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, To List and Trade Shares of the Direxion Daily Municipal Bond Taxable Bear 1X Fund Under NYSE Arca Equities Rule 5.2(j)(3), 78231-78233 [2016-26790]

Download as PDF Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Notices The public may view the background documentation for this information collection at the following Web site, www.reginfo.gov. Comments should be directed to: (i) Desk Officer for the Securities and Exchange Commission, Office of Information and Regulatory Affairs, Office of Management and Budget, Room 10102, New Executive Office Building, Washington, DC 20503, or by sending an email to: Shagufta_ Ahmed@omb.eop.gov; and (ii) Pamela Dyson, Director/Chief Information Officer, Securities and Exchange Commission, c/o Remi Pavlik-Simon, 100 F Street NE., Washington, DC 20549 or send an email to: PRA_Mailbox@ sec.gov. Comments must be submitted to OMB within 30 days of this notice. Dated: November 1, 2016. Brent J. Fields, Secretary. [FR Doc. 2016–26785 Filed 11–4–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–79211; File No. SR– NYSEArca–2016–100] 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, To List and Trade Shares of the Direxion Daily Municipal Bond Taxable Bear 1X Fund Under NYSE Arca Equities Rule 5.2(j)(3) sradovich on DSK3GMQ082PROD with NOTICES November 1, 2016. I. Introduction On July 13, 2016, NYSE Arca, Inc. (‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Exchange Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to list and trade shares (‘‘Shares’’) of the Direxion Daily Municipal Bond Taxable Bear 1X Fund (‘‘Fund’’), a series of the Direxion Shares ETF Trust (‘‘Trust’’). The proposed rule change was published for comment in the Federal Register on August 3, 2016.3 On September 14, 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 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 78433 (July 28, 2016), 81 FR 51241. 4 15 U.S.C. 78s(b)(2). 2 17 VerDate Sep<11>2014 16:02 Nov 04, 2016 Jkt 241001 rule change, or institute proceedings to determine whether to disapprove the proposed rule change.5 On September 15, 2016, the Exchange filed Amendment No. 1 to the proposed rule change.6 The Commission 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. II. The Exchange’s Description of the Proposal The Exchange proposes to list and trade the Shares under NYSE Arca Equities Rule 5.2(j)(3), Commentary .02, which governs the listing and trading of Investment Company Units based on fixed income securities indexes. The Fund is a series of the Trust.8 Rafferty Asset Management, LLC would be the investment adviser to the Fund. Foreside Fund Services, LLC will be the distributor of the Fund’s Shares. The Bank of New York Mellon would serve as the accounting agent, custodian, and transfer agent for the Fund. U.S. Bancorp Fund Services, LLC will serve as the Fund’s administrator.9 The Standard & Poor’s National AMTFree Municipal Bond Index (‘‘Index’’) would be the Fund’s benchmark.10 The Index is a broad, comprehensive, market value-weighted index designed to measure the performance of the taxexempt, investment-grade U.S. 5 See Securities Exchange Act Release No. 78840, 81 FR 64552 (September 20, 2016). The Commission designated November 1, 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 replaced the original filing in its entirety, the Exchange: (1) Revised the description of the Fund’s principal investments and (2) made other technical amendments. Amendment No. 1 is available at https://www.sec.gov/comments/sr-nysearca-2016100/nysearca2016100-1.pdf. 7 15 U.S.C. 78s(b)(2)(B). 8 The Trust is registered under the Investment Company Act of 1940 (‘‘1940 Act’’). According to the Exchange, on February 29, 2016, the Trust filed a registration statement on Form N–1A under the Securities Act of 1933 and the 1940 Act (File Nos.: 811–22201 and 333–150525). 9 Additional information regarding the Trust, the Fund, and the Shares, including investment strategies, risks, creation and redemption procedures, fees, portfolio holdings, disclosure policies, calculation of the NAV, distributions, and taxes, among other things, can be found in Amendment No. 1 and the Registration Statement, as applicable. See Amendment No. 1, supra note 6 and Registration Statement, supra note 8. 