Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change To List and Trade Shares of the Hartford Municipal Opportunities ETF Under NYSE Arca Rule 8.600-E, 42147-42153 [2017-18799]

Download as PDF Federal Register / Vol. 82, No. 171 / Wednesday, September 6, 2017 / Notices SECURITIES AND EXCHANGE COMMISSION [Release No. 34–81505; File No. SR– NYSEArca–2017–90] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change To List and Trade Shares of the Hartford Municipal Opportunities ETF Under NYSE Arca Rule 8.600–E August 30, 2017. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on August 17, 2017, NYSE Arca, Inc. (the ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to list and trade shares of the Hartford Municipal Opportunities ETF under NYSE Arca Rule 8.600–E (‘‘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. asabaliauskas on DSKBBXCHB2PROD with NOTICES II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to list and trade shares (‘‘Shares’’) of the Hartford 1 15 U.S.C. 78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 2 15 VerDate Sep<11>2014 17:37 Sep 05, 2017 Jkt 241001 Municipal Opportunities ETF (‘‘Fund’’) under NYSE Arca Rule 8.600–E,4 which governs the listing and trading of Managed Fund Shares.5 The Shares will be offered by the Hartford Funds Exchange-Traded Trust (the ‘‘Trust’’), which is registered with the Commission as an open-end management investment company.6 The Fund is a series of the Trust. Hartford Funds Management Company, LLC (‘‘HFMC’’ or ‘‘Manager’’) will be the investment manager to the Fund. ALPS Distributors, Inc. (‘‘ALPS’’ or the ‘‘Distributor’’) will be the principal underwriter to the Fund. HFMC is an indirect subsidiary of The Hartford Financial Services Group, Inc. Wellington Management Company LLP 4 The Securities and Exchange Commission (‘‘Commission’’) has approved for Exchange listing and trading shares of actively managed funds 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); 80865 (June 6, 2017), 82 FR 26970 (June 12, 2017) (order approving listing and trading of shares of the Franklin Liberty Intermediate Municipal Opportunities ETF and Franklin Liberty Municipal Bond ETF under NYSE Arca Equities Rule 8.600); 80885 (June 8, 2017), 82 FR 27302 (June 14, 2017) (order approving listing and trading of shares of the IQ Municipal Insured ETF, IQ Municipal Short Duration ETF, and IQ Municipal Intermediate ETF Under NYSE Arca Equities 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 Rule 5.2–E(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 June 26, 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 Fund (File Nos. 333–215165 and 811–23222) (‘‘Registration Statement’’). The description of the operation of the Trust and the Fund herein is based, in part, on the Registration Statement. In addition, the Commission has issued an order granting certain exemptive relief to the Trust under the 1940 Act. See Investment Company Act Release No. 32454 (January 27, 2017) (File No. 812–812–13828– 01) (‘‘Exemptive Order’’). PO 00000 Frm 00092 Fmt 4703 Sfmt 4703 42147 (‘‘Wellington Management’’ or ‘‘SubAdviser’’) will be the sub-adviser to the Fund and will perform the daily investment of the assets for the Fund. Commentary .06 to Rule 8.600–E 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, 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. Neither the Manager nor Sub-Adviser is a registered broker-dealer but each is affiliated with a broker-dealer. The Manager and Sub-Adviser each has implemented a ‘‘fire wall’’ with respect to such broker-dealer affiliate regarding access to information concerning the composition of and/or changes to the Fund’s portfolio. In addition, personnel who make decisions on the Fund’s portfolio composition must be subject to procedures designed to prevent the use and dissemination of material, nonpublic information regarding the Fund’s portfolio. In the event (a) the Manager or Sub-Adviser becomes registered as a broker-dealer or newly affiliated with a broker-dealer, or (b) any new adviser or sub-adviser to the Fund is a registered broker-dealer or becomes affiliated with a broker-dealer, the applicable adviser or sub-adviser will implement and 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 Sub-Adviser 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. E:\FR\FM\06SEN1.SGM 06SEN1 42148 Federal Register / Vol. 82, No. 171 / Wednesday, September 6, 2017 / Notices 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 the Fund’s portfolio, and will be subject to procedures designed to prevent the use and dissemination of material non-public information regarding such portfolio. asabaliauskas on DSKBBXCHB2PROD with NOTICES Hartford Municipal Opportunities ETF According to the Registration Statement, the Fund will seek to provide current income that is generally exempt from federal income taxes, and long-term total return. The Fund will seek to achieve its investment objective by investing in investment grade and non-investment grade municipal securities that the Sub-Adviser considers to be attractive from a yield perspective while considering total return. Under normal market conditions,8 at least 80% of the Fund’s net assets must be invested in municipal securities (‘‘Municipal Securities’’).9 The Fund will generally hold a diversified portfolio of investments across states and sectors, although the Fund is not required to invest in all states and sectors at all times. According to the Registration Statement, the Fund may invest in the following Municipal Securities: • General obligation bonds • Revenue (or limited obligation) bonds • Private activity (or industrial development) bonds • Municipal notes • Municipal lease obligations • Zero-coupon Municipal Securities The Sub-Adviser will combine topdown strategy with bottom-up fundamental research and comprehensive risk management within the portfolio construction process. Bottom-up, internally generated, fundamental research attempts to identify relative value among sectors, within sectors, and between individual securities. Other Investments While the Fund, under normal market conditions, will invest at least 80% of its net assets in Municipal Securities as described above, the Fund may, under normal market conditions, invest up to 20% of its net assets in the aggregate in the securities and financial instruments described below. 8 The term ‘‘normal market conditions’’ is defined in NYSE Arca Rule 8.600–E(c)(5). 9 Municipal securities primarily include debt obligations are issued by or on behalf of the District of Columbia, states, territories, commonwealths and possessions of the United States and their political subdivisions (e.g., cities, towns, counties, school districts, authorities and commissions) and agencies, authorities and instrumentalities. VerDate Sep<11>2014 17:37 Sep 05, 2017 Jkt 241001 The Fund may invest in exchangetraded fund (‘‘ETFs’’) 10 and exchangetraded notes. (‘‘ETNs’’).11 The Fund may invest in securities issued or guaranteed as to principal or interest by the U.S. Government, its agencies or instrumentalities. The Fund may invest some or all of its assets in cash, high quality money market instruments,12 U.S. Government securities and shares of money market investment companies for temporary defensive purposes in response to adverse market, economic or political conditions when its sub-adviser, subject to the overall supervision of HFMC, deems it appropriate. The Fund may invest in non-agency asset-backed securities. The Fund may invest in registered money market funds that invest in money market instruments, as permitted by regulations adopted under the 1940 Act. The Fund may invest in registered money market funds that invest in money market instruments and other investment company securities as permitted under the 1940 Act. The Fund may enter into repurchase and reverse repurchase agreements. The Fund may invest in securities that are not registered under the 1933 Act (‘‘restricted securities’’). The Fund may invest in zero-coupon securities (in addition to zero-coupon Municipal Securities). The Fund may invest in variable rate bonds known as ‘‘inverse floaters’’ which pay interest at rates that bear an inverse relationship to changes in shortterm market interest rates. The Fund may invest in municipal inverse floaters, which are a type of inverse floater in which a municipal bond is deposited with a special purpose vehicle (SPV), which issues, in return, the municipal inverse floater (which is comprised of a residual interest in the cash flows and assets of the SPV) plus proceeds from the issuance by the SPV of floating rate certificates to third parties. 10 For purposes of this filing, the term ‘‘ETFs’’ includes Investment Company Units (as described in NYSE Arca Rule 5.2–E(j)(3)); Portfolio Depositary Receipts (as described in NYSE Arca Rule 8.100– E); and Managed Fund Shares (as described in NYSE Arca Rule 8.600–E). All ETFs will be listed and traded in the U.S. on a national securities exchange. While the Fund may invest in inverse ETFs, the Fund will not invest in leveraged (e.g., 2X, ¥2X, 3X or ¥3X) ETFs. 11 ETNs are securities such as those listed on the Exchange under NYSE Arca Rule 5.2–E(j)(6). 