Self-Regulatory Organizations; NYSE Arca, Inc.; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change, as Modified by Amendment No. 1 Thereto, Regarding Use of Rule 144A Securities by the Fidelity Corporate Bond ETF, Fidelity Investment Grade Bond ETF, Fidelity Limited Term Bond ETF, and Fidelity Total Bond ETF, 60759-60764 [2016-21129]

Download as PDF Federal Register / Vol. 81, No. 171 / Friday, September 2, 2016 / Notices Investment Management, Chief Counsel’s Office). SUPPLEMENTARY INFORMATION: The following is a summary of the application. The complete application may be obtained via the Commission’s Web site by searching for the file number, or an applicant using the Company name box, at https:// www.sec.gov/search/search.htm or by calling (202) 551–8090. mstockstill on DSK3G9T082PROD with NOTICES Summary of the Application 1. The Adviser will serve as the investment adviser to the Subadvised Series pursuant to an investment advisory agreement with the Trust (the ‘‘Investment Management Agreement’’).1 The Adviser will provide the Subadvised Series with continuous and comprehensive investment management services subject to the supervision of, and policies established by, each Subadvised Series’ board of trustees (‘‘Board’’). The Investment Management Agreement permits the Adviser, subject to the approval of the Board, to delegate to one or more subadvisers (each, a ‘‘Sub-Adviser’’ and collectively, the ‘‘Sub-Advisers’’) the responsibility to provide the day-to-day portfolio investment management of each Subadvised Series, subject to the supervision and direction of the Adviser. The primary responsibility for managing the Subadvised Series will remain vested in the Adviser. The Adviser will hire, evaluate, allocate assets to and oversee the Sub-Advisers, including determining whether a SubAdviser should be terminated, at all times subject to the authority of the Board. 2. Applicants request an exemption to permit the Adviser, subject to Board approval, to hire certain Sub-Advisers pursuant to Sub-Advisory Agreements and materially amend existing SubAdvisory Agreements without obtaining the shareholder approval required under section 15(a) of the Act and rule 18f–2 under the Act.2 Applicants also seek an 1 Applicants request relief with respect to any existing and any future series of the Trust and any other registered open-end management company or series thereof that: (a) Is advised by the Adviser or its successor or by a person controlling, controlled by, or under common control with the Adviser or its successor (each, also an ‘‘Adviser’’); (b) uses the manager of managers structure described in the application; and (c) complies with the terms and conditions of the application (each, a ‘‘Subadvised Series’’). For purposes of the requested order, ‘‘successor’’ is limited to an entity that results from a reorganization into another jurisdiction or a change in the type of business organization. 2 The requested relief will not extend to any subadviser that is an affiliated person, as defined in section 2(a)(3) of the Act, of the Subadvised Series, the Trust or the Adviser, other than by reason of serving as a sub-adviser to one or more of the Subadvised Series (‘‘Affiliated Sub-Adviser’’). VerDate Sep<11>2014 18:25 Sep 01, 2016 Jkt 238001 exemption from the Disclosure Requirements to permit each Subadvised Series to disclose (as both a dollar amount and a percentage of the Subadvised Series’ net assets): (a) The aggregate fees paid to the Adviser and any Affiliated Sub-Advisers; and (b) the aggregate fees paid to Sub-Advisers other than Affiliated Sub-Advisers (collectively, ‘‘Aggregate Fee Disclosure’’). For any Subadvised Series that employs an Affiliated Sub-Adviser, the Subadvised Series will provide separate disclosure of any fees paid to the Affiliated Sub-Adviser. 3. Applicants agree that any order granting the requested relief will be subject to the terms and conditions stated in the application. Such terms and conditions provide for, among other safeguards, appropriate disclosure to Subadvised Series shareholders and notification about sub-advisory changes and enhanced Board oversight to protect the interests of the Subadvised Series’ shareholders. 4. Section 6(c) of the Act provides that the Commission may exempt any person, security, or transaction or any class or classes of persons, securities, or transactions from any provisions of the Act, or any rule thereunder, if such relief is necessary or appropriate in the public interest and consistent with the protection of investors and purposes fairly intended by the policy and provisions of the Act. Applicants believe that the requested relief meets this standard because, as further explained in the application, the Investment Management Agreements will remain subject to shareholder approval, while the role of the SubAdvisers is substantially similar to that of individual portfolio managers, so that requiring shareholder approval of SubAdvisory Agreements would impose unnecessary delays and expenses on the Subadvised Series. Applicants believe that the requested relief from the Disclosure Requirements meets this standard because it will improve the Adviser’s ability to negotiate fees paid to the Sub-Advisers that are more advantageous for the Subadvised Series. For the Commission, by the Division of Investment Management, under delegated authority. Robert W. Errett, Deputy Secretary. [FR Doc. 2016–21133 Filed 9–1–16; 8:45 am] BILLING CODE 8011–01–P PO 00000 60759 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–78712; File No. SR– NYSEArca–2016–70] Self-Regulatory Organizations; NYSE Arca, Inc.; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change, as Modified by Amendment No. 1 Thereto, Regarding Use of Rule 144A Securities by the Fidelity Corporate Bond ETF, Fidelity Investment Grade Bond ETF, Fidelity Limited Term Bond ETF, and Fidelity Total Bond ETF August 29, 2016. I. Introduction On May 11, 2016, NYSE Arca, Inc. (‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to permit the Fidelity Corporate Bond ETF, Fidelity Investment Grade Bond ETF, Fidelity Limited Term Bond ETF, and Fidelity Total Bond ETF (individually, ‘‘Fund,’’ and collectively, ‘‘Funds’’) to consider securities issued pursuant to Rule 144A under the Securities Act of 1933 (‘‘Securities Act’’) as debt securities eligible for principal investment. The proposed rule change was published for comment in the Federal Register on May 31, 2016.3 On June 30, 2016, pursuant to section 19(b)(2) of the Act,4 the Commission designated a longer period within which to approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether to disapprove the proposed rule change.5 On July 26, 2016, the Exchange filed Amendment No. 1 to the proposed rule change.6 The Commission 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 77891 (May 24, 2016), 81 FR 34388 (‘‘Notice’’). 4 15 U.S.C. 78s(b)(2). 5 See Securities Exchange Act Release No. 78207, 81 FR 44338 (Jul. 7, 2016). The Commission designated August 29, 2016 as the date by which the Commission shall either approve or disapprove, or institute proceedings to determine whether to disapprove, the proposed rule change. 6 In Amendment No. 1, which amended and replaced the proposed rule change in its entirety, the Exchange: (a) Corrected certain aspects of the the investment descriptions for each Fund in accordance with the Prior Corporate Bond Releases and Prior Total Bond Releases (as defined herein); (b) confirmed that all of the Rule 144A securities in which a Fund invests will be corporate debt securities for which transactions are reported to TRACE (as defined herein); and (c) confirmed that FINRA (as defined herein), on behalf of the 2 17 Continued Frm 00091 Fmt 4703 Sfmt 4703 E:\FR\FM\02SEN1.SGM 02SEN1 60760 Federal Register / Vol. 81, No. 171 / Friday, September 2, 2016 / Notices has received no comments on the proposed rule change. This order institutes proceedings under section 19(b)(2)(B) of the Act7 to determine whether to approve or disapprove the proposed rule change, as modified by Amendment No. 1 thereto. II. Exchange’s Description of the Proposal The Commission approved the listing and trading of shares (‘‘Shares’’) of the Funds under NYSE Arca Equities Rule 8.600,8 which governs the listing and trading of Managed Fund Shares. The Exchange proposes to amend the representation in the Prior Corporate Bond Notice and Prior Total Bond Notice to provide that each Fund may include Rule 144A securities within a Fund’s principal investments in debt securities (i.e., debt securities in which at least 80% of a Fund’s assets are invested). mstockstill on DSK3G9T082PROD with NOTICES A. Exchange’s Description of the Funds Fidelity Investments Money Management, Inc. (‘‘FIMM’’), an affiliate of Fidelity Management & Research Company (‘‘FMR’’), is the manager (‘‘Manager’’) of each Fund. FMR Co., Inc. (‘‘FMRC’’) serves as a sub-adviser for the Fidelity Total Bond ETF. FMRC has day-to-day responsibility for choosing certain types of investments of Exchange, is able to access, as needed, trade information for the Rule 144A securities as well as certain other fixed income securities held by the Funds reported to TRACE. Amendment No. 1 is available at: https://www.sec.gov/comments/srnysearca-2016-70/nysearca201670-1.pdf. Because Amendment No. 1 to the proposed rule change does not materially alter the substance of the proposed rule change or raise unique or novel regulatory issues, Amendment No. 1 is not subject to notice and comment. 7 15 U.S.C. 78s(b)(2)(B). 8 See Securities Exchange Act Release Nos. 72068 (May 1, 2014), 79 FR 25923 (May 6, 2014) (SR– NYSEArca–2014–47) (notice of filing of proposed rule change relating to listing and trading of Shares of Fidelity Corporate Bond ETF Managed Shares under NYSE Arca Equities Rule 8.600) (‘‘Prior Corporate Bond Notice’’); 72439 (Jun. 20, 2014), 79 FR 36361 (Jun. 26, 2014) (SR–NYSEArca–2014–47) (order approving proposed rule change relating to listing and trading of Shares of Fidelity Corporate Bond ETF Managed Shares under NYSE Arca Equities Rule 8.600) (‘‘Prior Corporate Bond Order’’ and, together with the Prior Corporate Bond Notice, ‘‘Prior Corporate Bond Releases’’); 72064 (May 1, 2014), 79 FR 25908 (May 6, 2014) (SR–NYSEArca– 2014–46) (notice of filing of proposed rule change relating to listing and trading of Shares of Fidelity Investment Grade Bond ETF; Fidelity Limited Term Bond ETF; and Fidelity Total Bond ETF under NYSE Arca Equities Rule 8.600) (‘‘Prior Total Bond Notice’’); 72748 (Aug. 4, 2014), 79 FR 46484 (Aug. 8, 2014) (SR–NYSEArca–2014–46) (order approving proposed rule change relating to listing and trading of Shares of the Fidelity Investment Grade Bond ETF, Fidelity Limited Term Bond ETF, and Fidelity Total Bond ETF under NYSE Arca Equities Rule 8.600) (‘‘Prior Total Bond ETF Order’’ and, together with the Prior Total Bond Notice, ‘‘Prior Total Bond Releases’’). VerDate Sep<11>2014 18:25 Sep 01, 2016 Jkt 238001 foreign and domestic issuers for Fidelity Total Bond ETF. Other investment advisers, which also are affiliates of FMR, serve as sub-advisers to the Funds and assist FIMM with foreign investments, including Fidelity Management & Research (U.K.) Inc., Fidelity Management & Research (Hong Kong) Limited, and Fidelity Management & Research (Japan) Inc. (individually, ‘‘Sub-Adviser,’’ and together with FMRC, collectively ‘‘SubAdvisers’’). Fidelity Distributors Corporation is the distributor for the Funds’ Shares. The Funds are funds of Fidelity Merrimack Street Trust (‘‘Trust’’), a Massachusetts business trust.9 The Exchange represents that the Shares of the Fidelity Corporate Bond ETF, Fidelity Limited Term Bond ETF, and Fidelity Total Bond ETF are currently trading on the Exchange. 