Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a Proposed Rule Change, as Modified by Amendment No. 2, To List and Trade Shares of the Hartford Municipal Opportunities ETF Under NYSE Arca Rule 8.600-E, 57497-57501 [2017-26120]

Download as PDF Federal Register / Vol. 82, No. 232 / Tuesday, December 5, 2017 / Notices the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. be submitted on or before December 26, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.11 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–26126 Filed 12–4–17; 8:45 am] Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– MRX–2017–26 on the subject line. sradovich on DSK3GMQ082PROD with NOTICES 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: Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Designation of a Longer Period for Commission Action on a Proposed Rule Change, as Modified by Amendment No. 2, To List and Trade Shares of the JPMorgan Long/Short ETF Under NYSE Arca Rule 8.600–E 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–MRX–2017–26. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (http://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the 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. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–MRX–2017–26, and should VerDate Sep<11>2014 18:13 Dec 04, 2017 Jkt 244001 BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–82176; File No. SR– NYSEArca–2017–87] November 29, 2017. On September 26, 2017, NYSE Arca, Inc. (‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to list and trade shares (‘‘Shares’’) of the JPMorgan Long/Short ETF (‘‘Fund’’) under NYSE Arca Rule 8.600–E. The proposed rule change was published for comment in the Federal Register on October 16, 2017.3 On November 17, 2017, the Exchange filed Amendment No. 1 to the proposed rule change, which amended and superseded the proposed rule change as originally filed. On November 27, 2017, the Exchange filed Amendment No. 2 to the proposed rule change, which amended and superseded the proposed rule change as modified by Amendment No. 1.4 The Commission has received no comments on the proposed rule change. 11 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Securities Exchange Act Release No. 81842 (October 10, 2017), 82 FR 48127. 4 In Amendment No. 2, the Exchange: (1) Changed the name of the Fund; (2) moved cash and cash equivalents from the ‘‘other investments’’ category to the ‘‘principal investments’’ category; (3) specified that no more than 10% of the equity weight of the Fund’s portfolio will be invested in non-exchange-traded American Depositary Receipts; (4) provided additional information regarding the Fund’s holding of over-the-counter contingent value rights; (5) provided additional information regarding the availability of information for the Shares; and (6) made other clarifications, corrections, and technical changes. Amendment No. 2 is available at https:// www.sec.gov/comments/sr-nysearca-2017-87/ nysearca201787-2724825-161541.pdf. 1 15 PO 00000 Frm 00075 Fmt 4703 Sfmt 4703 57497 Section 19(b)(2) of the Act 5 provides that, within 45 days of the publication of notice of the filing of a proposed rule change, or within such longer period up to 90 days as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or as to which the self-regulatory organization consents, the Commission shall either approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether the proposed rule change should be disapproved. The 45th day after publication of the notice for this proposed rule change is November 30, 2017. The Commission is extending this 45-day time period. The Commission finds that it is appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposed rule change, as modified by Amendment No. 2. Accordingly, the Commission, pursuant to Section 19(b)(2) of the Act,6 designates January 14, 2018, as the date by which the Commission shall either approve or disapprove, or institute proceedings to determine whether to disapprove, the proposed rule change (File Number SR–NYSEArca-2017–87), as modified by Amendment No. 2. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.7 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–26130 Filed 12–4–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–82166; File No. SR– NYSEArca–2017–90] Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a Proposed Rule Change, as Modified by Amendment No. 2, To List and Trade Shares of the Hartford Municipal Opportunities ETF Under NYSE Arca Rule 8.600–E November 29, 2017. I. Introduction On August 17, 2017, NYSE Arca, Inc. (‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act 5 15 U.S.C. 78s(b)(2). 6 Id. 7 17 E:\FR\FM\05DEN1.SGM CFR 200.30–3(a)(31). 05DEN1 57498 Federal Register / Vol. 82, No. 232 / Tuesday, December 5, 2017 / Notices of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to list and trade shares (‘‘Shares’’) of the Hartford Municipal Opportunities ETF (‘‘Fund’’) under NYSE Arca Rule 8.600– E. The proposed rule change was published for comment in the Federal Register on September 6, 2017.3 On October 17, 2017, the Exchange filed Amendment No. 1 to the proposed rule change. On October 23, 2017, the Exchange filed Amendment No. 2 to the proposed rule change, which replaced and superseded the proposed rule change as modified by Amendment No. 1.4 The Commission has not received any comments on the proposed rule change. This order approves the proposed rule change, as modified by Amendment No. 2. management investment company.6 The Fund is a series of the Trust. Hartford Funds Management Company, LLC (‘‘Manager’’) will be the investment manager to the Fund. Wellington Management Company LLP (‘‘SubAdviser’’) will be the sub-adviser to the Fund and will perform the daily investment of the assets for the Fund.7 ALPS Distributors, Inc. (‘‘Distributor’’) will be the principal underwriter to the Fund. State Street Bank and Trust Company will serve as transfer agent for the Fund. The Exchange has made the following representations and statements in describing the Fund and its investment strategies, including the Fund’s portfolio holdings and investment restrictions.8 II. The Exchange’s Description of the Proposed Rule Change The Exchange proposes to list and trade Shares of the Funds under NYSE Arca Equities Rule 8.600–E, which governs the listing and trading of Managed Fund Shares on the Exchange.5 The Shares will be offered by Hartford Funds Exchange-Traded Trust (‘‘Trust’’), which is registered with the Commission as an open-end A. The Application of Generic Listing Requirements to the Funds The Exchange states that it is submitting this proposed rule change because the portfolio of the Fund will not meet all of the ‘‘generic’’ listing requirements of Commentary .01 to NYSE Arca Equities Rule 8.600–E that 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 81505 (August 30, 2017), 82 FR 42147 (‘‘Notice’’). 