12 Money market instruments include the following: (1) Banker’s acceptances; (2) short-term corporate obligations, including commercial paper, notes, and bonds; (3) other short-term debt obligations; and (4) obligations of U.S. banks. PO 00000 Frm 00093 Fmt 4703 Sfmt 4703 The Fund may invest in derivative instruments, as described below. The Fund may use derivative instruments to manage portfolio risk, to replicate securities the Fund could buy that are not currently available in the market or for other investment purposes. The Fund may invest in interest rate futures contracts. The Fund may invest in interest rate swaps, caps, floors and collars. Disclosure of Portfolio Holdings On each day the NYSE Arca is open (a ‘‘Business Day’’), before commencement of trading in Shares on the Exchange in the Exchange’s Core Trading Session, HFMC will disclose the Fund’s iNAV Basket.13 Additionally, on each Business Day, before commencement of trading in Shares on the Exchange, the Fund will disclose on its Web site the identities and quantities of the Fund’s portfolio holdings that will form the basis for the Fund’s calculation of NAV at the end of the Business Day. The NAV per Share will be determined for the Fund’s Shares as of the close of regular trading on the New York Stock Exchange (the ‘‘NYSE’’) (normally 4:00 p.m. Eastern Time) (the ‘‘NYSE Close’’) on each day that the Exchange is open (‘‘Valuation Date’’). The net asset value for the Shares will be determined by dividing the value of the Fund’s net assets attributable to the Shares by the number of Shares outstanding. For purposes of calculating the NAV, portfolio securities and other assets held in the Fund’s portfolio for which market prices are readily available are valued at market value. Market value is generally determined on the basis of last reported trade prices or official close price. If no trades were reported, market value is based on prices obtained from a quotation reporting system, established market makers, or independent pricing services. If market prices are not readily available or are deemed unreliable, the Fund will use the fair value of the security or other instrument as determined in good faith under policies and procedures established by and under the supervision of the Board of Trustees of the Trust. Market prices are considered not readily available where there is an absence of current or reliable market-based data (e.g., trade information or broker quotes), including where events occur after the close of the 13 An iNAV will be based on the current market value of the Fund’s portfolio holdings that will form the basis for the Fund’s calculation of NAV at the end of the Business Day, as disclosed on the Fund’s Web site prior to that Business Day’s commencement of trading (the ‘‘iNAV Basket’’). E:\FR\FM\06SEN1.SGM 06SEN1 asabaliauskas on DSKBBXCHB2PROD with NOTICES Federal Register / Vol. 82, No. 171 / Wednesday, September 6, 2017 / Notices relevant market, but prior to the NYSE Close that materially affect the values of the Fund’s portfolio holdings or assets. Prices of foreign equities that are principally traded on certain foreign markets are adjusted daily pursuant to a fair value pricing service approved by the Trust’s Board of Trustees in order to reflect an adjustment for the factors occurring after the close of certain foreign markets but before the NYSE Close. Fixed income investments and nonexchange traded derivatives held by the Fund will normally be valued on the basis of quotes obtained from brokers and dealers or independent pricing services in accordance with procedures established by the Trust’s Board of Trustees. Prices obtained from independent pricing services use information provided by market makers or estimates of market values obtained from yield data relating to investments or securities with similar characteristics. Senior floating rate interests generally trade in over-the-counter (‘‘OTC’’) markets and are priced through an independent pricing service utilizing independent market quotations from loan dealers or financial institutions. Generally, the Fund may use fair valuation in regard to fixed income positions when the Fund holds defaulted or distressed investments or investments in a company in which a reorganization is pending. Short term investments maturing in 60 days or less are generally valued at amortized cost if their original term to maturity was 60 days or less, or by amortizing their value on the 61st day prior to maturity, if the original term exceeded 60 days. Investments valued in currencies other than U.S. dollars will be converted to U.S. dollars using exchange rates obtained from independent pricing services for calculation of the NAV. Investments in open-end mutual funds are valued at the respective NAV of each open-end mutual fund on the Valuation Date. Financial instruments for which prices are not available from an independent pricing service may be valued using market quotations obtained from one or more dealers that make markets in the respective financial instrument in accordance with procedures established by the Trust’s Board of Trustees. Creation and Redemption of Shares According to the Registration Statement, the Trust will issue and sell Shares of the Fund only in Creation Units at the NAV next determined after receipt of an order in proper form on any Business Day. The number of VerDate Sep<11>2014 17:37 Sep 05, 2017 Jkt 241001 Shares of the Fund that will constitute a Creation Unit is 50,000. The size of a Creation Unit is subject to change. Creation of Shares The consideration for purchase of Creation Units will generally consist of ‘‘Deposit Securities’’ and the ‘‘Cash Component’’, which will generally correspond pro rata, to the extent practicable, to the Fund’s securities, or, as permitted or required by the Fund, of cash. Together, the Deposit Securities and Cash Component constitute the ‘‘Fund Deposit,’’ which represents the minimum initial and subsequent investment amount for a Creation Unit of the Fund. Creation Units of Shares of the Fund may be issued partially for cash. The Transfer Agent, through the NSCC, will make available on each Business Day, prior to the Core Trading Session (subject to amendments) on the Exchange (currently 9:30 a.m., Eastern time), the identity and the required number of each Deposit Security and the amount of the Cash Component to be included in the current Fund Deposit (based on information at the end of the previous Business Day). To be eligible to place orders with the Distributor and to create a Creation Unit of the Fund, an entity must be: (i) A ‘‘Participating Party,’’ i.e., a brokerdealer or other participant in the clearing process through the Continuous Net Settlement System of the NSCC (the ‘‘Clearing Process’’); or (ii) a participant of DTC (‘‘DTC Participant’’) and must have executed an agreement with the Distributor (and accepted by the Transfer Agent), with respect to creations and redemptions of Creation Units (‘‘Participant Agreement’’) (discussed below). A Participating Party or DTC Participant who has executed a Participant Agreement is referred to as an ‘‘Authorized Participant.’’ Except as described below, and in all cases subject to the terms of the applicable Participant Agreement, all orders to create Creation Units of the Fund must be received by the Transfer Agent no later than the closing time of the Exchange’s Core Trading Session (‘‘Order Cutoff Time’’) (ordinarily 4:00 p.m., Eastern time) in each case on the date such order is placed for creation of Creation Units to be effected based on the NAV of shares of the Fund as next determined after receipt of an order in proper form. Orders requesting substitution of a ‘‘cash-in-lieu’’ amount or a cash creation, must be received by the Transfer Agent no later than 3:00 p.m., Eastern time. The date on which an order to create Creation Units (or an order to redeem Creation Units, as PO 00000 Frm 00094 Fmt 4703 Sfmt 4703 42149 discussed below) is placed is referred to as the ‘‘Transmittal Date’’. Fund Deposits created through the Clearing Process, if available, must be delivered through a Participating Party that has executed a Participant Agreement. Fund Deposits created outside the Clearing Process must be delivered through a DTC Participant that has executed a Participant Agreement. 