Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change Regarding the Natixis Loomis Sayles Short Duration Income ETF, 19578-19586 [2018-09340]

Download as PDF 19578 Federal Register / Vol. 83, No. 86 / Thursday, May 3, 2018 / Notices Table of Contents I. Introduction II. Docketed Proceeding(s) sradovich on DSK3GMQ082PROD with NOTICES I. Introduction The Commission gives notice that the Postal Service filed request(s) for the Commission to consider matters related to negotiated service agreement(s). The request(s) may propose the addition or removal of a negotiated service agreement from the market dominant or the competitive product list, or the modification of an existing product currently appearing on the market dominant or the competitive product list. Section II identifies the docket number(s) associated with each Postal Service request, the title of each Postal Service request, the request’s acceptance date, and the authority cited by the Postal Service for each request. For each request, the Commission appoints an officer of the Commission to represent the interests of the general public in the proceeding, pursuant to 39 U.S.C. 505 (Public Representative). Section II also establishes comment deadline(s) pertaining to each request. The public portions of the Postal Service’s request(s) can be accessed via the Commission’s website (https:// www.prc.gov). Non-public portions of the Postal Service’s request(s), if any, can be accessed through compliance with the requirements of 39 CFR 3007.40. The Commission invites comments on whether the Postal Service’s request(s) in the captioned docket(s) are consistent with the policies of title 39. For request(s) that the Postal Service states concern market dominant product(s), applicable statutory and regulatory requirements include 39 U.S.C. 3622, 39 U.S.C. 3642, 39 CFR part 3010, and 39 CFR part 3020, subpart B. For request(s) that the Postal Service states concern competitive product(s), applicable statutory and regulatory requirements include 39 U.S.C. 3632, 39 U.S.C. 3633, 39 U.S.C. 3642, 39 CFR part 3015, and 39 CFR part 3020, subpart B. Comment deadline(s) for each request appear in section II. II. Docketed Proceeding(s) 1. Docket No(s).: CP2018–166; Filing Title: USPS Notice of Change in Prices Pursuant to Amendment to Priority Mail Contract 421; Filing Acceptance Date: April 26, 2018; Filing Authority: 39 U.S.C. 3642 and 39 CFR 3020.30 et seq.; Public Representative: Kenneth R. Moeller; Comments Due: May 4, 2018. 2. Docket No(s).: MC2018–147 and CP2018–211; Filing Title: USPS Request to Add Priority Mail Express, Priority VerDate Sep<11>2014 17:29 May 02, 2018 Jkt 244001 Mail & First-Class Package Service Contract 34 to Competitive Product List and Notice of Filing Materials Under Seal; Filing Acceptance Date: April 26, 2018; Filing Authority: 39 U.S.C. 3642 and 39 CFR 3020.30 et seq.; Public Representative: Kenneth R. Moeller; Comments Due: May 4, 2018. This Notice will be published in the Federal Register. Ruth Ann Abrams, Acting Secretary. [FR Doc. 2018–09356 Filed 5–2–18; 8:45 am] BILLING CODE 7710–FW–P SECURITIES AND EXCHANGE COMMISSION [Investment Company Act Release No. 33088] Notice of Applications for Deregistration Under Section 8(f) of the Investment Company Act of 1940 April 27, 2018. The following is a notice of applications for deregistration under section 8(f) of the Investment Company Act of 1940 for the month of April 2018. A copy of each application may be obtained via the Commission’s website by searching for the file number, or for an applicant using the Company name box, at https://www.sec.gov/search/ search.htm or by calling (202) 551– 8090. An order granting each application will be issued unless the SEC orders a hearing. Interested persons may request a hearing on any application by writing to the SEC’s Secretary at the address below and serving the relevant applicant with a copy of the request, personally or by mail. Hearing requests should be received by the SEC by 5:30 p.m. on May 22, 2018, and should be accompanied by proof of service on applicants, in the form of an affidavit or, for lawyers, a certificate of service. Pursuant to Rule 0–5 under the Act, hearing requests should state the nature of the writer’s interest, any facts bearing upon the desirability of a hearing on the matter, the reason for the request, and the issues contested. Persons who wish to be notified of a hearing may request notification by writing to the Commission’s Secretary. ADDRESSES: The Commission: Secretary, U.S. Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. FOR FURTHER INFORMATION CONTACT: Shawn Davis, Branch Chief, at (202) 551–6413 or Chief Counsel’s Office at (202) 551–6821; SEC, Division of PO 00000 Frm 00058 Fmt 4703 Sfmt 4703 Investment Management, Chief Counsel’s Office, 100 F Street NE, Washington, DC 20549–8010. PNC Advantage Funds [File No. 811– 07850] Summary: Applicant seeks an order declaring that it has ceased to be an investment company. The applicant has transferred its assets to PNC Treasury Plus Money Market Fund, a series of PNC Funds, and, on March 1, 2018, made a final distribution to its shareholders based on net asset value. Expenses of approximately $77,886.98 incurred in connection with the reorganization were paid by the investment adviser of the applicant and of the acquiring fund. Filing Dates: The application was filed on April 10, 2018, and amended on April 25, 2018. Applicant’s Address: One East Pratt Street, 5th Floor, Baltimore, Maryland 21202. Deutsche High Income Opportunities Fund, Inc. [File No. 811–21949] Summary: Applicant, a closed-end investment company, seeks an order declaring that it has ceased to be an investment company. On March 16, 2018, applicant made a liquidating distribution to its shareholders, based on net asset value. Expenses of $13,157 incurred in connection with the liquidation were paid by the applicant. Filing Date: The application was filed on April 24, 2018. Applicant’s Address: 345 Park Avenue, New York, New York 10154. For the Commission, by the Division of Investment Management, pursuant to delegated authority. Robert W. Errett, Deputy Secretary. [FR Doc. 2018–09345 Filed 5–2–18; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–83122; File No. SR– NYSEArca–2018–25] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change Regarding the Natixis Loomis Sayles Short Duration Income ETF April 27, 2018. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (‘‘Act’’) 2 and Rule 19b–4 thereunder,3 1 15 U.S.C. 78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 2 15 E:\FR\FM\03MYN1.SGM 03MYN1 Federal Register / Vol. 83, No. 86 / Thursday, May 3, 2018 / Notices notice is hereby given that, on April 16, 2018, NYSE Arca, Inc. (‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes certain changes regarding investments of the Natixis Loomis Sayles Short Duration Income ETF, which is currently listed and traded on the Exchange under NYSE Arca Rule 8.600–E (‘‘Managed Fund Shares’’). The proposed change is available on the Exchange’s website 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 sradovich on DSK3GMQ082PROD with NOTICES 1. Purpose The Exchange proposes to list and trade shares (‘‘Shares’’) of the following under NYSE Arca Rule 8.600–E, which governs the listing and trading of Managed Fund Shares 4: Natixis Loomis Sayles Short Duration Income ETF 4 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. VerDate Sep<11>2014 17:29 May 02, 2018 Jkt 244001 (‘‘Fund’’). The Shares are offered by Natixis ETF Trust (the ‘‘Trust’’), which is registered with the Commission as an open-end management investment company.5 Natixis Advisors, L.P. (the ‘‘Adviser’’) is the investment adviser for the Fund. Loomis, Sayles & Company, L.P. is the Fund’s sub-adviser (‘‘SubAdviser’’). ALPS Distributors, Inc. (the ‘‘Distributor’’) is the principal underwriter and distributor of the Fund’s Shares. The Adviser is the Fund’s administrator. State Street Bank and Trust Company (‘‘State Street’’) serves as the custodian, and transfer agent (‘‘Transfer Agent’’ or ‘‘Custodian’’) for the Fund.6 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. 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.7 Commentary .06 to Rule 5 Shares of the Fund commenced trading on the Exchange on December 28, 2017 pursuant to Commentary .01 to NYSE Arca Rule 8.600–E. 6 The Trust is registered under the 1940 Act. On December 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. 333–210156 and 811–23146) (‘‘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. 30654 (August 20, 2013) (File No. 812–13942–02) (‘‘Exemptive Order’’). 7 An investment adviser to an open-end fund is required to be registered under the Investment Advisers Act of 1940 (the ‘‘Advisers Act’’). As a result, the Adviser and 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 PO 00000 Frm 00059 Fmt 4703 Sfmt 4703 19579 8.600–E is similar to Commentary .03(a)(i) and (iii) to NYSE Arca s Rule 5.2–E(j)(3); however, Commentary .06 in connection with the establishment of a ‘‘fire wall’’ between the investment adviser and the broker-dealer reflects the applicable open-end fund’s portfolio, not an underlying benchmark index, as is the case with index-based funds. The Adviser and Sub-Adviser are not registered as a broker-dealer but each is affiliated with a broker-dealer and has implemented and will maintain a ‘‘fire wall’’ with respect to such broker-dealer regarding access to information concerning the composition and/or changes to the Fund’s portfolio. In the event (a) the Adviser or SubAdviser becomes registered as a brokerdealer or newly affiliated with a brokerdealer, or (b) any new adviser or subadviser is a registered broker-dealer or becomes affiliated with a broker-dealer, it will implement and maintain a fire wall with respect to its relevant personnel or broker-dealer affiliate regarding access to information concerning the composition and/or changes to the portfolio, and will be subject to procedures designed to prevent the use and dissemination of material non-public information regarding such portfolio. Natixis Loomis Sayles Short Duration Income ETF Principal Investments According to the Registration Statement, the Fund’s investment objective is current income consistent with preservation of capital. Under normal market conditions,8 the Fund will invest at least 80% of its net assets in ‘‘Fixed-Income Securities’’ (as described below). The Fixed Income Securities in which the Fund may invest are the following: • U.S. Government Securities, including U.S. Treasury Bills, U.S. Treasury Notes and Bonds, U.S. Treasury Floating Rate Notes, Treasury Inflation-Protected Securities (‘‘TIPS’’), and obligations of U.S. agencies or instrumentalities (e.g., ‘‘Ginnie Maes’’, ‘‘Fannie Maes’’ and ‘‘Freddie Macs’’); • agency and non-agency assetbacked securities (‘‘ABS’’); 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. 8 The term ‘‘normal market conditions’’ is defined in NYSE Arca Rule 8.600–E(c)(5). E:\FR\FM\03MYN1.SGM 03MYN1 19580 Federal Register / Vol. 83, No. 86 / Thursday, May 3, 2018 / Notices • U.S. dollar-denominated foreign securities, including emerging market securities; • Adjustable-Rate Mortgage Securities (‘‘ARMs’’); • junior and senior loans; • bank loans, loan participations and assignments; • agency and non-agency mortgagebacked securities; • collateralized mortgage obligations (‘‘CMOs’’); • zero coupon and pay-in-kind securities; • corporate bonds; • Non-US government securities, supranational entities obligations issued by foreign governments, or international agencies and instrumentalities; • inflation-linked and inflationindexed securities; • money market instruments; 9 • mortgage-related securities (such as Government National Mortgage Association or Federal National Mortgage Association certificates); • mortgage dollar rolls; • variable and floating rate securities; • Rule 144A securities; • taxable municipal securities; • step-coupon securities; and • stripped securities. The Fund may hold any portion of its assets in cash (U.S. dollars, foreign currencies or multinational currency units) and/or cash equivalents.10 Other Investments sradovich on DSK3GMQ082PROD with NOTICES While the Fund, under normal market conditions, will invest at least 80% of its net assets in the securities and financial instruments described above, the Fund may invest its remaining assets in the securities and financial instruments referenced below. The Fund may enter into short sales of securities. The Fund may invest in exchangetraded funds (‘‘ETFs’’) 11 and exchangetraded notes (‘‘ETNs’’).12 The Fund may invest in bilateral credit default swaps, bilateral interest rate swaps and bilateral standardized 9 Money market instruments are short-term instruments referenced in Commentary .01 (c) to NYSE Arca Rule 8.600–E. 10 For purposes of this filing, cash equivalents include the short-term instruments enumerated in Commentary .01(c) to NYSE Arca Rule 8.600–E. 11 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. 