10 The 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. PO 00000 Frm 00125 Fmt 4703 Sfmt 4703 78231 municipal bond market. The Fund would seek daily inverse investment results of the Index but would not seek to achieve its stated investment objective over a period of time greater than one day. Further, the Fund might 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 would gain this inverse exposure by investing in a combination of Financial Instruments (defined below) that provide inverse exposure to the underlying securities of the Index. The Fund would not seek income that is exempt from federal, state, or local income taxes. A. The Fund’s Principal Investments The Fund would seek to track 100% of the inverse of the daily performance of the Index. Under normal circumstances, the Fund would 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 exchange-traded funds (‘‘ETFs’’) and indices, traded on U.S. exchanges (based on gross notional value); swaps that provide short exposure to the securities included in the Index and various ETFs (based on gross notional value); and short positions in ETFs, as described below in this section, that, in combination, provide inverse exposure to the Index. The Fund might 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 might 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 E:\FR\FM\07NON1.SGM 07NON1 78232 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Notices National AMT-Free Municipal Bond Portfolio, Vanguard Tax-Exempt Bond ETF, and the PIMCO Intermediate Municipal Bond Active ExchangeTraded Fund. The Fund might 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.11 The Fund would not take long positions in ETFs or invest in options that overlie inverse, leveraged, or inverse leveraged ETFs. B. The Fund’s Non-Principal Investments According to the Exchange, 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, and the Fund’s remaining assets might be invested 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 termsto-maturity of less than 397 days, and repurchase agreements that have termsto-maturity of less than 397 days. III. Proceedings To Determine Whether To Approve or Disapprove SR– NYSEArca–2016–100 and Grounds for Disapproval Under Consideration The Commission is instituting proceedings pursuant to Section 19(b)(2)(B) of the Act 12 to determine whether the proposed rule change, as modified by Amendment No. 1, 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 stated 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,13 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.’’ 14 The Exchange has submitted the proposed rule change because the Shares do not meet all of the ‘‘generic’’ listing requirements of Commentary .02(a) to NYSE Arca Equities Rule 5.2(j)(3). Namely, Commentary .02(a)(2) to NYSE Arca Equities Rule 5.2(j)(3) provides that, for an index or portfolio that underlies a series of Investment Company Units, components that in the aggregate account for at least 75% of the weight of such index or portfolio each shall have a minimum original principal amount outstanding of $100 million or more. Although the Index that underlies the Shares does not satisfy this requirement, the Exchange states that the Index is nonetheless sufficiently broad-based to deter potential manipulation because: (1) It is composed of approximately 3,063 issues and 474 unique issuers; (2) 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 (3) the total ($248 billion) and the average ($81 million) dollar amount outstanding of Index issues are ‘‘substantial.’’ 15 The Commission seeks comment on whether the Index characteristics the Exchange has identified, as noted above, provide sufficient basis for the Commission to determine that the 13 Id. sradovich on DSK3GMQ082PROD with NOTICES 11 For purposes of this filing, ETFs are 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) and also are securities listed on another national securities exchange pursuant to substantially equivalent listing rules. The Fund will not take short positions in inverse, leveraged, or inverse leveraged ETFs. 12 15 U.S.C. 78s(b)(2)(B). VerDate Sep<11>2014 16:02 Nov 04, 2016 Jkt 241001 14 15 U.S.C. 78f(b)(5). 15 Namely, according to the Exchange, 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. PO 00000 Frm 00126 Fmt 4703 Sfmt 4703 Index, and thereby the Shares that overlie it, is not susceptible to manipulation. In this regard, the Commission notes that it recently approved a proposal to list and trade shares of an actively managed municipal bond ETF,16 where the listing exchange made a number of other representations regarding the type of municipal bonds that the fund would hold. For example, the exchange, in that instance, stated that the fund’s investments in municipal securities would provide exposure to at least 15 different states, with no more than 30% of the value of the fund’s net assets comprising municipal securities that provide exposure to any single state. Further, the exchange also noted that the fund would include securities from a minimum of 13 non-affiliated issuers.17 Although in this filing, the Fund would seek an inverse investment result of an index rather than actively manage a portfolio of municipal securities, the concerns regarding the susceptibility of the Index underlying the Shares to manipulation is similar to the concerns regarding the susceptibility of a portfolio to manipulation. Accordingly, the Commission seeks comment on whether the Exchange has demonstrated that its proposal is consistent with Section 6(b)(5) of the Act, and specifically whether the price of the Shares is susceptible to manipulation. 