Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Amendment No. 1 and Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change as Modified by Amendment No. 1 Thereto Regarding the Continued Listing and Trading of Shares of the Natixis Loomis Sayles Short Duration Income ETF, 37831-37839 [2018-16536]
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Federal Register / Vol. 83, No. 149 / Thursday, August 2, 2018 / Notices
www.prc.gov, Docket Nos. MC2018–196,
CP2018–274.
Elizabeth Reed,
Attorney, Corporate and Postal Business Law.
[FR Doc. 2018–16525 Filed 8–1–18; 8:45 am]
Commission a USPS Request to Add
Priority Mail Contract 456 to
Competitive Product List. Documents
are available at www.prc.gov, Docket
Nos. MC2018–200, CP2018–278.
Elizabeth Reed,
Attorney, Corporate and Postal Business Law.
BILLING CODE 7710–12–P
[FR Doc. 2018–16519 Filed 8–1–18; 8:45 am]
POSTAL SERVICE
BILLING CODE 7710–12–P
Product Change—Parcel Select
Negotiated Service Agreement
POSTAL SERVICE
Postal
Notice.
AGENCY:
ACTION:
ServiceTM.
Product Change—Priority Mail
Negotiated Service Agreement
The Postal Service gives
notice of filing a request with the Postal
Regulatory Commission to add a
domestic shipping services contract to
the list of Negotiated Service
Agreements in the Mail Classification
Schedule’s Competitive Products List.
DATES: Date of notice required under 39
U.S.C. 3642(d)(1): August 2, 2018.
FOR FURTHER INFORMATION CONTACT:
Elizabeth Reed, 202–268–3179.
SUPPLEMENTARY INFORMATION: The
United States Postal Service® hereby
gives notice that, pursuant to 39 U.S.C.
3642 and 3632(b)(3), on July 27, 2018,
it filed with the Postal Regulatory
Commission a Request of the United
States Postal Service to Add Parcel
Select Contract 32 to Competitive
Product List. Documents are available at
www.prc.gov, Docket Nos. MC2018–197,
CP2018–275.
SUMMARY:
Elizabeth Reed,
Attorney, Corporate and Postal Business Law.
[FR Doc. 2018–16520 Filed 8–1–18; 8:45 am]
Postal ServiceTM.
ACTION: Notice.
SUMMARY:
Elizabeth Reed,
Attorney, Corporate and Postal Business Law.
BILLING CODE 7710–12–P
[FR Doc. 2018–16521 Filed 8–1–18; 8:45 am]
POSTAL SERVICE
BILLING CODE 7710–12–P
Product Change—Priority Mail
Negotiated Service Agreement
POSTAL SERVICE
Postal
Notice.
AGENCY:
ACTION:
ServiceTM.
The Postal Service gives
notice of filing a request with the Postal
Regulatory Commission to add a
domestic shipping services contract to
the list of Negotiated Service
Agreements in the Mail Classification
Schedule’s Competitive Products List.
DATES: Date of required notice: August
2, 2018.
FOR FURTHER INFORMATION CONTACT:
Elizabeth Reed, 202–268–3179.
SUPPLEMENTARY INFORMATION: The
United States Postal Service® hereby
gives notice that, pursuant to 39 U.S.C.
3642 and 3632(b)(3), on July 27, 2018,
it filed with the Postal Regulatory
SUMMARY:
daltland on DSKBBV9HB2PROD with NOTICES
The
United States Postal Service® hereby
gives notice that, pursuant to 39 U.S.C.
3642 and 3632(b)(3), on July 27, 2018,
it filed with the Postal Regulatory
Commission a USPS Request to Add
Priority Mail Express, Priority Mail, &
First-Class Package Service Contract 43
to Competitive Product List. Documents
are available at www.prc.gov, Docket
Nos. MC2018–198, CP2018–276.
SUPPLEMENTARY INFORMATION:
Elizabeth Reed,
Attorney, Corporate and Postal Business Law.
[FR Doc. 2018–16522 Filed 8–1–18; 8:45 am]
BILLING CODE 7710–12–P
AGENCY:
The Postal Service gives
notice of filing a request with the Postal
Regulatory Commission to add a
domestic shipping services contract to
the list of Negotiated Service
Agreements in the Mail Classification
Schedule’s Competitive Products List.
