80 FR 36372 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 1, Relating to the Listing and Trading of Shares of Newfleet Multi-Sector Unconstrained Bond ETF under NYSE Arca Equities Rule 8.600
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 80, Issue 121 (June 24, 2015)
Federal Register Volume 80, Issue 121 (June 24, 2015)
| Page Range | 36372-36380 | |
| FR Document | 2015-15455 |
[Federal Register Volume 80, Number 121 (Wednesday, June 24, 2015)] [Notices] [Pages 36372-36380] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2015-15455] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-75247; File No. SR-NYSEArca-2015-42] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 1, Relating to the Listing and Trading of Shares of Newfleet Multi-Sector Unconstrained Bond ETF under NYSE Arca Equities Rule 8.600 June 18, 2015. Pursuant to section 19(b)(1) \1\ of the Securities Exchange Act of 1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given that, on June 5, 2015, NYSE Arca, Inc. (the ``Exchange'' or ``NYSE Arca'') filed with the Securities and Exchange Commission (the ``Commission'') the proposed rule change as described in Items I and II below, which Items have been prepared by the self-regulatory organization. On June 15, 2015, NYSE Arca filed Amendment No. 1 to the proposed rule change.\4\ The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. --------------------------------------------------------------------------- \1\ 15 U.S.C.78s(b)(1). \2\ 15 U.S.C. 78a. \3\ 17 CFR 240.19b-4. \4\ Amendment No. 1 replaces and supersedes the filing in its entirety. --------------------------------------------------------------------------- I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to list and trade shares of the following under NYSE Arca Equities Rule 8.600 (``Managed Fund Shares''): Newfleet Multi-Sector Unconstrained Bond ETF. 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 [[Page 36373]] and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization's Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to list and trade shares (``Shares'') of the following under NYSE Arca Equities Rule 8.600, which governs the listing and trading of Managed Fund Shares: \5\ Newfleet Multi-Sector Unconstrained Bond ETF,\6\ a series of the ETFis Series Trust I (``Trust'').\7\ --------------------------------------------------------------------------- \5\ A Managed Fund Share is a security that represents an interest in an investment company registered under the Investment Company Act of 1940 (15 U.S.C. 80a-1) (``1940 Act'') organized as an open-end investment company or similar entity that invests in a portfolio of securities selected by its investment adviser consistent with its investment objectives and policies. In contrast, an open-end investment company that issues Investment Company Units, listed and traded on the Exchange under NYSE Arca Equities Rule 5.2(j)(3), seeks to provide investment results that correspond generally to the price and yield performance of a specific foreign or domestic stock index, fixed income securities index or combination thereof. \6\ The Commission has approved listing and trading on the Exchange of a number of actively managed funds under Rule 8.600. See, e.g., Securities Exchange Act Release Nos. 69591 (May 16, 2013), 78 FR 30372 (May 22, 2013) (SR-NYSEArca-2013-33) (order approving Exchange listing and trading of International Bear ETF); 69061 (March 7, 2013), 78 FR 15990 (March 13, 2013) (SR-NYSEArca- 2013-01) (order approving Exchange listing and trading of Newfleet Multi-Sector Income ETF); and 67277 (June 27, 2012), 77 FR 39554 (July 3, 2012) (SR-NYSEArca-2012-39) (order approving Exchange listing and trading of the Global Alpha & Beta ETF). \7\ The Trust is registered under the 1940 Act. On January 26, 2015, the Trust filed with the Commission an amendment to its registration statement on Form N-1A under the Securities Act of 1933 (15 U.S.C. 77a) (``Securities Act''), and under the 1940 Act relating to the Fund (File Nos. 333-187668 and 811-22819) (``Registration Statement''). The description of the operation of the Trust and the Fund herein is based, in part, on the Registration Statement. In addition, the Commission has issued an order granting certain exemptive relief to the Trust under the 1940 Act. See Investment Company Act Release No. 30607 (July 23, 2013) (File No. 812-14080) (``Exemptive Order''). --------------------------------------------------------------------------- The investment adviser to the Fund will be Etfis Capital LLC. (the ``Adviser''). The Fund's Sub-Adviser will be Newfleet Asset Management LLC (``Sub-Adviser''). ETF Issuer Solutions Inc. will serve as the Fund's operational administrator. ETF Distributors LLC will serve as the distributor (the ``Distributor'') of Fund Shares on an agency basis.\8\ --------------------------------------------------------------------------- \8\ This Amendment No. 1 to SR-NYSEArca-201[5]-42 replaces SR- NYSEArca-201[5]-42 as originally filed and supersedes such filing in its entirety. --------------------------------------------------------------------------- The Bank of New York Mellon (the ``Administrator'') will serve as the administrator, custodian, transfer agent and fund accounting agent for the Fund. Commentary .06 to Rule 8.600 provides that, if the investment adviser to the investment company issuing Managed Fund Shares is affiliated with a broker-dealer, such investment adviser shall erect a ``fire wall'' between the investment adviser and the broker-dealer with respect to access to information concerning the composition and/or changes to such investment company portfolio.\9\ In addition, Commentary .06 further requires that personnel who make decisions on the open-end fund's portfolio composition must be subject to procedures designed to prevent the use and dissemination of material nonpublic information regarding the open-end fund's portfolio. The Adviser and Sub-Adviser are not registered as broker-dealers but each is affiliated with one or more broker-dealers and has implemented and will maintain a fire wall with respect to each such broker-dealer affiliate regarding access to information concerning the composition and/or changes to the portfolio. In the event (a) the Adviser or Sub-Adviser become registered broker-dealers or newly affiliated with a broker-dealer, or (b) any new adviser or sub-adviser is a registered broker-dealer or becomes affiliated with a broker-dealer, it will implement a fire wall with respect to its relevant personnel or its broker-dealer affiliate regarding access to information concerning the composition and/or changes to the portfolio, and will be subject to procedures designed to prevent the use and dissemination of material non-public information regarding such portfolio. --------------------------------------------------------------------------- \9\ An investment adviser to an open-end fund is required to be registered under the Investment Advisers Act of 1940 (the ``Advisers Act''). As a result, the Adviser and Sub-Adviser and their related personnel are subject to the provisions