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 on a Business Day and only through a Participating Party or DTC Participant who has executed a Participant Agreement. With respect to the Fund, the Transfer Agent, through the NSCC, makes available immediately prior to the opening of business on the Exchange (currently 9:30 a.m., Eastern time) on each Business Day, the identity of the Fund’s securities and/or an amount of cash that will be applicable (subject to possible amendment or correction) to redemption requests received in proper form (as described below) on that day. All orders are subject to acceptance by the Distributor. The Fund’s securities received on redemption will generally correspond pro rata, to the extent practicable, to the Fund’s securities. The Fund’s securities received on redemption (‘‘Fund Securities’’) may not be identical to Deposit Securities that are applicable to creations of Creation Units. Unless cash only redemptions are available or specified for the Fund, the redemption proceeds for a Creation Unit will generally consist of Fund Securities—as announced on the Business Day of the request for a redemption order 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, less the redemption transaction fee and variable fees described below. Notwithstanding the foregoing, the Trust will substitute a ‘‘cash-in-lieu’’ amount to replace any Fund Security that is a non-deliverable instrument. Orders to redeem Creation Units of the Fund through the Clearing Process, if available, must be delivered through a Participating Party that has executed the Participant Agreement. Orders to redeem Creation Units of the Fund outside the Clearing Process must be delivered through a DTC E:\FR\FM\06SEN1.SGM 06SEN1 42150 Federal Register / Vol. 82, No. 171 / Wednesday, September 6, 2017 / Notices asabaliauskas on DSKBBXCHB2PROD with NOTICES Participant that has executed the Participant Agreement. Availability of Information The Fund will disclose on the Fund’s Web site (www.hartfordfunds.com) at the start of each business day the identities and quantities of the securities and other assets held by the 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. The Web site for the Fund will contain the following information, on a per-Share basis, for the 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 the Fund if, shorter). In addition, on each business day, before the commencement of trading in Shares on the NYSE Arca, the Fund will disclose on its Web site the identities and quantities of the portfolio securities and other assets held by the Fund that will form the basis for the calculation of NAV at the end of the business day. The Fund’s portfolio holdings will be disclosed on the Fund’s Web site daily after the close of trading on the Exchange and prior to the opening of trading on the Exchange the following day. On a daily basis, the Fund will disclose the information required under NYSE Arca Rule 8.600–E(c)(2) to the extent applicable. The Web site information will be publicly available at no charge. The approximate value of the Fund’s investments on a per-Share basis, the iNAV, 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 the Fund’s Statement of Additional Information (‘‘SAI’’), shareholder reports, Form N–CSR and Form N–SAR, filed twice a year. The Fund’s 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 VerDate Sep<11>2014 17:37 Sep 05, 2017 Jkt 241001 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 published daily in the financial section of newspapers. Quotation and last sale information for the Shares, ETFs and ETNs will be available via the Consolidated Tape Association (‘‘CTA’’) high-speed line, and from the national securities exchange on which they are listed. Quotation information from brokers and dealers or pricing services will be available for Municipal Bonds. 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 each asset class in which the Fund will invest will generally be available through nationally recognized data service providers through subscription agreements. In addition, the iNAV (which is the Portfolio Indicative Value, as defined in NYSE Arca Rule 8.600– E(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.14 Investment Restrictions The Fund may hold up to an aggregate amount of 15% of its net assets in illiquid assets (calculated at the time of investment) deemed illiquid by the Adviser, consistent with Commission guidance. The Fund will monitor its portfolio liquidity on an ongoing basis to determine whether, in light of current circumstances, an adequate level of liquidity is being maintained, and will consider taking appropriate steps in order to maintain adequate liquidity if, through a change in values, net assets, or other circumstances, more than 15% of the Fund’s net assets are held in illiquid assets. Illiquid assets may 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.15 14 Currently, it is the Exchange’s understanding that several major market data vendors display and/ or make widely available Portfolio Indicative Values taken from CTA or other data feeds. 15 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 PO 00000 Frm 00095 Fmt 4703 Sfmt 4703 The Fund intends to qualify for and to elect treatment as a separate regulated investment company under Subchapter M of the Internal Revenue Code of 1986.16 The 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. Under normal market conditions, except for periods of high cash inflows or outflows,17 the Fund will satisfy the following criteria: i. The Fund will have a minimum of 20 non-affiliated issuers; ii. No single municipal securities issuer will account for more than 10% of the weight of the Fund’s portfolio; iii. No individual bond will account for more than 5% of the weight of the Fund’s portfolio; iv. The Fund will limit its investments in Municipal Securities of any one state to 20% of the Fund’s total assets and will be diversified among issuers in at least 10 states; v. The Fund will be diversified among a minimum of five different sectors of the municipal bond market.18 Pre-refunded bonds will be excluded from the above limits given that they have a high level of credit quality and liquidity.19 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). 16 26 U.S.C. 851. 17 ‘‘Periods of high cash inflows or outflows’’ as used herein, mean rolling periods of seven calendar days during which inflows or outflows of cash, in the aggregate, exceed 10% of the Fund’s net assets as of the opening of business on the first day of such periods. 18 The Fund’s investments in Municipal Securities will include investments in state and local (e.g., county, city, town) Municipal Securities relating to such sectors as the following: Airports; bridges and highways; hospitals; housing; jails; mass transportation; nursing homes; parks; public buildings; recreational facilities; school facilities; streets; and water and sewer works. 19 The Manager represents that pre-refunded bonds (also known as refunded or escrow-secured bonds) have a high level of credit quality and liquidity because the issuer ‘‘prerefunds’’ the bond by setting aside in advance all or a portion of the amount to be paid to the bondholders when the bond is called. Generally, an issuer uses the proceeds from a new bond issue to buy high grade, interest bearing debt securities, including direct E:\FR\FM\06SEN1.SGM 06SEN1 Federal Register / Vol. 82, No. 171 / Wednesday, September 6, 2017 / Notices asabaliauskas on DSKBBXCHB2PROD with NOTICES Application of Generic Listing Requirements The Exchange is submitting this proposed rule change because the portfolios for the Fund will not meet all of the ‘‘generic’’ listing requirements of Commentary .01 to NYSE Arca Rule 8.600–E applicable to the listing of Managed Fund Shares. The Fund’s portfolio will meet all such requirements except for those set forth in Commentary .01(b)(1).20 The Exchange believes that it is appropriate and in the public interest to approve listing and trading of Shares of the Fund on the Exchange notwithstanding that the Fund would not meet the requirements of Commentary .01(b)(1) to Rule 8.600–E in that the Fund’s 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 the Fund’s portfolio may consist of components with less than $100 million minimum original principal amount outstanding would provide the Fund with greater ability to select from a broad range of Municipal Securities, as described above, that would support the Fund’s investment goal. The Exchange believes that, notwithstanding that the Fund’s portfolio may not satisfy Commentary .01(b)(1) to Rule 8.600–E, the Fund’s portfolios will not be susceptible to manipulation. As noted above, the Fund’s investments will be diversified among a minimum of 20 non-affiliated issuers; no single municipal securities issuer will account for more than 10% of the weight of the Fund’s portfolio; no individual bond will account for more than 5% of the weight of the Fund’s portfolio; the Fund will limit its investments in Municipal Securities of any one state to 20% of the Fund’s total assets and will be diversified among issuers in at least 10 states; and the Fund will be diversified among a minimum of five different sectors of the municipal bond market. The Exchange notes that, other than Commentary .01(b)(1) to Rule 8.600–E, the Fund’s portfolio will meet all other requirements of Rule 8.600–E. obligations of the U.S. government, which are then deposited in an irrevocable escrow account held by a trustee bank to secure all future payments of principal and interest on the pre-refunded bonds. 