1. Fidelity Corporate Bond ETF As described in the Prior Corporate Bond Notice, the Fidelity Corporate Bond ETF seeks a high level of current income. The Manager normally invests at least 80% of Fidelity Corporate Bond ETF assets in investment-grade corporate bonds and other corporate debt securities.10 Corporate debt securities are bonds and other debt securities issued by corporations and other business structures, as described in the Prior Corporate Bond Notice. The Fidelity Corporate Bond ETF may hold uninvested cash or may invest it in cash equivalents such as money market securities, or shares of short-term bond exchanged-traded funds registered under the 1940 Act (‘‘ETFs’’), or mutual funds or money market funds, including Fidelity central funds (special types of investment vehicles created by Fidelity for use by the Fidelity funds and other advisory clients). The Manager uses the 9 The Trust is registered under the Investment Company Act of 1940 (‘‘1940 Act’’). According to the Exchange, on December 29, 2015, the Trust filed with the Commission an amendment to its registration statement on Form N–1A under the Securities Act and the 1940 Act relating to the Funds (File Nos. 333–186372 and 811–22796) (‘‘Registration Statement’’). In addition, the Exchange states that the Trust has obtained certain exemptive relief under the 1940 Act. See Investment Company Act Release No. 30513 (May 10, 2013) (File No. 812–14104). 10 According to the Exchange, investment-grade debt securities include all types of debt instruments, including corporate debt securities that are of medium and high-quality. An investment-grade rating means the security or issuer is rated investment-grade by a credit rating agency registered as a nationally recognized statistical rating organization with the Commission (for example, Moody’s Investors Service, Inc.), or is unrated but considered to be of equivalent quality by the Fidelity Corporate Bond ETF’s Manager or Sub-Advisers. PO 00000 Frm 00092 Fmt 4703 Sfmt 4703 Barclays U.S. Credit Bond Index as a guide in structuring the Fund and selecting its investments. FIMM manages the Fund to have similar overall interest rate risk to the Barclays U.S. Credit Bond Index. As stated in the Prior Corporate Bond Releases, in buying and selling securities for the Fund, the Manager analyzes the credit quality of the issuer, security-specific features, current valuation relative to alternatives in the market, short-term trading opportunities resulting from market inefficiencies, and potential future valuation. In managing the Fund’s exposure to various risks, including interest rate risk, the Manager considers, among other things, the market’s overall risk characteristics, the market’s current pricing of those risks, information on the Fund’s competitive universe and internal views of potential future market conditions. While the Manager normally invests at least 80% of assets of the Fund in investment grade corporate bonds and other corporate debt securities, as described above, the Manager may invest up to 20% of the Fund’s assets in other securities and financial instruments, as summarized below. In addition to corporate debt securities, the debt securities in which the Fund may invest are U.S. Government securities; repurchase agreements and reverse repurchase agreements; mortgage- and other assetbacked securities; loans; loan participations, loan assignments, and other evidences of indebtedness, including letters of credit, revolving credit facilities, and other standby financing commitments; structured securities; stripped securities; municipal securities; sovereign debt obligations; obligations of international agencies or supranational entities; and other securities believed to have debtlike characteristics, including hybrid securities, which may offer characteristics similar to those of a bond security such as stated maturity and preference over equity in bankruptcy. The Fund may invest in restricted securities, which are subject to legal restrictions on their sale. Restricted securities generally can be sold in privately negotiated transactions, pursuant to an exemption from registration under the Securities Act, or in a registered public offering. 2. Fidelity Investment Grade Bond ETF As described in the Prior Total Bond Notice, the Fidelity Investment Grade Bond ETF (which has not yet commenced operation) will seek a high level of current income. The Manager normally will invest at least 80% of the E:\FR\FM\02SEN1.SGM 02SEN1 Federal Register / Vol. 81, No. 171 / Friday, September 2, 2016 / Notices mstockstill on DSK3G9T082PROD with NOTICES Fund’s assets in investment-grade debt securities (those of medium and high quality). The debt securities in which the Fund may invest are corporate debt securities; U.S. Government securities; repurchase agreements and reverse repurchase agreements; money market securities; mortgage- and other assetbacked securities; senior loans; loan participations and loan assignments and other evidences of indebtedness, including letters of credit, revolving credit facilities and other standby financing commitments; stripped securities; municipal securities; sovereign debt obligations; and obligations of international agencies or supranational entities (collectively, ‘‘Debt Securities’’). As described in the Prior Total Bond Notice, the Fidelity Investment Grade Bond ETF may hold uninvested cash or may invest it in cash equivalents such as repurchase agreements, shares of short term bond ETFs, mutual funds, or money market funds, including Fidelity central funds (special types of investment vehicles created by Fidelity for use by the Fidelity funds and other advisory clients). The Manager will use the Barclays U.S. Aggregate Bond Index (‘‘Aggregate Index’’) as a guide in structuring the Fund and selecting its investments, and will manage the Fund to have similar overall interest rate risk to the Aggregate Index. As described in the Prior Total Bond Notice, the Manager will consider other factors when selecting the Fidelity Investment Grade Bond ETF’s investments, including the credit quality of the issuer, security-specific features, current valuation relative to alternatives in the market, short-term trading opportunities resulting from market inefficiencies, and potential future valuation. In managing the Fidelity Investment Grade Bond ETF’s exposure to various risks, including interest rate risk, the Manager will consider, among other things, the market’s overall risk characteristics, the market’s current pricing of those risks, information on the Fidelity Investment Grade Bond ETF’s competitive universe, and internal views of potential future market conditions. 3. Fidelity Limited Term Bond ETF As described in the Prior Total Bond Notice, the Fidelity Limited Term Bond ETF seeks to provide a high rate of income. The Manager normally invests at least 80% of the Fidelity Limited Term Bond ETF’s assets in investmentgrade Debt Securities (those of medium and high quality). The Fidelity Limited Term Bond ETF may hold uninvested cash or may invest VerDate Sep<11>2014 18:25 Sep 01, 2016 Jkt 238001 it in cash equivalents such as repurchase agreements, shares of short term bond ETFs, mutual funds, or money market funds, including Fidelity central funds (special types of investment vehicles created by Fidelity for use by the Fidelity funds and other advisory clients). The Manager uses the Fidelity Limited Term Composite Index (‘‘Composite Index’’) as a guide in structuring the Fund and selecting its investments. The Manager manages the Fidelity Limited Term Bond ETF to have similar overall interest rate risk to the Composite Index. The Manager considers other factors when selecting the Fidelity Limited Term Bond ETF’s investments, including the credit quality of the issuer, security-specific features, current valuation relative to alternatives in the market, short-term trading opportunities resulting from market inefficiencies, and potential future valuation. In managing the Fidelity Limited Term Bond ETF’s exposure to various risks, including interest rate risk, the Manager considers, among other things, the market’s overall risk characteristics, the market’s current pricing of those risks, information on the Fund’s competitive universe, and internal views of potential future market conditions. 4. Fidelity Total Bond ETF As described in the Prior Total Bond Notice, the Fidelity Total Bond ETF seeks a high level of current income. The Manager normally invests at least 80% of the Fidelity Total Bond ETF’s assets in Debt Securities. The Manager allocates the Fidelity Total Bond ETF’s assets across investment-grade, high yield, and emerging market Debt Securities. The Manager may invest up to 20% of the Fund’s assets in lowerquality Debt Securities. The Fidelity Total Bond ETF may hold uninvested cash or may invest it in cash equivalents such as repurchase agreements, shares of short term bond ETFs, mutual funds, or money market funds, including Fidelity central funds (special types of investment vehicles created by Fidelity for use by the Fidelity funds and other advisory clients). The Manager uses the Barclays U.S. Universal Bond Index (‘‘Universal Index’’) as a guide in structuring and selecting the investments of the Fidelity Total Bond ETF and selecting its investments, and in allocating the Fidelity Total Bond ETF’s assets across the investment-grade, high yield, and emerging market asset classes. The Manager manages the Fidelity Total Bond ETF to have similar overall interest rate risk to the Universal Index. PO 00000 Frm 00093 Fmt 4703 Sfmt 4703 60761 The Manager considers other factors when selecting the Fund’s investments, including the credit quality of the issuer, security-specific features, current valuation relative to alternatives in the market, short-term trading opportunities resulting from market inefficiencies, and potential future valuation. In managing the Fund’s exposure to various risks, including interest rate risk, the Manager considers, among other things, the market’s overall risk characteristics, the market’s current pricing of those risks, information on the Fund’s competitive universe, and internal views of potential future market conditions. As described in the Prior Total Bond Notice, the Manager may invest the Fidelity Total Bond ETF’s assets in Debt Securities of foreign issuers in addition to securities of domestic issuers. 