12 ETNs are Index-Linked Securities as described in NYSE Arca Rule 5.2–E(j)(6). VerDate Sep<11>2014 17:29 May 02, 2018 Jkt 244001 commodity and equity index total return swaps. The Fund may invest in the following swaps: interest rate, index, commodity, equity-linked, fixed income, credit default, credit-linked and currency exchange swaps. The Fund may invest in swaptions. The Fund may invest in the following options: U.S. exchange-traded and overthe-counter (‘‘OTC’’) options on domestic and foreign indices, options on futures contracts, and other options. The Fund may invest in futures, including index futures. The Fund may invest in publicly or privately issued interests in investment pools whose underlying assets are credit default, credit-linked, interest rate, currency exchange, equity-linked or other types of swap contracts and related underlying securities or securities loan agreements. The Fund may invest in nonexchange-traded open-end investment company securities up to the limits imposed by the 1940 Act. With respect to any of the Fund’s investments, the Fund may purchase securities on a forward commitment or when-issued or delayed delivery basis. Use of Derivatives by the Fund Investments in derivative instruments will be made in accordance with the 1940 Act and consistent with the Fund’s investment objective and policies. The Fund will typically use derivative instruments as a substitute for taking a position in the underlying asset where advantageous and/or as part of a strategy designed to reduce exposure to other risks, such as interest rate risk. The Fund may also use derivative instruments to enhance returns, manage portfolio duration, or manage the risk of securities price fluctuations. To limit the potential risk associated with such transactions, the Fund segregates or ‘‘earmarks’’ assets determined to be liquid by the Adviser in accordance with procedures established by the Trust’s Board of Trustees (the ‘‘Board’’) and in accordance with the 1940 Act (or, as permitted by applicable regulation, enter into certain offsetting positions) to cover its obligations under derivative instruments. These procedures have been adopted consistent with Section 18 of the 1940 Act and related Commission guidance. In addition, the Fund has included appropriate risk disclosure in its offering documents, including leveraging risk. Leveraging risk is the risk that certain transactions of the Fund, including the Fund’s use of derivatives, may give rise to leverage, causing the Fund to be more volatile than if it had not been leveraged. PO 00000 Frm 00060 Fmt 4703 Sfmt 4703 Because the markets for certain securities, or the securities themselves, may be unavailable or cost prohibitive as compared to derivative instruments, suitable derivative transactions may be an efficient alternative for the Fund to obtain the desired asset exposure. Creation and Redemption of Shares According to the Registration Statement, the Fund issues and sells Shares of the Fund only in Creation Units of 100,000 Shares on a continuous basis through the Distributor at the NAV next determined after receipt of an order in proper form on any business day. The size of a Creation Unit is subject to change. The consideration for purchase of Creation Units generally consists of ‘‘Deposit Securities’’ and the ‘‘Cash Component’’, which generally correspond pro rata, to the extent practicable, to the Fund securities, or, as permitted by the Fund, the ‘‘Cash Deposit.’’ Together, the Deposit Securities and the Cash Component or, alternatively, the Cash Deposit, constitute the ‘‘Fund Deposit,’’ which represents the minimum initial and subsequent investment amount for a Creation Unit of the Fund. The Transfer Agent and Custodian, through the National Securities Clearing Corporation (‘‘NSCC’’), makes available on each business day, prior to the opening of the Core Trading Session on NYSE Arca (currently 9:30 a.m., Eastern Time (‘‘E.T.’’)), 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). The Fund may also permit the substitution of an amount of cash (a ‘‘cash-in-lieu’’ amount) to replace any Deposit Security of the Fund that is a non-deliverable instrument. The amount of cash contributed will be equivalent to the price of the instrument listed as a Deposit Security. The Fund reserves the right to permit the substitution of a ‘‘cash in-lieu’’ amount to be added to replace any Deposit Security under specified circumstances. Procedures for Creating Creation Units 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; or (ii) a participant of the Depository Trust Company (‘‘DTC’’) (‘‘DTC Participant’’) and must have executed an Authorized E:\FR\FM\03MYN1.SGM 03MYN1 Federal Register / Vol. 83, No. 86 / Thursday, May 3, 2018 / Notices sradovich on DSK3GMQ082PROD with NOTICES Participant agreement with the Distributor, and accepted by the Transfer Agent, with respect to creations and redemptions of Creation Units. A Participating Party or DTC Participant who has executed an ‘‘Authorized Participant Agreement’’ is referred to as an ‘‘Authorized Participant.’’ To initiate a creation order for a Creation Unit, an Authorized Participant must submit an irrevocable order to purchase Shares in proper form to the Transfer Agent no later than 2:00 p.m., E.T. on any business day for creation of Creation Units to be effected based on the NAV of Shares of the Fund on the following business day. Redemption of Creation Units 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 an Authorized Participant Agreement. With respect to the Fund, State Street, through the NSCC, makes available immediately prior to the opening of the Core Trading Session on the NYSE Arca on each business day, the identity of the Fund’s securities and/or an amount of cash that will be applicable to redemption requests received in proper form on that day. The Fund’s securities received on redemption generally correspond pro rata, to the positions in the Fund’s portfolio. The Fund’s securities received on redemption (‘‘Fund Securities’’) will generally be identical to Deposit Securities that are applicable to creations of Creation Units. Subject to the terms of the applicable Authorized Participant Agreement and any creation and redemption procedures adopted by the Fund and provided to all Authorized Participants, to initiate a redemption order for a Creation Unit, an Authorized Participant must submit an irrevocable order to redeem Shares in proper form to the Transfer Agent no later than 2:00 p.m., E.T. on any business day for redemption of Creation Units to be effected based on the NAV of shares of the Fund on that business day. Unless cash only redemptions are available or specified for the Fund, the redemption proceeds for a Creation Unit generally consists 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 VerDate Sep<11>2014 17:29 May 02, 2018 Jkt 244001 Fund Securities, less the redemption transaction fee and variable fees.13 The Fund may substitute a ‘‘cash-in-lieu’’ amount to replace any Fund Security in certain limited circumstances. The amount of cash paid out in such cases will be equivalent to the value of the instrument listed as the Fund Security. In the event that the Fund Securities have a value greater than the NAV of the Shares, a compensating cash payment equal to the difference will be included in the Cash Component required to be delivered by an Authorized Participant. Derivatives Valuation Methodology for Purposes of Determining Portfolio Indicative Value On each business day, before commencement of trading in Fund Shares on NYSE Arca, the Fund discloses on its website the identities and quantities of the portfolio instruments and other assets held by the Fund that form the basis for the Fund’s calculation of NAV at the end of the business day. The NAV of the Shares of the Fund is determined once each day the New York Stock Exchange (the ‘‘NYSE’’) is open, as of the close of its regular trading session (normally 4:00 p.m., E.T.) (‘‘NYSE Close’’). In order to provide additional information regarding the intra-day value of Shares of the Fund, one or more major market data vendors disseminates every 15 seconds an updated Intraday Indicative Value (‘‘IIV’’) for the Fund as calculated by an information provider or market data vendor. A third party market data provider calculates the IIV for the Fund. With respect to specific derivatives: • Foreign currency derivatives may be valued intraday using market quotes, or another proxy as determined to be appropriate by the third party market data provider. • Futures may be valued intraday using the relevant futures exchange data, or another proxy as determined to be appropriate by the third party market data provider. • Swaps may be valued using intraday data from market vendors, or based on underlying asset price, or another proxy as determined to be appropriate by the third party market data provider. • Exchange listed options may be valued intraday using the relevant exchange data, or another proxy as determined to be appropriate by the third party market data provider. 13 The Adviser represents that, to the extent the Trust effects the redemption of Shares in cash, such transactions will be effected in the same manner for all Authorized Participants. PO 00000 Frm 00061 Fmt 4703 Sfmt 4703 19581 • OTC options and swaptions may be valued intraday through option valuation models (e.g., Black-Scholes) or using exchange-traded options as a proxy, or another proxy as determined to be appropriate by the third party market data provider. Disclosed Portfolio The Fund’s disclosure of derivative positions in the applicable Disclosed Portfolio includes information that market participants can use to value these positions intraday. On a daily basis, the Fund discloses the information regarding the Disclosed Portfolio required under NYSE Arca Rule 8.600–E (c)(2) to the extent applicable. Impact on Arbitrage Mechanism The Adviser believes there will be minimal, if any, impact to the arbitrage mechanism as a result of the use of derivatives. Market makers and participants should be able to value derivatives as long as the positions are disclosed with relevant information. The Adviser believes that the price at which Shares of the Fund trade will continue to be disciplined by arbitrage opportunities created by the ability to purchase or redeem Shares of the Fund at their NAV, which should ensure that Shares of the Fund will not trade at a material discount or premium in relation to their NAV. The Adviser does not believe there is any significant impact to the settlement or operational aspects of the Fund’s arbitrage mechanism due to the use of derivatives. Because derivatives generally are not eligible for in-kind transfer, they will be substituted with a ‘‘cash in lieu’’ amount when the Fund processes purchases or redemptions of block-size ‘‘Creation Units’’ (as described above) in-kind. Application of Generic Listing Requirements The Exchange is submitting this proposed rule change because the change described in the preceding paragraph would result in the portfolio for the Fund not meeting 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 would meet all such requirements except for those set forth in Commentary .01(b)(5) and Commentary .01(a)(1). The Fund will not comply with the requirement of Commentary .01(b)(5) to NYSE Arca Rule 8.600–E that nonagency, non-government-sponsored entity and privately-issued mortgage- E:\FR\FM\03MYN1.SGM 03MYN1 19582 Federal Register / Vol. 83, No. 86 / Thursday, May 3, 2018 / Notices sradovich on DSK3GMQ082PROD with NOTICES related and other asset-backed securities components of a portfolio shall not account, in the aggregate, for more than 20% of the weight of the fixed income portion of the portfolio.14 Instead, the Exchange proposes that up to 30% of the weight of the Fixed Income Securities portion of the Fund’s portfolio may consist of non-agency ABS and MBS. The Adviser represents that permitting limited investments in non-agency MBS and ABS, as described above, would be in the best interest of the Fund’s shareholders because such investments have the potential to reduce the overall risk profile of the Fund’s portfolio through diversification. In the Adviser’s view, such investments would reduce the Fund’s risk with respect to non-agency ABS and MBS investments by diversifying the Fund’s exposure among borrowers of such debt issues. The Adviser represents that the Fund will only purchase U.S. dollar denominated non-agency ABS and MBS that are settled through DTC. In addition, by allowing the Fund to allocate up to 30% of the weight of its Fixed Income Securities investments in such issues would afford the Fund greater flexibility to invest in the most liquid available Fixed Income Securities issues, in that such issues are expected to be as liquid, or more liquid, than other possible Fund investments. As noted above, the Fund may invest in equity securities that are nonexchange-traded securities of other open-end investment company securities (e.g., mutual funds). 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(a)(1)(A) through (E) to Rule 8.600–E with respect to the Fund’s investments in such securities.15 Investments in such 14 Commentary .01(b)(5) to NYSE Arca Rule 8.600–E provides that the components of the fixed income portion of a portfolio shall meet the following criteria initially and on a continuing basis: Non-agency, non-government-sponsored entity (‘‘GSE’’) and privately-issued mortgagerelated and other asset-backed securities components of a portfolio shall not account, in the aggregate, for more than 20% of the weight of the fixed income portion of the portfolio. 