80 FR 33309 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Amendment No. 1 and Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change, as Modified by Amendment No. 1 Thereto, To Amend NYSE Arca Equities Rule 8.600 To Adopt Generic Listing Standards for Managed Fund Shares
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 80, Issue 112 (June 11, 2015)
Federal Register Volume 80, Issue 112 (June 11, 2015)
| Page Range | 33309-33316 | |
| FR Document | 2015-14242 |
[Federal Register Volume 80, Number 112 (Thursday, June 11, 2015)] [Notices] [Pages 33309-33316] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2015-14242] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-75115; File No. SR-NYSEArca-2015-02] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Amendment No. 1 and Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change, as Modified by Amendment No. 1 Thereto, To Amend NYSE Arca Equities Rule 8.600 To Adopt Generic Listing Standards for Managed Fund Shares June 5, 2015. On February 17, 2015, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'') filed with the Securities and Exchange Commission (``SEC'' or ``Commission''), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to amend NYSE Arca Equities Rule 8.600 to adopt generic listing standards for Managed Fund Shares. The proposed rule change was published for comment in the Federal Register on March 10, 2015.\3\ The Commission received three comments on the proposal.\4\ On April 17, 2015, pursuant to Section 19(b)(2) of the Act,\5\ the Commission designated a longer period within which to either approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether to disapprove the proposed rule change.\6\ --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ See Securities Exchange Act Release No. 74433 (Mar. 4, 2015), 80 FR 12690 (``Notice''). \4\ See letter dated March 31, 2015 from Anonymous; letter dated March 31, 2015 from Dorothy Donohue, Deputy General Counsel, Securities Regulation, Investment Company Institute (``ICI''), to Brent J. Fields, Secretary, Commission; and letter dated March 31, 2015 from Thomas E. Faust Jr., Chairman and Chief Executive Officer, Eaton Vance Corp. (``Eaton Vance''), to Brent J. Fields, Secretary, Commission (all comments to the proposed rule change are available on the Commission's Web site at http://www.sec.gov/comments/sr-nysearca-2015-02/nysearca201502.shtml). ICI expressed strong support for the proposal, stating that it would add certainty and uniformity to the ETF listing process. Eaton Vance also expressed support for the proposal and offered suggestions to enhance the disclosure regime for Managed Fund Shares. The anonymous commenter said ``Great job!'' \5\ 15 U.S.C. 78s(b)(2). \6\ See Securities Exchange Act Release No. 74755, 80 FR 22762 (Apr. 23, 2014). The Commission determined that it was appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposed rule change and the comments received. Accordingly, the Commission designated June 8, 2015 as the date by which it should approve, disapprove, or institute proceedings to determine whether to disapprove the proposed rule change. --------------------------------------------------------------------------- Pursuant to Section 19(b)(1) of the Act \7\ and Rule 19b-4 thereunder,\8\ notice is hereby given that, on June 3, 2015, the Exchange filed with the Commission Amendment No. 1 to the proposed rule change, as described in Sections I and II below, which Sections have been prepared by the Exchange.\9\ The Commission is publishing this notice to solicit comments on the proposed rule change, as modified by Amendment No. 1 thereto, from interested persons. --------------------------------------------------------------------------- \7\ 15 U.S.C.78s(b)(1). \8\ 17 CFR 240.19b-4. \9\ Amendment No. 1 amends and replaces the filing, SR-NYSEArca- 2015-02, and supersedes such filing in its entirety (Amendment No. 1 to the proposed rule change is also available on the Commission's Web site at http://www.sec.gov/comments/sr-nysearca-2015-02/nysearca201502.shtml). --------------------------------------------------------------------------- Additionally, this order institutes proceedings under Section 19(b)(2)(B) of the Act \10\ to determine whether to approve or disapprove the proposed rule change, as modified by Amendment No. 1 thereto, as discussed in Section III below. The institution of proceedings does not indicate that the Commission has reached any conclusions with respect to any of the issues involved, nor does it mean that the Commission will ultimately disapprove the proposed rule change. Rather, as described in Section III, below, the Commission seeks and encourages interested persons to provide additional comment on the proposed rule change to inform the Commission's analysis of whether to [[Page 33310]] approve or disapprove the proposed rule change. --------------------------------------------------------------------------- \10\ 15 U.S.C. 78s(b)(2)(B). --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend NYSE Arca Equities Rule 8.600 to adopt generic listing standards for Managed Fund Shares. The text of the proposed rule change is available on the Exchange's Web site 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 Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend NYSE Arca Equities Rule 8.600 to adopt generic listing standards for Managed Fund Shares. Under the Exchange's current rules, a proposed rule change must be filed with the Commission for the listing and trading of each new series of Managed Fund Shares. The Exchange believes that it is appropriate to codify certain rules within Rule 8.600 that would generally eliminate the need for such proposed rule changes, which would create greater efficiency and promote uniform standards in the listing process.\11\ --------------------------------------------------------------------------- \11\ This Amendment No. 1 to SR-NYSEArca-2015-02 replaces SR- NYSEArca-2015-02 as originally filed and supersedes such filing in its entirety. --------------------------------------------------------------------------- Background Rule 8.600 sets forth certain rules related to the listing and trading of Managed Fund Shares.\12\ Under Rule 8.600(c)(1), the term ``Managed Fund Share'' means a security that: --------------------------------------------------------------------------- \12\ See Securities Exchange Act Release No. 57619 (April 4, 2008), 73 FR 19544 (April 10, 2008) (SR-NYSEArca-2008-25) (order approving NYSE Arca Equities Rule 8.600 and listing and trading of shares of certain issues of Managed Fund Shares) (the ``Approval Order''). The Approval Order approved the rules permitting the listing and trading of Managed Fund Shares, trading hours and halts, listing fees applicable to Managed Fund Shares, and the listing and trading of several individual series of Managed Fund Shares. --------------------------------------------------------------------------- (a) Represents an interest in a registered investment company (``Investment Company'') organized as an open-end management investment company or similar entity, that invests in a portfolio of securities selected by the Investment Company's investment adviser (hereafter ``Adviser'') consistent with the Investment Company's investment objectives and policies; (b) is issued in a specified aggregate minimum number in return for a deposit of a specified portfolio of securities and/or a cash amount with a value equal to the next determined net asset value; and (c) when aggregated in the same specified minimum number, may be redeemed at a holder's request, which holder will be paid a specified portfolio of securities and/or cash with a value equal to the next determined net asset value. Effectively, Managed Fund Shares are securities issued by an actively-managed open-end Investment Company (i.e., an actively-managed exchange-traded fund (``ETF'')). Because Managed Fund Shares are actively-managed, they do not seek to replicate the performance of a specified passive index of securities. Instead, they generally use an active investment strategy to seek to meet their investment objectives. In contrast, an open-end Investment Company that issues Investment Company Units (``Units''), listed and traded on the Exchange pursuant to NYSE Arca Equities Rule 5.2(j)(3), seeks to provide investment results that generally correspond to the price and yield performance of a specific foreign or domestic stock index, fixed income securities index or combination thereof. All Managed Fund Shares listed and/or traded pursuant to Rule 8.600 (including pursuant to unlisted trading privileges) are subject to the full panoply of Exchange rules and procedures that currently govern the trading of equity securities on the Exchange.\13\ --------------------------------------------------------------------------- \13\ See Approval Order, supra note 12, at 19547. --------------------------------------------------------------------------- In addition, Rule 8.600(d) currently provides for the criteria that Managed Fund Shares must satisfy for initial and continued listing on the Exchange, including, for example, that a minimum number of Managed Fund Shares are required to be outstanding at the time of commencement of trading on the Exchange. However, the current process for listing and trading new series of Managed Fund Shares on the Exchange requires that the Exchange submit a proposed rule change with the Commission. In this regard, Commentary .01 to Rule 8.600 specifies that the Exchange will file separate proposals under Section 19(b) of the Act (hereafter, a ``proposed rule change'') before listing and trading of shares of an issue of Managed Fund Shares. Proposed Changes to Rule 8.600 The Exchange would amend Commentary .01 to Rule 8.600 to specify that the Exchange may approve Managed Fund Shares for listing and/or trading (including pursuant to unlisted trading privileges) pursuant to SEC Rule 19b-4(e) under the Act, which pertains to derivative securities products (``SEC Rule 19b-4(e)'').\14\ SEC Rule 19b-4(e)(1) provides that the listing and trading of a new derivative securities product by a self-regulatory organization (``SRO'') is not deemed a proposed rule change, pursuant to paragraph (c)(1) of Rule 19b-4,\15\ if the Commission has approved, pursuant to section 19(b) of the Act, the SRO's trading rules, procedures and listing standards for the product class that would include the new derivative securities product and the SRO has a surveillance program for the product class. This is the current method pursuant to which ``passive'' ETFs are listed under NYSE Arca Equities Rule 5.2(j)(3). --------------------------------------------------------------------------- \14\ 17 CFR 240.19b-4(e). As provided under SEC Rule 19b-4(e), the term ``new derivative securities product'' means any type of option, warrant, hybrid securities product or any other security, other than a single equity option or a security futures product, whose value is based, in whole or in part, upon the performance of, or interest in, an underlying instrument. \15\ 17 CFR 240.19b-4(c)(1). As provided under SEC Rule 19b- 4(c)(1), a stated policy, practice, or interpretation of the SRO shall be deemed to be a proposed rule change unless it is reasonably and fairly implied by an existing rule of the SRO. --------------------------------------------------------------------------- The Exchange would also specify within Commentary .01 to Rule 8.600 that components of Managed Fund Shares listed pursuant to SEC Rule 19b- 4(e) must satisfy on an initial and continued basis certain specific criteria, which the Exchange would include within Commentary .01, as described in greater detail below. As proposed, the Exchange would continue to file separate proposed rule changes before the listing and trading of Managed Fund Shares with components that do not satisfy the additional criteria described below or components other than those specified below. For example, if the components of a Managed Fund Share exceeded one of the applicable thresholds, the Exchange would file a [[Page 33311]] separate proposed rule change before listing and trading such Managed Fund Share. Similarly, if the components of a Managed Fund Share included a security or asset that is not specified below, the Exchange would file a separate proposed rule change. The Exchange would also add to the criteria of Rule 8.600(c) to provide that the Web site for each series of Managed Fund Shares shall disclose certain information regarding the Disclosed Portfolio, to the extent applicable. The required information includes the following, to the extent applicable: ticker symbol, CUSIP or other identifier, a description of the holding, identity of the asset upon which the derivative is based, the strike price for any options, the quantity of each security or other asset held as measured by select metrics, maturity date, coupon rate, effective date, market value and percentage weight of the holding in the portfolio.