DATES: Date of required notice: August
2, 2018.
FOR FURTHER INFORMATION CONTACT:
Elizabeth Reed, 202–268–3179.
SUPPLEMENTARY INFORMATION: The
United States Postal Service® hereby
gives notice that, pursuant to 39 U.S.C.
3642 and 3632(b)(3), on July 27, 2018,
it filed with the Postal Regulatory
Commission a USPS Request to Add
Priority Mail Contract 457 to
Competitive Product List. Documents
are available at www.prc.gov, Docket
Nos. MC2018–201, CP2018–279.
37831
VerDate Sep<11>2014
17:06 Aug 01, 2018
Jkt 244001
Product Change—Priority Mail
Express, Priority Mail, & First-Class
Package Service Negotiated Service
Agreement
Postal ServiceTM.
ACTION: Notice.
AGENCY:
The Postal Service gives
notice of filing a request with the Postal
Regulatory Commission to add a
domestic shipping services contract to
the list of Negotiated Service
Agreements in the Mail Classification
Schedule’s Competitive Products List.
DATES: Date of required notice: August
2, 2018.
FOR FURTHER INFORMATION CONTACT:
Elizabeth Reed, 202–268–3179.
SUMMARY:
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83733; File No. SR–
NYSEArca–2018–25]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of
Amendment No. 1 and Order Instituting
Proceedings To Determine Whether To
Approve or Disapprove a Proposed
Rule Change as Modified by
Amendment No. 1 Thereto Regarding
the Continued Listing and Trading of
Shares of the Natixis Loomis Sayles
Short Duration Income ETF
July 27, 2018.
I. Introduction
On April 16, 2018, NYSE Arca, Inc.
(‘‘Exchange’’ or ‘‘NYSE Arca’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) 1 of the Securities
Exchange Act of 1934 (‘‘Exchange
Act’’) 2 and Rule 19b–4 thereunder,3 a
proposed rule change to continue listing
and trading shares of the Natixis Loomis
Sayles Short Duration Income ETF
under NYSE Arca Rule 8.600–E,
Managed Fund Shares.4 The proposed
rule change was published for comment
in the Federal Register on May 3, 2018.5
On June 5, 2018, the Commission
extended the time period within which
to approve the proposed rule change,
disapprove the proposed rule change, or
institute proceedings to determine
whether to approve or disapprove the
proposed rule change to August 1,
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
4 Currently, the Exchange lists and trades the
shares pursuant to NYSE Arca Rule 8.600–E. As
discussed further below, the Exchange submitted
this proposed rule change to permit the fund’s
portfolio to deviate from two of the ‘‘generic’’ listing
requirements applicable to Managed Fund Shares.
5 See Securities Exchange Act Release No. 83122
(April 27, 2018), 83 FR 19578. (‘‘Notice’’).
2 15
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Federal Register / Vol. 83, No. 149 / Thursday, August 2, 2018 / Notices
2018.6 On June 6, 2018, the Exchange
filed Amendment No. 1 to the proposed
rule change, which replaced and
superseded the proposed rule change as
originally filed. The Commission
received no comments on the proposed
rule change. The Commission is
publishing this notice and order to
solicit comments on the proposed rule
change, as modified by Amendment No.
1, from interested persons and to
institute proceedings under Section
19(b)(2)(B) of the Exchange Act to
determine whether to approve or
disapprove the proposed rule change as
modified by Amendment No. 1.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and the
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.
9 The
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
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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: 7 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.8 Natixis Advisors, L.P. (the
‘‘Adviser’’) is the investment adviser for
6 See Securities Exchange Act Release No. 83385,
83 FR 27034 (June 11, 2018).
7 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.
8 Shares of the Fund commenced trading on the
Exchange on December 28, 2017 pursuant to
Commentary .01 to NYSE Arca Rule 8.600–E.
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17:06 Aug 01, 2018
Jkt 244001
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.9
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.10 Commentary .06 to Rule
8.600–E is similar to Commentary
.03(a)(i) and (iii) to NYSE Arca Rule
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),
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’’).
