Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change To List and Trade Shares of the IQ Municipal Insured ETF; IQ Municipal Short Duration ETF; and IQ Municipal Intermediate ETF Under NYSE Arca Equities Rule 8.600, 21573-21581 [2017-09311]

Download as PDF Federal Register / Vol. 82, No. 88 / Tuesday, May 9, 2017 / Notices Title Date 21573 ADAMS Accession No. STPNOC letter to NRC, Submittal of GSI–191 Chemical Effects Test Reports ............................................... 02/27/2014 NRC Letter to STPNOC, Request for Additional Information, Round 1 ............................................................ NUREG–0713, Volume 34, Occupational Radiation Exposure at Commercial Nuclear Power Reactors and Other Facilities 2012: Forty-Fifth Annual Report. STPNOC letter to NRC, Second Submittal of CASA Grande Source Code for STP’s Risk-Informed GSI– 191 Licensing Application. STPNOC letter to NRC, First Set of Responses to April, 2014, Requests for Additional Information Regarding STP Risk-Informed GSl–191 Licensing Application—Revised. STPNOC letter to NRC, Second Set of Responses to April, 2014, Requests for Additional Information Regarding STP Risk-Informed GSI–191 Licensing Application. STPNOC letter to NRC, Third Set of Responses to April, 2014, Requests for Additional Information Regarding STP Risk-Informed GSI–191 Licensing Application. NRC letter to STPNOC, Request for Additional Information, Round 2 ............................................................. STPNOC letter to NRC, Submittal of Updated CASA Grande Input for STP’s Risk-Informed GSI–191 Licensing Application. STPNOC letter to NRC, Description of Revised Risk-Informed Methodology and Responses to Round 2 Requests for Additional Information Regarding STP Risk-Informed GSI–191 Licensing Application. STPNOC letter to NRC, Supplement 2 to STP Pilot Submittal and Requests for Exemptions and License Amendment for a Risk-Informed Approach to Address Generic Safety Issue (GSI)–191 and Respond to Generic Letter (GL) 2004–02. NRC letter to STPNOC, Request for Additional Information, Round 3 (without Risk) ...................................... NRC letter to STPNOC, Request of Additional Information, Round 3 (Risk) .................................................... STPNOC letter to NRC, First Set of Responses to April 11, 2016, Requests for Additional Information Regarding STP Risk-Informed GSl–191 Licensing Application. STPNOC letter to NRC, Applicability of Application Supplement 1 Correspondence to Supplement 2 Regarding STP Risk-Informed GSI–191 Licensing Application. STPNOC letter to NRC, Second Set of Responses to April 11, 2016, Requests for Additional Information Regarding STP Risk-Informed GSI–191 Licensing Application. STPNOC letter to NRC, Third Set of Responses to April 11, 2016, Requests for Additional Information Regarding STP Risk-Informed GSI–191 Licensing Application—Part A. STPNOC letter to NRC, Third Set of Responses to April 11, 2016, Requests for Additional Information Regarding STP Risk-Informed GSI–191 Licensing Application—Part B. STPNOC letter to NRC, Third Set of Responses to April 11, 2016, Requests for Additional Information Regarding STP Risk-Informed GSI–191 Licensing Application—Part C. STPNOC letter to NRC, Third Set of Responses to April 11, 2016, Requests for Additional Information Regarding STP Risk-Informed GSI–191 Licensing Application—Part D. STPNOC letter to NRC, Third Set of Responses to April 11, 2016, Requests for Additional Information Regarding STP Risk-Informed GSI–191 Licensing Application—Part E. STPNOC letter to NRC, Supplement 3 to Revised Pilot Submittal and Requests for Exemptions and License Amendment for a Risk-Informed Approach to Address Generic Safety Issue (GSl)–191 and Respond to Generic Letter (GL) 2004–02. STPNOC letter to NRC, Response to Request for Additional Information Regarding Sensitivity Studies for STPNOC Risk-Informed Pilot GSl–191 Application. STPNOC letter to NRC, Revised Applicability Matrix for Response to Request for Additional Information Questions APLA–1a and APLA–1b Regarding STP Risk-Informed GSl–191 Licensing Application. STPNOC letter to NRC, Response to Request for Additional Information on Revised Applicability Matrix for Questions Regarding Risk-Informed GSI–191 Licensing Application. 04/15/2014 04/2014 ML14072A075 (package) ML14087A075 ML14126A597 05/15/2014 ML14149A354 05/22/2014 07/15/2014 ML14149A439 (package) ML14178A467 (package) ML14202A045 03/03/2015 03/10/2015 ML14357A171 ML15072A092 03/25/2015 ML15091A440 08/20/2015 ML15246A125 (package) 04/11/2016 05/26/2016 05/11/2016 ML16082A507 ML16125A290 ML16154A117 06/09/2016 ML16176A148 06/16/2016 ML16196A241 07/18/2016 ML16209A226 07/21/2016 ML16229A189 07/21/2016 ML16230A232 07/28/2016 ML16221A393 09/12/2016 ML16272A162 10/20/2016 ML16302A015 11/9/2016 ML16321A407 12/7/2016 ML16365A006 01/19/2017 ML17025A123 Dated at Rockville, Maryland, this 2nd day of May, 2017. For the Nuclear Regulatory Commission. Robert J. Pascarelli, Chief, Plant Licensing Branch IV, Division of Operating Reactor Licensing, Office of Nuclear Reactor Regulation. [FR Doc. 2017–09369 Filed 5–8–17; 8:45 am] mstockstill on DSK30JT082PROD with NOTICES BILLING CODE 7590–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–80584; File No. SR– NYSEArca–2017–44] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change To List and Trade Shares of the IQ Municipal Insured ETF; IQ Municipal Short Duration ETF; and IQ Municipal Intermediate ETF Under NYSE Arca Equities Rule 8.600 06/25/2014 (‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on April 20, 2017, NYSE Arca, Inc. (‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. May 3, 2017. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 2 15 1 15 VerDate Sep<11>2014 18:19 May 08, 2017 Jkt 241001 PO 00000 U.S.C.78s(b)(1). Frm 00072 Fmt 4703 3 17 Sfmt 4703 U.S.C. 78a. CFR 240.19b–4. E:\FR\FM\09MYN1.SGM 09MYN1 21574 Federal Register / Vol. 82, No. 88 / Tuesday, May 9, 2017 / Notices I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to list and trade shares of the IQ Municipal Insured ETF; IQ Municipal Short Duration ETF; and IQ Municipal Intermediate ETF (each a ‘‘Fund’’ and, collectively, the ‘‘Funds’’) under NYSE Arca Equities Rule 8.600 (‘‘Managed Fund Shares’’). The proposed change is available on the Exchange’s Web site at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change mstockstill on DSK30JT082PROD with NOTICES 1. Purpose The Exchange proposes to list and trade shares (‘‘Shares’’) of each Fund under NYSE Arca Equities Rule 8.600,4 which governs the listing and trading of Managed Fund Shares.5 The Shares will 4 The Securities and Exchange Commission (‘‘Commission’’) has approved for Exchange listing and trading shares of actively managed funds of the [sic] that principally hold municipal bonds. See, e.g., Securities Exchange Act Release Nos. 60981 (November 10, 2009), 74 FR 59594 (November 18, 2009) (SR–NYSEArca–2009–79) (order approving listing and trading of shares of the PIMCO ShortTerm Municipal Bond Strategy Fund and PIMCO Intermediate Municipal Bond Strategy Fund); 79293 (November 10, 2016), 81 FR 81189 (November 17, 2016) (SR–NYSEArca–2016–107) (order approving listing and trading of shares of Cumberland Municipal Bond ETF under Rule 8.600). The Commission also has approved listing and trading on the Exchange of shares of the SPDR Nuveen S&P High Yield Municipal Bond Fund under Commentary .02 of NYSE Arca Equities Rule 5.2(j)(3). See Securities Exchange Act Release No. 63881 (February 9, 2011), 76 FR 9065 (February 16, 2011) (SR–NYSEArca–2010–120). 5 A Managed Fund Share is a security that represents an interest in an investment company registered under the Investment Company Act of 1940 (15 U.S.C. 80a–1) (‘‘1940 Act’’) organized as an open-end investment company or similar entity that invests in a portfolio of securities selected by its investment adviser consistent with its investment objectives and policies. In contrast, an open-end investment company that issues VerDate Sep<11>2014 18:19 May 08, 2017 Jkt 241001 be offered by the IndexIQ Active ETF Trust (the ‘‘Trust’’), which is registered with the Commission as an open-end management investment company.6 Each Fund is a series of the Trust. The investment adviser to each Fund will be IndexIQ Advisors LLC (the ‘‘Adviser’’). MacKay Shields LLC will be each Fund’s sub-adviser (Subadviser). ALPS Distributors, Inc. Inc. [sic] will serve as the distributor (the ‘‘Distributor’’) of each Fund’s Shares on an agency basis. The Bank of New York Mellon (‘‘BNY Mellon’’) will serve as each Fund’s Administrator, Custodian, Transfer Agent and Securities Lending Agent. Commentary .06 to Rule 8.600 provides that, if the investment adviser to the investment company issuing Managed Fund Shares is affiliated with a broker-dealer, such investment adviser shall erect a ‘‘fire wall’’ between the investment adviser and the brokerdealer with respect to access to information concerning the composition and/or changes to such investment company portfolio.7 In addition, Investment Company Units, listed and traded on the Exchange under NYSE Arca Equities Rule 5.2(j)(3), seeks to provide investment results that correspond generally to the price and yield performance of a specific foreign or domestic stock index, fixed income securities index or combination thereof. 6 The Trust is registered under the 1940 Act. On February 24, 2017, the Trust filed with the Commission its registration statement on Form N– 1A under the Securities Act of 1933 (15 U.S.C. 77a) (‘‘Securities Act’’), and under the 1940 Act relating to the Funds (File Nos. 333–183489 and 811–22739) (‘‘Registration Statement’’). The description of the operation of the Trust and the Funds herein is based, in part, on the Registration Statement. In addition, the Commission has issued an order granting certain exemptive relief to the Trust under the 1940 Act. See Investment Company Act Release No. 30198 (September 10, 2012) (File No. 812– 13956) (‘‘Exemptive Order’’). 7 An investment adviser to an open-end fund is required to be registered under the Investment Advisers Act of 1940 (the ‘‘Advisers Act’’). As a result, the Adviser and Subadviser and their related personnel are subject to the provisions of Rule 204A–1 under the Advisers Act relating to codes of ethics. This Rule requires investment advisers to adopt a code of ethics that reflects the fiduciary nature of the relationship to clients as well as compliance with other applicable securities laws. Accordingly, procedures designed to prevent the communication and misuse of non-public information by an investment adviser must be consistent with Rule 204A–1 under the Advisers Act. In addition, Rule 206(4)–7 under the Advisers Act makes it unlawful for an investment adviser to provide investment advice to clients unless such investment adviser has (i) adopted and implemented written policies and procedures reasonably designed to prevent violation, by the investment adviser and its supervised persons, of the Advisers Act and the Commission rules adopted thereunder; (ii) implemented, at a minimum, an annual review regarding the adequacy of the policies and procedures established pursuant to subparagraph (i) above and the effectiveness of their implementation; and (iii) designated an individual (who is a supervised person) responsible for PO 00000 Frm 00073 Fmt 4703 Sfmt 4703 Commentary .06 further requires that personnel who make decisions on the open-end fund’s portfolio composition must be subject to procedures designed to prevent the use and dissemination of material nonpublic information regarding the open-end fund’s portfolio. The Adviser or Subadviser is not a registered broker-dealer but is affiliated with a broker-dealer. The Adviser and Subadviser have implemented a ‘‘fire wall’’ with respect to such broker-dealer affiliate regarding access to information concerning the composition of and/or changes to each Fund’s portfolio. In the event (a) the Adviser or Subadviser becomes registered as a broker-dealer or newly affiliated with a broker-dealer, or (b) any new adviser or sub-adviser to a Fund is a registered broker-dealer or becomes affiliated with a broker-dealer, the applicable adviser or sub-adviser will implement and maintain a fire wall with respect to its relevant personnel or broker-dealer affiliate regarding access to information concerning the composition and/or changes to a Fund’s portfolio, and will be subject to procedures designed to prevent the use and dissemination of material nonpublic information regarding such portfolio. IQ Municipal Insured ETF According to the Registration Statement, the Fund will seek current income exempt from federal income tax. The Fund, under normal market conditions,8 will invest at least 80% of its assets in municipal bonds (‘‘Municipal Bonds’’, as described below) that are covered by insurance policies that guarantee the timely administering the policies and procedures adopted under subparagraph (i) above. 8 The term ‘‘under normal market conditions’’ as used herein includes, but is not limited to, the absence of adverse market, economic, political or other conditions, including extreme volatility or trading halts in the fixed income markets or the financial markets generally; operational issues (e.g., systems failure) causing dissemination of inaccurate market information; or force majeure type events such as natural or man-made disaster, act of God, armed conflict, act of terrorism, riot or labor disruption or any similar intervening circumstance. On a temporary basis, including for defensive purposes, during the initial invest-up period (i.e., the six-week period following the commencement of trading of Shares on the Exchange) and during periods of high cash inflows or outflows (i.e., rolling periods of seven calendar days during which inflows or outflows of cash, in the aggregate, exceed 10% of a Fund’s net assets as of the opening of business on the first day of such periods), a Fund may depart from its principal investment strategies; for example, it may hold a higher than normal proportion of its assets in cash. During such periods, a Fund may not be able to achieve its investment objectives. A Fund may adopt a defensive strategy when the Adviser believes securities in which a Fund normally invests have elevated risks due to political or economic factors and in other extraordinary circumstances. E:\FR\FM\09MYN1.SGM 09MYN1 Federal Register / Vol. 82, No. 88 / Tuesday, May 9, 2017 / Notices payment of principal and interest. The Fund generally will maintain a dollarweighted average duration within plus or minus two years of the dollarweighted average duration of the S&P Municipal Bond Insured Index.9 For [sic] Fund, as well as the IQ Municipal Short Duration ETF and IQ Intermediate ETF which are discussed below, the Subadviser’s investment process will begin with an assessment of macro factors that may impact the municipal bond market, as well as other regulatory, tax, governmental, and technical factors that may impact the municipal bond market. Following the assessment of these factors, the Subadviser will develop an investment strategy to position a Fund among various sectors of the municipal bond market and different states. The Subadviser then will employ a fundamental, ‘‘bottom-up’’ credit research analysis to select individual Municipal Bonds. mstockstill on DSK30JT082PROD with NOTICES Municipal Bonds For purposes of this filing, the term ‘‘Municipal Bonds’’ as applied to each of