4 In Amendment No. 2, the Exchange: (1) Clarified that the list of municipal securities included in the section of the Notice entitled Hartford Municipal Opportunities ETF are the Municipal Securities in which the Fund is permitted to invest at least 80% of its net assets; (2) specified that redemption orders would not be subject to acceptance by the distributor of the Fund; (3) identified the Fund’s transfer agent; (4) explained that the Fund’s sponsor believes that the 1:00 p.m., E.T. cut-off time for creation and redemption orders would not have a material impact on an authorized participant’s arbitrage opportunities with respect to the Shares because it will not affect the primary arbitrage mechanism applicable to the Fund, which is the ability to trade the futures contracts and other derivative instruments that are used for hedging purposes throughout the U.S. trading day; and (5) made non-substantive, technical amendments. Because Amendment No. 2 makes only clarifying and technical changes, and does not present unique or novel regulatory issues, it is not subject to notice and comment. Amendment No. 2 is available at: https://www.sec.gov/comments/sr-nysearca-201790/nysearca201790-2651202-161338.pdf. 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. sradovich on DSK3GMQ082PROD with NOTICES 2 17 VerDate Sep<11>2014 18:13 Dec 04, 2017 Jkt 244001 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), and under the 1940 Act relating to the Fund (File Nos. 333– 215165 and 811–23222) (‘‘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 (Jan. 27, 2017) (File No. 812–13828–01). 7 The Exchange represents that neither the Manager nor Sub-Adviser is a registered brokerdealer but that each is affiliated with a brokerdealer. The Exchange represents that the Manager and Sub-Adviser have each implemented a ‘‘fire wall’’ with respect to this broker-dealer affiliate regarding access to information concerning the composition of and/or changes to the Fund’s portfolio. In addition, the Exchange represents that Commentary .06 to Rule 8.600–E requires that personnel who make decisions on the Fund’s portfolio composition be subject to procedures designed to prevent the use and dissemination of material, non-public information regarding the Fund’s portfolio. In the event that (a) the Manager or Sub-Adviser becomes registered as a brokerdealer 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 subadviser will implement and maintain a fire wall with respect to its relevant personnel or brokerdealer affiliate regarding access to information concerning the composition of 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 the portfolio. 8 The Commission notes that additional information regarding the Trust, the Fund, and the Shares, including investment strategies, risks, creation and redemption procedures, calculation of net asset value (‘‘NAV’’), fees, distributions, and taxes, among other things, is included in the proposed rule change, as modified by Amendment No. 2, and the Registration Statement, as applicable. See Amendment No. 2 and Registration Statement, supra notes 4 and 6, respectively. PO 00000 Frm 00076 Fmt 4703 Sfmt 4703 apply to the listing of Managed Fund Shares. The Exchange states that the Fund’s portfolio will meet all the requirements set forth in Commentary .01 to NYSE Arca Equities Rule 8.600– E except for those set forth in Commentary .01(b)(1), which requires that components that in the aggregate account for at least 75% of the fixed income weight of the portfolio each have a minimum original principal amount outstanding of $100 million or more. B. The Fund’s Principal Investments According to the Exchange, the Fund’s investment objective is to provide current income that is generally exempt from federal income taxes and to provide long-term total return. Under normal market conditions,9 the Fund will invest at least 80% of its net assets in municipal securities.10 The Fund may invest in one or more of the following municipal securities (collectively, ‘‘Municipal Securities’’): • General obligation bonds; • Revenue (or limited obligation) bonds; • Private activity (or industrial development) bonds; • Municipal notes; • Municipal lease obligations; and • Zero-coupon Municipal Securities. C. The Fund’s Other Investments According to the Exchange, while the Fund, under normal market conditions, will invest at least 80% of its net assets in Municipal Securities, the Fund may, under normal market conditions, invest up to 20% of its net assets in the aggregate in the following securities and financial instruments described below: • Exchange-traded funds (‘‘ETFs’’) 11 and exchange-traded notes (‘‘ETNs’’); 12 • securities issued or guaranteed as to principal or interest by the U.S. Government or by its agencies or instrumentalities; 9 The term ‘‘normal market conditions’’ is defined in NYSE Arca Rule 8.600–E(c)(5). 10 According to the Exchange, municipal securities primarily include debt obligations that 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. 11 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). The Exchange states that 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. 12 ETNs are securities such as those listed on the Exchange under NYSE Arca Rule 5.2–E(j)(6). E:\FR\FM\05DEN1.SGM 05DEN1 Federal Register / Vol. 82, No. 232 / Tuesday, December 5, 2017 / Notices sradovich on DSK3GMQ082PROD with NOTICES • non-agency asset-backed securities; • registered money market funds that invest in money market instruments, as permitted by regulations adopted under the 1940 Act; • registered money market funds that invest in money market instruments and other investment company securities as permitted under the 1940 Act; • repurchase and reverse repurchase agreements; • securities that are not registered under the 1933 Act (‘‘restricted securities’’); • zero-coupon securities (in addition to zero-coupon Municipal Securities); • 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; • 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 comprises 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; and • derivative instruments, including interest-rate futures contracts and interest-rate swaps, caps, floors, and collars. 