund’s investment objective. The
Adviser represents that the allocations
of the Fund’s portfolio will remain
consistent with the allocation
limitations discussed in the Prior
Releases, and that the Fund may invest
in the same instruments as are
contained in the Original Benchmark, as
discussed in the Prior Release. However,
the Adviser now represents that the
Fund will use portfolio management
strategies in seeking to achieve its
investment objective in a manner that
allocates the Fund’s investments in
those same instruments in a manner to
correspond to the New Benchmark,
rather than the Original Benchmark.
All statements and representations
made in this filing and the Prior
Releases regarding (a) the description of
the Fund’s portfolio, (b) limitations on
portfolio holdings or reference assets, or
(c) the applicability of Exchange rules
and surveillance procedures shall
constitute continued listing
requirements for listing the Shares on
the Exchange. The Adviser has
represented to the Exchange that it will
advise the Exchange of any failure by
the Fund to comply with the continued
listing requirements, and, pursuant to
its obligations under Section 19(g)(1) of
the Act, the Exchange will monitor for
compliance with the continued listing
requirements.15 If the Fund is not in
compliance with the applicable listing
requirements, the Exchange will
commence delisting procedures under
NYSE Arca Rule 5.5(m).
The proposed rule change is designed
to perfect the mechanism of a free and
open market and, in general, to protect
investors and the public interest in that
the Fund will continue to comply with
all initial and continued listing
requirements under NYSE Arca Rule
8.600. The proposed rule change will
permit the Fund to continue to operate
in a manner similar to other Managed
15 The Commission notes that certain other
proposals for the listing and trading of Managed
Fund Shares include a representation that the
exchange will ‘‘surveil’’ for compliance with the
continued listing requirements. See, e.g., Securities
Exchange Act Release No. 77499 (April 1, 2016), 81
FR 20428 (April 7, 2016) (Notice of Filing of
Amendment No. 2, and Order Granting Accelerated
Approval of a Proposed Rule Change, as Modified
by Amendment No. 2, to List and Trade Shares of
the SPDR DoubleLine Short Duration Total Return
Tactical ETF of the SSgA Active Trust), available
at: https://www.sec.gov/rules/sro/bats/2016/34–
77499.pdf. In the context of this representation, it
is the Commission’s view that ‘‘monitor’’ and
‘‘surveil’’ both mean ongoing oversight of the
Fund’s compliance with the continued listing
requirements. Therefore, the Commission does not
view ‘‘monitor’’ as a more or less stringent
obligation than ‘‘surveil’’ with respect to the
continued listing requirements.
PO 00000
Frm 00107
Fmt 4703
Sfmt 4703
Fund Shares that invest primarily in
futures contracts, and will permit
continued listing on the Exchange for
the Fund after it begins to utilize the
quantitative, rules-based strategy
designed to seek performance that
corresponds to the New Benchmark,
which will enhance competition among
issues Managed Fund Shares currently
trading on the Exchange. Except for the
changes noted above, all other
representations made in the Prior
Releases are unchanged.
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 Exchange Act. The
proposed rule change will permit the
continued listing on the Exchange of the
Fund after it begins to utilize the
quantitative, rules-based strategy
designed to correspond to the New
Benchmark, which will enhance
competition among issues of Managed
Fund Shares.
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
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 for 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 Act16 and Rule 19b–4(f)(6)
thereunder.17
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
16 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). As required under Rule
19b–4(f)(6)(iii), the Exchange provided the
Commission with written notice of its intent to file
the proposed rule change, along with a brief
description and the 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.
17 17
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Federal Register / Vol. 81, No. 108 / Monday, June 6, 2016 / Notices
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) of the Act18 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:
sradovich on DSK3TPTVN1PROD with NOTICES
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSEArca–2016–83 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSEArca–2016–83. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
18 15
U.S.C. 78s(b)(2)(B).
VerDate Sep<11>2014
16:36 Jun 03, 2016
Jkt 238001
available publicly. All submissions
should refer to File Number SR–
NYSEArca–2016–83 and should be
submitted on or before June 27, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Brent J. Fields,
Secretary.
