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, To List and Trade Shares of the SPDR SSGA Responsible Reserves ESG ETF Under NYSE Arca Rule 8.600-E, 24050-24057 [2020-09128]

Download as PDF 24050 Federal Register / Vol. 85, No. 84 / Thursday, April 30, 2020 / Notices SECURITIES AND EXCHANGE COMMISSION [Release No. 34–88738; File No. SR– NYSEArca–2020–07] 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, To List and Trade Shares of the SPDR SSGA Responsible Reserves ESG ETF Under NYSE Arca Rule 8.600–E April 24, 2020. On January 14, 2020, NYSE Arca, Inc. (‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’ or ‘‘Exchange Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to list and trade shares (‘‘Shares’’) of the SPDR SSGA Responsible Reserves ESG ETF (‘‘Fund’’), under NYSE Arca Rule 8.600–E (Managed Fund Shares). The proposed rule change was published for comment in the Federal Register on January 30, 2020.3 On March 12, 2020, pursuant to Section 19(b)(2) of the Act,4 the Commission designated a longer period within which to approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether to disapprove the proposed rule change.5 On April 22, 2020, the Exchange filed Amendment No. 1 to the proposed rule change, which superseded the proposed rule change as originally filed.6 The Commission has received no comments on the proposed rule change.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 pursuant to Section 19(b)(2)(B) of the Act 7 to determine whether to approve or disapprove the proposed rule change, as modified by Amendment No. 1. 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 88031 (January 24, 2020), 85 FR 5493 (‘‘Notice’’). 4 15 U.S.C. 78s(b)(2). 5 See Securities Exchange Act Release No. 88364, 85 FR 15550 (March 18, 2020). The Commission designated April 29, 2020, as the date by which the Commission shall approve or disapprove, or institute proceedings to determine whether to disapprove, the proposed rule change. 6 Amendment No. 1 is available on the Commission’s website at https://www.sec.gov/rules/ sro/nysearca.htm. 7 15 U.S.C. 78s(b)(2)(B). jbell on DSKJLSW7X2PROD with NOTICES 2 17 VerDate Sep<11>2014 18:56 Apr 29, 2020 Jkt 250001 I. The Exchange’s Description of the Proposed Rule Change, as Modified by Amendment No. 1 The Exchange proposes to list and trade shares of the SPDR SSGA Responsible Reserves ESG ETF (the ‘‘Fund’’), under NYSE Arca Rule 8.600– E (‘‘Managed Fund Shares’’).This Amendment 1 to SR–NYSEArca–2020– 07 replaces SR–NYSEArca–2020–07 as originally filed and supersedes such filing in its entirety. The proposed change is available on the Exchange’s website at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to list and trade shares (‘‘Shares’’) of the SPDR SSGA Responsible Reserves ESG ETF under NYSE Arca Rule 8.600–E (the ‘‘Fund’’), a series of the SSGA Active Trust (‘‘Trust’’) 8, under NYSE Arca Rule 8.600–E, which governs the listing and trading of Managed Fund Shares 9 on the Exchange. 8 The Trust is registered under the 1940 Act. On December 20, 2019, the Trust filed with the Commission an amendment to its registration statement on Form N–1A under the Securities Act of 1933 (15 U.S.C. 77a) (‘‘Securities Act’’) and the 1940 Act relating to the Fund (File Nos. 333– 173276 and 811–22542) (the ‘‘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 under the 1940 Act to the Trust. See Investment Company Act Release No. 29524, December 13, 2010) (File No. 812–13487) (‘‘Exemptive Order’’). Investments made by the Fund will comply with the conditions set forth in the Exemptive Order. 9 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 PO 00000 Frm 00109 Fmt 4703 Sfmt 4703 SSGA Funds Management, Inc. (‘‘Adviser’’) will be the investment adviser to the Fund. The Adviser is a wholly-owned subsidiary of State Street Global Advisors, Inc. (‘‘SSGA’’), which itself is a wholly-owned subsidiary of State Street Corporation. State Street Global Advisors Funds Distributors, LLC (‘‘Distributor’’) will be the distributor of the Fund’s Shares. State Street Bank and Trust Company will be the custodian (‘‘Custodian’’) and transfer agent for the Fund. Commentary .06 to Rule 8.600–E provides that, if the investment adviser to the investment company issuing Managed Fund Shares is affiliated with a broker-dealer, such investment adviser shall erect and maintain 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.10 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. The Adviser is not registered as a broker-dealer but is affiliated with a broker-dealer and has implemented and will maintain a fire wall with respect to 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. 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 its related personnel are subject to the provisions of Rule 204A–1 under the Advisers Act relating to codes of ethics. This Rule requires investment advisers to adopt a code of ethics that reflects the fiduciary nature of the relationship to clients as well as compliance with other applicable securities laws. Accordingly, procedures designed to prevent the communication and misuse of non-public information by an investment adviser must be consistent with Rule 204A–1 under the Advisers Act. In addition, Rule 206(4)–7 under the Advisers Act makes it unlawful for an investment adviser to provide investment advice to clients unless such investment adviser has (i) adopted and implemented written policies and procedures reasonably designed to prevent violation, by the investment adviser and its supervised persons, of the Advisers Act and the Commission rules adopted thereunder; (ii) implemented, at a minimum, an annual review regarding the adequacy of the policies and procedures established pursuant to subparagraph (i) above and the effectiveness of their implementation; and (iii) designated an individual (who is a supervised person) responsible for administering the policies and procedures adopted under subparagraph (i) above. E:\FR\FM\30APN1.SGM 30APN1 Federal Register / Vol. 85, No. 84 / Thursday, April 30, 2020 / Notices such broker-dealer affiliate regarding access to information concerning the composition and/or changes to the portfolio. In the event (a) the Adviser becomes registered as a broker-dealer or newly affiliated with one or more broker-dealers, or (b) any new adviser or sub-adviser is a registered broker-dealer or becomes affiliated with a brokerdealer, it will implement and maintain a fire wall with respect to its relevant personnel or its 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. jbell on DSKJLSW7X2PROD with NOTICES SPDR SSGA Responsible Reserves ESG ETF According to the Registration Statement, the investment objective of the Fund will be to seek to maximize current income while giving consideration to environmental, social and governance (‘‘ESG’) criteria, consistent with the preservation of capital and liquidity by investing in a portfolio of high-quality, short-term debt obligations. The Fund will follow a disciplined investment process in which the Adviser bases its decisions on the relative attractiveness of different shortterm debt instruments (‘‘Short-Term Fixed Income Securities’’) while considering ESG criteria at the time of purchase. Under normal market conditions,11 the Fund will invest at least 80% of its net assets in Short-Term Fixed Income Securities (as described below), cash and cash equivalents 12 to maintain a maximum dollar-weighted average maturity of sixty days or less and dollarweighted average life of 120 days or less. Short-Term Fixed Income Securities in which the Fund will invest will have remaining maturities of 397 calendar days or less. The Adviser intends to consider ESG criteria at the time of purchase by using ESG-related metrics for each Fund investment. The potential investment universe will first be screened to remove issuers involved in, and/or which derive significant revenue from, certain practices, industries or product lines, including: Extreme event controversies, controversial weapons, civilian firearms, thermal coal extraction, tobacco, and UN global compact 11 The term ‘‘normal market conditions’’ is defined in NYSE Arca Rule 8.600–E(c)(5). 12 The term ‘‘cash equivalents’’ is defined in Commentary .01(c) to NYSE Arca Rule 8.600–E. VerDate Sep<11>2014 18:56 Apr 29, 2020 Jkt 250001 violations. While issuers in the financial services sector are not included in the initial screening process, the Adviser will consider scoring criteria to assign an ESG rating to issuers in the financial services sector. Principal Investments According to the Registration Statement, the Fund will attempt to meet its investment objective by investing in a broad range of Short-Term Fixed Income Securities, as described below. The Fund may invest in the following Short-Term Fixed Income Securities: • Short-term obligations of the U.S. Government, its agencies, instrumentalities, authorities or political subdivisions (other than cash equivalents); 13 • mortgage pass-through securities; 14 • corporate bonds, floating rate bonds or variable rate bonds (including ‘‘inverse floaters’’); • bank obligations, including negotiable certificates of deposit, time deposits and bankers’ acceptances 15 (other than cash equivalents); • zero coupon securities; • Eurodollar Certificates of Deposit (‘‘ECDs’’), Eurodollar Time Deposits (‘‘ETDs’’) and Yankee Certificates of Deposit (‘‘YCDs’’); 16 • inflation-protected public obligations (‘‘TIPS)’’ of the U.S. Treasury, as well as TIPS of major governments, excluding the United States; • repurchase and reverse repurchase agreements (other than repurchase and reverse repurchase agreements that are cash equivalents); • sovereign debt obligations issued or guaranteed by foreign governments or their agencies; • commercial paper (other than cash equivalents); • private placements, restricted securities and Rule 144A securities. The Fund may hold cash and cash equivalents. Other Investments While the Fund, under normal market conditions, will invest at least 80% of 13 The term ‘‘cash equivalents’’ is defined in Commentary .01(c) to NYSE Arca Rule 8.600–E. 14 The Fund will seek to obtain exposure to U.S. agency mortgage pass-through securities primarily through the use of ‘‘to-be-announced’’ or ‘‘TBA transactions.’’ 15 Under normal market conditions, the Fund intends to invest more than 25% of its total assets in bank obligations. 