of Rule 204A-1 under the Advisers Act relating to codes of ethics. This Rule requires investment advisers to adopt a code of ethics that reflects the fiduciary nature of the relationship to clients as well as compliance with other applicable securities laws. Accordingly, procedures designed to prevent the communication and misuse of non- public information by an investment adviser must be consistent with Rule 204A-1 under the Advisers Act. In addition, Rule 206(4)-7 under the Advisers Act makes it unlawful for an investment adviser to provide investment advice to clients unless such investment adviser has (i) adopted and implemented written policies and procedures reasonably designed to prevent violation, by the investment adviser and its supervised persons, of the Advisers Act and the Commission rules adopted thereunder; (ii) implemented, at a minimum, an annual review regarding the adequacy of the policies and procedures established pursuant to subparagraph (i) above and the effectiveness of their implementation; and (iii) designated an individual (who is a supervised person) responsible for administering the policies and procedures adopted under subparagraph (i) above. --------------------------------------------------------------------------- Description of the Fund Principal Investments According to the Registration Statement, the Fund will, under normal market conditions,\10\ invest at least eighty percent (80%) of the Fund's net assets in fixed income securities, across all sectors of the fixed income market, and in U.S. Treasury futures. The Fund may invest across the credit rating spectrum, which includes securities rated below investment grade by a nationally recognized statistical rating organization (``NRSRO''). The Fund also may invest in unrated securities. The Fund has no target duration for its investment portfolio and the Fund's portfolio managers may target shorter or longer durations in response to their view of the fixed income markets generally or any sector thereof. --------------------------------------------------------------------------- \10\ The term ``under normal market conditions'' includes, but is not limited to, the absence of extreme volatility or trading halts in the fixed income markets or the 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. In the absence of normal market conditions, the Fund may invest 100% of its total assets, without limitation, in cash or cash equivalents. The Fund may be invested in this manner for extended periods depending on the Sub-Adviser's assessment of market conditions. --------------------------------------------------------------------------- The Fund's investment objective will seek to provide a high level of current income and, secondarily, capital appreciation. According to the Registration Statement, the Fund will apply a time-tested approach to credit research to capitalize on opportunities across undervalued areas of the bond market. According to the Registration Statement, under normal market conditions, the Sub-Adviser will seek to select securities using a sector rotation approach and seek to adjust the proportion of Fund investments in various sectors and sub-sectors in an effort to obtain higher relative returns. The Fund's investable assets will typically be allocated among various sectors and sub-sectors of the fixed income market using a top- down, relative value approach that looks at factors such as yield and spreads, supply and demand, investment environment, and sector fundamentals. The Sub-Adviser will then typically [[Page 36374]] select particular investments using a bottom-up, fundamental research- driven analysis that includes assessment of credit risk, company management, issuer capital structure, technical market conditions, and valuations. The Sub-Adviser will select securities it believes offer the best potential to achieve the Fund's investment objective of providing a relatively high level of current income, and secondarily, capital appreciation. The Sub-Adviser will seek to provide diversification by allocating the Fund's investments among various sectors of the fixed income markets (as described below), including corporate investment-grade, corporate high-yield, non-agency commercial mortgage-backed securities (``CMBS''), agency and non-agency residential mortgage-backed securities (``RMBS''), non-U.S. dollar securities, emerging market high-yield securities, and asset-backed securities (``ABS''). The Fund may invest in the following fixed income securities:Securities issued or guaranteed as to principal and interest by the U.S. Government, its agencies, authorities or instrumentalities, including, without limitation, collateralized mortgage obligations (``CMOs''), real estate mortgage investment conduits (``REMICs'') and other pass-through securities; Non-agency \11\ CMBS, agency and non-agency RMBS, and other ABS, including equipment trust certificates; \12\ --------------------------------------------------------------------------- \11\ ``Non-agency'' securities are financial instruments that have been issued by an entity that is not a government-sponsored agency, such as the Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, Federal Home Loan Banks, or the Government National Mortgage Association. \12\ The Fund may invest up to 20% of its net assets in the aggregate in non-agency CMBS, RMBS and ABS. The liquidity of any such security will be a factor in the selection of any such security. --------------------------------------------------------------------------- Yankee bonds; \13\ --------------------------------------------------------------------------- \13\ Yankee bonds are denominated in U.S. dollars, registered in accordance with the Securities Act and publicly issued in the U.S. by foreign banks and corporations. --------------------------------------------------------------------------- Loan assignments, including senior and junior bank loans (generally with floating rates); \14\ --------------------------------------------------------------------------- \14\ The Fund may invest in loan assignments, including senior and junior bank loans, rated C or higher by an NRSRO or is unrated but considered to be of comparable quality by the Adviser or Sub- Adviser. The Fund will not invest in loan assignments that are in default at time of purchase. The Fund will only invest in U.S. dollar-denominated loan assignments. In addition, for investment purposes, a bank loan must have a par amount outstanding of U.S. $150 million or greater at the time it is originally issued. The Fund may invest up to 20% of its net assets in junior bank loans. --------------------------------------------------------------------------- Corporate bonds; and Taxable municipal bonds and tax-exempt municipal bonds. The Fund represents that the portfolio generally will include a minimum of 13 non-affiliated issuers of debt securities. The Fund will only purchase performing securities and not distressed debt.