20 Commentary .01(b)(1) to NYSE Arca Rule 8.600–E 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. VerDate Sep<11>2014 17:37 Sep 05, 2017 Jkt 241001 Trading Halts With respect to trading halts, the Exchange may consider all relevant factors in exercising its discretion to halt or suspend trading in the Shares of the Fund.21 Trading in Shares of the Fund will be halted if the circuit breaker parameters in NYSE Arca Rule 7.12–E 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 NYSE Arca from 4 a.m. to 8 p.m., Eastern Time in accordance with NYSE Arca Rule 7.34–E (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 Rule 7.6–E, the minimum price variation (‘‘MPV’’) for quoting and entry of orders in equity securities traded on NYSE Arca is $0.01, with the exception of securities that are priced less than $1.00 for which the MPV for order entry is $0.0001. The Shares of the Fund will conform to the initial and continued listing criteria under NYSE Arca Rule 8.600–E. Consistent with NYSE Arca Rule 8.600– E(d)(2)(B)(ii), the Adviser will implement and maintain, or be subject to, procedures designed to prevent the use and dissemination of material nonpublic information regarding the actual components of the Fund’s portfolio. The Exchange represents that, for initial and/or continued listing, the Fund will be in compliance with Rule 10A–3 22 under the Act, as provided by NYSE Arca Rule 5.3–E. 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. The Fund’s investments will be consistent with the 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, 21 See 22 17 PO 00000 NYSE Arca Rule 7.12–E, Commentary .04. CFR 240.10A–3. Frm 00096 Fmt 4703 Sfmt 4703 42151 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.23 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.24 The Exchange or FINRA, on behalf of the Exchange, or both, will communicate as needed regarding trading in the Shares, ETFs and ETNs 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, ETFs and ETNs from such markets and other entities. In addition, the Exchange may obtain information regarding trading in the Shares, ETFs and ETNs 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 the 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. 23 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. 24 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. E:\FR\FM\06SEN1.SGM 06SEN1 42152 Federal Register / Vol. 82, No. 171 / Wednesday, September 6, 2017 / Notices asabaliauskas on DSKBBXCHB2PROD with NOTICES 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) the applicability of Exchange listing rules specified in this rule filing shall constitute continued listing requirements for listing the Shares of the Fund on the Exchange. The issuer has represented to the Exchange that it will advise the Exchange of any failure by the Fund to comply with the continued listing requirements, and, pursuant to its obligations under Section 19(g)(1) of the Act, the Exchange will monitor for compliance with the continued listing requirements. If the Fund is not in compliance with the applicable listing requirements, the Exchange will commence delisting procedures under NYSE Arca Rule 5.5–E(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 Rule 9.2–E(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 iNAV will not be calculated or publicly disseminated; (4) how information regarding the iNAV 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 the Fund is subject to various fees and expenses described in the Registration Statement. The Bulletin will discuss any exemptive, no-action, and interpretive relief granted by the Commission from any rules under the Act. The Bulletin will also disclose that the NAV for the Shares 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 VerDate Sep<11>2014 17:37 Sep 05, 2017 Jkt 241001 under Section 6(b)(5) 25 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 Rule 8.600–E. 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, ETFs and ETNs 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, ETFs and ETNs from such markets and other entities. In addition, the Exchange may obtain information regarding trading in the Shares, ETFs and ETNs 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 the 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. The Fund may not purchase illiquid assets if, in the aggregate, more than 15% of its net assets would be invested in illiquid assets. Neither the Manager nor Sub-Adviser is a registered brokerdealer but each is affiliated with a broker-dealer. The Manager and SubAdviser each has implemented a ‘‘fire wall’’ with respect to such broker-dealer affiliate regarding access to information concerning the composition of and/or changes to the Fund’s portfolio. The Exchange believes that it is appropriate and in the public interest to approve listing and trading of Shares of the Fund on the Exchange notwithstanding that the Fund would not meet the requirements of Commentary .01(b)(1) to Rule 8.600–E 25 15 PO 00000 U.S.C. 78f(b)(5). Frm 00097 Fmt 4703 Sfmt 4703 in that the Fund’s investments in municipal securities will be welldiversified. As noted above, the Fund’s investments will be well-diversified in that the Fund will have a minimum of 20 non-affiliated issuers; no single municipal securities issuer will account for more than 10% of the weight of the Fund’s portfolio; no individual bond will account for more than 5% of the weight of the Fund’s portfolio; the Fund will limit its investments in Municipal Securities of any one state to 20% of the Fund’s total assets and will be diversified among issuers in at least 10 states; and the Fund will be diversified among a minimum of five different sectors of the municipal bond market. The Exchange believes that permitting Fund Shares to be listed and traded on the Exchange notwithstanding that less than 75% of the weight of the Fund’s portfolio may consist of components with less than $100 million minimum original principal amount outstanding would provide the Fund with greater ability to select from a broad range of municipal securities, as described above, that would support the Fund’s investment objective. 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 the Fund and the Shares, thereby promoting market transparency. Quotation and last sale information for the Shares, ETFs and ETNs will be available via the CTA high-speed line, and from the national securities exchange 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 Fund will be halted if the circuit breaker parameters in NYSE Arca Rule 7.12–E 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 Rule 8.600–E(d)(2)(D), which sets forth circumstances under which Shares of the Fund may be halted. In addition, as noted above, investors will have ready access to information regarding the Fund’s holdings, the iNAV, the Disclosed Portfolio, and quotation and last sale information for the Shares. E:\FR\FM\06SEN1.SGM 06SEN1 Federal Register / Vol. 82, No. 171 / Wednesday, September 6, 2017 / Notices 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 the Fund’s holdings, iNAV, Disclosed Portfolio, and quotation and last sale information for the Shares. IV. Solicitation of Comments B. Self-Regulatory Organization’s Statement on Burden on Competition All submissions should refer to File Number SR–NYSEArca–2017–90. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR– NYSEArca–2017–90, and should be submitted on or before September 27, 2017. 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 an additional type of actively-managed exchange-traded product 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. asabaliauskas on DSKBBXCHB2PROD with NOTICES III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or 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 the proposed rule change, or (B) institute proceedings to determine whether the proposed rule change should be disapproved. VerDate Sep<11>2014 17:37 Sep 05, 2017 Jkt 241001 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: For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.26 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–18799 Filed 9–5–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION 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–2017–90 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. PO 00000 [Release No. 34–81503; File No. SR– BatsEDGX–2017–35] Self-Regulatory Organizations; Bats EDGX Exchange, Inc.; Notice of Filing of a Proposed Rule Change, as Modified by Amendment No. 1, To Harmonize the Corporate Governance Framework With That of Chicago Board Options Exchange, Incorporated and C2 Options Exchange Incorporated August 30, 2017. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on August 23, 2017, Bats EDGX Exchange, Inc. (‘‘Exchange’’ or ‘‘EDGX’’) 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 Exchange. On August 25, 2017, the Exchange filed Amendment No. 1 to the proposed rule change. The Commission is publishing this notice to solicit comments on the proposed rule change, as modified by Amendment No. 1, from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange filed a proposal to amend and restate its certificate of incorporation and bylaws, as well as amend its Rules. The text of the proposed rule change is available at the Exchange’s Web site at www.bats.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 Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the 26 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 Frm 00098 Fmt 4703 42153 Sfmt 4703 E:\FR\FM\06SEN1.SGM 06SEN1