16 ECDs and ETDs are U.S. dollar denominated certificates of deposit and time deposits, respectively, issued by non-U.S. branches of domestic banks and non-U.S. banks. YCDs are U.S. dollar denominated certificates of deposit issued by U.S. branches of non-U.S. banks. PO 00000 Frm 00110 Fmt 4703 Sfmt 4703 24051 the Fund’s net assets in the securities described above in ‘‘Principal Investments,’’ the Fund may invest its remaining assets in the securities described below. The Fund may invest in exchange traded funds (‘‘ETFs’’).17 The Fund may invest in the securities of non-exchange-traded investment company securities, subject to applicable limitations under Section 12(d)(1) of the 1940 Act.18 The Fund will not invest in securities or other financial instruments that have not been described in this proposed rule change. Creation and Redemption of Creation Units The Fund will issue and redeem its Shares on a continuous basis, at net asset value (‘‘NAV’’), only in a large specified number of Shares (a ‘‘Creation Unit’’). Creation Unit sizes are 50,000 Shares per Creation Unit. The Creation Unit size for the Fund may change. The Trust will issue and sell Shares of the Fund only in Creation Units on a continuous basis through the Distributor at their NAV per Share next determined after receipt of an order, on any Business Day (as defined below), in proper form pursuant to the terms of the Authorized Participant Agreement (‘‘Participant Agreement’’). A ‘‘Business Day’’ with respect to the Fund is, generally, any day on which the NYSE is open for business. The consideration for purchase of a Creation Unit of the Fund generally will consist of either (i) the in-kind deposit of a designated portfolio of securities (the ‘‘Deposit Securities’’) per each Creation Unit and the ‘‘Cash Component’’ (defined below), computed as described below or (ii) the cash value of the Deposit Securities (‘‘Deposit Cash’’) and Cash Component, computed as described below. Together, the Deposit Securities or Deposit Cash, as applicable, and the Cash Component constitute the ‘‘Fund Deposit,’’ which represents the minimum initial and subsequent investment amount for a Creation Unit of the Fund. The ‘‘Cash Component’’, is an amount equal to the difference 17 For purposes of this filing, ‘‘ETFs’’ are 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. The Fund will not invest in inverse or leveraged (e.g., 2X, -2X, 3X or -3X) ETFs. 18 Investments in other non-exchange-traded open-end management investment company securities will not exceed 20% of the total assets of the Fund. E:\FR\FM\30APN1.SGM 30APN1 24052 Federal Register / Vol. 85, No. 84 / Thursday, April 30, 2020 / Notices between the NAV of the Shares (per Creation Unit) and the market value of the Deposit Securities or Deposit Cash, as applicable. The Custodian, through the National Securities Clearing Corporation (‘‘NSCC’’), will make available on each Business Day, prior to the opening of business on the Exchange (currently 9:30 a.m., Eastern time), the list of the names and the required number of shares of each Deposit Security or the required amount of Deposit Cash, as applicable, to be included in the current Fund Deposit (based on information at the end of the previous Business Day) for the Fund. To be eligible to place orders to purchase a Creation Unit of the Fund, an entity must be (i) a ‘‘Participating Party’’, i.e., a broker-dealer or other participant in the clearing process through the Continuous Net Settlement System of the NSCC (the ‘‘Clearing Process’’), a clearing agency that is registered with the SEC; or (ii) a Depository Trust Company participant. jbell on DSKJLSW7X2PROD with NOTICES Redemption of Shares Shares may be redeemed only in Creation Units at their NAV next determined after receipt of a redemption request in proper form by the Fund and only on a Business Day. With respect to the Fund, the Custodian, through the NSCC, will make available prior to the opening of business on the Exchange on each Business Day, the list of the names and share quantities of the Fund’s portfolio securities that will be applicable on that day (‘‘Fund Securities’’). Fund Securities received on redemption may not be identical to Deposit Securities. Redemption proceeds for a Creation Unit will be paid either in-kind or in cash or a combination thereof, as determined by the Trust. With respect to in-kind redemptions of the Fund, redemption proceeds for a Creation Unit will consist of Fund Securities, as announced by the Custodian prior to the opening of business on the Business Day of the request for redemption 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 (the ‘‘Cash Redemption Amount’’), less a fixed redemption transaction fee and any applicable additional variable charge. Notwithstanding the foregoing, at the Trust’s discretion, an Authorized Participant may receive the corresponding cash value of the securities in lieu of the in-kind VerDate Sep<11>2014 18:56 Apr 29, 2020 Jkt 250001 securities value representing one or more Fund Securities.19 Investment Restrictions The Fund’s investments in sovereign debt obligations and corporate bonds, floating rate bonds and variable rate bonds will be limited to 30% of the Fund’s total assets. The Fund’s investments will be consistent with the Fund’s investment objective and will not be used to enhance leverage (although certain derivatives and other investments may result in leverage). That is, while the Fund will be permitted to borrow as permitted under the 1940 Act, the Fund’s investments will not be used to seek performance that is the multiple or inverse multiple (e.g., 2Xs and 3Xs) of the Fund’s primary broad-based securities benchmark index (as defined in Form N–1A).20 Application of Generic Listing Requirements The Exchange is submitting this proposed rule change because the portfolio for the Fund will not meet all of the ‘‘generic’’ listing requirements of Commentary .01 to NYSE Arca Rule 8.600–E applicable to the listing of Managed Fund Shares. The Fund’s portfolio would meet all such requirements except for those set forth in Commentary .01(a)(1)(A) through (E) (with respect to the Fund’s investments in non-exchange-traded investment company securities) and Commentary .01(b)(3) to NYSE Arca Rule 8.600–E with respect to the Fund’s investments in Short-Term Fixed Income Securities.21 The Fund’s Short-Term Fixed Income Securities may not comply with the requirements set forth in Commentary .01(b)(3) to NYSE Arca Rule 8.600–E. While the requirement set forth in Commentary .01(b)(3) is intended to ensure that the Short-Term Fixed Income Securities included in the Fund’s portfolio are sufficiently 19 The Adviser represents that, to the extent the Trust effects the creation or redemption of Shares wholly or partially in cash, such transactions will be effected in the same manner for all Authorized Participants. 20 The Fund’s broad-based securities benchmark index will be identified in a future amendment to the Registration Statement following the Fund’s first full calendar year of performance. 21 Commentary .01(b)(3) to NYSE Arca Rule 8.600–E provides as follows: ‘‘An underlying portfolio (excluding exempted securities) that includes fixed income securities shall include a minimum of 13 non-affiliated issuers, provided, however, that there shall be no minimum number of non-affiliated issuers required for fixed income securities if at least 70% of the weight of the portfolio consists of equity securities as described in Commentary .01(a) above’’. PO 00000 Frm 00111 Fmt 4703 Sfmt 4703 diversified among non-affiliated issuers, the Exchange believes that any concerns related to non-compliance are mitigated by the types of instruments that the Fund would hold. As noted above, with respect to the Fund’s holdings in ShortTerm Fixed Income Securities, cash and cash equivalents, such Fund holdings will maintain a maximum dollarweighted average maturity of sixty days or less and dollar-weighted average life of 120 days or less and will have remaining maturities of 397 calendar days or less. The Fund’s Short-Term Fixed Income Securities primarily will include those instruments that are included in the definition of cash and cash equivalents, but are not considered cash and cash equivalents because they have maturities of three months or longer. The Exchange believes, however, that Short-Term Fixed Income Securities are less susceptible than other types of fixed income instruments both to price manipulation and volatility and that the holdings as proposed are generally consistent with the policy concerns which Commentary .01(b)(3) is intended to address. Because the ShortTerm Fixed Income Securities will consist generally of high-quality ShortTerm Fixed Income Securities described above, the Exchange believes that the policy concerns that Commentary .01(b)(3) is intended to address are otherwise mitigated and that the Fund should be permitted to hold these securities in a manner that may not comply with such provision. The Adviser represents that the Fund is not a money market fund but its investment strategy follows certain guidelines applicable to such funds. Specifically, the Fund will only invest in Short-Term Fixed Income Securities to maintain a maximum dollar-weighted average maturity of sixty days or less and dollar-weighted average life of 120 days or less. The Fund will invest in Short-Term Fixed Income Securities that have remaining maturities of 397 calendar days or less. While the Fund will have portfolio holdings that meet the definition of cash and cash equivalents under NYSE Arca Rule 8.600–E, Commentary .01(c), the other assets may at times be invested in longer dated securities, including U.S. and foreign government securities, and corporate bonds. The exemption from the 13 non-affiliated issuer requirement for the fixed income portion of the Fund’s portfolio will allow the Fund to invest in a limited number of ShortTerm Fixed Income Securities without having to allocate a small percentage of assets under management to the required minimum 13 issuers. E:\FR\FM\30APN1.SGM 30APN1 Federal Register / Vol. 85, No. 84 / Thursday, April 30, 2020 / Notices jbell on DSKJLSW7X2PROD with NOTICES The Fund’s investments in sovereign debt obligations and corporate bonds, floating rate bonds and variable rate bonds will be limited to 30% of the Fund’s total assets. All Short-Term Fixed Income Securities will comply with the requirements of Commentary .01(b) to NYSE Arca Rule 8.600–E, except for Commentary .01(b)(3) as described above, and the cash equivalents the Fund may invest in will comply with the requirements of Commentary .01(c). The Fund may invest in shares of investment company securities (other than ETFs), which are equity securities. Therefore, to the extent the Fund invests in shares of other non-exchange-traded open-end management investment company securities, the Fund will not comply with the requirements of Commentary .01(a)(1)(A) through (E) to NYSE Arca Rule 8.600–E (U.S. Component Stocks) with respect to its non-exchange-traded investment securities holdings.22 However, it is appropriate and in the public interest to approve listing and 22 Commentary .01(a)(1) to NYSE Arca Rule 8.600–E 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 IndexLinked 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; and (F) American Depositary Receipts (‘‘ADRs’’) in a portfolio may be exchange-traded or non-exchangetraded. However, no more than 10% of the equity weight of a portfolio shall consist of non-exchangetraded ADRs. VerDate Sep<11>2014 18:56 Apr 29, 2020 Jkt 250001 trading of Shares of the Fund notwithstanding that the Fund’s holdings in such securities would not meet the requirements of Commentary .01(a)(1)(A) through (E) to Rule 8.600–E. Investments in other non-exchangetraded open-end management investment company securities will not exceed 20% of the total assets of the Fund. Such investments, which may include mutual funds that invest, for example, principally in fixed income securities, would be utilized to help the Fund meet its investment objective and to equitize cash in the short term. The Fund will invest in such securities only to the extent that those investments would be consistent with the requirements of Section 12(d)(1) of the 1940 Act and the rules thereunder.23 Because such securities must satisfy applicable 1940 Act diversification requirements, and have a net asset value based on the value of securities and financial assets the investment company holds, 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)(1)(A) through (D) to Rule 8.600– E exclude 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)).24 In its 23 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 Nos. 86362 (July 12, 2019), 84 FR 34457 (July 18, 2019) (SR–NYSEArca–2019–36 (Notice of Filing of Amendment No. 3 and Order Granting Accelerated Approval of a Proposed Rule Change, as Modified by Amendment No. 3, to List and Trade Shares of JPMorgan Income Builder Blend ETF under NYSE Arca Rule 8.600–E); 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). 24 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 PO 00000 Frm 00112 Fmt 4703 Sfmt 4703 24053 2008 Approval Order approving amendments to Commentary .01(a) to Rule 5.2(j)(3) to 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 mutual fund shares certain of the generic quantitative criteria (e.g., market capitalization, trading volume, or portfolio criteria) in Commentary .01(a)(1) (A) through (D) applicable to U.S. Component Stocks. For example, the requirements 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 are tailored to exchange-traded securities (i.e., U.S. Component Stocks) and not to mutual fund shares, which do not trade in the secondary market and for which no such volume information is reported. In addition, Commentary .01(a)(1)(A) relating to minimum market value of portfolio component stocks, Commentary .01(a)(1)(C) relating to weighting of portfolio component stocks, and Commentary .01(a)(1)(D) relating to minimum number of portfolio components are not appropriately applied to open-end management investment company securities; openend investment companies hold multiple individual securities as disclosed publicly in accordance with the 1940 Act, and application of Commentary .01(a)(1)(A) through (D) would not serve the purposes served with respect to U.S. Component Stocks, namely, to establish minimum liquidity 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 Rule 8.600–E To Adopt Generic Listing Standards for Managed Fund Shares). See also Amendment No. 7 to SR– NYSEArca–2015–110, available at https:// www.sec.gov/comments/sr-nysearca-2015-110/ nysearca2015110-9.pdf. E:\FR\FM\30APN1.SGM 30APN1 24054 Federal Register / Vol. 85, No. 84 / Thursday, April 30, 2020 / Notices and diversification criteria for U.S. Component Stocks held by series of Managed Fund Shares. The Exchange notes that the Commission has previously approved 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.25 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) regarding the Fund’s investments in non-exchange-traded investment company securities and Commentary .01(b)(3) to Rule 8.600–E regarding the Fund’s investments in Short-Term Fixed Income Securities, as described above, the Fund will meet all other requirements of Rule 8.600–E. Availability of Information The Fund’s website (www.spdrs.com) will include a form of the prospectus for the Fund that may be downloaded. The Fund’s website will include 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 mid-point of the bid/ask spread at the time of calculation of such NAV (the ‘‘Bid/Ask Price’’),26 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 Adviser will disclose on the Fund’s website the Disclosed Portfolio for the Fund as defined in NYSE Arca Rule 8.600–E(c)(2) that will form the basis for the Fund’s calculation of NAV at the end of the business day.27 note 22, supra. 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. 27 Under accounting procedures to be followed by the Fund, trades made on the prior business day (‘‘T’’) will be booked and reflected in NAV on the On a daily basis, the Fund will disclose on its website the information regarding the Disclosed Portfolio required under NYSE Arca Rule 8.600– E (c)(2) to the extent applicable. The Fund’s website information will be publicly available at no charge. Investors can also obtain the Fund’s Statement of Additional Information (‘‘SAI’’), its Shareholder Reports, its Form N–CSR and Form N–PORT, filed quarterly, and its Form N–CEN, filed annually. The Fund’s SAI and Shareholder Reports are available free upon request from the Trust, and those documents and the Form N–CSR and Form N–CEN may be viewed on-screen or downloaded from the Commission’s website at www.sec.gov. Quotation and last sale information for the Shares and ETFs will be available via the CTA high speed line. Quotation and last sale information for such U.S. exchange-listed securities will be available from the exchange on which they are listed and from major market data vendors. Information regarding market price and trading volume for the Shares will be continually available on a real-time basis throughout the day on brokers’ computer screens and other electronic services. Information regarding the previous day’s closing price and trading volume information for the Shares will be published daily in the financial section of newspapers. Quotation information for Short-Term Fixed Income Securities and cash equivalents may be obtained from brokers and dealers who make markets in such securities or through nationally recognized pricing services through subscription agreements. The U.S. dollar value of foreign securities, instruments and currencies can be derived by using foreign currency exchange rate quotations obtained from nationally recognized pricing services. Price information for non-exchangetraded investment company securities is available from major market data vendors. In addition, the Portfolio Indicative Value (‘‘PIV’’), 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.28 The dissemination of the PIV, 25 See jbell on DSKJLSW7X2PROD with NOTICES 26 The VerDate Sep<11>2014 18:56 Apr 29, 2020 Jkt 250001 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. 28 Currently, it is the Exchange’s understanding that several major market data vendors display and/ or make widely available PIVs taken from the CTA or other data feeds. PO 00000 Frm 00113 Fmt 4703 Sfmt 4703 together with the Disclosed Portfolio, will allow investors to determine the approximate value of the underlying portfolio of the Fund on a daily basis and will provide a close 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.29 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 of the Fund inadvisable. Trading in the Shares will be subject to NYSE Arca Rule 8.600–E(d)(2)(D), which sets forth circumstances under which Shares of the Fund may be halted. 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. Except as described herein with respect to the generic listing requirements in Commentary .01 to NYSE Arca Rule 8.600–E, the Shares of the Fund 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 30 under the Act, as provided by NYSE Arca Rule 5.3–E. A minimum of 100,000 Shares of the Fund will be outstanding at the commencement of trading on the Exchange. The Exchange will obtain a representation from the issuer of the Shares of the Fund that the NAV and the Disclosed Portfolio will be made 29 See 30 17 E:\FR\FM\30APN1.SGM NYSE Arca Rule 7.12–E. CFR 240 10A–3. 30APN1 Federal Register / Vol. 85, No. 84 / Thursday, April 30, 2020 / Notices available to all market participants at the same time. jbell on DSKJLSW7X2PROD 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.31 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 applicable federal securities laws. 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 and ETFs with other markets and other entities that are members of the Intermarket Surveillance Group (‘‘ISG’’), and the Exchange or FINRA, on behalf of the Exchange, or both, may obtain trading information regarding trading in Shares and ETFs from such markets and other entities. In addition, the Exchange may obtain information regarding trading in Shares and ETFs from markets and other entities that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement.32 FINRA, on behalf of the Exchange, is able to access, as needed, trade information for certain fixed income securities held by the Fund reported to FINRA’s Trade Reporting and Compliance Engine (‘‘TRACE’’). In addition, the Exchange also has a general policy prohibiting the distribution of material, non-public information by its employees. 31 FINRA conducts cross-market surveillances on behalf of the Exchange pursuant to a regulatory services agreement. The Exchange is responsible for FINRA’s performance under this regulatory services agreement. 32 For a list of the current members of ISG, see www.isgportal.org. The Exchange notes that not all components of the Disclosed Portfolio for the Fund may trade on markets that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. VerDate Sep<11>2014 18:56 Apr 29, 2020 Jkt 250001 All statements and representations made in this filing regarding (a) the description of the portfolio holdings or reference assets, (b) limitations on portfolio holdings or reference assets, or (c) the applicability of Exchange listing rules specified in this rule filing shall constitute continued listing requirements for listing the Shares 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 PIV will not be calculated or publicly disseminated; (4) how information regarding the PIV 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 will be 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 PO 00000 Frm 00114 Fmt 4703 Sfmt 4703 24055 under Section 6(b)(5) 33 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 Adviser is not registered as a broker-dealer but is affiliated with a broker-dealer and has implemented and will maintain a fire wall with respect to such broker-dealer affiliate regarding access to information concerning the composition and/or changes to the portfolio. 