Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change To Amend Commentary .01 to NYSE Arca Rule 8.600-E Relating to Generic Listing Standards for Managed Fund Shares Applicable To Holdings in Fixed Income Securities, 8138-8141 [2019-03982]
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Federal Register / Vol. 84, No. 44 / Wednesday, March 6, 2019 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–0017, OMB Control No.
3235–0017]
Submission for OMB Review;
Comment Request
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736.
Extension:
Rules 6a–1 and 6a–2, Form 1
Notice is hereby given that pursuant
to the Paperwork Reduction Act of 1995
(‘‘PRA’’) (44 U.S.C. 3501 et seq.), the
Securities and Exchange Commission
(‘‘Commission’’) has submitted to the
Office of Management and Budget
(‘‘OMB’’) a request for approval of
extension of the previously approved
collection of information provided for in
Rule 6a–1 (17 CFR 240.6a–1), Rule 6a–
2 (17 CFR 240.6a–2), and Form 1 (17
CFR 249.1) under the Securities
Exchange Act of 1934 (‘‘Exchange Act’’
or ‘‘Act’’) (15 U.S.C. 78a et seq.).
The Exchange Act sets forth a
regulatory scheme for national securities
exchanges. Rule 6a–1 under the Act
generally requires an applicant for
initial registration as a national
securities exchange to file an
application with the Commission on
Form 1. An exchange that seeks an
exemption from registration based on
limited trading volume also must apply
for such exemption on Form 1. Rule 6a–
2 under the Act requires registered and
exempt exchanges: (1) To amend the
Form 1 if there are any material changes
to the information provided in the
initial Form 1; and (2) to submit
periodic updates of certain information
provided in the initial Form 1, whether
such information has changed or not.
The information required pursuant to
Rules 6a–1 and 6a–2 is necessary to
enable the Commission to maintain
accurate files regarding the exchange
and to exercise its statutory oversight
functions. Without the information
submitted pursuant to Rule 6a–1 on
Form 1, the Commission would not be
able to determine whether the
respondent has met the criteria for
registration (or an exemption from
registration) set forth in Section 6 of the
Exchange Act. The amendments and
periodic updates of information
submitted pursuant to Rule 6a–2 are
necessary to assist the Commission in
determining whether a national
securities exchange or exempt exchange
is continuing to operate in compliance
with the Exchange Act.
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Initial filings on Form 1 by new
exchanges are made on a one-time basis.
The Commission estimates that it will
receive approximately one initial Form
1 filing per year and that each
respondent would incur an average
burden of 880 hours to file an initial
Form 1 at an average internal
compliance cost per response of
approximately $335,984. Therefore, the
Commission estimates that the annual
burden for all respondents to file the
initial Form 1 would be 880 hours (one
response/respondent × one respondent ×
880 hours/response) and an internal
compliance cost of $335,984 (one
response/respondent × one respondent ×
$335,984/response).
There currently are 21 entities
registered as national securities
exchanges. The Commission estimates
that each registered or exempt exchange
files nine amendments or periodic
updates to Form 1 per year, incurring an
average burden of 25 hours to comply
with Rule 6a–2. The SEC estimates that
the average internal compliance cost for
a national securities exchange per
response would be approximately
$8,365. The Commission estimates that
the annual burden for all respondents to
file amendments and periodic updates
to the Form 1 pursuant to Rule 6a–2 is
4,725 hours (21 respondents × 25 hours/
response × 9 responses/respondent per
year) and an internal compliance cost of
$1,580,985 (21 respondents × $8,365/
response × 9 responses/respondent per
year).
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
under the PRA unless it displays a
currently valid OMB control number.
The public may view background
documentation for this information
collection at the following website:
www.reginfo.gov. Comments should be
directed to: (i) Desk Officer for the
Securities and Exchange Commission,
Office of Information and Regulatory
Affairs, Office of Management and
Budget, Room 10102, New Executive
Office Building, Washington, DC 20503,
or by sending an email to:
Lindsay.M.Abate@omb.eop.gov; and (ii)
Charles Riddle, Acting Director/Chief
Information Officer, Securities and
Exchange Commission, c/o Candace
Kenner, 100 F Street NE, Washington,
DC 20549, or by sending an email to:
PRA_Mailbox@sec.gov. Comments must
be submitted to OMB within 30 days of
this notice.