5. Other Investments of the Funds While, as described above, the Manager normally invests at least 80% of assets of Fidelity Limited Term Bond ETF in investment-grade Debt Securities (and will normally invest at least 80% of assets of the Fidelity Investment Grade Bond ETF in investment-grade Debt Securities), and the Manager normally invests at least 80% of assets of the Fidelity Total Bond ETF in Debt Securities, the Manager may invest up to 20% of a Fund’s assets in other securities and financial instruments (‘‘Other Investments,’’ as described in the Prior Total Bond Notice). As described in the Prior Corporate Bond Notice and Prior Total Bond Notice, as part of a Fund’s Other Investments, (i.e., up to 20% of a Fund’s assets), each Fund may invest in restricted securities, which are subject to legal restrictions on their sale.11 B. Exchange’s Description of the Proposed Change to the Principal Investments of the Funds The Exchange proposes that each Fund may include Rule 144A securities within a Fund’s principal investments in debt securities (i.e., debt securities in which at least 80% of a Fund’s assets are invested). As discussed below, the Exchange believes it is appropriate for Rule 144A securities to be included as 11 Restricted securities are subject to legal restrictions on their sale. Restricted securities generally can be sold in privately negotiated transactions, pursuant to an exemption from registration under the Securities Act, or in a registered public offering. Rule 144A securities are securities which, while privately placed, are eligible for purchase and resale pursuant to Rule 144A. Rule 144A permits certain qualified institutional buyers, such as a Fund, to trade in privately placed securities even though such securities are not registered under the Securities Act. E:\FR\FM\02SEN1.SGM 02SEN1 60762 Federal Register / Vol. 81, No. 171 / Friday, September 2, 2016 / Notices mstockstill on DSK3G9T082PROD with NOTICES principal investments of a Fund in view of (1) the high level of liquidity in the market for such securities compared to other debt securities asset classes, and (2) the high level of transparency in the market for Rule 144A securities, particularly in light of reporting of transaction data in such securities through the Trade Reporting and Compliance Engine (‘‘TRACE’’) operated by the Financial Industry Regulatory Authority (‘‘FINRA’’). All of the Rule 144A securities in which a Fund invests will be corporate debt securities for which transactions are reported in TRACE. FMR has represented to the Exchange that Rule 144A securities account for approximately 20% of daily trading volume in U.S. corporate bonds. Dealers trade and report transactions in Rule 144A securities in the same manner as registered corporate bonds. While the average number of daily trades and U.S. dollar volume in registered corporate bonds is much higher than in Rule 144A securities, the average lot size is higher for Rule 144A securities.12 Specifically, the average lot size for 144A securities for the period January 1, 2015 through August 31, 2015 was approximately $2.2 million, compared to an average lot size for the same period of approximately $500,000 for registered corporate bonds. In addition, in 2013, the Commission approved FINRA rules relating to dissemination of information regarding transactions in Rule 144A securities in TRACE.13 In approving FINRA’s proposed rule change to amend its rules regarding dissemination of Rule 144A transactions, the Commission stated: 12 Source: MarketAxess Trace Data. For example, for the period January 1, 2015 through August 31, 2015, for registered bonds and Rule 144A securities with $1 billion to $1.999 billion the average daily dollar volume outstanding was approximately $6.8 billion and $1.7 billion, respectively, and the average lot size was $666,647 and $2,398,292, respectively. 13 See Securities Exchange Act Release Nos. 70009 (Jul. 19, 2013), 78 FR 44997 (Jul. 25, 2103) (SR–FINRA–2013–029) (notice of filing of a proposed rule change relating to the dissemination of transactions in TRACE-Eligible securities effected pursuant to Rule 144A); 70345 (Sept. 6, 2013), 78 FR 56251 (Sept. 12, 2013) (SR–FINRA–2013–029) (order approving proposed rule change relating to the dissemination of transactions in TRACE-Eligible securities effected pursuant to Rule 144A). In the proposed rule change, FINRA proposed to amend FINRA Rule 6750 to provide for the dissemination of Rule 144A transactions, provided the asset type (e.g., corporate bonds) currently is subject to dissemination under FINRA Rule 6750; to amend the dissemination protocols to extend the dissemination caps currently applicable to the nonRule 144A transactions in such asset type (e.g., nonRule 144A corporate bond transactions) to Rule 144A transactions in such securities; to amend FINRA Rule 7730 to establish a data set for realtime Rule 144A transaction data and a second data set for historic Rule 144A transaction data; to amend the definition of ‘‘Historic TRACE Data’’ to reference the three data sets currently included therein and the proposed fourth data set; and to make other clarifying and technical amendments. FINRA Rule 6730(a) requires any transaction in a TRACE-Eligible security to be reported to TRACE as soon as practicable, but no later than within 15 minutes of the transaction, subject to specified exceptions. FINRA Rule 6730(c) requires the trade report to contain information on size, price, time of execution, amount of commission, the date of settlement, and other information. 14 In its June 30, 2014 press release ‘‘FINRA Brings 144A Corporate Debt Transactions Into the Light,’’ FINRA stated: ‘‘144A transactions—resales of restricted corporate debt securities to large institutions called qualified institutional buyers (QIBs)—account for a significant portion of the volume in corporate debt securities. In the first quarter of 2014, 144A transactions comprised nearly 13 percent of the average daily volume in investment-grade corporate debt, and nearly 30 percent of the average daily volume in high-yield corporate debt. 144A transactions comprised nearly 20 percent of the average daily volume in the corporate debt market as a whole. Through the Trade Reporting and Compliance Engine (TRACE), FINRA will disseminate 144A transactions subject to the same dissemination caps that are currently in effect for non-144A transactions. The same dissemination cap for investment-grade corporate bonds ($5 million) applies to both 144A and non144A corporate bond transactions, and the $1 million dissemination cap for high-yield corporate bonds similarly applies to both 144A and non-144A transactions. 144A transactions are also subject to the same 15-minute reporting requirement as non144A corporate debt transactions.’’ See also FINRA Regulatory Notice 13–35 October 2013. VerDate Sep<11>2014 18:25 Sep 01, 2016 Jkt 238001 Real-time dissemination of last-sale information could aid dealers in deriving better quotations, because they would know the prices at which other market participants had recently transacted in the same or similar instruments. This information could aid all market participants in evaluating current quotations, because they could inquire why dealer quotations might differ from the prices of recently executed transactions. Furthermore, post-trade transparency affords market participants a means of testing whether dealer quotations before the last sale were close to the price at which the last sale was executed. In this manner, post-trade transparency can promote price competition between dealers and more efficient price discovery and ultimately lower transaction costs in the market for Rule 144A securities. Transactions executed by FINRA members became subject to dissemination through FINRA’s TRACE on June 30, 2014, thus providing a level of transparency to the Rule 144A market comparable to that of registered bonds.14 The Exchange notes that, while the proposed rule change would categorize Rule 144A securities within a Fund’s principal investments in debt securities, any investments in Rule 144A securities, of course, would be required to comply with restrictions under the 1940 Act and rules thereunder relating to investment in illiquid assets. As stated in the Prior Corporate Bond Notice and Prior Total Bond Notice, each Fund may hold up to an aggregate PO 00000 Frm 00094 Fmt 4703 Sfmt 4703 amount of 15% of its net assets in illiquid assets (calculated at the time of investment), including Rule 144A securities deemed illiquid by the Manager or Sub-Advisers. Each Fund monitors 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 a Fund’s net assets are held in illiquid assets. Illiquid assets include assets subject to contractual or other restrictions on resale and other instruments that lack readily available markets as determined in accordance with Commission staff guidance.15 Moreover, as stated in the Prior Corporate Bond Notice and Prior Total Bond Notice, each Fund does not currently intend to purchase any asset if, as a result, more than 10% of its net assets would be invested in assets that are deemed to be illiquid because they are subject to legal or contractual restrictions on resale or because they cannot be sold or disposed of in the ordinary course of business at approximately the prices at which they are valued. For purposes of a Fund’s illiquid assets limitation discussed above, if through a change in values, net assets, or other circumstances, a Fund were in a position where more than 10% of its net assets were invested in illiquid assets, it would consider appropriate steps to protect liquidity. The Prior Corporate Bond Notice and Prior Total Bond Notice stated that various factors may be considered in determining the liquidity of a Fund’s investments, including: (1) The frequency of trades and quotes for the asset; (2) the number of dealers wishing to purchase or sell the asset and the number of other potential purchasers; (3) dealer undertakings to make a market in the asset; and (4) the nature 15 In its recent rulemaking proposal relating to open-end fund liquidity risk management programs, the Commission noted that ‘‘[s]ecurities offered pursuant to rule 144A under the Securities Act may be considered liquid depending on certain factors.’’ The Commission, citing to the ‘‘Statement Regarding ‘Restricted Securities’’’ noted: ‘‘The Commission stated [in the ‘‘Statement Regarding ‘Restricted Securities’’’] that ‘determination of the liquidity of Rule 144A securities in the portfolio of an investment company issuing redeemable securities is a question of fact for the board of directors to determine, based upon the trading markets for the specific security’ and noted that the board should consider the unregistered nature of a rule 144A security as one of the factors it evaluates in determining its liquidity.’’ See Release Nos. 33– 9922; IC–31835; File Nos. S7–16–15; S7–08–15 (Sept. 22, 2015); n.94. E:\FR\FM\02SEN1.SGM 02SEN1 mstockstill on DSK3G9T082PROD with NOTICES Federal Register / Vol. 81, No. 171 / Friday, September 2, 2016 / Notices of the asset and the nature of the marketplace in which it trades (including any demand, put or tender features, the mechanics and other requirements for transfer, any letters of credit or other credit enhancement features, any ratings, the number of holders, the method of soliciting offers, the time required to dispose of the security, and the ability to assign or offset the rights and obligations of the asset). The Exchange believes that the size of the Rule 144A market (approximately 20% of daily trading volume in U.S. corporate bonds), the active participation of multiple dealers utilizing trading protocols that are similar to those in the corporate bond market, and the transparency of the 144A market resulting from reporting of Rule 144A transactions in TRACE will deter manipulation in trading the Shares. The Exchange notes that all of the Rule 144A securities in which a Fund invests will be corporate debt securities for which transactions are reported in TRACE. The Exchange represents that, except for the change described above, all other representations made in the Prior Corporate Bond Releases and the Prior Total Bond Releases remain unchanged. The Funds will continue to comply with all initial and continued listing requirements under NYSE Arca Equities Rule 8.600. The Exchange further represents that the 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.16 The Exchange represents that these procedures are adequate to properly monitor Exchange trading of the Shares in all trading sessions and to deter and detect violations of Exchange rules and federal securities laws applicable to trading on the Exchange. The Exchange or FINRA, on behalf of the Exchange, or both, will communicate as needed regarding trading in the Shares and underlying exchange-traded options, futures, exchange-traded equity securities (including ADRs, EDRs, and GDRs), and other exchange-traded instruments with other markets and other entities that are members of the ISG, and the Exchange or FINRA, on behalf of the Exchange, or both, may 16 FINRA conducts cross-market surveillances on behalf of the Exchange pursuant to a regulatory services agreement. The Exchange is responsible for FINRA’s performance under this regulatory services agreement. VerDate Sep<11>2014 18:25 Sep 01, 2016 Jkt 238001 obtain trading information regarding trading in the Shares and underlying exchange-traded options, futures, exchange-traded equity securities (including ADRs, EDRs, and GDRs), and other exchange-traded instruments from such markets and other entities. The Exchange may obtain information regarding trading in the Shares and underlying exchange-traded options, futures, exchange-traded equity securities (including ADRs, EDRs, and GDRs), and other exchange-traded instruments from markets and other entities that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement.17 FINRA, on behalf of the Exchange, is able to access, as needed, trade information for the Rule 144A securities as well as certain other fixed income securities held by the Funds reported to TRACE. In addition, as stated in the Prior Corporate Bond Releases and the Prior Total Bond Releases, investors have ready access to information regarding the Funds’ holdings, the Portfolio Indicative Value, the Disclosed Portfolio, and quotation and last-sale information for the Shares. The Exchange also represents that all statements and representations made in this filing and the Prior Corporate Bond Releases and Prior Total Bond Releases regarding (a) the description of the Funds’ respective portfolios, (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 of the Funds on the Exchange. The Adviser has represented to the Exchange that it will advise the Exchange of any failure by a 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 a Fund is not in compliance with the applicable listing requirements, the Exchange will commence delisting procedures under NYSE Arca Equities Rule 5.5(m). III. Proceedings To Determine Whether To Approve or Disapprove SR– NYSEArca–2016–70 and Grounds for Disapproval Under Consideration The Commission is instituting proceedings pursuant to section 17 For a list of the current members of ISG, see www.isgportal.org. The Exchange notes that not all of the components of the portfolio for a Fund may trade on exchanges that are members of the ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. PO 00000 Frm 00095 Fmt 4703 Sfmt 4703 60763 19(b)(2)(B) of the Act 18 to determine whether the proposed rule change, as modified by Amendment No. 1 thereto, should be approved or disapproved. Institution of such proceedings is appropriate at this time in view of the legal and policy issues raised by the proposed rule change. Institution of proceedings does not indicate that the Commission has reached any conclusions with respect to any of the issues involved. Rather, as described below, the Commission seeks and encourages interested persons to provide comments on the proposed rule change. Pursuant to section 19(b)(2)(B) of the Act,19 the Commission is providing notice of the grounds for disapproval under consideration. The Commission is instituting proceedings to allow for additional analysis of the proposed rule change’s consistency with section 6(b)(5) of the Act, which requires, among other things, that the rules of a national securities exchange be ‘‘designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade,’’ and ‘‘to protect investors and the public interest.’’ 20 IV. Procedure: Request for Written Comments The Commission requests that interested persons provide written submissions of their views, data, and arguments with respect to the issues identified above, as well as any other concerns they may have with the proposal, as modified by Amendment No. 1. In particular, the Commission invites the written views of interested persons concerning whether the proposal, as modified by Amendment No. 1, is consistent with section 6(b)(5) or any other provision of the Act, or the rules and regulations thereunder. Although there do not appear to be any issues relevant to approval or disapproval that would be facilitated by an oral presentation of views, data, and arguments, the Commission will consider, pursuant to Rule 19b–4, any request for an opportunity to make an oral presentation.21 18 15 U.S.C. 78s(b)(2)(B). 19 Id. 20 15 U.S.C. 78f(b)(5). 19(b)(2) of the Act, as amended by the Securities Act Amendments of 1975, Public Law 94–29 (June 4, 1975), grants the Commission flexibility to determine what type of proceeding— either oral or notice and opportunity for written comments—is appropriate for consideration of a particular proposal by a self-regulatory organization. See Securities Act Amendments of 1975, Senate Comm. on Banking, Housing & Urban 21 Section E:\FR\FM\02SEN1.SGM Continued 02SEN1 mstockstill on DSK3G9T082PROD with NOTICES 60764 Federal Register / Vol. 81, No. 171 / Friday, September 2, 2016 / Notices Interested persons are invited to submit written data, views, and arguments regarding whether the proposal should be approved or disapproved by September 23, 2016. Any person who wishes to file a rebuttal to any other person’s submission must file that rebuttal by October 7, 2016. The Commission asks that commenters address the sufficiency of the Exchange’s statements in support of the proposal, which are set forth in the Notice,22 as modified by Amendment No. 1 thereto,23 in addition to any other comments they may wish to submit about the proposed rule change. The Commission generally seeks comment on whether the Exchange’s representations relating to the proposed portfolio holdings in Rule 144A securities are sufficient to prevent the susceptibility of the Funds to manipulation and are thereby consistent with the requirements of section 6(b)(5) of the Act, which, among other things, requires that the rules of an exchange be designed to prevent fraudulent and manipulative acts and practices and to protect investors and the public interest. In particular, the Commission seeks comment on the following: As described above, the Exchange has proposed that each Fund be permitted to include Rule 144A securities within a Fund’s principal investments in debt securities. As a result of the proposed change, each Fund would be permitted to invest 100% of its principal investments in Rule 144A securities. The Exchange also provides that all of the Rule 144A securities in which a Fund invests will be corporate debt securities for which transactions are reported in TRACE. Rule 144A securities are restricted securities, which, as described above, are subject to legal restrictions on their sale and generally are sold in privately negotiated transactions, pursuant to an exemption from registration under the Securities Act, or in a registered public offering. The Exchange has not proposed additional quantitative criteria with respect to minimum liquidity or minimum diversification measures to be applied to the Rule 144A securities. Do commenters have views on whether the specific Rule 144A securities in which each Fund may invest would be sufficiently liquid and sufficiently diversified so as to reduce the extent to which Managed Fund Shares holding principally restricted securities may be susceptible to manipulation? Affairs, S. Rep. No. 75, 94th Cong., 1st Sess. 30 (1975). 22 See supra note 3. 23 See supra note 6. VerDate Sep<11>2014 18:25 Sep 01, 2016 Jkt 238001 Comments may be submitted by any of the following methods: SECURITIES AND EXCHANGE COMMISSION Electronic Comments [File No. 500–1] • 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–2016–70 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–2016–70. 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–2016–70 and should be submitted on or before September 23, 2016. Rebuttal comments should be submitted by October 7, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.24 Robert W. Errett, Deputy Secretary. [FR Doc. 2016–21129 Filed 9–1–16; 8:45 am] BILLING CODE 8011–01–P 24 17 PO 00000 CFR 200.30–3(a)(57). Frm 00096 Fmt 4703 Sfmt 4703 In the Matter of Luxeyard, Inc., and SuperDirectories, Inc.; Order of Suspension of Trading August 31, 2016. It appears to the Securities and Exchange Commission that there is a lack of current and accurate information concerning the securities of Luxeyard, Inc. (CIK No. 1493587), a Delaware corporation with its principal place of business listed as Los Angeles, California, with stock quoted on OTC Link (previously, ‘‘Pink Sheets’’) operated by OTC Markets Group, Inc. (‘‘OTC Link’’) under the ticker symbol LUXR, because it has not filed any periodic reports since April 9, 2013. On August 19, 2015, Luxeyard, Inc. was sent a delinquency letter by the Division of Corporation Finance requesting compliance with its periodic filing obligations, but did not receive the delinquency letter due to its failure to maintain a valid address on file with the Commission as required by Commission rules (Rule 301 of Regulation S–T, 17 CFR 232.301 and Section 5.4 of EDGAR Filer Manual). It appears to the Securities and Exchange Commission that there is a lack of current and accurate information concerning the securities of SuperDirectories, Inc. (CIK No. 1338624), a delinquent Wyoming corporation with its principal place of business listed as Merrill, New York, with stock quoted on OTC Link under the ticker symbol SDIR, because it has not filed any periodic reports since the period ended June 30, 2014. On September 25, 2015, SuperDirectories, Inc. was sent a delinquency letter by the Division of Corporation Finance requesting compliance with its periodic filing obligations, but did not receive the delinquency letter due to its failure to maintain a valid address on file with the Commission as required by Commission rules (Rule 301 of Regulation S–T, 17 CFR 232.301 and Section 5.4 of EDGAR Filer Manual). The Commission is of the opinion that the public interest and the protection of investors require a suspension of trading in the securities of the above-listed company. Therefore, it is ordered, pursuant to Section 12(k) of the Securities Exchange Act of 1934, that trading in the securities of the above-listed company is suspended for the period from 9:30 a.m. EDT on August 31, 2016, through 11:59 p.m. EDT on September 14, 2016. E:\FR\FM\02SEN1.SGM 02SEN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 81, Number 171 (Friday, September 2, 2016)]
[Notices]
[Pages 60759-60764]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-21129]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78712; File No. SR-NYSEArca-2016-70]