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 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 applicable federal securities laws. The Exchange or FINRA, on behalf of the Exchange, or both, will communicate as needed regarding trading in the Shares and ETFs 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 such securities from such markets and other entities. In addition, the Exchange may obtain information regarding trading in such securities from markets and other entities that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. FINRA, on behalf of the Exchange, is able to access, as needed, trade information for certain fixed income securities held by the Fund reported to FINRA’s TRACE. The PIV, 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. Except as described herein, the Shares of the Fund will conform to the initial 33 15 E:\FR\FM\30APN1.SGM U.S.C. 78f(b)(5). 30APN1 jbell on DSKJLSW7X2PROD with NOTICES 24056 Federal Register / Vol. 85, No. 84 / Thursday, April 30, 2020 / Notices and continued listing criteria under NYSE Arca Rule 8.600–E. The Exchange represents that, for initial and/or continued listing, the Fund will be in compliance with Rule 10A–3 under the Act, as provided by NYSE Arca Rule 5.3–E. A minimum of 100,000 Shares of the Fund will be outstanding at the commencement of trading on the Exchange. The Exchange will obtain a representation from the issuer of the Shares of the Fund 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 Fund’s portfolio holdings will be disclosed on its website daily after the close of trading on the Exchange and prior to the opening of trading on the Exchange the following day. On a daily basis, the Fund will disclose the information regarding the Disclosed Portfolio required under NYSE Arca Rule 8.600– E (c)(2) to the extent applicable. The Fund’s website information will be publicly available at no charge. Investors can also obtain the Fund’s Statement of Additional Information (‘‘SAI’’), its Shareholder Reports, its Form N–CSR, filed twice a year, and its Form N–CEN, filed annually. The Fund’s SAI and Shareholder Reports are available free upon request from the Trust, and those documents and the Form N–CSR and Form N–CEN may be viewed on-screen or downloaded from the Commission’s website at www.sec.gov. Quotation and last sale information for the Shares and ETFs will be available via the CTA high speed line. With respect to the Fund’s noncompliance with Commentary .01(b)(3) (with respect to Short-Term Fixed Income Securities),34 the requirement set forth in Commentary .01(b)(3) is intended to ensure that the Short-Term Fixed Income Securities included in the Fund’s portfolio are sufficiently diversified among non-affiliated issuers, and the Exchange believes that any concerns related to non-compliance are mitigated by the types of instruments that the Fund would hold. The Fund’s Short-Term Fixed Income Securities primarily will include those instruments that are included in the definition of cash and cash equivalents, but are not considered cash and cash equivalents because they have maturities of three months or longer. The Exchange believes, however, that 34 See note 21, supra. VerDate Sep<11>2014 18:56 Apr 29, 2020 Jkt 250001 Short-Term Fixed Income Securities are less susceptible than other types of fixed income instruments both to price manipulation and volatility and that the holdings as proposed are generally consistent with the policy concerns which Commentary .01(b)(3) is intended to address. As noted above, with respect to the Fund’s holdings in Short-Term Fixed Income Securities, cash and cash equivalents, such Fund holdings will maintain a maximum dollar-weighted average maturity of sixty days or less and dollar-weighted average life of 120 days or less and will have remaining maturities of 397 calendar days or less. Because the Short-Term Fixed Income Securities will consist generally of highquality Short-Term Fixed Income Securities described above, the Exchange believes that the policy concerns that Commentary .01(b)(3) is intended to address are otherwise mitigated and that the Fund should be permitted to hold these securities in a manner that may not comply with such provision. As noted above, the Fund’s portfolio will 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 securities of open-end investment company securities. 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 non-exchangetraded securities of open-end investment company securities. Investments in non-exchange-traded securities of open-end investment company 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. Investments in non-exchange-traded open-end management investment company securities will not exceed 20% of the total assets of the Fund. The website for the Fund will include the prospectus for the Fund and additional data relating to NAV and other applicable quantitative information. Moreover, prior to the commencement of trading, the Exchange will inform its ETP Holders in an Information Bulletin of the special characteristics and risks associated with trading the Shares of the Fund. Trading in Shares of the Fund will be halted if PO 00000 Frm 00115 Fmt 4703 Sfmt 4703 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 Rule 8.600–E(d)(2)(D), which sets forth circumstances under which Shares of the Fund may be halted. In addition, as noted above, investors will have ready access to information regarding the Fund’s holdings, the PIV, the Disclosed Portfolio, and quotation and last sale information for the Shares. The Fund’s investments will be consistent with the Fund’s investment objective and will not be used to enhance leverage. That is, while the Fund will be permitted to borrow as permitted under the 1940 Act, the Fund’s investments will not be used to seek performance that is the multiple or inverse multiple (e.g., 2Xs and 3Xs) of the Fund’s primary broad-based securities benchmark index (as defined in Form N–1A).35 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 actively-managed exchange-traded product and will enhance competition among market participants, to the benefit of investors and the marketplace. As noted above, the Exchange has in place surveillance procedures relating to trading in the Shares and may obtain information via ISG from other exchanges that are members of ISG or with which the Exchange has entered into a comprehensive surveillance sharing agreement. In addition, as noted above, investors have ready access to information regarding the Fund’s holdings, the PIV, the Disclosed Portfolio for the Fund, and quotation and last sale information for the Shares. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purpose of the Act. The Exchange notes that the proposed rule change will facilitate the listing and trading of an additional type of actively-managed exchange-traded product that holds fixed income securities and equity securities and that will enhance competition among market participants, to the benefit of investors and the marketplace. 35 See E:\FR\FM\30APN1.SGM note 20, supra. 30APN1 Federal Register / Vol. 85, No. 84 / Thursday, April 30, 2020 / Notices C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. jbell on DSKJLSW7X2PROD with NOTICES III. Proceedings To Determine Whether To Approve or Disapprove SRNYSEArca-2020–07, as Modified by Amendment No. 1, and Grounds for Disapproval Under Consideration The Commission is instituting proceedings pursuant to Section 19(b)(2)(B) of the Exchange Act 36 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 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,37 the Commission is providing notice of the grounds for disapproval under consideration. The Commission is instituting proceedings to allow for additional analysis of the proposed rule change’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, . . . to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest.’’ 38 IV. Procedure: Request for Written Comments The Commission requests that interested persons provide written submissions of their views, data, and arguments with respect to the issues identified above, as well as any other concerns they may have with the proposal. In particular, the Commission invites the written views of interested persons concerning whether the proposed rule change, as modified by Amendment No. 1, is consistent with Section 6(b)(5) or any other provision of 36 15 U.S.C. 78s(b)(2)(B). 37 Id. 38 15 U.S.C. 78f(b)(5). VerDate Sep<11>2014 18:56 Apr 29, 2020 Jkt 250001 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, any request for an opportunity to make an oral presentation.39 Interested persons are invited to submit written data, views, and arguments regarding whether the proposed rule change, as modified by Amendment No. 1, should be approved or disapproved by May 21, 2020. Any person who wishes to file a rebuttal to any other person’s submission must file that rebuttal by June 4, 2020. The Commission asks that commenters address the sufficiency of the Exchange’s statements in support of the proposal, which are set forth in Amendment No. 1,40 and any other issues raised by the proposed rule change under the Act. In particular, the Commission seeks commenters’ views regarding whether the Exchange has adequately described the proposed investments of the Fund for the Commission to make a determination under Section 6(b)(5) of 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-2020–07 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–2020–07. 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 39 Section 19(b)(2) of the Exchange Act, as amended by the Securities Act Amendments of 1975, Public Law 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 Act Amendments of 1975, Senate Comm. on Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st Sess. 30 (1975). 40 See supra note 6. PO 00000 Frm 00116 Fmt 4703 Sfmt 4703 24057 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-2020–07 and should be submitted on or before May 21, 2020. Rebuttal comments should be submitted by June 4, 2020. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.41 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2020–09128 Filed 4–29–20; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–88740; File No. SR– NYSEAMER–2020–29] Self-Regulatory Organizations; NYSE American LLC; Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 2, To Modify Rule 967NY Regarding the Treatment of Orders Subject to Trade Collar Protection April 24, 2020. 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 April 9, 2020, NYSE American LLC (‘‘NYSE American’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the 41 17 CFR 200.30–3(a)(12) & 17 CFR 200.30– 3(a)(57). 1 15 U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. E:\FR\FM\30APN1.SGM 30APN1