10 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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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 broker-dealers 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 nonpublic 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,11 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’’);
• 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 (‘‘MBS’’);
11 The term ‘‘normal market conditions’’ is
defined in NYSE Arca Rule 8.600–E(c)(5).
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Federal Register / Vol. 83, No. 149 / Thursday, August 2, 2018 / Notices
the-counter (‘‘OTC’’) options on Fixed
Income Securities, domestic and foreign
equity and fixed income indices, CDX,
U.S. Treasury futures contracts, interest
rates and currencies.
The Fund may invest in futures on
Fixed Income Securities, domestic and
foreign equity and fixed income indices,
interest rates and CDX.
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.
With respect to any of the Fund’s
investments identified above, the Fund
may purchase securities on a forward
commitment or when-issued or delayed
delivery basis.
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 Fixed Income Securities.
The Fund may invest in exchangetraded funds (‘‘ETFs’’) 14 and exchangetraded notes (‘‘ETNs’’). 15
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, credit
default, credit default swaps index
(‘‘CDX’’), commodity, equity-linked,
fixed income, credit default, creditlinked and currency exchange swaps or
an index or indexes of the foregoing.
The Fund may invest in swaptions.
The Fund may invest in the following
options: U.S. exchange-traded and over-
daltland on DSKBBV9HB2PROD with NOTICES
• 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; 12
• 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.13
Use of Derivatives by the Fund
Investments in derivative instruments
will be 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’’)
to cover its obligations under derivative
instruments. 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.
12 Money market instruments are short-term
instruments referenced in Commentary .01 (c) to
NYSE Arca Rule 8.600–E.
13 For purposes of this filing, cash equivalents
shall mean the short-term instruments enumerated
in Commentary .01(c) to NYSE Arca Rule 8.600–E.
14 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.
15 ETNs are Index-Linked Securities as described
in NYSE Arca Rule 5.2–E(j)(6).
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17:06 Aug 01, 2018
Jkt 244001
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
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37833
basis through the Distributor at the net
asset value (‘‘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
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
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Federal Register / Vol. 83, No. 149 / Thursday, August 2, 2018 / Notices
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.
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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.16 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.
16 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.
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Jkt 244001
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.
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.
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.
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.
Disclosed Portfolio
The Fund’s disclosure of derivative
positions in the applicable Disclosed
Portfolio includes information that
market participants can use to value
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Application of Generic Listing
Requirements
The Exchange is submitting this
proposed rule change because the
portfolio for the Fund would not meet
all of the ‘‘generic’’ listing requirements
of Commentary .01 to NYSE Arca Rule
8.600–E applicable to the listing of
Managed Fund Shares. The Fund’s
portfolio 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 (‘‘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.17
Instead, up to 30% of the weight of the
17 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.
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Fixed Income Securities portion of the
Fund’s portfolio may consist of nonagency, non-GSE and privately-issued
mortgage-related and other asset-backed
securities. The Adviser represents that
permitting limited investments in nonagency, non-GSE and privately-issued
mortgage-related and other asset-backed
securities, 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 nonagency, non-GSE and privately-issued
mortgage-related and other asset-backed
securities 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.18 Investments in such
18 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
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
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17:06 Aug 01, 2018
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equity securities will not be principal
investments of the Fund.19 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.20 Because such
securities must 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 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).21 In its
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.
19 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.
20 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).
21 The Commission initially approved the
Exchange’s proposed rule change to exclude
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37835
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
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
‘‘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.
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listing and trading of an issue of
Managed Fund Shares that may invest
in equity securities that are nonexchange-traded securities of other
open-end investment company
securities 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 such
fund’s investments in such securities.22
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.
Availability of Information
daltland on DSKBBV9HB2PROD with NOTICES
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’’),23 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.24
22 See Securities Exchange Act Release No. 83319
(May 24, 2018) (SR–NYSEArca-2018–15) (Order
Approving a Proposed Rule Change, as Modified by
Amendment No. 1 Thereto, to Continue Listing and
Trading Shares of the PGIM Ultra Short Bond ETF
Under NYSE Arca Rule 8.600–E).
23 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.
24 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.