\16\ --------------------------------------------------------------------------- \16\ Proposed rule changes for previously-listed series of Managed Fund Shares have similarly included disclosure requirements with respect to each portfolio holding, as applicable to the type of holding. See, e.g. Securities Exchange Act Release No. 72666 (July 3, 2014), 79 FR 44224 (July 30, 2014) (SR-NYSEArca-2013-122) (the ``PIMCO Total Return Use of Derivatives Approval''), at 44227. --------------------------------------------------------------------------- In addition, the Exchange would amend Rule 8.600(d) to specify that all Managed Fund Shares must have a stated investment objective, which must be adhered to under normal market conditions.\17\ --------------------------------------------------------------------------- \17\ The Exchange would also add a new defined term under Rule 8.600(c)(5) to specify that the term ``normal market conditions'' includes, but is not limited to, the absence of trading halts in the applicable financial markets generally; operational issues causing dissemination of inaccurate market information; or force majeure type events such as systems failure, natural or man-made disaster, act of God, armed conflict, act of terrorism, riot or labor disruption or any similar intervening circumstance. --------------------------------------------------------------------------- Finally, the Exchange would also amend the continued listing requirement in Rule 8.600(d)(2)(A) by changing the requirement that a Portfolio Indicative Value for Managed Fund Shares be widely disseminated by one or more major market data vendors at least every 15 seconds during the time when the Managed Fund Shares trade on the Exchange to a requirement that a Portfolio Indicative Value be widely disseminated by one or more major market data vendors at least every 15 seconds during the Core Trading Session (as defined in NYSE Arca Equities Rule 7.34). Proposed Managed Fund Share Portfolio Standards The Exchange is proposing standards that would pertain to Managed Fund Shares to qualify for listing and trading pursuant to SEC Rule 19b-4(e). These standards would be grouped according to security or asset type. The Exchange notes that the standards proposed for a Managed Fund Share portfolio that holds domestic equity securities, Derivative Securities Products and Index-Linked Securities are based in large part on the existing equity security standards applicable to Units in Commentary .01 to Rule 5.2(j)(3). The standards proposed for a Managed Fund Share portfolio that holds fixed income securities are based in large part on the existing fixed income security standards applicable to Units in Commentary .02 to Rule 5.2(j)(3). Many of the standards proposed for other types of holdings in a Managed Fund Share portfolio are based on previous proposed rule changes for specific series of Managed Fund Shares.\18\ --------------------------------------------------------------------------- \18\ See the PIMCO Total Return Use of Derivatives Approval. See also, Securities Exchange Act Release Nos. 66321 (February 3, 2012), 77 FR 6850 (February 9, 2012) (SR-NYSEArca-2011-95) (the ``PIMCO Total Return Approval''); [sic] 69244 (March 27, 2013), 78 FR 19766 (April 2, 2013) (SR-NYSEArca-2013-08) (the ``SPDR Blackstone/GSO Senior Loan Approval''); 68870 (February 8, 2013), 78 FR 11245 (February 15, 2013) (SR-NYSEArca-2012-139) (the ``First Trust Preferred Securities and Income Approval''); 69591 (May 16, 2013), 78 FR 30372 (May 22, 2013) (SR-NYSEArca-2013-33) (the ``International Bear Approval''); 61697 (March 12, 2010), 75 FR 13616 (March 22, 2010) (SR-NYSEArca-2010-04) (the ``WisdomTree Real Return Approval''); and 67054 (May 24, 2012), 77 FR 32161 (May 31, 2012) (SR-NYSEArca-2012-25) (the ``WisdomTree Brazil Bond Approval''). Certain standards proposed herein for Managed Fund Shares are also based on previous proposed rule changes for specific series of Units for which Commission approval for listing was required due to the Units not satisfying certain standards of Commentary .01 and .02 to Rule 5.2(j)(3). See Securities Exchange Act Release Nos. 67985 (October 4, 2012), 77 FR 61804 (October 11, 2012) (SR-NYSEArca-2012-92) (the ``iShares 2018 S&P AMT-Free Municipal Series and iShares 2019 S&P AMT-Free Municipal Series Approval''); 63881(February 9, 2011), 76 FR 9065 (February 16, 2011) (SR-NYSEArca-2010-120) (the ``SPDR Nuveen S&P High Yield Municipal Bond ETF Approval''); 63176 (October 25, 2010), 75 FR 66815 (October 29, 2010) (SR-NYSEArca-2010-94) (the ``iShares Taxable Municipal Bond Fund Approval''); and 69373 (April 15, 2013), 78 FR 23601 (April 19, 2013) (SR-NYSEArca-2012-108) (the ``NYSE Arca U.S. Equity Synthetic Reverse Convertible Index Fund Approval''). --------------------------------------------------------------------------- Proposed Commentary .01(a) would describe the standards for a Managed Fund Share portfolio that holds equity securities, which are defined to be U.S. Component Stocks,\19\ Derivative Securities Products,\20\ and Index-Linked Securities \21\ listed on a national securities exchange as follows: --------------------------------------------------------------------------- \19\ For the purposes of Commentary .01 and this proposal, the term ``U.S. Component Stocks'' would have the same meaning as defined in NYSE Arca Equities Rule 5.2(j)(3). \20\ For the purposes of Commentary .01 and this proposal, the term ``Derivative Securities Products'' would have the same meaning as defined in NYSE Arca Equities Rule 7.34(a)(4)(A). \21\ Index-Linked Securities are securities listed under NYSE Arca Equities Rule 5.2(j)(6). --------------------------------------------------------------------------- (1) 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 must have a minimum market value of at least $75 million; \22\ --------------------------------------------------------------------------- \22\ This proposed text is identical to the corresponding text of Commentary .01(a)(A)(1) to Rule 5.2(j)(3), except for the omission of the reference to ``index,'' which is not applicable, and the addition of the reference to Index-Linked Securities. --------------------------------------------------------------------------- (2) 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 must 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; \23\ --------------------------------------------------------------------------- \23\ This proposed text is identical to the corresponding text of Commentary .01(a)(A)(2) to Rule 5.2(j)(3), except for the omission of the reference to ``index,'' which is not applicable, and the addition of the reference to Index-Linked Securities. --------------------------------------------------------------------------- (3) The most heavily weighted component stock (excluding Derivative Securities Products and Index-Linked Securities) must 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) must not exceed 65% of the equity weight of the portfolio; \24\ --------------------------------------------------------------------------- \24\ This proposed text is identical to the corresponding text of Commentary .01(a)(A)(3) to Rule 5.2(j)(3), except for the omission of the reference to ``index,'' which is not applicable, and the addition of the reference to Index-Linked Securities. --------------------------------------------------------------------------- (4) A portfolio that includes any equity security as described in Commentary .01(a) shall include a minimum of 13 component stocks; provided, however, that there shall be no minimum number of component stocks if (a) 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 (b) one or more series of Derivative Securities Products or Index-Linked Securities account for 100% of the equity weight [[Page 33312]] of the portfolio of a series of Managed Fund Shares; \25\ --------------------------------------------------------------------------- \25\ This proposed text is identical to the corresponding text of Commentary .01(a)(A)(4) to Rule 5.2(j)(3), except for the omission of the reference to ``index,'' which is not applicable, the addition of the reference to Index-Linked Securities, and the reference to the 100% limit applying to the ``equity portion'' of the portfolio. --------------------------------------------------------------------------- (5) Except as provided in proposed Commentary .01(a), equity securities in the portfolio must be U.S. Component Stocks listed on a national securities exchange and must be NMS Stocks as defined in Rule 600 of Regulation NMS; \26\ --------------------------------------------------------------------------- \26\ 17 CFR 240.600. This proposed text is identical to the corresponding text of Commentary .01(a)(A)(5) to Rule 5.2(j)(3), except for the addition of ``equity'' to make clear that the standard applies to ``equity securities'', the exclusion of unsponsored ADRs, and the omission of the reference to ``index,'' which is not applicable. --------------------------------------------------------------------------- (6) For Derivative Securities Products and Index-Linked Securities, no more than 25% of the equity weight of the portfolio could include leveraged and/or inverse leveraged Derivative Securities Products or Index-Linked Securities; and (7) American Depositary Receipts (``ADRs'') may be sponsored or unsponsored. However no more than 10% of the equity weight of the portfolio shall consist of unsponsored ADRs. Proposed Commentary .01(b) would describe the standards for a Managed Fund Share portfolio that holds fixed income securities, which are debt securities \27\ that are notes, bonds, debentures or evidence of indebtedness that include, but are not limited to, U.S. Department of Treasury securities (``Treasury Securities''), government-sponsored entity securities (``GSE Securities''), municipal securities, trust preferred securities, supranational debt and debt of a foreign country or a subdivision thereof, investment grade and high yield corporate debt, bank loans, mortgage and asset backed securities, and commercial paper. The applicable portfolio holdings standards would be as follows: --------------------------------------------------------------------------- \27\ Debt securities include a variety of fixed income obligations, including, but not limited to, corporate debt securities, government securities, municipal securities, convertible securities, and mortgage-backed securities. Debt securities include investment-grade securities, non-investment-grade securities, and unrated securities. Debt securities also include variable and floating rate securities. To the extent a fund holds a convertible security, the equity security into which such security is converted would be required to meet the criteria of proposed Commentary .01(a). --------------------------------------------------------------------------- (1) Components that in the aggregate account for at least 75% of the fixed income weight of the portfolio shall meet the following: (i) Each shall have a minimum original principal amount outstanding of $100 million or more; \28\ or --------------------------------------------------------------------------- \28\ This text of proposed Commentary .01(b)(1)(i) to Rule 8.600 is based on the corresponding text of Commentary .02(a)(2) to Rule 5.2(j)(3) . --------------------------------------------------------------------------- (ii) if a municipal bond component, such component shall be issued in an offering with an aggregate size, as set forth in the official statement of the offering, of $100 million or more; \29\ --------------------------------------------------------------------------- \29\ This proposed text is similar to the amendment to Commentary .02(a)(2) to Rule 5.2(j)(3) as proposed in SR-NYSEArca- 2015-01. See Securities Exchange Act Release No. 74175 (January 29, 2015), 80 FR 6150 (February 4, 2015) (notice of filing of proposed rule change amending NYSE Arca Equities Rule 5.2(j)(3), Commentary .02 relating to listing of Investment Company Units based on municipal bond indexes). Proposed rule changes for series of Units previously listed and traded on the Exchange pursuant to Rule 5.2(j)(3) similarly included the ability for such Units' holdings to include municipal bond components with individual principal amount outstanding of less than $100 million. See, e.g., iShares 2018 S&P AMT-Free Municipal Series and iShares 2019 S&P AMT-Free Municipal Series Approval, supra note 18, at 61807; SPDR Nuveen S&P High Yield Municipal Bond ETF Approval, supra note 18, at 9066; and iShares Taxable Municipal Bond Fund Approval, supra note 18, at 66815-6. The proposed rule takes into account features of municipal bonds that differ from those of most other Fixed Income Securities. Principally, municipal bonds are issued with either ``serial'' or ``term'' maturities or some combination thereof. The official statement issued in connection with a municipal bond offering describes the terms of the bonds and the issuer and/or obligor on the related bonds, which is comprised of a number of specific maturity sizes. The entire issue (sometimes referred to as the ``deal size'') receives the same credit rating and the various maturities are all subject to the provisions set forth in the official statement. The entire issue is based on a specified project or group of related projects and funded by the same revenue or other funding sources identified in the official statement. The Exchange believes that the proposed rule change is reasonable and appropriate in that pricing and liquidity of such maturity sizes is predominately based on the common characteristics of the aggregate issue of which the municipal bond is part. Thus, consideration of the aggregate issue rather than the individual bond component does not raise concerns regarding pricing or liquidity of the index components or of the Units overlying the applicable municipal bond index. --------------------------------------------------------------------------- (2) No component fixed-income security (excluding Treasury Securities and GSE Securities) could represent more than 30% of the fixed income weight of the portfolio, and the five most heavily weighted component fixed income securities in the portfolio must not in the aggregate account for more than 65% of the fixed income weight of the portfolio,\30\ --------------------------------------------------------------------------- \30\ This proposed text is identical to the corresponding text of Commentary .02(a)(4) to Rule 5.2(j)(3), except for the omission of the reference to ``index,'' which is not applicable. --------------------------------------------------------------------------- (3) An underlying portfolio (excluding exempted securities) that includes fixed income securities must 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 proposed Commentary .01(a).\31\ --------------------------------------------------------------------------- \31\ This proposed text is similar to the corresponding text of Commentary .02(a)(5) to Rule 5.2(j)(3), except for the omission of the reference to ``index,'' which is not applicable, the exclusion of the text ``consisting entirely of exempted securities'' and the provision 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 proposed Commentary .01(a). --------------------------------------------------------------------------- (4) Component securities that in aggregate account for at least 90% of the fixed income weight of the portfolio must be either (a) from issuers that are required to file reports pursuant to Sections 13 and 15(d) of the Act; (b) from issuers that have a worldwide market value of its outstanding common equity held by non-affiliates of $700 million or more; (c) from issuers that have outstanding securities that are notes, bonds debentures, or evidence of indebtedness having a total remaining principal amount of at least $1 billion; (d) exempted securities as defined in Section 3(a)(12) of the Act; or (e) from issuers that are a government of a foreign country or a political subdivision of a foreign country; and (5) Non-agency, non-GSE and privately-issued mortgage-related and other asset-backed securities components of a portfolio shall not account, in the aggregate, for more than 20% of the weight of the fixed income portion of the portfolio. Proposed Commentary .01(c) would describe the standards for a Managed Fund Share portfolio that holds cash and cash equivalents.\32\ Specifically, the portfolio may hold short-term instruments with maturities of less than 3 months. There would be no limitation to the percentage of the portfolio invested in such holdings. Short-term instruments would include the following: \33\ --------------------------------------------------------------------------- \32\ Proposed rule changes for previously-listed series of Managed Fund Shares have similarly included the ability for such Managed Fund Share holdings to include cash and cash equivalents. See, e.g., SPDR Blackstone/GSO Senior Loan Approval, supra note 18, at 19768-69 and First Trust Preferred Securities and Income Approval, supra note 18, at 76150. \33\ Proposed rule changes for previously-listed series of Managed Fund Shares have similarly specified short-term instruments with respect to their inclusion in Managed Fund Share holdings. See, e.g., First Trust Preferred Securities and Income Approval, supra note 18, at 76150-51. --------------------------------------------------------------------------- (1) U.S. Government securities, including bills, notes and bonds differing as to maturity and rates of interest, which are either issued or guaranteed by the U.S. Treasury or by [[Page 33313]] U.S. Government agencies or instrumentalities; (2) certificates of deposit issued against funds deposited in a bank or savings and loan association; (3) bankers' acceptances, which are short-term credit instruments used to finance commercial transactions; (4) repurchase agreements and reverse repurchase agreements; (5) bank time deposits, which are monies kept on deposit with banks or savings and loan associations for a stated period of time at a fixed rate of interest; (6) commercial paper, which are short-term unsecured promissory notes; and (7) money market funds. Proposed Commentary .01(d) would describe the standards for a Managed Fund Share portfolio that holds listed derivatives, including futures, options and swaps on commodities, currencies and financial instruments (e.g., stocks, fixed income, interest rates, and volatility) or a basket or index of any of the foregoing.\34\ There would be no limitation to the percentage of the portfolio invested in such holdings; provided, however, that, in the aggregate, at least 90% of the weight of such holdings invested in futures and exchange-traded options shall consist of futures and options whose principal market is a member of the Intermarket Surveillance Group (``ISG'') or is a market with which the Exchange has a comprehensive surveillance sharing agreement (``CSSA'').\35\ Proposed Commentary .01(e) would describe the standards for a Managed Fund Share portfolio that holds over the counter (``OTC'') derivatives, including forwards, options and swaps on commodities, currencies and financial instruments (e.g., stocks, fixed income, interest rates, and volatility) or a basket or index of any of the foregoing.\36\ Proposed Commentary .01(e)(1) would provide that no more than 60% of the assets in the portfolio may be invested in OTC derivatives, provided, however, that no more than 20% of the assets in the portfolio may be invested in OTC derivatives that are not centrally cleared. --------------------------------------------------------------------------- \34\ Proposed rule changes for previously-listed series of Managed Fund Shares have similarly included the ability for such Managed Fund Share holdings to include listed derivatives. See, e.g., WisdomTree Real Return Approval, supra note 18, at 13617 and WisdomTree Brazil Bond Approval, supra note 18, at 32163. \35\ ISG is comprised of an international group of exchanges, market centers, and market regulators that perform front-line market surveillance in their respective jurisdictions. See https://www.isgportal.org/home.html. \36\ A proposed rule change for series of Units previously listed and traded on the Exchange pursuant to Rule 5.2(j)(3) similarly included the ability for such Units' holdings to include OTC derivatives, specifically OTC down-and-in put options, which are not NMS Stocks as defined in Rule 600 of Regulation NMS and therefore do not satisfy the requirements of Commentary .01(a)(A) to Rule 5.2(j)(3). See, e.g., NYSE Arca U.S. Equity Synthetic Reverse Convertible Index Fund Approval, supra note 18, at 23602. --------------------------------------------------------------------------- Proposed Commentary .01(f) would provide that, to the extent that listed or OTC derivatives are used to gain exposure to individual equities and/or fixed income securities, or to indexes of equities and/ or fixed income securities, such equities and/or fixed income securities, as applicable, shall meet the criteria set forth in Commentary .01(a) and .01(b) to Rule 8.600, respectively. The Exchange believes that the proposed standards would continue to ensure transparency surrounding the listing process for Managed Fund Shares. Additionally, the Exchange believes that the proposed portfolio standards for listing and trading Managed Fund Shares, many of which track existing Exchange rules relating to Units, are reasonably designed to promote a fair and orderly market for such Managed Fund Shares.