\15\ --------------------------------------------------------------------------- \15\ Distressed debt is debt that is currently in default and is not expected to pay the current coupon. --------------------------------------------------------------------------- The Fund may invest in securities of U.S. or non-U.S. issuers of any maturity or credit quality rating. The Fund generally will consider a security to be ``investment grade'' if it is rated within the four highest rating categories of a NRSRO or, if unrated, it is determined to be of comparable quality by the Sub-Adviser (pursuant to procedures reviewed and approved by the Trust's Board of Trustees (``Board'')). Securities that are not determined to be investment grade are considered below investment grade. There is no limitation to the Fund's holdings in below investment grade securities or non-U.S. issuers (as measured by country of risk). The fixed income securities referenced above may be issued by foreign issuers, including foreign governments and their political subdivisions and issuers located in emerging markets countries.\16\ --------------------------------------------------------------------------- \16\ The Adviser expects that under normal market conditions, the Fund will seek to invest at least 75% of its corporate bond assets in issuances that have at least $100,000,000 par amount outstanding in developed countries and at least $200,000,000 par amount outstanding in emerging market countries. --------------------------------------------------------------------------- The fixed income securities referenced above may be short-term securities of U.S. and non-U.S. issuers. The Fund has no target duration for its investment portfolio and the Fund's portfolio managers may target shorter or longer durations in response to their view of the fixed income markets generally or any sector thereof. Duration measures the interest rate sensitivity of a fixed income security by assessing and weighting the present value of the security's payment pattern. Generally, the longer the maturity, the greater the duration and, therefore, the greater effect interest rate changes have on the price of the security. The Sub-Adviser will seek to adjust (i) the proportion of Fund investments primarily in the sectors described above, and (ii) the selections within sectors to obtain higher relative returns. The Sub- Adviser will regularly review the Fund's portfolio construction, endeavoring to minimize risk exposure by closely monitoring portfolio characteristics such as sector concentration and portfolio duration and by investing no more than 5% of the Fund's total assets in securities of any single issuer (excluding the U.S. government, its agencies, authorities or instrumentalities). The Fund may invest in U.S. Treasury futures contracts traded on U.S. futures exchanges in an attempt to protect the Fund's current or intended investments from broad fluctuations in securities prices.\17\ --------------------------------------------------------------------------- \17\ In instances involving the purchase of futures contracts, the Fund will deposit in a segregated account with its custodian an amount of cash, cash equivalents and/or appropriate securities equal to the cost of such futures contracts, to the extent that such deposits are required under the 1940 Act. --------------------------------------------------------------------------- Other Investments While the Fund, under normal market conditions, will invest at least eighty percent (80%) of its assets in fixed income securities and financial instruments, as described above, the Fund may invest its remaining assets in other assets and financial instruments, as described below. The Fund may hold the following exchange-traded equity securities: common stocks, preferred stocks, warrants, convertible securities, unit investment trusts, master limited partnerships, real estate investment trusts (``REITs''), exchange-traded funds (``ETFs'') \18\ and exchange- traded notes (``ETNs'').\19\ --------------------------------------------------------------------------- \18\ The ETFs in which the Fund may invest will be registered under the 1940 Act and include Investment Company Units (as described in NYSE Arca Equities Rule 5.2(j)(3)); Portfolio Depositary Receipts (as described in NYSE Arca Equities Rule 8.100); and Managed Fund Shares (as described in NYSE Arca Equities Rule 8.600). Such ETFs all will be listed and traded in the U.S. on registered exchanges. The Fund may invest in inverse ETFs, leveraged ETFs and inverse leveraged ETFs (e.g., 2X or 3X). \19\ ETNs, also called index-linked securities as would be listed, for example, under NYSE Arca Equities Rule 5.2(j)(6), are senior, unsecured, unsubordinated debt securities issued by an underwriting bank that are designed to provide returns that are linked to a particular benchmark less investor fees. The Fund will not invest in leveraged ETNs and inverse leveraged ETNs (e.g., 2X or 3X). --------------------------------------------------------------------------- The Fund will purchase such equity securities traded in the U.S. on registered exchanges. To gain exposure to the performance of foreign issuers, the Fund may invest in the following types of equity securities: American Depositary Receipts (``ADRs''), ``ordinary shares,'' and ``New York shares'' (each of which is issued and traded in the U.S.); and Global Depositary Receipts (``GDRs''), European Depositary Receipts (``EDRs''), and International Depositary Receipts (``IDRs''), which are traded on foreign exchanges (all of the foregoing financial instruments collectively referred to as ``Equity Financial Instruments'').\20\ --------------------------------------------------------------------------- \20\ ADRs are U.S. dollar denominated receipts typically issued by U.S. banks and trust companies that evidence ownership of underlying securities issued by a foreign issuer. The underlying securities may not necessarily be denominated in the same currency as the securities into which they may be converted. The underlying securities are held in trust by a custodian bank or similar financial institution in the issuer's home country. The depositary bank may not have physical custody of the underlying securities at all times and may charge fees for various services, including forwarding dividends and interest and corporate actions. The Fund may invest in sponsored or unsponsored ADRs; however, non-exchange listed ADRs will not exceed 10% of the Fund's net assets. Ordinary shares are shares of foreign issuers that are traded abroad and on a U.S. exchange. New York shares are shares that a foreign issuer has allocated for trading in the U.S. ADRs, ordinary shares, and New York shares all may be purchased with and sold for U.S. dollars, which protects the Fund from foreign settlement risks. GDRs, EDRs, and IDRs are similar to ADRs in that they are certificates evidencing ownership of shares of a foreign issuer; however, GDRs, EDRs, and IDRs may be issued in bearer form and denominated in other currencies, and are generally designed for use in specific or multiple securities markets outside the U.S. EDRs, for example, are designed for use in European securities markets while GDRs are designed for use throughout the