[FR Doc. 2016–13212 Filed 6–3–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–77947; File No. SR–
NYSEARCA–2016–76]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Implementing the
Quoting and Trading Provisions of the
Plan To Implement a Tick Size Pilot
Program Submitted to the Commission
Pursuant to Rule 608 of Regulation
NMS Under the Act
May 31, 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 20,
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, II, and
III 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 implement
the quoting and trading provisions of
the Plan to Implement a Tick Size Pilot
Program submitted to the Commission
pursuant to Rule 608 of Regulation
NMS 4 under the Act (the ‘‘Plan’’). The
proposed rule change is substantially
similar to proposed rule changes
recently approved or published by the
Commission by New York Stock
Exchange LLC to adopt NYSE Rules
67(a) and 67(c)–(e), which also
implemented the quoting and trading
19 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.
4 17 CFR 242.608.
1 15
PO 00000
Frm 00108
Fmt 4703
Sfmt 4703
36361
provisions of the Plan.5 Therefore, the
Exchange has designated this proposal
as ‘‘non-controversial’’ and provided the
Commission with the notice required by
Rule 19b–4(f)(6)(iii) under the Act.6 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.
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 establish
rules to require its ETP Holders 7 to
comply with the requirements of the
Plan to Implement a Tick Size Pilot
Program (the ‘‘Plan’’),8 which is
designed to study and assess the impact
of increment conventions on the
liquidity and trading of the common
stocks of small capitalization
5 See, Securities Exchange Act Release No. 76229
(October 22, 2015), 80 FR 66065 (October 28, 2015)
(SR–NYSE–2015–46), as amended by Partial
Amendments No. 1 and No. 2 to the Quoting &
Trading Rules Proposal. See, Securities Exchange
Act Release No. 77703 (April 25, 2016), 81 FR
25725 (April 29, 2016) (SR–NYSE–2015–46).
6 17 CFR 240.19b–4(f)(6)(iii).
7 The term ETP Holder is defined in NYSE Arca
Equities Rule 1.1(n) to mean a sole proprietorship,
partnership, corporation, limited liability company
or other organization in good standing that has been
issued an ETP. An ETP Holder must be a registered
broker or dealer pursuant to Section 15 of the Act.
An ETP Holder shall agree to be bound by the
Certificate of Incorporation, Bylaws and Rules of
NYSE Arca Equities, and by all applicable rules and
regulations of the Commission.
The term ETP is defined in NYSE Arca Equities
Rule 1.1(m) to mean an equity trading permit issued
by NYSE Arca Equities for effecting approved
securities transactions on NYSE Arca Equities’
trading facilities.
8 See Securities and Exchange Act Release No.
74892 (May 6, 2015), 80 FR 27513 (File No.
4–657) (‘‘Tick Plan Approval Order’’). See, also,
Securities and Exchange Act Release No. 76382
(November 6, 2015) (File No. 4–657), 80 FR 70284
(File No. 4–657) (November 13, 2015), which
extended the pilot period commencement date from
May 6, 2015 to October 3, 2016.
E:\FR\FM\06JNN1.SGM
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Agencies
[Federal Register Volume 81, Number 108 (Monday, June 6, 2016)]
[Notices]
[Pages 36357-36361]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-13212]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-77952; File No. SR-NYSEArca-2016-83]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change To Reflect a Change
to the Benchmark Index Applicable to the WisdomTree Managed Futures
Strategy Fund
May 31, 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 27, 2016, NYSE Arca, Inc. (the ``Exchange'' or
``NYSE Arca'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C.78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to reflect a change to the benchmark index
applicable to the WisdomTree Managed Futures Strategy Fund. 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.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Commission previously approved the listing and trading of the
shares (``Shares'') of the Fund on the Exchange under NYSE Arca
Equities Rule 8.600,\4\ which governs the listing and trading of
``Managed Fund Shares,'' on the Exchange.\5\ The Fund is an actively-
managed exchange traded fund. WisdomTree Asset Management, Inc.