Self-Regulatory Organizations; NYSE Arca, Inc.; Order Instituting
Proceedings To Determine Whether To Approve or Disapprove a Proposed
Rule Change, as Modified by Amendment No. 1 Thereto, Regarding Use of
Rule 144A Securities by the Fidelity Corporate Bond ETF, Fidelity
Investment Grade Bond ETF, Fidelity Limited Term Bond ETF, and Fidelity
Total Bond ETF

August 29, 2016.

I. Introduction

On May 11, 2016, NYSE Arca, Inc. (``Exchange'') filed with the
Securities and Exchange Commission (``Commission''), pursuant to
section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\
and Rule 19b-4 thereunder,\2\ a proposed rule change to permit the
Fidelity Corporate Bond ETF, Fidelity Investment Grade Bond ETF,
Fidelity Limited Term Bond ETF, and Fidelity Total Bond ETF
(individually, ``Fund,'' and collectively, ``Funds'') to consider
securities issued pursuant to Rule 144A under the Securities Act of
1933 (``Securities Act'') as debt securities eligible for principal
investment. The proposed rule change was published for comment in the
Federal Register on May 31, 2016.\3\ On June 30, 2016, pursuant to
section 19(b)(2) of the Act,\4\ the Commission designated a longer
period within which to approve the proposed rule change, disapprove the
proposed rule change, or institute proceedings to determine whether to
disapprove the proposed rule change.\5\ On July 26, 2016, the Exchange
filed Amendment No. 1 to the proposed rule change.\6\ The Commission

[[Page 60760]]

has received no comments on the proposed rule change. This order
institutes proceedings under section 19(b)(2)(B) of the Act\7\ to
determine whether to approve or disapprove the proposed rule change, as
modified by Amendment No. 1 thereto.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 77891 (May 24,
2016), 81 FR 34388 (``Notice'').
\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 78207, 81 FR 44338
(Jul. 7, 2016). The Commission designated August 29, 2016 as the
date by which the Commission shall either approve or disapprove, or
institute proceedings to determine whether to disapprove, the
proposed rule change.
\6\ In Amendment No. 1, which amended and replaced the proposed
rule change in its entirety, the Exchange: (a) Corrected certain
aspects of the the investment descriptions for each Fund in
accordance with the Prior Corporate Bond Releases and Prior Total
Bond Releases (as defined herein); (b) confirmed that all of the
Rule 144A securities in which a Fund invests will be corporate debt
securities for which transactions are reported to TRACE (as defined
herein); and (c) confirmed that FINRA (as defined herein), on behalf
of the Exchange, is able to access, as needed, trade information for
the Rule 144A securities as well as certain other fixed income
securities held by the Funds reported to TRACE. Amendment No. 1 is
available at: https://www.sec.gov/comments/sr-nysearca-2016-70/nysearca201670-1.pdf. Because Amendment No. 1 to the proposed rule
change does not materially alter the substance of the proposed rule
change or raise unique or novel regulatory issues, Amendment No. 1
is not subject to notice and comment.
\7\ 15 U.S.C. 78s(b)(2)(B).
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II. Exchange's Description of the Proposal

The Commission approved the listing and trading of shares
(``Shares'') of the Funds under NYSE Arca Equities Rule 8.600,\8\ which
governs the listing and trading of Managed Fund Shares. The Exchange
proposes to amend the representation in the Prior Corporate Bond Notice
and Prior Total Bond Notice to provide that each Fund may include Rule
144A securities within a Fund's principal investments in debt
securities (i.e., debt securities in which at least 80% of a Fund's
assets are invested).
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\8\ See Securities Exchange Act Release Nos. 72068 (May 1,
2014), 79 FR 25923 (May 6, 2014) (SR-NYSEArca-2014-47) (notice of
filing of proposed rule change relating to listing and trading of
Shares of Fidelity Corporate Bond ETF Managed Shares under NYSE Arca
Equities Rule 8.600) (``Prior Corporate Bond Notice''); 72439 (Jun.
20, 2014), 79 FR 36361 (Jun. 26, 2014) (SR-NYSEArca-2014-47) (order
approving proposed rule change relating to listing and trading of
Shares of Fidelity Corporate Bond ETF Managed Shares under NYSE Arca
Equities Rule 8.600) (``Prior Corporate Bond Order'' and, together
with the Prior Corporate Bond Notice, ``Prior Corporate Bond
Releases''); 72064 (May 1, 2014), 79 FR 25908 (May 6, 2014) (SR-
NYSEArca-2014-46) (notice of filing of proposed rule change relating
to listing and trading of Shares of Fidelity Investment Grade Bond
ETF; Fidelity Limited Term Bond ETF; and Fidelity Total Bond ETF
under NYSE Arca Equities Rule 8.600) (``Prior Total Bond Notice'');
72748 (Aug. 4, 2014), 79 FR 46484 (Aug. 8, 2014) (SR-NYSEArca-2014-
46) (order approving proposed rule change relating to listing and
trading of Shares of the Fidelity Investment Grade Bond ETF,
Fidelity Limited Term Bond ETF, and Fidelity Total Bond ETF under
NYSE Arca Equities Rule 8.600) (``Prior Total Bond ETF Order'' and,
together with the Prior Total Bond Notice, ``Prior Total Bond
Releases'').
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A. Exchange's Description of the Funds