\37\ These proposed standards would also work in conjunction with the existing initial and continued listing criteria related to surveillance procedures and trading guidelines. --------------------------------------------------------------------------- \37\ See Approval Order, supra note 12 at 19548. --------------------------------------------------------------------------- In support of this proposal, the Exchange represents that: \38\ --------------------------------------------------------------------------- \38\ The Exchange made similar representations in the Approval Order. See id. at 19549. --------------------------------------------------------------------------- (1) the Managed Fund Shares will continue to conform to the initial and continued listing criteria under Rule 8.600; (2) the Exchange's surveillance procedures are adequate to continue to properly monitor the trading of the Managed Fund Shares in all trading sessions and to deter and detect violations of Exchange rules. Specifically, the Exchange intends to utilize its existing surveillance procedures applicable to derivative products, which will include Managed Fund Shares, to monitor trading in the Managed Fund Shares; (3) prior to the commencement of trading of a particular series of Managed Fund Shares, the Exchange will inform its Equity Trading Permit (``ETP'') Holders in a Bulletin of the special characteristics and risks associated with trading the Managed Fund Shares, including procedures for purchases and redemptions of Managed Fund Shares, suitability requirements under NYSE Arca Equities Rule 9.2(a), the risks involved in trading the Managed Fund Shares during the Opening and Late Trading Sessions when an updated Portfolio Indicative Value will not be calculated or publicly disseminated, information regarding the Portfolio Indicative Value and the Disclosed Portfolio, prospectus delivery requirements, and other trading information. In addition, the Bulletin will disclose that the Managed Fund Shares are subject to various fees and expenses, as described in the Registration Statement, and will discuss any exemptive, no-action, and interpretive relief granted by the Commission from any rules under the Act. Finally, the Bulletin will disclose that the net asset value for the Managed Fund Shares will be calculated after 4 p.m. ET each trading day; and (4) the issuer of a series of Managed Fund Shares will be required to comply with Rule 10A-3 under the Act for the initial and continued listing of Managed Fund Shares, as provided under NYSE Arca Equities Rule 5.3. The Exchange notes that the proposed change is not otherwise intended to address any other issues and that the Exchange is not aware of any problems that ETP Holders or issuers would have in complying with the proposed change. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,\39\ in general, and furthers the objectives of Section 6(b)(5) of the Act,\40\ in particular, because it is 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. --------------------------------------------------------------------------- \39\ 15 U.S.C. 78f(b). \40\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- 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 because it would facilitate the listing and trading of additional Managed Fund Shares, which would enhance competition among market participants, to the benefit of investors and the marketplace. Specifically, after more than six years under the current process, whereby the Exchange is required to file a proposed rule change with the Commission for the listing and trading of each new series of Managed Fund Shares, the Exchange believes that it is appropriate to codify certain rules within Rule 8.600 that would generally eliminate the need for separate proposed rule changes. The Exchange [[Page 33314]] believes that this would facilitate the listing and trading of additional types of Managed Fund Shares that have investment portfolios that are similar to investment portfolios for Units, which have been approved for listing and trading, thereby creating greater efficiencies in the listing process for the Exchange and the Commission. In this regard, the Exchange notes that the standards proposed for Managed Fund Share portfolios that include domestic equity securities, Derivative Securities Products, and Index-Linked Securities are based in large part on the existing equity security standards applicable to Units in Commentary .01 to Rule 5.2(j)(3) and that the standards proposed for Managed Fund Share portfolios that include fixed income securities are based in large part on the existing fixed income standards applicable to Units in Commentary .02 to Rule 5.2(j)(3). Additionally, many of the standards proposed for other types of holdings of series of Managed Fund Shares are based on previous proposed rule changes for specific series of Managed Fund Shares.\41\ --------------------------------------------------------------------------- \41\ See supra, note 18. --------------------------------------------------------------------------- With respect to the proposed addition to the criteria of Rule 8.600(c) to provide that the Web site for each series of Managed Fund Shares shall disclose certain information regarding the Disclosed Portfolio, to the extent applicable, the Exchange notes that proposed rule changes approved by the Commission for previously-listed series of Managed Fund Shares have similarly included disclosure requirements with respect to each portfolio holding, as applicable to the type of holding.\42\ With respect to the proposed exclusion of Derivatives Securities Products and Index-Linked Securities from the requirements of proposed Commentary .01(a) of Rule 8.600, the Exchange believes it is appropriate to exclude Index-Linked Securities as well as Derivative Securities Products from certain component stock eligibility criteria for Managed Fund Shares in so far as Derivative Securities Products and Index-Linked Securities are themselves subject to specific quantitative listing and continued listing requirements of a national securities exchange on which such securities are listed. Derivative Securities Products and Index-Linked Securities that are components of a fund's portfolio would have been listed and traded on a national securities exchange pursuant to a proposed rule change approved by the Commission pursuant to Section 19(b)(2) of the Act \43\ or submitted by a national securities exchange pursuant to Section 19(b)(3)(A) of the Act \44\ or would have been listed by a national securities exchange pursuant to the requirements of Rule 19b-4(e) under the Act.\45\ The Exchange also notes that Derivative Securities Products and Index-Linked Securities are derivatively priced, and, therefore, the Exchange believes that it would not be necessary to apply the proposed generic quantitative criteria (e.g., market capitalization, trading volume, or portfolio component weighting) applicable to equity securities other than Derivative Securities Products or Index-Linked Securities (e.g., common stocks) to such products.\46\ --------------------------------------------------------------------------- \42\ See supra, note 16. \43\ 15 U.S.C. 78s(b)(2). \44\ 15 U.S.C. 78s(b)(3)(A). \45\ 17 CFR 240.19b-4(e). \46\ See Securities Exchange Act Release Nos. 57561 (March 26, 2008), 73 FR 17390 (April 1, 2008) (SR-NYSEArca-2008-29) (notice of filing of proposed rule change to amend eligibility criteria for components of an index underlying Investment Company Units); 57751 (May 1, 2008), 73 FR 25818 (May 7, 2008) (SR-NYSEArca-2008-29) (order approving proposed rule change to amend eligibility criteria for components of an index underlying Investment Company Units). --------------------------------------------------------------------------- With respect to the proposed amendment to the continued listing requirement in Rule 8.600(d)(2)(A) to require dissemination of a Portfolio Indicative Value at least every 15 seconds during the Core Trading Session (as defined in NYSE Arca Equities Rule 7.34), such requirement conforms to the requirement applicable to the dissemination of the Intraday Indicative Value for Investment Company Units in Commentary .01(c) and Commentary .02 (c) to NYSE Arca Equities Rule 5.2(j)(3). In addition, such dissemination is consistent with representations made in proposed rule changes for issues of Managed Fund Shares previously approved by the Commission.\47\ --------------------------------------------------------------------------- \47\ See, e.g., Approval Order, supra note 12; International Bear Approval, supra note 18. --------------------------------------------------------------------------- With respect to the proposed requirement in Commentary .01(b)(3) to Rule 8.600 that an underlying portfolio (excluding exempted securities) that includes fixed income securities must include a minimum of 13 non- affiliated issuers, but that there would 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, the Exchange notes that such requirement is consistent with proposed Commentary .01(b)(2). The Exchange further notes that Commentary .02 (a)(4) to Rule 5.2(j)(3) currently provides that a single fixed income security can represent up to 30% of the weight of an index underlying a series of Investment Company Units. Proposed Commentary .01(b)(3) to Rule 8.600, therefore, provides for a maximum weighting of a fixed income security in a fund's portfolio comparable to existing rules applicable to Investment Company Units based on fixed income indexes. With respect to proposed Commentary .01(d)(1) to Rule 8.600 relating to listed derivatives, the Exchange believes that it is appropriate that there be no limit to the percentage of a portfolio invested in such holdings, provided that, in the aggregate, at least 90% of the weight of such holdings invested in futures and exchange- traded options would consist of futures and options whose principal market is a member of ISG or is a market with which the Exchange has a comprehensive surveillance sharing agreement. Such a requirement would facilitate information sharing among market participants trading shares of a series on Managed Fund Shares as well as futures and options that such series may hold. In addition, listed swaps would be centrally cleared, reducing counterparty risk and thereby furthering investor protection.\48\ --------------------------------------------------------------------------- \48\ The Commission has noted that ``[c]entral clearing mitigates counterparty risk among dealers and other institutions by shifting that risk from individual counterparties to [central counterparties (``CCPs'')], thereby protecting CCPs from each other's potential failures.'' See Securities Exchange Act Release No. 67286 (June 28, 2012) (File No. S7-44-10) (Process for Submissions for Review of Security-Based Swaps for Mandatory Clearing and Notice Filing Requirements for Clearing Agencies). --------------------------------------------------------------------------- With respect to proposed Commentary .01(e) to Rule 8.600 relating to OTC derivatives, the Exchange believes that the limitation to 20% of assets for non-centrally cleared derivatives would assure that the preponderance of fund investments in derivatives would be in centrally cleared derivatives. With respect to proposed Commentary .01(f) to Rule 8.600 relating to a fund's use of listed or OTC derivatives to gain exposure to individual equities and/or fixed income securities, or to indexes of equities and/or indexes of fixed income securities, the Exchange notes that such exposure would be required to meet the numerical and other criteria set forth in proposed Commentary .01(a) and .01(b) to Rule 8.600 respectively. Quotation and other market information relating to listed futures and options is available from the exchanges listing such instruments as well as from market data vendors. With respect to listed swaps, which are centrally cleared and traded on ``Swap Execution Facilities (``SEFs'')'', intraday [[Page 33315]] pre-trade (quoting) information, including real time streaming quotes and market depth is available through the facilities of the applicable SEF.\49\ --------------------------------------------------------------------------- \49\ There are currently five categories of swaps eligible for central clearing: Interest rate swaps; credit default swaps; foreign exchange swaps; equity swaps; and commodity swaps. The following entities provide central clearing for OTC derivatives: ICE Clear Credit (US); ICE Clear (EU); CME Group; LCH.Clearnet; and Eurex. --------------------------------------------------------------------------- The Exchange notes that a fund's investments in derivative instruments would be subject to limits on leverage imposed by the 1940 Act. Section 18(f) of the 1940 Act and related Commission guidance limit the amount of leverage an investment company can obtain. A fund's investments would be consistent with its investment objective and would not be used to enhance leverage. To limit the potential risk associated with a fund's use of derivatives, a fund will segregate or ``earmark'' assets determined to be liquid by a fund in accordance with the 1940 Act (or, as permitted by applicable regulation, enter into certain offsetting positions) to cover its obligations under derivative instruments. A fund's investments will not be used to seek performance that is the multiple or inverse multiple (i.e., 2Xs and 3Xs) of a fund's broad-based securities market index (as defined in Form N- 1A).