Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change Relating to the Listing and Trading of Shares of the Direxion Daily Municipal Bond Taxable Bear 1X Fund Under NYSE Arca Equities Rule 5.2(j)(3), 51241-51248 [2016-18315]

Download as PDF Federal Register / Vol. 81, No. 149 / Wednesday, August 3, 2016 / Notices 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– FINRA–2016–028 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. asabaliauskas on DSK3SPTVN1PROD with NOTICES All submissions should refer to File Number SR–FINRA–2016–028. 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 a.m. and 3 p.m. Copies of such filing also will be available for inspection and copying at the principal office of FINRA. 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–FINRA–2016–028 and should be submitted on or before August 24, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.13 Robert W. Errett, Deputy Secretary. SECURITIES AND EXCHANGE COMMISSION [Release No. 34–78433; File No. SR– NYSEArca–2016–100] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change Relating to the Listing and Trading of Shares of the Direxion Daily Municipal Bond Taxable Bear 1X Fund Under NYSE Arca Equities Rule 5.2(j)(3) July 28, 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 July 13, 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 list and trade under NYSE Arca Equities Rule 5.2(j)(3), Commentary .02, the shares of the Direxion Daily Municipal Bond Taxable Bear 1X 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. [FR Doc. 2016–18317 Filed 8–2–16; 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 13 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 18:21 Aug 02, 2016 Jkt 238001 PO 00000 Frm 00068 Fmt 4703 Sfmt 4703 51241 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 Direxion Daily Municipal Bond Taxable Bear 1X Fund (‘‘Fund’’) under NYSE Arca Equities Rule 5.2(j)(3), Commentary .02, which governs the listing and trading of Investment Company Units (‘‘Units’’) based on fixed income securities indexes.4 The Fund is a series of the 4 The Commission previously has approved proposed rule changes relating to listing and trading on the Exchange of Units based on municipal bond indexes. See Securities Exchange Act Release Nos. 67985 (October 4, 2012), 77 FR 61804 (October 11, 2012) (SR–NYSEArca–2012–92) (order approving proposed rule change relating to the listing and trading of iShares 2018 S&P AMT-Free Municipal Series and iShares 2019 S&P AMT-Free Municipal Series under NYSE Arca Equities Rule 5.2(j)(3), Commentary .02); 67729 (August 24, 2012), 77 FR 52776 (August 30, 2012) (SR–NYSEArca–2012–92) (notice of proposed rule change relating to the listing and trading of iShares 2018 S&P AMT-Free Municipal Series and iShares 2019 S&P AMT-Free Municipal Series under NYSE Arca Equities Rule 5.2(j)(3), Commentary .02); 71232 (January 3, 2014), 79 FR 1662 (January 9, 2014) (SR–NYSEArca–2013– 118) (order approving listing and trading of shares of the Market Vectors Short High-Yield Municipal Index ETF under NYSE Arca Equities Rule 5.2(j)(3), Commentary .02); 72523, (July 2, 2014), 79 FR 39016 (July 9, 2014) (SR–NYSEArca–2014–37) (order approving proposed rule change relating to the listing and trading of iShares 2020 S&P AMTFree Municipal Series under NYSE Arca Equities Rule 5.2(j)(3), Commentary .02); 72172 (May 15, 2014), 79 FR 29241 (May 21, 2014) (SR–NYSEArca– 2014–37) (notice of proposed rule change relating to the listing and trading of iShares 2020 S&P AMTFree Municipal Series under NYSE Arca Equities Rule 5.2(j)(3), Commentary .02); 75376 (July 7, 2015), 80 FR 40113 (July 13, 2015) (SR–NYSEArca– 2015–18) (order approving proposed rule change relating to the listing and trading of Vanguard TaxExempt Bond Index Fund under NYSE Arca Equities Rule 5.2(j)(3), Commentary .02); 75468 (July 16, 2015), 80 FR 43500 (July 22, 2015) (SR– NYSEArca–2015–25) (order approving proposed rule change relating to the listing and trading of iShares iBonds 2021 and 2022 AMT-Free Muni Bond ETF under NYSE Arca Equities Rule 5.2(j)(3)). The Commission also has issued a notice of filing and immediate effectiveness of a proposed rule change relating to listing and trading on the Exchange of shares of the iShares Taxable Municipal Bond Fund. See Securities Exchange Act Release No. 63176 (October 25, 2010), 75 FR 66815 (October 29, 2010) (SR–NYSEArca–2010–94). The Commission has approved for Exchange listing and trading of shares of two actively managed funds of the PIMCO ETF Trust that principally hold municipal bonds. See Securities Exchange Act Release No. 60981 (November 10, 2009), 74 FR 59594 (November 18, 2009) (SR–NYSEArca–2009– 79) (order approving listing and trading of shares of the PIMCO Short-Term Municipal Bond Strategy Fund and PIMCO Intermediate Municipal Bond Strategy Fund). The Commission also has approved listing and trading on the Exchange of shares of the SPDR® Nuveen S&P High Yield Municipal Bond Fund under Commentary .02 of NYSE Arca Equities Rule 5.2(j)(3). See Securities Exchange Act Release No.63881 (February 9, 2011), 76 FR 9065 (February 16, 2011) (SR–NYSEArca–2010–120). E:\FR\FM\03AUN1.SGM 03AUN1 51242 Federal Register / Vol. 81, No. 149 / Wednesday, August 3, 2016 / Notices Direxion Shares ETF Trust (‘‘Trust’’).5 Rafferty Asset Management, LLC will be the investment adviser to the Fund (‘‘Adviser’’). Bank of New York Mellon will serve as transfer agent, accounting agent and custodian for the Fund (‘‘Transfer Agent’’). Foreside Fund Services, LLC will be the distributor (‘‘Distributor’’) for the Fund’s Shares. U.S. Bancorp Fund Services, LLC will serve as the Fund’s administrator. Principal Investments asabaliauskas on DSK3SPTVN1PROD with NOTICES According to the Registration Statement, the Fund will seek to track 100% of the inverse of the performance of a benchmark index that measures the investment-grade segment of the U.S. municipal bond market. The Fund, under normal circumstances,6 will create net short positions by investing at least 80% of the Fund’s assets (plus any borrowings for investment purposes) in the following financial instruments (‘‘Financial Instruments’’): Options on securities, including exchange-traded funds (‘‘ETFs’’) and indices, traded on U.S. exchanges; swaps; and short positions in ETFs, as described below in this ‘‘Principal Investments’’ section, that, in combination, provide inverse exposure to the Standard & Poor’s National AMT-Free Municipal Bond Index (‘‘Index’’).7 The Fund will seek daily inverse investment results and will not seek to achieve its stated investment objective over a period of time greater than one day. The Fund will not seek income that is exempt from federal, state or local income taxes. 5 On February 29, 2016, the Trust filed a registration statement on Form N–1A under the Securities Act of 1933 (15 U.S.C. 77a) (‘‘1933 Act’’) and the Investment Company Act of 1940 (‘‘1940 Act’’) (15 U.S.C. 80a–1) (File Nos.: 811–22201 and 333–150525) (the ‘‘Registration Statement’’). The description of the operation of the Trust and the Fund herein is based, in part, on the Registration Statement. In addition, the Commission has issued an order granting certain exemptive relief to the Trust under the 1940 Act. See Investment Company Act Release No. 27773 (April 2, 2007) (File No. 812–13336). 6 The term ‘‘under normal circumstances’’ includes, but is not limited to, the absence of extreme volatility or trading halts in the fixed income markets or the financial markets generally; operational issues (e.g., systems failure) causing dissemination of inaccurate market information; or force majeure type events such as natural or manmade disaster, act of God, armed conflict, act of terrorism, riot or labor disruption or any similar intervening circumstance. 7 The Commission previously has approved a proposed rule change relating to listing and trading on the Exchange of Units based on the Index. See Securities Exchange Act Release No. 75376 (July 7, 2015), 80 FR 40113 (July 13, 2015) (SR–NYSEArca– 2015–18) (order approving proposed rule change relating to the listing and trading of Vanguard TaxExempt Bond Index Fund under NYSE Arca Equities Rule 5.2(j)(3), Commentary .02). VerDate Sep<11>2014 18:21 Aug 02, 2016 Jkt 238001 The Fund may invest in options that provide short exposure to the Index or various ETFs including, iShares National Muni Bond ETF, SPDR Nuveen Barclays Municipal Bond ETF, iShares Short-term National Muni Bond ETF, SPDR Nuveen Barclays Short-Term Municipal Bond ETF, Market Vectors High-Yield Municipal Index ETF, SPDR Nuveen S&P High Yield Municipal Bond ETF, Market Vectors AMT-Free Intermediate Municipal Index ETF, PowerShares National AMT-Free Municipal Bond Portfolio, Vanguard Tax-Exempt Bond ETF and the PIMCO Intermediate Municipal Bond Active Exchange-Traded Fund. The Fund may invest in swaps that provide short exposure to the securities included in the Index and various ETFs, including iShares National Muni Bond ETF, SPDR Nuveen Barclays Municipal Bond ETF, iShares Short-term National Muni Bond ETF, SPDR Nuveen Barclays Short-Term Municipal Bond ETF, Market Vectors High-Yield Municipal Index ETF, SPDR Nuveen S&P High Yield Municipal Bond ETF, Market Vectors AMT-Free Intermediate Municipal Index ETF, PowerShares National AMT-Free Municipal Bond Portfolio, Vanguard Tax-Exempt Bond ETF and the PIMCO Intermediate Municipal Bond Active ExchangeTraded Fund. The Fund may take direct short positions in ETFs, such as the iShares National Muni Bond ETF, SPDR Nuveen Barclays Municipal Bond ETF, iShares Short-term National Muni Bond ETF, SPDR Nuveen Barclays Short-Term Municipal Bond ETF, Market Vectors High-Yield Municipal Index ETF, SPDR Nuveen S&P High Yield Municipal Bond ETF, Market Vectors AMT-Free Intermediate Municipal Index ETF, PowerShares National AMT-Free Municipal Bond Portfolio, Vanguard Tax-Exempt Bond ETF and the PIMCO Intermediate Municipal Bond Active Exchange-Traded Fund.8 The Fund will not take long positions in ETFs. The Fund has proposed to use the Index as its benchmark index.9 The Index is a broad, comprehensive, market value-weighted index designed to 8 For purposes of this filing, ETFs include 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). The Fund will not invest in inverse, leveraged or inverse leveraged ETFs (e.g., –2X, –3X, 2X or 3X). 