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. Additionally, the fund may, when its sub-adviser, subject to the overall supervision of the Manager, deems it appropriate, invest some or all of its assets in cash, high-quality moneymarket instruments,13 U.S. Government securities, and shares of money-market investment companies for temporary defensive purposes in response to adverse market, economic, or political conditions. D. The Fund’s Investment Restrictions According to the Exchange, 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 the 13 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. VerDate Sep<11>2014 18:13 Dec 04, 2017 Jkt 244001 Fund 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. 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,14 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; and (v) the Fund will be diversified among a minimum of five different sectors of the municipal bond market.15 The Exchange states that prerefunded bonds will be excluded from the above limits because they have a high level of credit quality and liquidity.16 III. Discussion and Commission’s Findings After careful review, the Commission finds that the Exchange’s proposal to list and trade the Shares is consistent with 14 ‘‘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. 15 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. 16 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. PO 00000 Frm 00077 Fmt 4703 Sfmt 4703 57499 the Act and the rules and regulations thereunder applicable to a national securities exchange.17 In particular, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act,18 which requires, among other things, that the Exchange’s rules be designed to prevent fraudulent and manipulative acts and practices, promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. The Commission also finds that the proposal to list and trade Shares on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the Act,19 which sets forth Congress’ finding that it is in the public interest and appropriate for the protection of investors and the maintenance of fair and orderly markets to assure the availability to brokers, dealers, and investors of information with respect to quotations for, and transactions in, securities. Quotation and last sale information for the Shares, and for any ETFs and ETNs held in the Fund’s portfolio, will be available via the Consolidated Tape Association (‘‘CTA’’) high-speed line and from the national securities exchange on which they are listed. 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.20 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, the Manager will disclose the Fund’s iNAV Basket.21 Additionally, 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 17 In approving this proposed rule change, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 18 15 U.S.C. 78f(b)(5). 19 15 U.S.C. 78k–1(a)(1)(C)(iii). 20 The Exchange represents that several major market data vendors display or make widely available Portfolio Indicative Values taken from CTA or other data feeds. 21 The iNAV will be based on the current market value of the portfolio holdings that constitute the iNAV Basket. E:\FR\FM\05DEN1.SGM 05DEN1 sradovich on DSK3GMQ082PROD with NOTICES 57500 Federal Register / Vol. 82, No. 232 / Tuesday, December 5, 2017 / Notices (normally 4:00 p.m. Eastern Time) on each day that the Exchange is open. 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 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. The Commission further believes that the proposal to list and trade the Shares is reasonably designed to promote fair disclosure of information that may be necessary to price the Shares appropriately and to prevent trading when a reasonable degree of transparency cannot be assured. 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. 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.22 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. The Exchange represents that it has a general policy prohibiting the distribution of material, non-public information by its employees. In addition, Commentary .06 to NYSE Arca Equities Rule 8.600–E further requires that personnel who make decisions on the open-end fund’s portfolio composition must be subject to procedures designed to prevent the use and dissemination of material nonpublic information regarding the open-end fund’s portfolio. The Exchange represents that neither the Manager nor Sub-Adviser is a registered broker-dealer but that each is affiliated 22 The Exchange may consider all relevant factors in exercising its discretion to halt or suspend trading in the Shares of the Fund. VerDate Sep<11>2014 18:13 Dec 04, 2017 Jkt 244001 with a broker-dealer and that the Manager and Sub-Adviser have each implemented a ‘‘fire wall’’ with respect to this broker-dealer affiliate regarding access to information concerning the composition of and/or changes to the Fund’s portfolio. 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. The Exchange represents that trading in the Shares will be subject to the existing trading surveillances as well as crossmarket 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.23 The Exchange represents that it 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. In support of this proposal, the Exchange has made the following additional representations: (1) The Shares of the Fund will conform to the initial and continued listing criteria under NYSE Arca Rule 8.600–E. (2) The Exchange has appropriate rules to facilitate transactions in the Shares during all trading sessions. (3) Trading in the Shares will be subject to the existing trading surveillances as well as cross-market surveillances, administered by 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. These surveillances 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 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. PO 00000 Frm 00078 Fmt 4703 Sfmt 4703 all relevant parties for all relevant trading violations. (4) The Exchange or FINRA, on behalf of the Exchange, or both, will communicate as needed regarding trading in the Shares, and any ETFs or ETNs held in the Fund’s portfolio, with other markets and other entities that are members of the Intermarket Surveillance Group (‘‘ISG’’), and the Exchange or FINRA, on behalf of the Exchange, or both, may obtain trading information