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Dated: February 27, 2019.
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019–04007 Filed 3–5–19; 8:45 am]
BILLING CODE P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–85220; File No. SR–
NYSEArca–2019–06]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of Proposed
Rule Change To Amend Commentary
.01 to NYSE Arca Rule 8.600–E
Relating to Generic Listing Standards
for Managed Fund Shares Applicable
To Holdings in Fixed Income Securities
February 28, 2019.
Pursuant to Section 19(b)(1)1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on February
14, 2019, NYSE Arca, Inc. (the
‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Commentary .01(b)(5) to NYSE Arca
Rule 8.600–E relating to a generic listing
standards for Managed Fund Shares
applicable to holdings in fixed income
securities. The proposed change is
available on the Exchange’s website at
www.nyse.com, at the principal office of
the Exchange, and at the Commission’s
Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
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Federal Register / Vol. 84, No. 44 / Wednesday, March 6, 2019 / Notices
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
Commentary .01 to NYSE Arca Rule
8.600–E sets forth generic listing
standards for listing and trading of
Managed Fund Shares on the
Exchange.4 The Exchange proposes to
amend Commentary .01(b)(5) to Rule
8.600–E, as described below.5
Proposed Amendment to Commentary
.01(b)(5) to Rule 8.600–E
Commentary .01(b) to NYSE Arca
Rule 8.600–E sets forth generic listing
standards applicable to fixed income
securities included in the portfolio of a
series of Managed Fund Shares.6
Commentary .01(b)(5) provides that
non-agency, non- GSE and privatelyissued mortgage-related and other assetbacked securities (‘‘ABS’’ and,
collectively, ‘‘non-agency ABS’’)
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. The Exchange
proposes to amend Commentary
.01(b)(5) by deleting the words ‘‘fixed
income portion’’ to provide that such
20% limitation would apply to the
entire portfolio rather than to only the
fixed income portion of the portfolio.
Thus, Commentary .01(b)(5) would
4 A Managed Fund Share is a security that
represents an interest in an investment company
registered under the Investment Company Act of
1940 (15 U.S.C. 80a–1) (the ‘‘1940 Act’’) organized
as an open-end investment company or similar
entity that invests in a portfolio of securities
selected by its investment adviser consistent with
its investment objectives and policies. In contrast,
an open-end investment company that issues
Investment Company Units, listed and traded on
the Exchange under NYSE Arca Rule 5.2–E(j)(3),
seeks to provide investment results that correspond
generally to the price and yield performance of a
specific foreign or domestic stock index, fixed
income securities index or combination thereof.
5 The Commission approved the generic listing
standards in Commentary .01 to NYSE Arca Rule
8.600–E in Securities Exchange Act Release No.
78397 (July 22, 2016), 81 FR 49320 (July 27, 2016)
(SR–NYSEArca–2015–110) (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).
6 Commentary .01(b) provides that fixed income
securities are debt securities that are notes, bonds,
debentures or evidence of indebtedness that
include, but are not limited to, U.S. Department of
Treasury securities (‘‘Treasury Securities’’),
government-sponsored entity securities (‘‘GSE
Securities’’), municipal securities, trust preferred
securities, supranational debt and debt of a foreign
country or a subdivision thereof, investment grade
and high yield corporate debt, bank loans, mortgage
and asset backed securities, and commercial paper.
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18:35 Mar 05, 2019
Jkt 247001
provide that non-agency, non-GSE and
privately-issued mortgage-related and
other ABS components of a portfolio
shall not account, in the aggregate, for
more than 20% of the weight of the
portfolio.
The Exchange believes this
amendment is appropriate because a
fund’s investment in non-agency, nonGSE and privately-issued mortgagerelated and other ABS may provide a
fund with benefits associated with
increased diversification, as such
investments may be less correlated to
interest rates than many other fixed
income securities. The Exchange notes
that application of the 20% limitation
only to the fixed income portion of a
fund’s portfolio may impose a much
more restrictive percentage limit on
permitted holdings of non-agency ABS
for funds that have a more diversified
investment portfolio than for funds that
hold principally or exclusively fixed
income securities. For example, a fund
holding 100% of its assets in fixed
income securities can hold 20% of its
entire portfolio’s weight in non-agency
ABS. In contrast, a fund holding 25% of
its assets in fixed income securities,
25% in U.S Component Stocks, and
50% in cash and cash equivalents is
limited to a 5% (25%*20%=5%)
allocation to non-agency ABS. The
Exchange, therefore, believes
application of the 20% limitation to a
fund’s entire portfolio would be more
equitable for Managed Fund Shares
issuers with different investment
objectives and holdings.