(``WisdomTree Asset Management'') is the investment adviser
(``Adviser'') to the Fund. WisdomTree Investments, Inc. (``WisdomTree
Investments'') is the
[[Page 36358]]
parent company of WisdomTree Asset Management. Mellon Capital
Management Corporation (``Mellon'' or ``Sub-Adviser'') serves as the
sub-adviser for the Fund. State Street Bank and Trust Company is the
administrator, custodian and transfer agent for the Fund. Foreside Fund
Services, LLC (``Distributor'') serves as distributor for the Fund.\6\
The Shares are offered by the Trust, which is registered with the
Commission as an investment company.\7\
---------------------------------------------------------------------------
\4\ NYSE Arca Equities Rule 8.600 (c)(1) provides that, among
other criteria, 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) (``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\ See Securities Exchange Act Release No. 63598 (December 22,
2010), 75 FR 82106 (December 29, 2010)(SR-NYSEArca-2010-98) (``Prior
Order''). See also Securities Exchange Act Release No. 63292
(November 9, 2010), 75 FR 70319 (November 17, 2010) (``Prior
Notice'', and with the Prior Order, the ``Prior Releases'').
\6\ The Prior Releases identified The Bank of New York Mellon as
the administrator, custodian and transfer agent for the Fund and
ALPS Distributors, Inc. as the distributor for the Fund.
\7\ The Trust is registered under the 1940 Act. The Trust
intends to file a prospectus supplement with the Commission or a
post-effective amendment to its registration statement on Form N-1A
under the Securities Act of 1933 (15 U.S.C. 77a) (``Securities
Act'') and under the 1940 Act relating to the Fund (File Nos. 333-
132380 and 811-21864) (the ``Registration Statement''), to reflect
the changes in this proposed rule change upon effectiveness of such
proposed rule change. The descriptions of the operation of the Trust
and the Fund will be reflected in any such filing. 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.
28471 (October 27, 2008) (File No. 812-13458) (``Exemptive Order'').
Investments by the Fund will comply with the conditions in the
Exemptive Order. Share [sic] of the Fund are currently listed and
traded on the Exchange in compliance with all original and continued
listing standards of the Exchange and requirements of the Prior
Releases.
---------------------------------------------------------------------------
The Prior Releases stated that the Adviser would manage the Fund
using a strategy designed to correspond to the performance of the
Diversified Trends IndicatorTM (``Original Benchmark''). In
this proposed rule change, the Exchange proposes to reflect a change to
the benchmark index applicable to the Fund. The new benchmark will be
the WisdomTree Managed Futures Index (``New Benchmark,'' and together
with the Original Benchmark, the ``Benchmarks''), a proprietary index
developed by WisdomTree Investments.\8\ Upon implementation of the
proposed rule change, the Adviser will manage the Fund using a strategy
designed to correspond to the performance of the New Benchmark. The
Adviser anticipates investing Fund assets through the Sub-Adviser based
on the New Benchmark on or around June 30, 2016.
---------------------------------------------------------------------------
\8\ The changes described herein will be effected contingent
upon filing of a prospectus supplement or upon effectiveness of the
Trust's most recent post-effective amendment to its Registration
Statement. See note 7, supra. The Adviser represents that the
Adviser will not implement the changes described herein until the
instant proposed rule change is operative.
---------------------------------------------------------------------------
The Adviser believes that it is in the best interest of the Fund
and its shareholders to replace the Original Benchmark with the New
Benchmark while keeping the Fund's asset exposure and investment
strategies similar, and without changing the Fund's investment
objective. The Adviser believes that the New Benchmark will serve to
optimize the Fund's investment strategy, while seeking to provide
enhanced risk-adjusted returns over time.
Description of the Shares, the Benchmark and the Fund
According to the Prior Releases, the WisdomTree Managed Futures
Strategy Fund seeks to provide investors with positive total returns in
rising or falling markets that are not directly correlated to broad
market equity or fixed income returns. The Fund is currently managed
using a quantitative, rules-based strategy designed to provide returns
that correspond to the performance of the Original Benchmark. The
Original Benchmark is a widely used indicator designed to capture the
economic benefit derived from rising or declining price trends in
commodity, currency, and U.S. Treasury futures markets.
Under this proposed rule change, the Exchange seeks to permit the
Fund to be managed using a different, quantitative, rules-based
strategy, described below, that is designed to provide returns that
correspond to the New Benchmark. The New Benchmark is a proprietary
index, developed and owned by WisdomTree Investments that is also
designed to capture the economic benefit derived from rising or
declining price trends in commodity, currency, and U.S. Treasury
futures markets.