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. In particular, the Commission invites the written views of interested persons concerning whether the proposal 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 16 See Securities Exchange Act Release No. 78913 (Sep. 23, 2016), 81 FR 69109 (Oct. 5, 2016) (SR– NASDAQ–2016–002). 17 For purposes of this restriction, the exchange provided that ‘‘non-affiliated issuers’’ are issuers that are not ‘‘affiliated persons’’ within the meaning of Section 2(a)(3) of the 1940 Act. Additionally, each state and each separate political subdivision, agency, authority, or instrumentality of such state, each multi-state agency or authority, and each guarantor, if any, would be treated as separate issuers of municipal securities. E:\FR\FM\07NON1.SGM 07NON1 Federal Register / Vol. 81, No. 215 / Monday, November 7, 2016 / Notices request for an opportunity to make an oral presentation.18 Interested persons are invited to submit written data, views, and arguments regarding whether the proposal should be approved or disapproved by November 28, 2016. Any person who wishes to file a rebuttal to any other person’s submission must file that rebuttal by December 12, 2016. The Commission asks that commenters address the sufficiency of the Exchange’s statements in support of the proposal, which are set forth in Amendment No. 1 to the proposed rule change, in addition to any other comments they may wish to submit about the proposed rule change. 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. sradovich on DSK3GMQ082PROD with NOTICES 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 Numbers 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 18 Section 19(b)(2) of the Act, as amended by the Securities Act Amendments of 1975, Pub. L. 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). VerDate Sep<11>2014 16:02 Nov 04, 2016 Jkt 241001 business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of these filings 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 November 28, 2016. Rebuttal comments should be submitted by December 12, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.19 Brent J. Fields, Secretary. [FR Doc. 2016–26790 Filed 11–4–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–79214; File No. SR– NYSEArca–2016–139] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending Commentary .05 to Rule 6.91 November 1, 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 October 25, 2016, NYSE Arca, Inc. (the ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend Commentary .05 to Rule 6.91(Electronic Complex Order Trading) to enhance the price protection filters applicable to electronically entered Complex Orders. The proposed rule change is available on the Exchange’s Web site at www.nyse.com, at the principal office of 19 17 CFR 200.30–3(a)(57). U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00127 Fmt 4703 Sfmt 4703 78233 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 is proposing to amend Commentary .05 to Rule 6.91 to enhance the Exchange’s price protection filters applicable to electronically entered Complex Orders,4 including by clarifying how the functionality operates and expanding its application, as described below. Clarifying the Description of the Filter Commentary .05 to Rule 6.91 currently sets forth the Price Protection Filter (the ‘‘Filter’’) applicable to each incoming ‘‘Electronic Complex Order’’ (or ‘‘ECO’’).5 The Filter automatically rejects incoming ECOs with a price that deviates from the current market by the Specified Amount,6 which varies depending on the smallest MPV of any leg in the ECO.7 4 Rule 6.62(e) defines a Complex Order as any order involving the simultaneous purchase and/or sale of two or more different option series in the same underlying security, for the same account, in a ratio that is equal to or greater than one-to-three (.333) and less than or equal to three-to-one (3.00) and for the purpose of executing particular investment strategy. 5 Per Rule 6.91, an ECO is a Complex Order that has been entered into the NYSE Arca System (‘‘System’’) and routed to the Complex Matching Engine (‘‘CME’’) for possible execution. The CME is the mechanism in which ECOs are executed against each other or against individual quotes and orders in the Consolidated Book. ECOs that are not immediately executed by the CME are ranked in the Consolidated Book. See Rule 6.91(a). 6 The Specified Amount is defined as: (i) .10 for orders where the smallest Minimum Price Variation (‘‘MPV’’) of any leg of the Electronic Complex Order is .01; (ii) .15 for orders where the smallest MPV of any leg of the Electronic Complex Order is .05; and .30 for orders where the smallest MPV of any leg of the Electronic Complex Order is .10. See Commentary .05 to Rule 6.91. 7 See Commentary .05 to Rule 6.91(a). The Exchange notes that each ECO is entered into the Continued E:\FR\FM\07NON1.SGM 07NON1

