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]
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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
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11/9/2016
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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
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3 17
Sfmt 4703
U.S.C. 78a.
CFR 240.19b–4.
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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
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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
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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.
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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.
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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
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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.
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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
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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
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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
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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.
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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
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(‘‘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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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).
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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
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.
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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
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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.
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17 FINRA
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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),
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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
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09MYN1
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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
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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
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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 (https://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 (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
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 https://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
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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.
---------------------------------------------------------------------------
[[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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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'').
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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 (https://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 (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the
[[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