the Funds includes the following: • Municipal lease obligations (and certificates of participation in such obligations); • municipal general obligation bonds (including industrial development bonds issued pursuant to federal tax law), which are issued for either project or enterprise financings in which the bond issuer pledges to the bondholders the revenues generated by the operating projects financed from the proceeds of the bond issuance; • limited obligation bonds, which are payable only from the revenues derived from a particular facility or class of facilities or, in some cases from the proceeds of a special excise or other specific revenue source; • municipal revenue bonds (which are typically secured by revenues generated by the issuer), including revenue anticipation notes; • municipal bond anticipation notes (which are normally issued to provide interim financial assistance until longterm financing can be arranged); • Municipal Bonds that feature credit enhancements, such as lines of credit, letters of credit, municipal bond insurance, and standby bond purchase agreements; 9 Municipal bonds are issued by or on behalf of the District of Columbia, states, territories, commonwealths and possessions of the United States and their political subdivisions and agencies, authorities and instrumentalities. Municipal securities, which may be issued in various forms, including bonds and notes, are issued to obtain funds for various public purposes. VerDate Sep<11>2014 18:19 May 08, 2017 Jkt 241001 • discount bonds (which may be originally issued at a discount to par value or sold at market price below par value); • premium bonds, which are sold at a premium to par value; • zero coupon bonds, which are issued at an original issue discount, with the full value, including accrued interest, paid at maturity; • taxable municipal bonds, including Build America Bonds; • municipal notes; • municipal cash equivalents; • private activity bonds (including without limitation industrial development bonds); • pre-refunded and escrowed to maturity bonds; and • securities issued by entities whose underlying assets are Municipal Bonds (i.e., tender option bond (TOB) trusts and custodial receipts trusts and variable rate demand notes (VRDNs) that pay interest monthly or quarterly based on a floating rate that is reset daily or weekly based on an index of short-term municipal rates). The Fund may invest more than 25% of its total assets in Municipal Bonds that are related in such a way that an economic, business or political development or change affecting one such security could also affect the other securities. However, the Fund’s investments will be diversified among a minimum of ten different sectors of the Municipal Bond market. The Fund’s investments in Municipal Bonds will include investments in state and local (e.g., county, city, town) and authorityissued Municipal Bonds relating to such sectors as the following: State general obligation; local general obligation; education; hospital; housing; industrial development revenue (IDR)/pollution control revenue (PCR); power; resource recovery; transportation; water/sewer; leasing; special tax; and pre-refunded bonds. The Fund’s investments will be diversified among at least 15 different states, with no more than 30% of the Fund’s securities invested in municipal securities from a single state. Under normal market conditions, no security (excluding Treasury securities) will represent more than 25% of the weight of the portfolio, and the five highest weighed securities will not, in the aggregate, account for more than 50% of the weight of the Fund. No Municipal Bond held by the Fund will exceed 5% of the weight of the Fund’s portfolio and no single Municipal Bond issuer will account for more than 8% of the weight of the Fund’s portfolio. The Fund will PO 00000 Frm 00074 Fmt 4703 Sfmt 4703 21575 hold Municipal Bonds of a minimum of 25 non-affiliated issuers.10 Other Investments With respect to each of the Funds, while a Fund, under normal market conditions, will invest at least 80% of its assets in Municipal Bonds, as described above, a Fund may invest its remaining assets in other assets and financial instruments, as described below. A Fund may invest in shares of exchange-traded funds (‘‘ETFs’’) and money market funds,11 and may invest directly and indirectly in: Fixed rate and floating rate U.S. government securities, including bills, notes and bonds differing as to maturity and rates of interest, which are either issued or guaranteed by the U.S. Treasury or by U.S. government agencies or instrumentalities (‘‘U.S. Government Securities’’); repurchase agreements; commercial paper; and may purchase securities on a when-issued basis or for settlement at a future date (forward commitment), if a Fund holds sufficient liquid assets to meet the purchase price (collectively, ‘‘Other Investments’’). IQ Municipal Short Duration ETF According to the Registration Statement, the Fund will seek current income exempt from federal income tax. The Fund, under normal market conditions, will invest at least 80% of its assets in Municipal Bonds. The Fund generally will maintain a dollarweighted average portfolio duration of three years or less. The Fund may invest more than 25% of its total assets in Municipal Bonds that are related in such a way that an economic, business or political development or change affecting one such security could also affect the other securities. However, the Fund’s investments will be diversified among a minimum of ten different sectors of the municipal bond market. The Fund’s investments will be diversified among at least 15 different states, with no more than 30% of the Fund’s securities invested in municipal securities from a single state. Under normal market 10 For purposes of this restriction, 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, will be treated as separate issuers of Municipal Bonds. 11 For purposes of this filing, ETFs include Investment Company Units (as described in NYSE Arca Equities Rule 5.2(j)(3)); Portfolio Depositary Receipts (as described in NYSE Arca Equities Rule 8.100); and Managed Fund Shares (as described in NYSE Arca Equities Rule 8.600). The ETFs all will be listed and traded in the U.S. on registered exchanges. E:\FR\FM\09MYN1.SGM 09MYN1 21576 Federal Register / Vol. 82, No. 88 / Tuesday, May 9, 2017 / Notices conditions, no security (excluding Treasury securities) will represent more than 25% of the weight of the portfolio, and the five highest weighed securities will not, in the aggregate, account for more than 50% of the weight of the Fund. No Municipal Bond held by the Fund will exceed 5% of the weight of the Fund’s portfolio and no single Municipal Bond issuer will account for more than 8% of the weight of the Fund’s portfolio. The Fund will hold Municipal Bonds of a minimum of 25 non-affiliated issuers. While the Fund, under normal market conditions, will invest at least 80% of its assets in Municipal Bonds, the Fund may invest its remaining assets in Other Investments. mstockstill on DSK30JT082PROD with NOTICES IQ Municipal Intermediate ETF According to the Registration Statement, the Fund will seek current income exempt from federal income tax. The Fund, under normal market conditions, will invest at least 80% of its assets in Municipal Bonds. The Fund generally will maintain a dollarweighted average duration within plus or minus two years of the dollarweighted average duration of the S&P Municipal Bond Intermediate Index. The Fund may invest more than 25% of its total assets in Municipal Bonds that are related in such a way that an economic, business or political development or change affecting one such security could also affect the other securities. However, the Fund’s investments will be diversified among a minimum of ten different sectors of the municipal bond market. The Fund’s investments will be diversified among at least 15 different states, with no more than 30% of the Fund’s securities invested in municipal securities from a single state. Under normal market conditions, no security (excluding Treasury securities) will represent more than 25% of the weight of the portfolio, and the five highest weighed securities will not, in the aggregate, account for more than 50% of the weight of the Fund. No Municipal Bond held by the Fund will exceed 5% of the weight of the Fund’s portfolio and no single Municipal Bond issuer will account for more than 8% of the weight of the Fund’s portfolio. The Fund will hold Municipal Bonds of a minimum of 25 non-affiliated issuers. While the Fund, under normal market conditions, will invest at least 80% of its assets in Municipal Bonds, the Fund may invest its remaining assets in Other Investments. VerDate Sep<11>2014 18:19 May 08, 2017 Jkt 241001 Determination of Net Asset Value (‘‘NAV’’) According to the Registration Statement, the NAV of the Shares for a Fund will be equal to a Fund’s total assets minus the Fund’s total liabilities divided by the total number of Shares outstanding. Interest and investment income on the Trust’s assets accrue daily and are included in a Fund’s total assets. Expenses and fees (including investment advisory, management, administration and distribution fees, if any) accrue daily and are included in the Fund’s total liabilities. The NAV is calculated by the Administrator and Custodian and determined each business day as of the close of the NYSE Arca Core Trading Session (ordinarily 4:00 p.m. Eastern time). A Fund typically will value fixedincome portfolio securities, including Municipal Bonds, using last available bid prices or current market quotations provided by dealers or prices (including evaluated prices) supplied by a Fund’s approved independent third-party pricing services. Pricing services may use matrix pricing or valuation models that utilize certain inputs and assumptions to derive values. An amortized cost method of valuation may be used with respect to debt obligations with sixty days or less remaining to maturity unless the Adviser determines in good faith that such method does not represent fair value. Generally, trading in U.S. Government Securities, money market funds, and certain fixed-income securities is substantially completed each day at various times prior to the close of business on the NYSE. The values of such securities used in computing the NAV of the Fund will be determined as of such times. The value of any ETFs held by the Fund is based on such securities’ closing price on local markets, when available. The value of a money market fund held by a Fund will be based on the NAV of the money market fund. When market quotations or prices are not readily available or are deemed unreliable or not representative of an investment’s fair value, investments are valued using fair value pricing as determined in good faith by the Adviser under procedures established by and under the general supervision and responsibility of the Trust’s Board of Trustees. Indicative Intra-Day Value The approximate value of each Fund’s investments on a per-Share basis, the Indicative Intra-Day Value (‘‘IIV’’) will be disseminated by the Exchange or one PO 00000 Frm 00075 Fmt 4703 Sfmt 4703 or more major market data vendors every 15 seconds during the Exchange’s Core Trading Session (ordinarily 9:30 a.m. to 4:00 p.m., Eastern Time). The IIV should not be viewed as a ‘‘real-time’’ update of NAV because the IIV may not be calculated in the same manner as NAV, which is computed once per day. An independent third party calculator will calculate the IIV for each Fund during the Exchange’s Core Trading Session by dividing the ‘‘Estimated Fund Value’’ as of the time of the calculation by the total number of outstanding Shares of that Fund. ‘‘Estimated Fund Value’’ is the sum of the estimated amount of cash held in a Fund’s portfolio, the estimated amount of accrued interest owed to the Fund and the estimated value of the securities held in the Fund’s portfolio, minus the estimated amount of the Fund’s liabilities. The IIV will be calculated based on the same portfolio holdings disclosed on the Trust’s Web site. Purchase and Redemption of Creation Units Creation of Shares According to the Registration Statement, the Trust will issue and sell Shares of a Fund only in Creation Units of at least 50,000 Shares on a continuous basis through the Distributor, at their NAV next determined after receipt, on any business day (that is, any day on which the New York Stock Exchange (‘‘NYSE’’) is open for business.), for an order received in proper form. The consideration for purchase of a Creation Unit of a Fund generally will consist of an in-kind deposit of a designated portfolio of securities—the Deposit Securities—per each Creation Unit constituting a substantial replication, or a representation, of the securities included in a Fund’s portfolio and an amount of cash—the ‘‘Cash Component.’’ Together, the Deposit Securities and the Cash Component constitute the ‘‘Fund Deposit,’’ which represents the minimum initial and subsequent investment amount for a Creation Unit of a Fund. The Cash Component is an amount equal to the difference between the NAV of the Shares (per Creation Unit) and the market value of the Deposit Securities. The Administrator, through the National Securities Clearing Corporation (‘‘NSCC’’), will make available on each business day, immediately prior to the opening of business on the Exchange (currently 9:30 a.m., Eastern Time), the list of the names and the required number of shares of each Deposit Security to be included in the current E:\FR\FM\09MYN1.SGM 09MYN1 Federal Register / Vol. 82, No. 88 / Tuesday, May 9, 2017 / Notices mstockstill on DSK30JT082PROD with NOTICES Fund Deposit (based on information at the end of the previous business day) for a Fund. In addition to the list of names and numbers of securities constituting the current Deposit Securities of a Fund Deposit, the Administrator, through the NSCC, also will make available on each business day, the estimated Cash Component, effective through and including the previous business day, per outstanding Creation Unit of a Fund. To be eligible to place orders to create a Creation Unit of a Fund, an entity must be (i) a ‘‘Participating Party’’, i.e., a broker-dealer or other participant in the clearing process through the Continuous Net Settlement System of the NSCC (the ‘‘Clearing Process’’), a clearing agency that is registered with the Commission; or (ii) a DTC Participant, and, in each case, must have executed an agreement (‘‘Participant Agreement’’) with the Trust, the Distributor and the Administrator with respect to creations and redemptions of Creation Units. A Participating Party and DTC Participant are collectively referred to as an ‘‘Authorized Participant.’’ All orders to create Creation Units must be placed for one or more Creation Unit size aggregations of at least 50,000 Shares. All orders to create Creation Units, whether through the Clearing Process (through a Participating Party) or outside the Clearing Process (through a DTC Participant), must be received by the Distributor no later than 3:00 p.m. Eastern Time, in each case on the date such order is placed in order for the creation of Creation Units to be effected based on the NAV of Shares of a Fund as next determined on such date after receipt of the order in proper form. Redemption of Shares Shares may be redeemed only in Creation Units at their NAV next determined after receipt of a redemption request in proper form by the Distributor and the Fund through the Administrator and only on a business day. Orders to redeem Creation Units must be received by the Administrator not later than 3:00 Eastern Time. With respect to each Fund, the Administrator, through the NSCC, will make available immediately prior to the opening of business on the Exchange (currently 9:30 a.m., Eastern Time) on each business day, the designated portfolio of securities (‘‘Fund Securities’’) per each Creation Unit that will be applicable (subject to possible amendment or correction) to redemption requests received in proper form (as defined below) on that day. Fund Securities received on redemption VerDate Sep<11>2014 18:19 May 08, 2017 Jkt 241001 may not be identical to Deposit Securities which are applicable to creations of Creation Units. Unless cash redemptions are available or specified for a Fund, the redemption proceeds for a Creation Unit generally will consist of Fund Securities—as announced by the Administrator on the business day of the request for redemption received in proper form— plus cash in an amount equal to the difference between the NAV of the Shares being redeemed, as next determined after a receipt of a request in proper form, and the value of the Fund Securities (the ‘‘Cash Redemption Amount’’), less a redemption transaction fee. In the event that the Fund Securities have a value greater than the NAV of the Shares, a compensating cash payment equal to the differential is required to be made by or through an Authorized Participant by the redeeming shareholder. The redemption proceeds for a Creation Unit of a Fund will consist solely of cash in an amount equal to the NAV of the Shares being redeemed, as next determined after receipt of a request in proper form less a redemption transaction fee. If it is not possible to effect deliveries of the Fund Securities, the Trust may in its discretion exercise its option to redeem such Shares in cash, and the redeeming Beneficial Owner will be required to receive its redemption proceeds in cash. In addition, an investor may request a redemption in cash which a Fund may, in its sole discretion, permit. In either case, the investor will receive a cash payment equal to the NAV of its Shares based on the NAV of Shares of a Fund next determined after the redemption request is received in proper form. A Fund may also, in its sole discretion, upon request of a shareholder, provide such redeemer a portfolio of securities which differs from the exact composition of a Fund Securities but does not differ in NAV. Availability of Information Each Fund will disclose on the Funds’ Web site (www.iqetfs.com) at the start of each business day the identities and quantities of the securities and other assets held by each Fund that will form the basis of the Fund’s calculation of its net asset value (‘‘NAV’’) on that business day. The portfolio holdings so disclosed will be based on information as of the close of business on the prior business day and/or trades that have been completed prior to the opening of business on that business day and that are expected to settle on the business day. Online disclosure of such holdings is publicly available at no charge. PO 00000 Frm 00076 Fmt 4703 Sfmt 4703 21577 The Web site for the Funds will contain the following information, on a per-Share basis, for each Fund: (1) The prior business day’s NAV; (2) the reported midpoint of the bid-ask spread at the time of NAV calculation (the ‘‘Bid-Ask Price’’); (3) a calculation of the premium or discount of the Bid-Ask Price against such NAV; and (4) data in chart format displaying the frequency distribution of discounts and premiums of the Bid-Ask Price against the NAV, within appropriate ranges, for each of the four previous calendar quarters (or for the life of a Fund if, shorter). In addition, on each business day, before the commencement of trading in Shares on the NYSE Arca, each Fund will disclose on its Web site the identities and quantities of the portfolio securities and other assets held by each Fund that will form the basis for the calculation of NAV at the end of the business day. On a daily basis, the Funds will disclose the information required under NYSE Arca Equities Rule 8.600 (c)(2) to the extent applicable. Each Fund’s portfolio holdings will be disclosed on the Funds’ Web site daily after the close of trading on the Exchange and prior to the opening of trading on the Exchange the following day. Information regarding the extent and frequency with which market prices of Shares have tracked the relevant Fund’s NAV for the most recently completed calendar year and the quarters since that year will be available without charge on the Funds’ Web site. The approximate value of a Fund’s investments on a per-Share basis, the IIV, will be disseminated every 15 seconds during the Exchange Core Trading Session (ordinarily 9:30 a.m. to 4:00 p.m., Eastern Time). Investors can also obtain each Fund’s Statement of Additional Information (‘‘SAI’’), shareholder reports, Form N– CSR and Form N–SAR, filed twice a year. The Funds’ SAI and shareholder reports will be available free upon request from the Trust, and those documents and the Form N–CSR and Form N–SAR may be viewed on-screen or downloaded from the Commission’s Web site at www.sec.gov. Information regarding market price and trading volume of the Shares will be continually available on a real-time basis throughout the day on brokers’ computer screens and other electronic services. Information regarding the previous day’s closing price and trading volume information for the Shares will be publicly available. Quotation and last sale information for the Shares and will be available via the Consolidated Tape Association E:\FR\FM\09MYN1.SGM 09MYN1 21578 Federal Register / Vol. 82, No. 88 / Tuesday, May 9, 2017 / Notices (‘‘CTA’’) high-speed line, and from the national securities exchange [sic] on which they are listed. Quotation information from brokers and dealers or pricing services will be available for Municipal Bonds and Other Investments. Price information for money market funds will be available from the applicable investment company’s Web site and from market data vendors. Pricing information regarding Municipal Bonds and Other Investments will generally be available through nationally recognized data service providers through subscription agreements. In addition, the IIV (which is the Portfolio Indicative Value, as defined in NYSE Arca Equities Rule 8.600(c)(3)), will be widely disseminated at least every 15 seconds during the Core Trading Session by one or more major market data vendors or other information providers.12 mstockstill on DSK30JT082PROD with NOTICES Investment Restrictions Each Fund may hold up to an aggregate amount of 15% of its net assets in illiquid assets (calculated at the time of investment) deemed illiquid by the Adviser, consistent with Commission guidance. Each Fund will monitor its portfolio liquidity on an ongoing basis to determine whether, in light of current circumstances, an adequate level of liquidity is being maintained, and will consider taking appropriate steps in order to maintain adequate liquidity if, through a change in values, net assets, or other circumstances, more than 15% of a Fund’s net assets are held in illiquid assets. Illiquid assets include securities subject to contractual or other restrictions on resale and other instruments that lack readily available markets as determined in accordance with Commission staff guidance.13 12 Currently, it is the Exchange’s understanding that several major market data vendors display and/ or make widely available IIVs taken from CTA or other data feeds. 13 The Commission has stated that long-standing Commission guidelines have required open-end funds to hold no more than 15% of their net assets in illiquid securities and other illiquid assets. See Investment Company Act Release No. 28193 (March 11, 2008), 73 FR 14618 (March 18, 2008), footnote 34. See also, Investment Company Act Release No. 5847 (October 21, 1969), 35 FR 19989 (December 31, 1970) (Statement Regarding ‘‘Restricted Securities’’); Investment Company Act Release No. 18612 (March 12, 1992), 57 FR 9828 (March 20, 1992) (Revisions of Guidelines to Form N–1A). A fund’s portfolio security is illiquid if it cannot be disposed of in the ordinary course of business within seven days at approximately the value ascribed to it by the fund. See Investment Company Act Release No. 14983 (March 12, 1986), 51 FR 9773 (March 21, 1986) (adopting amendments to Rule 2a–7 under the 1940 Act); Investment Company Act Release No. 17452 (April 23, 1990), 55 FR 17933 (April 30, 1990) (adopting Rule 144A under the Securities Act). VerDate Sep<11>2014 18:19 May 08, 2017 Jkt 241001 Each Fund’s investments will be consistent with its investment goal and will not be used to provide multiple returns of a benchmark or to produce leveraged returns. Each Fund may invest more than 25% of its total assets in municipal bonds that are related in such a way that an economic, business or political development or change affecting one such security could also affect the other securities. However, a Fund’s investments will be diversified among a minimum of ten different sectors of the municipal bond market. A Fund’s investments will be diversified among at least 15 different states, with no more than 30% of a Fund’s securities invested in municipal securities from a single state. Under normal market conditions, no security (excluding Treasury securities) will represent more than 25% of the weight of the portfolio, and the five highest weighed securities will not, in the aggregate, account for more than 50% of the weight of the Fund. No Municipal Bond held by the Fund will exceed 5% of the weight of the Fund’s portfolio and no single Municipal Bond issuer will account for more than 8% of the weight of the Fund’s portfolio. The Fund will hold Municipal Bonds of a minimum of 25 non-affiliated issuers. Application of Generic Listing Requirements The Exchange is submitting this proposed rule change because the portfolios for the Funds will not meet all of the ‘‘generic’’ listing requirements of Commentary .01 to NYSE Arca Equities Rule 8.600 applicable to the listing of Managed Fund Shares. Each Fund’s portfolio will meet all such requirements except for those set forth in Commentary .01(b)(1).14 The Exchange believes that it is appropriate and in the public interest to approve listing and trading of Shares of the Funds on the Exchange notwithstanding that the Funds would not meet the requirements of Commentary .01(b)(1) to Rule 8.600 in that the Funds’ investments in municipal securities will be welldiversified. The Exchange believes that permitting Fund Shares to be listed and traded on the Exchange notwithstanding that less than 75% of the weight of a Fund’s portfolio may consist of components with less than $100 million minimum original principal amount outstanding 14 Commentary .01(b)(1) to NYSE Arca Equities Rule 8.600 provides that components that in the aggregate account for at least 75% of the fixed income weight of the portfolio each shall have a minimum original principal amount outstanding of $100 million or more. PO 00000 Frm 00077 Fmt 4703 Sfmt 4703 would provide the Funds with greater ability to select from a broad range of Municipal Bonds, as described above, that would support a Fund’s investment goal. The Exchange believes that, notwithstanding that each Fund’s portfolio may not satisfy Commentary .01(b)(1) to Rule 8.600, the Funds’ portfolios will not be susceptible to manipulation. As noted above, the Funds’ investments will be diversified among a minimum of ten different sectors of the municipal bond market. The Funds’ investments will be diversified among at least 15 different states, with no more than 30% of a Fund’s securities invested in municipal securities from a single state. Additionally, no Municipal Bond held by a Fund will exceed 5% of the weight of the Fund’s portfolio and no single Municipal Bond issuer will account for more than 8% of the weight of a Fund’s portfolio. A Fund will hold Municipal Bonds of a minimum of 25 nonaffiliated issuers. The Exchange notes that, other than Commentary .01(b)(1) to Rule 8.600, each Fund’s portfolio will meet all other requirements of Rule 8.600. Trading Halts With respect to trading halts, the Exchange may consider all relevant factors in exercising its discretion to halt or suspend trading in the Shares of a Fund.15 Trading in Shares of a Fund will be halted if the circuit breaker parameters in NYSE Arca Equities Rule 7.12 have been reached. Trading also may be halted because of market conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable. Trading Rules The Exchange deems the Shares to be equity securities, thus rendering trading in the Shares subject to the Exchange’s existing rules governing the trading of equity securities. Shares will trade on the NYSE Arca Marketplace from 4 a.m. to 8 p.m., Eastern Time in accordance with NYSE Arca Equities Rule 7.34 (Early, Core, and Late Trading Sessions). The Exchange has appropriate rules to facilitate transactions in the Shares during all trading sessions. As provided in NYSE Arca Equities Rule 7.6, the minimum price variation (‘‘MPV’’) for quoting and entry of orders in equity securities traded on the NYSE Arca Marketplace is $0.01, with the exception of securities that are priced less than $1.00 for which the MPV for order entry is $0.0001. 15 See E:\FR\FM\09MYN1.SGM NYSE Arca Equities Rule 7.12. 09MYN1 Federal Register / Vol. 82, No. 88 / Tuesday, May 9, 2017 / Notices The Shares of each Fund will conform to the initial and continued listing criteria under NYSE Arca Equities Rule 8.600. Consistent with NYSE Arca Equities Rule 8.600(d)(2)(B)(ii), the Adviser will implement and maintain, or be subject to, procedures designed to prevent the use and dissemination of material non-public information regarding the actual components of a Fund’s portfolio. The Exchange represents that, for initial and/or continued listing, a Fund will be in compliance with Rule 10A–3 16 under the Act, as provided by NYSE Arca Equities Rule 5.3. A minimum of 100,000 Shares will be outstanding at the commencement of trading on the Exchange. The Exchange will obtain a representation from the issuer of the Shares that the NAV per Share will be calculated daily and that the NAV and the Disclosed Portfolio will be made available to all market participants at the same time. Each Fund’s investments will be consistent with a Fund’s investment goal and will not be used to enhance leverage. Surveillance The Exchange represents that trading in the Shares will be subject to the existing trading surveillances, administered by the Financial Industry Regulatory Authority (‘‘FINRA’’) on behalf of the Exchange, or by regulatory staff of the Exchange, which are designed to detect violations of Exchange rules and applicable federal securities laws. 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.17 The surveillances referred to above generally focus on detecting securities trading outside their normal patterns, which could be indicative of manipulative or other violative activity. When such situations are detected, surveillance analysis follows and investigations are opened, where appropriate, to review the behavior of all relevant parties for all relevant trading violations.18 16 17 CFR 240.10A–3. conducts cross-market surveillances on behalf of the Exchange pursuant to a regulatory services agreement. The Exchange is responsible for FINRA’s performance under this regulatory services agreement. 