world. --------------------------------------------------------------------------- [[Page 36375]] With respect to its exchange-traded equity securities investments, the Fund will normally invest in equity securities that are listed and traded on a U.S. exchange or in markets that are members of the Intermarket Surveillance Group (``ISG'') or parties to a comprehensive surveillance sharing agreement with the Exchange. In any case, not more than 10% of the net assets of the Fund in the aggregate invested in exchange-traded equity securities will consist of equity securities whose principal market is not a member of ISG or a market with which the Exchange does not have a comprehensive surveillance sharing agreement. The Fund may invest in, to the extent permitted by section 12(d)(1) of the 1940 Act and the rules thereunder,\21\ other affiliated and unaffiliated funds, such as open-end or closed-end management investment companies (``closed-end funds''), including other ETFs. --------------------------------------------------------------------------- \21\ 15 U.S.C. 80a-12(d)(1). --------------------------------------------------------------------------- The Fund also may invest in the securities of other investment companies in compliance with section 12(d)(1)(E), (F) and (G) of the 1940 Act and the rules thereunder.\22\ --------------------------------------------------------------------------- \22\ 15 U.S.C. 80a-12(d)(1)(E),(F) and (G). --------------------------------------------------------------------------- The Fund may invest in the exchange traded securities of pooled vehicles that are not investment companies and, thus, not required to comply with the provisions of the 1940 Act. Such pooled vehicles would be required to comply with the provisions of other federal securities laws, such as the Securities Act. These pooled vehicles typically hold commodities, such as gold or oil, currency, or other property that is itself not a security.\23\ --------------------------------------------------------------------------- \23\ Exchange-traded pooled investment vehicles include Trust Issued Receipts (as described in NYSE Arca Equities Rule 8.200); Commodity-Based Trust Shares (as described in NYSE Arca Equities Rule 8.201); Currency Trust Shares (as described in NYSE Arca Equities Rule 8.202); Commodity Index Trust Shares (as described in NYSE Arca Equities Rule 8.203); and Trust Units (as described in NYSE Arca Equities Rule 8.500). --------------------------------------------------------------------------- Investment Restrictions The Fund may hold up to an aggregate amount of 15% of its net assets in illiquid assets (calculated at the time of investment), including Rule 144A fixed income securities and bank loans, that are deemed illiquid by the Adviser, consistent with Commission guidance.\24\ Thus, only those Rule 144A securities and bank loans, that are deemed illiquid by the Adviser would be included in the limitation of 15% of net assets in illiquid assets.\25\ --------------------------------------------------------------------------- \24\ The Commission has stated that long-standing Commission guidelines have required open-end funds to hold no more than 15% of their net assets in illiquid securities and other illiquid assets. See Investment Company Act Release No. 28193 (March 11, 2008), 73 FR 14618 (March 18, 2008), footnote 34. See also, Investment Company Act Release No. 5847 (October 21, 1969), 35 FR 19989 (December 31, 1970) (Statement Regarding ``Restricted Securities''); Investment Company Act Release No. 18612 (March 12, 1992), 57 FR 9828 (March 20, 1992) (Revisions of Guidelines to Form N-1A). A fund's portfolio security is illiquid if it cannot be disposed of in the ordinary course of business within seven days at approximately the value ascribed to it by the fund. See Investment Company Act Release No. 14983 (March 12, 1986), 51 FR 9773 (March 21, 1986) (adopting amendments to Rule 2a-7 under the 1940 Act); Investment Company Act Release No. 17452 (April 23, 1990), 55 FR 17933 (April 30, 1990) (adopting Rule 144A under the Securities Act). \25\ Rule 144A securities and loan assignments, including bank loans, are subject to the Fund's 15% limitation on holdings in illiquid assets only if deemed illiquid by the Adviser. In reaching liquidity decisions relating to Rule 144A securities and loan assignments, the Adviser may consider the following factors: the frequency of trades and quotes for the security; the number of dealers wishing to purchase or sell the security and the number of other potential purchasers; dealer undertakings to make a market in the security; and the nature of the security and the nature of the marketplace trades (e.g., the time needed to dispose of the security, the method of soliciting offers, and the mechanics of transfer.) The Adviser represents that the Adviser and the Board will continue to evaluate each 144A security and loan assignment based on the Fund's valuation procedures to oversee liquidity and valuation concerns. --------------------------------------------------------------------------- The Adviser has represented that it will invest generally in loan assignments, including bank loans, that it deems highly liquid, with readily available prices. The Fund will not invest in options contracts or swap agreements. The Fund will seek to qualify for treatment as a regulated investment company under the Internal Revenue Code of 1986.\26\ --------------------------------------------------------------------------- \26\ 26 U.S.C. 851. --------------------------------------------------------------------------- The Fund's investments will be consistent with its investment objective and will not be used to provide multiple returns of a benchmark or to produce leveraged returns. Creation and Redemption of Shares The Trust will issue and sell Shares of the Fund only in ``Creation Units'' on a continuous basis through the Distributor, at their NAV next determined after receipt, on any business day, for an order received in proper form. All orders to create Creation Units must be placed for one or more Creation Unit size aggregations of Shares (50,000 Shares per Creation Unit). The Creation Unit size is subject to change. The consideration for purchase of a Creation Unit of the Fund generally will consist of an in-kind deposit of ``Deposit Securities'' for each Creation Unit constituting a substantial replication, or a representation, of the securities included in the Fund's portfolio and a ``Cash Component'' computed as described below. Together, the Deposit Securities and the Cash Component constitute the ``Fund Deposit'', which represents the minimum initial and subsequent investment amount for a Creation Unit of the Fund. The Cash Component is an amount equal to the difference between the NAV of the Shares (per Creation Unit) and the market value of the Deposit Securities. If the Cash Component is a positive number (i.e., the NAV per Creation Unit exceeds the market value of the Deposit Securities), the Cash Component will be such positive amount. If the Cash Component is a negative number (i.e., the NAV per