9 S&P Dow Jones Indices is the ‘‘Index Provider’’ with respect to the Index. The Index Provider is not a broker-dealer or affiliated with a broker-dealer and has implemented procedures designed to prevent the use and dissemination of material, nonpublic information regarding the Index. PO 00000 Frm 00069 Fmt 4703 Sfmt 4703 measure the performance of the taxexempt, investment-grade U.S. municipal bond market. Index constituents are derived from the Standard & Poor’s/Investortools Municipal Bond Index. In order to be classified as an eligible bond for inclusion in the Index, a bond must meet all of the following criteria on the rebalancing date: The bond issuer is a state, local government, or agency such that interest on the bond is exempt from federal income tax; a bond must have a rating of at least BBB- by Standard & Poor’s, Baa3 by Moody’s, or BBB- by Fitch; the bond must be denominated in U.S. Dollars (‘‘USD’’); each bond must be a constituent of a deal where the deal’s original offering amount was at least $100 million USD; as of the next rebalancing date, the bond must have a minimum term to maturity and/or call date greater than or equal to one calendar month plus one calendar day; the amount outstanding, or par amount, is used to determine the weight of the bond in the Index; and the bond must have a minimum par amount of $25 million USD. At each monthly rebalancing, no issuer can represent more than 25% of the weight of the Index, and individual issuers that represent 5% of the Index’s weight cannot account for more than 50% of the Index in aggregate. The Index is generally reviewed and rebalanced on a monthly basis. The following bond types are specifically excluded from the Index: Bonds subject to the alternative minimum tax; commercial paper; derivative securities (inverse floaters, forwards, swaps); housing bonds; insured conduit bonds where the obligor is a for-profit institution; noninsured conduit bonds; non-rated bonds; notes; taxable municipals; tobacco bonds; and variable rate debt. The Fund may gain inverse exposure to only a representative sample of the securities in the Index that have aggregate characteristics similar to those of the Index. The Fund will gain this inverse exposure by investing in a combination of financial instruments that provide inverse exposure to the underlying securities of the Index. The Fund will invest in derivatives as a substitute for directly shorting securities in order to gain inverse exposure to the Index or its components. The Fund will seek to remain fully invested at all times consistent with its stated investment objective. At the close of the markets each trading day, the Adviser will position the Fund’s portfolio so that its exposure to the Index is consistent with the Fund’s investment objective. The impact of the Index’s movements during E:\FR\FM\03AUN1.SGM 03AUN1 Federal Register / Vol. 81, No. 149 / Wednesday, August 3, 2016 / Notices the day will affect whether the Fund’s portfolio needs to be re-positioned. For example, if the Index has fallen on a given day, net assets of the Fund should rise, meaning that the Fund’s exposure will need to be increased. Conversely, if the Index has risen on a given day, net assets of the Fund should fall, meaning the Fund’s exposure will need to be reduced. This re-positioning strategy typically results in high portfolio turnover. According to the Registration Statement, because of daily rebalancing and the compounding of each day’s return over time, the return of the Fund for periods longer than a single day will be the result of each day’s returns compounded over the period, which will very likely differ from ¥100% of the return of the Index over the same period. Non-Principal Investments While under normal circumstances, at least 80% of the Fund’s assets will be invested in Financial Instruments to establish net short positions, as described above, the Fund’s remaining assets may be used to invest in cash and the following cash equivalents (in addition to cash or cash equivalents used to collateralize the Fund’s investments in Financial Instruments): Money market funds, depository accounts with institutions with high quality credit ratings, U.S. government securities that have terms-to-maturity of less than 397 days and repurchase agreements that have terms-to-maturity of less than 397 days. asabaliauskas on DSK3SPTVN1PROD with NOTICES Investment Restrictions The Fund may hold up to an aggregate amount of 15% of its net assets in illiquid assets (calculated at the time of investment), including securities deemed illiquid by the Adviser, consistent with Commission guidance. 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.10 10 The Commission has stated that long-standing Commission guidelines have required open-end funds to hold no more than 15% of their net assets VerDate Sep<11>2014 18:21 Aug 02, 2016 Jkt 238001 The Fund is classified as diversified within the meaning of the 1940 Act.11 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 Exchange is submitting this proposed rule change because the Index for the Fund does not meet all of the ‘‘generic’’ listing requirements of Commentary .02(a) to NYSE Arca Equities Rule 5.2(j)(3) applicable to the listing of Units based on fixed income securities indexes. The Index meets all such requirements except for those set forth in Commentary .02(a)(2).13 Specifically, as of May 23, 2016, 32.75% of the weight of the Index components have a minimum original principal amount outstanding of $100 million or more. As of May 23, 2016, 95.87% of the weight of the Index components was composed of individual maturities that were part of an entire municipal bond offering with a minimum original principal amount outstanding of $100 million or more for all maturities of the offering. In addition, as of May 23, 2016, the total dollar amount outstanding of issues in the Index was approximately $248 billion and the average dollar amount outstanding of issues in the Index was approximately $81 million. Further, as of May 23, 2016, the most heavily weighted component represents 0.43% of the weight of the Index and the five most heavily weighted components represent 1.88% of the weight of the Index.14 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). 11 The diversification standard is set forth in Section 5(b)(1) of the 1940 Act. 12 26 U.S.C. 851. 13 Commentary .02(a)(2) to NYSE Arca Equities Rule 5.2(j)(3) provides that components that in the aggregate account for at least 75% of the weight of the index or portfolio each shall have a minimum original principal amount outstanding of $100 million or more. 14 Commentary .02(a)(4) to NYSE Arca Equities Rule 5.2(j)(3) provides that no component fixedincome security (excluding Treasury Securities and PO 00000 Frm 00070 Fmt 4703 Sfmt 4703 51243 Therefore, the Exchange believes that, notwithstanding that the Index does not satisfy the criterion in NYSE Arca Equities Rule 5.2(j)(3), Commentary .02 (a)(2), the Index is sufficiently broadbased to deter potential manipulation, given that it is composed of approximately 3,063 issues and 474 unique issuers. In addition, the Index securities are sufficiently liquid to deter potential manipulation in that a substantial portion (95.87%) of the Index weight is composed of maturities that are part of an entire municipal bond offering with a minimum original principal amount outstanding of $100 million or more, and in view of the substantial total dollar amount outstanding and the average dollar amount outstanding of Index issues, as referenced above. All statements and representations made in this filing regarding (i) the description of the portfolio, (ii) limitations on portfolio holdings or reference assets or (iii) 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). Valuation Methodology for Purposes of Determining Net Asset Value The NAV of Shares, under normal market conditions, will be calculated each day that the New York Stock Exchange (‘‘NYSE’’) is open for business except for days on which the U.S. municipal bond markets are closed. The NAV will be calculated on each such day as of the close of the NYSE, which is typically 4:00 p.m. Eastern Time (‘‘E.T.’’). On days that the U.S. municipal bond markets close early, the NAV will be calculated as of the recommended closing time for the bond markets, which may be before 4:00 p.m. E.T., subject to the discretion of the Adviser. GSE Securities, as defined therein) shall represent more than 30% of the weight of the index or portfolio, and the five most heavily weighted component fixed-income securities in the index or portfolio shall not in the aggregate account for more than 65% of the weight of the index or portfolio. E:\FR\FM\03AUN1.SGM 03AUN1 asabaliauskas on DSK3SPTVN1PROD with NOTICES 51244 Federal Register / Vol. 81, No. 149 / Wednesday, August 3, 2016 / Notices For purposes of calculating NAV, the Fund will value its assets on the basis of market quotations, last sale prices or estimates of value furnished by pricing services or brokers who make markets in such instruments. If such information is not available for a security or instrument held by a Fund, if such information is determined to be unreliable by the Adviser, if the Adviser determines that the market price is stale or if, to the Adviser’s knowledge, such information does not reflect a significant event occurring after the close of the market on which the security principally trades but prior to the time at which the Fund calculates the NAV, the security will be valued at fair value estimates by the Adviser pursuant to policies and procedures established by the Board of Trustees (‘‘Board’’). The Fund may also establish fair value for an instrument if trading in a particular instrument is halted and trading does not resume prior to the closing of the relevant exchange or market. If a reliable market quotation becomes available for a security formerly valued through fair valuation techniques, the Adviser will compare the market quotation to the fair value price to evaluate the effectiveness of the Fund’s fair valuation procedures and will use that market value in the next calculation of NAV. If no last sale is reported on an exchange, the mean of the last bid and last offer prices will be used. Securities that are primarily traded on the NASDAQ Global Market (‘‘NASDAQ’’) for which market quotations are readily available shall be valued using the NASDAQ Official Closing Price. If the NASDAQ Official Closing Price is not available, such securities shall be valued at the last sale price on the day of valuation, or if there has been no sale on such day, at the mean between the last bid and last sale prices. Options will be valued at the last sales price of the respective exchange on which they trade. If there have been no trades for an option on that trading day, then the option will be valued at the mean of the last bid and ask quotations. Swaps will be valued based upon prices from third party vendor models or quotations from market makers to the extent available. Repurchase agreements will be valued on the basis of broker quotes or valuations provided by a third party pricing service, which in determining value utilizes information regarding recent sales, market transactions in comparable securities, quotations from dealers and various relationships between securities. Short-term debt instruments having a remaining maturity of 60 days or less VerDate Sep<11>2014 18:21 Aug 02, 2016 Jkt 238001 will be valued at amortized cost, which approximates market value. If the Board determines that the amortized cost method does not represent the fair value of the short-term debt instrument, the investment will be valued at fair value as determined by policies and procedures adopted by the Board. Debt instruments with a maturity of greater than 60 days (other than U.S. government securities with maturities of greater than 60 days) will be valued at prices that reflect broker/dealer supplied valuations or are obtained from independent pricing services, which may consider the trade activity, treasury spreads, yields or price of bonds of comparable quality, coupon, maturity and type, as well as prices quoted by dealers who make markets in such securities. Money market funds and depository accounts will be valued at NAV. U.S. government securities with maturities of greater than 60 days will be valued at the mean of the closing bid price and offer price provided by an independent third-party pricing service. Securities and other assets for which market quotations are not readily available, or for which the Adviser has reason to question the validity of quotations received, will be valued at fair value in accordance with policies and procedures adopted by the Board. Derivatives Valuation Methodology for Purposes of Determining Intraday Indicative Value In order to provide additional information regarding the intraday value of Shares of the Fund, the NYSE Arca or a market data vendor or other information providers will disseminate every 15 seconds an updated Intraday Indicative Value (‘‘IIV’’) for the Fund as calculated by a third party market data provider. A third party market data provider will calculate the IIV for the Fund. The third party market data provider may use market quotes if available or may fair value securities against proxies (such as swap or yield curves). Swaps will be valued intraday based on the value of the reference assets as determined by a third-party market data provider. U.S. exchange-listed options may be valued intraday using the relevant exchange data, or another proxy as determined to be appropriate by the third party market data provider. Purchase and Issuance of Creation Units The Trust will issue and sell Shares only in aggregations of ‘‘Creation Units’’ on a continuous basis through the Distributor, without a sales load, at their NAV next determined after receipt, on PO 00000 Frm 00071 Fmt 4703 Sfmt 4703 any business day, of an order in proper form received by the Distributor by 4:00 p.m. E.T. on any day that the NYSE is open for business except for days on which the U.S. municipal bond markets are closed. The number of Shares that constitute a Creation Unit will be 50,000 Shares and the value of such Creation Unit will be $1.25 million USD. The size of a Creation Unit is subject to change. Creation Units of Shares may be purchased only by or through an ‘‘Authorized Participant.’’ 