Agencies

[Federal Register Volume 85, Number 84 (Thursday, April 30, 2020)]
[Notices]
[Pages 24050-24057]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-09128]



[[Page 24050]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88738; File No. SR-NYSEArca-2020-07]


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, To List and Trade Shares of the SPDR SSGA Responsible 
Reserves ESG ETF Under NYSE Arca Rule 8.600-E

April 24, 2020.
    On January 14, 2020, NYSE Arca, Inc. (``Exchange'' or ``NYSE 
Arca'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to list and trade shares 
(``Shares'') of the SPDR SSGA Responsible Reserves ESG ETF (``Fund''), 
under NYSE Arca Rule 8.600-E (Managed Fund Shares). The proposed rule 
change was published for comment in the Federal Register on January 30, 
2020.\3\ On March 12, 2020, pursuant to Section 19(b)(2) of the Act,\4\ 
the Commission designated a longer period within which to approve the 
proposed rule change, disapprove the proposed rule change, or institute 
proceedings to determine whether to disapprove the proposed rule 
change.\5\ On April 22, 2020, the Exchange filed Amendment No. 1 to the 
proposed rule change, which superseded the proposed rule change as 
originally filed.\6\ The Commission has 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 
pursuant to Section 19(b)(2)(B) of the Act \7\ to determine whether to 
approve or disapprove the proposed rule change, as modified by 
Amendment No. 1.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 88031 (January 24, 
2020), 85 FR 5493 (``Notice'').
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 88364, 85 FR 15550 
(March 18, 2020). The Commission designated April 29, 2020, as the 
date by which the Commission shall approve or disapprove, or 
institute proceedings to determine whether to disapprove, the 
proposed rule change.
    \6\ Amendment No. 1 is available on the Commission's website at 
https://www.sec.gov/rules/sro/nysearca.htm.
    \7\ 15 U.S.C. 78s(b)(2)(B).
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I. The Exchange's Description of the Proposed Rule Change, as Modified 
by Amendment No. 1

    The Exchange proposes to list and trade shares of the SPDR SSGA 
Responsible Reserves ESG ETF (the ``Fund''), under NYSE Arca Rule 
8.600-E (``Managed Fund Shares'').This Amendment 1 to SR-NYSEArca-2020-
07 replaces SR-NYSEArca-2020-07 as originally filed and supersedes such 
filing in its entirety.
    The proposed change is available on the Exchange's website at 
www.nyse.com, at the principal office of the Exchange, and at the 
Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to list and trade shares (``Shares'') of the 
SPDR SSGA Responsible Reserves ESG ETF under NYSE Arca Rule 8.600-E 
(the ``Fund''), a series of the SSGA Active Trust (``Trust'') \8\, 
under NYSE Arca Rule 8.600-E, which governs the listing and trading of 
Managed Fund Shares \9\ on the Exchange.
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    \8\ The Trust is registered under the 1940 Act. On December 20, 
2019, the Trust filed with the Commission an amendment to its 
registration statement on Form N-1A under the Securities Act of 1933 
(15 U.S.C. 77a) (``Securities Act'') and the 1940 Act relating to 
the Fund (File Nos. 333-173276 and 811-22542) (the ``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 under the 1940 Act to the Trust. See Investment 
Company Act Release No. 29524, December 13, 2010) (File No. 812-
13487) (``Exemptive Order''). Investments made by the Fund will 
comply with the conditions set forth in the Exemptive Order.
    \9\ 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.
---------------------------------------------------------------------------

    SSGA Funds Management, Inc. (``Adviser'') will be the investment 
adviser to the Fund. The Adviser is a wholly-owned subsidiary of State 
Street Global Advisors, Inc. (``SSGA''), which itself is a wholly-owned 
subsidiary of State Street Corporation. State Street Global Advisors 
Funds Distributors, LLC (``Distributor'') will be the distributor of 
the Fund's Shares. State Street Bank and Trust Company will be the 
custodian (``Custodian'') and transfer agent for the Fund.
    Commentary .06 to Rule 8.600-E provides that, if the investment 
adviser to the investment company issuing Managed Fund Shares is 
affiliated with a broker-dealer, such investment adviser shall erect 
and maintain 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.\10\ 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. The 
Adviser is not registered as a broker-dealer but is affiliated with a 
broker-dealer and has implemented and will maintain a fire wall with 
respect to

[[Page 24051]]

such broker-dealer affiliate regarding access to information concerning 
the composition and/or changes to the portfolio. In the event (a) the 
Adviser becomes registered as a broker-dealer or newly affiliated with 
one or more broker-dealers, 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 its broker-dealer affiliate regarding access to 
information concerning the composition and/or changes to the portfolio, 
and will be subject to procedures designed to prevent the use and 
dissemination of material non-public information regarding such 
portfolio.
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    \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 its 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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SPDR SSGA Responsible Reserves ESG ETF
    According to the Registration Statement, the investment objective 
of the Fund will be to seek to maximize current income while giving 
consideration to environmental, social and governance (``ESG') 
criteria, consistent with the preservation of capital and liquidity by 
investing in a portfolio of high-quality, short-term debt obligations.
    The Fund will follow a disciplined investment process in which the 
Adviser bases its decisions on the relative attractiveness of different 
short-term debt instruments (``Short-Term Fixed Income Securities'') 
while considering ESG criteria at the time of purchase.
    Under normal market conditions,\11\ the Fund will invest at least 
80% of its net assets in Short-Term Fixed Income Securities (as 
described below), cash and cash equivalents \12\ to maintain a maximum 
dollar-weighted average maturity of sixty days or less and dollar-
weighted average life of 120 days or less. Short-Term Fixed Income 
Securities in which the Fund will invest will have remaining maturities 
of 397 calendar days or less.
---------------------------------------------------------------------------

    \11\ The term ``normal market conditions'' is defined in NYSE 
Arca Rule 8.600-E(c)(5).
    \12\ The term ``cash equivalents'' is defined in Commentary 
.01(c) to NYSE Arca Rule 8.600-E.
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    The Adviser intends to consider ESG criteria at the time of 
purchase by using ESG-related metrics for each Fund investment. The 
potential investment universe will first be screened to remove issuers 
involved in, and/or which derive significant revenue from, certain 
practices, industries or product lines, including: Extreme event 
controversies, controversial weapons, civilian firearms, thermal coal 
extraction, tobacco, and UN global compact violations. While issuers in 
the financial services sector are not included in the initial screening 
process, the Adviser will consider scoring criteria to assign an ESG 
rating to issuers in the financial services sector.
Principal Investments
    According to the Registration Statement, the Fund will attempt to 
meet its investment objective by investing in a broad range of Short-
Term Fixed Income Securities, as described below.
    The Fund may invest in the following Short-Term Fixed Income 
Securities:
     Short-term obligations of the U.S. Government, its 
agencies, instrumentalities, authorities or political subdivisions 
(other than cash equivalents); \13\
---------------------------------------------------------------------------

    \13\ The term ``cash equivalents'' is defined in Commentary 
.01(c) to NYSE Arca Rule 8.600-E.
---------------------------------------------------------------------------

     mortgage pass-through securities; \14\
---------------------------------------------------------------------------

    \14\ The Fund will seek to obtain exposure to U.S. agency 
mortgage pass-through securities primarily through the use of ``to-
be-announced'' or ``TBA transactions.''
---------------------------------------------------------------------------

     corporate bonds, floating rate bonds or variable rate 
bonds (including ``inverse floaters'');
     bank obligations, including negotiable certificates of 
deposit, time deposits and bankers' acceptances \15\ (other than cash 
equivalents);
---------------------------------------------------------------------------

    \15\ Under normal market conditions, the Fund intends to invest 
more than 25% of its total assets in bank obligations.
---------------------------------------------------------------------------

     zero coupon securities;
     Eurodollar Certificates of Deposit (``ECDs''), Eurodollar 
Time Deposits (``ETDs'') and Yankee Certificates of Deposit (``YCDs''); 
\16\
---------------------------------------------------------------------------

    \16\ ECDs and ETDs are U.S. dollar denominated certificates of 
deposit and time deposits, respectively, issued by non-U.S. branches 
of domestic banks and non-U.S. banks. YCDs are U.S. dollar 
denominated certificates of deposit issued by U.S. branches of non-
U.S. banks.
---------------------------------------------------------------------------

     inflation-protected public obligations (``TIPS)'' of the 
U.S. Treasury, as well as TIPS of major governments, excluding the 
United States;
     repurchase and reverse repurchase agreements (other than 
repurchase and reverse repurchase agreements that are cash 
equivalents);
     sovereign debt obligations issued or guaranteed by foreign 
governments or their agencies;
     commercial paper (other than cash equivalents);
     private placements, restricted securities and Rule 144A 
securities.
    The Fund may hold cash and cash equivalents.
Other Investments
    While the Fund, under normal market conditions, will invest at 
least 80% of the Fund's net assets in the securities described above in 
``Principal Investments,'' the Fund may invest its remaining assets in 
the securities described below.
    The Fund may invest in exchange traded funds (``ETFs'').\17\
---------------------------------------------------------------------------

    \17\ For purposes of this filing, ``ETFs'' are 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. The Fund will not invest in inverse or 
leveraged (e.g., 2X, -2X, 3X or -3X) ETFs.
---------------------------------------------------------------------------