Agencies

[Federal Register Volume 82, Number 171 (Wednesday, September 6, 2017)]
[Notices]
[Pages 42147-42153]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-18799]



[[Page 42147]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81505; File No. SR-NYSEArca-2017-90]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change To List and Trade Shares of the Hartford 
Municipal Opportunities ETF Under NYSE Arca Rule 8.600-E

August 30, 2017.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on August 17, 2017, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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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 Hartford 
Municipal Opportunities ETF under NYSE Arca Rule 8.600-E (``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 the 
Hartford Municipal Opportunities ETF (``Fund'') under NYSE Arca Rule 
8.600-E,\4\ which governs the listing and trading of Managed Fund 
Shares.\5\ The Shares will be offered by the Hartford Funds Exchange-
Traded Trust (the ``Trust''), which is registered with the Commission 
as an open-end management investment company.\6\ The Fund is a series 
of the Trust.
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    \4\ The Securities and Exchange Commission (``Commission'') has 
approved for Exchange listing and trading shares of actively managed 
funds 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); 80865 (June 6, 
2017), 82 FR 26970 (June 12, 2017) (order approving listing and 
trading of shares of the Franklin Liberty Intermediate Municipal 
Opportunities ETF and Franklin Liberty Municipal Bond ETF under NYSE 
Arca Equities Rule 8.600); 80885 (June 8, 2017), 82 FR 27302 (June 
14, 2017) (order approving listing and trading of shares of the IQ 
Municipal Insured ETF, IQ Municipal Short Duration ETF, and IQ 
Municipal Intermediate ETF Under NYSE Arca Equities 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 Rule 5.2-E(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 June 26, 
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 Fund 
(File Nos. 333-215165 and 811-23222) (``Registration Statement''). 
The description of the operation of the Trust and the Fund herein is 
based, in part, on the Registration Statement. In addition, the 
Commission has issued an order granting certain exemptive relief to 
the Trust under the 1940 Act. See Investment Company Act Release No. 
32454 (January 27, 2017) (File No. 812-812-13828-01) (``Exemptive 
Order'').
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    Hartford Funds Management Company, LLC (``HFMC'' or ``Manager'') 
will be the investment manager to the Fund. ALPS Distributors, Inc. 
(``ALPS'' or the ``Distributor'') will be the principal underwriter to 
the Fund. HFMC is an indirect subsidiary of The Hartford Financial 
Services Group, Inc. Wellington Management Company LLP (``Wellington 
Management'' or ``Sub-Adviser'') will be the sub-adviser to the Fund 
and will perform the daily investment of the assets for the Fund.
    Commentary .06 to Rule 8.600-E 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. Neither the 
Manager nor Sub-Adviser is a registered broker-dealer but each is 
affiliated with a broker-dealer. The Manager and Sub-Adviser each has 
implemented a ``fire wall'' with respect to such broker-dealer 
affiliate regarding access to information concerning the composition of 
and/or changes to the Fund's portfolio. In addition, personnel who make 
decisions on the Fund's portfolio composition must be subject to 
procedures designed to prevent the use and dissemination of material, 
non-public information regarding the Fund's portfolio. In the event (a) 
the Manager or Sub-Adviser becomes registered as a broker-dealer or 
newly affiliated with a broker-dealer, or (b) any new adviser or sub-
adviser to the Fund is a registered broker-dealer or becomes affiliated 
with a broker-dealer, the applicable adviser or sub-adviser will 
implement and

[[Page 42148]]

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 the 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 Sub-Adviser 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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Hartford Municipal Opportunities ETF
    According to the Registration Statement, the Fund will seek to 
provide current income that is generally exempt from federal income 
taxes, and long-term total return. The Fund will seek to achieve its 
investment objective by investing in investment grade and non-
investment grade municipal securities that the Sub-Adviser considers to 
be attractive from a yield perspective while considering total return. 
Under normal market conditions,\8\ at least 80% of the Fund's net 
assets must be invested in municipal securities (``Municipal 
Securities'').\9\ The Fund will generally hold a diversified portfolio 
of investments across states and sectors, although the Fund is not 
required to invest in all states and sectors at all times.
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    \8\ The term ``normal market conditions'' is defined in NYSE 
Arca Rule 8.600-E(c)(5).
    \9\ Municipal securities primarily include debt obligations are 
issued by or on behalf of the District of Columbia, states, 
territories, commonwealths and possessions of the United States and 
their political subdivisions (e.g., cities, towns, counties, school 
districts, authorities and commissions) and agencies, authorities 
and instrumentalities.
---------------------------------------------------------------------------

    According to the Registration Statement, the Fund may invest in the 
following Municipal Securities:

 General obligation bonds
 Revenue (or limited obligation) bonds
 Private activity (or industrial development) bonds
 Municipal notes
 Municipal lease obligations
 Zero-coupon Municipal Securities