18 For a list of the current members of ISG, see www.isgportal.org. The Exchange notes that not all components of the Disclosed Portfolio may trade on markets that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. mstockstill on DSK30JT082PROD with NOTICES 17 FINRA VerDate Sep<11>2014 18:19 May 08, 2017 Jkt 241001 The Exchange or FINRA, on behalf of the Exchange, or both, will communicate as needed regarding trading in the Shares and ETFs 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 ETFs from such markets and other entities. In addition, the Exchange may obtain information regarding trading in the Shares and ETFs from markets and other entities that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. In addition, FINRA, on behalf of the Exchange, is able to access, as needed, trade information for certain fixed income securities held by a Fund reported to FINRA’s Trade Reporting and Compliance Engine (‘‘TRACE’’). FINRA also can access data obtained from the Municipal Securities Rulemaking Board (‘‘MSRB’’) relating to municipal bond trading activity for surveillance purposes in connection with trading in the Shares. In addition, the Exchange also has a general policy prohibiting the distribution of material, non-public information by its employees. All statements and representations made in this filing regarding (a) the description of the portfolio, (b) limitations on portfolio holdings or reference assets, or (c) or (c) [sic] the applicability of Exchange listing rules specified in this rule filing shall constitute continued listing requirements for listing the Shares of a Fund on the Exchange. The issuer 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). Information Bulletin Prior to the commencement of trading, the Exchange will inform its Equity Trading Permit Holders in an Information Bulletin (‘‘Bulletin’’) of the special characteristics and risks associated with trading the Shares. Specifically, the Bulletin will discuss the following: (1) The procedures for purchases and redemptions of Shares in Creation Unit aggregations (and that Shares are not individually redeemable); (2) NYSE Arca Equities Rule 9.2(a), PO 00000 Frm 00078 Fmt 4703 Sfmt 4703 21579 which imposes a duty of due diligence on its Equity Trading Permit Holders to learn the essential facts relating to every customer prior to trading the Shares; (3) the risks involved in trading the Shares during the Opening and Late Trading Sessions when an updated IIV will not be calculated or publicly disseminated; (4) how information regarding the IIV and the Disclosed Portfolio is disseminated; (5) the requirement that Equity Trading Permit Holders deliver a prospectus to investors purchasing newly issued Shares prior to or concurrently with the confirmation of a transaction; and (6) trading information. In addition, the Bulletin will reference that each Fund is subject to various fees and expenses described in the Registration Statement. The Bulletin will discuss any exemptive, no-action, and interpretive relief granted by the Commission from any rules under the Act. The Bulletin will also disclose that the NAV for the Shares will be calculated after 4:00 p.m., Eastern Time each trading day. 2. Statutory Basis The basis under the Act for this proposed rule change is the requirement under Section 6(b)(5) 19 that an exchange have rules that are designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to, and perfect the mechanism of a free and open market and, in general, to protect investors and the public interest. The Exchange believes that the proposed rule change is designed to prevent fraudulent and manipulative acts and practices in that the Shares will be listed and traded on the Exchange pursuant to the initial and continued listing criteria in NYSE Arca Equities Rule 8.600. The Exchange has in place surveillance procedures that are adequate to properly monitor trading in the Shares in all trading sessions and to deter and detect violations of Exchange rules and applicable federal securities laws. The Exchange or FINRA, on behalf of the Exchange, or both, will communicate as needed regarding trading in the Shares 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 from such markets and other entities. In addition, the Exchange may obtain information regarding trading in the Shares from markets and other entities that are members of ISG or with which the 19 15 E:\FR\FM\09MYN1.SGM U.S.C. 78f(b)(5). 09MYN1 mstockstill on DSK30JT082PROD with NOTICES 21580 Federal Register / Vol. 82, No. 88 / Tuesday, May 9, 2017 / Notices Exchange has in place a comprehensive surveillance sharing agreement. In addition, FINRA, on behalf of the Exchange, is able to access, as needed, trade information for certain fixed income securities held by a Fund reported to TRACE. FINRA also can access data obtained from the MSRB relating to municipal bond trading activity for surveillance purposes in connection with trading in the Shares. Each Fund may not purchase illiquid assets if, in the aggregate, more than 15% of its net assets would be invested in illiquid assets. The Adviser is not registered as a broker-dealer but is affiliated with a broker-dealer and will implement and maintain a fire wall with respect to each of its relevant personnel or broker-dealer affiliate regarding access to information concerning the composition and/or changes to the portfolios. The Exchange believes that it is appropriate and in the public interest to approve listing and trading of Shares of the Funds on the Exchange notwithstanding that the Funds would not meet the requirements of Commentary .01(b)(1) to Rule 8.600 in that the Funds’ investments in municipal securities will be welldiversified. As noted above, the Funds’ investments will be diversified among a minimum of ten different sectors of the municipal bond market. The Funds’ investments will be diversified among at least 15 different states, with no more than 30% of a Fund’s securities invested in municipal securities from a single state. Additionally, no Municipal Bond held by a Fund will exceed 5% of the weight of the Fund’s portfolio and no single Municipal Bond issuer will account for more than 8% of the weight of a Fund’s portfolio. A Fund will hold Municipal Bonds of a minimum of 25 non-affiliated issuers. The Exchange notes that, other than Commentary .01(b)(1) to Rule 8.600, each Fund’s portfolio will meet all other requirements of Rule 8.600. The Exchange believes that permitting Fund Shares to be listed and traded on the Exchange notwithstanding that less than 75% of the weight of a Fund’s portfolio may consist of components with less than $100 million minimum original principal amount outstanding would provide the Funds with greater ability to select from a broad range of municipal securities, as described above, that would support a Fund’s investment goal. The proposed rule change is designed to promote just and equitable principles of trade and to protect investors and the public interest in that the Exchange will obtain a representation from the issuer VerDate Sep<11>2014 18:19 May 08, 2017 Jkt 241001 of the Shares that the NAV per Share will be calculated daily and that the NAV and the Disclosed Portfolio will be made available to all market participants at the same time. In addition, a large amount of information is publicly available regarding each Fund and the Shares, thereby promoting market transparency. Quotation and last sale information for the Shares and ETFs will be available via the CTA highspeed line, and from the national securities exchange [sic] on which they are listed. Prior to the commencement of trading, the Exchange will inform its Equity Trading Permit Holders in an Information Bulletin of the special characteristics and risks associated with trading the Shares. Trading in Shares of the Funds will be halted if the circuit breaker parameters in NYSE Arca Equities Rule 7.12 have been reached or because of market conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable. Trading in the Shares will be subject to NYSE Arca Equities Rule 8.600(d)(2)(D), which sets forth circumstances under which Shares of the Funds may be halted. In addition, as noted above, investors will have ready access to information regarding the Funds’ holdings, the IIV, the Disclosed Portfolio, and quotation and last sale information for the Shares. The proposed rule change is designed to perfect the mechanism of a free and open market and, in general, to protect investors and the public interest in that it will facilitate the listing and trading of additional types of actively-managed exchange-traded products that principally hold municipal bonds and that will enhance competition among market participants, to the benefit of investors and the marketplace. As noted above, the Exchange has in place surveillance procedures relating to trading in the Shares and may obtain information via ISG from other exchanges that are members of ISG or with which the Exchange has entered into a comprehensive surveillance sharing agreement. In addition, as noted above, investors will have ready access to information regarding each Fund’s holdings, IIV, Disclosed Portfolio, and quotation and last sale information for the Shares. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purpose of the Act. The Exchange notes that the proposed rule change will facilitate the listing and trading of PO 00000 Frm 00079 Fmt 4703 Sfmt 4703 additional types of actively-managed exchange-traded products that principally hold municipal bonds and that will enhance competition among market participants, to the benefit of investors and the marketplace. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) by order approve or disapprove such proposed rule change; or (B) institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NYSEArca–2017–44 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–2017–44. 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 (http://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 E:\FR\FM\09MYN1.SGM 09MYN1 Federal Register / Vol. 82, No. 88 / Tuesday, May 9, 2017 / Notices 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–2017–44 and should be submitted on or before May 30, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.20 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–09311 Filed 5–8–17; 8:45 am] BILLING CODE P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–80585; File No. SR– NASDAQ–2017–041] Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Exchange’s Fees at Rule 7047 mstockstill on DSK30JT082PROD with NOTICES May 3, 2017. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on April 20, 2017, The NASDAQ Stock Market LLC (‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 20 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 VerDate Sep<11>2014 18:19 May 08, 2017 Jkt 241001 21581 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend the Exchange’s fees at Rule 7047 to clarify the application of Nasdaq fees to Derived Data in light of changing industry practices. Specifically, the proposed changes will: (i) Limit application of the Derived Data Distributor Fee for Nasdaq Basic in Rule 7047(c)(2) only to those Distributors that both create and distribute Derived Data; (ii) clarify that the Nasdaq Basic per Subscriber user fees in Rules 7047(b)(1) and (b)(2), and the distributor fee in Rule 7047(c)(1), cover both Nasdaq data feeds and Derived Data therefrom; and (iii) clarify that the enterprise licenses for Professional and Non-Professional Subscribers in Rules 7047(b)(4) and (b)(5) cover the distribution of Derived Data from Nasdaq Basic. The proposal is described in further detail below. The text of the proposed rule change is available on the Exchange’s Web site at http://nasdaq.cchwallstreet.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. for Professional and Non-Professional Subscribers in Rules 7047(b)(4) and (b)(5) cover the distribution of Derived Data from Nasdaq Basic. 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 Exchange 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 these 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 aspects of such statements. Derived Data Distributor Fee A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to clarify the application of Nasdaq fees to Derived Data in light of changing industry practices. Specifically, the proposed changes will: (i) Limit application of the Derived Data Distributor Fee for Nasdaq Basic in Rule 7047(c)(2) only to those Distributors that both create and distribute Derived Data; (ii) clarify that the Nasdaq Basic per Subscriber user fees in Rules 7047(b)(1) and (b)(2), and the distributor fee in Rule 7047(c)(1), cover both Nasdaq data feeds and Derived Data therefrom; and (iii) clarify that the enterprise licenses PO 00000 Frm 00080 Fmt 4703 Sfmt 4703 Nasdaq Basic Nasdaq Basic provides best bid and offer information from the Nasdaq Market Center, as well as last sale transaction reports from both the Nasdaq Market Center and the FINRA/ Nasdaq Trade Reporting Facility (‘‘TRF’’). This is a subset of the ‘‘core’’ quotation and last sale data provided by securities information processors under the CQ/CT Plan and the UTP Plan. The three components of Nasdaq Basic, which may be purchased individually or in combination, are: (i) Nasdaq Basic for Nasdaq, which contains the best bid and offer on the Nasdaq Market Center and last sale transaction reports for Nasdaq and the FINRA/Nasdaq TRF for Nasdaq-listed stocks; (ii) Nasdaq Basic for NYSE, which covers NYSE-listed stocks, and (iii) Nasdaq Basic for NYSE MKT, which provides data on stocks listed on NYSE MKT and other listing venues whose quotes and trade reports are disseminated on Tape B. A Distributor 3 of Derived Data 4 from Nasdaq Basic may pay a $1,500 per month fee to disseminate such data to an unlimited number of NonProfessional Subscribers 5 under Rule 7047(c)(2). If a Distributor elects not to pay the Derived Data Distributor Fee, the Distributor must pay the per Subscriber charges for NonProfessionals set forth in Rule 7047(b)(2). In either case, Distributors of Derived Data must also pay the 3 A ‘‘Distributor’’ is ‘‘any entity that receives NASDAQ Basic data directly from NASDAQ or indirectly through another entity and then distributes it to one or more Subscribers.’’ Nasdaq Rule 7047(d)(1). 4 ‘‘Derived Data’’ is ‘‘pricing data or other information that is created in whole or in part from NASDAQ information; it cannot be reverse engineered to recreate NASDAQ information, or be used to create other data that is recognizable as a reasonable substitute for NASDAQ information.’’ Nasdaq Rule 7047(d)(5). 5 A ‘‘Non-Professional Subscriber’’ is a natural person who is not (i) registered or qualified in any capacity with the Commission, the Commodity Futures Trading Commission, any state securities agency, any securities exchange or association, or (ii) any commodities or futures contract market or association; engaged as an ‘‘investment adviser’’ as that term is defined in Section 201(11) of the Investment Advisers Act of 1940 (whether or not registered or qualified under that Act); or (iii) employed by a bank or other organization exempt from registration under federal or state securities laws to perform functions that would require registration or qualification if such functions were performed for an organization not so exempt. Nasdaq Rule 7047(d)(3)(A). E:\FR\FM\09MYN1.SGM 09MYN1