15 Commentary .01 (a) to Rule 8.600–E specifies the equity securities accommodated by the generic criteria in Commentary .01(a), namely, U.S. Component Stocks (as described in Rule 5.2– E(j)(3)); Non-U.S. Component Stocks (as described in Rule 5.2–E(j)(3)); Derivative Securities Products (i.e., Investment Company Units and securities described in Section 2 of Rule 8–E); and IndexLinked Securities that qualify for Exchange listing and trading under Rule 5.2–E(j)(6). Commentary .01(a)(1) to Rule 8.600–E (U.S. Component Stocks) provides that the component stocks of the equity portion of a portfolio that are U.S. Component VerDate Sep<11>2014 17:29 May 02, 2018 Jkt 244001 equity securities will not be principal investments of the Fund.16 Such investments, which may include mutual funds that invest, for example, principally in fixed income securities, would be utilized to help the Fund meet its investment objective and to equitize cash in the short term. The Fund will invest in non-exchange-traded open-end investment company securities only to the extent that such an investment would be consistent with the requirements of Section 12(d)(1) of the 1940 Act and the rules thereunder.17 Because such securities must satisfy applicable 1940 Act diversification requirements, and have a net asset value based on the value of securities and Stocks shall meet the following criteria initially and on a continuing basis: (A) Component stocks (excluding Derivative Securities Products and Index-Linked Securities) that in the aggregate account for at least 90% of the equity weight of the portfolio (excluding such Derivative Securities Products and Index-Linked Securities) each shall have a minimum market value of at least $75 million; (B) Component stocks (excluding Derivative Securities Products and Index-Linked Securities) that in the aggregate account for at least 70% of the equity weight of the portfolio (excluding such Derivative Securities Products and Index-Linked Securities) each shall have a minimum monthly trading volume of 250,000 shares, or minimum notional volume traded per month of $25,000,000, averaged over the last six months; (C) The most heavily weighted component stock (excluding Derivative Securities Products and Index-Linked Securities) shall not exceed 30% of the equity weight of the portfolio, and, to the extent applicable, the five most heavily weighted component stocks (excluding Derivative Securities Products and Index-Linked Securities) shall not exceed 65% of the equity weight of the portfolio; (D) Where the equity portion of the portfolio does not include Non-U.S. Component Stocks, the equity portion of the portfolio shall include a minimum of 13 component stocks; provided, however, that there shall be no minimum number of component stocks if (i) one or more series of Derivative Securities Products or Index-Linked Securities constitute, at least in part, components underlying a series of Managed Fund Shares, or (ii) one or more series of Derivative Securities Products or Index-Linked Securities account for 100% of the equity weight of the portfolio of a series of Managed Fund Shares; (E) Except as provided herein, equity securities in the portfolio shall be U.S. Component Stocks listed on a national securities exchange and shall be NMS Stocks as defined in Rule 600 of Regulation NMS under the Securities Exchange Act of 1934. 16 For purposes of this section of the filing, nonexchange-traded securities of other registered investment companies do not include money market funds, which are cash equivalents under Commentary .01(c) to Rule 8.600–E and for which there is no limitation in the percentage of the portfolio invested in such securities. 17 The Commission has previously approved proposed rule changes under Section 19(b) of the Act for series of Managed Fund Shares that may invest in non-exchange traded investment company securities to the extent permitted by Section 12(d)(1) of the 1940 Act and the rules thereunder. See, e.g., Securities Exchange Act Release No. 78414 (July 26, 2016), 81 FR 50576 (August 1, 2016) (SR–NYSEArca–2016–79) (order approving listing and trading of shares of the Virtus Japan Alpha ETF under NYSE Arca Equities Rule 8.600). PO 00000 Frm 00062 Fmt 4703 Sfmt 4703 financial assets the investment company holds, the Exchange believes it is both unnecessary and inappropriate to apply to such investment company securities the criteria in Commentary .01(a)(1). The Exchange notes that Commentary .01(A) through (D) to Rule 8.600–E exclude application of those provisions to certain ‘‘Derivative Securities Products’’ that are exchange-traded investment company securities, including 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).18 In its 2008 Approval Order approving amendments to Commentary .01(a) to Rule 5.2(j)(3) that exclude Derivative Securities Products from certain provisions of Commentary .01(a) (which exclusions are similar to those in Commentary .01(a)(1) to Rule 8.600–E), the Commission stated that ‘‘based on the trading characteristics of Derivative Securities Products, it may be difficult for component Derivative Securities Products to satisfy certain quantitative index criteria, such as the minimum market value and trading volume limitations.’’ The Exchange notes that it would be difficult or impossible to apply to non-exchange-traded investment company securities the generic quantitative criteria (e.g., market capitalization, trading volume, or portfolio criteria) in Commentary .01 (A) through (D) applicable to U.S. Component Stocks. For example, the 18 The Commission initially approved the Exchange’s proposed rule change to exclude ‘‘Derivative Securities Products’’ (i.e., Investment Company Units and securities described in Section 2 of Rule 8) and ‘‘Index-Linked Securities (as described in Rule 5.2–E (j)(6)) from Commentary .01(a)(A) (1) through (4) to Rule 5.2–E(j)(3 in Securities Exchange Act Release No. 57751 (May 1, 2008), 73 FR 25818 (May 7, 2008) (SR–NYSEArca– 2008–29) (Order Granting Approval of a Proposed Rule Change, as Modified by Amendment No. 1 Thereto, to Amend the Eligibility Criteria for Components of an Index Underlying Investment Company Units) (‘‘2008 Approval Order’’). See also, Securities Exchange Act Release No. 57561 (March 26, 2008), 73 FR 17390 (April 1, 2008) (Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto to Amend the Eligibility Criteria for Components of an Index Underlying Investment Company Units). The Commission subsequently approved generic criteria applicable to listing and trading of Managed Fund Shares, including exclusions for Derivative Securities Products and Index-Linked Securities in Commentary .01(a)(1)(A) through (D), in Securities Exchange Act Release No. 78397 (July 22, 2016), 81 FR 49320 (July 27, 2016) (Order Granting Approval of Proposed Rule Change, as Modified by Amendment No. 7 Thereto, Amending NYSE Arca Equities Rule 8.600 To Adopt Generic Listing Standards for Managed Fund Shares). See also, Amendment No. 7 to SR– NYSEArca–2015–110, available at https:// www.sec.gov/comments/sr-nysearca-2015-110/ nysearca2015110-9.pdf. E:\FR\FM\03MYN1.SGM 03MYN1 Federal Register / Vol. 83, No. 86 / Thursday, May 3, 2018 / Notices requirement for U.S. Component Stocks in Commentary .01(a)(1)(B) that there be minimum monthly trading volume of 250,000 shares, or minimum notional volume traded per month of $25,000,000, averaged over the last six months is tailored to exchange-traded securities (e.g., U.S. Component Stocks) and not to mutual fund shares, which do not trade in the secondary market. Moreover, application of such criteria would not serve the purpose served with respect to U.S. Component Stocks, namely, to establish minimum liquidity and diversification criteria for U.S. Component Stocks held by series of Managed Fund Shares. The Exchange notes that the Commission has previously approved the listing of Managed Fund Shares with similar investment objectives and strategies where such funds were permitted to invest in the shares of other registered investment companies that are not ETFs or money market funds.19 Thus, the Exchange believes that it is appropriate to permit the Fund to invest in non-exchange-traded open-end management investment company securities, as described above. The Exchange notes that, other than Commentary .01(a)(1)(A) through (E) and Commentary .01(b)(5) to Rule 8.600–E, the Fund’s portfolio will meet all other requirements of Rule 8.600–E. sradovich on DSK3GMQ082PROD with NOTICES Availability of Information The Fund’s website (www.im.natixis.com/us/active-shortduration-income-etf) includes a form of the prospectus for the Fund that may be downloaded. The Fund’s website includes additional quantitative information updated on a daily basis including, for the Fund, (1) daily trading volume, the prior business day’s reported closing price, NAV and midpoint of the bid/ask spread at the time of calculation of such NAV (the ‘‘Bid/Ask Price’’),20 and a calculation of the premium and discount of the Bid/ Ask Price against the NAV, and (2) data 19 See, e.g., Exchange Act Release Nos. 79053 (October 5, 2016), 81 FR 70468 (October 12, 2016) (SR–BatsBZX–2016–35) (permitting the JPMorgan Global Bond Opportunities ETF to invest in ‘‘investment company securities that are not ETFs’’); 74297 (February 18, 2015), 80 FR 9788 (February 24, 2015) (SR–BATS–2014–056) (permitting the U.S. Fixed Income Balanced Risk ETF to invest in ‘‘exchange traded and nonexchange traded investment companies (including investment companies advised by the Adviser or its affiliates) that invest in such Fixed Income Securities’’). 20 The Bid/Ask Price of the Fund’s Shares will be determined using the mid-point of the highest bid and the lowest offer on the Exchange as of the time of calculation of the Fund’s NAV. The records relating to Bid/Ask Prices will be retained by the Fund and its service providers. VerDate Sep<11>2014 17:29 May 02, 2018 Jkt 244001 in chart format displaying the frequency distribution of discounts and premiums of the daily Bid/Ask Price against the NAV, within appropriate ranges, for each of the four previous calendar quarters. On each business day, before commencement of trading in Shares in the Core Trading Session on the Exchange, the Fund discloses on its website the Disclosed Portfolio as defined in NYSE Arca Rule 8.600–E (c)(2) that forms the basis for the Fund’s calculation of NAV at the end of the business day.21 On a daily basis, the Fund discloses the information required under NYSE Arca Rule 8.600–E (c)(2) to the extent applicable. The website information will be publicly available at no charge. In addition, a basket composition file, which includes the security names and share quantities, if applicable, required to be delivered in exchange for the Fund’s Shares, together with estimates and actual cash components, is publicly disseminated daily prior to the opening of the Exchange via the NSCC. The basket represents one Creation Unit of the Fund. Authorized Participants may refer to the basket composition file for information regarding Fixed Income Securities, and any other instrument that may comprise the Fund’s basket on a given day. Investors can also obtain the Trust’s Statement of Additional Information (‘‘SAI’’), the Fund’s Shareholder Reports, and the Fund’s Forms N–CSR and Forms 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, Form N–PX and Form N–SAR may be viewed on-screen or downloaded from the Commission’s website at www.sec.gov. Intra-day and closing price information regarding exchange-traded options (including options on futures) and futures will be available from the exchange on which such instruments are traded. Intra-day and closing price information regarding Fixed Income Securities also will be available from major market data vendors. Price information relating to unlisted preferred equity securities, Rule 144A securities, OTC options, swaps and swaptions will be available from major market data vendors. Intra-day price information for exchange-traded derivative instruments will be available 21 Under accounting procedures followed by the Fund, trades made on the prior business day (‘‘T’’) will be booked and reflected in NAV on the current business day (‘‘T+1’’). Accordingly, the Fund will be able to disclose at the beginning of the business day the portfolio that will form the basis for the NAV calculation at the end of the business day. PO 00000 Frm 00063 Fmt 4703 Sfmt 4703 19583 from the applicable exchange and from major market data vendors. Price information regarding non-exchangetraded investment company securities will be available from the applicable investment company. 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. Exchange-traded options quotation and last sale information for options cleared via the Options Clearing Corporation (‘‘OCC’’) is available via the Options Price Reporting Authority. In addition, the IIV, as defined in NYSE Arca Rule 8.600–E (c)(3), will be widely disseminated by one or more major market data vendors at least every 15 seconds during the Core Trading Session. The dissemination of the IIV, together with the Disclosed Portfolio, may allow investors to determine an approximate value of the underlying portfolio of the Fund on a daily basis and to provide an estimate of that value throughout the trading day. 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. 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. These may include: (1) The extent to which trading is not occurring in the securities and/or the financial instruments comprising the Disclosed Portfolio of the Fund; or (2) whether other unusual conditions or circumstances detrimental to the maintenance of a fair and orderly market are present. 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. 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 E:\FR\FM\03MYN1.SGM 03MYN1 19584 Federal Register / Vol. 83, No. 86 / Thursday, May 3, 2018 / Notices sradovich on DSK3GMQ082PROD with NOTICES equity securities. Shares will trade on the NYSE Arca Marketplace from 4:00 a.m. to 8:00 p.m. E.T. 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 the NYSE Arca Marketplace is $0.01, with the exception of securities that are priced less than $1.00 for which the MPV for order entry is $0.0001. The Shares will conform to the initial and continued listing criteria under NYSE Arca Rule 8.600–E. The Exchange represents that, for initial and/or continued listing, the Fund will be in compliance with Rule 10A–3 under the Act, as provided by NYSE Arca Rule 5.3–E. The Exchange has obtained 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. Surveillance The Exchange represents that trading in the Shares will be subject to the existing trading surveillances administered by the Exchange, as well as cross-market surveillances administered by the Financial Industry Regulatory Authority (‘‘FINRA’’) on behalf 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. 