regarding trading in the Shares, and any ETFs or ETNs held in the Fund’s portfolio, from these markets and other entities. In addition, the Exchange may obtain information regarding trading in the Shares, and any ETFs or ETNs held in the Fund’s portfolio, 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. FINRA also can access data obtained from the Municipal Securities Rulemaking Board relating to municipal bond trading activity for surveillance purposes in connection with trading in the Shares. (5) Prior to the commencement of trading, the Exchange will inform its Equity Trading Permit Holders in a Bulletin of the special characteristics and risks associated with trading the Shares. Specifically, the Bulletin will discuss the following: (a) The procedures for purchases and redemptions of Shares in Creation Unit aggregations (and that Shares are not individually redeemable); (b) 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; (c) 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; (d) how information regarding the iNAV and the Disclosed Portfolio is disseminated; (e) 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 (f) trading information. 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 E:\FR\FM\05DEN1.SGM 05DEN1 sradovich on DSK3GMQ082PROD with NOTICES Federal Register / Vol. 82, No. 232 / Tuesday, December 5, 2017 / Notices Shares will be calculated after 4:00 p.m., Eastern Time each trading day. (6) The Exchange represents that, for initial and continued listing, the Fund will be in compliance with Rule 10A–3 24 under the Act, as provided by NYSE Arca Rule 5.3–E. (7) Under normal market conditions, at least 80% of the Fund’s net assets must be invested in Municipal Securities. (8) 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. (9) 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. (10) The Fund’s portfolio will meet all the requirements set forth in Commentary .01 to NYSE Arca Equities Rule 8.600–E except for those set forth in Commentary .01(b)(1). (11) Under normal market conditions, except for periods of high cash inflows or outflows, the Fund will satisfy the following criteria in lieu of the criteria in Commentary .01(b)(1): (a) The Fund will have a minimum of 20 nonaffiliated issuers; (b) no single municipal securities issuer will account for more than 10% of the weight of the Fund’s portfolio; (c) no individual bond will account for more than 5% of the weight of the Fund’s portfolio; (d) 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 (e) the Fund will be diversified among a minimum of five different sectors of the municipal bond market. (12) 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 the Fund 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 24 17 CFR 240.10A–3. VerDate Sep<11>2014 18:13 Dec 04, 2017 Jkt 244001 markets as determined in accordance with Commission staff guidance. (13) Each Fund’s investments will be consistent with its investment objective and will not be used to provide multiple returns of a benchmark or to produce leveraged returns. The Exchange also represents that 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) 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.25 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). The Commission believes that the Exchange’s initial and continued listing requirements, combined with the Fund’s investment criteria that would apply to Municipal Securities in the portfolio, are designed to mitigate the potential for price manipulation of the Shares. This approval order is based on all of the Exchange’s representations, including those set forth above and in the Notice, and the Exchange’s description of the Fund. The Commission notes that the Fund and the Shares must comply with the requirements of NYSE Arca Equities Rule 8.600–E to be listed and traded on the Exchange. For the foregoing reasons, the Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act 26 and the rules and regulations thereunder applicable to a national securities exchange. 25 The Commission notes that certain other proposals for the listing and trading of Managed Fund Shares include a representation that the exchange will ‘‘surveil’’ for compliance with the continued listing requirements. See, e.g., Securities Exchange Act Release No. 78005 (Jun. 7, 2016), 81 FR 38247 (Jun. 13, 2016) (SR–BATS–2015–100). In the context of this representation, it is the Commission’s view that ‘‘monitor’’ and ‘‘surveil’’ both mean ongoing oversight of a fund’s compliance with the continued listing requirements. Therefore, the Commission does not view ‘‘monitor’’ as a more or less stringent obligation than ‘‘surveil’’ with respect to the continued listing requirements. 26 15 U.S.C. 78f(b)(5). PO 00000 Frm 00079 Fmt 4703 Sfmt 4703 57501 IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,27 that the proposed rule change (SR–NYSEArca– 2017–90), as modified by Amendment No. 2, be, and it hereby is, approved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.28 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–26120 Filed 12–4–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–82168; File No. SR–CBOE– 2017–057] Self-Regulatory Organizations; Cboe Exchange, Inc.; Notice of Filing of Amendment No. 1 and Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change, as Amended, To Amend Interpretation and Policy .07 of Exchange Rule 4.11, Position Limits, To Increase the Position Limits for Options on Certain Exchange Traded Products November 29, 2017. I. Introduction On August 15, 2017, Cboe Exchange, Inc. (‘‘Exchange’’ or ‘‘Cboe’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to amend Interpretation and Policy .07 of Exchange Rule 4.11, Position Limits, to increase the position limits for options on the following exchange traded funds (‘‘ETFs’’) and exchange traded note (‘‘ETN’’): iShares China Large-Cap ETF (‘‘FXI’’), iShares MSCI EAFE ETF (‘‘EFA’’), iShares MSCI Emerging Markets ETF (‘‘EEM’’), iShares Russell 2000 ETF (‘‘IWM’’), iShares MSCI Brazil Capped ETF (‘‘EWZ’’), iShares 20+ Year Treasury Bond Fund ETF (‘‘TLT’’), iPath S&P 500 VIX ShortTerm Futures ETN (‘‘VXX’’), PowerShares QQQ Trust (‘‘QQQQ’’), and iShares MSCI Japan ETF (‘‘EWJ’’). The proposed rule change was published for comment in the Federal Register on August 31, 2017.3 On 27 15 U.S.C. 78s(b)(2) CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 See Securities Exchange Act Release No. 81483 (August 25, 2017), 82 FR 41457 (‘‘Notice’’). 28 17 E:\FR\FM\05DEN1.SGM 05DEN1