Fidelity Investments Money Management, Inc. (``FIMM''), an
affiliate of Fidelity Management & Research Company (``FMR''), is the
manager (``Manager'') of each Fund. FMR Co., Inc. (``FMRC'') serves as
a sub-adviser for the Fidelity Total Bond ETF. FMRC has day-to-day
responsibility for choosing certain types of investments of foreign and
domestic issuers for Fidelity Total Bond ETF. Other investment
advisers, which also are affiliates of FMR, serve as sub-advisers to
the Funds and assist FIMM with foreign investments, including Fidelity
Management & Research (U.K.) Inc., Fidelity Management & Research (Hong
Kong) Limited, and Fidelity Management & Research (Japan) Inc.
(individually, ``Sub-Adviser,'' and together with FMRC, collectively
``Sub-Advisers''). Fidelity Distributors Corporation is the distributor
for the Funds' Shares.
The Funds are funds of Fidelity Merrimack Street Trust (``Trust''),
a Massachusetts business trust.\9\ The Exchange represents that the
Shares of the Fidelity Corporate Bond ETF, Fidelity Limited Term Bond
ETF, and Fidelity Total Bond ETF are currently trading on the Exchange.
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\9\ The Trust is registered under the Investment Company Act of
1940 (``1940 Act''). According to the Exchange, on December 29,
2015, the Trust filed with the Commission an amendment to its
registration statement on Form N-1A under the Securities Act and the
1940 Act relating to the Funds (File Nos. 333-186372 and 811-22796)
(``Registration Statement''). In addition, the Exchange states that
the Trust has obtained certain exemptive relief under the 1940 Act.
See Investment Company Act Release No. 30513 (May 10, 2013) (File
No. 812-14104).
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1. Fidelity Corporate Bond ETF
As described in the Prior Corporate Bond Notice, the Fidelity
Corporate Bond ETF seeks a high level of current income. The Manager
normally invests at least 80% of Fidelity Corporate Bond ETF assets in
investment-grade corporate bonds and other corporate debt
securities.\10\ Corporate debt securities are bonds and other debt
securities issued by corporations and other business structures, as
described in the Prior Corporate Bond Notice.
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\10\ According to the Exchange, investment-grade debt securities
include all types of debt instruments, including corporate debt
securities that are of medium and high-quality. An investment-grade
rating means the security or issuer is rated investment-grade by a
credit rating agency registered as a nationally recognized
statistical rating organization with the Commission (for example,
Moody's Investors Service, Inc.), or is unrated but considered to be
of equivalent quality by the Fidelity Corporate Bond ETF's Manager
or Sub-Advisers.
---------------------------------------------------------------------------

The Fidelity Corporate Bond ETF may hold uninvested cash or may
invest it in cash equivalents such as money market securities, or
shares of short-term bond exchanged-traded funds registered under the
1940 Act (``ETFs''), or mutual funds or money market funds, including
Fidelity central funds (special types of investment vehicles created by
Fidelity for use by the Fidelity funds and other advisory clients). The
Manager uses the Barclays U.S. Credit Bond Index as a guide in
structuring the Fund and selecting its investments. FIMM manages the
Fund to have similar overall interest rate risk to the Barclays U.S.
Credit Bond Index.
As stated in the Prior Corporate Bond Releases, in buying and
selling securities for the Fund, the Manager analyzes the credit
quality of the issuer, security-specific features, current valuation
relative to alternatives in the market, short-term trading
opportunities resulting from market inefficiencies, and potential
future valuation. In managing the Fund's exposure to various risks,
including interest rate risk, the Manager considers, among other
things, the market's overall risk characteristics, the market's current
pricing of those risks, information on the Fund's competitive universe
and internal views of potential future market conditions.
While the Manager normally invests at least 80% of assets of the
Fund in investment grade corporate bonds and other corporate debt
securities, as described above, the Manager may invest up to 20% of the
Fund's assets in other securities and financial instruments, as
summarized below.
In addition to corporate debt securities, the debt securities in
which the Fund may invest are U.S. Government securities; repurchase
agreements and reverse repurchase agreements; mortgage- and other
asset-backed securities; loans; loan participations, loan assignments,
and other evidences of indebtedness, including letters of credit,
revolving credit facilities, and other standby financing commitments;
structured securities; stripped securities; municipal securities;
sovereign debt obligations; obligations of international agencies or
supranational entities; and other securities believed to have debt-like
characteristics, including hybrid securities, which may offer
characteristics similar to those of a bond security such as stated
maturity and preference over equity in bankruptcy.
The Fund may invest in restricted securities, which are subject to
legal restrictions on their sale. Restricted securities generally can
be sold in privately negotiated transactions, pursuant to an exemption
from registration under the Securities Act, or in a registered public
offering.
2. Fidelity Investment Grade Bond ETF
As described in the Prior Total Bond Notice, the Fidelity
Investment Grade Bond ETF (which has not yet commenced operation) will
seek a high level of current income. The Manager normally will invest
at least 80% of the

[[Page 60761]]

Fund's assets in investment-grade debt securities (those of medium and
high quality). The debt securities in which the Fund may invest are
corporate debt securities; U.S. Government securities; repurchase
agreements and reverse repurchase agreements; money market securities;
mortgage- and other asset-backed securities; senior loans; loan
participations and loan assignments and other evidences of
indebtedness, including letters of credit, revolving credit facilities
and other standby financing commitments; stripped securities; municipal
securities; sovereign debt obligations; and obligations of
international agencies or supranational entities (collectively, ``Debt
Securities'').
As described in the Prior Total Bond Notice, the Fidelity
Investment Grade Bond ETF may hold uninvested cash or may invest it in
cash equivalents such as repurchase agreements, shares of short term
bond ETFs, mutual funds, or money market funds, including Fidelity
central funds (special types of investment vehicles created by Fidelity
for use by the Fidelity funds and other advisory clients). The Manager
will use the Barclays U.S. Aggregate Bond Index (``Aggregate Index'')
as a guide in structuring the Fund and selecting its investments, and
will manage the Fund to have similar overall interest rate risk to the
Aggregate Index.
As described in the Prior Total Bond Notice, the Manager will
consider other factors when selecting the Fidelity Investment Grade
Bond ETF's investments, including the credit quality of the issuer,
security-specific features, current valuation relative to alternatives
in the market, short-term trading opportunities resulting from market
inefficiencies, and potential future valuation. In managing the
Fidelity Investment Grade Bond ETF's exposure to various risks,
including interest rate risk, the Manager will consider, among other
things, the market's overall risk characteristics, the market's current
pricing of those risks, information on the Fidelity Investment Grade
Bond ETF's competitive universe, and internal views of potential future
market conditions.
3. Fidelity Limited Term Bond ETF
As described in the Prior Total Bond Notice, the Fidelity Limited
Term Bond ETF seeks to provide a high rate of income. The Manager
normally invests at least 80% of the Fidelity Limited Term Bond ETF's
assets in investment-grade Debt Securities (those of medium and high
quality).
The Fidelity Limited Term Bond ETF may hold uninvested cash or may
invest it in cash equivalents such as repurchase agreements, shares of
short term bond ETFs, mutual funds, or money market funds, including
Fidelity central funds (special types of investment vehicles created by
Fidelity for use by the Fidelity funds and other advisory clients). The
Manager uses the Fidelity Limited Term Composite Index (``Composite
Index'') as a guide in structuring the Fund and selecting its
investments. The Manager manages the Fidelity Limited Term Bond ETF to
have similar overall interest rate risk to the Composite Index.
The Manager considers other factors when selecting the Fidelity
Limited Term Bond ETF's investments, including the credit quality of
the issuer, security-specific features, current valuation relative to
alternatives in the market, short-term trading opportunities resulting
from market inefficiencies, and potential future valuation. In managing
the Fidelity Limited Term Bond ETF's exposure to various risks,
including interest rate risk, the Manager considers, among other
things, the market's overall risk characteristics, the market's current
pricing of those risks, information on the Fund's competitive universe,
and internal views of potential future market conditions.
4. Fidelity Total Bond ETF
As described in the Prior Total Bond Notice, the Fidelity Total
Bond ETF seeks a high level of current income. The Manager normally
invests at least 80% of the Fidelity Total Bond ETF's assets in Debt
Securities. The Manager allocates the Fidelity Total Bond ETF's assets
across investment-grade, high yield, and emerging market Debt
Securities. The Manager may invest up to 20% of the Fund's assets in
lower-quality Debt Securities.
The Fidelity Total Bond ETF may hold uninvested cash or may invest
it in cash equivalents such as repurchase agreements, shares of short
term bond ETFs, mutual funds, or money market funds, including Fidelity
central funds (special types of investment vehicles created by Fidelity
for use by the Fidelity funds and other advisory clients).
The Manager uses the Barclays U.S. Universal Bond Index
(``Universal Index'') as a guide in structuring and selecting the
investments of the Fidelity Total Bond ETF and selecting its
investments, and in allocating the Fidelity Total Bond ETF's assets
across the investment-grade, high yield, and emerging market asset
classes. The Manager manages the Fidelity Total Bond ETF to have
similar overall interest rate risk to the Universal Index. The Manager
considers other factors when selecting the Fund's investments,
including the credit quality of the issuer, security-specific features,
current valuation relative to alternatives in the market, short-term
trading opportunities resulting from market inefficiencies, and
potential future valuation. In managing the Fund's exposure to various
risks, including interest rate risk, the Manager considers, among other
things, the market's overall risk characteristics, the market's current
pricing of those risks, information on the Fund's competitive universe,
and internal views of potential future market conditions.
As described in the Prior Total Bond Notice, the Manager may invest
the Fidelity Total Bond ETF's assets in Debt Securities of foreign
issuers in addition to securities of domestic issuers.
5. Other Investments of the Funds
While, as described above, the Manager normally invests at least
80% of assets of Fidelity Limited Term Bond ETF in investment-grade
Debt Securities (and will normally invest at least 80% of assets of the
Fidelity Investment Grade Bond ETF in investment-grade Debt
Securities), and the Manager normally invests at least 80% of assets of
the Fidelity Total Bond ETF in Debt Securities, the Manager may invest
up to 20% of a Fund's assets in other securities and financial
instruments (``Other Investments,'' as described in the Prior Total
Bond Notice). As described in the Prior Corporate Bond Notice and Prior
Total Bond Notice, as part of a Fund's Other Investments, (i.e., up to
20% of a Fund's assets), each Fund may invest in restricted securities,
which are subject to legal restrictions on their sale.\11\
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\11\ Restricted securities are subject to legal restrictions on
their sale. Restricted securities generally can be sold in privately
negotiated transactions, pursuant to an exemption from registration
under the Securities Act, or in a registered public offering. Rule
144A securities are securities which, while privately placed, are
eligible for purchase and resale pursuant to Rule 144A. Rule 144A
permits certain qualified institutional buyers, such as a Fund, to
trade in privately placed securities even though such securities are
not registered under the Securities Act.
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B. Exchange's Description of the Proposed Change to the Principal
Investments of the Funds