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17:06 Aug 01, 2018
Jkt 244001
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 Rule 144A
securities, interests in investment pools,
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 realtime 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
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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
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 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
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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.
daltland on DSKBBV9HB2PROD with NOTICES
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
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Jkt 244001
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.
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37837
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
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
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of the Shares that the NAV per Share
will be calculated daily and that the
NAV and the Disclosed Portfolio will be
made available to all market
participants at the same time. In
addition, a large amount of information
is publicly available regarding 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 nonagency, non-GSE and privately-issued
mortgage-related and other asset-backed
securities, 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, non-GSE and
privately-issued mortgage-related and
VerDate Sep<11>2014
17:06 Aug 01, 2018
Jkt 244001
other asset-backed securities 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. Because such
securities 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
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.
PO 00000
Frm 00056
Fmt 4703
Sfmt 4703
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.
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. Proceedings to Determine Whether
to Approve or Disapprove SR–
NYSEArca–2018–25 and Grounds for
Disapproval Under Consideration
The Commission is instituting
proceedings pursuant to Section
19(b)(2)(B) of the Exchange Act 25 to
determine whether the proposed rule
change, as modified by Amendment No.
1, should be approved or disapproved.
Institution of such proceedings is
appropriate at this time in view of the
legal and policy issues raised by the
proposed rule change. Institution of
proceedings does not indicate that the
Commission has reached any
conclusions with respect to any of the
issues involved. Rather, as described
25 15
E:\FR\FM\02AUN1.SGM
U.S.C. 78s(b)(2)(B).
02AUN1
Federal Register / Vol. 83, No. 149 / Thursday, August 2, 2018 / Notices
daltland on DSKBBV9HB2PROD with NOTICES
below, the Commission seeks and
encourages interested persons to
provide comments on the proposed rule
change.
Pursuant to Section 19(b)(2)(B) of the
Exchange Act,26 the Commission is
providing notice of the grounds for
disapproval under consideration. The
Commission is instituting proceedings
to allow for additional analysis of the
proposal’s consistency with Section
6(b)(5) of the Exchange Act, which
requires, among other things, that the
rules of a national securities exchange
be designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, and to protect investors and the
public interest.27 In light of the
portfolio’s potential exposure to the
permitted investments identified above
(including junior loans, ABS, MBS, and
interests in investment pools in
particular), the Commission seeks
commenters’ views on the sufficiency of
the information provided in the
proposed rule change to support a
determination that the listing and
trading of the Shares would be
consistent with Section 6(b)(5) of the
Exchange Act as modified by
Amendment No. 1. The Commission
notes that the Exchange proposes to
exempt equity interests in investment
pools from all of the requirements of
Commentary .01(a)(1) to NYSE Arca
Rule 8.600–E.In light of the portfolio’s
potential exposure to the permitted
investments identified above, the
Commission seeks commenters’ views
on the sufficiency of the information
provided in the proposed rule change to
support a determination that the listing
and trading of the Shares would be
consistent with Section 6(b)(5) of the
Exchange Act as modified by
Amendment No. 1.
IV. Procedure: Request for Written
Comments
Interested persons are invited to
submit written views, data, and
arguments concerning the foregoing,
including whether the proposed rule
change as modified by Amendment No.
1 is consistent with Section 6(b)(5) or
any other provision of the Exchange
Act, or the rules and regulations
thereunder. Although there do not
appear to be any issues relevant to
approval or disapproval that would be
facilitated by an oral presentation of
views, data, and arguments, the
Commission will consider, pursuant to
Rule 19b–4 under the Exchange Act,28
26 Id.
27 15
28 17
U.S.C. 78f(b)(5).
CFR 240.19b–4.
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17:06 Aug 01, 2018
Jkt 244001
any request for an opportunity to make
an oral presentation.29
Interested persons are invited to
submit written data, views, and
arguments regarding whether the
proposal should be approved or
disapproved by August 23, 2018. Any
person who wishes to file a rebuttal to
any other person’s submission must file
that rebuttal by September 6, 2018.