In addition, a fund’s investment in
non-agency, non-GSE and privatelyissued mortgage-related and other ABS
will be subject to a fund’s liquidity risk
management program as approved by a
fund’s board of directors.7 The liquidity
procedures generally include public
disclosure by funds of their liquidity
and redemption practices. A fund’s
holdings in non-agency ABS would be
encompassed within a fund’s liquidity
risk management program. To the extent
a fund’s procedures facilitate its ability
to meet its redemption obligations, they
may reduce potential manipulation of a
fund’s shares by promoting an efficient
redemption mechanism for exchange7 Rule 22e–4(b) under the 1940 Act requires,
among other things, that a fund ‘‘adopt and
implement a written liquidity risk management
program that is reasonably designed to assess and
manage its liquidity risk.’’ The rule is ‘‘designed to
promote effective liquidity risk management
throughout the open-end investment company
industry, thereby reducing the risk that funds will
be unable to meet their redemption obligations and
mitigating dilution of the interests of fund
shareholders.’’ See Release Nos. 33–10233; IC–
32315; File No. S7–16–15 (October 13, 2016).
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8139
traded funds, including funds that hold
non-agency ABS.
The Exchange notes that the
Commission has previously approved
the listing of actively managed
exchange-traded funds that can invest
20% of their total assets in non-U.S.
Government, non-agency, non-GSE and
other privately issued ABS and
mortgage-backed securities (‘‘MBS’’).8 In
addition, the Commission has
previously approved listing and trading
of shares of an issue of Managed Fund
Shares where such fund’s investments
in non-U.S. Government, non-agency,
non-GSE and other privately issued ABS
will, in the aggregate, not exceed 20%
of the total assets of the fund, rather
than the weight of the fixed income
portion of the fund’s portfolio.9
Therefore, the Exchange believes it is
appropriate to apply the 20% limitation
to a fund’s investment in non-agency,
non-GSE and privately-issued mortgagerelated and other ABS components of a
portfolio in Commentary .01(b)(5) to a
fund’s total assets.
The Exchange believes the proposed
amendments would provide issuers of
Managed Fund Shares with additional
investment choices for fund portfolios
for issues permitted to list and trade on
the Exchange pursuant to the Rule 19b–
4(e), which would enhance competition
among market participants, to the
benefit of investors and the marketplace.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act,10 in general, and
furthers the objectives of Sections
6(b)(5) of the Act,11 in particular,
8 See, e.g., Securities Exchange Act Release Nos.
80946 (June 15, 2017) 82 FR 28126 (June 20, 2017)
(SR–NASDAQ–2017–039) (permitting the
Guggenheim Limited Duration ETF to invest up to
20% of its total assets in privately-issued, nonagency and non-GSE ABS and MBS); 76412
(November 10, 2015), 80 FR 71880 (November 17,
2015) (SR–NYSEArca–2015–111) (permitting the
RiverFront Strategic Income Fund to invest up to
20% of its assets in privately-issued, non-agency
and non-GSE ABS and MBS); 74814 (April 27,
2015), 80 FR 24986 (May 1, 2015) (SR–NYSEArca–
2014–107) (permitting the Guggenheim Enhanced
Short Duration ETF to invest up to 20% of its assets
in privately-issued, non-agency and non-GSE ABS
and MBS); 74109 (January 21, 2015), 80 FR 4327
(January 27, 2015) (SR–NYSEArca–2014–134)
(permitting the IQ Wilshire Alternative Strategies
ETF to invest up to 20% of its total assets in MBS
and other ABS, without any limit on the type of
such MBS and ABS).
9 See Securities Exchange Act Release No. 83319
(May 24, 2018), 83 FR 25097 (May 31, 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).
10 15 U.S.C. 78f(b).
11 15 U.S.C. 78f(b)(5).