The Exchange proposes that each Fund may include Rule 144A
securities within a Fund's principal investments in debt securities
(i.e., debt securities in which at least 80% of a Fund's assets are
invested). As discussed below, the Exchange believes it is appropriate
for Rule 144A securities to be included as

[[Page 60762]]

principal investments of a Fund in view of (1) the high level of
liquidity in the market for such securities compared to other debt
securities asset classes, and (2) the high level of transparency in the
market for Rule 144A securities, particularly in light of reporting of
transaction data in such securities through the Trade Reporting and
Compliance Engine (``TRACE'') operated by the Financial Industry
Regulatory Authority (``FINRA''). All of the Rule 144A securities in
which a Fund invests will be corporate debt securities for which
transactions are reported in TRACE.
FMR has represented to the Exchange that Rule 144A securities
account for approximately 20% of daily trading volume in U.S. corporate
bonds. Dealers trade and report transactions in Rule 144A securities in
the same manner as registered corporate bonds. While the average number
of daily trades and U.S. dollar volume in registered corporate bonds is
much higher than in Rule 144A securities, the average lot size is
higher for Rule 144A securities.\12\ Specifically, the average lot size
for 144A securities for the period January 1, 2015 through August 31,
2015 was approximately $2.2 million, compared to an average lot size
for the same period of approximately $500,000 for registered corporate
bonds.
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\12\ Source: MarketAxess Trace Data. For example, for the period
January 1, 2015 through August 31, 2015, for registered bonds and
Rule 144A securities with $1 billion to $1.999 billion the average
daily dollar volume outstanding was approximately $6.8 billion and
$1.7 billion, respectively, and the average lot size was $666,647
and $2,398,292, respectively.
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In addition, in 2013, the Commission approved FINRA rules relating
to dissemination of information regarding transactions in Rule 144A
securities in TRACE.\13\ In approving FINRA's proposed rule change to
amend its rules regarding dissemination of Rule 144A transactions, the
Commission stated:
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\13\ See Securities Exchange Act Release Nos. 70009 (Jul. 19,
2013), 78 FR 44997 (Jul. 25, 2103) (SR-FINRA-2013-029) (notice of
filing of a proposed rule change relating to the dissemination of
transactions in TRACE-Eligible securities effected pursuant to Rule
144A); 70345 (Sept. 6, 2013), 78 FR 56251 (Sept. 12, 2013) (SR-
FINRA-2013-029) (order approving proposed rule change relating to
the dissemination of transactions in TRACE-Eligible securities
effected pursuant to Rule 144A). In the proposed rule change, FINRA
proposed to amend FINRA Rule 6750 to provide for the dissemination
of Rule 144A transactions, provided the asset type (e.g., corporate
bonds) currently is subject to dissemination under FINRA Rule 6750;
to amend the dissemination protocols to extend the dissemination
caps currently applicable to the non-Rule 144A transactions in such
asset type (e.g., non-Rule 144A corporate bond transactions) to Rule
144A transactions in such securities; to amend FINRA Rule 7730 to
establish a data set for real-time Rule 144A transaction data and a
second data set for historic Rule 144A transaction data; to amend
the definition of ``Historic TRACE Data'' to reference the three
data sets currently included therein and the proposed fourth data
set; and to make other clarifying and technical amendments. FINRA
Rule 6730(a) requires any transaction in a TRACE-Eligible security
to be reported to TRACE as soon as practicable, but no later than
within 15 minutes of the transaction, subject to specified
exceptions. FINRA Rule 6730(c) requires the trade report to contain
information on size, price, time of execution, amount of commission,
the date of settlement, and other information.

Real-time dissemination of last-sale information could aid
dealers in deriving better quotations, because they would know the
prices at which other market participants had recently transacted in
the same or similar instruments. This information could aid all
market participants in evaluating current quotations, because they
could inquire why dealer quotations might differ from the prices of
recently executed transactions. Furthermore, post-trade transparency
affords market participants a means of testing whether dealer
quotations before the last sale were close to the price at which the
last sale was executed. In this manner, post-trade transparency can
promote price competition between dealers and more efficient price
discovery and ultimately lower transaction costs in the market for
---------------------------------------------------------------------------
Rule 144A securities.

Transactions executed by FINRA members became subject to
dissemination through FINRA's TRACE on June 30, 2014, thus providing a
level of transparency to the Rule 144A market comparable to that of
registered bonds.\14\
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\14\ In its June 30, 2014 press release ``FINRA Brings 144A
Corporate Debt Transactions Into the Light,'' FINRA stated: ``144A
transactions--resales of restricted corporate debt securities to
large institutions called qualified institutional buyers (QIBs)--
account for a significant portion of the volume in corporate debt
securities. In the first quarter of 2014, 144A transactions
comprised nearly 13 percent of the average daily volume in
investment-grade corporate debt, and nearly 30 percent of the
average daily volume in high-yield corporate debt. 144A transactions
comprised nearly 20 percent of the average daily volume in the
corporate debt market as a whole. Through the Trade Reporting and
Compliance Engine (TRACE), FINRA will disseminate 144A transactions
subject to the same dissemination caps that are currently in effect
for non-144A transactions. The same dissemination cap for
investment-grade corporate bonds ($5 million) applies to both 144A
and non-144A corporate bond transactions, and the $1 million
dissemination cap for high-yield corporate bonds similarly applies
to both 144A and non-144A transactions. 144A transactions are also
subject to the same 15-minute reporting requirement as non-144A
corporate debt transactions.'' See also FINRA Regulatory Notice 13-
35 October 2013.
---------------------------------------------------------------------------

The Exchange notes that, while the proposed rule change would
categorize Rule 144A securities within a Fund's principal investments
in debt securities, any investments in Rule 144A securities, of course,
would be required to comply with restrictions under the 1940 Act and
rules thereunder relating to investment in illiquid assets. As stated
in the Prior Corporate Bond Notice and Prior Total Bond Notice, each
Fund may hold up to an aggregate amount of 15% of its net assets in
illiquid assets (calculated at the time of investment), including Rule
144A securities deemed illiquid by the Manager or Sub-Advisers. Each
Fund monitors 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 a Fund's
net assets are held in illiquid assets. Illiquid assets include assets
subject to contractual or other restrictions on resale and other
instruments that lack readily available markets as determined in
accordance with Commission staff guidance.\15\
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\15\ In its recent rulemaking proposal relating to open-end fund
liquidity risk management programs, the Commission noted that
``[s]ecurities offered pursuant to rule 144A under the Securities
Act may be considered liquid depending on certain factors.'' The
Commission, citing to the ``Statement Regarding `Restricted
Securities''' noted: ``The Commission stated [in the ``Statement
Regarding `Restricted Securities'''] that `determination of the
liquidity of Rule 144A securities in the portfolio of an investment
company issuing redeemable securities is a question of fact for the
board of directors to determine, based upon the trading markets for
the specific security' and noted that the board should consider the
unregistered nature of a rule 144A security as one of the factors it
evaluates in determining its liquidity.'' See Release Nos. 33-9922;
IC-31835; File Nos. S7-16-15; S7-08-15 (Sept. 22, 2015); n.94.
---------------------------------------------------------------------------