    The Sub-Adviser will combine top-down strategy with bottom-up 
fundamental research and comprehensive risk management within the 
portfolio construction process. Bottom-up, internally generated, 
fundamental research attempts to identify relative value among sectors, 
within sectors, and between individual securities.
Other Investments
    While the Fund, under normal market conditions, will invest at 
least 80% of its net assets in Municipal Securities as described above, 
the Fund may, under normal market conditions, invest up to 20% of its 
net assets in the aggregate in the securities and financial instruments 
described below.
    The Fund may invest in exchange-traded fund (``ETFs'') \10\ and 
exchange-traded notes. (``ETNs'').\11\
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    \10\ For purposes of this filing, the term ``ETFs'' includes 
Investment Company Units (as described in NYSE Arca Rule 5.2-
E(j)(3)); Portfolio Depositary Receipts (as described in NYSE Arca 
Rule 8.100-E); and Managed Fund Shares (as described in NYSE Arca 
Rule 8.600-E). All ETFs will be listed and traded in the U.S. on a 
national securities exchange. While the Fund may invest in inverse 
ETFs, the Fund will not invest in leveraged (e.g., 2X, -2X, 3X or -
3X) ETFs.
    \11\ ETNs are securities such as those listed on the Exchange 
under NYSE Arca Rule 5.2-E(j)(6).
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    The Fund may invest in securities issued or guaranteed as to 
principal or interest by the U.S. Government, its agencies or 
instrumentalities.
    The Fund may invest some or all of its assets in cash, high quality 
money market instruments,\12\ U.S. Government securities and shares of 
money market investment companies for temporary defensive purposes in 
response to adverse market, economic or political conditions when its 
sub-adviser, subject to the overall supervision of HFMC, deems it 
appropriate.
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    \12\ Money market instruments include the following: (1) 
Banker's acceptances; (2) short-term corporate obligations, 
including commercial paper, notes, and bonds; (3) other short-term 
debt obligations; and (4) obligations of U.S. banks.
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    The Fund may invest in non-agency asset-backed securities.
    The Fund may invest in registered money market funds that invest in 
money market instruments, as permitted by regulations adopted under the 
1940 Act.
    The Fund may invest in registered money market funds that invest in 
money market instruments and other investment company securities as 
permitted under the 1940 Act.
    The Fund may enter into repurchase and reverse repurchase 
agreements.
    The Fund may invest in securities that are not registered under the 
1933 Act (``restricted securities'').
    The Fund may invest in zero-coupon securities (in addition to zero-
coupon Municipal Securities).
    The Fund may invest in variable rate bonds known as ``inverse 
floaters'' which pay interest at rates that bear an inverse 
relationship to changes in short-term market interest rates.
    The Fund may invest in municipal inverse floaters, which are a type 
of inverse floater in which a municipal bond is deposited with a 
special purpose vehicle (SPV), which issues, in return, the municipal 
inverse floater (which is comprised of a residual interest in the cash 
flows and assets of the SPV) plus proceeds from the issuance by the SPV 
of floating rate certificates to third parties.
    The Fund may invest in derivative instruments, as described below. 
The Fund may use derivative instruments to manage portfolio risk, to 
replicate securities the Fund could buy that are not currently 
available in the market or for other investment purposes.
    The Fund may invest in interest rate futures contracts.
    The Fund may invest in interest rate swaps, caps, floors and 
collars.
Disclosure of Portfolio Holdings
    On each day the NYSE Arca is open (a ``Business Day''), before 
commencement of trading in Shares on the Exchange in the Exchange's 
Core Trading Session, HFMC will disclose the Fund's iNAV Basket.\13\ 
Additionally, on each Business Day, before commencement of trading in 
Shares on the Exchange, the Fund will disclose on its Web site the 
identities and quantities of the Fund's portfolio holdings that will 
form the basis for the Fund's calculation of NAV at the end of the 
Business Day.
---------------------------------------------------------------------------

    \13\ An iNAV will be based on the current market value of the 
Fund's portfolio holdings that will form the basis for the Fund's 
calculation of NAV at the end of the Business Day, as disclosed on 
the Fund's Web site prior to that Business Day's commencement of 
trading (the ``iNAV Basket'').
---------------------------------------------------------------------------

    The NAV per Share will be determined for the Fund's Shares as of 
the close of regular trading on the New York Stock Exchange (the 
``NYSE'') (normally 4:00 p.m. Eastern Time) (the ``NYSE Close'') on 
each day that the Exchange is open (``Valuation Date''). The net asset 
value for the Shares will be determined by dividing the value of the 
Fund's net assets attributable to the Shares by the number of Shares 
outstanding.
    For purposes of calculating the NAV, portfolio securities and other 
assets held in the Fund's portfolio for which market prices are readily 
available are valued at market value. Market value is generally 
determined on the basis of last reported trade prices or official close 
price. If no trades were reported, market value is based on prices 
obtained from a quotation reporting system, established market makers, 
or independent pricing services. If market prices are not readily 
available or are deemed unreliable, the Fund will use the fair value of 
the security or other instrument as determined in good faith under 
policies and procedures established by and under the supervision of the 
Board of Trustees of the Trust. Market prices are considered not 
readily available where there is an absence of current or reliable 
market-based data (e.g., trade information or broker quotes), including 
where events occur after the close of the

[[Page 42149]]

relevant market, but prior to the NYSE Close that materially affect the 
values of the Fund's portfolio holdings or assets. Prices of foreign 
equities that are principally traded on certain foreign markets are 
adjusted daily pursuant to a fair value pricing service approved by the 
Trust's Board of Trustees in order to reflect an adjustment for the 
factors occurring after the close of certain foreign markets but before 
the NYSE Close.
    Fixed income investments and non-exchange traded derivatives held 
by the Fund will normally be valued on the basis of quotes obtained 
from brokers and dealers or independent pricing services in accordance 
with procedures established by the Trust's Board of Trustees. Prices 
obtained from independent pricing services use information provided by 
market makers or estimates of market values obtained from yield data 
relating to investments or securities with similar characteristics. 
Senior floating rate interests generally trade in over-the-counter 
(``OTC'') markets and are priced through an independent pricing service 
utilizing independent market quotations from loan dealers or financial 
institutions. Generally, the Fund may use fair valuation in regard to 
fixed income positions when the Fund holds defaulted or distressed 
investments or investments in a company in which a reorganization is 
pending. Short term investments maturing in 60 days or less are 
generally valued at amortized cost if their original term to maturity 
was 60 days or less, or by amortizing their value on the 61st day prior 
to maturity, if the original term exceeded 60 days.
    Investments valued in currencies other than U.S. dollars will be 
converted to U.S. dollars using exchange rates obtained from 
independent pricing services for calculation of the NAV.
    Investments in open-end mutual funds are valued at the respective 
NAV of each open-end mutual fund on the Valuation Date.
    Financial instruments for which prices are not available from an 
independent pricing service may be valued using market quotations 
obtained from one or more dealers that make markets in the respective 
financial instrument in accordance with procedures established by the 
Trust's Board of Trustees.
Creation and Redemption of Shares
    According to the Registration Statement, the Trust will issue and 
sell Shares of the Fund only in Creation Units at the NAV next 
determined after receipt of an order in proper form on any Business 
Day. The number of Shares of the Fund that will constitute a Creation 
Unit is 50,000. The size of a Creation Unit is subject to change.
Creation of Shares
    The consideration for purchase of Creation Units will generally 
consist of ``Deposit Securities'' and the ``Cash Component'', which 
will generally correspond pro rata, to the extent practicable, to the 
Fund's securities, or, as permitted or required by the Fund, of cash. 
Together, the Deposit Securities and Cash Component constitute the 
``Fund Deposit,'' which represents the minimum initial and subsequent 
investment amount for a Creation Unit of the Fund. Creation Units of 
Shares of the Fund may be issued partially for cash.
    The Transfer Agent, through the NSCC, will make available on each 
Business Day, prior to the Core Trading Session (subject to amendments) 
on the Exchange (currently 9:30 a.m., Eastern time), the identity and 
the required number of each Deposit Security and the amount of the Cash 
Component to be included in the current Fund Deposit (based on 
information at the end of the previous Business Day).
    To be eligible to place orders with the Distributor and to create a 
Creation Unit of the 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''); or (ii) a participant of DTC (``DTC 
Participant'') and must have executed an agreement with the Distributor 
(and accepted by the Transfer Agent), with respect to creations and 
redemptions of Creation Units (``Participant Agreement'') (discussed 
below). A Participating Party or DTC Participant who has executed a 
Participant Agreement is referred to as an ``Authorized Participant.''
    Except as described below, and in all cases subject to the terms of 
the applicable Participant Agreement, all orders to create Creation 
Units of the Fund must be received by the Transfer Agent no later than 
the closing time of the Exchange's Core Trading Session (``Order Cutoff 
Time'') (ordinarily 4:00 p.m., Eastern time) in each case on the date 
such order is placed for creation of Creation Units to be effected 
based on the NAV of shares of the Fund as next determined after receipt 
of an order in proper form. Orders requesting substitution of a ``cash-
in-lieu'' amount or a cash creation, must be received by the Transfer 
Agent no later than 3:00 p.m., Eastern time. The date on which an order 
to create Creation Units (or an order to redeem Creation Units, as 
discussed below) is placed is referred to as the ``Transmittal Date''.
    Fund Deposits created through the Clearing Process, if available, 
must be delivered through a Participating Party that has executed a 
Participant Agreement.
    Fund Deposits created outside the Clearing Process must be 
delivered through a DTC Participant that has executed a Participant 
Agreement.
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 on a 
Business Day and only through a Participating Party or DTC Participant 
who has executed a Participant Agreement.
    With respect to the Fund, the Transfer Agent, through the NSCC, 
makes available immediately prior to the opening of business on the 
Exchange (currently 9:30 a.m., Eastern time) on each Business Day, the 
identity of the Fund's securities and/or an amount of cash that will be 
applicable (subject to possible amendment or correction) to redemption 
requests received in proper form (as described below) on that day. All 
orders are subject to acceptance by the Distributor. The Fund's 
securities received on redemption will generally correspond pro rata, 
to the extent practicable, to the Fund's securities. The Fund's 
securities received on redemption (``Fund Securities'') may not be 
identical to Deposit Securities that are applicable to creations of 
Creation Units.
    Unless cash only redemptions are available or specified for the 
Fund, the redemption proceeds for a Creation Unit will generally 
consist of Fund Securities--as announced on the Business Day of the 
request for a redemption order 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, less the redemption 
transaction fee and variable fees described below. Notwithstanding the 
foregoing, the Trust will substitute a ``cash-in-lieu'' amount to 
replace any Fund Security that is a non-deliverable instrument.
    Orders to redeem Creation Units of the Fund through the Clearing 
Process, if available, must be delivered through a Participating Party 
that has executed the Participant Agreement.
    Orders to redeem Creation Units of the Fund outside the Clearing 
Process must be delivered through a DTC