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. The Exchange or FINRA, on behalf of the Exchange, or both, will communicate as needed regarding trading in the Shares, ETFs, ETNs, certain exchange-traded options and certain futures 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 VerDate Sep<11>2014 17:29 May 02, 2018 Jkt 244001 obtain trading information regarding trading in the Shares, ETFs, ETNs, certain exchange-traded options and certain futures from such markets and other entities. In addition, the Exchange may obtain information regarding trading in the Shares, ETFs, ETNs, certain exchange-traded options and certain futures from markets and other entities that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement (‘‘CSSA’’). The Exchange is able to access from FINRA, 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 certain municipal bond trading activity for surveillance purposes in connection with trading in the Shares. In addition, the Exchange also has a general policy prohibiting the distribution of material, non-public information by its employees. All statements and representations made in this filing regarding (a) the description of the portfolio or reference assets, (b) limitations on portfolio holdings or reference assets, or (c) the applicability of Exchange rules and surveillance procedures shall constitute continued listing requirements for listing the Shares 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 (‘‘ETP’’) Holders in an Information Bulletin (‘‘Bulletin’’) of the special characteristics and risks associated with trading the Shares of the Fund. Specifically, the Bulletin will discuss the following: (1) The procedures for purchases and redemptions of Shares in Creation Units (and that Shares are not individually redeemable); (2) NYSE Arca 9.2–E(a), which imposes a duty of due diligence on its ETP 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 Early PO 00000 Frm 00064 Fmt 4703 Sfmt 4703 and Late Trading Sessions when an updated IIV will not be calculated or publicly disseminated; (4) how information regarding the IIV and the Disclosed Portfolio is disseminated; (5) the requirement that ETP 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 of the Fund is calculated after 4:00 p.m. E.T. each trading day. 2. Statutory Basis The basis under the Act for this proposed rule change is the requirement under Section 6(b)(5) 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 federal securities laws applicable to trading on the Exchange. The Adviser is not registered as a broker-dealer but the Adviser is affiliated with a broker-dealer and has implemented and will maintain a ‘‘fire wall’’ with respect to such broker-dealer regarding access to information concerning the composition and/or changes to the Fund’s portfolio. The Exchange or FINRA, on behalf of the Exchange, or both, will communicate as needed regarding trading in the Shares, ETFs, ETNs, certain exchange-traded options and certain futures 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, ETNs, certain exchange-traded options and certain futures from such markets E:\FR\FM\03MYN1.SGM 03MYN1 sradovich on DSK3GMQ082PROD with NOTICES Federal Register / Vol. 83, No. 86 / Thursday, May 3, 2018 / Notices and other entities. In addition, the Exchange may obtain information regarding trading in the Shares, ETFs, ETNs, certain exchange-traded options and certain futures from markets and other entities that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. The Exchange is able to access from FINRA, as needed, trade information for certain fixed income securities held by the Fund reported to FINRA’s TRACE. FINRA also can access data obtained from the MSRB relating to certain municipal bond trading activity for surveillance purposes in connection with trading in the Shares. 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. The website for the Fund includes a form of the prospectus for the Fund and additional data relating to NAV and other applicable quantitative information. 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, and trading in the Shares will be subject to NYSE Arca 8.600–E (d)(2)(D), which sets forth circumstances under which trading in the Shares of the Fund may be halted. In addition, as noted above, investors have ready access to information regarding the Fund’s holdings, the IIV, the Disclosed Portfolio, and quotation and last sale information for the Shares. In the aggregate, at least 90% of the weight of the Fund’s holdings invested in futures, exchange-traded options, and listed swaps shall, on both an initial and continuing basis, consist of futures, options, and swaps for which the Exchange may obtain information from other members or affiliates of the ISG or for which the principal market is a market with which the Exchange has a CSSA. As described above, deviations from the generic requirements of Commentary .01(a) are necessary for the Fund to achieve its investment objective in a manner that is cost-effective and that maximizes investors’ returns. Further, the proposed alternative VerDate Sep<11>2014 17:29 May 02, 2018 Jkt 244001 requirements are narrowly tailored to allow the Fund to achieve its investment objective in manner that is consistent with the principles of Section 6(b)(5) of the Act. As a result, it is in the public interest to approve listing and trading of Shares of the Fund on the Exchange pursuant to the requirements set forth herein. The Adviser represents that permitting limited investments in nonagency MBS and ABS, as described above, would be in the best interest of the Fund’s shareholders because such investments have the potential to reduce the overall risk profile of the Fund’s portfolio. In the Adviser’s view, such investments would reduce the Fund’s risk with respect to non-agency ABS and MBS investments by diversifying the Fund’s exposure among borrowers of such debt issues. In addition, by allowing the Fund to allocate up to 30% of the weight of its Fixed Income Securities investments in such issues would afford the Fund greater flexibility to invest in the most liquid available Fixed Income Securities issues, in that such issues are expected to be as liquid, or more liquid, than other possible Fund investments. The Exchange also 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(a)(1)(A) through (E) to Rule 8.600–E with respect to the Fund’s investments in non-exchange-traded open-end investment company securities. Investments in such equity securities will not be principal investments of the Fund. Such investments, which may include mutual funds that invest, for example, principally in fixed income securities, would be utilized to help the Fund meet its investment objective and to equitize cash in the short term. The Fund will invest in non-exchange-traded open-end investment company securities only to the extent that such an investment would be consistent with the requirements of Section 12(d)(1) of the 1940 Act and the rules thereunder. Because such securities must satisfy applicable 1940 Act diversification requirements, and have a net asset value based on the value of securities and financial assets the investment company holds, the Exchange believes it is both unnecessary and inappropriate to apply to such investment company securities the criteria in Commentary .01(a)(1). The Exchange notes that it would be difficult or impossible to apply to nonexchange-traded investment company securities the generic quantitative PO 00000 Frm 00065 Fmt 4703 Sfmt 4703 19585 criteria (e.g., market capitalization, trading volume, or portfolio criteria) in Commentary .01 (A) through (D) applicable to U.S. Component Stocks. For example, the requirement for U.S. Component Stocks in Commentary .01(a)(1)(B) that there be minimum monthly trading volume of 250,000 shares, or minimum notional volume traded per month of $25,000,000, averaged over the last six months is tailored to exchange-traded securities (e.g., U.S. Component Stocks) and not to mutual fund shares, which do not trade in the secondary market. Moreover, application of such criteria would not serve the purpose served with respect to U.S. Component Stocks, namely, to establish minimum liquidity and diversification criteria for U.S. Component Stocks held by series of Managed Fund Shares. Other than Commentary .01(a)(1)(A) through (E) and Commentary .01(b)(5) to Rule 8.600–E, the Fund’s portfolio will meet all other requirements of Rule 8.600–E. 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 an additional type of actively managed ETF 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 CSSA. In addition, as noted above, investors have ready access to information regarding the Fund’s holdings, the IIV, the 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 issue of Managed Fund Shares that, through permitted use of an increased level of non-agency ABS and MBS above that currently permitted by the generic listing requirements of Commentary .01 to NYSE Arca Rule 8.600–E, will enhance competition among market participants, to the benefit of investors and the marketplace. E:\FR\FM\03MYN1.SGM 03MYN1 19586 Federal Register / Vol. 83, No. 86 / Thursday, May 3, 2018 / Notices 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 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–2018–25 on the subject line. sradovich on DSK3GMQ082PROD with NOTICES Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to File Number SR–NYSEArca–2018–25. 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 website (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 17:29 May 02, 2018 Jkt 244001 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.22 Robert W. Errett, Deputy Secretary. [FR Doc. 2018–09340 Filed 5–2–18; 8:45 am] 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: VerDate Sep<11>2014 provisions of 5 U.S.C. 552, will be available for website 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–NYSEArca-2018–25 and should be submitted on or before May 24, 2018. BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–83125; File No. SR– NASDAQ–2017–088] Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Amendment No. 2 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 2, To Amend Nasdaq Rule 4703(a) To Allow Members To Designate an Order with a RTFY or SCAN Routing Order Attribute To Activate at 7:00 a.m. ET April 27, 2018. I. Introduction On August 30, 2017, The Nasdaq Stock Market LLC (‘‘Nasdaq’’ or ‘‘Exchange’’) 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 Nasdaq Rule 4703(a) relating to the times for activating an order with a RTFY or SCAN routing order attribute. The proposed rule change was published for comment in the Federal Register on September 18, 2017.3 On 22 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. 81579 (September 12, 2017), 82 FR 43584. 1 15 PO 00000 Frm 00066 Fmt 4703 Sfmt 4703 October 31, 2017, pursuant to Section 19(b)(2) of the Act,4 the Commission designated a longer period within which to approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether to disapprove the proposed rule change.5 On December 13, 2017, the Exchange filed Amendment No. 1 to the proposed rule change, which amended and superseded the proposed rule change as originally filed.6 On December 15, 2017, the Commission published notice of Amendment No. 1 and instituted proceedings under Section 19(b)(2)(B) of the Act 7 to determine whether to approve or disapprove the proposed rule change, as modified by Amendment No. 1.8 On March 14, 2018, pursuant to Section 19(b)(2) of the Act,9 the Commission designated a longer period within which to issue an order approving or disapproving the proposed rule change.10 On April 19, 2018, the Exchange filed Amendment No. 2 to the proposed rule change, which amended and superseded the proposed rule change, as modified by Amendment No. 1.11 The Commission has received no 4 15 U.S.C. 78s(b)(2). Securities Exchange Act Release No. 81986, 82 FR 51453 (November 6, 2017). The Commission designated December 17, 2017 as the date by which the Commission shall approve or disapprove, or institute proceedings to determine whether to disapprove, the proposed rule change. 6 In Amendment No. 1, the Exchange: (1) Modified the proposal to allow members entering an order with a RTFY or SCAN routing order attribute to designate the order to activate at a specific time during Pre-Market Hours (rather than System Hours) on the same day; (2) specified that the proposed functionality would be offered on a port level basis; (3) stated that all of the times-inforce in Nasdaq Rule 4703(a) currently apply to orders with RTFY or SCAN routing order attributes and made corresponding clarifications and corrections throughout the proposal; (4) provided additional information regarding why members might use the proposed functionality; and (5) provided additional discussion regarding members’ best execution obligations and the application of the Exchange’s regulatory checks associated with the proposed functionality, and reminded members of their regulatory obligations (e.g., Market Access Rule, Regulation SHO) when using the proposed functionality. Amendment No. 1 is available at https://www.sec.gov/comments/sr-nasdaq-2017088/nasdaq2017088-2798107-161689.pdf. 7 15 U.S.C. 78s(b)(2)(B). 8 See Securities Exchange Act Release No. 82335, 82 FR 60637 (December 21, 2017). 9 15 U.S.C. 78s(b)(2). 10 See Securities Exchange Act Release No. 82871, 83 FR 12229 (March 20, 2018). The Commission designated May 16, 2018 as the date by which the Commission shall either approve or disapprove the proposed rule change. 11 In Amendment No. 2, the Exchange: (1) Further narrowed the proposal by allowing members to designate orders with RTFY or SCAN routing order attributes to activate at 7:00 a.m. ET; (2) provided additional information regarding why members might use the proposed functionality; and (3) compared the proposed functionality to existing 5 See E:\FR\FM\03MYN1.SGM 03MYN1