Agencies

[Federal Register Volume 82, Number 88 (Tuesday, May 9, 2017)]
[Notices]
[Pages 21573-21581]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-09311]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80584; File No. SR-NYSEArca-2017-44]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change To List and Trade Shares of the IQ Municipal 
Insured ETF; IQ Municipal Short Duration ETF; and IQ Municipal 
Intermediate ETF Under NYSE Arca Equities Rule 8.600

May 3, 2017.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on April 20, 2017, NYSE Arca, Inc. (``Exchange'' or ``NYSE 
Arca'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C.78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.

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[[Page 21574]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to list and trade shares of the IQ Municipal 
Insured ETF; IQ Municipal Short Duration ETF; and IQ Municipal 
Intermediate ETF (each a ``Fund'' and, collectively, the ``Funds'') 
under NYSE Arca Equities Rule 8.600 (``Managed Fund Shares''). The 
proposed change is available on the Exchange's Web site at 
www.nyse.com, at the principal office of the Exchange, and at the 
Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to list and trade shares (``Shares'') of each 
Fund under NYSE Arca Equities Rule 8.600,\4\ which governs the listing 
and trading of Managed Fund Shares.\5\ The Shares will be offered by 
the IndexIQ Active ETF Trust (the ``Trust''), which is registered with 
the Commission as an open-end management investment company.\6\ Each 
Fund is a series of the Trust.
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    \4\ The Securities and Exchange Commission (``Commission'') has 
approved for Exchange listing and trading shares of actively managed 
funds of the [sic] that principally hold municipal bonds. See, e.g., 
Securities Exchange Act Release Nos. 60981 (November 10, 2009), 74 
FR 59594 (November 18, 2009) (SR-NYSEArca-2009-79) (order approving 
listing and trading of shares of the PIMCO Short-Term Municipal Bond 
Strategy Fund and PIMCO Intermediate Municipal Bond Strategy Fund); 
79293 (November 10, 2016), 81 FR 81189 (November 17, 2016) (SR-
NYSEArca-2016-107) (order approving listing and trading of shares of 
Cumberland Municipal Bond ETF under Rule 8.600). The Commission also 
has approved listing and trading on the Exchange of shares of the 
SPDR Nuveen S&P High Yield Municipal Bond Fund under Commentary .02 
of NYSE Arca Equities Rule 5.2(j)(3). See Securities Exchange Act 
Release No. 63881 (February 9, 2011), 76 FR 9065 (February 16, 2011) 
(SR-NYSEArca-2010-120).
    \5\ A Managed Fund Share is a security that represents an 
interest in an investment company registered under the Investment 
Company Act of 1940 (15 U.S.C. 80a-1) (``1940 Act'') organized as an 
open-end investment company or similar entity that invests in a 
portfolio of securities selected by its investment adviser 
consistent with its investment objectives and policies. In contrast, 
an open-end investment company that issues Investment Company Units, 
listed and traded on the Exchange under NYSE Arca Equities Rule 
5.2(j)(3), seeks to provide investment results that correspond 
generally to the price and yield performance of a specific foreign 
or domestic stock index, fixed income securities index or 
combination thereof.
    \6\ The Trust is registered under the 1940 Act. On February 24, 
2017, the Trust filed with the Commission its registration statement 
on Form N-1A under the Securities Act of 1933 (15 U.S.C. 77a) 
(``Securities Act''), and under the 1940 Act relating to the Funds 
(File Nos. 333-183489 and 811-22739) (``Registration Statement''). 
The description of the operation of the Trust and the Funds herein 
is based, in part, on the Registration Statement. In addition, the 
Commission has issued an order granting certain exemptive relief to 
the Trust under the 1940 Act. See Investment Company Act Release No. 
30198 (September 10, 2012) (File No. 812-13956) (``Exemptive 
Order'').
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    The investment adviser to each Fund will be IndexIQ Advisors LLC 
(the ``Adviser''). MacKay Shields LLC will be each Fund's sub-adviser 
(Subadviser). ALPS Distributors, Inc. Inc. [sic] will serve as the 
distributor (the ``Distributor'') of each Fund's Shares on an agency 
basis. The Bank of New York Mellon (``BNY Mellon'') will serve as each 
Fund's Administrator, Custodian, Transfer Agent and Securities Lending 
Agent.
    Commentary .06 to Rule 8.600 provides that, if the investment 
adviser to the investment company issuing Managed Fund Shares is 
affiliated with a broker-dealer, such investment adviser shall erect a 
``fire wall'' between the investment adviser and the broker-dealer with 
respect to access to information concerning the composition and/or 
changes to such investment company portfolio.\7\ In addition, 
Commentary .06 further requires that personnel who make decisions on 
the open-end fund's portfolio composition must be subject to procedures 
designed to prevent the use and dissemination of material nonpublic 
information regarding the open-end fund's portfolio. The Adviser or 
Subadviser is not a registered broker-dealer but is affiliated with a 
broker-dealer. The Adviser and Subadviser have implemented a ``fire 
wall'' with respect to such broker-dealer affiliate regarding access to 
information concerning the composition of and/or changes to each Fund's 
portfolio. In the event (a) the Adviser or Subadviser becomes 
registered as a broker-dealer or newly affiliated with a broker-dealer, 
or (b) any new adviser or sub-adviser to a Fund is a registered broker-
dealer or becomes affiliated with a broker-dealer, the applicable 
adviser or sub-adviser will implement and maintain a fire wall with 
respect to its relevant personnel or broker-dealer affiliate regarding 
access to information concerning the composition and/or changes to a 
Fund's portfolio, and will be subject to procedures designed to prevent 
the use and dissemination of material non-public information regarding 
such portfolio.
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    \7\ An investment adviser to an open-end fund is required to be 
registered under the Investment Advisers Act of 1940 (the ``Advisers 
Act''). As a result, the Adviser and Subadviser and their related 
personnel are subject to the provisions of Rule 204A-1 under the 
Advisers Act relating to codes of ethics. This Rule requires 
investment advisers to adopt a code of ethics that reflects the 
fiduciary nature of the relationship to clients as well as 
compliance with other applicable securities laws. Accordingly, 
procedures designed to prevent the communication and misuse of non-
public information by an investment adviser must be consistent with 
Rule 204A-1 under the Advisers Act. In addition, Rule 206(4)-7 under 
the Advisers Act makes it unlawful for an investment adviser to 
provide investment advice to clients unless such investment adviser 
has (i) adopted and implemented written policies and procedures 
reasonably designed to prevent violation, by the investment adviser 
and its supervised persons, of the Advisers Act and the Commission 
rules adopted thereunder; (ii) implemented, at a minimum, an annual 
review regarding the adequacy of the policies and procedures 
established pursuant to subparagraph (i) above and the effectiveness 
of their implementation; and (iii) designated an individual (who is 
a supervised person) responsible for administering the policies and 
procedures adopted under subparagraph (i) above.
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IQ Municipal Insured ETF
    According to the Registration Statement, the Fund will seek current 
income exempt from federal income tax. The Fund, under normal market 
conditions,\8\ will invest at least 80% of its assets in municipal 
bonds (``Municipal Bonds'', as described below) that are covered by 
insurance policies that guarantee the timely