Agencies

[Federal Register Volume 82, Number 232 (Tuesday, December 5, 2017)]
[Notices]
[Pages 57497-57501]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-26120]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82166; File No. SR-NYSEArca-2017-90]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a 
Proposed Rule Change, as Modified by Amendment No. 2, To List and Trade 
Shares of the Hartford Municipal Opportunities ETF Under NYSE Arca Rule 
8.600-E

November 29, 2017.

I. Introduction

    On August 17, 2017, NYSE Arca, Inc. (``Exchange'') filed with the 
Securities and Exchange Commission (``Commission''), pursuant to 
Section 19(b)(1) of the Securities Exchange Act

[[Page 57498]]

of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule 
change to list and trade shares (``Shares'') of the Hartford Municipal 
Opportunities ETF (``Fund'') under NYSE Arca Rule 8.600-E. The proposed 
rule change was published for comment in the Federal Register on 
September 6, 2017.\3\ On October 17, 2017, the Exchange filed Amendment 
No. 1 to the proposed rule change. On October 23, 2017, the Exchange 
filed Amendment No. 2 to the proposed rule change, which replaced and 
superseded the proposed rule change as modified by Amendment No. 1.\4\ 
The Commission has not received any comments on the proposed rule 
change. This order approves the proposed rule change, as modified by 
Amendment No. 2.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 81505 (August 30, 
2017), 82 FR 42147 (``Notice'').
    \4\ In Amendment No. 2, the Exchange: (1) Clarified that the 
list of municipal securities included in the section of the Notice 
entitled Hartford Municipal Opportunities ETF are the Municipal 
Securities in which the Fund is permitted to invest at least 80% of 
its net assets; (2) specified that redemption orders would not be 
subject to acceptance by the distributor of the Fund; (3) identified 
the Fund's transfer agent; (4) explained that the Fund's sponsor 
believes that the 1:00 p.m., E.T. cut-off time for creation and 
redemption orders would not have a material impact on an authorized 
participant's arbitrage opportunities with respect to the Shares 
because it will not affect the primary arbitrage mechanism 
applicable to the Fund, which is the ability to trade the futures 
contracts and other derivative instruments that are used for hedging 
purposes throughout the U.S. trading day; and (5) made non-
substantive, technical amendments. Because Amendment No. 2 makes 
only clarifying and technical changes, and does not present unique 
or novel regulatory issues, it is not subject to notice and comment. 
Amendment No. 2 is available at: https://www.sec.gov/comments/sr-nysearca-2017-90/nysearca201790-2651202-161338.pdf.
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II. The Exchange's Description of the Proposed Rule Change