Agencies

[Federal Register Volume 83, Number 86 (Thursday, May 3, 2018)]
[Notices]
[Pages 19578-19586]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-09340]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83122; File No. SR-NYSEArca-2018-25]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Regarding the Natixis Loomis Sayles Short 
Duration Income ETF

April 27, 2018.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\

[[Page 19579]]

notice is hereby given that, on April 16, 2018, NYSE Arca, Inc. 
(``Exchange'' or ``NYSE Arca'') filed with the Securities and Exchange 
Commission (``Commission'') the proposed rule change as described in 
Items I and II below, which Items have been prepared by the self-
regulatory organization. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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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 certain changes regarding investments of the 
Natixis Loomis Sayles Short Duration Income ETF, which is currently 
listed and traded on the Exchange under NYSE Arca Rule 8.600-E 
(``Managed Fund Shares''). The proposed change is available on the 
Exchange's website 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 
following under NYSE Arca Rule 8.600-E, which governs the listing and 
trading of Managed Fund Shares \4\: Natixis Loomis Sayles Short 
Duration Income ETF (``Fund''). The Shares are offered by Natixis ETF 
Trust (the ``Trust''), which is registered with the Commission as an 
open-end management investment company.\5\ Natixis Advisors, L.P. (the 
``Adviser'') is the investment adviser for the Fund. Loomis, Sayles & 
Company, L.P. is the Fund's sub-adviser (``Sub-Adviser''). ALPS 
Distributors, Inc. (the ``Distributor'') is the principal underwriter 
and distributor of the Fund's Shares. The Adviser is the Fund's 
administrator. State Street Bank and Trust Company (``State Street'') 
serves as the custodian, and transfer agent (``Transfer Agent'' or 
``Custodian'') for the Fund.\6\
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    \4\ 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.
    \5\ Shares of the Fund commenced trading on the Exchange on 
December 28, 2017 pursuant to Commentary .01 to NYSE Arca Rule 
8.600-E.
    \6\ The Trust is registered under the 1940 Act. On December 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. 333-210156 and 811-23146) (``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. 
30654 (August 20, 2013) (File No. 812-13942-02) (``Exemptive 
Order'').
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    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. 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.\7\ Commentary .06 to Rule 
8.600-E is similar to Commentary .03(a)(i) and (iii) to NYSE Arca s 
Rule 5.2-E(j)(3); however, Commentary .06 in connection with the 
establishment of a ``fire wall'' between the investment adviser and the 
broker-dealer reflects the applicable open-end fund's portfolio, not an 
underlying benchmark index, as is the case with index-based funds. The 
Adviser and Sub-Adviser are not registered as a broker-dealer but each 
is affiliated with a broker-dealer and has implemented and will 
maintain a ``fire wall'' with respect to such broker-dealer regarding 
access to information concerning the composition and/or changes to the 
Fund's portfolio. In the event (a) the Adviser or Sub-Adviser becomes 
registered as a broker-dealer or newly affiliated with a broker-dealer, 
or (b) any new adviser or sub-adviser is a registered broker-dealer or 
becomes affiliated with a broker-dealer, it will implement and maintain 
a fire wall with respect to its relevant personnel or broker-dealer 
affiliate regarding access to information concerning the composition 
and/or changes to the 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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Natixis Loomis Sayles Short Duration Income ETF
Principal Investments
    According to the Registration Statement, the Fund's investment 
objective is current income consistent with preservation of capital. 
Under normal market conditions,\8\ the Fund will invest at least 80% of 
its net assets in ``Fixed-Income Securities'' (as described below).
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    \8\ The term ``normal market conditions'' is defined in NYSE 
Arca Rule 8.600-E(c)(5).
---------------------------------------------------------------------------

    The Fixed Income Securities in which the Fund may invest are the 
following:
     U.S. Government Securities, including U.S. Treasury Bills, 
U.S. Treasury Notes and Bonds, U.S. Treasury Floating Rate Notes, 
Treasury Inflation-Protected Securities (``TIPS''), and obligations of 
U.S. agencies or instrumentalities (e.g., ``Ginnie Maes'', ``Fannie 
Maes'' and ``Freddie Macs'');
     agency and non-agency asset-backed securities (``ABS'');

[[Page 19580]]