Creation Unit is less than the market value of the Deposit Securities), the Cash Component will be such negative amount, and the creator will be entitled to receive cash from the Fund in an amount equal to the Cash Component. The Cash Component serves the function of compensating for any differences between the NAV per Creation Unit and the market value of the Deposit Securities. The Administrator, through the National Securities Clearing Corporation (``NSCC''), will make available on each business day, immediately prior to the opening of business on the Exchange (currently 9:30 a.m., Eastern Time), the list of the names and the required number of Shares of each Deposit Security to be included in the current Fund Deposit (based on information at the end of the previous business day) for the Fund. Such Fund Deposit will be applicable, subject to any adjustments as described below, in order to effect creations of Creation Units of the Fund [[Page 36376]] until such time as the next-announced composition of the Deposit Securities is made available. The identity and number of Shares of the Deposit Securities required for the Fund Deposit for the Fund will change as rebalancing adjustments and corporate action events are reflected from time to time by the Sub-Adviser with a view to the investment objective of the Fund. In addition, the Trust reserves the right to permit or require the substitution of an amount of cash--i.e., a ``cash in lieu'' amount--to be added to the Cash Component to replace any Deposit Security that may not be available in sufficient quantity for delivery, that may not be eligible for transfer or that may not be eligible for trading by an ``Authorized Participant'' (as described below) or the investor for which it is acting. In addition to the list of names and numbers of securities constituting the current Deposit Securities of the Fund Deposit, the Administrator, through NSCC, also will make available on each business day the estimated Cash Component, effective through and including the previous business day, per outstanding Creation Unit of the Fund. Procedures for Creation of Creation Units To be eligible to place orders to create a Creation Unit of the Fund, an entity must be (i) a ``Participating Party'', i.e., a broker- dealer or other participant in the clearing process through the Continuous Net Settlement System of NSCC (the ``Clearing Process'') or a clearing agency that is registered with the Commission, or (ii) a Depositary Trust Company (``DTC'') Participant (see ``Book Entry Only System'') and, in each case, must have executed an agreement with the Trust, the Distributor and the Administrator with respect to creations and redemptions of Creation Units (``Participant Agreement''). A Participating Party and DTC Participant are collectively referred to as an ``Authorized Participant''. All orders to create Creation Units must be received by the Distributor no later than the close of the regular trading session on the Exchange (ordinarily 4:00 p.m. Eastern Time) (``Closing Time''), in each case on the date such order is placed in order for the creation of Creation Units to be effected based on the NAV of Shares of the Fund as next determined on such date after receipt of the order in proper form. Redemption of Creation Units Shares may be redeemed only in Creation Units at their NAV next determined after receipt of a redemption request in proper form by the Distributor and the Fund through the Administrator and only on a business day. With respect to the Fund, the Administrator, through NSCC, will make available immediately prior to the opening of business on the Exchange (currently 9:30 a.m., Eastern Time) on each business day, the Deposit Securities that will be applicable (subject to possible amendment or correction) to redemption requests received in proper form on that day. Deposit Securities received on redemption may not be identical to Deposit Securities which are applicable to creations of Creation Units. Unless cash redemptions are available or specified for the Fund, the redemption proceeds for a Creation Unit generally consist of Deposit Securities, as announced by the Administrator on the business day of the request for redemption received in proper form, plus cash in an amount equal to the difference between the NAV of the Shares being redeemed, as next determined after a receipt of a request in proper form, and the value of the Deposit Securities (the ``Cash Redemption Amount''), less a redemption transaction fee. In the event that the Deposit Securities have a value greater than the NAV of the Shares, a compensating cash payment equal to the differential is required to be made by or through an Authorized Participant by the redeeming shareholder. If it is not possible to effect deliveries of the Deposit Securities, the Trust may in its discretion exercise its option to redeem such shares in cash, and the redeeming Beneficial Owner will be required to receive its redemption proceeds in cash. In addition, an investor may request a redemption in cash which the Fund may, in its sole discretion, permit.\27\ In either case, the investor will receive a cash payment equal to the NAV of its Shares based on the NAV of Shares of the Fund next determined after the redemption request is received in proper form (minus a redemption transaction fee and additional charge for requested cash redemptions specified above, to offset the Trust's brokerage and other transaction costs associated with the disposition of Deposit Securities). The Fund may also, in its sole discretion, upon request of a shareholder, provide such redeemer a portfolio of securities which differs from the exact composition of the Deposit Securities but does not differ in NAV. --------------------------------------------------------------------------- \27\ The Adviser represents that, to the extent the Trust effects the redemption of Shares in cash, such transactions will be effected in the same manner for all Authorized Participants. --------------------------------------------------------------------------- The right of redemption may be suspended or the date of payment postponed with respect to the Fund (1) for any period during which the Exchange is closed (other than customary weekend and holiday closings); (2) for any period during which trading on the Exchange is suspended or restricted; (3) for any period during which an emergency exists as a result of which disposal of the Shares of the Fund or determination of the Shares' NAV is not reasonably practicable; or (4) in such other circumstance as is permitted by the Commission. Net Asset Value The NAV of the Shares for the Fund will be equal to the Fund's total assets minus the Fund's total liabilities divided by the total number of Shares outstanding. Interest and investment income on the Trust's assets will accrue daily and will be included in the Fund's total assets. Expenses and fees (including investment advisory, management, administration and distribution fees, if any) will accrue daily and will be included in the Fund's total liabilities. The pricing and valuation of portfolio