    The Exchange proposes to list and trade Shares of the Funds under 
NYSE Arca Equities Rule 8.600-E, which governs the listing and trading 
of Managed Fund Shares on the Exchange.\5\ The Shares will be offered 
by Hartford Funds Exchange-Traded Trust (``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 (``Manager'') will be the investment manager to 
the Fund. Wellington Management Company LLP (``Sub-Adviser'') will be 
the sub-adviser to the Fund and will perform the daily investment of 
the assets for the Fund.\7\ ALPS Distributors, Inc. (``Distributor'') 
will be the principal underwriter to the Fund. State Street Bank and 
Trust Company will serve as transfer agent for the Fund.
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    \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), and 
under the 1940 Act relating to the Fund (File Nos. 333-215165 and 
811-23222) (``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 
(Jan. 27, 2017) (File No. 812-13828-01).
    \7\ The Exchange represents that neither the Manager nor Sub-
Adviser is a registered broker-dealer but that each is affiliated 
with a broker-dealer. The Exchange represents that the Manager and 
Sub-Adviser have each implemented a ``fire wall'' with respect to 
this broker-dealer affiliate regarding access to information 
concerning the composition of and/or changes to the Fund's 
portfolio. In addition, the Exchange represents that Commentary .06 
to Rule 8.600-E requires that personnel who make decisions on the 
Fund's portfolio composition be subject to procedures designed to 
prevent the use and dissemination of material, non-public 
information regarding the Fund's portfolio. In the event that (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 maintain a fire wall with respect to its 
relevant personnel or broker-dealer affiliate regarding access to 
information concerning the composition of 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 the portfolio.
---------------------------------------------------------------------------

    The Exchange has made the following representations and statements 
in describing the Fund and its investment strategies, including the 
Fund's portfolio holdings and investment restrictions.\8\
---------------------------------------------------------------------------

    \8\ The Commission notes that additional information regarding 
the Trust, the Fund, and the Shares, including investment 
strategies, risks, creation and redemption procedures, calculation 
of net asset value (``NAV''), fees, distributions, and taxes, among 
other things, is included in the proposed rule change, as modified 
by Amendment No. 2, and the Registration Statement, as applicable. 
See Amendment No. 2 and Registration Statement, supra notes 4 and 6, 
respectively.
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A. The Application of Generic Listing Requirements to the Funds

    The Exchange states that it is submitting this proposed rule change 
because the portfolio of the Fund will not meet all of the ``generic'' 
listing requirements of Commentary .01 to NYSE Arca Equities Rule 
8.600-E that apply to the listing of Managed Fund Shares. The Exchange 
states that the Fund's portfolio will meet all the requirements set 
forth in Commentary .01 to NYSE Arca Equities Rule 8.600-E except for 
those set forth in Commentary .01(b)(1), which requires that components 
that in the aggregate account for at least 75% of the fixed income 
weight of the portfolio each have a minimum original principal amount 
outstanding of $100 million or more.

B. The Fund's Principal Investments

    According to the Exchange, the Fund's investment objective is to 
provide current income that is generally exempt from federal income 
taxes and to provide long-term total return. Under normal market 
conditions,\9\ the Fund will invest at least 80% of its net assets in 
municipal securities.\10\ The Fund may invest in one or more of the 
following municipal securities (collectively, ``Municipal 
Securities''):
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    \9\ The term ``normal market conditions'' is defined in NYSE 
Arca Rule 8.600-E(c)(5).
    \10\ According to the Exchange, municipal securities primarily 
include debt obligations that 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.
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     General obligation bonds;
     Revenue (or limited obligation) bonds;
     Private activity (or industrial development) bonds;
     Municipal notes;
     Municipal lease obligations; and
     Zero-coupon Municipal Securities.