Comments may be submitted by any
of the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSEArca–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
29 Section 19(b)(2) of the Exchange Act, as
amended by the Securities Acts Amendments of
1975, Pub. L. 94–29 (June 4, 1975), grants the
Commission flexibility to determine what type of
proceeding—either oral or notice and opportunity
for written comments—is appropriate for
consideration of a particular proposal by a selfregulatory organization. See Securities Acts
Amendments of 1975, Senate Comm. on Banking,
Housing & Urban Affairs, S. Rep. No. 75, 94th
Cong., 1st Sess. 30 (1975).
PO 00000
Frm 00057
Fmt 4703
Sfmt 4703
37839
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
August 23, 2018. Rebuttal comments
should be submitted by September 6,
2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.30
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2018–16536 Filed 8–1–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83725; File No. SR–OCC–
2017–020]
Self-Regulatory Organizations; The
Options Clearing Corporation; Notice
of Filing of Amendments No. 1 and 2
to Proposed Rule Change Concerning
Enhanced and New Tools for Recovery
Scenarios
July 27, 2018.
On December 18, 2017, The Options
Clearing Corporation (‘‘OCC’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) proposed
rule change SR–OCC–2017–020
(‘‘Proposed Rule Change’’) pursuant to
Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’),1 and
Rule 19b–4 thereunder,2 concerning
enhanced and new tools for recovery
scenarios.3 The Proposed Rule Change
was published for comment in the
Federal Register on December 26,
2017.4 On March 22, 2018, the
Commission instituted proceedings
under Section 19(b)(2)(B)(i) of the Act 5
to determine whether to approve or
30 17
CFR 200.30–3(a)(57).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 On December 8, 2017, OCC also filed this
proposal as an advance notice SR–OCC–2017–809
(‘‘Advance Notice’’) with the Commission pursuant
to Section 806(e)(1) of Title VIII of the Dodd-Frank
Wall Street Reform and Consumer Protection Act,
entitled the Payment, Clearing, and Settlement
Supervision Act of 2010 (12 U.S.C. 5465(e)(1)) and
Rule 19b–4(n)(1)(i) of the Act (17 CFR 240.19b–
4(n)(1)(i)). Notice of filing of the Advance Notice
was published for comment in the Federal Register
on January 23, 2018. Securities Exchange Act
Release No. 82513 (Jan. 17, 2018), 83 FR 3244 (Jan.
23, 2018) (SR–OCC–2017–809).
4 Securities Exchange Act Release No. 82531 (Dec.
19, 2017), 82 FR 61107 (Dec. 26, 2017) (SR–OCC–
2017–020) (‘‘Initial Filing’’).
5 15 U.S.C. 78s(b)(2)(B)(i).
1 15
E:\FR\FM\02AUN1.SGM
02AUN1
]]>Agencies
[Federal Register Volume 83, Number 149 (Thursday, August 2, 2018)]
[Notices]
[Pages 37831-37839]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-16536]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-83733; File No. SR-NYSEArca-2018-25]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Amendment No. 1 and Order Instituting Proceedings To Determine
Whether To Approve or Disapprove a Proposed Rule Change as Modified by
Amendment No. 1 Thereto Regarding the Continued Listing and Trading of
Shares of the Natixis Loomis Sayles Short Duration Income ETF
July 27, 2018.
I. Introduction
On April 16, 2018, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'')
filed with the Securities and Exchange Commission (``Commission''),
pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 1934
(``Exchange Act'') \2\ and Rule 19b-4 thereunder,\3\ a proposed rule
change to continue listing and trading shares of the Natixis Loomis
Sayles Short Duration Income ETF under NYSE Arca Rule 8.600-E, Managed
Fund Shares.\4\ The proposed rule change was published for comment in
the Federal Register on May 3, 2018.\5\ On June 5, 2018, the Commission
extended the time period within which to approve the proposed rule
change, disapprove the proposed rule change, or institute proceedings
to determine whether to approve or disapprove the proposed rule change
to August 1,
[[Page 37832]]
2018.\6\ On June 6, 2018, the Exchange filed Amendment No. 1 to the
proposed rule change, which replaced and superseded the proposed rule
change as originally filed. The Commission received no comments on the
proposed rule change. The Commission is publishing this notice and
order to solicit comments on the proposed rule change, as modified by
Amendment No. 1, from interested persons and to institute proceedings
under Section 19(b)(2)(B) of the Exchange Act to determine whether to
approve or disapprove the proposed rule change as modified by Amendment
No. 1.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
\4\ Currently, the Exchange lists and trades the shares pursuant
to NYSE Arca Rule 8.600-E. As discussed further below, the Exchange
submitted this proposed rule change to permit the fund's portfolio
to deviate from two of the ``generic'' listing requirements
applicable to Managed Fund Shares.