     U.S. dollar-denominated foreign securities, including 
emerging market securities;
     Adjustable-Rate Mortgage Securities (``ARMs'');
     junior and senior loans;
     bank loans, loan participations and assignments;
     agency and non-agency mortgage-backed securities;
     collateralized mortgage obligations (``CMOs'');
     zero coupon and pay-in-kind securities;
     corporate bonds;
     Non-US government securities, supranational entities 
obligations issued by foreign governments, or international agencies 
and instrumentalities;
     inflation-linked and inflation-indexed securities;
     money market instruments; \9\
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    \9\ Money market instruments are short-term instruments 
referenced in Commentary .01 (c) to NYSE Arca Rule 8.600-E.
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     mortgage-related securities (such as Government National 
Mortgage Association or Federal National Mortgage Association 
certificates);
     mortgage dollar rolls;
     variable and floating rate securities;
     Rule 144A securities;
     taxable municipal securities;
     step-coupon securities; and
     stripped securities.
    The Fund may hold any portion of its assets in cash (U.S. dollars, 
foreign currencies or multinational currency units) and/or cash 
equivalents.\10\
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    \10\ For purposes of this filing, cash equivalents include the 
short-term instruments enumerated in Commentary .01(c) to NYSE Arca 
Rule 8.600-E.
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Other Investments
    While the Fund, under normal market conditions, will invest at 
least 80% of its net assets in the securities and financial instruments 
described above, the Fund may invest its remaining assets in the 
securities and financial instruments referenced below.
    The Fund may enter into short sales of securities.
    The Fund may invest in exchange-traded funds (``ETFs'') \11\ and 
exchange-traded notes (``ETNs'').\12\
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    \11\ 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.
    \12\ ETNs are Index-Linked Securities as described in NYSE Arca 
Rule 5.2-E(j)(6).
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    The Fund may invest in bilateral credit default swaps, bilateral 
interest rate swaps and bilateral standardized commodity and equity 
index total return swaps. The Fund may invest in the following swaps: 
interest rate, index, commodity, equity-linked, fixed income, credit 
default, credit-linked and currency exchange swaps. The Fund may invest 
in swaptions.
    The Fund may invest in the following options: U.S. exchange-traded 
and over-the-counter (``OTC'') options on domestic and foreign indices, 
options on futures contracts, and other options.
    The Fund may invest in futures, including index futures.
    The Fund may invest in publicly or privately issued interests in 
investment pools whose underlying assets are credit default, credit-
linked, interest rate, currency exchange, equity-linked or other types 
of swap contracts and related underlying securities or securities loan 
agreements.
    The Fund may invest in non-exchange-traded open-end investment 
company securities up to the limits imposed by the 1940 Act.
    With respect to any of the Fund's investments, the Fund may 
purchase securities on a forward commitment or when-issued or delayed 
delivery basis.
Use of Derivatives by the Fund
    Investments in derivative instruments will be made in accordance 
with the 1940 Act and consistent with the Fund's investment objective 
and policies. The Fund will typically use derivative instruments as a 
substitute for taking a position in the underlying asset where 
advantageous and/or as part of a strategy designed to reduce exposure 
to other risks, such as interest rate risk. The Fund may also use 
derivative instruments to enhance returns, manage portfolio duration, 
or manage the risk of securities price fluctuations. To limit the 
potential risk associated with such transactions, the Fund segregates 
or ``earmarks'' assets determined to be liquid by the Adviser in 
accordance with procedures established by the Trust's Board of Trustees 
(the ``Board'') and in accordance with the 1940 Act (or, as permitted 
by applicable regulation, enter into certain offsetting positions) to 
cover its obligations under derivative instruments. These procedures 
have been adopted consistent with Section 18 of the 1940 Act and 
related Commission guidance. In addition, the Fund has included 
appropriate risk disclosure in its offering documents, including 
leveraging risk. Leveraging risk is the risk that certain transactions 
of the Fund, including the Fund's use of derivatives, may give rise to 
leverage, causing the Fund to be more volatile than if it had not been 
leveraged. Because the markets for certain securities, or the 
securities themselves, may be unavailable or cost prohibitive as 
compared to derivative instruments, suitable derivative transactions 
may be an efficient alternative for the Fund to obtain the desired 
asset exposure.
Creation and Redemption of Shares
    According to the Registration Statement, the Fund issues and sells 
Shares of the Fund only in Creation Units of 100,000 Shares on a 
continuous basis through the Distributor at the NAV next determined 
after receipt of an order in proper form on any business day. The size 
of a Creation Unit is subject to change.
    The consideration for purchase of Creation Units generally consists 
of ``Deposit Securities'' and the ``Cash Component'', which generally 
correspond pro rata, to the extent practicable, to the Fund securities, 
or, as permitted by the Fund, the ``Cash Deposit.'' Together, the 
Deposit Securities and the Cash Component or, alternatively, the Cash 
Deposit, constitute the ``Fund Deposit,'' which represents the minimum 
initial and subsequent investment amount for a Creation Unit of the 
Fund.
    The Transfer Agent and Custodian, through the National Securities 
Clearing Corporation (``NSCC''), makes available on each business day, 
prior to the opening of the Core Trading Session on NYSE Arca 
(currently 9:30 a.m., Eastern Time (``E.T.'')), 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).
    The Fund may also permit the substitution of an amount of cash (a 
``cash-in-lieu'' amount) to replace any Deposit Security of the Fund 
that is a non-deliverable instrument. The amount of cash contributed 
will be equivalent to the price of the instrument listed as a Deposit 
Security. The Fund reserves the right to permit the substitution of a 
``cash in-lieu'' amount to be added to replace any Deposit Security 
under specified circumstances.
Procedures for Creating Creation Units
    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; or 
(ii) a participant of the Depository Trust Company (``DTC'') (``DTC 
Participant'') and must have executed an Authorized

[[Page 19581]]

Participant agreement with the Distributor, and accepted by the 
Transfer Agent, with respect to creations and redemptions of Creation 
Units. A Participating Party or DTC Participant who has executed an 
``Authorized Participant Agreement'' is referred to as an ``Authorized 
Participant.''
    To initiate a creation order for a Creation Unit, an Authorized 
Participant must submit an irrevocable order to purchase Shares in 
proper form to the Transfer Agent no later than 2:00 p.m., E.T. on any 
business day for creation of Creation Units to be effected based on the 
NAV of Shares of the Fund on the following business day.
Redemption of Creation Units
    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 an Authorized Participant Agreement.
    With respect to the Fund, State Street, through the NSCC, makes 
available immediately prior to the opening of the Core Trading Session 
on the NYSE Arca on each business day, the identity of the Fund's 
securities and/or an amount of cash that will be applicable to 
redemption requests received in proper form on that day. The Fund's 
securities received on redemption generally correspond pro rata, to the 
positions in the Fund's portfolio. The Fund's securities received on 
redemption (``Fund Securities'') will generally be identical to Deposit 
Securities that are applicable to creations of Creation Units.
    Subject to the terms of the applicable Authorized Participant 
Agreement and any creation and redemption procedures adopted by the 
Fund and provided to all Authorized Participants, to initiate a 
redemption order for a Creation Unit, an Authorized Participant must 
submit an irrevocable order to redeem Shares in proper form to the 
Transfer Agent no later than 2:00 p.m., E.T. on any business day for 
redemption of Creation Units to be effected based on the NAV of shares 
of the Fund on that business day.
    Unless cash only redemptions are available or specified for the 
Fund, the redemption proceeds for a Creation Unit generally consists 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.\13\ The Fund may substitute a ``cash-in-lieu'' amount to 
replace any Fund Security in certain limited circumstances. The amount 
of cash paid out in such cases will be equivalent to the value of the 
instrument listed as the Fund Security. In the event that the Fund 
Securities have a value greater than the NAV of the Shares, a 
compensating cash payment equal to the difference will be included in 
the Cash Component required to be delivered by an Authorized 
Participant.
---------------------------------------------------------------------------

    \13\ The Adviser represents that, to the extent the Trust 
effects the redemption of Shares in cash, such transactions will be 
effected in the same manner for all Authorized Participants.
---------------------------------------------------------------------------

Derivatives Valuation Methodology for Purposes of Determining Portfolio 
Indicative Value
    On each business day, before commencement of trading in Fund Shares 
on NYSE Arca, the Fund discloses on its website the identities and 
quantities of the portfolio instruments and other assets held by the 
Fund that form the basis for the Fund's calculation of NAV at the end 
of the business day. The NAV of the Shares of the Fund is determined 
once each day the New York Stock Exchange (the ``NYSE'') is open, as of 
the close of its regular trading session (normally 4:00 p.m., E.T.) 
(``NYSE Close'').
    In order to provide additional information regarding the intra-day 
value of Shares of the Fund, one or more major market data vendors 
disseminates every 15 seconds an updated Intraday Indicative Value 
(``IIV'') for the Fund as calculated by an information provider or 
market data vendor. A third party market data provider calculates the 
IIV for the Fund.
    With respect to specific derivatives:
     Foreign currency derivatives may be valued intraday using 
market quotes, or another proxy as determined to be appropriate by the 
third party market data provider.
     Futures may be valued intraday using the relevant futures 
exchange data, or another proxy as determined to be appropriate by the 
third party market data provider.
     Swaps may be valued using intraday data from market 
vendors, or based on underlying asset price, or another proxy as 
determined to be appropriate by the third party market data provider.
     Exchange listed options may be valued intraday using the 
relevant exchange data, or another proxy as determined to be 
appropriate by the third party market data provider.
     OTC options and swaptions may be valued intraday through 
option valuation models (e.g., Black-Scholes) or using exchange-traded 
options as a proxy, or another proxy as determined to be appropriate by 
the third party market data provider.
Disclosed Portfolio
    The Fund's disclosure of derivative positions in the applicable 
Disclosed Portfolio includes information that market participants can 
use to value these positions intraday. On a daily basis, the Fund 
discloses the information regarding the Disclosed Portfolio required 
under NYSE Arca Rule 8.600-E (c)(2) to the extent applicable.
Impact on Arbitrage Mechanism
    The Adviser believes there will be minimal, if any, impact to the 
arbitrage mechanism as a result of the use of derivatives. Market 
makers and participants should be able to value derivatives as long as 
the positions are disclosed with relevant information. The Adviser 
believes that the price at which Shares of the Fund trade will continue 
to be disciplined by arbitrage opportunities created by the ability to 
purchase or redeem Shares of the Fund at their NAV, which should ensure 
that Shares of the Fund will not trade at a material discount or 
premium in relation to their NAV.
    The Adviser does not believe there is any significant impact to the 
settlement or operational aspects of the Fund's arbitrage mechanism due 
to the use of derivatives. Because derivatives generally are not 
eligible for in-kind transfer, they will be substituted with a ``cash 
in lieu'' amount when the Fund processes purchases or redemptions of 
block-size ``Creation Units'' (as described above) in-kind.
Application of Generic Listing Requirements
    The Exchange is submitting this proposed rule change because the 
change described in the preceding paragraph would result in the 
portfolio for the Fund not meeting 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 would meet all 
such requirements except for those set forth in Commentary .01(b)(5) 
and Commentary .01(a)(1).
    The Fund will not comply with the requirement of Commentary 
.01(b)(5) to NYSE Arca Rule 8.600-E that non-agency, non-government-
sponsored entity and privately-issued mortgage-