C. The Fund's Other Investments

    According to the Exchange, while the Fund, under normal market 
conditions, will invest at least 80% of its net assets in Municipal 
Securities, the Fund may, under normal market conditions, invest up to 
20% of its net assets in the aggregate in the following securities and 
financial instruments described below:
     Exchange-traded funds (``ETFs'') \11\ and exchange-traded 
notes (``ETNs''); \12\
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    \11\ 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). The Exchange states 
that 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.
    \12\ ETNs are securities such as those listed on the Exchange 
under NYSE Arca Rule 5.2-E(j)(6).
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     securities issued or guaranteed as to principal or 
interest by the U.S. Government or by its agencies or 
instrumentalities;

[[Page 57499]]

     non-agency asset-backed securities;
     registered money market funds that invest in money market 
instruments, as permitted by regulations adopted under the 1940 Act;
     registered money market funds that invest in money market 
instruments and other investment company securities as permitted under 
the 1940 Act;
     repurchase and reverse repurchase agreements;
     securities that are not registered under the 1933 Act 
(``restricted securities'');
     zero-coupon securities (in addition to zero-coupon 
Municipal Securities);
     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;
     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 comprises 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; and
     derivative instruments, including interest-rate futures 
contracts and interest-rate swaps, caps, floors, and collars. 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.
    Additionally, the fund may, when its sub-adviser, subject to the 
overall supervision of the Manager, deems it appropriate, invest some 
or all of its assets in cash, high-quality money-market 
instruments,\13\ U.S. Government securities, and shares of money-market 
investment companies for temporary defensive purposes in response to 
adverse market, economic, or political conditions.
---------------------------------------------------------------------------

    \13\ 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.
---------------------------------------------------------------------------

D. The Fund's Investment Restrictions

    According to the Exchange, 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 
the Fund 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.
    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,\14\ 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; and (v) the Fund will be diversified 
among a minimum of five different sectors of the municipal bond 
market.\15\ The Exchange states that pre-refunded bonds will be 
excluded from the above limits because they have a high level of credit 
quality and liquidity.\16\
---------------------------------------------------------------------------

    \14\ ``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.
    \15\ 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.
    \16\ 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.
---------------------------------------------------------------------------

III. Discussion and Commission's Findings

    After careful review, the Commission finds that the Exchange's 
proposal to list and trade the Shares is consistent with the Act and 
the rules and regulations thereunder applicable to a national 
securities exchange.\17\ In particular, the Commission finds that the 
proposed rule change is consistent with Section 6(b)(5) of the Act,\18\ 
which requires, among other things, that the Exchange's rules be 
designed to prevent fraudulent and manipulative acts and practices, 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general, to protect investors and the public 
interest.
---------------------------------------------------------------------------

    \17\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \18\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Commission also finds that the proposal to list and trade 
Shares on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of 
the Act,\19\ which sets forth Congress' finding that it is in the 
public interest and appropriate for the protection of investors and the 
maintenance of fair and orderly markets to assure the availability to 
brokers, dealers, and investors of information with respect to 
quotations for, and transactions in, securities. Quotation and last 
sale information for the Shares, and for any ETFs and ETNs held in the 
Fund's portfolio, will be available via the Consolidated Tape 
Association (``CTA'') high-speed line and from the national securities 
exchange on which they are listed.
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
---------------------------------------------------------------------------

    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.\20\ 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, the 
Manager will disclose the Fund's iNAV Basket.\21\ Additionally, 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

[[Page 57500]]

(normally 4:00 p.m. Eastern Time) on each day that the Exchange is 
open.
---------------------------------------------------------------------------

    \20\ The Exchange represents that several major market data 
vendors display or make widely available Portfolio Indicative Values 
taken from CTA or other data feeds.
    \21\ The iNAV will be based on the current market value of the 
portfolio holdings that constitute the iNAV Basket.
---------------------------------------------------------------------------

    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 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.
    The Commission further believes that the proposal to list and trade 
the Shares is reasonably designed to promote fair disclosure of 
information that may be necessary to price the Shares appropriately and 
to prevent trading when a reasonable degree of transparency cannot be 
assured. 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. 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.\22\ 
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.
---------------------------------------------------------------------------

    \22\ The Exchange may consider all relevant factors in 
exercising its discretion to halt or suspend trading in the Shares 
of the Fund.
---------------------------------------------------------------------------