Moreover, as stated in the Prior Corporate Bond Notice and Prior
Total Bond Notice, each Fund does not currently intend to purchase any
asset if, as a result, more than 10% of its net assets would be
invested in assets that are deemed to be illiquid because they are
subject to legal or contractual restrictions on resale or because they
cannot be sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued. For purposes of a
Fund's illiquid assets limitation discussed above, if through a change
in values, net assets, or other circumstances, a Fund were in a
position where more than 10% of its net assets were invested in
illiquid assets, it would consider appropriate steps to protect
liquidity.
The Prior Corporate Bond Notice and Prior Total Bond Notice stated
that various factors may be considered in determining the liquidity of
a Fund's investments, including: (1) The frequency of trades and quotes
for the asset; (2) the number of dealers wishing to purchase or sell
the asset and the number of other potential purchasers; (3) dealer
undertakings to make a market in the asset; and (4) the nature

[[Page 60763]]

of the asset and the nature of the marketplace in which it trades
(including any demand, put or tender features, the mechanics and other
requirements for transfer, any letters of credit or other credit
enhancement features, any ratings, the number of holders, the method of
soliciting offers, the time required to dispose of the security, and
the ability to assign or offset the rights and obligations of the
asset).
The Exchange believes that the size of the Rule 144A market
(approximately 20% of daily trading volume in U.S. corporate bonds),
the active participation of multiple dealers utilizing trading
protocols that are similar to those in the corporate bond market, and
the transparency of the 144A market resulting from reporting of Rule
144A transactions in TRACE will deter manipulation in trading the
Shares. The Exchange notes that all of the Rule 144A securities in
which a Fund invests will be corporate debt securities for which
transactions are reported in TRACE.
The Exchange represents that, except for the change described
above, all other representations made in the Prior Corporate Bond
Releases and the Prior Total Bond Releases remain unchanged. The Funds
will continue to comply with all initial and continued listing
requirements under NYSE Arca Equities Rule 8.600.
The Exchange further represents that the 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.\16\ The Exchange
represents that these procedures are adequate to properly monitor
Exchange trading of the Shares in all trading sessions and to deter and
detect violations of Exchange rules and federal securities laws
applicable to trading on the Exchange. The Exchange or FINRA, on behalf
of the Exchange, or both, will communicate as needed regarding trading
in the Shares and underlying exchange-traded options, futures,
exchange-traded equity securities (including ADRs, EDRs, and GDRs), and
other exchange-traded instruments with other markets and other entities
that are members of the ISG, and the Exchange or FINRA, on behalf of
the Exchange, or both, may obtain trading information regarding trading
in the Shares and underlying exchange-traded options, futures,
exchange-traded equity securities (including ADRs, EDRs, and GDRs), and
other exchange-traded instruments from such markets and other entities.
The Exchange may obtain information regarding trading in the Shares and
underlying exchange-traded options, futures, exchange-traded equity
securities (including ADRs, EDRs, and GDRs), and other exchange-traded
instruments from markets and other entities that are members of ISG or
with which the Exchange has in place a comprehensive surveillance
sharing agreement.\17\ FINRA, on behalf of the Exchange, is able to
access, as needed, trade information for the Rule 144A securities as
well as certain other fixed income securities held by the Funds
reported to TRACE. In addition, as stated in the Prior Corporate Bond
Releases and the Prior Total Bond Releases, investors have ready access
to information regarding the Funds' holdings, the Portfolio Indicative
Value, the Disclosed Portfolio, and quotation and last-sale information
for the Shares.
---------------------------------------------------------------------------

\16\ FINRA conducts cross-market surveillances on behalf of the
Exchange pursuant to a regulatory services agreement. The Exchange
is responsible for FINRA's performance under this regulatory
services agreement.
\17\ For a list of the current members of ISG, see
www.isgportal.org. The Exchange notes that not all of the components
of the portfolio for a Fund may trade on exchanges that are members
of the ISG or with which the Exchange has in place a comprehensive
surveillance sharing agreement.
---------------------------------------------------------------------------

The Exchange also represents that all statements and
representations made in this filing and the Prior Corporate Bond
Releases and Prior Total Bond Releases regarding (a) the description of
the Funds' respective portfolios, (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 of the Funds on the Exchange. The Adviser has
represented to the Exchange that it will advise the Exchange of any
failure by a 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 a Fund is not in compliance with the applicable
listing requirements, the Exchange will commence delisting procedures
under NYSE Arca Equities Rule 5.5(m).

III. Proceedings To Determine Whether To Approve or Disapprove SR-
NYSEArca-2016-70 and Grounds for Disapproval Under Consideration

The Commission is instituting proceedings pursuant to section
19(b)(2)(B) of the Act \18\ to determine whether the proposed rule
change, as modified by Amendment No. 1 thereto, should be approved or
disapproved. Institution of such proceedings is appropriate at this
time in view of the legal and policy issues raised by the proposed rule
change. Institution of proceedings does not indicate that the
Commission has reached any conclusions with respect to any of the
issues involved. Rather, as described below, the Commission seeks and
encourages interested persons to provide comments on the proposed rule
change.
---------------------------------------------------------------------------

\18\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

Pursuant to section 19(b)(2)(B) of the Act,\19\ the Commission is
providing notice of the grounds for disapproval under consideration.
The Commission is instituting proceedings to allow for additional
analysis of the proposed rule change's consistency with section 6(b)(5)
of the Act, which requires, among other things, that the rules of a
national securities exchange be ``designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade,'' and ``to protect investors and the public
interest.'' \20\
---------------------------------------------------------------------------

\19\ Id.
\20\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

IV. Procedure: Request for Written Comments

The Commission requests that interested persons provide written
submissions of their views, data, and arguments with respect to the
issues identified above, as well as any other concerns they may have
with the proposal, as modified by Amendment No. 1. In particular, the
Commission invites the written views of interested persons concerning
whether the proposal, as modified by Amendment No. 1, is consistent
with section 6(b)(5) or any other provision of the Act, or the rules
and regulations thereunder. Although there do not appear to be any
issues relevant to approval or disapproval that would be facilitated by
an oral presentation of views, data, and arguments, the Commission will
consider, pursuant to Rule 19b-4, any request for an opportunity to
make an oral presentation.\21\
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\21\ Section 19(b)(2) of the Act, as amended by the Securities
Act Amendments of 1975, Public Law 94-29 (June 4, 1975), grants the
Commission flexibility to determine what type of proceeding--either
oral or notice and opportunity for written comments--is appropriate
for consideration of a particular proposal by a self-regulatory
organization. See Securities Act Amendments of 1975, Senate Comm. on
Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st
Sess. 30 (1975).

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[[Page 60764]]

Interested persons are invited to submit written data, views, and
arguments regarding whether the proposal should be approved or
disapproved by September 23, 2016. Any person who wishes to file a
rebuttal to any other person's submission must file that rebuttal by
October 7, 2016. The Commission asks that commenters address the
sufficiency of the Exchange's statements in support of the proposal,
which are set forth in the Notice,\22\ as modified by Amendment No. 1
thereto,\23\ in addition to any other comments they may wish to submit
about the proposed rule change.
---------------------------------------------------------------------------

\22\ See supra note 3.
\23\ See supra note 6.
---------------------------------------------------------------------------

The Commission generally seeks comment on whether the Exchange's
representations relating to the proposed portfolio holdings in Rule
144A securities are sufficient to prevent the susceptibility of the
Funds to manipulation and are thereby consistent with the requirements
of section 6(b)(5) of the Act, which, among other things, requires that
the rules of an exchange be designed to prevent fraudulent and
manipulative acts and practices and to protect investors and the public
interest. In particular, the Commission seeks comment on the following:
As described above, the Exchange has proposed that each Fund be
permitted to include Rule 144A securities within a Fund's principal
investments in debt securities. As a result of the proposed change,
each Fund would be permitted to invest 100% of its principal
investments in Rule 144A securities. The Exchange also provides that
all of the Rule 144A securities in which a Fund invests will be
corporate debt securities for which transactions are reported in TRACE.
Rule 144A securities are restricted securities, which, as described
above, are subject to legal restrictions on their sale and generally
are sold in privately negotiated transactions, pursuant to an exemption
from registration under the Securities Act, or in a registered public
offering. The Exchange has not proposed additional quantitative
criteria with respect to minimum liquidity or minimum diversification
measures to be applied to the Rule 144A securities. Do commenters have
views on whether the specific Rule 144A securities in which each Fund
may invest would be sufficiently liquid and sufficiently diversified so
as to reduce the extent to which Managed Fund Shares holding
principally restricted securities may be susceptible to manipulation?
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-2016-70 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-2016-70. 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-2016-70 and should
be submitted on or before September 23, 2016. Rebuttal comments should
be submitted by October 7, 2016.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
---------------------------------------------------------------------------

\24\ 17 CFR 200.30-3(a)(57).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-21129 Filed 9-1-16; 8:45 am]
BILLING CODE 8011-01-P

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