\5\ See Securities Exchange Act Release No. 83122 (April 27,
2018), 83 FR 19578. (``Notice'').
\6\ See Securities Exchange Act Release No. 83385, 83 FR 27034
(June 11, 2018).
---------------------------------------------------------------------------
II. Self-Regulatory Organization's Statement of the Purpose of, and the
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: \7\ 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.\8\ 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.\9\
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\7\ 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.
\8\ Shares of the Fund commenced trading on the Exchange on
December 28, 2017 pursuant to Commentary .01 to NYSE Arca Rule
8.600-E.
\9\ 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), 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.\10\ Commentary .06 to Rule
8.600-E is similar to Commentary .03(a)(i) and (iii) to NYSE Arca 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 broker-dealers 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.
---------------------------------------------------------------------------
\10\ 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.
---------------------------------------------------------------------------
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,\11\ the Fund will invest at least 80%
of its net assets in ``Fixed-Income Securities'' (as described below).
---------------------------------------------------------------------------
\11\ 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'');
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
(``MBS'');
[[Page 37833]]
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; \12\
---------------------------------------------------------------------------
\12\ Money market instruments are short-term instruments
referenced in Commentary .01 (c) to NYSE Arca Rule 8.600-E.
---------------------------------------------------------------------------
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.\13\
---------------------------------------------------------------------------
\13\ For purposes of this filing, cash equivalents shall mean
the short-term instruments enumerated in Commentary .01(c) to NYSE
Arca Rule 8.600-E.
---------------------------------------------------------------------------
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 Fixed Income Securities.
The Fund may invest in exchange-traded funds (``ETFs'') \14\ and
exchange-traded notes (``ETNs''). \15\
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\14\ 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.
\15\ 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, credit default, credit default swaps index (``CDX''),
commodity, equity-linked, fixed income, credit default, credit-linked
and currency exchange swaps or an index or indexes of the foregoing.
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 Fixed Income Securities,
domestic and foreign equity and fixed income indices, CDX, U.S.
Treasury futures contracts, interest rates and currencies.
The Fund may invest in futures on Fixed Income Securities, domestic
and foreign equity and fixed income indices, interest rates and CDX.
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.
With respect to any of the Fund's investments identified above, 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 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'') to cover its obligations
under derivative instruments. 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 net asset value
(``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 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
[[Page 37834]]
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.\16\ 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.
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\16\ 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.
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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
portfolio for the Fund would not meet all of the ``generic'' listing
requirements of Commentary .01 to NYSE Arca Rule 8.600-E applicable to
the listing of Managed Fund Shares. The Fund's portfolio 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 (``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.\17\ Instead, up to 30% of the weight
of the
[[Page 37835]]
Fixed Income Securities portion of the Fund's portfolio may consist of
non-agency, non-GSE and privately-issued mortgage-related and other
asset-backed securities. The Adviser represents that permitting limited
investments in non-agency, non-GSE and privately-issued mortgage-
related and other asset-backed securities, 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, non-GSE and privately-issued mortgage-related and other asset-
backed securities 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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\17\ 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.\18\ Investments in such equity securities will not be
principal investments of the Fund.\19\ 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.\20\
Because such securities must 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).
---------------------------------------------------------------------------
\18\ 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.
\19\ 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.
\20\ 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).
---------------------------------------------------------------------------
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).\21\ 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 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.
---------------------------------------------------------------------------
\21\ 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.
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The Exchange notes that the Commission has previously approved
[[Page 37836]]
listing and trading of an issue of Managed Fund Shares that may invest
in equity securities that are non-exchange-traded securities of other
open-end investment company securities 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 such fund's investments in such
securities.\22\ 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.