\50\ --------------------------------------------------------------------------- \50\ See, e.g., Securities Exchange Act Release No. 74842 (April 29, 2015), 86 FR 25723 (May 5, 2015) (SR-NYSEArca-2014-89) (order approving listing and trading of shares of eight PIMCO exchange- traded funds). --------------------------------------------------------------------------- The proposed rule change is also designed to protect investors and the public interest because Managed Fund Shares listed and traded pursuant to Rule 8.600, including pursuant to the proposed new portfolio standards, would continue to be subject to the full panoply of Exchange rules and procedures that currently govern the trading of equity securities on the Exchange.\51\ --------------------------------------------------------------------------- \51\ See Approval Order, supra note 12, at 19547. --------------------------------------------------------------------------- The Exchange believes that the proposed rule change is designed to prevent fraudulent and manipulative acts and practices because the Managed Fund Shares will be listed and traded on the Exchange pursuant to the initial and continued listing criteria in Rule 8.600. The Exchange has in place surveillance procedures that are adequate to properly monitor trading in the Managed Fund Shares in all trading sessions and to deter and detect violations of Exchange rules and applicable federal securities laws. The Financial Industry Regulatory Authority, Inc. (``FINRA''), on behalf of the Exchange, will communicate as needed regarding trading in Managed Fund Shares with other markets that are members of the ISG, including all U.S. securities exchanges and futures exchanges on which the components are traded. In addition, the Exchange may obtain information regarding trading in Managed Fund Shares from other markets that are members of the ISG, including all U.S. securities exchanges and futures exchanges on which the components are traded, or with which the Exchange has in place a CSSA. The Exchange also believes that the proposed rule change would fulfill the intended objective of Rule 19b-4(e) under the Act by allowing Managed Fund Shares that satisfy the proposed listing standards to be listed and traded without separate Commission approval. However, as proposed, the Exchange would continue to file separate proposed rule changes before the listing and trading of Managed Fund Shares that do not satisfy the additional criteria described above. For these reasons, the Exchange believes that the proposal is consistent with the Act. B. Self-Regulatory Organization's Statement on Burden on Competition In accordance with Section 6(b)(8) of the Act,\52\ 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 purposes of the Act. Instead, the Exchange believes that the proposed rule change would facilitate the listing and trading of additional types of Managed Fund Shares and result in a significantly more efficient process surrounding the listing and trading of Managed Fund Shares, which will enhance competition among market participants, to the benefit of investors and the marketplace. The Exchange believes that this would reduce the time frame for bringing Managed Fund Shares to market, thereby reducing the burdens on issuers and other market participants and promoting competition. In turn, the Exchange believes that the proposed change would make the process for listing Managed Fund Shares more competitive by applying uniform listing standards with respect to Managed Fund Shares. --------------------------------------------------------------------------- \52\ 15 U.S.C. 78f(b)(8). --------------------------------------------------------------------------- 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 File No. SR-NYSEArca-2015-02 and Grounds for Disapproval Under Consideration The Commission is instituting proceedings pursuant to Section 19(b)(2)(B) of the Act \53\ to determine whether the proposed rule change, as modified by Amendment No. 1 thereto, 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, as discussed below. As noted above, 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 to inform the Commission's analysis of whether to approve or disapprove the proposed rule change, as modified by Amendment No. 1 thereto. --------------------------------------------------------------------------- \53\ 15 U.S.C. 78s(b)(2)(B). --------------------------------------------------------------------------- Pursuant to Section 19(b)(2)(B) of the Act,\54\ 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 Act, which requires, among other things, that the rules of a national securities exchange be ``designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade,'' and ``to protect investors and the public interest.'' \55\ --------------------------------------------------------------------------- \54\ Id. \55\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- IV. Procedure: Request for Written Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change, as modified by Amendment No. 1 thereto, is consistent with Section 6(b)(5) of the Act or any other provision of the Act, or the rules and regulations thereunder. Although there do not appear to be any issues relevant to approval or disapproval which 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.\56\ --------------------------------------------------------------------------- \56\ Section 19(b)(2) of the 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). --------------------------------------------------------------------------- [[Page 33316]] Interested persons are invited to submit written data, views, and arguments regarding whether the proposal, as modified by Amendment No. 1 thereto, should be approved or disapproved by July 2, 2015. Any person who wishes to file a rebuttal to any other person's submission must file that rebuttal by July 16, 2015. 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,\57\ in addition to any other comments they may wish to submit about the proposed rule change. In particular, the Commission seeks comment on the following: --------------------------------------------------------------------------- \57\ See supra note 9. --------------------------------------------------------------------------- 1. In general, do commenters believe that the proposed listing requirements are adequate to deter manipulation of the price of generically listed Managed Fund Shares and other trading abuses? If so, why? If not, why not? 2. The Exchange proposes to require that, to qualify for generic listing, the portfolio underlying the Managed Fund Shares must not hold more than certain percentages of OTC Derivatives, specifically: No more than 60% of the value of the underlying portfolio may consist of OTC Derivatives,\58\ and no more than 20% of the value of the underlying portfolio may consist of OTC Derivatives that are not centrally- cleared. --------------------------------------------------------------------------- \58\ The Exchange states that currently there are five categories of swaps eligible for central clearing--interest rate swaps; credit default swaps; foreign exchange swaps; equity swaps; and commodity swaps--and that the following entities provide central clearing for OTC derivatives: ICE Clear Credit (US); ICE Clear (EU); CME Group; LCH.Clearnet; and Eurex. See supra note 49. --------------------------------------------------------------------------- a. ETF arbitrage mechanisms generally are designed to maintain alignment between intraday trading prices of ETF shares and the contemporaneous value of the underlying portfolio. Are the proposed limits for OTC Derivatives sufficient to support effective and efficient arbitrage activity in generically listed Managed Fund Shares? Will the proposed limits on OTC Derivatives facilitate alignment of the secondary market price of generically listed Managed Fund Shares with the value of their underlying portfolio? Why or why not? Are different percentages more appropriate? If so, what should they be and why? b. What sources of pricing information (both intraday and end-of- day) are available for centrally-cleared OTC Derivatives? What sources of pricing information (both intraday and end-of-day) are available for non-centrally-cleared OTC Derivatives? Do the answers to these questions depend upon the underlying reference asset? Comments may be submitted by any of the following methods: Electronic CommentsUse the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to [email protected]. Please include File Number SR-NYSEArca-2015-02 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-2015-02. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission's Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NYSEArca-2015-02 and should be submitted on or before July 2, 2015. Rebuttal comments should be submitted by July 16, 2015. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\59\ --------------------------------------------------------------------------- \59\ 17 CFR 200.30-3(a)(12) and 17 CFR 200.30-3(a)(57). Robert W. Errett, Deputy Secretary. [FR Doc. 2015-14242 Filed 6-10-15; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 80, No. 112 / Thursday, June 11, 2015 / Notices 33309
1,640 mutual funds, approximately 410 The public may view the background 17, 2015, pursuant to Section 19(b)(2) of
of which engage in direct marketing and documentation for this information the Act,5 the Commission designated a
therefore deliver their own collection at the following Web site, longer period within which to either
prospectuses. Of the approximately 410 www.reginfo.gov. Comments should be approve the proposed rule change,
mutual funds that engage in direct directed to: (i) Desk Officer for the disapprove the proposed rule change, or
marketing, the Commission estimates Securities and Exchange Commission, institute proceedings to determine
that approximately half of these mutual Office of Information and Regulatory whether to disapprove the proposed
funds (205) (i) do not send the implied Affairs, Office of Management and rule change.6
consent notice requirement because Budget, Room 10102, New Executive Pursuant to Section 19(b)(1) of the
they obtain affirmative written consent Office Building, Washington, DC 20503, Act 7 and Rule 19b–4 thereunder,8
to household prospectuses in the fund’s or by sending an email to: Shagufta_ notice is hereby given that, on June 3,
account opening documentation; or (ii) Ahmed@omb.eop.gov; and (ii) Pamela 2015, the Exchange filed with the
do not take advantage of the Dyson, Director/Chief Information Commission Amendment No. 1 to the
householding provision because of Officer, Securities and Exchange proposed rule change, as described in
electronic delivery options which lessen Commission, c/o Remi Pavlik-Simon, Sections I and II below, which Sections
the economic and operational benefits 100 F Street NE., Washington, DC 20549 have been prepared by the Exchange.9
of rule 154 when compared with the or send an email to: PRA_Mailbox@ The Commission is publishing this
costs of compliance. Therefore, the sec.gov. Comments must be submitted to notice to solicit comments on the
Commission estimates that each direct- OMB within 30 days of this notice. proposed rule change, as modified by
marketed fund will spend an average of Dated: June 5, 2015. Amendment No. 1 thereto, from
20 hours per year complying with the Robert W. Errett, interested persons.