Differences between the Original Benchmark and the New Benchmark
are described below.
The Benchmarks
The Original Benchmark is a rules-based indicator designed to
capture rising and falling price trends in the commodity, currency and
U.S. Treasury futures markets through long and short positions on U.S.
listed futures contracts. The Original Benchmark consists of U.S.
listed futures contracts on 16 tangible commodities and 8 financial
futures. The 16 commodity futures contracts are: Light crude oil,
natural gas, RBOB gas (``Gasoline''), heating oil, soybeans, corn,
wheat, gold, silver, copper, live cattle, lean hogs, coffee, cocoa,
cotton and sugar. The 8 financial futures contracts are: the Australian
dollar (``AUD''), British pound sterling (``GBP''), Canadian dollar
(``CAD''), Euro (``EUR''), Japanese yen (``JPY''), Swiss franc
(``CHF''), 10-year U.S. Treasury note and 30-year U.S. Treasury bond.
Each contract is sometimes referred to as a ``Component'' of the
Original Benchmark.
The New Benchmark also is a rules-based indicator designed to
capture rising and falling price trends in the commodity, currency and
U.S. Treasury futures markets through long and short positions on U.S.
listed futures contracts. The New Benchmark consists of U.S. listed
futures contracts on 16 tangible commodities and 8 financial futures.
The 16 commodity futures contracts are: Light crude oil, natural gas,
Gasoline, heating oil, soybeans, corn, wheat, gold, silver, copper,
live cattle, lean hogs, coffee, cocoa, cotton and sugar. The 8
financial futures contracts are: the AUD, GBP, CAD, EUR, JPY, CHF, 10-
year U.S. Treasury note and 30-year U.S. Treasury bond. Each contract
is sometimes referred to as a ``Component'' of the New Benchmark.
(1) Asset Treatment
Under the Original Benchmark, Components that are similar in nature
(such as gas and oil or gold and silver) are aggregated into
``Sectors.'' There are nine commodity Sectors in the Original
Benchmark: Energy (light crude oil, natural gas, Gasoline, and heating
oil), Grains (soybeans, corn), Precious Metals (gold and silver),
Industrial Metals (copper), Livestock (live cattle, lean hogs), Coffee,
Cocoa, Cotton, and Sugar. Each financial futures contract is considered
to be its own Sector. As a result, there are eight financial Sectors in
the Original Benchmark: The AUD, GBP, CAD, EUR, JPY, CHF, 10-year U.S.
Treasury note and 30-year U.S. Treasury bond.
Under the New Benchmark, there are no Sectors, but rather each of
the 24 Components is treated separately for weighting and long, short
or flat position determinations. The twenty Components with the lowest
36-month rolling volatility are included. All Components may be long,
short or flat, except for Energy futures (i.e., light crude oil,
natural gas, Gasoline and heating oil), which are held either long or
flat.
(2) Weighting Methodology
Within the Original Benchmark, Components may be positioned as long
or short, except that the Energy Sector and its Components may never be
positioned short. The Original Benchmark's methodology provides that,
due to significant levels of continuous consumption, limited reserves
and other factors, the Energy Sector can only be long or flat (i.e., no
exposure).
At the beginning of each calendar year and month, the Original
Benchmark is weighted evenly (i.e., 50/50) between commodity futures
contracts and
[[Page 36359]]
financial futures contracts. If the Energy Sector is flat, financial
futures represent approximately 61.5% of the weight of the original
Benchmark and commodity futures represent approximately 38.5% of
weighting of the Original Benchmark. When Energy is long, financial
futures and commodity futures each represent 50% of the weight of the
Original Benchmark.
If the Energy Sector is flat then the weighting of the other
Sectors and Components within the Benchmark is increased on a pro-rata
basis.\9\ As a result, at the beginning of each calendar year and
month, if Energy is flat, financial futures will represent
approximately 61.5% of the weight of the Original Benchmark and
commodities will represent approximately 38.5% of the weight of the
Original Benchmark.