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Federal Register / Vol. 84, No. 44 / Wednesday, March 6, 2019 / Notices
because it is designed to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, to foster cooperation
and coordination with persons engaged
in regulating, clearing, settling,
processing information with respect to,
and facilitating transactions in
securities, to remove impediments to,
and perfect the mechanisms of, a free
and open market and a national market
system and, in general, to protect
investors and the public interest and
because it is not designed to permit
unfair discrimination between
customers, issuers, brokers, or dealers.
The Exchange has in place
surveillance procedures that are
adequate to properly monitor trading in
series of Managed Fund Shares in all
trading sessions and to deter and detect
violations of Exchange rules and
applicable federal securities laws. The
Exchange notes that the Exchange or
Financial Industry Regulatory Authority
(‘‘FINRA’’), on behalf of the Exchange,
or both, would communicate as needed
regarding trading in Managed Fund
Shares with other markets and other
entities that are members of the
Intermarket Surveillance Group, and the
Exchange or FINRA, on behalf of the
Exchange, or both, could obtain trading
information regarding trading in
Managed Fund Shares from such
markets and other entities. In addition,
the Exchange could obtain information
regarding trading in Managed Fund
Shares from markets and other entities
that are members of ISG or with which
the Exchange has in place a
comprehensive surveillance sharing
agreement.
With respect to the proposed
amendment to Commentary .01(b)(5),
the Exchange believes this amendment
is appropriate because a fund’s
investment in non-agency, non-GSE and
privately-issued mortgage-related and
other ABS may provide a fund with
benefits associated with increased
diversification, as such investments may
be less correlated to interest rates than
many other fixed income securities. As
noted above, application of the 20%
limitation to only the fixed income
portion of a fund’s portfolio may impose
a much lower percentage limit on
permitted holdings of non-agency ABS
for funds that have a more diversified
investment portfolio than for funds that
hold principally or exclusively fixed
income securities. The Exchange,
therefore, believes application of the
20% limitation to a fund’s entire
portfolio would be more equitable for
Managed Fund Shares issuers with
different investment objectives and
holdings.
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18:35 Mar 05, 2019
Jkt 247001
In addition, a fund’s investment in
non-agency, non-GSE and privatelyissued mortgage-related and other ABS
will be subject to a fund’s risk
management program as approved by a
fund’s board of directors, as required by
Rule 22e–4 under the 1940 Act, which
requires investment companies,
including in-kind exchange-traded
funds, to adopt a liquidity risk
management program.12 The liquidity
procedures generally include public
disclosure by funds of their liquidity
and redemption practices. A fund’s
holdings in non-GSE and privatelyissued mortgage-related and other ABS
would be encompassed within a fund’s
liquidity risk management program. To
the extent a fund’s procedures facilitate
its ability to meet its redemption
obligations, they may reduce potential
manipulation of a fund’s shares by
promoting an efficient redemption
mechanism for exchange-traded funds,
including those that hold non-agency
ABS.
The Exchange notes that the
Commission has previously approved
the listing of actively managed
exchange-traded funds that can invest
20% of their total assets in non-U.S.
Government, non-agency, non-GSE and
other privately issued ABS and MBS.13
In addition, the Commission has
previously approved listing and trading
of shares of an issue of Managed Fund
Shares where such fund’s investments
in non-U.S. Government, non-agency,
non-GSE and other privately issued ABS
will, in the aggregate, not exceed more
than 20% of the total assets of the fund,
rather than the weight of the fixed
income portion of the fund’s portfolio.14
Therefore, the Exchange believes it is
appropriate to apply the 20% limitation
to a fund’s investment in non-agency,
non-GSE and privately-issued mortgagerelated and other ABS components of a
portfolio in Commentary .01(b)(5) to a
fund’s total assets.
The proposed rule change is designed
to perfect the mechanism of a free and
open market and, in general, to protect
investors and the public interest in that
it will facilitate the listing and trading
of additional types of Managed Fund
Shares that will enhance competition
among market participants, to the
benefit of investors and the marketplace.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
In accordance with Section 6(b)(8) of
the Act,15 the Exchange believes that the
12 See
note 7, supra.
note 8, supra.
14 See note 9, supra.
15 15 U.S.C. 78f(b)(8).