[[Page 21575]]

payment of principal and interest. The Fund generally will maintain a 
dollar-weighted average duration within plus or minus two years of the 
dollar-weighted average duration of the S&P Municipal Bond Insured 
Index.\9\
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    \8\ The term ``under normal market conditions'' as used herein 
includes, but is not limited to, the absence of adverse market, 
economic, political or other conditions, including extreme 
volatility or trading halts in the fixed income markets or the 
financial markets generally; operational issues (e.g., systems 
failure) causing dissemination of inaccurate market information; or 
force majeure type events such as natural or man-made disaster, act 
of God, armed conflict, act of terrorism, riot or labor disruption 
or any similar intervening circumstance. On a temporary basis, 
including for defensive purposes, during the initial invest-up 
period (i.e., the six-week period following the commencement of 
trading of Shares on the Exchange) and during periods of high cash 
inflows or outflows (i.e., rolling periods of seven calendar days 
during which inflows or outflows of cash, in the aggregate, exceed 
10% of a Fund's net assets as of the opening of business on the 
first day of such periods), a Fund may depart from its principal 
investment strategies; for example, it may hold a higher than normal 
proportion of its assets in cash. During such periods, a Fund may 
not be able to achieve its investment objectives. A Fund may adopt a 
defensive strategy when the Adviser believes securities in which a 
Fund normally invests have elevated risks due to political or 
economic factors and in other extraordinary circumstances.
    \9\ Municipal bonds are issued by or on behalf of the District 
of Columbia, states, territories, commonwealths and possessions of 
the United States and their political subdivisions and agencies, 
authorities and instrumentalities. Municipal securities, which may 
be issued in various forms, including bonds and notes, are issued to 
obtain funds for various public purposes.
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    For [sic] Fund, as well as the IQ Municipal Short Duration ETF and 
IQ Intermediate ETF which are discussed below, the Subadviser's 
investment process will begin with an assessment of macro factors that 
may impact the municipal bond market, as well as other regulatory, tax, 
governmental, and technical factors that may impact the municipal bond 
market. Following the assessment of these factors, the Subadviser will 
develop an investment strategy to position a Fund among various sectors 
of the municipal bond market and different states. The Subadviser then 
will employ a fundamental, ``bottom-up'' credit research analysis to 
select individual Municipal Bonds.
Municipal Bonds
    For purposes of this filing, the term ``Municipal Bonds'' as 
applied to each of the Funds includes the following:
     Municipal lease obligations (and certificates of 
participation in such obligations);
     municipal general obligation bonds (including industrial 
development bonds issued pursuant to federal tax law), which are issued 
for either project or enterprise financings in which the bond issuer 
pledges to the bondholders the revenues generated by the operating 
projects financed from the proceeds of the bond issuance;
     limited obligation bonds, which are payable only from the 
revenues derived from a particular facility or class of facilities or, 
in some cases from the proceeds of a special excise or other specific 
revenue source;
     municipal revenue bonds (which are typically secured by 
revenues generated by the issuer), including revenue anticipation 
notes;
     municipal bond anticipation notes (which are normally 
issued to provide interim financial assistance until long-term 
financing can be arranged);
     Municipal Bonds that feature credit enhancements, such as 
lines of credit, letters of credit, municipal bond insurance, and 
standby bond purchase agreements;
     discount bonds (which may be originally issued at a 
discount to par value or sold at market price below par value);
     premium bonds, which are sold at a premium to par value;
     zero coupon bonds, which are issued at an original issue 
discount, with the full value, including accrued interest, paid at 
maturity;
     taxable municipal bonds, including Build America Bonds;
     municipal notes;
     municipal cash equivalents;
     private activity bonds (including without limitation 
industrial development bonds);
     pre-refunded and escrowed to maturity bonds; and
     securities issued by entities whose underlying assets are 
Municipal Bonds (i.e., tender option bond (TOB) trusts and custodial 
receipts trusts and variable rate demand notes (VRDNs) that pay 
interest monthly or quarterly based on a floating rate that is reset 
daily or weekly based on an index of short-term municipal rates).
    The Fund may invest more than 25% of its total assets in Municipal 
Bonds that are related in such a way that an economic, business or 
political development or change affecting one such security could also 
affect the other securities. However, the Fund's investments will be 
diversified among a minimum of ten different sectors of the Municipal 
Bond market. The Fund's investments in Municipal Bonds will include 
investments in state and local (e.g., county, city, town) and 
authority-issued Municipal Bonds relating to such sectors as the 
following: State general obligation; local general obligation; 
education; hospital; housing; industrial development revenue (IDR)/
pollution control revenue (PCR); power; resource recovery; 
transportation; water/sewer; leasing; special tax; and pre-refunded 
bonds. The Fund's investments will be diversified among at least 15 
different states, with no more than 30% of the Fund's securities 
invested in municipal securities from a single state. Under normal 
market conditions, no security (excluding Treasury securities) will 
represent more than 25% of the weight of the portfolio, and the five 
highest weighed securities will not, in the aggregate, account for more 
than 50% of the weight of the Fund. No Municipal Bond held by the Fund 
will exceed 5% of the weight of the Fund's portfolio and no single 
Municipal Bond issuer will account for more than 8% of the weight of 
the Fund's portfolio. The Fund will hold Municipal Bonds of a minimum 
of 25 non-affiliated issuers.\10\
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    \10\ For purposes of this restriction, 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, will be treated as separate issuers of 
Municipal Bonds.
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Other Investments
    With respect to each of the Funds, while a Fund, under normal 
market conditions, will invest at least 80% of its assets in Municipal 
Bonds, as described above, a Fund may invest its remaining assets in 
other assets and financial instruments, as described below.
    A Fund may invest in shares of exchange-traded funds (``ETFs'') and 
money market funds,\11\ and may invest directly and indirectly in: 
Fixed rate and floating rate U.S. government securities, including 
bills, notes and bonds differing as to maturity and rates of interest, 
which are either issued or guaranteed by the U.S. Treasury or by U.S. 
government agencies or instrumentalities (``U.S. Government 
Securities''); repurchase agreements; commercial paper; and may 
purchase securities on a when-issued basis or for settlement at a 
future date (forward commitment), if a Fund holds sufficient liquid 
assets to meet the purchase price (collectively, ``Other 
Investments'').
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    \11\ For purposes of this filing, ETFs include Investment 
Company Units (as described in NYSE Arca Equities Rule 5.2(j)(3)); 
Portfolio Depositary Receipts (as described in NYSE Arca Equities 
Rule 8.100); and Managed Fund Shares (as described in NYSE Arca 
Equities Rule 8.600). The ETFs all will be listed and traded in the 
U.S. on registered exchanges.
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IQ Municipal Short Duration ETF
    According to the Registration Statement, the Fund will seek current 
income exempt from federal income tax. The Fund, under normal market 
conditions, will invest at least 80% of its assets in Municipal Bonds. 
The Fund generally will maintain a dollar-weighted average portfolio 
duration of three years or less.
    The Fund may invest more than 25% of its total assets in Municipal 
Bonds that are related in such a way that an economic, business or 
political development or change affecting one such security could also 
affect the other securities. However, the Fund's investments will be 
diversified among a minimum of ten different sectors of the municipal 
bond market. The Fund's investments will be diversified among at least 
15 different states, with no more than 30% of the Fund's securities 
invested in municipal securities from a single state. Under normal 
market

[[Page 21576]]

conditions, no security (excluding Treasury securities) will represent 
more than 25% of the weight of the portfolio, and the five highest 
weighed securities will not, in the aggregate, account for more than 
50% of the weight of the Fund. No Municipal Bond held by the Fund will 
exceed 5% of the weight of the Fund's portfolio and no single Municipal 
Bond issuer will account for more than 8% of the weight of the Fund's 
portfolio. The Fund will hold Municipal Bonds of a minimum of 25 non-
affiliated issuers.
    While the Fund, under normal market conditions, will invest at 
least 80% of its assets in Municipal Bonds, the Fund may invest its 
remaining assets in Other Investments.
IQ Municipal Intermediate ETF
    According to the Registration Statement, the Fund will seek current 
income exempt from federal income tax. The Fund, under normal market 
conditions, will invest at least 80% of its assets in Municipal Bonds. 
The Fund generally will maintain a dollar-weighted average duration 
within plus or minus two years of the dollar-weighted average duration 
of the S&P Municipal Bond Intermediate Index.
    The Fund may invest more than 25% of its total assets in Municipal 
Bonds that are related in such a way that an economic, business or 
political development or change affecting one such security could also 
affect the other securities. However, the Fund's investments will be 
diversified among a minimum of ten different sectors of the municipal 
bond market. The Fund's investments will be diversified among at least 
15 different states, with no more than 30% of the Fund's securities 
invested in municipal securities from a single state. Under normal 
market conditions, no security (excluding Treasury securities) will 
represent more than 25% of the weight of the portfolio, and the five 
highest weighed securities will not, in the aggregate, account for more 
than 50% of the weight of the Fund. No Municipal Bond held by the Fund 
will exceed 5% of the weight of the Fund's portfolio and no single 
Municipal Bond issuer will account for more than 8% of the weight of 
the Fund's portfolio. The Fund will hold Municipal Bonds of a minimum 
of 25 non-affiliated issuers.
    While the Fund, under normal market conditions, will invest at 
least 80% of its assets in Municipal Bonds, the Fund may invest its 
remaining assets in Other Investments.
Determination of Net Asset Value (``NAV'')
    According to the Registration Statement, the NAV of the Shares for 
a Fund will be equal to a Fund's total assets minus the Fund's total 
liabilities divided by the total number of Shares outstanding. Interest 
and investment income on the Trust's assets accrue daily and are 
included in a Fund's total assets. Expenses and fees (including 
investment advisory, management, administration and distribution fees, 
if any) accrue daily and are included in the Fund's total liabilities. 
The NAV is calculated by the Administrator and Custodian and determined 
each business day as of the close of the NYSE Arca Core Trading Session 
(ordinarily 4:00 p.m. Eastern time).
    A Fund typically will value fixed-income portfolio securities, 
including Municipal Bonds, using last available bid prices or current 
market quotations provided by dealers or prices (including evaluated 
prices) supplied by a Fund's approved independent third-party pricing 
services. Pricing services may use matrix pricing or valuation models 
that utilize certain inputs and assumptions to derive values. An 
amortized cost method of valuation may be used with respect to debt 
obligations with sixty days or less remaining to maturity unless the 
Adviser determines in good faith that such method does not represent 
fair value.
    Generally, trading in U.S. Government Securities, money market 
funds, and certain fixed-income securities is substantially completed 
each day at various times prior to the close of business on the NYSE. 
The values of such securities used in computing the NAV of the Fund 
will be determined as of such times.
    The value of any ETFs held by the Fund is based on such securities' 
closing price on local markets, when available. The value of a money 
market fund held by a Fund will be based on the NAV of the money market 
fund.
    When market quotations or prices are not readily available or are 
deemed unreliable or not representative of an investment's fair value, 
investments are valued using fair value pricing as determined in good 
faith by the Adviser under procedures established by and under the 
general supervision and responsibility of the Trust's Board of 
Trustees.
Indicative Intra-Day Value
    The approximate value of each Fund's investments on a per-Share 
basis, the Indicative Intra-Day Value (``IIV'') will be disseminated by 
the Exchange or one or more major market data vendors every 15 seconds 
during the Exchange's Core Trading Session (ordinarily 9:30 a.m. to 
4:00 p.m., Eastern Time). The IIV should not be viewed as a ``real-
time'' update of NAV because the IIV may not be calculated in the same 
manner as NAV, which is computed once per day.
    An independent third party calculator will calculate the IIV for 
each Fund during the Exchange's Core Trading Session by dividing the 
``Estimated Fund Value'' as of the time of the calculation by the total 
number of outstanding Shares of that Fund. ``Estimated Fund Value'' is 
the sum of the estimated amount of cash held in a Fund's portfolio, the 
estimated amount of accrued interest owed to the Fund and the estimated 
value of the securities held in the Fund's portfolio, minus the 
estimated amount of the Fund's liabilities. The IIV will be calculated 
based on the same portfolio holdings disclosed on the Trust's Web site.
Purchase and Redemption of Creation Units
Creation of Shares
    According to the Registration Statement, the Trust will issue and 
sell Shares of a Fund only in Creation Units of at least 50,000 Shares 
on a continuous basis through the Distributor, at their NAV next 
determined after receipt, on any business day (that is, any day on 
which the New York Stock Exchange (``NYSE'') is open for business.), 
for an order received in proper form.
    The consideration for purchase of a Creation Unit of a Fund 
generally will consist of an in-kind deposit of a designated portfolio 
of securities--the Deposit Securities--per each Creation Unit 
constituting a substantial replication, or a representation, of the 
securities included in a Fund's portfolio and an amount of cash--the 
``Cash Component.'' Together, the Deposit Securities and the Cash 
Component constitute the ``Fund Deposit,'' which represents the minimum 
initial and subsequent investment amount for a Creation Unit of a Fund. 
The Cash Component is an amount equal to the difference between the NAV 
of the Shares (per Creation Unit) and the market value of the Deposit 
Securities.
    The Administrator, through the National Securities Clearing 
Corporation (``NSCC''), will make available on each business day, 
immediately prior to the opening of business on the Exchange (currently 
9:30 a.m., Eastern Time), the list of the names and the required number 
of shares of each Deposit Security to be included in the current