---------------------------------------------------------------------------
\9\ To arrive at the Sector weightings when Energy is flat,
divide the Sector Base Weight by one minus the Energy Sector Base
Weight (i.e., Sector Base Weight/1--0.1875)).
---------------------------------------------------------------------------
At the beginning of each calendar year and month, each Component
and Sector within the Original Benchmark also has a ``Base Weight,''
depending on whether the Energy Sector is long or flat. If the Energy
Sector is flat, then the Base Weight of the other Sectors and
Components within the Original Benchmark is increased on a pro-rata
basis. Commodity Sector weights are based on, but not exactly
proportional to, historical world production levels. Commodity Sectors
that have higher historical production levels are weighted higher in
the Original Benchmark. Weightings of the financial futures Sectors are
based on, but not directly proportional to, historical gross domestic
product (``GDP''). Larger economic regions (i.e., Europe as measured by
the Euro) should get a higher weighting than smaller regions (i.e.,
Australia as measured by AUD).\10\
---------------------------------------------------------------------------
\10\ The Adviser represents that, as of March 31, 2016, the
Fund's investment in the Components of the Original Benchmark are as
follows: (i) Silver, corn, wheat and coffee were not selected into
the portfolio for April (Nominal exposure, 0.00%) due to their high
realized volatilities, and (ii) although selected into the
portfolio, crude oil, natural gas, heating oil and Gasoline were not
given any weight (nominal exposure, 0.00%) as short positions in
those commodities were not allowed. The selected commodities were
given equal nominal weight (6.25%): Copper, soybeans, cocoa, lean
hogs, CHF and CAD were not fully invested due to lack of total
conviction based on the Composite Momentum Signal methodology. Only
\2/3\ of the nominal exposure was invested into their respective
futures contract (effective weight: 4.17%). Gold, sugar, cotton,
live cattle, EUR, JPY, GBP, AUD, 30-year Treasury bond and 10-year
Treasury note were fully invested (effective weight: 6.25%).
---------------------------------------------------------------------------
Under the New Benchmark, the 20 Components with the lowest realized
36 month rolling volatility will be included.\11\ If Energy futures are
flat, then Energy assets will be excluded. The remaining assets will be
weighted equally prior to the ``Composite Momentum Signal'' (described
below) being applied.
---------------------------------------------------------------------------
\11\ The Adviser represents that the commodity futures contracts
included in the New Benchmark (and therefore anticipated to be
included in the Fund) are heavily traded and are based on some of
the world's most liquid and actively-traded commodities. According
to the Adviser, as of January 1, 2016, the 3-month average daily
trading volume (``ADTV'') of the commodity futures contracts
representing Components in the New Benchmark were as follows: Crude
oil: $20,402,707,680; natural gas: $3,613,649,760); heating oil:
$2,489,853,660; Gasoline: $3,367,039,200; copper: $434,060,000;
sugar: $707,097,600; cotton: $285,940,000; wheat: $1,085,637,500;
corn: $3,619,192,500; soybeans: $3,826,910,000; gold:
$14,866,492,080; silver: $3,122,181,600; cocoa: $429,350,900;
coffee: $452,838,750; live cattle: $1,786,550,000; and lean hogs:
$437,824,000.
The listed financial futures contracts included in the New
Benchmark (and therefore anticipated to be included in the Fund) are
heavily traded and represent six of the world's most liquid and
actively-traded currencies (as well as the U.S. dollar through
futures on 30-year Treasury bonds and 10-year Treasury notes).
According to the Adviser, as of January 1, 2016, the 3-month ADTV of
the financial futures contracts representing Components in the New
Benchmark were as follows: EUR: $33,014,630,700; AUD:
$7,428,685,500; CAD: $6,686,911,000; GBP: $8,644,461,188; CHF:
$9,904,476,250; 10-year Treasury note: $148,389,752,565; and 30-year
Treasury bond: $38,918,903,603.