Agencies

[Federal Register Volume 81, Number 215 (Monday, November 7, 2016)]
[Notices]
[Pages 78231-78233]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-26790]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79211; File No. SR-NYSEArca-2016-100]


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, To List and Trade Shares 
of the Direxion Daily Municipal Bond Taxable Bear 1X Fund Under NYSE 
Arca Equities Rule 5.2(j)(3)

November 1, 2016.

I. Introduction

    On July 13, 2016, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule 
change to list and trade shares (``Shares'') of the Direxion Daily 
Municipal Bond Taxable Bear 1X Fund (``Fund''), a series of the 
Direxion Shares ETF Trust (``Trust''). The proposed rule change was 
published for comment in the Federal Register on August 3, 2016.\3\ On 
September 14, 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 September 15, 2016, the Exchange filed Amendment No. 1 to 
the proposed rule change.\6\ The Commission 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 78433 (July 28, 
2016), 81 FR 51241.
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 78840, 81 FR 64552 
(September 20, 2016). The Commission designated November 1, 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 replaced the original filing in 
its entirety, the Exchange: (1) Revised the description of the 
Fund's principal investments and (2) made other technical 
amendments. Amendment No. 1 is available at https://www.sec.gov/comments/sr-nysearca-2016-100/nysearca2016100-1.pdf.
    \7\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

II. The Exchange's Description of the Proposal

    The Exchange proposes to list and trade the Shares under NYSE Arca 
Equities Rule 5.2(j)(3), Commentary .02, which governs the listing and 
trading of Investment Company Units based on fixed income securities 
indexes. The Fund is a series of the Trust.\8\ Rafferty Asset 
Management, LLC would be the investment adviser to the Fund. Foreside 
Fund Services, LLC will be the distributor of the Fund's Shares. The 
Bank of New York Mellon would serve as the accounting agent, custodian, 
and transfer agent for the Fund. U.S. Bancorp Fund Services, LLC will 
serve as the Fund's administrator.\9\
---------------------------------------------------------------------------

    \8\ The Trust is registered under the Investment Company Act of 
1940 (``1940 Act''). According to the Exchange, on February 29, 
2016, the Trust filed a registration statement on Form N-1A under 
the Securities Act of 1933 and the 1940 Act (File Nos.: 811-22201 
and 333-150525).
    \9\ Additional information regarding the Trust, the Fund, and 
the Shares, including investment strategies, risks, creation and 
redemption procedures, fees, portfolio holdings, disclosure 
policies, calculation of the NAV, distributions, and taxes, among 
other things, can be found in Amendment No. 1 and the Registration 
Statement, as applicable. See Amendment No. 1, supra note 6 and 
Registration Statement, supra note 8.
---------------------------------------------------------------------------

    The Standard & Poor's National AMT-Free Municipal Bond Index 
(``Index'') would be the Fund's benchmark.\10\ 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. The Fund would seek daily inverse investment results of the 
Index but would not seek to achieve its stated investment objective 
over a period of time greater than one day. Further, the Fund might 
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 would gain this inverse exposure by investing in a 
combination of Financial Instruments (defined below) that provide 
inverse exposure to the underlying securities of the Index. The Fund 
would not seek income that is exempt from federal, state, or local 
income taxes.
---------------------------------------------------------------------------

    \10\ The 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.
---------------------------------------------------------------------------

A. The Fund's Principal Investments

    The Fund would seek to track 100% of the inverse of the daily 
performance of the Index. Under normal circumstances, the Fund would 
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 exchange-
traded funds (``ETFs'') and indices, traded on U.S. exchanges (based on 
gross notional value); swaps that provide short exposure to the 
securities included in the Index and various ETFs (based on gross 
notional value); and short positions in ETFs, as described below in 
this section, that, in combination, provide inverse exposure to the 
Index.
    The Fund might 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 might 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

[[Page 78232]]

National AMT-Free Municipal Bond Portfolio, Vanguard Tax-Exempt Bond 
ETF, and the PIMCO Intermediate Municipal Bond Active Exchange-Traded 
Fund.
    The Fund might 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.\11\ 
The Fund would not take long positions in ETFs or invest in options 
that overlie inverse, leveraged, or inverse leveraged ETFs.
---------------------------------------------------------------------------

    \11\ For purposes of this filing, ETFs are 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) and also are securities listed on another national securities 
exchange pursuant to substantially equivalent listing rules. The 
Fund will not take short positions in inverse, leveraged, or inverse 
leveraged ETFs.
---------------------------------------------------------------------------

B. The Fund's Non-Principal Investments

    According to the Exchange, 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, and the Fund's 
remaining assets might be invested 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.