notice requirement of the rule, for a total Deputy Secretary. Additionally, this order institutes
of 4,100 hours. Of the 410 mutual funds [FR Doc. 2015–14246 Filed 6–10–15; 8:45 am] proceedings under Section 19(b)(2)(B) of
that engage in direct marketing, the the Act 10 to determine whether to
BILLING CODE 8011–01–P
Commission estimates that approve or disapprove the proposed
approximately seventy-five percent rule change, as modified by Amendment
(308) of these funds will each spend 1 SECURITIES AND EXCHANGE No. 1 thereto, as discussed in Section III
hour complying with the annual COMMISSION below. The institution of proceedings
explanation of the right to revoke does not indicate that the Commission
requirement of the rule, for a total of 308 [Release No. 34–75115; File No. SR– has reached any conclusions with
hours. The Commission estimates that NYSEArca–2015–02]
respect to any of the issues involved,
there are approximately 200 broker- Self-Regulatory Organizations; NYSE nor does it mean that the Commission
dealers that carry customer accounts Arca, Inc.; Notice of Filing of will ultimately disapprove the proposed
and, therefore, may be required to Amendment No. 1 and Order Instituting rule change. Rather, as described in
deliver mutual fund prospectuses. The Proceedings To Determine Whether To Section III, below, the Commission
Commission estimates that each affected Approve or Disapprove a Proposed seeks and encourages interested persons
broker-dealer will spend, on average, Rule Change, as Modified by to provide additional comment on the
approximately 20 hours complying with Amendment No. 1 Thereto, To Amend proposed rule change to inform the
the notice requirement of the rule, for a NYSE Arca Equities Rule 8.600 To Commission’s analysis of whether to
total of 4,000 hours. Each broker-dealer Adopt Generic Listing Standards for
will also spend 1 hour complying with Managed Fund Shares Officer, Eaton Vance Corp. (‘‘Eaton Vance’’), to
the annual explanation of the right to Brent J. Fields, Secretary, Commission (all
revoke requirement, for a total of 200 June 5, 2015. comments to the proposed rule change are available
on the Commission’s Web site at http://
hours. Therefore, the total number of On February 17, 2015, NYSE Arca, www.sec.gov/comments/sr-nysearca-2015-02/
respondents for rule 154 is 507 (307 Inc. (‘‘NYSE Arca’’ or ‘‘Exchange’’) filed nysearca201502.shtml). ICI expressed strong
mutual funds plus 200 broker-dealers), with the Securities and Exchange support for the proposal, stating that it would add
and the estimated total hour burden is Commission (‘‘SEC’’ or ‘‘Commission’’), certainty and uniformity to the ETF listing process.
Eaton Vance also expressed support for the
approximately 8,608 hours (4,408 hours pursuant to Section 19(b)(1) of the proposal and offered suggestions to enhance the
for mutual funds plus 4,200 hours for Securities Exchange Act of 1934 disclosure regime for Managed Fund Shares. The
broker-dealers). (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a anonymous commenter said ‘‘Great job!’’
The estimate of average burden hours proposed rule change to amend NYSE 5 15 U.S.C. 78s(b)(2).
6 See Securities Exchange Act Release No. 74755,
is made solely for the purposes of the Arca Equities Rule 8.600 to adopt
80 FR 22762 (Apr. 23, 2014). The Commission
Paperwork Reduction Act, and is not generic listing standards for Managed determined that it was appropriate to designate a
derived from a comprehensive or even Fund Shares. The proposed rule change longer period within which to take action on the
a representative survey or study of the was published for comment in the proposed rule change so that it has sufficient time
costs of Commission rules and forms. Federal Register on March 10, 2015.3 to consider the proposed rule change and the
comments received. Accordingly, the Commission
Compliance with the collection of The Commission received three designated June 8, 2015 as the date by which it
information requirements of the rule is comments on the proposal.4 On April should approve, disapprove, or institute
necessary to obtain the benefit of relying proceedings to determine whether to disapprove the
1 15 U.S.C. 78s(b)(1). proposed rule change.
on the rule. Responses to the collections 2 17 7 15 U.S.C.78s(b)(1).
CFR 240.19b–4.
mstockstill on DSK4VPTVN1PROD with NOTICES
of information will not be kept 3 See Securities Exchange Act Release No. 74433 8 17 CFR 240.19b–4.
confidential. The rule does not require (Mar. 4, 2015), 80 FR 12690 (‘‘Notice’’). 9 Amendment No. 1 amends and replaces the
these records be retained for any 4 See letter dated March 31, 2015 from filing, SR–NYSEArca–2015–02, and supersedes
specific period of time. An agency may Anonymous; letter dated March 31, 2015 from such filing in its entirety (Amendment No. 1 to the
not conduct or sponsor, and a person is Dorothy Donohue, Deputy General Counsel, proposed rule change is also available on the
Securities Regulation, Investment Company Commission’s Web site at http://www.sec.gov/
not required to respond to, a collection Institute (‘‘ICI’’), to Brent J. Fields, Secretary, comments/sr-nysearca-2015-02/
of information unless it displays a Commission; and letter dated March 31, 2015 from nysearca201502.shtml).
currently valid control number. Thomas E. Faust Jr., Chairman and Chief Executive 10 15 U.S.C. 78s(b)(2)(B).
VerDate Sep<11>2014 17:06 Jun 10, 2015 Jkt 235001 PO 00000 Frm 00082 Fmt 4703 Sfmt 4703 E:\FR\FM\11JNN1.SGM 11JNN1](https://thefederalregister.org/doc/80_FR_33421/page/1.svg)
![Federal Register / Vol. 80, No. 112 / Thursday, June 11, 2015 / Notices 33311
separate proposed rule change before Shares to qualify for listing and trading Securities 21 listed on a national
listing and trading such Managed Fund pursuant to SEC Rule 19b–4(e). These securities exchange as follows:
Share. Similarly, if the components of a standards would be grouped according (1) Component stocks (excluding
Managed Fund Share included a to security or asset type. The Exchange Derivative Securities Products and
security or asset that is not specified notes that the standards proposed for a Index-Linked Securities) that in the
below, the Exchange would file a Managed Fund Share portfolio that
aggregate account for at least 90% of the
separate proposed rule change. holds domestic equity securities,
equity weight of the portfolio (excluding
The Exchange would also add to the Derivative Securities Products and
criteria of Rule 8.600(c) to provide that such Derivative Securities Products and
Index-Linked Securities are based in
the Web site for each series of Managed large part on the existing equity security Index-Linked Securities) each must
Fund Shares shall disclose certain standards applicable to Units in have a minimum market value of at least
information regarding the Disclosed Commentary .01 to Rule 5.2(j)(3). The $75 million; 22
Portfolio, to the extent applicable. The standards proposed for a Managed Fund (2) Component stocks (excluding
required information includes the Share portfolio that holds fixed income Derivative Securities Products and
following, to the extent applicable: securities are based in large part on the Index-Linked Securities) that in the
ticker symbol, CUSIP or other identifier, existing fixed income security standards aggregate account for at least 70% of the
a description of the holding, identity of applicable to Units in Commentary .02 equity weight of the portfolio (excluding
the asset upon which the derivative is to Rule 5.2(j)(3). Many of the standards such Derivative Securities Products and
based, the strike price for any options, proposed for other types of holdings in Index-Linked Securities) each must
the quantity of each security or other a Managed Fund Share portfolio are have a minimum monthly trading
asset held as measured by select based on previous proposed rule volume of 250,000 shares, or minimum
metrics, maturity date, coupon rate, changes for specific series of Managed notional volume traded per month of
effective date, market value and Fund Shares.18 $25,000,000, averaged over the last six
percentage weight of the holding in the Proposed Commentary .01(a) would months; 23
portfolio.16 describe the standards for a Managed
In addition, the Exchange would (3) The most heavily weighted
Fund Share portfolio that holds equity
amend Rule 8.600(d) to specify that all component stock (excluding Derivative
securities, which are defined to be U.S.