---------------------------------------------------------------------------
The New Benchmark determines a Composite Momentum Signal for each
asset, based on the 3-month, 6-month, and 12-month returns (each, a
``Signal'') for the asset, based on its rolling schedule. If the return
is positive, the New Benchmark will assign positive one (+1) to it; if
the return is negative, the New Benchmark will assign a negative one (-
1) to it. The three Signals are aggregated by the New Benchmark, and if
all signals are in the same direction, the Fund will invest the
assigned weight. Otherwise, the Fund will invest two-thirds of the
assigned weight. The direction of the trade (i.e., long or short) will
be based on the direction of the majority of the Signals.\12\
---------------------------------------------------------------------------
\12\ The current weighting of the New Benchmark as of January 1,
2016, is as follows. Silver, corn, wheat and coffee were not
selected due to high volatility. The Energy group is flat as Signals
indicate a short position. The weight of the Energy group is
therefore proportionately assigned to the included assets. Each of
copper, gold, soybeans, sugar, cotton, cocoa, live cattle, lean
hogs, EUR, JPY, GBP, CHF, AUD, CAD, 30-year Treasury bond, and 10-
year Treasury note futures were therefore weighted at 6.25%.
---------------------------------------------------------------------------
(3) Rebalancing
The weight of each Component and Sector in the Original Benchmark
changes throughout each month based upon performance. At the end of
each month, each Sector is reset back to its applicable Base Weight
depending on whether the Energy Sector is long or flat. Within Sectors
that have multiple Components, the weight of each Component relative to
the others is allowed to fluctuate throughout the year and Component
weights are reset back to their respective Base Weights only at year-
end.
Under the New Benchmark, each month, the 20 assets with the lowest
36-month volatility on a rolling basis are included. If an asset within
the Energy group is short, the value of that asset is flat and
allocated proportionately to the included assets. Weighing is then
determined as discussed above.
(4) Long/Short/Flat Determination
As stated in the Prior Releases, in order to capture both rising
and falling price trends, at the end of each month each Sector in the
Original Benchmark (other than the Energy Sector) is positioned as
either ``long'' or ``short.'' This determination is made using an
algorithm that compares the Sector's monthly return to the Sector's
historic weighted moving average returns. If the Sector's returns are
above its moving average returns, the Sector is positioned as ``long''
throughout the following month. If the Sector's returns are below its
moving average, the Sector is positioned as ``short'' throughout the
following month (with the exception of the Energy Sector, which would
be positioned flat). All Components within a Sector are held in the
same direction. The value of a Sector and the value of the Original
Benchmark should increase if a long position increases in value or if a
short position decreases in value. For example, if a Sector is long in
the Original Benchmark and the value of its Components goes up intra-
month, the return of the Sector (and therefore the Original Benchmark)
should increase. If a Sector is short in the Original Benchmark, and
the value of its Components goes down intra-month, the return of the
Sector (and therefore the Original Benchmark) should increase.
Under the New Benchmark, the Fund will be rebalanced each month
based on the Composite Momentum Signal framework described above. Just
as under the Original Benchmark, the New Benchmark should increase if a
long position increases in value or if a short position decreases in
value. For example, if a Component is long in the New Benchmark and its
value goes up intra-month, the return of the Component (and therefore
the New Benchmark) should increase. If a Component is short in the New
[[Page 36360]]
Benchmark, and its value goes down intra-month, the return of the
Component (and therefore the New Benchmark) should increase.\13\
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\13\ Because the New Benchmark does not classify Components into
Sectors, the above explanation of the impact of changes in the value
of long or short assets in the New Benchmark is discussed with
respect to Components, rather than with respect to Sectors.
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The Adviser represents that the Sub-Adviser will continue to invest
the Fund in the same assets as are contained in the Prior Releases and
will remain subject to, and invest the Fund assets, in accordance [sic]
all of the other requirements and limitations identified in the Prior
Releases. As a condition to continued listing and trading Shares of the
Fund on the Exchange, the Fund will continue to comply with all initial
and continued listing requirements under NYSE Arca Rule 8.600.
Except for the changes noted above, all other facts presented and
representations made in the Prior Releases are unchanged.
2. Statutory Basis
The basis under the Exchange Act for this proposed rule change is
the requirement under Section 6(b)(5)\14\ that an exchange have rules
that are designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to remove
impediments to, and perfect the mechanism of a free and open market
and, in general, to protect investors and the public interest. The
Exchange believes that the proposed rule change is designed to prevent
fraudulent and manipulative acts and practices. The Adviser is changing
the representation that it will seek investment returns that correspond
to the Original Benchmark to that it will seek investment returns that
correspond to the New Benchmark.