13 See
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proposed rule change would not impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
proposed rule change would permit
Exchange listing and trading under Rule
19b–4(e) of additional types of Managed
Fund Shares, which would enhance
competition among market participants,
to the benefit of investors and the
marketplace.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period up
to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will:
(A) by order approve or disapprove
the proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSEArca–2019–06 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-2019–06. 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/
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Federal Register / Vol. 84, No. 44 / Wednesday, March 6, 2019 / Notices
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–2019–06 and
should be submitted on or before March
27, 2019.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.16
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019–03982 Filed 3–5–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–85223; File No. SR–MSRB–
2019–05]
Self-Regulatory Organizations;
Municipal Securities Rulemaking
Board; Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change To Amend Rule G–21, on
Advertising by Brokers, Dealers and
Municipal Securities Dealers, Rule G–
40, on Advertising by Municipal
Advisors, and Rule G–8, on Books and
Records
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that on February
26, 2019 the Municipal Securities
Rulemaking Board (‘‘MSRB’’) filed with
the Securities and Exchange
16 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
18:35 Mar 05, 2019
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The MSRB filed with the Commission
a proposed rule change (the ‘‘proposed
rule change’’) to amend MSRB Rule G–
21, on advertising by brokers, dealers
and municipal securities dealers,
(‘‘proposed amended Rule G–21’’) and
MSRB Rule G–40, on advertising by
municipal advisors, (‘‘proposed
amended Rule G–40’’) to exempt
interactive content that is an
advertisement and that would be posted
or disseminated on an interactive
electronic forum from the requirement
that a municipal securities principal, a
general securities principal, or a
municipal advisor principal approve
that advertisement prior to first use. The
proposed rule change would also make
a technical amendment to Rule G–8, on
books and records to be made by
brokers, dealers, and municipal
securities dealers and municipal
advisors (‘‘proposed amended Rule G–
8’’). The proposed rule change has been
filed for immediate effectiveness under
Section 19(b)(3)(A) of the Exchange
Act 3 and Rule 19b–4(f)(6) thereunder.4
The effective date of the amendments to
Rule G–21 and Rule G–40 will be
announced in an MSRB Notice to be
published on the MSRB’s website
following the effectiveness of this
proposed rule change. To provide
brokers, dealers, municipal securities
dealers and municipal advisors
(collectively, ‘‘regulated entities’’) with
sufficient time to develop supervisory
and compliance policies and
procedures, the effective date to be
announced will be no less than 30 days
and no more than 180 days following
publication of the MSRB Notice.5
However, proposed amended Rule G–8
3 15
February 28, 2019.
VerDate Sep<11>2014
Commission (‘‘SEC’’ or ‘‘Commission’’)
the proposed rule change as described
in Items I, II, and III below, which Items
have been prepared by the MSRB. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
Jkt 247001
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
5 See Exchange Act Release No. 83177 (May 7,
2018), 83 FR 21794 (May 10, 2018) (File No. SR–
MSRB–2018–01). The amendments to Rule G–21
and new Rule G–40 were to become effective on
February 7, 2019. However, to provide the industry
with sufficient time to establish supervisory and
compliance policies and procedures, the MSRB
filed with the SEC for immediate effectiveness an
extension of that effective date. The new effective
date of the amendments to Rule G–21 and new Rule
G–40 will be announced in an MSRB Notice to be
published on the MSRB’s website. See File No. SR–
MSRB–2019–01.
4 17
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8141
will become operative 30 days after the
date of filing.
The text of the proposed rule change
is available on the MSRB’s website at
www.msrb.org/Rules-andInterpretations/SEC-Filings/2019Filings.aspx, at the MSRB’s principal
office, and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
MSRB included statements concerning
the purpose of and basis for the
proposed rule change and discussed any
comments it received on the proposed
rule change. The text of these statements
may be examined at the places specified
in Item IV below. The MSRB has
prepared summaries, set forth in
Sections A, B, and C below, of the most
significant aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The proposed rule change would
amend Rule G–21 and Rule G–40 (the
‘‘advertising rules’’) to exempt
interactive content that is an
advertisement and that would be posted
or disseminated on an interactive
electronic forum from the requirement
that a municipal securities principal, a
general securities principal, or a
municipal advisor principal approve
that advertisement prior to first use. The
proposed rule change also would make
a technical amendment to Rule G–8.