15 Creation Units will be sold only for cash at their NAV next determined after receipt of the order, plus a transaction fee. Purchase orders will be processed either through a manual clearing process (‘‘Manual Clearing Process’’) run at the Depository Trust Company (‘‘DTC’’) or through an enhanced clearing process (‘‘Enhanced Clearing Process’’) that is available only to those DTC participants that also are participants in the Continuous Net Settlement System of NSCC. Redemption of Creation Units Shares may be redeemed only in Creation Units at their NAV next determined after receipt of a redemption request in proper form by the Distributor on any business day. A redemption order must be received in good order by the Transfer Agent by 4:00 p.m. E.T. on any day that the NYSE is open for business except for days on which the U.S. municipal bond markets are closed in order to receive the NAV determined on that day. Orders to redeem Creation Units of the Fund using the Enhanced Clearing Process must be delivered through a DTC participant that has executed the Authorized Participant Agreement and has the ability to transact through the Federal Reserve System. A DTC participant who wishes to place a redemption order need not be an Authorized Participant, but such redemption orders must state that the DTC Participant is not using a clearing process and that redemption of Creation Units will instead be effected through the Manual Clearing Process (for cash and U.S. government securities). The order must be accompanied or preceded by the requisite number of Shares specified in such order, which delivery must be made through DTC or the 15 ‘‘Authorized Participants’’ include market makers, large investors and institutions who wish to deal in Creation Units directly with the Fund that have entered into an authorized participant agreement (‘‘Authorized Participant Agreement’’) with the Distributor and the Transfer Agent, or purchase through a dealer that has entered into an Authorized Participant Agreement. E:\FR\FM\03AUN1.SGM 03AUN1 Federal Register / Vol. 81, No. 149 / Wednesday, August 3, 2016 / Notices Federal Reserve System to the custodian by the third business day following such date on which the order is received by the Transfer Agent. The redemption proceeds for a Creation Unit of the Fund will consist solely of cash in an amount equal to the NAV of the Shares being redeemed, as next determined after a receipt of a request in proper form, less the redemption transaction fee. The right of redemption may be suspended or the date of payment postponed with respect to the Fund (1) for any period during which the NYSE is closed (other than customary weekend and holiday closings); (2) for any period during which trading on the NYSE is suspended or restricted; (3) for any period during which an emergency exists as a result of which disposal of the Shares of the Fund’s portfolio securities or determination of its net asset value is not reasonably practicable; or (4) in such other circumstance as is permitted by the Commission. The Exchange represents that: (1) Except for Commentary .02(a)(2) to NYSE Arca Equities Rule 5.2(j)(3), the Shares of the Fund currently satisfy all of the generic listing standards under NYSE Arca Equities Rule 5.2(j)(3); (2) the continued listing standards under NYSE Arca Equities Rules 5.2(j)(3) and 5.5(g)(2) applicable to Units shall apply to the Shares; and (3) the Trust is required to comply with Rule 10A–3 under the Act 16 for the initial and continued listing of the Shares. In addition, the Exchange represents that the Shares will comply with all other requirements applicable to Units including, but not limited to, requirements relating to the dissemination of key information such as the value of the Index and the applicable Intraday Indicative Value (‘‘IIV’’),17 rules governing the trading of equity securities, trading hours, trading halts, surveillance, and the Information Bulletin to Equity Trading Permit Holders (‘‘ETP Holders’’), as set forth in Exchange rules applicable to Units and prior Commission orders approving the generic listing rules applicable to the listing and trading of Units.18 16 17 CFR 240.10A–3. IIV will be widely disseminated by one or more major market data vendors at least every 15 seconds during the Exchange’s Core Trading Session of 9:30 a.m. to 4:00 p.m., E.T. Currently, it is the Exchange’s understanding that several major market data vendors display and/or make widely available IIVs taken from the Consolidated Tape Association (‘‘CTA’’) or other data feeds. 18 See, e.g., Securities Exchange Act Release Nos. 55783 (May 17, 2007), 72 FR 29194 (May 24, 2007) (SR–NYSE Arca–2007–36) (order approving NYSE Arca generic listing standards for Units based on a fixed income index); 44551 (July 12, 2001), 66 FR asabaliauskas on DSK3SPTVN1PROD with NOTICES 17 The VerDate Sep<11>2014 18:21 Aug 02, 2016 Jkt 238001 The current value of the Index will be widely disseminated by one or more major market data vendors at least once per day, as required by NYSE Arca Equities Rule 5.2(j)(3), Commentary .02(b)(ii). The IIV for Shares of the Fund will be disseminated by one or more major market data vendors, updated at least every 15 seconds during the Exchange’s Core Trading Session, as required by NYSE Arca Equities Rule 5.2(j)(3), Commentary .02(c). The Index value, calculated and disseminated at least once daily, as well as the components of the Index and their percentage weighting, will be available from major market data vendors. In addition, as disclosed in the Registration Statement, the portfolio of securities held by the Fund will be disclosed daily on the Fund’s Web site at www.direxioninvestments.com. Availability of Information The Fund’s Web site (www.direxioninvestments.com), 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) the prior business day’s reported composite closing price (‘‘Market Close Price’’) and NAV, and a calculation of the premium and discount of the Market Close Price against the NAV, and (2) data in chart format displaying the frequency distribution of discounts and premiums of the daily Market Close 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 Trust will disclose on its Web site the following information regarding each portfolio holding, as applicable to the type of holding: Ticker symbol, CUSIP number or other identifier, if any; a description of the holding (including the type of holding, such as the type of swap); the identity of the security, index or other asset or instrument underlying the holding, if any; for options, the option strike price; quantity held (as measured by, for example, par value, notional value or number of shares, contracts or units); maturity date, if any; coupon rate, if any; market value of the holding; and 37716 (July 19, 2001) (SR–PCX–2001–14) (order approving generic listing standards for Units and Portfolio Depositary Receipts); 41983 (October 6, 1999), 64 FR 56008 (October 15, 1999) (SR–PCX– 98–29) (order approving rules for listing and trading of Units). PO 00000 Frm 00072 Fmt 4703 Sfmt 4703 51245 the percentage weighting of the holding in the Fund’s portfolio. The Web site information will be publicly available at no charge. Investors can also obtain the Fund’s Summary Prospectus, Prospectus, Statement of Additional Information (‘‘SAI’’) and its Shareholder Reports, filed twice a year. The Trust’s SAI and Shareholder Reports are available free upon request from the Trust. Additionally, the SAI and the Trust’s N– CSR and Form N–SAR may be viewed on-screen or downloaded from the Commission’s Web site. Quotation and last sale information for the Shares will be available via the Consolidated Tape Association (‘‘CTA’’) high speed line. Quotation and last sale information for such U.S. exchangelisted securities will be available from the exchange on which they are listed. Quotation and last sale information for exchange-listed options cleared via the Options Clearing Corporation will be available via the Options Price Reporting Authority. One source of price information for municipal securities is the Electronic Municipal Market Access, which is administered by the Municipal Securities Rulemaking Board. Price information for cash equivalents and swaps may be obtained from brokers and dealers who make markets in such securities or through nationally recognized pricing services through subscription agreements. In addition, the IIV as defined in NYSE Arca Equities Rule 5.2(j)(3), Commentary .01(c) will be widely disseminated by one or more major market data vendors at least every 15 seconds during the Core Trading Session. 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 of the Fund inadvisable. These may include: (1) The extent to which trading is not occurring in the securities and/or the financial instruments of the Fund; or (2) whether other unusual conditions or circumstances detrimental to the maintenance of a fair and orderly market are present. If the IIV, Index 19 See E:\FR\FM\03AUN1.SGM NYSE Arca Equities Rule 7.12. 03AUN1 51246 Federal Register / Vol. 81, No. 149 / Wednesday, August 3, 2016 / Notices asabaliauskas on DSK3SPTVN1PROD with NOTICES value or the value of the Index components is not being disseminated as required, the Exchange may halt trading during the day in which the disruption occurs; if the interruption persists past the day in which it occurred, the Exchange will halt trading no later than the beginning of the trading day following the interruption. The Exchange will obtain a representation from the Fund that the NAV for the Fund will be calculated daily and will be made available to all market participants at the same time. Under NYSE Arca Equities Rule 7.34(a)(5), if the Exchange becomes aware that the NAV for the Fund is not being disseminated to all market participants at the same time, it will halt trading in the Shares until such time as the NAV is available to all market participants. 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. E.T. 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, 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 Rules 5.2(j)(3) and 5.5(g)(2), except that the Index will not meet the requirements of Commentary .02(a)(2) to NYSE Arca Equities Rule 5.2(j)(3), as described above. 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 of 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 of the Fund that the NAV 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 20 17 CFR 240 10A–3. VerDate Sep<11>2014 18:21 Aug 02, 2016 Jkt 238001 existing trading surveillances administered by the Exchange as well as cross-market surveillances administered by the 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 applicable federal securities laws. 