Managed Fund Shares must have a Component Stocks,19 Derivative Securities Products and Index-Linked
stated investment objective, which must Securities Products,20 and Index-Linked Securities) must not exceed 30% of the
be adhered to under normal market equity weight of the portfolio, and, to
conditions.17 18 See the PIMCO Total Return Use of Derivatives
the extent applicable, the five most
Finally, the Exchange would also Approval. See also, Securities Exchange Act Release heavily weighted component stocks
amend the continued listing Nos. 66321 (February 3, 2012), 77 FR 6850 (excluding Derivative Securities
requirement in Rule 8.600(d)(2)(A) by (February 9, 2012) (SR–NYSEArca–2011–95) (the Products and Index-Linked Securities)
‘‘PIMCO Total Return Approval’’); [sic] 69244
changing the requirement that a (March 27, 2013), 78 FR 19766 (April 2, 2013) (SR– must not exceed 65% of the equity
Portfolio Indicative Value for Managed NYSEArca–2013–08) (the ‘‘SPDR Blackstone/GSO weight of the portfolio; 24
Fund Shares be widely disseminated by Senior Loan Approval’’); 68870 (February 8, 2013),
(4) A portfolio that includes any
one or more major market data vendors 78 FR 11245 (February 15, 2013) (SR–NYSEArca–
2012–139) (the ‘‘First Trust Preferred Securities and equity security as described in
at least every 15 seconds during the Income Approval’’); 69591 (May 16, 2013), 78 FR Commentary .01(a) shall include a
time when the Managed Fund Shares 30372 (May 22, 2013) (SR–NYSEArca–2013–33) minimum of 13 component stocks;
trade on the Exchange to a requirement (the ‘‘International Bear Approval’’); 61697 (March
provided, however, that there shall be
that a Portfolio Indicative Value be 12, 2010), 75 FR 13616 (March 22, 2010) (SR–
NYSEArca–2010–04) (the ‘‘WisdomTree Real no minimum number of component
widely disseminated by one or more Return Approval’’); and 67054 (May 24, 2012), 77 stocks if (a) one or more series of
major market data vendors at least every FR 32161 (May 31, 2012) (SR–NYSEArca–2012–25)
Derivative Securities Products or Index-
15 seconds during the Core Trading (the ‘‘WisdomTree Brazil Bond Approval’’). Certain
Session (as defined in NYSE Arca standards proposed herein for Managed Fund Linked Securities constitute, at least in
Equities Rule 7.34).
Shares are also based on previous proposed rule part, components underlying a series of
changes for specific series of Units for which Managed Fund Shares, or (b) one or
Commission approval for listing was required due
Proposed Managed Fund Share Portfolio to the Units not satisfying certain standards of more series of Derivative Securities
Standards Commentary .01 and .02 to Rule 5.2(j)(3). See Products or Index-Linked Securities
Securities Exchange Act Release Nos. 67985 account for 100% of the equity weight
The Exchange is proposing standards (October 4, 2012), 77 FR 61804 (October 11, 2012)
that would pertain to Managed Fund (SR–NYSEArca–2012–92) (the ‘‘iShares 2018 S&P
21 Index-Linked Securities are securities listed
AMT-Free Municipal Series and iShares 2019 S&P
16 Proposed rule changes for previously-listed AMT-Free Municipal Series Approval’’); under NYSE Arca Equities Rule 5.2(j)(6).
63881(February 9, 2011), 76 FR 9065 (February 16, 22 This proposed text is identical to the
series of Managed Fund Shares have similarly
included disclosure requirements with respect to 2011) (SR–NYSEArca–2010–120) (the ‘‘SPDR corresponding text of Commentary .01(a)(A)(1) to
each portfolio holding, as applicable to the type of Nuveen S&P High Yield Municipal Bond ETF Rule 5.2(j)(3), except for the omission of the
holding. See, e.g. Securities Exchange Act Release Approval’’); 63176 (October 25, 2010), 75 FR 66815 reference to ‘‘index,’’ which is not applicable, and
No. 72666 (July 3, 2014), 79 FR 44224 (July 30, (October 29, 2010) (SR–NYSEArca–2010–94) (the the addition of the reference to Index-Linked
2014) (SR–NYSEArca–2013–122) (the ‘‘PIMCO ‘‘iShares Taxable Municipal Bond Fund Securities.
Total Return Use of Derivatives Approval’’), at Approval’’); and 69373 (April 15, 2013), 78 FR 23 This proposed text is identical to the
44227. 23601 (April 19, 2013) (SR–NYSEArca–2012–108) corresponding text of Commentary .01(a)(A)(2) to
17 The Exchange would also add a new defined (the ‘‘NYSE Arca U.S. Equity Synthetic Reverse Rule 5.2(j)(3), except for the omission of the
mstockstill on DSK4VPTVN1PROD with NOTICES
term under Rule 8.600(c)(5) to specify that the term Convertible Index Fund Approval’’). reference to ‘‘index,’’ which is not applicable, and
19 For the purposes of Commentary .01 and this the addition of the reference to Index-Linked
‘‘normal market conditions’’ includes, but is not
limited to, the absence of trading halts in the proposal, the term ‘‘U.S. Component Stocks’’ would Securities.
applicable financial markets generally; operational have the same meaning as defined in NYSE Arca 24 This proposed text is identical to the
issues causing dissemination of inaccurate market Equities Rule 5.2(j)(3). corresponding text of Commentary .01(a)(A)(3) to
information; or force majeure type events such as 20 For the purposes of Commentary .01 and this Rule 5.2(j)(3), except for the omission of the
systems failure, natural or man-made disaster, act proposal, the term ‘‘Derivative Securities Products’’ reference to ‘‘index,’’ which is not applicable, and
of God, armed conflict, act of terrorism, riot or labor would have the same meaning as defined in NYSE the addition of the reference to Index-Linked
disruption or any similar intervening circumstance. Arca Equities Rule 7.34(a)(4)(A). Securities.
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![33314 Federal Register / Vol. 80, No. 112 / Thursday, June 11, 2015 / Notices
believes that this would facilitate the or submitted by a national securities index underlying a series of Investment
listing and trading of additional types of exchange pursuant to Section Company Units. Proposed Commentary
Managed Fund Shares that have 19(b)(3)(A) of the Act 44 or would have .01(b)(3) to Rule 8.600, therefore,
investment portfolios that are similar to been listed by a national securities provides for a maximum weighting of a
investment portfolios for Units, which exchange pursuant to the requirements fixed income security in a fund’s
have been approved for listing and of Rule 19b–4(e) under the Act.45 The portfolio comparable to existing rules
trading, thereby creating greater Exchange also notes that Derivative applicable to Investment Company
efficiencies in the listing process for the Securities Products and Index-Linked Units based on fixed income indexes.
Exchange and the Commission. In this Securities are derivatively priced, and, With respect to proposed
regard, the Exchange notes that the therefore, the Exchange believes that it Commentary .01(d)(1) to Rule 8.600
standards proposed for Managed Fund would not be necessary to apply the relating to listed derivatives, the
Share portfolios that include domestic proposed generic quantitative criteria Exchange believes that it is appropriate
equity securities, Derivative Securities (e.g., market capitalization, trading that there be no limit to the percentage
Products, and Index-Linked Securities volume, or portfolio component of a portfolio invested in such holdings,
are based in large part on the existing weighting) applicable to equity provided that, in the aggregate, at least
equity security standards applicable to securities other than Derivative 90% of the weight of such holdings
Units in Commentary .01 to Rule Securities Products or Index-Linked invested in futures and exchange-traded
5.2(j)(3) and that the standards proposed Securities (e.g., common stocks) to such options would consist of futures and
for Managed Fund Share portfolios that products.46 options whose principal market is a
include fixed income securities are With respect to the proposed member of ISG or is a market with
based in large part on the existing fixed amendment to the continued listing which the Exchange has a
income standards applicable to Units in requirement in Rule 8.600(d)(2)(A) to comprehensive surveillance sharing
Commentary .02 to Rule 5.2(j)(3). require dissemination of a Portfolio agreement. Such a requirement would
Additionally, many of the standards Indicative Value at least every 15 facilitate information sharing among
proposed for other types of holdings of seconds during the Core Trading market participants trading shares of a
series of Managed Fund Shares are Session (as defined in NYSE Arca series on Managed Fund Shares as well
based on previous proposed rule Equities Rule 7.34), such requirement as futures and options that such series
changes for specific series of Managed conforms to the requirement applicable may hold. In addition, listed swaps
Fund Shares.41 to the dissemination of the Intraday would be centrally cleared, reducing
With respect to the proposed addition Indicative Value for Investment counterparty risk and thereby furthering
to the criteria of Rule 8.600(c) to provide Company Units in Commentary .01(c) investor protection.48
that the Web site for each series of and Commentary .02 (c) to NYSE Arca With respect to proposed
Managed Fund Shares shall disclose Equities Rule 5.2(j)(3). In addition, such Commentary .01(e) to Rule 8.600
certain information regarding the dissemination is consistent with relating to OTC derivatives, the
Disclosed Portfolio, to the extent representations made in proposed rule Exchange believes that the limitation to
applicable, the Exchange notes that changes for issues of Managed Fund 20% of assets for non-centrally cleared
proposed rule changes approved by the Shares previously approved by the derivatives would assure that the
Commission for previously-listed series Commission.47 preponderance of fund investments in
of Managed Fund Shares have similarly With respect to the proposed derivatives would be in centrally
included disclosure requirements with requirement in Commentary .01(b)(3) to cleared derivatives.
respect to each portfolio holding, as Rule 8.600 that an underlying portfolio With respect to proposed
applicable to the type of holding.42 With (excluding exempted securities) that Commentary .01(f) to Rule 8.600 relating
respect to the proposed exclusion of includes fixed income securities must to a fund’s use of listed or OTC
Derivatives Securities Products and include a minimum of 13 non-affiliated derivatives to gain exposure to
Index-Linked Securities from the issuers, but that there would be no individual equities and/or fixed income
requirements of proposed Commentary minimum number of non-affiliated securities, or to indexes of equities and/
.01(a) of Rule 8.600, the Exchange issuers required for fixed income or indexes of fixed income securities,
believes it is appropriate to exclude securities if at least 70% of the weight the Exchange notes that such exposure
Index-Linked Securities as well as of the portfolio consists of equity would be required to meet the
Derivative Securities Products from securities, the Exchange notes that such numerical and other criteria set forth in
certain component stock eligibility requirement is consistent with proposed proposed Commentary .01(a) and .01(b)
criteria for Managed Fund Shares in so Commentary .01(b)(2). The Exchange to Rule 8.600 respectively.