    The Exchange represents that it has a general policy prohibiting 
the distribution of material, non-public information by its employees. 
In addition, Commentary .06 to NYSE Arca Equities Rule 8.600-E further 
requires that personnel who make decisions on the open-end fund's 
portfolio composition must be subject to procedures designed to prevent 
the use and dissemination of material nonpublic information regarding 
the open-end fund's portfolio. The Exchange represents that neither the 
Manager nor Sub-Adviser is a registered broker-dealer but that each is 
affiliated with a broker-dealer and that the Manager and Sub-Adviser 
have each implemented a ``fire wall'' with respect to this broker-
dealer affiliate regarding access to information concerning the 
composition of and/or changes to the Fund's portfolio.
    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. The Exchange represents that trading in the Shares will be 
subject to the existing trading surveillances as well as cross-market 
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.\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 Exchange represents that it 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.
    In support of this proposal, the Exchange has made the following 
additional representations:
    (1) The Shares of the Fund will conform to the initial and 
continued listing criteria under NYSE Arca Rule 8.600-E.
    (2) The Exchange has appropriate rules to facilitate transactions 
in the Shares during all trading sessions.
    (3) Trading in the Shares will be subject to the existing trading 
surveillances as well as cross-market surveillances, administered by 
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. These surveillances 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.
    (4) The Exchange or FINRA, on behalf of the Exchange, or both, will 
communicate as needed regarding trading in the Shares, and any ETFs or 
ETNs held in the Fund's portfolio, with other markets and other 
entities that are members of the Intermarket Surveillance Group 
(``ISG''), and the Exchange or FINRA, on behalf of the Exchange, or 
both, may obtain trading information regarding trading in the Shares, 
and any ETFs or ETNs held in the Fund's portfolio, from these markets 
and other entities. In addition, the Exchange may obtain information 
regarding trading in the Shares, and any ETFs or ETNs held in the 
Fund's portfolio, 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. FINRA also can access data obtained 
from the Municipal Securities Rulemaking Board relating to municipal 
bond trading activity for surveillance purposes in connection with 
trading in the Shares.
    (5) Prior to the commencement of trading, the Exchange will inform 
its Equity Trading Permit Holders in a Bulletin of the special 
characteristics and risks associated with trading the Shares. 
Specifically, the Bulletin will discuss the following: (a) The 
procedures for purchases and redemptions of Shares in Creation Unit 
aggregations (and that Shares are not individually redeemable); (b) 
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; (c) 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; (d) how 
information regarding the iNAV and the Disclosed Portfolio is 
disseminated; (e) 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 (f) 
trading information. 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

[[Page 57501]]

Shares will be calculated after 4:00 p.m., Eastern Time each trading 
day.
    (6) The Exchange represents that, for initial and continued 
listing, the Fund will be in compliance with Rule 10A-3 \24\ under the 
Act, as provided by NYSE Arca Rule 5.3-E.
---------------------------------------------------------------------------

    \24\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------

    (7) Under normal market conditions, at least 80% of the Fund's net 
assets must be invested in Municipal Securities.
    (8) 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.
    (9) 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.
    (10) The Fund's portfolio will meet all the requirements set forth 
in Commentary .01 to NYSE Arca Equities Rule 8.600-E except for those 
set forth in Commentary .01(b)(1).
    (11) Under normal market conditions, except for periods of high 
cash inflows or outflows, the Fund will satisfy the following criteria 
in lieu of the criteria in Commentary .01(b)(1): (a) The Fund will have 
a minimum of 20 non-affiliated issuers; (b) no single municipal 
securities issuer will account for more than 10% of the weight of the 
Fund's portfolio; (c) no individual bond will account for more than 5% 
of the weight of the Fund's portfolio; (d) 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 (e) the Fund will be diversified among a minimum of five 
different sectors of the municipal bond market.
    (12) 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 the Fund 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.
    (13) Each Fund's investments will be consistent with its investment 
objective and will not be used to provide multiple returns of a 
benchmark or to produce leveraged returns.
    The Exchange also represents that 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) 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.\25\ 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).
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    \25\ The Commission notes that certain other proposals for the 
listing and trading of Managed Fund Shares include a representation 
that the exchange will ``surveil'' for compliance with the continued 
listing requirements. See, e.g., Securities Exchange Act Release No. 
78005 (Jun. 7, 2016), 81 FR 38247 (Jun. 13, 2016) (SR-BATS-2015-
100). In the context of this representation, it is the Commission's 
view that ``monitor'' and ``surveil'' both mean ongoing oversight of 
a fund's compliance with the continued listing requirements. 
Therefore, the Commission does not view ``monitor'' as a more or 
less stringent obligation than ``surveil'' with respect to the 
continued listing requirements.
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    The Commission believes that the Exchange's initial and continued 
listing requirements, combined with the Fund's investment criteria that 
would apply to Municipal Securities in the portfolio, are designed to 
mitigate the potential for price manipulation of the Shares. This 
approval order is based on all of the Exchange's representations, 
including those set forth above and in the Notice, and the Exchange's 
description of the Fund. The Commission notes that the Fund and the 
Shares must comply with the requirements of NYSE Arca Equities Rule 
8.600-E to be listed and traded on the Exchange.
    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act \26\ and the 
rules and regulations thereunder applicable to a national securities 
exchange.
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    \26\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\27\ that the proposed rule change (SR-NYSEArca-2017-90), as 
modified by Amendment No. 2, be, and it hereby is, approved.
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    \27\ 15 U.S.C. 78s(b)(2)
    \28\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-26120 Filed 12-4-17; 8:45 am]
 BILLING CODE 8011-01-P