[[Page 42150]]

Participant that has executed the Participant Agreement.
Availability of Information
    The Fund will disclose on the Fund's Web site 
(www.hartfordfunds.com) at the start of each business day the 
identities and quantities of the securities and other assets held by 
the 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.
    The Web site for the Fund will contain the following information, 
on a per-Share basis, for the 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 the Fund if, shorter). In addition, on each business day, 
before the commencement of trading in Shares on the NYSE Arca, the Fund 
will disclose on its Web site the identities and quantities of the 
portfolio securities and other assets held by the Fund that will form 
the basis for the calculation of NAV at the end of the business day.
    The Fund's portfolio holdings will be disclosed on the Fund's Web 
site daily after the close of trading on the Exchange and prior to the 
opening of trading on the Exchange the following day. On a daily basis, 
the Fund will disclose the information required under NYSE Arca Rule 
8.600-E(c)(2) to the extent applicable. The Web site information will 
be publicly available at no charge.
    The approximate value of the Fund's investments on a per-Share 
basis, the iNAV, 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 the Fund's Statement of Additional 
Information (``SAI''), shareholder reports, Form N-CSR and Form N-SAR, 
filed twice a year. The Fund's 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 
published daily in the financial section of newspapers.
    Quotation and last sale information for the Shares, ETFs and ETNs 
will be available via the Consolidated Tape Association (``CTA'') high-
speed line, and from the national securities exchange on which they are 
listed.
    Quotation information from brokers and dealers or pricing services 
will be available for Municipal Bonds. 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 
each asset class in which the Fund will invest will generally be 
available through nationally recognized data service providers through 
subscription agreements. In addition, the iNAV (which is the Portfolio 
Indicative Value, as defined in NYSE Arca Rule 8.600-E(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.\14\
---------------------------------------------------------------------------

    \14\ Currently, it is the Exchange's understanding that several 
major market data vendors display and/or make widely available 
Portfolio Indicative Values taken from CTA or other data feeds.
---------------------------------------------------------------------------

Investment Restrictions
    The Fund may hold up to an aggregate amount of 15% of its net 
assets in illiquid assets (calculated at the time of investment) deemed 
illiquid by the Adviser, consistent with Commission guidance. The Fund 
will monitor its portfolio liquidity on an ongoing basis to determine 
whether, in light of current circumstances, an adequate level of 
liquidity is being maintained, and will consider taking appropriate 
steps in order to maintain adequate liquidity if, through a change in 
values, net assets, or other circumstances, more than 15% of the Fund's 
net assets are held in illiquid assets. Illiquid assets may 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.\15\
---------------------------------------------------------------------------

    \15\ 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).
---------------------------------------------------------------------------

    The Fund intends to qualify for and to elect treatment as a 
separate regulated investment company under Subchapter M of the 
Internal Revenue Code of 1986.\16\
---------------------------------------------------------------------------

    \16\ 26 U.S.C. 851.
---------------------------------------------------------------------------

    The 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.
    Under normal market conditions, except for periods of high cash 
inflows or outflows,\17\ the Fund will satisfy the following criteria:
---------------------------------------------------------------------------

    \17\ ``Periods of high cash inflows or outflows'' as used 
herein, mean rolling periods of seven calendar days during which 
inflows or outflows of cash, in the aggregate, exceed 10% of the 
Fund's net assets as of the opening of business on the first day of 
such periods.
---------------------------------------------------------------------------

    i. The Fund will have a minimum of 20 non-affiliated issuers;
    ii. No single municipal securities issuer will account for more 
than 10% of the weight of the Fund's portfolio;
    iii. No individual bond will account for more than 5% of the weight 
of the Fund's portfolio;
    iv. The Fund will limit its investments in Municipal Securities of 
any one state to 20% of the Fund's total assets and will be diversified 
among issuers in at least 10 states;
    v. The Fund will be diversified among a minimum of five different 
sectors of the municipal bond market.\18\
---------------------------------------------------------------------------

    \18\ The Fund's investments in Municipal Securities will include 
investments in state and local (e.g., county, city, town) Municipal 
Securities relating to such sectors as the following: Airports; 
bridges and highways; hospitals; housing; jails; mass 
transportation; nursing homes; parks; public buildings; recreational 
facilities; school facilities; streets; and water and sewer works.
---------------------------------------------------------------------------

    Pre-refunded bonds will be excluded from the above limits given 
that they have a high level of credit quality and liquidity.\19\
---------------------------------------------------------------------------

    \19\ The Manager represents that pre-refunded bonds (also known 
as refunded or escrow-secured bonds) have a high level of credit 
quality and liquidity because the issuer ``prerefunds'' the bond by 
setting aside in advance all or a portion of the amount to be paid 
to the bondholders when the bond is called. Generally, an issuer 
uses the proceeds from a new bond issue to buy high grade, interest 
bearing debt securities, including direct obligations of the U.S. 
government, which are then deposited in an irrevocable escrow 
account held by a trustee bank to secure all future payments of 
principal and interest on the pre-refunded bonds.