III. Proceedings To Determine Whether To Approve or Disapprove SR-
NYSEArca-2016-100 and Grounds for Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Act \12\ to determine whether the proposed rule 
change, as modified by Amendment No. 1, 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 stated below, the Commission seeks and 
encourages interested persons to provide comments on the proposed rule 
change.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

    Pursuant to Section 19(b)(2)(B) of the Act,\13\ 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.'' \14\ The Exchange has submitted the proposed rule change 
because the Shares do not meet all of the ``generic'' listing 
requirements of Commentary .02(a) to NYSE Arca Equities Rule 5.2(j)(3). 
Namely, Commentary .02(a)(2) to NYSE Arca Equities Rule 5.2(j)(3) 
provides that, for an index or portfolio that underlies a series of 
Investment Company Units, components that in the aggregate account for 
at least 75% of the weight of such index or portfolio each shall have a 
minimum original principal amount outstanding of $100 million or more. 
Although the Index that underlies the Shares does not satisfy this 
requirement, the Exchange states that the Index is nonetheless 
sufficiently broad-based to deter potential manipulation because: (1) 
It is composed of approximately 3,063 issues and 474 unique issuers; 
(2) 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 (3) the total ($248 billion) and the average ($81 million) dollar 
amount outstanding of Index issues are ``substantial.'' \15\
---------------------------------------------------------------------------

    \13\ Id.
    \14\ 15 U.S.C. 78f(b)(5).
    \15\ Namely, according to the Exchange, 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.
---------------------------------------------------------------------------

    The Commission seeks comment on whether the Index characteristics 
the Exchange has identified, as noted above, provide sufficient basis 
for the Commission to determine that the Index, and thereby the Shares 
that overlie it, is not susceptible to manipulation. In this regard, 
the Commission notes that it recently approved a proposal to list and 
trade shares of an actively managed municipal bond ETF,\16\ where the 
listing exchange made a number of other representations regarding the 
type of municipal bonds that the fund would hold. For example, the 
exchange, in that instance, stated that the fund's investments in 
municipal securities would provide exposure to at least 15 different 
states, with no more than 30% of the value of the fund's net assets 
comprising municipal securities that provide exposure to any single 
state. Further, the exchange also noted that the fund would include 
securities from a minimum of 13 non-affiliated issuers.\17\ Although in 
this filing, the Fund would seek an inverse investment result of an 
index rather than actively manage a portfolio of municipal securities, 
the concerns regarding the susceptibility of the Index underlying the 
Shares to manipulation is similar to the concerns regarding the 
susceptibility of a portfolio to manipulation. Accordingly, the 
Commission seeks comment on whether the Exchange has demonstrated that 
its proposal is consistent with Section 6(b)(5) of the Act, and 
specifically whether the price of the Shares is susceptible to 
manipulation.
---------------------------------------------------------------------------

    \16\ See Securities Exchange Act Release No. 78913 (Sep. 23, 
2016), 81 FR 69109 (Oct. 5, 2016) (SR-NASDAQ-2016-002).
    \17\ For purposes of this restriction, the exchange provided 
that ``non-affiliated issuers'' are issuers that are not 
``affiliated persons'' within the meaning of Section 2(a)(3) of the 
1940 Act. Additionally, each state and each separate political 
subdivision, agency, authority, or instrumentality of such state, 
each multi-state agency or authority, and each guarantor, if any, 
would be treated as separate issuers of municipal securities.
---------------------------------------------------------------------------

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. In particular, the Commission invites the written 
views of interested persons concerning whether the proposal 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

[[Page 78233]]

request for an opportunity to make an oral presentation.\18\
---------------------------------------------------------------------------

    \18\ Section 19(b)(2) of the Act, as amended by the Securities 
Act Amendments of 1975, Pub. L. 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).
---------------------------------------------------------------------------

    Interested persons are invited to submit written data, views, and 
arguments regarding whether the proposal should be approved or 
disapproved by November 28, 2016. Any person who wishes to file a 
rebuttal to any other person's submission must file that rebuttal by 
December 12, 2016. The Commission asks that commenters address the 
sufficiency of the Exchange's statements in support of the proposal, 
which are set forth in Amendment No. 1 to the proposed rule change, in 
addition to any other comments they may wish to submit about the 
proposed rule change.
    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 Numbers 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 these filings 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 November 28, 2016. Rebuttal comments should 
be submitted by December 12, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
---------------------------------------------------------------------------

    \19\ 17 CFR 200.30-3(a)(57).
---------------------------------------------------------------------------

Brent J. Fields,
Secretary.
[FR Doc. 2016-26790 Filed 11-4-16; 8:45 am]
 BILLING CODE 8011-01-P
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.