[[Page 21577]]

Fund Deposit (based on information at the end of the previous business 
day) for a Fund.
    In addition to the list of names and numbers of securities 
constituting the current Deposit Securities of a Fund Deposit, the 
Administrator, through the NSCC, also will make available on each 
business day, the estimated Cash Component, effective through and 
including the previous business day, per outstanding Creation Unit of a 
Fund.
    To be eligible to place orders to create a Creation Unit of a Fund, 
an entity must be (i) a ``Participating Party'', i.e., a broker-dealer 
or other participant in the clearing process through the Continuous Net 
Settlement System of the NSCC (the ``Clearing Process''), a clearing 
agency that is registered with the Commission; or (ii) a DTC 
Participant, and, in each case, must have executed an agreement 
(``Participant Agreement'') with the Trust, the Distributor and the 
Administrator with respect to creations and redemptions of Creation 
Units. A Participating Party and DTC Participant are collectively 
referred to as an ``Authorized Participant.''
    All orders to create Creation Units must be placed for one or more 
Creation Unit size aggregations of at least 50,000 Shares. All orders 
to create Creation Units, whether through the Clearing Process (through 
a Participating Party) or outside the Clearing Process (through a DTC 
Participant), must be received by the Distributor no later than 3:00 
p.m. Eastern Time, in each case on the date such order is placed in 
order for the creation of Creation Units to be effected based on the 
NAV of Shares of a Fund as next determined on such date after receipt 
of the order in proper form.
Redemption of Shares
    Shares may be redeemed only in Creation Units at their NAV next 
determined after receipt of a redemption request in proper form by the 
Distributor and the Fund through the Administrator and only on a 
business day. Orders to redeem Creation Units must be received by the 
Administrator not later than 3:00 Eastern Time.
    With respect to each Fund, the Administrator, through the NSCC, 
will make available immediately prior to the opening of business on the 
Exchange (currently 9:30 a.m., Eastern Time) on each business day, the 
designated portfolio of securities (``Fund Securities'') per each 
Creation Unit that will be applicable (subject to possible amendment or 
correction) to redemption requests received in proper form (as defined 
below) on that day. Fund Securities received on redemption may not be 
identical to Deposit Securities which are applicable to creations of 
Creation Units.
    Unless cash redemptions are available or specified for a Fund, the 
redemption proceeds for a Creation Unit generally will consist of Fund 
Securities--as announced by the Administrator on the business day of 
the request for redemption received in proper form--plus cash in an 
amount equal to the difference between the NAV of the Shares being 
redeemed, as next determined after a receipt of a request in proper 
form, and the value of the Fund Securities (the ``Cash Redemption 
Amount''), less a redemption transaction fee. In the event that the 
Fund Securities have a value greater than the NAV of the Shares, a 
compensating cash payment equal to the differential is required to be 
made by or through an Authorized Participant by the redeeming 
shareholder.
    The redemption proceeds for a Creation Unit of a Fund will consist 
solely of cash in an amount equal to the NAV of the Shares being 
redeemed, as next determined after receipt of a request in proper form 
less a redemption transaction fee.
    If it is not possible to effect deliveries of the Fund Securities, 
the Trust may in its discretion exercise its option to redeem such 
Shares in cash, and the redeeming Beneficial Owner will be required to 
receive its redemption proceeds in cash. In addition, an investor may 
request a redemption in cash which a Fund may, in its sole discretion, 
permit. In either case, the investor will receive a cash payment equal 
to the NAV of its Shares based on the NAV of Shares of a Fund next 
determined after the redemption request is received in proper form. A 
Fund may also, in its sole discretion, upon request of a shareholder, 
provide such redeemer a portfolio of securities which differs from the 
exact composition of a Fund Securities but does not differ in NAV.
Availability of Information
    Each Fund will disclose on the Funds' Web site (www.iqetfs.com) at 
the start of each business day the identities and quantities of the 
securities and other assets held by each Fund that will form the basis 
of the Fund's calculation of its net asset value (``NAV'') on that 
business day. The portfolio holdings so disclosed will be based on 
information as of the close of business on the prior business day and/
or trades that have been completed prior to the opening of business on 
that business day and that are expected to settle on the business day. 
Online disclosure of such holdings is publicly available at no charge.
    The Web site for the Funds will contain the following information, 
on a per-Share basis, for each Fund: (1) The prior business day's NAV; 
(2) the reported midpoint of the bid-ask spread at the time of NAV 
calculation (the ``Bid-Ask Price''); (3) a calculation of the premium 
or discount of the Bid-Ask Price against such NAV; and (4) data in 
chart format displaying the frequency distribution of discounts and 
premiums of the Bid-Ask Price against the NAV, within appropriate 
ranges, for each of the four previous calendar quarters (or for the 
life of a Fund if, shorter). In addition, on each business day, before 
the commencement of trading in Shares on the NYSE Arca, each Fund will 
disclose on its Web site the identities and quantities of the portfolio 
securities and other assets held by each Fund that will form the basis 
for the calculation of NAV at the end of the business day.
    On a daily basis, the Funds will disclose the information required 
under NYSE Arca Equities Rule 8.600 (c)(2) to the extent applicable.
    Each Fund's portfolio holdings will be disclosed on the Funds' Web 
site daily after the close of trading on the Exchange and prior to the 
opening of trading on the Exchange the following day.
    Information regarding the extent and frequency with which market 
prices of Shares have tracked the relevant Fund's NAV for the most 
recently completed calendar year and the quarters since that year will 
be available without charge on the Funds' Web site.
    The approximate value of a Fund's investments on a per-Share basis, 
the IIV, will be disseminated every 15 seconds during the Exchange Core 
Trading Session (ordinarily 9:30 a.m. to 4:00 p.m., Eastern Time).
    Investors can also obtain each Fund's Statement of Additional 
Information (``SAI''), shareholder reports, Form N-CSR and Form N-SAR, 
filed twice a year. The Funds' SAI and shareholder reports will be 
available free upon request from the Trust, and those documents and the 
Form N-CSR and Form N-SAR may be viewed on-screen or downloaded from 
the Commission's Web site at www.sec.gov. Information regarding market 
price and trading volume of the Shares will be continually available on 
a real-time basis throughout the day on brokers' computer screens and 
other electronic services. Information regarding the previous day's 
closing price and trading volume information for the Shares will be 
publicly available.
    Quotation and last sale information for the Shares and will be 
available via the Consolidated Tape Association

[[Page 21578]]

(``CTA'') high-speed line, and from the national securities exchange 
[sic] on which they are listed.
    Quotation information from brokers and dealers or pricing services 
will be available for Municipal Bonds and Other Investments. Price 
information for money market funds will be available from the 
applicable investment company's Web site and from market data vendors. 
Pricing information regarding Municipal Bonds and Other Investments 
will generally be available through nationally recognized data service 
providers through subscription agreements. In addition, the IIV (which 
is the Portfolio Indicative Value, as defined in NYSE Arca Equities 
Rule 8.600(c)(3)), will be widely disseminated at least every 15 
seconds during the Core Trading Session by one or more major market 
data vendors or other information providers.\12\
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    \12\ Currently, it is the Exchange's understanding that several 
major market data vendors display and/or make widely available IIVs 
taken from CTA or other data feeds.
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Investment Restrictions
    Each Fund may hold up to an aggregate amount of 15% of its net 
assets in illiquid assets (calculated at the time of investment) deemed 
illiquid by the Adviser, consistent with Commission guidance. Each Fund 
will monitor its portfolio liquidity on an ongoing basis to determine 
whether, in light of current circumstances, an adequate level of 
liquidity is being maintained, and will consider taking appropriate 
steps in order to maintain adequate liquidity if, through a change in 
values, net assets, or other circumstances, more than 15% of a Fund's 
net assets are held in illiquid assets. Illiquid assets include 
securities subject to contractual or other restrictions on resale and 
other instruments that lack readily available markets as determined in 
accordance with Commission staff guidance.\13\
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    \13\ The Commission has stated that long-standing Commission 
guidelines have required open-end funds to hold no more than 15% of 
their net assets in illiquid securities and other illiquid assets. 
See Investment Company Act Release No. 28193 (March 11, 2008), 73 FR 
14618 (March 18, 2008), footnote 34. See also, Investment Company 
Act Release No. 5847 (October 21, 1969), 35 FR 19989 (December 31, 
1970) (Statement Regarding ``Restricted Securities''); Investment 
Company Act Release No. 18612 (March 12, 1992), 57 FR 9828 (March 
20, 1992) (Revisions of Guidelines to Form N-1A). A fund's portfolio 
security is illiquid if it cannot be disposed of in the ordinary 
course of business within seven days at approximately the value 
ascribed to it by the fund. See Investment Company Act Release No. 
14983 (March 12, 1986), 51 FR 9773 (March 21, 1986) (adopting 
amendments to Rule 2a-7 under the 1940 Act); Investment Company Act 
Release No. 17452 (April 23, 1990), 55 FR 17933 (April 30, 1990) 
(adopting Rule 144A under the Securities Act).
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    Each Fund's investments will be consistent with its investment goal 
and will not be used to provide multiple returns of a benchmark or to 
produce leveraged returns.
    Each Fund may invest more than 25% of its total assets in municipal 
bonds that are related in such a way that an economic, business or 
political development or change affecting one such security could also 
affect the other securities. However, a Fund's investments will be 
diversified among a minimum of ten different sectors of the municipal 
bond market. A Fund's investments will be diversified among at least 15 
different states, with no more than 30% of a Fund's securities invested 
in municipal securities from a single state. Under normal market 
conditions, no security (excluding Treasury securities) will represent 
more than 25% of the weight of the portfolio, and the five highest 
weighed securities will not, in the aggregate, account for more than 
50% of the weight of the Fund. No Municipal Bond held by the Fund will 
exceed 5% of the weight of the Fund's portfolio and no single Municipal 
Bond issuer will account for more than 8% of the weight of the Fund's 
portfolio. The Fund will hold Municipal Bonds of a minimum of 25 non-
affiliated issuers.
Application of Generic Listing Requirements
    The Exchange is submitting this proposed rule change because the 
portfolios for the Funds will not meet all of the ``generic'' listing 
requirements of Commentary .01 to NYSE Arca Equities Rule 8.600 
applicable to the listing of Managed Fund Shares. Each Fund's portfolio 
will meet all such requirements except for those set forth in 
Commentary .01(b)(1).\14\
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    \14\ Commentary .01(b)(1) to NYSE Arca Equities Rule 8.600 
provides that components that in the aggregate account for at least 
75% of the fixed income weight of the portfolio each shall have a 
minimum original principal amount outstanding of $100 million or 
more.
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    The Exchange believes that it is appropriate and in the public 
interest to approve listing and trading of Shares of the Funds on the 
Exchange notwithstanding that the Funds would not meet the requirements 
of Commentary .01(b)(1) to Rule 8.600 in that the Funds' investments in 
municipal securities will be well-diversified.
    The Exchange believes that permitting Fund Shares to be listed and 
traded on the Exchange notwithstanding that less than 75% of the weight 
of a Fund's portfolio may consist of components with less than $100 
million minimum original principal amount outstanding would provide the 
Funds with greater ability to select from a broad range of Municipal 
Bonds, as described above, that would support a Fund's investment goal.
    The Exchange believes that, notwithstanding that each Fund's 
portfolio may not satisfy Commentary .01(b)(1) to Rule 8.600, the 
Funds' portfolios will not be susceptible to manipulation. As noted 
above, the Funds' investments will be diversified among a minimum of 
ten different sectors of the municipal bond market. The Funds' 
investments will be diversified among at least 15 different states, 
with no more than 30% of a Fund's securities invested in municipal 
securities from a single state. Additionally, no Municipal Bond held by 
a Fund will exceed 5% of the weight of the Fund's portfolio and no 
single Municipal Bond issuer will account for more than 8% of the 
weight of a Fund's portfolio. A Fund will hold Municipal Bonds of a 
minimum of 25 non-affiliated issuers. The Exchange notes that, other 
than Commentary .01(b)(1) to Rule 8.600, each Fund's portfolio will 
meet all other requirements of Rule 8.600.
Trading Halts
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares of a Fund.\15\ Trading in Shares of a Fund will 
be halted if the circuit breaker parameters in NYSE Arca Equities Rule 
7.12 have been reached. Trading also may be halted because of market 
conditions or for reasons that, in the view of the Exchange, make 
trading in the Shares inadvisable.
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    \15\ See NYSE Arca Equities Rule 7.12.
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Trading Rules
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. Shares will trade on 
the NYSE Arca Marketplace from 4 a.m. to 8 p.m., Eastern Time in 
accordance with NYSE Arca Equities Rule 7.34 (Early, Core, and Late 
Trading Sessions). The Exchange has appropriate rules to facilitate 
transactions in the Shares during all trading sessions. As provided in 
NYSE Arca Equities Rule 7.6, the minimum price variation (``MPV'') for 
quoting and entry of orders in equity securities traded on the NYSE 
Arca Marketplace is $0.01, with the exception of securities that are 
priced less than $1.00 for which the MPV for order entry is $0.0001.