far as Derivative Securities Products and further notes that Commentary .02 (a)(4) Quotation and other market
Index-Linked Securities are themselves to Rule 5.2(j)(3) currently provides that information relating to listed futures
subject to specific quantitative listing a single fixed income security can and options is available from the
and continued listing requirements of a represent up to 30% of the weight of an exchanges listing such instruments as
national securities exchange on which well as from market data vendors. With
such securities are listed. Derivative 44 15 U.S.C. 78s(b)(3)(A). respect to listed swaps, which are
Securities Products and Index-Linked 45 17 CFR 240.19b–4(e). centrally cleared and traded on ‘‘Swap
Securities that are components of a 46 See Securities Exchange Act Release Nos. Execution Facilities (‘‘SEFs’’)’’, intraday
57561 (March 26, 2008), 73 FR 17390 (April 1,
fund’s portfolio would have been listed 2008) (SR–NYSEArca–2008–29) (notice of filing of
mstockstill on DSK4VPTVN1PROD with NOTICES
48 The Commission has noted that ‘‘[c]entral
and traded on a national securities proposed rule change to amend eligibility criteria clearing mitigates counterparty risk among dealers
exchange pursuant to a proposed rule for components of an index underlying Investment and other institutions by shifting that risk from
change approved by the Commission Company Units); 57751 (May 1, 2008), 73 FR 25818 individual counterparties to [central counterparties
(May 7, 2008) (SR–NYSEArca–2008–29) (order (‘‘CCPs’’)], thereby protecting CCPs from each
pursuant to Section 19(b)(2) of the Act 43 approving proposed rule change to amend other’s potential failures.’’ See Securities Exchange
eligibility criteria for components of an index Act Release No. 67286 (June 28, 2012) (File No. S7–
41 See supra, note 18. underlying Investment Company Units). 44–10) (Process for Submissions for Review of
42 See supra, note 16. 47 See, e.g., Approval Order, supra note 12; Security-Based Swaps for Mandatory Clearing and
43 15 U.S.C. 78s(b)(2). International Bear Approval, supra note 18. Notice Filing Requirements for Clearing Agencies).
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![33316 Federal Register / Vol. 80, No. 112 / Thursday, June 11, 2015 / Notices
Interested persons are invited to b. What sources of pricing For the Commission, by the Division of
submit written data, views, and information (both intraday and end-of- Trading and Markets, pursuant to delegated
arguments regarding whether the day) are available for centrally-cleared authority.59
proposal, as modified by Amendment OTC Derivatives? What sources of Robert W. Errett,
No. 1 thereto, should be approved or pricing information (both intraday and Deputy Secretary.
disapproved by July 2, 2015. Any end-of-day) are available for non- [FR Doc. 2015–14242 Filed 6–10–15; 8:45 am]
person who wishes to file a rebuttal to centrally-cleared OTC Derivatives? Do BILLING CODE 8011–01–P
any other person’s submission must file the answers to these questions depend
that rebuttal by July 16, 2015. The upon the underlying reference asset?
Commission asks that commenters Comments may be submitted by any SECURITIES AND EXCHANGE
address the sufficiency of the of the following methods: COMMISSION
Exchange’s statements in support of the [Release No. 34–75112; File No. SR–EDGA–
proposal, which are set forth in Electronic Comments 2015–20]
Amendment No. 1,57 in addition to any
other comments they may wish to • Use the Commission’s Internet Self-Regulatory Organizations; EDGA
submit about the proposed rule change. comment form (http://www.sec.gov/ Exchange, Inc.; Notice of Filing and
In particular, the Commission seeks rules/sro.shtml); or Immediate Effectiveness of a Proposed
comment on the following: • Send an email to rule-comments@ Rule Change to Rule 13.9 Describing a
1. In general, do commenters believe sec.gov. Please include File Number SR– Communication and Routing Service
that the proposed listing requirements NYSEArca–2015–02 on the subject line. Known as BATS Connect
are adequate to deter manipulation of
the price of generically listed Managed Paper Comments June 5, 2015.
Fund Shares and other trading abuses? Pursuant to Section 19(b)(1) of the
• Send paper comments in triplicate Securities Exchange Act of 1934 (the
If so, why? If not, why not? to Secretary, Securities and Exchange
2. The Exchange proposes to require ‘‘Act’’),1 and Rule 19b–4 thereunder,2
Commission, 100 F Street NE., notice is hereby given that on May 27,
that, to qualify for generic listing, the Washington, DC 20549–1090. 2015, EDGA Exchange, Inc. (the
portfolio underlying the Managed Fund
All submissions should refer to File ‘‘Exchange’’ or ‘‘EDGA’’) filed with the
Shares must not hold more than certain
Number SR–NYSEArca–2015–02. This Securities and Exchange Commission
percentages of OTC Derivatives,
file number should be included on the (‘‘Commission’’) the proposed rule
specifically: No more than 60% of the
subject line if email is used. To help the change as described in Items I and II
value of the underlying portfolio may
Commission process and review your below, which Items have been prepared
consist of OTC Derivatives,58 and no
comments more efficiently, please use by the Exchange. The Exchange has
more than 20% of the value of the
only one method. The Commission will designated this proposal as a ‘‘non-
underlying portfolio may consist of OTC
controversial’’ proposed rule change
Derivatives that are not centrally- post all comments on the Commission’s
pursuant to Section 19(b)(3)(A) of the
cleared. Internet Web site (http://www.sec.gov/
Act 3 and Rule 19b–4(f)(6)(iii)
a. ETF arbitrage mechanisms rules/sro.shtml). Copies of the
thereunder,4 which renders it effective
generally are designed to maintain submission, all subsequent
upon filing with the Commission. The
alignment between intraday trading amendments, all written statements
Commission is publishing this notice to
prices of ETF shares and the with respect to the proposed rule
solicit comments on the proposed rule
contemporaneous value of the change that are filed with the
change from interested persons.
underlying portfolio. Are the proposed Commission, and all written
limits for OTC Derivatives sufficient to communications relating to the I. Self-Regulatory Organization’s
support effective and efficient arbitrage proposed rule change between the Statement of the Terms of Substance of
activity in generically listed Managed Commission and any person, other than the Proposed Rule Change
Fund Shares? Will the proposed limits those that may be withheld from the The Exchange is proposing to amend
on OTC Derivatives facilitate alignment public in accordance with the Rule 13.9 to describe a communication
of the secondary market price of provisions of 5 U.S.C. 552, will be and routing service known as BATS
generically listed Managed Fund Shares available for Web site viewing and Connect. The proposed rule change is
with the value of their underlying printing in the Commission’s Public based on an identical service offered by
portfolio? Why or why not? Are Reference Room, 100 F Street NE., the Exchange’s affiliate, EDGX
different percentages more appropriate? Washington, DC 20549, on official Exchange, Inc. (‘‘EDGX’’).5
If so, what should they be and why? business days between the hours of The text of the proposed rule change
10:00 a.m. and 3:00 p.m. Copies of the is available at the Exchange’s Web site
flexibility to determine what type of proceeding— filing also will be available for at www.batstrading.com, at the
either oral or notice and opportunity for written inspection and copying at the principal principal office of the Exchange, and at
comments—is appropriate for consideration of a office of the Exchange. All comments the Commission’s Public Reference
particular proposal by a self-regulatory
organization. See Securities Act Amendments of
received will be posted without change; Room.
1975, Senate Comm. on Banking, Housing & Urban the Commission does not edit personal
Affairs, S. Rep. No. 75, 94th Cong., 1st Sess. 30 identifying information from 59 17 CFR 200.30–3(a)(12) and 17 CFR 200.30–
(1975). submissions. You should submit only 3(a)(57).
mstockstill on DSK4VPTVN1PROD with NOTICES
57 See supra note 9. 1 15 U.S.C. 78s(b)(1).
58 The Exchange states that currently there are
information that you wish to make 2 17 CFR 240.19b–4.
five categories of swaps eligible for central
available publicly. All submissions 3 15 U.S.C. 78s(b)(3)(A).
clearing—interest rate swaps; credit default swaps; should refer to File Number SR– 4 17 CFR 240.19b–4(f)(6)(iii).
foreign exchange swaps; equity swaps; and NYSEArca–2015–02 and should be 5 See EDGX Rule 13.9. See also Securities
commodity swaps—and that the following entities submitted on or before July 2, 2015. Exchange Act Release Nos. 73780 (December 8,
provide central clearing for OTC derivatives: ICE 2014), 79 FR 73942 (December 12, 2014) (SR–
Clear Credit (US); ICE Clear (EU); CME Group;
Rebuttal comments should be submitted EDGX–2014–28); and 74935 (May 12, 2015), 80 FR
LCH.Clearnet; and Eurex. See supra note 49. by July 16, 2015. 28335 (May 18, 2015) (SR–EDGX–2015–19).
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Document Created: 2015-12-15 15:07:38
Document Modified: 2015-12-15 15:07:38
| Category | Regulatory Information | |
| Collection | Federal Register | |
| sudoc Class | AE 2.7: GS 4.107: AE 2.106: | |
| Publisher | Office of the Federal Register, National Archives and Records Administration | |
| Section | Notices | |
| FR Citation | 80 FR 33309 |
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