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\22\ See Securities Exchange Act Release No. 83319 (May 24,
2018) (SR-NYSEArca-2018-15) (Order Approving a Proposed Rule Change,
as Modified by Amendment No. 1 Thereto, to Continue Listing and
Trading Shares of the PGIM Ultra Short Bond ETF Under NYSE Arca Rule
8.600-E).
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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''),\23\ 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.\24\
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\23\ 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.
\24\ 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.
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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 Rule 144A securities, interests in investment
pools, 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 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 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
[[Page 37837]]
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 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
[[Page 37838]]
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, non-GSE and privately-issued mortgage-related and other asset-
backed securities, 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, non-GSE and privately-issued mortgage-related
and other asset-backed securities 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. Because such
securities 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.
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. Proceedings to Determine Whether to Approve or Disapprove SR-
NYSEArca-2018-25 and Grounds for Disapproval Under Consideration
The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Exchange Act \25\ to determine whether the proposed
rule change, as modified by Amendment No. 1, should be approved or
disapproved. Institution of such proceedings is appropriate at this
time in view of the legal and policy issues raised by the proposed rule
change. Institution of proceedings does not indicate that the
Commission has reached any conclusions with respect to any of the
issues involved. Rather, as described
[[Page 37839]]
below, the Commission seeks and encourages interested persons to
provide comments on the proposed rule change.
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\25\ 15 U.S.C. 78s(b)(2)(B).
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Pursuant to Section 19(b)(2)(B) of the Exchange Act,\26\ the
Commission is providing notice of the grounds for disapproval under
consideration. The Commission is instituting proceedings to allow for
additional analysis of the proposal's consistency with Section 6(b)(5)
of the Exchange Act, which requires, among other things, that the rules
of a national securities exchange be designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, and to protect investors and the public
interest.\27\ In light of the portfolio's potential exposure to the
permitted investments identified above (including junior loans, ABS,
MBS, and interests in investment pools in particular), the Commission
seeks commenters' views on the sufficiency of the information provided
in the proposed rule change to support a determination that the listing
and trading of the Shares would be consistent with Section 6(b)(5) of
the Exchange Act as modified by Amendment No. 1. The Commission notes
that the Exchange proposes to exempt equity interests in investment
pools from all of the requirements of Commentary .01(a)(1) to NYSE Arca
Rule 8.600-E.In light of the portfolio's potential exposure to the
permitted investments identified above, the Commission seeks
commenters' views on the sufficiency of the information provided in the
proposed rule change to support a determination that the listing and
trading of the Shares would be consistent with Section 6(b)(5) of the
Exchange Act as modified by Amendment No. 1.
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\26\ Id.
\27\ 15 U.S.C. 78f(b)(5).
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IV. Procedure: Request for Written Comments
Interested persons are invited to submit written views, data, and
arguments concerning the foregoing, including whether the proposed rule
change as modified by Amendment No. 1 is consistent with Section
6(b)(5) or any other provision of the Exchange Act, or the rules and
regulations thereunder. Although there do not appear to be any issues
relevant to approval or disapproval that would be facilitated by an
oral presentation of views, data, and arguments, the Commission will
consider, pursuant to Rule 19b-4 under the Exchange Act,\28\ any
request for an opportunity to make an oral presentation.\29\
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\28\ 17 CFR 240.19b-4.
\29\ Section 19(b)(2) of the Exchange Act, as amended by the
Securities Acts Amendments of 1975, Pub. L. 94-29 (June 4, 1975),
grants the Commission flexibility to determine what type of
proceeding--either oral or notice and opportunity for written
comments--is appropriate for consideration of a particular proposal
by a self-regulatory organization. See Securities Acts Amendments of
1975, Senate Comm. on Banking, Housing & Urban Affairs, S. Rep. No.
75, 94th Cong., 1st Sess. 30 (1975).
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Interested persons are invited to submit written data, views, and
arguments regarding whether the proposal should be approved or
disapproved by August 23, 2018. Any person who wishes to file a
rebuttal to any other person's submission must file that rebuttal by
September 6, 2018.
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 August 23, 2018. Rebuttal comments should be
submitted by September 6, 2018.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\30\
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\30\ 17 CFR 200.30-3(a)(57).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2018-16536 Filed 8-1-18; 8:45 am]
BILLING CODE 8011-01-P