[[Page 21579]]

    The Shares of each Fund will conform to the initial and continued 
listing criteria under NYSE Arca Equities Rule 8.600. Consistent with 
NYSE Arca Equities Rule 8.600(d)(2)(B)(ii), the Adviser will implement 
and maintain, or be subject to, procedures designed to prevent the use 
and dissemination of material non-public information regarding the 
actual components of a Fund's portfolio. The Exchange represents that, 
for initial and/or continued listing, a Fund will be in compliance with 
Rule 10A-3 \16\ under the Act, as provided by NYSE Arca Equities Rule 
5.3. A minimum of 100,000 Shares will be outstanding at the 
commencement of trading on the Exchange. The Exchange will obtain a 
representation from the issuer of the Shares that the NAV per Share 
will be calculated daily and that the NAV and the Disclosed Portfolio 
will be made available to all market participants at the same time. 
Each Fund's investments will be consistent with a Fund's investment 
goal and will not be used to enhance leverage.
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    \16\ 17 CFR 240.10A-3.
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Surveillance
    The Exchange represents that trading in the Shares will be subject 
to the existing trading surveillances, administered by the Financial 
Industry Regulatory Authority (``FINRA'') on behalf of the Exchange, or 
by regulatory staff of the Exchange, which are designed to detect 
violations of Exchange rules and applicable federal securities laws. 
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.\17\
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    \17\ FINRA conducts cross-market surveillances on behalf of the 
Exchange pursuant to a regulatory services agreement. The Exchange 
is responsible for FINRA's performance under this regulatory 
services agreement.
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    The surveillances referred to above generally focus on detecting 
securities trading outside their normal patterns, which could be 
indicative of manipulative or other violative activity. When such 
situations are detected, surveillance analysis follows and 
investigations are opened, where appropriate, to review the behavior of 
all relevant parties for all relevant trading violations.\18\
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    \18\ For a list of the current members of ISG, see 
www.isgportal.org. The Exchange notes that not all components of the 
Disclosed Portfolio may trade on markets that are members of ISG or 
with which the Exchange has in place a comprehensive surveillance 
sharing agreement.
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    The Exchange or FINRA, on behalf of the Exchange, or both, will 
communicate as needed regarding trading in the Shares and ETFs 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 ETFs from such 
markets and other entities. In addition, the Exchange may obtain 
information regarding trading in the Shares and ETFs from markets and 
other entities that are members of ISG or with which the Exchange has 
in place a comprehensive surveillance sharing agreement. In addition, 
FINRA, on behalf of the Exchange, is able to access, as needed, trade 
information for certain fixed income securities held by a Fund reported 
to FINRA's Trade Reporting and Compliance Engine (``TRACE''). FINRA 
also can access data obtained from the Municipal Securities Rulemaking 
Board (``MSRB'') relating to municipal bond trading activity for 
surveillance purposes in connection with trading in the Shares.
    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
    All statements and representations made in this filing regarding 
(a) the description of the portfolio, (b) limitations on portfolio 
holdings or reference assets, or (c) or (c) [sic] the applicability of 
Exchange listing rules specified in this rule filing shall constitute 
continued listing requirements for listing the Shares of a Fund on the 
Exchange.
    The issuer 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).
Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its 
Equity Trading Permit Holders in an Information Bulletin (``Bulletin'') 
of the special characteristics and risks associated with trading the 
Shares. Specifically, the Bulletin will discuss the following: (1) The 
procedures for purchases and redemptions of Shares in Creation Unit 
aggregations (and that Shares are not individually redeemable); (2) 
NYSE Arca Equities Rule 9.2(a), which imposes a duty of due diligence 
on its Equity Trading Permit Holders to learn the essential facts 
relating to every customer prior to trading the Shares; (3) the risks 
involved in trading the Shares during the Opening and Late Trading 
Sessions when an updated IIV will not be calculated or publicly 
disseminated; (4) how information regarding the IIV and the Disclosed 
Portfolio is disseminated; (5) the requirement that Equity Trading 
Permit Holders deliver a prospectus to investors purchasing newly 
issued Shares prior to or concurrently with the confirmation of a 
transaction; and (6) trading information.
    In addition, the Bulletin will reference that each Fund is subject 
to various fees and expenses described in the Registration Statement. 
The Bulletin will discuss any exemptive, no-action, and interpretive 
relief granted by the Commission from any rules under the Act. The 
Bulletin will also disclose that the NAV for the Shares will be 
calculated after 4:00 p.m., Eastern Time each trading day.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \19\ that an exchange have rules that 
are designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to remove 
impediments to, and perfect the mechanism of a free and open market 
and, in general, to protect investors and the public interest.
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    \19\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares will be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria in NYSE Arca Equities Rule 
8.600. The Exchange has in place surveillance procedures that are 
adequate to properly monitor trading in the Shares in all trading 
sessions and to deter and detect violations of Exchange rules and 
applicable federal securities laws. The Exchange or FINRA, on behalf of 
the Exchange, or both, will communicate as needed regarding trading in 
the Shares 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 from 
such markets and other entities. In addition, the Exchange may obtain 
information regarding trading in the Shares from markets and other 
entities that are members of ISG or with which the

[[Page 21580]]

Exchange has in place a comprehensive surveillance sharing agreement. 
In addition, FINRA, on behalf of the Exchange, is able to access, as 
needed, trade information for certain fixed income securities held by a 
Fund reported to TRACE. FINRA also can access data obtained from the 
MSRB relating to municipal bond trading activity for surveillance 
purposes in connection with trading in the Shares. Each Fund may not 
purchase illiquid assets if, in the aggregate, more than 15% of its net 
assets would be invested in illiquid assets. The Adviser is not 
registered as a broker-dealer but is affiliated with a broker-dealer 
and will implement and maintain a fire wall with respect to each of its 
relevant personnel or broker-dealer affiliate regarding access to 
information concerning the composition and/or changes to the 
portfolios.
    The Exchange believes that it is appropriate and in the public 
interest to approve listing and trading of Shares of the Funds on the 
Exchange notwithstanding that the Funds would not meet the requirements 
of Commentary .01(b)(1) to Rule 8.600 in that the Funds' investments in 
municipal securities will be well-diversified. As noted above, the 
Funds' investments will be diversified among a minimum of ten different 
sectors of the municipal bond market. The Funds' investments will be 
diversified among at least 15 different states, with no more than 30% 
of a Fund's securities invested in municipal securities from a single 
state. Additionally, no Municipal Bond held by a Fund will exceed 5% of 
the weight of the Fund's portfolio and no single Municipal Bond issuer 
will account for more than 8% of the weight of a Fund's portfolio. A 
Fund will hold Municipal Bonds of a minimum of 25 non-affiliated 
issuers. The Exchange notes that, other than Commentary .01(b)(1) to 
Rule 8.600, each Fund's portfolio will meet all other requirements of 
Rule 8.600.
    The Exchange believes that permitting Fund Shares to be listed and 
traded on the Exchange notwithstanding that less than 75% of the weight 
of a Fund's portfolio may consist of components with less than $100 
million minimum original principal amount outstanding would provide the 
Funds with greater ability to select from a broad range of municipal 
securities, as described above, that would support a Fund's investment 
goal.
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest in 
that the Exchange will obtain a representation from the issuer of the 
Shares that the NAV per Share will be calculated daily and that the NAV 
and the Disclosed Portfolio will be made available to all market 
participants at the same time. In addition, a large amount of 
information is publicly available regarding each Fund and the Shares, 
thereby promoting market transparency. Quotation and last sale 
information for the Shares and ETFs will be available via the CTA high-
speed line, and from the national securities exchange [sic] on which 
they are listed. Prior to the commencement of trading, the Exchange 
will inform its Equity Trading Permit Holders in an Information 
Bulletin of the special characteristics and risks associated with 
trading the Shares. Trading in Shares of the Funds will be halted if 
the circuit breaker parameters in NYSE Arca Equities Rule 7.12 have 
been reached or because of market conditions or for reasons that, in 
the view of the Exchange, make trading in the Shares inadvisable. 
Trading in the Shares will be subject to NYSE Arca Equities Rule 
8.600(d)(2)(D), which sets forth circumstances under which Shares of 
the Funds may be halted. In addition, as noted above, investors will 
have ready access to information regarding the Funds' holdings, the 
IIV, the Disclosed Portfolio, and quotation and last sale information 
for the Shares.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
additional types of actively-managed exchange-traded products that 
principally hold municipal bonds and that will enhance competition 
among market participants, to the benefit of investors and the 
marketplace. As noted above, the Exchange has in place surveillance 
procedures relating to trading in the Shares and may obtain information 
via ISG from other exchanges that are members of ISG or with which the 
Exchange has entered into a comprehensive surveillance sharing 
agreement. In addition, as noted above, investors will have ready 
access to information regarding each Fund's holdings, IIV, Disclosed 
Portfolio, and quotation and last sale information for the Shares.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purpose of the Act. The Exchange notes that the 
proposed rule change will facilitate the listing and trading of 
additional types of actively-managed exchange-traded products that 
principally hold municipal bonds and that will enhance competition 
among market participants, to the benefit of investors and the 
marketplace.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) by order approve or disapprove such proposed rule change; or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2017-44 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-2017-44. 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 (http://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

[[Page 21581]]

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-2017-44 and should 
be submitted on or before May 30, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-09311 Filed 5-8-17; 8:45 am]
BILLING CODE P