securities will be determined in good faith in accordance with procedures approved by, and under the direction of, the Board. In determining the value of the Fund's assets, portfolio securities will generally be valued at market using quotations from the primary market in which they are traded. The Fund normally will use third party pricing services to obtain market quotations. Securities and assets for which market quotations are not readily available or which cannot be accurately valued using the Fund's normal pricing procedures will be valued by the Trust's Fair Value Pricing Committee at fair value as determined in good faith under policies approved by the Trust's Board. Fair value pricing may be used, for example, in situations where (i) portfolio securities, such as securities with small capitalizations, are so thinly traded that there have been no transactions for that security over an extended period of time; (ii) an event occurs after the close of the exchange on which a portfolio security is principally traded that is likely to change the value of the portfolio security prior to the Fund's NAV calculation; (iii) the exchange on which the portfolio security is principally traded closes early; or (iv) trading of the particular portfolio security is halted during the day and does not resume prior to the [[Page 36377]] Fund's NAV calculation. Pursuant to policies adopted by the Board, the Adviser will consult with BNY Mellon and the Sub-Adviser on a regular basis regarding the need for fair value pricing. The Fund's policies regarding fair value pricing are intended to result in a calculation of the Fund's NAV that fairly reflects portfolio security values as of the time of pricing. A portfolio security's ``fair value'' price may differ from the price next available for that portfolio security using the Fund's normal pricing procedures, and the fair value price may differ substantially from the price at which the security may ultimately be traded or sold. The Board will monitor and evaluate the Fund's use of fair value pricing, and periodically reviews the results of any fair valuation under the Trust's policies. The NAV will be determined as of the close of regular trading on the Exchange, normally 4:00 p.m. Eastern time, on each day that the Exchange is open for business. In computing the Fund's NAV, the Fund's securities holdings will be valued based on their last readily available market price. Exchange-traded equity securities will be valued at market value, which will generally be determined using the last reported official closing or last trading price on the exchange or market on which the security is primarily traded at the time of valuation or, if no sale has occurred, at the last quoted bid price on the primary market or exchange on which they are traded. If market prices are unavailable or the Fund believes that they are unreliable, or when the value of a security has been materially affected by events occurring after the relevant market closes, the Fund will price those securities at fair value as determined in good faith using methods approved by the Trust's Board. Unsponsored ADRs, which are traded OTC, will be valued on the basis of the market closing price on the exchange where the stock of the foreign issuer that underlies the ADR is listed. Investment company securities (other than ETFs), including mutual funds and closed end funds will be valued at net asset value. Currency spot rates will be taken from major market data vendors and will generally be determined as of the close of trading of the New York Stock Exchange. Futures contracts will generally be valued at the settlement price of the relevant exchange. In computing the Fund's net asset value per Share, Rule 144A fixed income securities will be valued based on price quotations and other equivalent indications of value provided by a third party pricing service. Corporate debt securities, bank loans, non-agency CMBS, agency and non-agency RMBS, non-U.S. dollar securities, emerging market high-yield securities, investment-grade bonds, ABS, municipal bonds, CMOs, REMICs, junk bonds, equipment trust certificates, and money market instruments generally trade in the OTC market rather than on a securities exchange. The Fund will generally value these portfolio securities by relying on independent pricing services. The Fund's pricing services will use valuation models or matrix pricing to determine current value. In general, pricing services use information with respect to comparable bond and note transactions, quotations from bond dealers or by reference to other securities that are considered comparable in such characteristics as rating, interest rate, maturity date, option adjusted spread models, prepayment projections, interest rate spreads and yield curves. Foreign exchange rates will be priced using 4:00 p.m. Eastern Time mean prices from major market data vendors. Availability of Information The Fund's Web site (www.newfleet.com), which will be publicly available prior to the public offering of Shares, will include a form of the prospectus for the Fund that may be downloaded. The Fund's Web site will include additional quantitative information updated on a daily basis, including, for the Fund, (1) daily trading volume, the prior business day's reported closing price, NAV and mid-point of the bid/ask spread at the time of calculation of such NAV (the ``Bid/Ask Price''),\28\ and a calculation of the premium and discount of the Bid/ Ask Price against the NAV, and (2) data in chart format displaying the frequency distribution of discounts and premiums of the daily Bid/Ask Price against the NAV, within appropriate ranges, for each of the four previous calendar quarters. On each business day, before commencement of trading in Shares in the Core Trading Session on the Exchange, the Fund's Web site will disclose the Disclosed Portfolio that will form the basis for the Fund's calculation of NAV at the end of the business day.\29\ --------------------------------------------------------------------------- \28\ The Bid/Ask Price of the Fund's Shares will be determined using the mid-point of the highest bid and the lowest offer on the Exchange as of the time of calculation of the Fund's NAV. The records relating to Bid/Ask Prices will be retained by the Fund and its service providers. \29\ Under accounting procedures followed by the Fund, trades made on the prior business day (``T'') will be booked and reflected in NAV on the current business day (``T+1''). Accordingly, the Fund will be able to disclose at the beginning of the business day the portfolio that will form the basis for the NAV calculation at the end of the business day. --------------------------------------------------------------------------- The Fund will disclose on the Fund's Web site the following information regarding each portfolio holding, as applicable to the type of holding: Ticker symbol, CUSIP number or other identifier, if any; a description of the holding (including the type of holding); the identity of the security, commodity, index or other asset or instrument underlying the holding, if any; quantity