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, or both, will communicate as needed regarding trading in the Shares, ETFs and options 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, or both, may obtain trading information regarding trading such securities from such markets and other entities. In addition, the Exchange may obtain information regarding trading in such securities from markets and other entities that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement (‘‘CSSA’’).22 FINRA, on behalf of the Exchange, is able to access, as needed, trade information for certain fixed income securities held by the Fund reported to FINRA’s Trade Reporting and Compliance Engine (‘‘TRACE’’). Not more than 10% of the net assets of the Fund in the aggregate invested in exchange-traded options shall consist of options whose principal market is not a member of ISG or is a market with which the Exchange does not have a CSSA. In addition, the Exchange also has a general policy prohibiting the distribution of material, non-public information by its employees. 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. 22 For a list of the current members of ISG, see www.isgportal.org. The Exchange notes that not all securities and financial instruments held by the Fund may trade on markets that are members of ISG or with which the Exchange has in place a CSSA. PO 00000 Frm 00073 Fmt 4703 Sfmt 4703 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 ETP Holders in an Information Bulletin (‘‘Bulletin’’) of the special characteristics and risks associated with trading the Shares of the Fund. Specifically, the Bulletin will discuss the following: (1) The procedures for purchases and redemptions of Shares in Creation Units (and that Shares are not individually redeemable); (2) NYSE Arca Equities Rule 9.2(a), which imposes a duty of due diligence on its ETP Holders to learn the essential facts relating to every customer prior to trading the Shares; (3) the risks involved in trading the Shares during the Opening and Late Trading Sessions when an updated IIV or Index value will not be calculated or publicly disseminated; (4) how information regarding the IIV and Index value is disseminated; (5) the requirement that ETP Holders deliver a prospectus to investors purchasing newly issued Shares prior to or concurrently with the confirmation of a transaction; and (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 of the Fund will be calculated after 4:00 p.m. E.T. each trading day. 2. Statutory Basis The basis under the Act for this proposed rule change is the requirement E:\FR\FM\03AUN1.SGM 03AUN1 asabaliauskas on DSK3SPTVN1PROD with NOTICES Federal Register / Vol. 81, No. 149 / Wednesday, August 3, 2016 / Notices 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 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 5.2(j)(3). The Exchange represents that trading in the Shares will be subject to the existing trading surveillances administered by the Exchange, as well as cross-market surveillances administered by FINRA on behalf of the Exchange, which are designed to detect violations of Exchange rules and applicable federal securities laws.24 The Exchange represents that these procedures are adequate to properly monitor Exchange trading of the Shares in all trading sessions and to deter and detect violations of Exchange rules and federal securities laws applicable to trading on the Exchange. The 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, or both, will communicate as needed regarding trading in the Shares with other markets that are members of the ISG or with which the Exchange has in place a CSSA. The Exchange and FINRA also can access data obtained from the Municipal Securities Rulemaking Board relating to municipal bond trading activity for surveillance purposes in connection with trading in the Shares. The Index Provider is not a broker-dealer or affiliated with a brokerdealer and has implemented procedures designed to prevent the use and dissemination of material, non-public information regarding the Index. As of May 23, 2016, there were approximately 3,063 issues in the Index. The Index meets all such requirements except for those set forth in Commentary 23 15 U.S.C. 78f(b)(5). surveils trading on the Exchange pursuant to a regulatory services agreement. The Exchange is responsible for FINRA’s performance under this regulatory services agreement. 24 FINRA VerDate Sep<11>2014 18:21 Aug 02, 2016 Jkt 238001 .02(a)(2).25 Specifically, as of May 23, 2016, 32.75% of the weight of the Index components have a minimum original principal amount outstanding of $100 million or more. As of May 23, 2016, 95.87% of the weight of the Index components was composed of individual maturities that were part of an entire municipal bond offering with a minimum original principal amount outstanding of $100 million or more for all maturities of the offering. In addition, as of May 23, 2016, the total dollar amount outstanding of issues in the Index was approximately $248 billion and the average dollar amount outstanding of issues in the Index was approximately $81 million. Further, as of May 23, 2016, the most heavily weighted component represents 0.43% of the weight of the Index and the five most heavily weighted components represent 1.88% of the weight of the Index.26 Therefore, the Exchange believes that, notwithstanding that the Index does not satisfy the criterion in NYSE Arca Equities Rule 5.2(j)(3), Commentary .02(a)(2), the Index is sufficiently broad-based to deter potential manipulation, given that it is composed of approximately 3,063 issues and 474 unique issuers. The Index securities are sufficiently liquid to deter potential manipulation in that a substantial portion (95.87%) of the Index weight is composed of maturities that are part of an entire municipal bond offering with a minimum original principal amount outstanding of $100 million or more, and in view of the substantial total dollar amount outstanding and the average dollar amount outstanding of Index issues, as referenced above. The Index value, calculated and disseminated at least once daily, as well as the components of the Index and their respective percentage weightings, will be available from major market data vendors. In addition, as disclosed in the Registration Statement, the portfolio of securities held by the Fund will be disclosed on the Fund’s Web site. The IIV for Shares of the Fund will be disseminated by one or more major market data vendors, updated at least every 15 seconds during the Exchange’s Core Trading Session. The proposed rule change is designed to promote just and equitable principles of trade and to protect investors and the public interest. In addition, a large amount of information is publicly available regarding the Fund and the Shares, thereby promoting market transparency. As disclosed in the 25 See 26 See PO 00000 note 13, supra. note 14, supra. Frm 00074 Fmt 4703 Sfmt 4703 51247 Registration Statement, the Fund’s portfolio holdings will be periodically disclosed on the Fund’s Web site. 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. The current value of the Index will be disseminated by one or more major market data vendors at least once per day. Information regarding market price and trading volume of the Shares will be continually available on a real-time basis throughout the day on brokers’ computer screens and other electronic services, and quotation and last sale information will be available via the CTA high-speed line. The Web site for the Fund will include the prospectus for the Fund and additional data relating to NAV and other applicable quantitative information. Moreover, prior to the commencement of trading, the Exchange will inform its ETP Holders in a Bulletin of the special characteristics and risks associated with trading the Shares. If the Exchange becomes aware that the NAV is not being disseminated to all market participants at the same time, it will halt trading in the Shares until such time as the NAV is available to all market participants. With respect to trading halts, the Exchange may consider all relevant factors in exercising its discretion to halt or suspend trading in the Shares of the Fund. Trading also may be halted because of market conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable. If the IIV or the Index values are not being disseminated as required, the Corporation may halt trading during the day in which the interruption to the dissemination of the applicable IIV or Index value occurs. If the interruption to the dissemination of the applicable IIV or Index value persists past the trading day in which it occurred, the Corporation will halt trading. Trading in Shares of the Fund will be halted if the circuit breaker parameters in NYSE Arca Equities Rule 7.12 have been reached or because of market conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable, and trading in the Shares will be subject to NYSE Arca Equities Rule 7.34, which sets forth circumstances under which Shares of the Fund may be halted. In addition, investors will have ready access to information regarding the IIV, 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 E:\FR\FM\03AUN1.SGM 03AUN1 51248 Federal Register / Vol. 81, No. 149 / Wednesday, August 3, 2016 / Notices investors and the public interest in that it will facilitate the listing and trading of an additional type of exchange-traded product that invests principally in municipal securities and 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 CSSA. In addition, investors will have ready access to information regarding the IIV and quotation and last sale information for the Shares. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purpose of the Act. The Exchange notes that the proposed rule change will facilitate the listing and trading of financial investments related to exchange-traded product that invests principally in municipal 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. asabaliauskas on DSK3SPTVN1PROD with NOTICES III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or 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. Comments may be submitted by any of the following methods: VerDate Sep<11>2014 18:21 Aug 02, 2016 Jkt 238001 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–2016–100 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–2016–100. 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–2016–100 and should be submitted on or before August 24, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.27 Robert W. Errett, Deputy Secretary. [FR Doc. 2016–18315 Filed 8–2–16; 8:45 am] PO 00000 CFR 200.30–3(a)(12). Frm 00075 [Release No. 34–78432; File No. SR– NYSEMKT–2016–58] Self-Regulatory Organizations; NYSE MKT LLC; Notice of Designation of a Longer Period for Commission Action on a Proposed Rule Change Relating to Amendments to NYSE MKT Rules 1600 et seq. and the Listing Rules Applicable to the Shares of the Nuveen Diversified Commodity Fund and the Nuveen Long/Short Commodity Total Return Fund July 28, 2016. On May 24, 2016, NYSE MKT LLC (‘‘Exchange’’) 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 among other things, amend NYSE MKT Rules 1600 et seq. and to amend the listing rules applicable to the shares of the Nuveen Diversified Commodity Fund and the Nuveen Long/Short Commodity Total Return Fund, which the Exchange currently lists and trades. The proposed rule change was published for comment in the Federal Register on June 13, 2016.3 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, 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 Commission is extending this 45-day 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 September 9, 2016, as the date by which the Commission shall either approve or disapprove or institute proceedings to determine whether to 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 78000 (June 7, 2016), 81 FR 38232. 4 15 U.S.C. 78s(b)(2). 5 Id. 2 17 BILLING CODE P 27 17 SECURITIES AND EXCHANGE COMMISSION Fmt 4703 Sfmt 4703 E:\FR\FM\03AUN1.SGM 03AUN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 81, Number 149 (Wednesday, August 3, 2016)]
[Notices]
[Pages 51241-51248]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-18315]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78433; File No. SR-NYSEArca-2016-100]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Relating to the Listing and Trading of Shares 
of the Direxion Daily Municipal Bond Taxable Bear 1X Fund Under NYSE 
Arca Equities Rule 5.2(j)(3)