    The Fund may invest in the securities of non-exchange-traded 
investment company securities, subject to applicable limitations under 
Section 12(d)(1) of the 1940 Act.\18\
---------------------------------------------------------------------------

    \18\ Investments in other non-exchange-traded open-end 
management investment company securities will not exceed 20% of the 
total assets of the Fund.
---------------------------------------------------------------------------

    The Fund will not invest in securities or other financial 
instruments that have not been described in this proposed rule change.
Creation and Redemption of Creation Units
    The Fund will issue and redeem its Shares on a continuous basis, at 
net asset value (``NAV''), only in a large specified number of Shares 
(a ``Creation Unit''). Creation Unit sizes are 50,000 Shares per 
Creation Unit. The Creation Unit size for the Fund may change.
    The Trust will issue and sell Shares of the Fund only in Creation 
Units on a continuous basis through the Distributor at their NAV per 
Share next determined after receipt of an order, on any Business Day 
(as defined below), in proper form pursuant to the terms of the 
Authorized Participant Agreement (``Participant Agreement''). A 
``Business Day'' with respect to the Fund is, generally, any day on 
which the NYSE is open for business.
    The consideration for purchase of a Creation Unit of the Fund 
generally will consist of either (i) the in-kind deposit of a 
designated portfolio of securities (the ``Deposit Securities'') per 
each Creation Unit and the ``Cash Component'' (defined below), computed 
as described below or (ii) the cash value of the Deposit Securities 
(``Deposit Cash'') and Cash Component, computed as described below.
    Together, the Deposit Securities or Deposit Cash, as applicable, 
and the Cash Component constitute the ``Fund Deposit,'' which 
represents the minimum initial and subsequent investment amount for a 
Creation Unit of the Fund. The ``Cash Component'', is an amount equal 
to the difference

[[Page 24052]]

between the NAV of the Shares (per Creation Unit) and the market value 
of the Deposit Securities or Deposit Cash, as applicable.
    The Custodian, through the National Securities Clearing Corporation 
(``NSCC''), will make available on each Business Day, prior to the 
opening of business on the Exchange (currently 9:30 a.m., Eastern 
time), the list of the names and the required number of shares of each 
Deposit Security or the required amount of Deposit Cash, as applicable, 
to be included in the current Fund Deposit (based on information at the 
end of the previous Business Day) for the Fund.
    To be eligible to place orders to purchase a Creation Unit of the 
Fund, an entity must be (i) a ``Participating Party'', i.e., a broker-
dealer or other participant in the clearing process through the 
Continuous Net Settlement System of the NSCC (the ``Clearing 
Process''), a clearing agency that is registered with the SEC; or (ii) 
a Depository Trust Company participant.
Redemption of Shares
    Shares may be redeemed only in Creation Units at their NAV next 
determined after receipt of a redemption request in proper form by the 
Fund and only on a Business Day. With respect to the Fund, the 
Custodian, through the NSCC, will make available prior to the opening 
of business on the Exchange on each Business Day, the list of the names 
and share quantities of the Fund's portfolio securities that will be 
applicable on that day (``Fund Securities''). Fund Securities received 
on redemption may not be identical to Deposit Securities.
    Redemption proceeds for a Creation Unit will be paid either in-kind 
or in cash or a combination thereof, as determined by the Trust. With 
respect to in-kind redemptions of the Fund, redemption proceeds for a 
Creation Unit will consist of Fund Securities, as announced by the 
Custodian prior to the opening of business on the Business Day of the 
request for redemption 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 (the ``Cash Redemption Amount''), less a 
fixed redemption transaction fee and any applicable additional variable 
charge. Notwithstanding the foregoing, at the Trust's discretion, an 
Authorized Participant may receive the corresponding cash value of the 
securities in lieu of the in-kind securities value representing one or 
more Fund Securities.\19\
---------------------------------------------------------------------------

    \19\ The Adviser represents that, to the extent the Trust 
effects the creation or redemption of Shares wholly or partially in 
cash, such transactions will be effected in the same manner for all 
Authorized Participants.
---------------------------------------------------------------------------

Investment Restrictions
    The Fund's investments in sovereign debt obligations and corporate 
bonds, floating rate bonds and variable rate bonds will be limited to 
30% of the Fund's total assets.
    The Fund's investments will be consistent with the Fund's 
investment objective and will not be used to enhance leverage (although 
certain derivatives and other investments may result in leverage). That 
is, while the Fund will be permitted to borrow as permitted under the 
1940 Act, the Fund's investments will not be used to seek performance 
that is the multiple or inverse multiple (e.g., 2Xs and 3Xs) of the 
Fund's primary broad-based securities benchmark index (as defined in 
Form N-1A).\20\
---------------------------------------------------------------------------

    \20\ The Fund's broad-based securities benchmark index will be 
identified in a future amendment to the Registration Statement 
following the Fund's first full calendar year of performance.
---------------------------------------------------------------------------

Application of Generic Listing Requirements
    The Exchange is submitting this proposed rule change because the 
portfolio for the Fund will not meet all of the ``generic'' listing 
requirements of Commentary .01 to NYSE Arca Rule 8.600-E applicable to 
the listing of Managed Fund Shares. The Fund's portfolio would meet all 
such requirements except for those set forth in Commentary .01(a)(1)(A) 
through (E) (with respect to the Fund's investments in non-exchange-
traded investment company securities) and Commentary .01(b)(3) to NYSE 
Arca Rule 8.600-E with respect to the Fund's investments in Short-Term 
Fixed Income Securities.\21\
---------------------------------------------------------------------------

    \21\ Commentary .01(b)(3) to NYSE Arca Rule 8.600-E provides as 
follows: ``An underlying portfolio (excluding exempted securities) 
that includes fixed income securities shall include a minimum of 13 
non-affiliated issuers, provided, however, that there shall be no 
minimum number of non-affiliated issuers required for fixed income 
securities if at least 70% of the weight of the portfolio consists 
of equity securities as described in Commentary .01(a) above''.
---------------------------------------------------------------------------

    The Fund's Short-Term Fixed Income Securities may not comply with 
the requirements set forth in Commentary .01(b)(3) to NYSE Arca Rule 
8.600-E. While the requirement set forth in Commentary .01(b)(3) is 
intended to ensure that the Short-Term Fixed Income Securities included 
in the Fund's portfolio are sufficiently diversified among non-
affiliated issuers, the Exchange believes that any concerns related to 
non-compliance are mitigated by the types of instruments that the Fund 
would hold. As noted above, with respect to the Fund's holdings in 
Short-Term Fixed Income Securities, cash and cash equivalents, such 
Fund holdings will maintain a maximum dollar-weighted average maturity 
of sixty days or less and dollar-weighted average life of 120 days or 
less and will have remaining maturities of 397 calendar days or less. 
The Fund's Short-Term Fixed Income Securities primarily will include 
those instruments that are included in the definition of cash and cash 
equivalents, but are not considered cash and cash equivalents because 
they have maturities of three months or longer. The Exchange believes, 
however, that Short-Term Fixed Income Securities are less susceptible 
than other types of fixed income instruments both to price manipulation 
and volatility and that the holdings as proposed are generally 
consistent with the policy concerns which Commentary .01(b)(3) is 
intended to address. Because the Short-Term Fixed Income Securities 
will consist generally of high-quality Short-Term Fixed Income 
Securities described above, the Exchange believes that the policy 
concerns that Commentary .01(b)(3) is intended to address are otherwise 
mitigated and that the Fund should be permitted to hold these 
securities in a manner that may not comply with such provision.
    The Adviser represents that the Fund is not a money market fund but 
its investment strategy follows certain guidelines applicable to such 
funds. Specifically, the Fund will only invest in Short-Term Fixed 
Income Securities to maintain a maximum dollar-weighted average 
maturity of sixty days or less and dollar-weighted average life of 120 
days or less. The Fund will invest in Short-Term Fixed Income 
Securities that have remaining maturities of 397 calendar days or less. 
While the Fund will have portfolio holdings that meet the definition of 
cash and cash equivalents under NYSE Arca Rule 8.600-E, Commentary 
.01(c), the other assets may at times be invested in longer dated 
securities, including U.S. and foreign government securities, and 
corporate bonds. The exemption from the 13 non-affiliated issuer 
requirement for the fixed income portion of the Fund's portfolio will 
allow the Fund to invest in a limited number of Short-Term Fixed Income 
Securities without having to allocate a small percentage of assets 
under management to the required minimum 13 issuers.