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

[[Page 42151]]

Application of Generic Listing Requirements
    The Exchange is submitting this proposed rule change because the 
portfolios for the Fund will not meet all of the ``generic'' listing 
requirements of Commentary .01 to NYSE Arca Rule 8.600-E applicable to 
the listing of Managed Fund Shares. The Fund's portfolio will meet all 
such requirements except for those set forth in Commentary 
.01(b)(1).\20\
---------------------------------------------------------------------------

    \20\ Commentary .01(b)(1) to NYSE Arca Rule 8.600-E 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.
---------------------------------------------------------------------------

    The Exchange believes that it is appropriate and in the public 
interest to approve listing and trading of Shares of the Fund on the 
Exchange notwithstanding that the Fund would not meet the requirements 
of Commentary .01(b)(1) to Rule 8.600-E in that the Fund's 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 the Fund's portfolio may consist of components with less than $100 
million minimum original principal amount outstanding would provide the 
Fund with greater ability to select from a broad range of Municipal 
Securities, as described above, that would support the Fund's 
investment goal.
    The Exchange believes that, notwithstanding that the Fund's 
portfolio may not satisfy Commentary .01(b)(1) to Rule 8.600-E, the 
Fund's portfolios will not be susceptible to manipulation. As noted 
above, the Fund's investments will be diversified among a minimum of 20 
non-affiliated issuers; no single municipal securities issuer will 
account for more than 10% of the weight of the Fund's portfolio; no 
individual bond will account for more than 5% of the weight of the 
Fund's portfolio; the Fund will limit its investments in Municipal 
Securities of any one state to 20% of the Fund's total assets and will 
be diversified among issuers in at least 10 states; and the Fund will 
be diversified among a minimum of five different sectors of the 
municipal bond market.
    The Exchange notes that, other than Commentary .01(b)(1) to Rule 
8.600-E, the Fund's portfolio will meet all other requirements of Rule 
8.600-E.
Trading Halts
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares of the Fund.\21\ Trading in Shares of the Fund 
will be halted if the circuit breaker parameters in NYSE Arca Rule 
7.12-E 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.
---------------------------------------------------------------------------

    \21\ See NYSE Arca Rule 7.12-E, Commentary .04.
---------------------------------------------------------------------------

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 
NYSE Arca from 4 a.m. to 8 p.m., Eastern Time in accordance with NYSE 
Arca Rule 7.34-E (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 Rule 7.6-E, the minimum 
price variation (``MPV'') for quoting and entry of orders in equity 
securities traded on NYSE Arca is $0.01, with the exception of 
securities that are priced less than $1.00 for which the MPV for order 
entry is $0.0001.
    The Shares of the Fund will conform to the initial and continued 
listing criteria under NYSE Arca Rule 8.600-E. Consistent with NYSE 
Arca Rule 8.600-E(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 the Fund's portfolio. The Exchange represents that, for 
initial and/or continued listing, the Fund will be in compliance with 
Rule 10A-3 \22\ under the Act, as provided by NYSE Arca Rule 5.3-E. 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. The Fund's 
investments will be consistent with the Fund's investment goal and will 
not be used to enhance leverage.
---------------------------------------------------------------------------

    \22\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------

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.\23\
---------------------------------------------------------------------------

    \23\ 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.
---------------------------------------------------------------------------

    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.\24\
---------------------------------------------------------------------------

    \24\ 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.
---------------------------------------------------------------------------

    The Exchange or FINRA, on behalf of the Exchange, or both, will 
communicate as needed regarding trading in the Shares, ETFs and ETNs 
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, ETFs and ETNs from 
such markets and other entities. In addition, the Exchange may obtain 
information regarding trading in the Shares, ETFs and ETNs 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 
the 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.

[[Page 42152]]

    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) the applicability of 
Exchange listing rules specified in this rule filing shall constitute 
continued listing requirements for listing the Shares of the Fund on 
the Exchange.
    The issuer has represented to the Exchange that it will advise the 
Exchange of any failure by the Fund to comply with the continued 
listing requirements, and, pursuant to its obligations under Section 
19(g)(1) of the Act, the Exchange will monitor for compliance with the 
continued listing requirements. If the Fund is not in compliance with 
the applicable listing requirements, the Exchange will commence 
delisting procedures under NYSE Arca Rule 5.5-E(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 Rule 9.2-E(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 iNAV will not be calculated or publicly disseminated; (4) how 
information regarding the iNAV 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 the Fund is subject 
to various fees and expenses described in the Registration Statement. 
The Bulletin will discuss any exemptive, no-action, and interpretive 
relief granted by the Commission from any rules under the Act. The 
Bulletin will also disclose that the NAV for the Shares 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) \25\ 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.
---------------------------------------------------------------------------

    \25\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    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 Rule 8.600-E. 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, ETFs 
and ETNs 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, ETFs and 
ETNs from such markets and other entities. In addition, the Exchange 
may obtain information regarding trading in the Shares, ETFs and ETNs 
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 the 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. The 
Fund may not purchase illiquid assets if, in the aggregate, more than 
15% of its net assets would be invested in illiquid assets. Neither the 
Manager nor Sub-Adviser is a registered broker-dealer but each is 
affiliated with a broker-dealer. The Manager and Sub-Adviser each has 
implemented a ``fire wall'' with respect to such broker-dealer 
affiliate regarding access to information concerning the composition of 
and/or changes to the Fund's portfolio.
    The Exchange believes that it is appropriate and in the public 
interest to approve listing and trading of Shares of the Fund on the 
Exchange notwithstanding that the Fund would not meet the requirements 
of Commentary .01(b)(1) to Rule 8.600-E in that the Fund's investments 
in municipal securities will be well-diversified. As noted above, the 
Fund's investments will be well-diversified in that the Fund will have 
a minimum of 20 non-affiliated issuers; no single municipal securities 
issuer will account for more than 10% of the weight of the Fund's 
portfolio; no individual bond will account for more than 5% of the 
weight of the Fund's portfolio; the Fund will limit its investments in 
Municipal Securities of any one state to 20% of the Fund's total assets 
and will be diversified among issuers in at least 10 states; and the 
Fund will be diversified among a minimum of five different sectors of 
the municipal bond market.
    The Exchange believes that permitting Fund Shares to be listed and 
traded on the Exchange notwithstanding that less than 75% of the weight 
of the Fund's portfolio may consist of components with less than $100 
million minimum original principal amount outstanding would provide the 
Fund with greater ability to select from a broad range of municipal 
securities, as described above, that would support the Fund's 
investment objective.
    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 the Fund and the Shares, 
thereby promoting market transparency. Quotation and last sale 
information for the Shares, ETFs and ETNs will be available via the CTA 
high-speed line, and from the national securities exchange 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 Fund will be halted if the 
circuit breaker parameters in NYSE Arca Rule 7.12-E 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 Rule 8.600-E(d)(2)(D), which sets forth 
circumstances under which Shares of the Fund may be halted. In 
addition, as noted above, investors will have ready access to 
information regarding the Fund's holdings, the iNAV, the Disclosed 
Portfolio, and quotation and last sale information for the Shares.

[[Page 42153]]

    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 the Fund's holdings, iNAV, 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 an 
additional type of actively-managed exchange-traded product 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 the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2017-90 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-2017-90. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSEArca-2017-90, and should 
be submitted on or before September 27, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
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    \26\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-18799 Filed 9-5-17; 8:45 am]
 BILLING CODE 8011-01-P
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