July 28, 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 July 13, 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.
---------------------------------------------------------------------------

    \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 under NYSE Arca Equities 
Rule 5.2(j)(3), Commentary .02, the shares of the Direxion Daily 
Municipal Bond Taxable Bear 1X 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 Exchange proposes to list and trade shares (``Shares'') of the 
Direxion Daily Municipal Bond Taxable Bear 1X Fund (``Fund'') under 
NYSE Arca Equities Rule 5.2(j)(3), Commentary .02, which governs the 
listing and trading of Investment Company Units (``Units'') based on 
fixed income securities indexes.\4\ The Fund is a series of the

[[Page 51242]]

Direxion Shares ETF Trust (``Trust'').\5\ Rafferty Asset Management, 
LLC will be the investment adviser to the Fund (``Adviser'').
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    \4\ The Commission previously has approved proposed rule changes 
relating to listing and trading on the Exchange of Units based on 
municipal bond indexes. See Securities Exchange Act Release Nos. 
67985 (October 4, 2012), 77 FR 61804 (October 11, 2012) (SR-
NYSEArca-2012-92) (order approving proposed rule change relating to 
the listing and trading of iShares 2018 S&P AMT-Free Municipal 
Series and iShares 2019 S&P AMT-Free Municipal Series under NYSE 
Arca Equities Rule 5.2(j)(3), Commentary .02); 67729 (August 24, 
2012), 77 FR 52776 (August 30, 2012) (SR-NYSEArca-2012-92) (notice 
of proposed rule change relating to the listing and trading of 
iShares 2018 S&P AMT-Free Municipal Series and iShares 2019 S&P AMT-
Free Municipal Series under NYSE Arca Equities Rule 5.2(j)(3), 
Commentary .02); 71232 (January 3, 2014), 79 FR 1662 (January 9, 
2014) (SR-NYSEArca-2013-118) (order approving listing and trading of 
shares of the Market Vectors Short High-Yield Municipal Index ETF 
under NYSE Arca Equities Rule 5.2(j)(3), Commentary .02); 72523, 
(July 2, 2014), 79 FR 39016 (July 9, 2014) (SR-NYSEArca-2014-37) 
(order approving proposed rule change relating to the listing and 
trading of iShares 2020 S&P AMT-Free Municipal Series under NYSE 
Arca Equities Rule 5.2(j)(3), Commentary .02); 72172 (May 15, 2014), 
79 FR 29241 (May 21, 2014) (SR-NYSEArca-2014-37) (notice of proposed 
rule change relating to the listing and trading of iShares 2020 S&P 
AMT-Free Municipal Series under NYSE Arca Equities Rule 5.2(j)(3), 
Commentary .02); 75376 (July 7, 2015), 80 FR 40113 (July 13, 2015) 
(SR-NYSEArca-2015-18) (order approving proposed rule change relating 
to the listing and trading of Vanguard Tax-Exempt Bond Index Fund 
under NYSE Arca Equities Rule 5.2(j)(3), Commentary .02); 75468 
(July 16, 2015), 80 FR 43500 (July 22, 2015) (SR-NYSEArca-2015-25) 
(order approving proposed rule change relating to the listing and 
trading of iShares iBonds 2021 and 2022 AMT-Free Muni Bond ETF under 
NYSE Arca Equities Rule 5.2(j)(3)). The Commission also has issued a 
notice of filing and immediate effectiveness of a proposed rule 
change relating to listing and trading on the Exchange of shares of 
the iShares Taxable Municipal Bond Fund. See Securities Exchange Act 
Release No. 63176 (October 25, 2010), 75 FR 66815 (October 29, 2010) 
(SR-NYSEArca-2010-94). The Commission has approved for Exchange 
listing and trading of shares of two actively managed funds of the 
PIMCO ETF Trust that principally hold municipal bonds. See 
Securities Exchange Act Release No. 60981 (November 10, 2009), 74 FR 
59594 (November 18, 2009) (SR-NYSEArca-2009-79) (order approving 
listing and trading of shares of the PIMCO Short-Term Municipal Bond 
Strategy Fund and PIMCO Intermediate Municipal Bond Strategy Fund). 
The Commission also has approved listing and trading on the Exchange 
of shares of the SPDR[supreg] Nuveen S&P High Yield Municipal Bond 
Fund under Commentary .02 of NYSE Arca Equities Rule 5.2(j)(3). See 
Securities Exchange Act Release No.63881 (February 9, 2011), 76 FR 
9065 (February 16, 2011) (SR-NYSEArca-2010-120).
    \5\ On February 29, 2016, the Trust filed a registration 
statement on Form N-1A under the Securities Act of 1933 (15 U.S.C. 
77a) (``1933 Act'') and the Investment Company Act of 1940 (``1940 
Act'') (15 U.S.C. 80a-1) (File Nos.: 811-22201 and 333-150525) (the 
``Registration Statement''). The description of the operation of the 
Trust and the Fund herein is based, in part, on the Registration 
Statement. In addition, the Commission has issued an order granting 
certain exemptive relief to the Trust under the 1940 Act. See 
Investment Company Act Release No. 27773 (April 2, 2007) (File No. 
812-13336).
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    Bank of New York Mellon will serve as transfer agent, accounting 
agent and custodian for the Fund (``Transfer Agent''). Foreside Fund 
Services, LLC will be the distributor (``Distributor'') for the Fund's 
Shares. U.S. Bancorp Fund Services, LLC will serve as the Fund's 
administrator.
Principal Investments
    According to the Registration Statement, the Fund will seek to 
track 100% of the inverse of the performance of a benchmark index that 
measures the investment-grade segment of the U.S. municipal bond 
market. The Fund, under normal circumstances,\6\ will create net short 
positions by investing at least 80% of the Fund's assets (plus any 
borrowings for investment purposes) in the following financial 
instruments (``Financial Instruments''): Options on securities, 
including exchange-traded funds (``ETFs'') and indices, traded on U.S. 
exchanges; swaps; and short positions in ETFs, as described below in 
this ``Principal Investments'' section, that, in combination, provide 
inverse exposure to the Standard & Poor's National AMT-Free Municipal 
Bond Index (``Index'').\7\ The Fund will seek daily inverse investment 
results and will not seek to achieve its stated investment objective 
over a period of time greater than one day. The Fund will not seek 
income that is exempt from federal, state or local income taxes.
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    \6\ The term ``under normal circumstances'' includes, but is not 
limited to, the absence of extreme volatility or trading halts in 
the fixed income markets or the financial markets generally; 
operational issues (e.g., systems failure) causing dissemination of 
inaccurate market information; or force majeure type events such as 
natural or man-made disaster, act of God, armed conflict, act of 
terrorism, riot or labor disruption or any similar intervening 
circumstance.
    \7\ The Commission previously has approved a proposed rule 
change relating to listing and trading on the Exchange of Units 
based on the Index. See Securities Exchange Act Release No. 75376 
(July 7, 2015), 80 FR 40113 (July 13, 2015) (SR-NYSEArca-2015-18) 
(order approving proposed rule change relating to the listing and 
trading of Vanguard Tax-Exempt Bond Index Fund under NYSE Arca 
Equities Rule 5.2(j)(3), Commentary .02).
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    The Fund may invest in options that provide short exposure to the 
Index or various ETFs including, iShares National Muni Bond ETF, SPDR 
Nuveen Barclays Municipal Bond ETF, iShares Short-term National Muni 
Bond ETF, SPDR Nuveen Barclays Short-Term Municipal Bond ETF, Market 
Vectors High-Yield Municipal Index ETF, SPDR Nuveen S&P High Yield 
Municipal Bond ETF, Market Vectors AMT-Free Intermediate Municipal 
Index ETF, PowerShares National AMT-Free Municipal Bond Portfolio, 
Vanguard Tax-Exempt Bond ETF and the PIMCO Intermediate Municipal Bond 
Active Exchange-Traded Fund.
    The Fund may invest in swaps that provide short exposure to the 
securities included in the Index and various ETFs, including iShares 
National Muni Bond ETF, SPDR Nuveen Barclays Municipal Bond ETF, 
iShares Short-term National Muni Bond ETF, SPDR Nuveen Barclays Short-
Term Municipal Bond ETF, Market Vectors High-Yield Municipal Index ETF, 
SPDR Nuveen S&P High Yield Municipal Bond ETF, Market Vectors AMT-Free 
Intermediate Municipal Index ETF, PowerShares National AMT-Free 
Municipal Bond Portfolio, Vanguard Tax-Exempt Bond ETF and the PIMCO 
Intermediate Municipal Bond Active Exchange-Traded Fund.
    The Fund may take direct short positions in ETFs, such as the 
iShares National Muni Bond ETF, SPDR Nuveen Barclays Municipal Bond 
ETF, iShares Short-term National Muni Bond ETF, SPDR Nuveen Barclays 
Short-Term Municipal Bond ETF, Market Vectors High-Yield Municipal 
Index ETF, SPDR Nuveen S&P High Yield Municipal Bond ETF, Market 
Vectors AMT-Free Intermediate Municipal Index ETF, PowerShares National 
AMT-Free Municipal Bond Portfolio, Vanguard Tax-Exempt Bond ETF and the 
PIMCO Intermediate Municipal Bond Active Exchange-Traded Fund.\8\ The 
Fund will not take long positions in ETFs.
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    \8\ For purposes of this filing, ETFs include 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). The Fund will not invest in inverse, leveraged or inverse 
leveraged ETFs (e.g., -2X, -3X, 2X or 3X).
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    The Fund has proposed to use the Index as its benchmark index.\9\ 
The Index is a broad, comprehensive, market value-weighted index 
designed to measure the performance of the tax-exempt, investment-grade 
U.S. municipal bond market. Index constituents are derived from the 
Standard & Poor's/Investortools Municipal Bond Index. In order to be 
classified as an eligible bond for inclusion in the Index, a bond must 
meet all of the following criteria on the rebalancing date: The bond 
issuer is a state, local government, or agency such that interest on 
the bond is exempt from federal income tax; a bond must have a rating 
of at least BBB- by Standard & Poor's, Baa3 by Moody's, or BBB- by 
Fitch; the bond must be denominated in U.S. Dollars (``USD''); each 
bond must be a constituent of a deal where the deal's original offering 
amount was at least $100 million USD; as of the next rebalancing date, 
the bond must have a minimum term to maturity and/or call date greater 
than or equal to one calendar month plus one calendar day; the amount 
outstanding, or par amount, is used to determine the weight of the bond 
in the Index; and the bond must have a minimum par amount of $25 
million USD. At each monthly rebalancing, no issuer can represent more 
than 25% of the weight of the Index, and individual issuers that 
represent 5% of the Index's weight cannot account for more than 50% of 
the Index in aggregate. The Index is generally reviewed and rebalanced 
on a monthly basis. The following bond types are specifically excluded 
from the Index: Bonds subject to the alternative minimum tax; 
commercial paper; derivative securities (inverse floaters, forwards, 
swaps); housing bonds; insured conduit bonds where the obligor is a 
for-profit institution; non-insured conduit bonds; non-rated bonds; 
notes; taxable municipals; tobacco bonds; and variable rate debt.
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    \9\ S&P Dow Jones Indices is the ``Index Provider'' with respect 
to the Index. The Index Provider is not a broker-dealer or 
affiliated with a broker-dealer and has implemented procedures 
designed to prevent the use and dissemination of material, non-
public information regarding the Index.
---------------------------------------------------------------------------