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\14\ 15 U.S.C. 78f(b)(5).
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The Adviser represents that there is no change to the Fund's
investment objective or to the securities or other assets identified in
the Prior Releases that the Fund utilizes in seeking to achieve its
investment objective. The Fund's use of such securities and other
assets will remain subject to all requirements and applicable
limitations identified in the Prior Releases. As a condition to the
continued listing and trading of the Shares on the Exchange, the Fund
will continue to comply with all initial and continued listing
requirements under NYSE Arca Rule 8.600.
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 Adviser represents that there is no change to the Fund's
investment objective. The Adviser represents that the allocations of
the Fund's portfolio will remain consistent with the allocation
limitations discussed in the Prior Releases, and that the Fund may
invest in the same instruments as are contained in the Original
Benchmark, as discussed in the Prior Release. However, the Adviser now
represents that the Fund will use portfolio management strategies in
seeking to achieve its investment objective in a manner that allocates
the Fund's investments in those same instruments in a manner to
correspond to the New Benchmark, rather than the Original Benchmark.
All statements and representations made in this filing and the
Prior Releases regarding (a) the description of the Fund's portfolio,
(b) limitations on portfolio holdings or reference assets, or (c) the
applicability of Exchange rules and surveillance procedures shall
constitute continued listing requirements for listing the Shares on the
Exchange. The Adviser has represented to the Exchange that it will
advise the Exchange of any failure by the Fund to comply with the
continued listing requirements, and, pursuant to its obligations under
Section 19(g)(1) of the Act, the Exchange will monitor for compliance
with the continued listing requirements.\15\ If the Fund is not in
compliance with the applicable listing requirements, the Exchange will
commence delisting procedures under NYSE Arca Rule 5.5(m).
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\15\ The Commission notes that certain other proposals for the
listing and trading of Managed Fund Shares include a representation
that the exchange will ``surveil'' for compliance with the continued
listing requirements. See, e.g., Securities Exchange Act Release No.
77499 (April 1, 2016), 81 FR 20428 (April 7, 2016) (Notice of Filing
of Amendment No. 2, and Order Granting Accelerated Approval of a
Proposed Rule Change, as Modified by Amendment No. 2, to List and
Trade Shares of the SPDR DoubleLine Short Duration Total Return
Tactical ETF of the SSgA Active Trust), available at: https://www.sec.gov/rules/sro/bats/2016/34-77499.pdf. In the context of this
representation, it is the Commission's view that ``monitor'' and
``surveil'' both mean ongoing oversight of the Fund's compliance
with the continued listing requirements. Therefore, the Commission
does not view ``monitor'' as a more or less stringent obligation
than ``surveil'' with respect to the continued listing requirements.
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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 the Fund will continue to comply with all
initial and continued listing requirements under NYSE Arca Rule 8.600.
The proposed rule change will permit the Fund to continue to operate in
a manner similar to other Managed Fund Shares that invest primarily in
futures contracts, and will permit continued listing on the Exchange
for the Fund after it begins to utilize the quantitative, rules-based
strategy designed to seek performance that corresponds to the New
Benchmark, which will enhance competition among issues Managed Fund
Shares currently trading on the Exchange. Except for the changes noted
above, all other representations made in the Prior Releases are
unchanged.
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 Exchange Act. The proposed rule
change will permit the continued listing on the Exchange of the Fund
after it begins to utilize the quantitative, rules-based strategy
designed to correspond to the New Benchmark, which will enhance
competition among issues of Managed Fund Shares.
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
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 for 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\16\ and Rule 19b-
4(f)(6) thereunder.\17\
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\16\ 15 U.S.C. 78s(b)(3)(A).
\17\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written
notice of its intent to file the proposed rule change, along with a
brief description and the 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.
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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
[[Page 36361]]
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) of the Act\18\ to determine whether the proposed rule
change should be approved or disapproved.
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\18\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-NYSEArca-2016-83 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2016-83. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549 on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSEArca-2016-83 and should
be submitted on or before June 27, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2016-13212 Filed 6-3-16; 8:45 am]
BILLING CODE 8011-01-P