Background
Interactive and Static Content
During the development of the recent
amendments to Rule G–21 and new
Rule G–40, the MSRB received requests
for guidance regarding the applicability
of those rules to the use of social media
by brokers, dealers, and municipal
securities dealers (collectively,
‘‘dealers’’) and municipal advisors in
connection with their municipal
securities activities and municipal
advisory activities. The MSRB
committed to providing that guidance 6
before the effective date of the
6 Letter from Pamela K. Ellis, Associate General
Counsel, Municipal Securities Rulemaking Board,
dated April 30, 2018, available at https://msrb.org/
∼/media/Files/SEC-Filings/2018/MSRB-201801%20MSRB%20Letter%20to%20SEC.ashx?.
E:\FR\FM\06MRN1.SGM
06MRN1
]]>Agencies
[Federal Register Volume 84, Number 44 (Wednesday, March 6, 2019)]
[Notices]
[Pages 8138-8141]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-03982]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85220; File No. SR-NYSEArca-2019-06]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change To Amend Commentary .01 to NYSE Arca Rule
8.600-E Relating to Generic Listing Standards for Managed Fund Shares
Applicable To Holdings in Fixed Income Securities
February 28, 2019.
Pursuant to Section 19(b)(1)\1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on February 14, 2019, NYSE Arca, Inc. (the ``Exchange'' or
``NYSE Arca'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Commentary .01(b)(5) to NYSE Arca
Rule 8.600-E relating to a generic listing standards for Managed Fund
Shares applicable to holdings in fixed income securities. The proposed
change is available on the Exchange's website at www.nyse.com, at the
principal office of the Exchange, and at the Commission's Public
Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below,
[[Page 8139]]
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
Commentary .01 to NYSE Arca Rule 8.600-E sets forth generic listing
standards for listing and trading of Managed Fund Shares on the
Exchange.\4\ The Exchange proposes to amend Commentary .01(b)(5) to
Rule 8.600-E, as described below.\5\
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\4\ A Managed Fund Share is a security that represents an
interest in an investment company registered under the Investment
Company Act of 1940 (15 U.S.C. 80a-1) (the ``1940 Act'') organized
as an open-end investment company or similar entity that invests in
a portfolio of securities selected by its investment adviser
consistent with its investment objectives and policies. In contrast,
an open-end investment company that issues Investment Company Units,
listed and traded on the Exchange under NYSE Arca Rule 5.2-E(j)(3),
seeks to provide investment results that correspond generally to the
price and yield performance of a specific foreign or domestic stock
index, fixed income securities index or combination thereof.
\5\ The Commission approved the generic listing standards in
Commentary .01 to NYSE Arca Rule 8.600-E in Securities Exchange Act
Release No. 78397 (July 22, 2016), 81 FR 49320 (July 27, 2016) (SR-
NYSEArca-2015-110) (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).
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Proposed Amendment to Commentary .01(b)(5) to Rule 8.600-E
Commentary .01(b) to NYSE Arca Rule 8.600-E sets forth generic
listing standards applicable to fixed income securities included in the
portfolio of a series of Managed Fund Shares.\6\ Commentary .01(b)(5)
provides that non-agency, non- GSE and privately-issued mortgage-
related and other asset-backed securities (``ABS'' and, collectively,
``non-agency ABS'') 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. The Exchange proposes to amend Commentary .01(b)(5)
by deleting the words ``fixed income portion'' to provide that such 20%
limitation would apply to the entire portfolio rather than to only the
fixed income portion of the portfolio. Thus, Commentary .01(b)(5) would
provide that non-agency, non-GSE and privately-issued mortgage-related
and other ABS components of a portfolio shall not account, in the
aggregate, for more than 20% of the weight of the portfolio.
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\6\ Commentary .01(b) provides that fixed income securities are
debt securities that are notes, bonds, debentures or evidence of
indebtedness that include, but are not limited to, U.S. Department
of Treasury securities (``Treasury Securities''), government-
sponsored entity securities (``GSE Securities''), municipal
securities, trust preferred securities, supranational debt and debt
of a foreign country or a subdivision thereof, investment grade and
high yield corporate debt, bank loans, mortgage and asset backed
securities, and commercial paper.