    The Fund may gain inverse exposure to only a representative sample 
of the securities in the Index that have aggregate characteristics 
similar to those of the Index. The Fund will gain this inverse exposure 
by investing in a combination of financial instruments that provide 
inverse exposure to the underlying securities of the Index. The Fund 
will invest in derivatives as a substitute for directly shorting 
securities in order to gain inverse exposure to the Index or its 
components. The Fund will seek to remain fully invested at all times 
consistent with its stated investment objective. At the close of the 
markets each trading day, the Adviser will position the Fund's 
portfolio so that its exposure to the Index is consistent with the 
Fund's investment objective. The impact of the Index's movements during

[[Page 51243]]

the day will affect whether the Fund's portfolio needs to be re-
positioned. For example, if the Index has fallen on a given day, net 
assets of the Fund should rise, meaning that the Fund's exposure will 
need to be increased. Conversely, if the Index has risen on a given 
day, net assets of the Fund should fall, meaning the Fund's exposure 
will need to be reduced. This re-positioning strategy typically results 
in high portfolio turnover.
    According to the Registration Statement, because of daily 
rebalancing and the compounding of each day's return over time, the 
return of the Fund for periods longer than a single day will be the 
result of each day's returns compounded over the period, which will 
very likely differ from -100% of the return of the Index over the same 
period.
Non-Principal Investments
    While under normal circumstances, at least 80% of the Fund's assets 
will be invested in Financial Instruments to establish net short 
positions, as described above, the Fund's remaining assets may be used 
to invest in cash and the following cash equivalents (in addition to 
cash or cash equivalents used to collateralize the Fund's investments 
in Financial Instruments): Money market funds, depository accounts with 
institutions with high quality credit ratings, U.S. government 
securities that have terms-to-maturity of less than 397 days and 
repurchase agreements that have terms-to-maturity of less than 397 
days.
Investment Restrictions
    The Fund may hold up to an aggregate amount of 15% of its net 
assets in illiquid assets (calculated at the time of investment), 
including securities deemed illiquid by the Adviser, consistent with 
Commission guidance. 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.\10\
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    \10\ 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).
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    The Fund is classified as diversified within the meaning of the 
1940 Act.\11\
---------------------------------------------------------------------------

    \11\ The diversification standard is set forth in Section 
5(b)(1) of the 1940 Act.
---------------------------------------------------------------------------

    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 Exchange is submitting this proposed rule change because the 
Index for the Fund does not meet all of the ``generic'' listing 
requirements of Commentary .02(a) to NYSE Arca Equities Rule 5.2(j)(3) 
applicable to the listing of Units based on fixed income securities 
indexes. The Index meets all such requirements except for those set 
forth in Commentary .02(a)(2).\13\ Specifically, as of May 23, 2016, 
32.75% of the weight of the Index components have a minimum original 
principal amount outstanding of $100 million or more.
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    \13\ Commentary .02(a)(2) to NYSE Arca Equities Rule 5.2(j)(3) 
provides that components that in the aggregate account for at least 
75% of the weight of the index or portfolio each shall have a 
minimum original principal amount outstanding of $100 million or 
more.
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    As of May 23, 2016, 95.87% of the weight of the Index components 
was composed of individual maturities that were part of an entire 
municipal bond offering with a minimum original principal amount 
outstanding of $100 million or more for all maturities of the offering. 
In addition, as of May 23, 2016, the total dollar amount outstanding of 
issues in the Index was approximately $248 billion and the average 
dollar amount outstanding of issues in the Index was approximately $81 
million. Further, as of May 23, 2016, the most heavily weighted 
component represents 0.43% of the weight of the Index and the five most 
heavily weighted components represent 1.88% of the weight of the 
Index.\14\
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    \14\ Commentary .02(a)(4) to NYSE Arca Equities Rule 5.2(j)(3) 
provides that no component fixed-income security (excluding Treasury 
Securities and GSE Securities, as defined therein) shall represent 
more than 30% of the weight of the index or portfolio, and the five 
most heavily weighted component fixed-income securities in the index 
or portfolio shall not in the aggregate account for more than 65% of 
the weight of the index or portfolio.
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    Therefore, the Exchange believes that, notwithstanding that the 
Index does not satisfy the criterion in NYSE Arca Equities Rule 
5.2(j)(3), Commentary .02 (a)(2), the Index is sufficiently broad-based 
to deter potential manipulation, given that it is composed of 
approximately 3,063 issues and 474 unique issuers. In addition, the 
Index securities are sufficiently liquid to deter potential 
manipulation in that a substantial portion (95.87%) of the Index weight 
is composed of maturities that are part of an entire municipal bond 
offering with a minimum original principal amount outstanding of $100 
million or more, and in view of the substantial total dollar amount 
outstanding and the average dollar amount outstanding of Index issues, 
as referenced above.
    All statements and representations made in this filing regarding 
(i) the description of the portfolio, (ii) limitations on portfolio 
holdings or reference assets or (iii) 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).
Valuation Methodology for Purposes of Determining Net Asset Value
    The NAV of Shares, under normal market conditions, will be 
calculated each day that the New York Stock Exchange (``NYSE'') is open 
for business except for days on which the U.S. municipal bond markets 
are closed. The NAV will be calculated on each such day as of the close 
of the NYSE, which is typically 4:00 p.m. Eastern Time (``E.T.''). On 
days that the U.S. municipal bond markets close early, the NAV will be 
calculated as of the recommended closing time for the bond markets, 
which may be before 4:00 p.m. E.T., subject to the discretion of the 
Adviser.

[[Page 51244]]