[[Page 19582]]

related and other asset-backed securities components of a portfolio 
shall not account, in the aggregate, for more than 20% of the weight of 
the fixed income portion of the portfolio.\14\ Instead, the Exchange 
proposes that up to 30% of the weight of the Fixed Income Securities 
portion of the Fund's portfolio may consist of non-agency ABS and MBS. 
The Adviser represents that permitting limited investments in non-
agency MBS and ABS, as described above, would be in the best interest 
of the Fund's shareholders because such investments have the potential 
to reduce the overall risk profile of the Fund's portfolio through 
diversification. In the Adviser's view, such investments would reduce 
the Fund's risk with respect to non-agency ABS and MBS investments by 
diversifying the Fund's exposure among borrowers of such debt issues. 
The Adviser represents that the Fund will only purchase U.S. dollar 
denominated non-agency ABS and MBS that are settled through DTC. In 
addition, by allowing the Fund to allocate up to 30% of the weight of 
its Fixed Income Securities investments in such issues would afford the 
Fund greater flexibility to invest in the most liquid available Fixed 
Income Securities issues, in that such issues are expected to be as 
liquid, or more liquid, than other possible Fund investments.
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    \14\ Commentary .01(b)(5) to NYSE Arca Rule 8.600-E provides 
that the components of the fixed income portion of a portfolio shall 
meet the following criteria initially and on a continuing basis: 
Non-agency, non-government-sponsored entity (``GSE'') and privately-
issued mortgage-related and other asset-backed securities components 
of a portfolio shall not account, in the aggregate, for more than 
20% of the weight of the fixed income portion of the portfolio.
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    As noted above, the Fund may invest in equity securities that are 
non-exchange-traded securities of other open-end investment company 
securities (e.g., mutual funds). 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(a)(1)(A) through (E) 
to Rule 8.600-E with respect to the Fund's investments in such 
securities.\15\ Investments in such equity securities will not be 
principal investments of the Fund.\16\ Such investments, which may 
include mutual funds that invest, for example, principally in fixed 
income securities, would be utilized to help the Fund meet its 
investment objective and to equitize cash in the short term. The Fund 
will invest in non-exchange-traded open-end investment company 
securities only to the extent that such an investment would be 
consistent with the requirements of Section 12(d)(1) of the 1940 Act 
and the rules thereunder.\17\ Because such securities must satisfy 
applicable 1940 Act diversification requirements, and have a net asset 
value based on the value of securities and financial assets the 
investment company holds, the Exchange believes it is both unnecessary 
and inappropriate to apply to such investment company securities the 
criteria in Commentary .01(a)(1).
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    \15\ Commentary .01 (a) to Rule 8.600-E specifies the equity 
securities accommodated by the generic criteria in Commentary 
.01(a), namely, U.S. Component Stocks (as described in Rule 5.2-
E(j)(3)); Non-U.S. Component Stocks (as described in Rule 5.2-
E(j)(3)); Derivative Securities Products (i.e., Investment Company 
Units and securities described in Section 2 of Rule 8-E); and Index-
Linked Securities that qualify for Exchange listing and trading 
under Rule 5.2-E(j)(6). Commentary .01(a)(1) to Rule 8.600-E (U.S. 
Component Stocks) provides that the component stocks of the equity 
portion of a portfolio that are U.S. Component Stocks shall meet the 
following criteria initially and on a continuing basis:
    (A) Component stocks (excluding Derivative Securities Products 
and Index-Linked Securities) that in the aggregate account for at 
least 90% of the equity weight of the portfolio (excluding such 
Derivative Securities Products and Index-Linked Securities) each 
shall have a minimum market value of at least $75 million;
    (B) Component stocks (excluding Derivative Securities Products 
and Index-Linked Securities) that in the aggregate account for at 
least 70% of the equity weight of the portfolio (excluding such 
Derivative Securities Products and Index-Linked Securities) each 
shall have a minimum monthly trading volume of 250,000 shares, or 
minimum notional volume traded per month of $25,000,000, averaged 
over the last six months;
    (C) The most heavily weighted component stock (excluding 
Derivative Securities Products and Index-Linked Securities) shall 
not exceed 30% of the equity weight of the portfolio, and, to the 
extent applicable, the five most heavily weighted component stocks 
(excluding Derivative Securities Products and Index-Linked 
Securities) shall not exceed 65% of the equity weight of the 
portfolio;
    (D) Where the equity portion of the portfolio does not include 
Non-U.S. Component Stocks, the equity portion of the portfolio shall 
include a minimum of 13 component stocks; provided, however, that 
there shall be no minimum number of component stocks if (i) one or 
more series of Derivative Securities Products or Index-Linked 
Securities constitute, at least in part, components underlying a 
series of Managed Fund Shares, or (ii) one or more series of 
Derivative Securities Products or Index-Linked Securities account 
for 100% of the equity weight of the portfolio of a series of 
Managed Fund Shares;
    (E) Except as provided herein, equity securities in the 
portfolio shall be U.S. Component Stocks listed on a national 
securities exchange and shall be NMS Stocks as defined in Rule 600 
of Regulation NMS under the Securities Exchange Act of 1934.
    \16\ For purposes of this section of the filing, non-exchange-
traded securities of other registered investment companies do not 
include money market funds, which are cash equivalents under 
Commentary .01(c) to Rule 8.600-E and for which there is no 
limitation in the percentage of the portfolio invested in such 
securities.
    \17\ The Commission has previously approved proposed rule 
changes under Section 19(b) of the Act for series of Managed Fund 
Shares that may invest in non-exchange traded investment company 
securities to the extent permitted by Section 12(d)(1) of the 1940 
Act and the rules thereunder. See, e.g., Securities Exchange Act 
Release No. 78414 (July 26, 2016), 81 FR 50576 (August 1, 2016) (SR-
NYSEArca-2016-79) (order approving listing and trading of shares of 
the Virtus Japan Alpha ETF under NYSE Arca Equities Rule 8.600).
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    The Exchange notes that Commentary .01(A) through (D) to Rule 
8.600-E exclude application of those provisions to certain ``Derivative 
Securities Products'' that are exchange-traded investment company 
securities, including 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).\18\ In its 2008 Approval Order approving amendments 
to Commentary .01(a) to Rule 5.2(j)(3) that exclude Derivative 
Securities Products from certain provisions of Commentary .01(a) (which 
exclusions are similar to those in Commentary .01(a)(1) to Rule 8.600-
E), the Commission stated that ``based on the trading characteristics 
of Derivative Securities Products, it may be difficult for component 
Derivative Securities Products to satisfy certain quantitative index 
criteria, such as the minimum market value and trading volume 
limitations.'' The Exchange notes that it would be difficult or 
impossible to apply to non-exchange-traded investment company 
securities the generic quantitative criteria (e.g., market 
capitalization, trading volume, or portfolio criteria) in Commentary 
.01 (A) through (D) applicable to U.S. Component Stocks. For example, 
the

[[Page 19583]]

requirement for U.S. Component Stocks in Commentary .01(a)(1)(B) that 
there be minimum monthly trading volume of 250,000 shares, or minimum 
notional volume traded per month of $25,000,000, averaged over the last 
six months is tailored to exchange-traded securities (e.g., U.S. 
Component Stocks) and not to mutual fund shares, which do not trade in 
the secondary market. Moreover, application of such criteria would not 
serve the purpose served with respect to U.S. Component Stocks, namely, 
to establish minimum liquidity and diversification criteria for U.S. 
Component Stocks held by series of Managed Fund Shares.
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    \18\ The Commission initially approved the Exchange's proposed 
rule change to exclude ``Derivative Securities Products'' (i.e., 
Investment Company Units and securities described in Section 2 of 
Rule 8) and ``Index-Linked Securities (as described in Rule 5.2-E 
(j)(6)) from Commentary .01(a)(A) (1) through (4) to Rule 5.2-E(j)(3 
in Securities Exchange Act Release No. 57751 (May 1, 2008), 73 FR 
25818 (May 7, 2008) (SR-NYSEArca-2008-29) (Order Granting Approval 
of a Proposed Rule Change, as Modified by Amendment No. 1 Thereto, 
to Amend the Eligibility Criteria for Components of an Index 
Underlying Investment Company Units) (``2008 Approval Order''). See 
also, Securities Exchange Act Release No. 57561 (March 26, 2008), 73 
FR 17390 (April 1, 2008) (Notice of Filing of Proposed Rule Change 
and Amendment No. 1 Thereto to Amend the Eligibility Criteria for 
Components of an Index Underlying Investment Company Units). The 
Commission subsequently approved generic criteria applicable to 
listing and trading of Managed Fund Shares, including exclusions for 
Derivative Securities Products and Index-Linked Securities in 
Commentary .01(a)(1)(A) through (D), in Securities Exchange Act 
Release No. 78397 (July 22, 2016), 81 FR 49320 (July 27, 2016) 
(Order Granting Approval of Proposed Rule Change, as Modified by 
Amendment No. 7 Thereto, Amending NYSE Arca Equities Rule 8.600 To 
Adopt Generic Listing Standards for Managed Fund Shares). See also, 
Amendment No. 7 to SR-NYSEArca-2015-110, available at https://www.sec.gov/comments/sr-nysearca-2015-110/nysearca2015110-9.pdf.
---------------------------------------------------------------------------

    The Exchange notes that the Commission has previously approved the 
listing of Managed Fund Shares with similar investment objectives and 
strategies where such funds were permitted to invest in the shares of 
other registered investment companies that are not ETFs or money market 
funds.\19\ Thus, the Exchange believes that it is appropriate to permit 
the Fund to invest in non-exchange-traded open-end management 
investment company securities, as described above.
---------------------------------------------------------------------------

    \19\ See, e.g., Exchange Act Release Nos. 79053 (October 5, 
2016), 81 FR 70468 (October 12, 2016) (SR-BatsBZX-2016-35) 
(permitting the JPMorgan Global Bond Opportunities ETF to invest in 
``investment company securities that are not ETFs''); 74297 
(February 18, 2015), 80 FR 9788 (February 24, 2015) (SR-BATS-2014-
056) (permitting the U.S. Fixed Income Balanced Risk ETF to invest 
in ``exchange traded and non-exchange traded investment companies 
(including investment companies advised by the Adviser or its 
affiliates) that invest in such Fixed Income Securities'').
---------------------------------------------------------------------------

    The Exchange notes that, other than Commentary .01(a)(1)(A) through 
(E) and Commentary .01(b)(5) to Rule 8.600-E, the Fund's portfolio will 
meet all other requirements of Rule 8.600-E.
Availability of Information
    The Fund's website (www.im.natixis.com/us/active-short-duration-income-etf) includes a form of the prospectus for the Fund that may be 
downloaded. The Fund's website includes additional quantitative 
information updated on a daily basis including, for the Fund, (1) daily 
trading volume, the prior business day's reported closing price, NAV 
and midpoint of the bid/ask spread at the time of calculation of such 
NAV (the ``Bid/Ask Price''),\20\ and a calculation of the premium and 
discount of the Bid/Ask Price against the NAV, and (2) data in chart 
format displaying the frequency distribution of discounts and premiums 
of the daily Bid/Ask Price against the NAV, within appropriate ranges, 
for each of the four previous calendar quarters. On each business day, 
before commencement of trading in Shares in the Core Trading Session on 
the Exchange, the Fund discloses on its website the Disclosed Portfolio 
as defined in NYSE Arca Rule 8.600-E (c)(2) that forms the basis for 
the Fund's calculation of NAV at the end of the business day.\21\
---------------------------------------------------------------------------

    \20\ The Bid/Ask Price of the Fund's Shares will be determined 
using the mid-point of the highest bid and the lowest offer on the 
Exchange as of the time of calculation of the Fund's NAV. The 
records relating to Bid/Ask Prices will be retained by the Fund and 
its service providers.
    \21\ Under accounting procedures followed by the Fund, trades 
made on the prior business day (``T'') will be booked and reflected 
in NAV on the current business day (``T+1''). Accordingly, the Fund 
will be able to disclose at the beginning of the business day the 
portfolio that will form the basis for the NAV calculation at the 
end of the business day.
---------------------------------------------------------------------------