[[Page 24053]]

    The Fund's investments in sovereign debt obligations and corporate 
bonds, floating rate bonds and variable rate bonds will be limited to 
30% of the Fund's total assets.
    All Short-Term Fixed Income Securities will comply with the 
requirements of Commentary .01(b) to NYSE Arca Rule 8.600-E, except for 
Commentary .01(b)(3) as described above, and the cash equivalents the 
Fund may invest in will comply with the requirements of Commentary 
.01(c).
    The Fund may invest in shares of investment company securities 
(other than ETFs), which are equity securities. Therefore, to the 
extent the Fund invests in shares of other non-exchange-traded open-end 
management investment company securities, the Fund will not comply with 
the requirements of Commentary .01(a)(1)(A) through (E) to NYSE Arca 
Rule 8.600-E (U.S. Component Stocks) with respect to its non-exchange-
traded investment securities holdings.\22\
---------------------------------------------------------------------------

    \22\ Commentary .01(a)(1) to NYSE Arca Rule 8.600-E 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; and (F) American Depositary Receipts 
(``ADRs'') in a portfolio may be exchange-traded or non-exchange-
traded. However, no more than 10% of the equity weight of a 
portfolio shall consist of non-exchange-traded ADRs.
---------------------------------------------------------------------------

    However, it is appropriate and in the public interest to approve 
listing and trading of Shares of the Fund notwithstanding that the 
Fund's holdings in such securities would not meet the requirements of 
Commentary .01(a)(1)(A) through (E) to Rule 8.600-E. Investments in 
other non-exchange-traded open-end management investment company 
securities will not exceed 20% of the total assets of the Fund. Such 
investments, which may include mutual funds that invest, for example, 
principally in fixed income securities, would be utilized to help the 
Fund meet its investment objective and to equitize cash in the short 
term. The Fund will invest in such securities only to the extent that 
those investments would be consistent with the requirements of Section 
12(d)(1) of the 1940 Act and the rules thereunder.\23\ Because such 
securities must satisfy applicable 1940 Act diversification 
requirements, and have a net asset value based on the value of 
securities and financial assets the investment company holds, it is 
both unnecessary and inappropriate to apply to such investment company 
securities the criteria in Commentary .01(a)(1).
---------------------------------------------------------------------------

    \23\ 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 Nos. 86362 (July 12, 2019), 84 FR 34457 (July 18, 2019) (SR-
NYSEArca-2019-36 (Notice of Filing of Amendment No. 3 and Order 
Granting Accelerated Approval of a Proposed Rule Change, as Modified 
by Amendment No. 3, to List and Trade Shares of JPMorgan Income 
Builder Blend ETF under NYSE Arca Rule 8.600-E); 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).
---------------------------------------------------------------------------

    The Exchange notes that Commentary .01(a)(1)(A) through (D) to Rule 
8.600-E exclude 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)).\24\ In 
its 2008 Approval Order approving amendments to Commentary .01(a) to 
Rule 5.2(j)(3) to 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 mutual fund 
shares certain of the generic quantitative criteria (e.g., market 
capitalization, trading volume, or portfolio criteria) in Commentary 
.01(a)(1) (A) through (D) applicable to U.S. Component Stocks. For 
example, the requirements 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 are tailored to exchange-traded 
securities (i.e., U.S. Component Stocks) and not to mutual fund shares, 
which do not trade in the secondary market and for which no such volume 
information is reported. In addition, Commentary .01(a)(1)(A) relating 
to minimum market value of portfolio component stocks, Commentary 
.01(a)(1)(C) relating to weighting of portfolio component stocks, and 
Commentary .01(a)(1)(D) relating to minimum number of portfolio 
components are not appropriately applied to open-end management 
investment company securities; open-end investment companies hold 
multiple individual securities as disclosed publicly in accordance with 
the 1940 Act, and application of Commentary .01(a)(1)(A) through (D) 
would not serve the purposes served with respect to U.S. Component 
Stocks, namely, to establish minimum liquidity

[[Page 24054]]

and diversification criteria for U.S. Component Stocks held by series 
of Managed Fund Shares.
---------------------------------------------------------------------------

    \24\ 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 Rule 8.600-E To Adopt 
Generic Listing Standards for Managed Fund Shares). See also 
Amendment No. 7 to SR-NYSEArca-2015-110, available at https://www.sec.gov/comments/sr-nysearca-2015-110/nysearca2015110-9.pdf.
---------------------------------------------------------------------------

    The Exchange notes that the Commission has previously approved 
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.\25\ 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.
---------------------------------------------------------------------------

    \25\ See note 22, supra.
---------------------------------------------------------------------------

    The Exchange notes that, other than Commentary .01(a)(1)(A) through 
(E) regarding the Fund's investments in non-exchange-traded investment 
company securities and Commentary .01(b)(3) to Rule 8.600-E regarding 
the Fund's investments in Short-Term Fixed Income Securities, as 
described above, the Fund will meet all other requirements of Rule 
8.600-E.
Availability of Information
    The Fund's website (www.spdrs.com) will include a form of the 
prospectus for the Fund that may be downloaded. The Fund's website will 
include 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 mid-point of the bid/ask spread 
at the time of calculation of such NAV (the ``Bid/Ask Price''),\26\ 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 
Adviser will disclose on the Fund's website the Disclosed Portfolio for 
the Fund as defined in NYSE Arca Rule 8.600-E(c)(2) that will form the 
basis for the Fund's calculation of NAV at the end of the business 
day.\27\
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    \26\ 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.
    \27\ Under accounting procedures to be 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 will disclose on its website the 
information regarding the Disclosed Portfolio required under NYSE Arca 
Rule 8.600-E (c)(2) to the extent applicable. The Fund's website 
information will be publicly available at no charge.
    Investors can also obtain the Fund's Statement of Additional 
Information (``SAI''), its Shareholder Reports, its Form N-CSR and Form 
N-PORT, filed quarterly, and its Form N-CEN, filed annually. The Fund's 
SAI and Shareholder Reports are available free upon request from the 
Trust, and those documents and the Form N-CSR and Form N-CEN may be 
viewed on-screen or downloaded from the Commission's website at 
www.sec.gov.
    Quotation and last sale information for the Shares and ETFs will be 
available via the CTA high speed line. Quotation and last sale 
information for such U.S. exchange-listed securities will be available 
from the exchange on which they are listed and from major market data 
vendors. Information regarding market price and trading volume for the 
Shares will be continually available on a real-time basis throughout 
the day on brokers' computer screens and other electronic services. 
Information regarding the previous day's closing price and trading 
volume information for the Shares will be published daily in the 
financial section of newspapers.
    Quotation information for Short-Term Fixed Income Securities and 
cash equivalents may be obtained from brokers and dealers who make 
markets in such securities or through nationally recognized pricing 
services through subscription agreements. The U.S. dollar value of 
foreign securities, instruments and currencies can be derived by using 
foreign currency exchange rate quotations obtained from nationally 
recognized pricing services. Price information for non-exchange-traded 
investment company securities is available from major market data 
vendors.
    In addition, the Portfolio Indicative Value (``PIV''), 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.\28\ The dissemination of the PIV, together with 
the Disclosed Portfolio, will allow investors to determine the 
approximate value of the underlying portfolio of the Fund on a daily 
basis and will provide a close estimate of that value throughout the 
trading day.
---------------------------------------------------------------------------

    \28\ Currently, it is the Exchange's understanding that several 
major market data vendors display and/or make widely available PIVs 
taken from the CTA or other data feeds.
---------------------------------------------------------------------------

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.\29\ 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 of the Fund inadvisable.
---------------------------------------------------------------------------

    \29\ See NYSE Arca Rule 7.12-E.
---------------------------------------------------------------------------

    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.
    Except as described herein with respect to the generic listing 
requirements in Commentary .01 to NYSE Arca Rule 8.600-E, the Shares of 
the Fund 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 
\30\ under the Act, as provided by NYSE Arca Rule 5.3-E. A minimum of 
100,000 Shares of the Fund will be outstanding at the commencement of 
trading on the Exchange. The Exchange will obtain a representation from 
the issuer of the Shares of the Fund that the NAV and the Disclosed 
Portfolio will be made

[[Page 24055]]

available to all market participants at the same time.
---------------------------------------------------------------------------

    \30\ 17 CFR 240 10A-3.
---------------------------------------------------------------------------

Surveillance
    The Exchange represents that trading in the Shares will be subject 
to the existing trading surveillances administered by the 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.\31\ 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 applicable federal securities laws.
---------------------------------------------------------------------------

    \31\ FINRA conducts cross-market surveillances on behalf of the 
Exchange pursuant to a regulatory services agreement. The Exchange 
is responsible for FINRA's performance under this regulatory 
services agreement.
---------------------------------------------------------------------------

    The surveillances referred to above generally focus on detecting 
securities trading outside their normal patterns, which could be 
indicative of manipulative or other violative activity. When such 
situations are detected, surveillance analysis follows and 
investigations are opened, where appropriate, to review the behavior of 
all relevant parties for all relevant trading violations.
    The Exchange or FINRA, on behalf of the Exchange, or both, will 
communicate as needed regarding trading in the Shares and ETFs with 
other markets and other entities that are members of the Intermarket 
Surveillance Group (``ISG''), and the Exchange or FINRA, on behalf of 
the Exchange, or both, may obtain trading information regarding trading 
in Shares and ETFs from such markets and other entities. In addition, 
the Exchange may obtain information regarding trading in Shares and 
ETFs from markets and other entities that are members of ISG or with 
which the Exchange has in place a comprehensive surveillance sharing 
agreement.\32\ FINRA, on behalf of the Exchange, is able to access, as 
needed, trade information for certain fixed income securities held by 
the Fund reported to FINRA's Trade Reporting and Compliance Engine 
(``TRACE'').
---------------------------------------------------------------------------