    For purposes of calculating NAV, the Fund will value its assets on 
the basis of market quotations, last sale prices or estimates of value 
furnished by pricing services or brokers who make markets in such 
instruments. If such information is not available for a security or 
instrument held by a Fund, if such information is determined to be 
unreliable by the Adviser, if the Adviser determines that the market 
price is stale or if, to the Adviser's knowledge, such information does 
not reflect a significant event occurring after the close of the market 
on which the security principally trades but prior to the time at which 
the Fund calculates the NAV, the security will be valued at fair value 
estimates by the Adviser pursuant to policies and procedures 
established by the Board of Trustees (``Board''). The Fund may also 
establish fair value for an instrument if trading in a particular 
instrument is halted and trading does not resume prior to the closing 
of the relevant exchange or market. If a reliable market quotation 
becomes available for a security formerly valued through fair valuation 
techniques, the Adviser will compare the market quotation to the fair 
value price to evaluate the effectiveness of the Fund's fair valuation 
procedures and will use that market value in the next calculation of 
NAV.
    If no last sale is reported on an exchange, the mean of the last 
bid and last offer prices will be used. Securities that are primarily 
traded on the NASDAQ Global Market (``NASDAQ'') for which market 
quotations are readily available shall be valued using the NASDAQ 
Official Closing Price. If the NASDAQ Official Closing Price is not 
available, such securities shall be valued at the last sale price on 
the day of valuation, or if there has been no sale on such day, at the 
mean between the last bid and last sale prices.
    Options will be valued at the last sales price of the respective 
exchange on which they trade. If there have been no trades for an 
option on that trading day, then the option will be valued at the mean 
of the last bid and ask quotations.
    Swaps will be valued based upon prices from third party vendor 
models or quotations from market makers to the extent available.
    Repurchase agreements will be valued on the basis of broker quotes 
or valuations provided by a third party pricing service, which in 
determining value utilizes information regarding recent sales, market 
transactions in comparable securities, quotations from dealers and 
various relationships between securities.
    Short-term debt instruments having a remaining maturity of 60 days 
or less will be valued at amortized cost, which approximates market 
value. If the Board determines that the amortized cost method does not 
represent the fair value of the short-term debt instrument, the 
investment will be valued at fair value as determined by policies and 
procedures adopted by the Board. Debt instruments with a maturity of 
greater than 60 days (other than U.S. government securities with 
maturities of greater than 60 days) will be valued at prices that 
reflect broker/dealer supplied valuations or are obtained from 
independent pricing services, which may consider the trade activity, 
treasury spreads, yields or price of bonds of comparable quality, 
coupon, maturity and type, as well as prices quoted by dealers who make 
markets in such securities.
    Money market funds and depository accounts will be valued at NAV.
    U.S. government securities with maturities of greater than 60 days 
will be valued at the mean of the closing bid price and offer price 
provided by an independent third-party pricing service.
    Securities and other assets for which market quotations are not 
readily available, or for which the Adviser has reason to question the 
validity of quotations received, will be valued at fair value in 
accordance with policies and procedures adopted by the Board.
Derivatives Valuation Methodology for Purposes of Determining Intraday 
Indicative Value
    In order to provide additional information regarding the intraday 
value of Shares of the Fund, the NYSE Arca or a market data vendor or 
other information providers will disseminate every 15 seconds an 
updated Intraday Indicative Value (``IIV'') for the Fund as calculated 
by a third party market data provider.
    A third party market data provider will calculate the IIV for the 
Fund. The third party market data provider may use market quotes if 
available or may fair value securities against proxies (such as swap or 
yield curves). Swaps will be valued intraday based on the value of the 
reference assets as determined by a third-party market data provider. 
U.S. exchange-listed options may be valued intraday using the relevant 
exchange data, or another proxy as determined to be appropriate by the 
third party market data provider.
Purchase and Issuance of Creation Units
    The Trust will issue and sell Shares only in aggregations of 
``Creation Units'' on a continuous basis through the Distributor, 
without a sales load, at their NAV next determined after receipt, on 
any business day, of an order in proper form received by the 
Distributor by 4:00 p.m. E.T. on any day that the NYSE is open for 
business except for days on which the U.S. municipal bond markets are 
closed. The number of Shares that constitute a Creation Unit will be 
50,000 Shares and the value of such Creation Unit will be $1.25 million 
USD. The size of a Creation Unit is subject to change.
    Creation Units of Shares may be purchased only by or through an 
``Authorized Participant.'' \15\ Creation Units will be sold only for 
cash at their NAV next determined after receipt of the order, plus a 
transaction fee.
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    \15\ ``Authorized Participants'' include market makers, large 
investors and institutions who wish to deal in Creation Units 
directly with the Fund that have entered into an authorized 
participant agreement (``Authorized Participant Agreement'') with 
the Distributor and the Transfer Agent, or purchase through a dealer 
that has entered into an Authorized Participant Agreement.
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    Purchase orders will be processed either through a manual clearing 
process (``Manual Clearing Process'') run at the Depository Trust 
Company (``DTC'') or through an enhanced clearing process (``Enhanced 
Clearing Process'') that is available only to those DTC participants 
that also are participants in the Continuous Net Settlement System of 
NSCC.
Redemption of Creation Units
    Shares may be redeemed only in Creation Units at their NAV next 
determined after receipt of a redemption request in proper form by the 
Distributor on any business day. A redemption order must be received in 
good order by the Transfer Agent by 4:00 p.m. E.T. on any day that the 
NYSE is open for business except for days on which the U.S. municipal 
bond markets are closed in order to receive the NAV determined on that 
day.
    Orders to redeem Creation Units of the Fund using the Enhanced 
Clearing Process must be delivered through a DTC participant that has 
executed the Authorized Participant Agreement and has the ability to 
transact through the Federal Reserve System. A DTC participant who 
wishes to place a redemption order need not be an Authorized 
Participant, but such redemption orders must state that the DTC 
Participant is not using a clearing process and that redemption of 
Creation Units will instead be effected through the Manual Clearing 
Process (for cash and U.S. government securities). The order must be 
accompanied or preceded by the requisite number of Shares specified in 
such order, which delivery must be made through DTC or the

[[Page 51245]]

Federal Reserve System to the custodian by the third business day 
following such date on which the order is received by the Transfer 
Agent.
    The redemption proceeds for a Creation Unit of the Fund will 
consist solely of cash in an amount equal to the NAV of the Shares 
being redeemed, as next determined after a receipt of a request in 
proper form, less the redemption transaction fee.
    The right of redemption may be suspended or the date of payment 
postponed with respect to the Fund (1) for any period during which the 
NYSE is closed (other than customary weekend and holiday closings); (2) 
for any period during which trading on the NYSE is suspended or 
restricted; (3) for any period during which an emergency exists as a 
result of which disposal of the Shares of the Fund's portfolio 
securities or determination of its net asset value is not reasonably 
practicable; or (4) in such other circumstance as is permitted by the 
Commission.
    The Exchange represents that: (1) Except for Commentary .02(a)(2) 
to NYSE Arca Equities Rule 5.2(j)(3), the Shares of the Fund currently 
satisfy all of the generic listing standards under NYSE Arca Equities 
Rule 5.2(j)(3); (2) the continued listing standards under NYSE Arca 
Equities Rules 5.2(j)(3) and 5.5(g)(2) applicable to Units shall apply 
to the Shares; and (3) the Trust is required to comply with Rule 10A-3 
under the Act \16\ for the initial and continued listing of the Shares. 
In addition, the Exchange represents that the Shares will comply with 
all other requirements applicable to Units including, but not limited 
to, requirements relating to the dissemination of key information such 
as the value of the Index and the applicable Intraday Indicative Value 
(``IIV''),\17\ rules governing the trading of equity securities, 
trading hours, trading halts, surveillance, and the Information 
Bulletin to Equity Trading Permit Holders (``ETP Holders''), as set 
forth in Exchange rules applicable to Units and prior Commission orders 
approving the generic listing rules applicable to the listing and 
trading of Units.\18\
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    \16\ 17 CFR 240.10A-3.
    \17\ The IIV will be widely disseminated by one or more major 
market data vendors at least every 15 seconds during the Exchange's 
Core Trading Session of 9:30 a.m. to 4:00 p.m., E.T. Currently, it 
is the Exchange's understanding that several major market data 
vendors display and/or make widely available IIVs taken from the 
Consolidated Tape Association (``CTA'') or other data feeds.
    \18\ See, e.g., Securities Exchange Act Release Nos. 55783 (May 
17, 2007), 72 FR 29194 (May 24, 2007) (SR-NYSE Arca-2007-36) (order 
approving NYSE Arca generic listing standards for Units based on a 
fixed income index); 44551 (July 12, 2001), 66 FR 37716 (July 19, 
2001) (SR-PCX-2001-14) (order approving generic listing standards 
for Units and Portfolio Depositary Receipts); 41983 (October 6, 
1999), 64 FR 56008 (October 15, 1999) (SR-PCX-98-29) (order 
approving rules for listing and trading of Units).
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    The current value of the Index will be widely disseminated by one 
or more major market data vendors at least once per day, as required by 
NYSE Arca Equities Rule 5.2(j)(3), Commentary .02(b)(ii). The IIV for 
Shares of the Fund will be disseminated by one or more major market 
data vendors, updated at least every 15 seconds during the Exchange's 
Core Trading Session, as required by NYSE Arca Equities Rule 5.2(j)(3), 
Commentary .02(c).
    The Index value, calculated and disseminated at least once daily, 
as well as the components of the Index and their percentage weighting, 
will be available from major market data vendors. In addition, as 
disclosed in the Registration Statement, the portfolio of securities 
held by the Fund will be disclosed daily on the Fund's Web site at 
www.direxioninvestments.com.
Availability of Information
    The Fund's Web site (www.direxioninvestments.com), 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) the prior 
business day's reported composite closing price (``Market Close 
Price'') and NAV, and a calculation of the premium and discount of the 
Market Close Price against the NAV, and (2) data in chart format 
displaying the frequency distribution of discounts and premiums of the 
daily Market Close 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 Trust will disclose on 
its Web site the following information regarding each portfolio 
holding, as applicable to the type of holding: Ticker symbol, CUSIP 
number or other identifier, if any; a description of the holding 
(including the type of holding, such as the type of swap); the identity 
of the security, index or other asset or instrument underlying the 
holding, if any; for options, the option strike price; quantity held 
(as measured by, for example, par value, notional value or number of 
shares, contracts or units); maturity date, if any; coupon rate, if 
any; market value of the holding; and the percentage weighting of the 
holding in the Fund's portfolio. The Web site information will be 
publicly available at no charge.
    Investors can also obtain the Fund's Summary Prospectus, 
Prospectus, Statement of Additional Information (``SAI'') and its 
Shareholder Reports, filed twice a year. The Trust's SAI and 
Shareholder Reports are available free upon request from the Trust. 
Additionally, the SAI and the Trust's N-CSR and Form N-SAR may be 
viewed on-screen or downloaded from the Commission's Web site.
    Quotation and last sale information for the Shares will be 
available via the Consolidated Tape Association (``CTA'') high speed 
line. Quotation and last sale information for such U.S. exchange-listed 
securities will be available from the exchange on which they are 
listed. Quotation and last sale information for exchange-listed options 
cleared via the Options Clearing Corporation will be available via the 
Options Price Reporting Authority. One source of price information for 
municipal securities is the Electronic Municipal Market Access, which 
is administered by the Municipal Securities Rulemaking Board.
    Price information for cash equivalents and swaps may be obtained 
from brokers and dealers who make markets in such securities or through 
nationally recognized pricing services through subscription agreements.
    In addition, the IIV as defined in NYSE Arca Equities Rule 
5.2(j)(3), Commentary .01(c) will be widely disseminated by one or more 
major market data vendors at least every 15 seconds during the Core 
Trading Session.
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 of the Fund inadvisable. These may include: 
(1) The extent to which trading is not occurring in the securities and/
or the financial instruments of the Fund; or (2) whether other unusual 
conditions or circumstances detrimental to the maintenance of a fair 
and orderly market are present. If the IIV, Index