    On a daily basis, the Fund discloses the information required under 
NYSE Arca Rule 8.600-E (c)(2) to the extent applicable. The website 
information will be publicly available at no charge.
    In addition, a basket composition file, which includes the security 
names and share quantities, if applicable, required to be delivered in 
exchange for the Fund's Shares, together with estimates and actual cash 
components, is publicly disseminated daily prior to the opening of the 
Exchange via the NSCC. The basket represents one Creation Unit of the 
Fund. Authorized Participants may refer to the basket composition file 
for information regarding Fixed Income Securities, and any other 
instrument that may comprise the Fund's basket on a given day.
    Investors can also obtain the Trust's Statement of Additional 
Information (``SAI''), the Fund's Shareholder Reports, and the Fund's 
Forms N-CSR and Forms 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, Form N-PX and Form N-SAR may be 
viewed on-screen or downloaded from the Commission's website at 
www.sec.gov. Intra-day and closing price information regarding 
exchange-traded options (including options on futures) and futures will 
be available from the exchange on which such instruments are traded. 
Intra-day and closing price information regarding Fixed Income 
Securities also will be available from major market data vendors. Price 
information relating to unlisted preferred equity securities, Rule 144A 
securities, OTC options, swaps and swaptions will be available from 
major market data vendors. Intra-day price information for exchange-
traded derivative instruments will be available from the applicable 
exchange and from major market data vendors. Price information 
regarding non-exchange-traded investment company securities will be 
available from the applicable investment company. 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. Exchange-traded options quotation and last sale information for 
options cleared via the Options Clearing Corporation (``OCC'') is 
available via the Options Price Reporting Authority. In addition, the 
IIV, as defined in NYSE Arca Rule 8.600-E (c)(3), will be widely 
disseminated by one or more major market data vendors at least every 15 
seconds during the Core Trading Session. The dissemination of the IIV, 
together with the Disclosed Portfolio, may allow investors to determine 
an approximate value of the underlying portfolio of the Fund on a daily 
basis and to provide an estimate of that value throughout the trading 
day.
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. 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. These may include: (1) The extent to 
which trading is not occurring in the securities and/or the financial 
instruments comprising the Disclosed Portfolio of the Fund; or (2) 
whether other unusual conditions or circumstances detrimental to the 
maintenance of a fair and orderly market are present. 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.
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

[[Page 19584]]

equity securities. Shares will trade on the NYSE Arca Marketplace from 
4:00 a.m. to 8:00 p.m. E.T. 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 the NYSE Arca Marketplace is $0.01, with the 
exception of securities that are priced less than $1.00 for which the 
MPV for order entry is $0.0001.
    The Shares will conform to the initial and continued listing 
criteria under NYSE Arca Rule 8.600-E. The Exchange represents that, 
for initial and/or continued listing, the Fund will be in compliance 
with Rule 10A-3 under the Act, as provided by NYSE Arca Rule 5.3-E. The 
Exchange has obtained 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.
Surveillance
    The Exchange represents that trading in the Shares will be subject 
to the existing trading surveillances administered by the Exchange, as 
well as cross-market surveillances administered by the Financial 
Industry Regulatory Authority (``FINRA'') on behalf 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.
    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.
    The Exchange or FINRA, on behalf of the Exchange, or both, will 
communicate as needed regarding trading in the Shares, ETFs, ETNs, 
certain exchange-traded options and certain futures 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, ETNs, certain 
exchange-traded options and certain futures from such markets and other 
entities. In addition, the Exchange may obtain information regarding 
trading in the Shares, ETFs, ETNs, certain exchange-traded options and 
certain futures from markets and other entities that are members of ISG 
or with which the Exchange has in place a comprehensive surveillance 
sharing agreement (``CSSA''). The Exchange is able to access from 
FINRA, 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 certain 
municipal bond trading activity for surveillance purposes in connection 
with trading in the Shares.
    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
    All statements and representations made in this filing regarding 
(a) the description of the portfolio or reference assets, (b) 
limitations on portfolio holdings or reference assets, or (c) the 
applicability of Exchange rules and surveillance procedures shall 
constitute continued listing requirements for listing the Shares 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 (``ETP'') Holders in an Information Bulletin 
(``Bulletin'') of the special characteristics and risks associated with 
trading the Shares of the Fund. Specifically, the Bulletin will discuss 
the following: (1) The procedures for purchases and redemptions of 
Shares in Creation Units (and that Shares are not individually 
redeemable); (2) NYSE Arca 9.2-E(a), which imposes a duty of due 
diligence on its ETP 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 Early and Late Trading Sessions when an 
updated IIV will not be calculated or publicly disseminated; (4) how 
information regarding the IIV and the Disclosed Portfolio is 
disseminated; (5) the requirement that ETP 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 of the Fund is 
calculated after 4:00 p.m. E.T. each trading day.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) 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 federal securities 
laws applicable to trading on the Exchange. The Adviser is not 
registered as a broker-dealer but the Adviser is affiliated with a 
broker-dealer and has implemented and will maintain a ``fire wall'' 
with respect to such broker-dealer regarding access to information 
concerning the composition and/or changes to the Fund's portfolio. The 
Exchange or FINRA, on behalf of the Exchange, or both, will communicate 
as needed regarding trading in the Shares, ETFs, ETNs, certain 
exchange-traded options and certain futures 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, ETNs, certain exchange-traded 
options and certain futures from such markets

[[Page 19585]]

and other entities. In addition, the Exchange may obtain information 
regarding trading in the Shares, ETFs, ETNs, certain exchange-traded 
options and certain futures from markets and other entities that are 
members of ISG or with which the Exchange has in place a comprehensive 
surveillance sharing agreement. The Exchange is able to access from 
FINRA, as needed, trade information for certain fixed income securities 
held by the Fund reported to FINRA's TRACE. FINRA also can access data 
obtained from the MSRB relating to certain municipal bond trading 
activity for surveillance purposes in connection with trading in the 
Shares.
    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. The website for the Fund 
includes a form of the prospectus for the Fund and additional data 
relating to NAV and other applicable quantitative information. 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, and trading in the Shares will be 
subject to NYSE Arca 8.600-E (d)(2)(D), which sets forth circumstances 
under which trading in the Shares of the Fund may be halted. In 
addition, as noted above, investors have ready access to information 
regarding the Fund's holdings, the IIV, the Disclosed Portfolio, and 
quotation and last sale information for the Shares. In the aggregate, 
at least 90% of the weight of the Fund's holdings invested in futures, 
exchange-traded options, and listed swaps shall, on both an initial and 
continuing basis, consist of futures, options, and swaps for which the 
Exchange may obtain information from other members or affiliates of the 
ISG or for which the principal market is a market with which the 
Exchange has a CSSA.
    As described above, deviations from the generic requirements of 
Commentary .01(a) are necessary for the Fund to achieve its investment 
objective in a manner that is cost-effective and that maximizes 
investors' returns. Further, the proposed alternative requirements are 
narrowly tailored to allow the Fund to achieve its investment objective 
in manner that is consistent with the principles of Section 6(b)(5) of 
the Act. As a result, it is in the public interest to approve listing 
and trading of Shares of the Fund on the Exchange pursuant to the 
requirements set forth herein.
    The Adviser represents that permitting limited investments in non-
agency MBS and ABS, as described above, would be in the best interest 
of the Fund's shareholders because such investments have the potential 
to reduce the overall risk profile of the Fund's portfolio. In the 
Adviser's view, such investments would reduce the Fund's risk with 
respect to non-agency ABS and MBS investments by diversifying the 
Fund's exposure among borrowers of such debt issues. In addition, by 
allowing the Fund to allocate up to 30% of the weight of its Fixed 
Income Securities investments in such issues would afford the Fund 
greater flexibility to invest in the most liquid available Fixed Income 
Securities issues, in that such issues are expected to be as liquid, or 
more liquid, than other possible Fund investments.
    The Exchange also 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(a)(1)(A) through (E) to Rule 8.600-E with respect to 
the Fund's investments in non-exchange-traded open-end investment 
company securities. Investments in such equity securities will not be 
principal investments of the Fund. Such investments, which may include 
mutual funds that invest, for example, principally in fixed income 
securities, would be utilized to help the Fund meet its investment 
objective and to equitize cash in the short term. The Fund will invest 
in non-exchange-traded open-end investment company securities only to 
the extent that such an investment would be consistent with the 
requirements of Section 12(d)(1) of the 1940 Act and the rules 
thereunder. Because such securities must satisfy applicable 1940 Act 
diversification requirements, and have a net asset value based on the 
value of securities and financial assets the investment company holds, 
the Exchange believes it is both unnecessary and inappropriate to apply 
to such investment company securities the criteria in Commentary 
.01(a)(1).
    The Exchange notes that it would be difficult or impossible to 
apply to non-exchange-traded investment company securities the generic 
quantitative criteria (e.g., market capitalization, trading volume, or 
portfolio criteria) in Commentary .01 (A) through (D) applicable to 
U.S. Component Stocks. For example, the requirement for U.S. Component 
Stocks in Commentary .01(a)(1)(B) that there be minimum monthly trading 
volume of 250,000 shares, or minimum notional volume traded per month 
of $25,000,000, averaged over the last six months is tailored to 
exchange-traded securities (e.g., U.S. Component Stocks) and not to 
mutual fund shares, which do not trade in the secondary market. 
Moreover, application of such criteria would not serve the purpose 
served with respect to U.S. Component Stocks, namely, to establish 
minimum liquidity and diversification criteria for U.S. Component 
Stocks held by series of Managed Fund Shares. Other than Commentary 
.01(a)(1)(A) through (E) and Commentary .01(b)(5) to Rule 8.600-E, the 
Fund's portfolio will meet all other requirements of Rule 8.600-E.
    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 
an additional type of actively managed ETF 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 CSSA. In addition, as noted above, 
investors have ready access to information regarding the Fund's 
holdings, the IIV, the 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 
issue of Managed Fund Shares that, through permitted use of an 
increased level of non-agency ABS and MBS above that currently 
permitted by the generic listing requirements of Commentary .01 to NYSE 
Arca Rule 8.600-E, will enhance competition among market participants, 
to the benefit of investors and the marketplace.

[[Page 19586]]

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 [email protected]. Please include 
File Number SR-NYSEArca-2018-25 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-2018-25. 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 website (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 website 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-NYSEArca-2018-25 and should be submitted 
on or before May 24, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2018-09340 Filed 5-2-18; 8:45 am]
BILLING CODE 8011-01-P


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