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The Exchange believes this amendment is appropriate because a
fund's investment in non-agency, non-GSE and privately-issued mortgage-
related and other ABS may provide a fund with benefits associated with
increased diversification, as such investments may be less correlated
to interest rates than many other fixed income securities. The Exchange
notes that application of the 20% limitation only to the fixed income
portion of a fund's portfolio may impose a much more restrictive
percentage limit on permitted holdings of non-agency ABS for funds that
have a more diversified investment portfolio than for funds that hold
principally or exclusively fixed income securities. For example, a fund
holding 100% of its assets in fixed income securities can hold 20% of
its entire portfolio's weight in non-agency ABS. In contrast, a fund
holding 25% of its assets in fixed income securities, 25% in U.S
Component Stocks, and 50% in cash and cash equivalents is limited to a
5% (25%*20%=5%) allocation to non-agency ABS. The Exchange, therefore,
believes application of the 20% limitation to a fund's entire portfolio
would be more equitable for Managed Fund Shares issuers with different
investment objectives and holdings.
In addition, a fund's investment in non-agency, non-GSE and
privately-issued mortgage-related and other ABS will be subject to a
fund's liquidity risk management program as approved by a fund's board
of directors.\7\ The liquidity procedures generally include public
disclosure by funds of their liquidity and redemption practices. A
fund's holdings in non-agency ABS would be encompassed within a fund's
liquidity risk management program. To the extent a fund's procedures
facilitate its ability to meet its redemption obligations, they may
reduce potential manipulation of a fund's shares by promoting an
efficient redemption mechanism for exchange-traded funds, including
funds that hold non-agency ABS.
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\7\ Rule 22e-4(b) under the 1940 Act requires, among other
things, that a fund ``adopt and implement a written liquidity risk
management program that is reasonably designed to assess and manage
its liquidity risk.'' The rule is ``designed to promote effective
liquidity risk management throughout the open-end investment company
industry, thereby reducing the risk that funds will be unable to
meet their redemption obligations and mitigating dilution of the
interests of fund shareholders.'' See Release Nos. 33-10233; IC-
32315; File No. S7-16-15 (October 13, 2016).
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The Exchange notes that the Commission has previously approved the
listing of actively managed exchange-traded funds that can invest 20%
of their total assets in non-U.S. Government, non-agency, non-GSE and
other privately issued ABS and mortgage-backed securities (``MBS'').\8\
In addition, the Commission has previously approved listing and trading
of shares of an issue of Managed Fund Shares where such fund's
investments in non-U.S. Government, non-agency, non-GSE and other
privately issued ABS will, in the aggregate, not exceed 20% of the
total assets of the fund, rather than the weight of the fixed income
portion of the fund's portfolio.\9\ Therefore, the Exchange believes it
is appropriate to apply the 20% limitation to a fund's investment in
non-agency, non-GSE and privately-issued mortgage-related and other ABS
components of a portfolio in Commentary .01(b)(5) to a fund's total
assets.
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\8\ See, e.g., Securities Exchange Act Release Nos. 80946 (June
15, 2017) 82 FR 28126 (June 20, 2017) (SR-NASDAQ-2017-039)
(permitting the Guggenheim Limited Duration ETF to invest up to 20%
of its total assets in privately-issued, non-agency and non-GSE ABS
and MBS); 76412 (November 10, 2015), 80 FR 71880 (November 17, 2015)
(SR-NYSEArca-2015-111) (permitting the RiverFront Strategic Income
Fund to invest up to 20% of its assets in privately-issued, non-
agency and non-GSE ABS and MBS); 74814 (April 27, 2015), 80 FR 24986
(May 1, 2015) (SR-NYSEArca-2014-107) (permitting the Guggenheim
Enhanced Short Duration ETF to invest up to 20% of its assets in
privately-issued, non-agency and non-GSE ABS and MBS); 74109
(January 21, 2015), 80 FR 4327 (January 27, 2015) (SR-NYSEArca-2014-
134) (permitting the IQ Wilshire Alternative Strategies ETF to
invest up to 20% of its total assets in MBS and other ABS, without
any limit on the type of such MBS and ABS).