held (as measured by, for example, par value, notional value or number of shares, contracts or units); maturity date, if any; coupon rate, if any; effective date, if any; market value of the holding; and the percentage weighting of the holding in the Fund's portfolio. The Web site information will be publicly available at no charge. In addition, a basket composition file, which includes the security names and share quantities, if applicable, required to be delivered in exchange for the Fund's Shares, together with estimates and actual cash components, will be publicly disseminated daily prior to the opening of the Exchange via the NSCC. The basket represents one Creation Unit of the Fund. The NAV of Shares of the Fund will normally be determined as of the close of the regular trading session on the Exchange (ordinarily 4:00 p.m. Eastern Time) on each business day. Authorized participants may refer to the basket composition file for information regarding securities and financial instruments that may comprise the Fund's basket on a given day. The approximate value of the Fund's investments on a per-Share basis, the Indicative Intra-Day Value (``IIV''), will be disseminated every 15 seconds during the Exchange Core Trading Session. The IIV should not be viewed as a ``real-time'' update of NAV because the IIV will be calculated by an independent third party and may not be calculated in the exact same manner as NAV, which will be computed daily. The IIV for the Fund will be calculated during hours of trading on the Exchange by dividing the ``Estimated Fund Value'' as of the time of the calculation by the total number of outstanding Shares. ``Estimated Fund Value'' is the sum of the estimated amount of cash held in the Fund's portfolio, the estimated amount of accrued interest owing to the Fund and the estimated value of the securities held in the Fund's portfolio, minus the estimated amount of the Fund's liabilities. The IIV will be calculated based on the same portfolio holdings disclosed on the Fund's Web site. In determining the estimated value for [[Page 36378]] each of the component securities, the IIV will use last sale, market prices or other methods that would be considered appropriate for pricing equity securities held by registered investment companies. Investors can also obtain the Trust's Statement of Additional Information (``SAI''), the Fund's shareholder reports, and its Form N- CSR and Form N-SAR, filed twice a year. The Trust's SAI and Shareholder Reports will be available free upon request from the Trust, and those documents and the Form N-CSR and Form N-SAR may be viewed on-screen or downloaded from the Commission's Web site at www.sec.gov. Information regarding market price and trading volume of the Shares will be continually available on a real-time basis throughout the day on brokers' computer screens and other electronic services. Information regarding the previous day's closing price and trading volume information for the Shares will be published daily in the financial section of newspapers. Quotation and last sale information for the Shares and the underlying U.S. exchange-traded equity securities will be available via the Consolidated Tape Association (``CTA'') high-speed line, and from the national securities exchange on which they are listed. Price information regarding exchange-traded equity securities and futures contracts held by the Fund will be available from the exchanges trading such assets. Quotation information from brokers and dealers or pricing services will be available for unsponsored ADRs; fixed income securities; bank loans; U.S. Treasury securities; other obligations issued or guaranteed by U.S. government agencies and instrumentalities; bank obligations; short-term securities; money market instruments; ABS; MBS; CMBS; RMBS; CMOs; shares of mutual funds; corporate debt securities; and convertible securities. Price information for investment company securities (other than ETFs and exchange-traded closed end funds) will be available from the investment company's Web site and from market data vendors. Pricing information regarding each asset class in which the Fund will invest will generally be available through nationally recognized data service providers through subscription agreements. Foreign exchange prices are available from major market data vendors. Intra-day and closing price information for Rule 144A fixed income securities and loan assignments will be available from major market data vendors. In addition, the IIV, (which is the Portfolio Indicative Value, as defined in NYSE Arca Equities Rule 8.600(c)(3)), will be widely disseminated at least every 15 seconds during the Core Trading Session by one or more major market data vendors.\30\ The dissemination of the IIV, together with the Disclosed Portfolio, will allow investors to determine the value of the underlying portfolio of the Fund on a daily basis and will provide a close estimate of that value throughout the trading day. --------------------------------------------------------------------------- \30\ Currently, it is the Exchange's understanding that several major market data vendors display and/or make widely available IIVs taken from CTA or other data feeds. --------------------------------------------------------------------------- Additional information regarding the Trust and the Shares, including investment strategies, risks, creation and redemption procedures, fees, portfolio holdings disclosure policies, distributions and taxes is included in the Registration Statement. Trading Halts With respect to trading halts, the Exchange may consider all relevant factors in exercising its discretion to halt or suspend trading in the Shares of the Fund.\31\ Trading in Shares of the Fund will be halted if the circuit breaker parameters in NYSE Arca Equities Rule 7.12 have been reached. Trading also may be halted because of market conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable. These may include: (1) The extent to which trading is not occurring in the securities and/or the financial instruments comprising the Disclosed Portfolio of the Fund; or (2) whether other unusual conditions or circumstances detrimental to the maintenance of a fair and orderly market are present. Trading in the Shares will be subject to NYSE Arca Equities Rule 8.600(d)(2)(D), which sets forth circumstances under which Shares of the Fund may be halted. --------------------------------------------------------------------------- \31\ See NYSE Arca Equities Rule 7.12, Commentary .04. --------------------------------------------------------------------------- Trading Rules The Exchange deems the Shares to be equity securities, thus rendering trading in the Shares subject to the Exchange's existing rules governing the trading of equity securities. Shares will trade on the NYSE Arca Marketplace from 4 a.m. to 8 p.m. Eastern Time in accordance with NYSE Arca Equities Rule 7.34 (Opening, Core, and Late Trading Sessions). The Exchange has appropriate rules to facilitate transactions in the Shares during all trading sessions. As provided in NYSE Arca Equities Rule 