    \32\ For a list of the current members of ISG, see 
www.isgportal.org. The Exchange notes that not all components of the 
Disclosed Portfolio for the Fund may trade on markets that are 
members of ISG or with which the Exchange has in place a 
comprehensive surveillance sharing agreement.
---------------------------------------------------------------------------

    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 holdings or reference assets, (b) 
limitations on portfolio holdings or reference assets, or (c) the 
applicability of Exchange listing rules specified in this rule filing 
shall constitute continued listing requirements for listing the Shares 
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 PIV will not be calculated or publicly disseminated; (4) how 
information regarding the PIV 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 
will be 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) \33\ 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.
---------------------------------------------------------------------------

    \33\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares will be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria in NYSE Arca Rule 8.600-E. The 
Adviser is not registered as a broker-dealer but is affiliated with a 
broker-dealer and has implemented and will maintain a fire wall with 
respect to such broker-dealer affiliate regarding access to information 
concerning the composition and/or changes to the portfolio. 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 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 applicable federal securities laws. The Exchange or 
FINRA, on behalf of the Exchange, or both, will communicate as needed 
regarding trading in the Shares and ETFs 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 such securities from such markets and other entities. 
In addition, the Exchange may obtain information regarding trading in 
such securities from markets and other entities that are members of ISG 
or with which the Exchange has in place a comprehensive surveillance 
sharing agreement. FINRA, on behalf of the Exchange, is able to access, 
as needed, trade information for certain fixed income securities held 
by the Fund reported to FINRA's TRACE.
    The PIV, 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.
    Except as described herein, the Shares of the Fund will conform to 
the initial

[[Page 24056]]

and continued listing criteria under NYSE Arca Rule 8.600-E. The 
Exchange represents that, for initial and/or continued listing, the 
Fund will be in compliance with Rule 10A-3 under the Act, as provided 
by NYSE Arca Rule 5.3-E. A minimum of 100,000 Shares of the Fund will 
be outstanding at the commencement of trading on the Exchange. The 
Exchange will obtain a representation from the issuer of the Shares of 
the Fund 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 Fund's portfolio holdings 
will be disclosed on its website daily after the close of trading on 
the Exchange and prior to the opening of trading on the Exchange the 
following day. On a daily basis, the Fund will disclose the information 
regarding the Disclosed Portfolio required under NYSE Arca Rule 8.600-E 
(c)(2) to the extent applicable. The Fund's website information will be 
publicly available at no charge.
    Investors can also obtain the Fund's Statement of Additional 
Information (``SAI''), its Shareholder Reports, its Form N-CSR, filed 
twice a year, and its Form N-CEN, filed annually. The Fund's SAI and 
Shareholder Reports are available free upon request from the Trust, and 
those documents and the Form N-CSR and Form N-CEN may be viewed on-
screen or downloaded from the Commission's website at www.sec.gov. 
Quotation and last sale information for the Shares and ETFs will be 
available via the CTA high speed line.
    With respect to the Fund's non-compliance with Commentary .01(b)(3) 
(with respect to Short-Term Fixed Income Securities),\34\ the 
requirement set forth in Commentary .01(b)(3) is intended to ensure 
that the Short-Term Fixed Income Securities included in the Fund's 
portfolio are sufficiently diversified among non-affiliated issuers, 
and the Exchange believes that any concerns related to non-compliance 
are mitigated by the types of instruments that the Fund would hold. The 
Fund's Short-Term Fixed Income Securities primarily will include those 
instruments that are included in the definition of cash and cash 
equivalents, but are not considered cash and cash equivalents because 
they have maturities of three months or longer. The Exchange believes, 
however, that Short-Term Fixed Income Securities are less susceptible 
than other types of fixed income instruments both to price manipulation 
and volatility and that the holdings as proposed are generally 
consistent with the policy concerns which Commentary .01(b)(3) is 
intended to address. As noted above, with respect to the Fund's 
holdings in Short-Term Fixed Income Securities, cash and cash 
equivalents, such Fund holdings will maintain a maximum dollar-weighted 
average maturity of sixty days or less and dollar-weighted average life 
of 120 days or less and will have remaining maturities of 397 calendar 
days or less. Because the Short-Term Fixed Income Securities will 
consist generally of high-quality Short-Term Fixed Income Securities 
described above, the Exchange believes that the policy concerns that 
Commentary .01(b)(3) is intended to address are otherwise mitigated and 
that the Fund should be permitted to hold these securities in a manner 
that may not comply with such provision.
---------------------------------------------------------------------------

    \34\ See note 21, supra.
---------------------------------------------------------------------------

    As noted above, the Fund's portfolio will 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 securities of open-end 
investment company securities. 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 non-exchange-
traded securities of open-end investment company securities. 
Investments in non-exchange-traded securities of open-end investment 
company 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. Investments in non-exchange-traded open-end management investment 
company securities will not exceed 20% of the total assets of the Fund.
    The website for the Fund will include the prospectus for the Fund 
and additional data relating to NAV and other applicable quantitative 
information. Moreover, prior to the commencement of trading, the 
Exchange will inform its ETP Holders in an Information Bulletin of the 
special characteristics and risks associated with trading 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 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 Rule 8.600-E(d)(2)(D), which sets 
forth circumstances under which Shares of the Fund may be halted. In 
addition, as noted above, investors will have ready access to 
information regarding the Fund's holdings, the PIV, the Disclosed 
Portfolio, and quotation and last sale information for the Shares. The 
Fund's investments will be consistent with the Fund's investment 
objective and will not be used to enhance leverage. That is, while the 
Fund will be permitted to borrow as permitted under the 1940 Act, the 
Fund's investments will not be used to seek performance that is the 
multiple or inverse multiple (e.g., 2Xs and 3Xs) of the Fund's primary 
broad-based securities benchmark index (as defined in Form N-1A).\35\
---------------------------------------------------------------------------

    \35\ See note 20, supra.
---------------------------------------------------------------------------

    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 actively-managed exchange-traded product and will enhance 
competition among market participants, to the benefit of investors and 
the marketplace. As noted above, the Exchange has in place surveillance 
procedures relating to trading in the Shares and may obtain information 
via ISG from other exchanges that are members of ISG or with which the 
Exchange has entered into a comprehensive surveillance sharing 
agreement. In addition, as noted above, investors have ready access to 
information regarding the Fund's holdings, the PIV, the Disclosed 
Portfolio for the Fund, and quotation and last sale information for the 
Shares.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purpose of the Act. The Exchange notes that the 
proposed rule change will facilitate the listing and trading of an 
additional type of actively-managed exchange-traded product that holds 
fixed income securities and equity securities and that will enhance 
competition among market participants, to the benefit of investors and 
the marketplace.

[[Page 24057]]

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-2020-07, as Modified by Amendment No. 1, and Grounds for 
Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Exchange Act \36\ 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 below, the Commission seeks and 
encourages interested persons to provide comments on the proposed rule 
change.
---------------------------------------------------------------------------

    \36\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

    Pursuant to Section 19(b)(2)(B) of the Exchange Act,\37\ the 
Commission is providing notice of the grounds for disapproval under 
consideration. The Commission is instituting proceedings to allow for 
additional analysis of the proposed rule change'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, . . . to remove impediments to 
and perfect the mechanism of a free and open market and a national 
market system, and, in general, to protect investors and the public 
interest.'' \38\
---------------------------------------------------------------------------

    \37\ Id.
    \38\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

IV. Procedure: Request for Written Comments

    The Commission requests that interested persons provide written 
submissions of their views, data, and arguments with respect to the 
issues identified above, as well as any other concerns they may have 
with the proposal. In particular, the Commission invites the written 
views of interested persons concerning 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, any request for an opportunity to 
make an oral presentation.\39\
---------------------------------------------------------------------------

    \39\ Section 19(b)(2) of the Exchange Act, as amended by the 
Securities Act Amendments of 1975, Public Law 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 Act Amendments of 
1975, Senate Comm. on Banking, Housing & Urban Affairs, S. Rep. No. 
75, 94th Cong., 1st Sess. 30 (1975).
---------------------------------------------------------------------------

    Interested persons are invited to submit written data, views, and 
arguments regarding whether the proposed rule change, as modified by 
Amendment No. 1, should be approved or disapproved by May 21, 2020. Any 
person who wishes to file a rebuttal to any other person's submission 
must file that rebuttal by June 4, 2020.
    The Commission asks that commenters address the sufficiency of the 
Exchange's statements in support of the proposal, which are set forth 
in Amendment No. 1,\40\ and any other issues raised by the proposed 
rule change under the Act. In particular, the Commission seeks 
commenters' views regarding whether the Exchange has adequately 
described the proposed investments of the Fund for the Commission to 
make a determination under Section 6(b)(5) of the Act.
---------------------------------------------------------------------------

    \40\ See supra note 6.
---------------------------------------------------------------------------

    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-2020-07 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-2020-07. 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-2020-07 and should be submitted 
on or before May 21, 2020. Rebuttal comments should be submitted by 
June 4, 2020.
    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\41\
---------------------------------------------------------------------------

    \41\ 17 CFR 200.30-3(a)(12) & 17 CFR 200.30-3(a)(57).

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-09128 Filed 4-29-20; 8:45 am]
 BILLING CODE 8011-01-P
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