\9\ See Securities Exchange Act Release No. 83319 (May 24,
2018), 83 FR 25097 (May 31, 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 believes the proposed amendments would provide issuers
of Managed Fund Shares with additional investment choices for fund
portfolios for issues permitted to list and trade on the Exchange
pursuant to the Rule 19b-4(e), which would enhance competition among
market participants, to the benefit of investors and the marketplace.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\10\ in general, and furthers the
objectives of Sections 6(b)(5) of the Act,\11\ in particular,
[[Page 8140]]
because it is designed to prevent fraudulent and manipulative acts and
practices, to promote just and equitable principles of trade, to foster
cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, to remove impediments to, and
perfect the mechanisms of, a free and open market and a national market
system and, in general, to protect investors and the public interest
and because it is not designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
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The Exchange has in place surveillance procedures that are adequate
to properly monitor trading in series of Managed Fund Shares in all
trading sessions and to deter and detect violations of Exchange rules
and applicable federal securities laws. The Exchange notes that the
Exchange or Financial Industry Regulatory Authority (``FINRA''), on
behalf of the Exchange, or both, would communicate as needed regarding
trading in Managed Fund Shares with other markets and other entities
that are members of the Intermarket Surveillance Group, and the
Exchange or FINRA, on behalf of the Exchange, or both, could obtain
trading information regarding trading in Managed Fund Shares from such
markets and other entities. In addition, the Exchange could obtain
information regarding trading in Managed Fund Shares from markets and
other entities that are members of ISG or with which the Exchange has
in place a comprehensive surveillance sharing agreement.
With respect to the proposed amendment to Commentary .01(b)(5), the
Exchange believes this amendment is appropriate because a fund's
investment in non-agency, non-GSE and privately-issued mortgage-related
and other ABS may provide a fund with benefits associated with
increased diversification, as such investments may be less correlated
to interest rates than many other fixed income securities. As noted
above, application of the 20% limitation to only the fixed income
portion of a fund's portfolio may impose a much lower percentage limit
on permitted holdings of non-agency ABS for funds that have a more
diversified investment portfolio than for funds that hold principally
or exclusively fixed income securities. The Exchange, therefore,
believes application of the 20% limitation to a fund's entire portfolio
would be more equitable for Managed Fund Shares issuers with different
investment objectives and holdings.
In addition, a fund's investment in non-agency, non-GSE and
privately-issued mortgage-related and other ABS will be subject to a
fund's risk management program as approved by a fund's board of
directors, as required by Rule 22e-4 under the 1940 Act, which requires
investment companies, including in-kind exchange-traded funds, to adopt
a liquidity risk management program.\12\ The liquidity procedures
generally include public disclosure by funds of their liquidity and
redemption practices. A fund's holdings in non-GSE and privately-issued
mortgage-related and other ABS would be encompassed within a fund's
liquidity risk management program. To the extent a fund's procedures
facilitate its ability to meet its redemption obligations, they may
reduce potential manipulation of a fund's shares by promoting an
efficient redemption mechanism for exchange-traded funds, including
those that hold non-agency ABS.
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\12\ See note 7, supra.
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The Exchange notes that the Commission has previously approved the
listing of actively managed exchange-traded funds that can invest 20%
of their total assets in non-U.S. Government, non-agency, non-GSE and
other privately issued ABS and MBS.\13\ In addition, the Commission has
previously approved listing and trading of shares of an issue of
Managed Fund Shares where such fund's investments in non-U.S.
Government, non-agency, non-GSE and other privately issued ABS will, in
the aggregate, not exceed more than 20% of the total assets of the
fund, rather than the weight of the fixed income portion of the fund's
portfolio.\14\ Therefore, the Exchange believes it is appropriate to
apply the 20% limitation to a fund's investment in non-agency, non-GSE
and privately-issued mortgage-related and other ABS components of a
portfolio in Commentary .01(b)(5) to a fund's total assets.
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\13\ See note 8, supra.
\14\ See note 9, supra.
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The proposed rule change is designed to perfect the mechanism of a
free and open market and, in general, to protect investors and the
public interest in that it will facilitate the listing and trading of
additional types of Managed Fund Shares that will enhance competition
among market participants, to the benefit of investors and the
marketplace.
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act,\15\ the Exchange
believes that the proposed rule change would not impose any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. The proposed rule change would permit Exchange
listing and trading under Rule 19b-4(e) of additional types of Managed
Fund Shares, which would enhance competition among market participants,
to the benefit of investors and the marketplace.
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\15\ 15 U.S.C. 78f(b)(8).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) by order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-NYSEArca-2019-06 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-2019-06. 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/
[[Page 8141]]
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-2019-06 and should
be submitted on or before March 27, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-03982 Filed 3-5-19; 8:45 am]
BILLING CODE 8011-01-P