[[Page 51246]]

value or the value of the Index components is not being disseminated as 
required, the Exchange may halt trading during the day in which the 
disruption occurs; if the interruption persists past the day in which 
it occurred, the Exchange will halt trading no later than the beginning 
of the trading day following the interruption. The Exchange will obtain 
a representation from the Fund that the NAV for the Fund will be 
calculated daily and will be made available to all market participants 
at the same time. Under NYSE Arca Equities Rule 7.34(a)(5), if the 
Exchange becomes aware that the NAV for the Fund is not being 
disseminated to all market participants at the same time, it will halt 
trading in the Shares until such time as the NAV is available to all 
market participants.
---------------------------------------------------------------------------

    \19\ See NYSE Arca Equities Rule 7.12.
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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. E.T. 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, 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 Rules 5.2(j)(3) and 5.5(g)(2), except 
that the Index will not meet the requirements of Commentary .02(a)(2) 
to NYSE Arca Equities Rule 5.2(j)(3), as described above. 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 of 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 of 
the Fund that the NAV will be made available to all market participants 
at the same time.
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    \20\ 17 CFR 240 10A-3.
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Surveillance
    The Exchange represents that trading in the Shares will be subject 
to the existing trading surveillances administered by the Exchange as 
well as cross-market surveillances administered by the 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 applicable federal securities laws.
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    \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.
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    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, or both, will 
communicate as needed regarding trading in the Shares, ETFs and options 
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, or both, may obtain trading information 
regarding trading such securities from such markets and other entities. 
In addition, the Exchange may obtain information regarding trading in 
such securities from markets and other entities that are members of ISG 
or with which the Exchange has in place a comprehensive surveillance 
sharing agreement (``CSSA'').\22\ FINRA, on behalf of the Exchange, is 
able to access, as needed, trade information for certain fixed income 
securities held by the Fund reported to FINRA's Trade Reporting and 
Compliance Engine (``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 securities and 
financial instruments held by the Fund may trade on markets that are 
members of ISG or with which the Exchange has in place a CSSA.
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    Not more than 10% of the net assets of the Fund in the aggregate 
invested in exchange-traded options shall consist of options whose 
principal market is not a member of ISG or is a market with which the 
Exchange does not have a CSSA.
    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 
ETP Holders in an Information Bulletin (``Bulletin'') of the special 
characteristics and risks associated with trading the Shares of the 
Fund. Specifically, the Bulletin will discuss the following: (1) The 
procedures for purchases and redemptions of Shares in Creation Units 
(and that Shares are not individually redeemable); (2) NYSE Arca 
Equities Rule 9.2(a), which imposes a duty of due diligence on its ETP 
Holders to learn the essential facts relating to every customer prior 
to trading the Shares; (3) the risks involved in trading the Shares 
during the Opening and Late Trading Sessions when an updated IIV or 
Index value will not be calculated or publicly disseminated; (4) how 
information regarding the IIV and Index value is disseminated; (5) the 
requirement that ETP Holders deliver a prospectus to investors 
purchasing newly issued Shares prior to or concurrently with the 
confirmation of a transaction; and (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 of the Fund 
will be calculated after 4:00 p.m. E.T. each trading day.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement

[[Page 51247]]

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 impediments 
to, and perfect the mechanism of a free and open market and, in 
general, to protect investors and the public interest.
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    \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 
5.2(j)(3). The Exchange represents that trading in the Shares will be 
subject to the existing trading surveillances administered by the 
Exchange, as well as cross-market surveillances administered by FINRA 
on behalf of the Exchange, which are designed to detect violations of 
Exchange rules and applicable federal securities laws.\24\ The Exchange 
represents that these procedures are adequate to properly monitor 
Exchange trading of the Shares in all trading sessions and to deter and 
detect violations of Exchange rules and federal securities laws 
applicable to trading on the Exchange. The 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, or both, 
will communicate as needed regarding trading in the Shares with other 
markets that are members of the ISG or with which the Exchange has in 
place a CSSA. The Exchange and FINRA also can access data obtained from 
the Municipal Securities Rulemaking Board relating to municipal bond 
trading activity for surveillance purposes in connection with trading 
in the Shares. The Index Provider is not a broker-dealer or affiliated 
with a broker-dealer and has implemented procedures designed to prevent 
the use and dissemination of material, non-public information regarding 
the Index. As of May 23, 2016, there were approximately 3,063 issues in 
the Index. The Index meets all such requirements except for those set 
forth in Commentary .02(a)(2).\25\ Specifically, as of May 23, 2016, 
32.75% of the weight of the Index components have a minimum original 
principal amount outstanding of $100 million or more.
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    \24\ FINRA surveils trading on the Exchange pursuant to a 
regulatory services agreement. The Exchange is responsible for 
FINRA's performance under this regulatory services agreement.
    \25\ See note 13, supra.
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    As of May 23, 2016, 95.87% of the weight of the Index components 
was composed of individual maturities that were part of an entire 
municipal bond offering with a minimum original principal amount 
outstanding of $100 million or more for all maturities of the offering. 
In addition, as of May 23, 2016, the total dollar amount outstanding of 
issues in the Index was approximately $248 billion and the average 
dollar amount outstanding of issues in the Index was approximately $81 
million. Further, as of May 23, 2016, the most heavily weighted 
component represents 0.43% of the weight of the Index and the five most 
heavily weighted components represent 1.88% of the weight of the 
Index.\26\ Therefore, the Exchange believes that, notwithstanding that 
the Index does not satisfy the criterion in NYSE Arca Equities Rule 
5.2(j)(3), Commentary .02(a)(2), the Index is sufficiently broad-based 
to deter potential manipulation, given that it is composed of 
approximately 3,063 issues and 474 unique issuers. The Index securities 
are sufficiently liquid to deter potential manipulation in that a 
substantial portion (95.87%) of the Index weight is composed of 
maturities that are part of an entire municipal bond offering with a 
minimum original principal amount outstanding of $100 million or more, 
and in view of the substantial total dollar amount outstanding and the 
average dollar amount outstanding of Index issues, as referenced above.
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    \26\ See note 14, supra.
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    The Index value, calculated and disseminated at least once daily, 
as well as the components of the Index and their respective percentage 
weightings, will be available from major market data vendors. In 
addition, as disclosed in the Registration Statement, the portfolio of 
securities held by the Fund will be disclosed on the Fund's Web site. 
The IIV for Shares of the Fund will be disseminated by one or more 
major market data vendors, updated at least every 15 seconds during the 
Exchange's Core Trading Session.
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest. 
In addition, a large amount of information is publicly available 
regarding the Fund and the Shares, thereby promoting market 
transparency. As disclosed in the Registration Statement, the Fund's 
portfolio holdings will be periodically disclosed on the Fund's Web 
site. 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. The current value of the Index will be 
disseminated by one or more major market data vendors at least once per 
day. Information regarding market price and trading volume of the 
Shares will be continually available on a real-time basis throughout 
the day on brokers' computer screens and other electronic services, and 
quotation and last sale information will be available via the CTA high-
speed line. The Web site for the Fund will include the prospectus for 
the Fund and additional data relating to NAV and other applicable 
quantitative information. Moreover, prior to the commencement of 
trading, the Exchange will inform its ETP Holders in a Bulletin of the 
special characteristics and risks associated with trading the Shares. 
If the Exchange becomes aware that the NAV is not being disseminated to 
all market participants at the same time, it will halt trading in the 
Shares until such time as the NAV is available to all market 
participants. With respect to trading halts, the Exchange may consider 
all relevant factors in exercising its discretion to halt or suspend 
trading in the Shares of the Fund. Trading also may be halted because 
of market conditions or for reasons that, in the view of the Exchange, 
make trading in the Shares inadvisable. If the IIV or the Index values 
are not being disseminated as required, the Corporation may halt 
trading during the day in which the interruption to the dissemination 
of the applicable IIV or Index value occurs. If the interruption to the 
dissemination of the applicable IIV or Index value persists past the 
trading day in which it occurred, the Corporation will halt trading. 
Trading in Shares of the Fund will be halted if the circuit breaker 
parameters in NYSE Arca Equities Rule 7.12 have been reached or because 
of market conditions or for reasons that, in the view of the Exchange, 
make trading in the Shares inadvisable, and trading in the Shares will 
be subject to NYSE Arca Equities Rule 7.34, which sets forth 
circumstances under which Shares of the Fund may be halted. In 
addition, investors will have ready access to information regarding the 
IIV, 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

[[Page 51248]]

investors and the public interest in that it will facilitate the 
listing and trading of an additional type of exchange-traded product 
that invests principally in municipal securities and 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 CSSA. In addition, investors will have 
ready access to information regarding the IIV and quotation and last 
sale information for the Shares.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purpose of the Act. The Exchange notes that the 
proposed rule change will facilitate the listing and trading of 
financial investments related to exchange-traded product that invests 
principally in municipal 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. 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-2016-100 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-2016-100. 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-2016-100 and should 
be submitted on or before August 24, 2016.
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    \27\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-18315 Filed 8-2-16; 8:45 am]
 BILLING CODE P

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