7.6, Commentary .03, the minimum price variation (``MPV'') for quoting and entry of orders in equity securities traded on the NYSE Arca Marketplace is $0.01, with the exception of securities that are priced less than $1.00 for which the MPV for order entry is $0.0001. The Shares will conform to the initial and continued listing criteria under NYSE Arca Equities Rule 8.600. Consistent with NYSE Arca Equities Rule 8.600(d)(2)(B)(ii), the Adviser will implement and maintain, or be subject to, procedures designed to prevent the use and dissemination of material non-public information regarding the actual components of the Fund's portfolio. The Exchange represents that, for initial and/or continued listing, the Fund will be in compliance with Rule 10A-3 \32\ under the Act, as provided by NYSE Arca Equities Rule 5.3. A minimum of 100,000 Shares will be outstanding at the commencement of trading on the Exchange. The Exchange will obtain a representation from the issuer of the Shares that the NAV per Share will be calculated daily and that the NAV and the Disclosed Portfolio \33\ as defined in NYSE Arca Equities Rule 8.600(c)(2) will be made available to all market participants at the same time. The Fund's investments will be consistent with the Fund's investment objective and will not be used to enhance leverage. --------------------------------------------------------------------------- \32\ 17 CFR 240.10A-3. \33\ The term ``Disclosed Portfolio'' is defined in NYSE Arca Equities Rule 8.600(c)(2). --------------------------------------------------------------------------- Additional information regarding the Trust, Fund, and Shares, including investment strategies, risks, creation and redemption procedures, fees, portfolio holdings, disclosure policies, distributions and taxes, availability of information, trading rules and halts, and surveillance procedures, among other things, can be found in the Registration Statement. Surveillance The Exchange represents that trading in the Shares will be subject to the existing trading surveillances, administered by the Financial Industry Regulatory Authority (``FINRA'') on behalf of the Exchange, which are designed to detect violations of Exchange rules and applicable federal securities laws. The Exchange represents that these procedures are adequate to properly monitor Exchange trading of the Shares in all trading sessions and to deter and detect violations of Exchange rules and federal [[Page 36379]] securities laws applicable to trading on the Exchange.\34\ --------------------------------------------------------------------------- \34\ FINRA surveils trading on the Exchange pursuant to a regulatory services agreement. The Exchange is responsible for FINRA's performance under this regulatory services agreement. --------------------------------------------------------------------------- The surveillances referred to above generally focus on detecting securities trading outside their normal patterns, which could be indicative of manipulative or other violative activity. When such situations are detected, surveillance analysis follows and investigations are opened, where appropriate, to review the behavior of all relevant parties for all relevant trading violations.\35\ --------------------------------------------------------------------------- \35\ For a list of the current members of ISG, see www.isgportal.org. The Exchange notes that not all components of the Disclosed Portfolio may trade on markets that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. --------------------------------------------------------------------------- FINRA, on behalf of the Exchange, will communicate as needed regarding trading in the Shares, exchange-traded equity securities and futures contracts with other markets and other entities that are members of the ISG, and FINRA, on behalf of the Exchange, may obtain trading information regarding trading in the Shares, exchange-traded equity securities and futures contracts from such markets and other entities. In addition, the Exchange may obtain information regarding trading in the Shares, exchange-traded equity securities and futures contracts from markets and other entities that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. In addition, FINRA, on behalf of the Exchange, is able to access, as needed, trade information for certain fixed income securities held by the Fund reported to FINRA's Trade Reporting and Compliance Engine (``TRACE''). In addition, the Exchange also has a general policy prohibiting the distribution of material, non-public information by its employees. Information Bulletin Prior to the commencement of trading, the Exchange will inform its Equity Trading Permit Holders in an Information Bulletin (``Bulletin'') of the special characteristics and risks associated with trading the Shares. Specifically, the Bulletin will discuss the following: (1) The procedures for purchases and redemptions of Shares in Creation Unit aggregations (and that Shares are not individually redeemable); (2) NYSE Arca Equities Rule 9.2(a), which imposes a duty of due diligence on its Equity Trading Permit Holders to learn the essential facts relating to every customer prior to trading the Shares; (3) the risks involved in trading the Shares during the Opening and Late Trading Sessions when an updated IIV will not be calculated or publicly disseminated; (4) how information regarding the IIV and the Disclosed Portfolio is disseminated; (5) the requirement that Equity Trading Permit Holders deliver a prospectus to investors purchasing newly issued Shares prior to or concurrently with the confirmation of a transaction; and (6) trading information. In addition, the Bulletin will reference that the Fund is subject to various fees and expenses described in the Registration Statement. The Bulletin will discuss any exemptive, no-action, and interpretive relief granted by the Commission from any rules under the Act. The Bulletin will also disclose that the NAV for the Shares will be calculated after 4:00 p.m. Eastern Time each trading day. 2. Statutory Basis The basis under the Act for this proposed rule change is the requirement under section 6(b)(5) \36\ that an exchange have rules that are designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to, and perfect the mechanism of a free and open market and, in general, to protect investors and the public interest. --------------------------------------------------------------------------- \36\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- The Exchange believes that the proposed rule change is designed to prevent fraudulent and manipulative acts and practices in that the Shares will be listed and traded on the Exchange pursuant to the initial and continued listing criteria in NYSE Arca Equities Rule 8.600. The Exchange has in place surveillance procedures that are adequate to properly monitor trading in the Shares in all trading sessions and to deter and detect violations of Exchange rules and applicable federal securities laws. FINRA, on behalf of the Exchange, will communicate as needed regarding trading in the Shares, exchange- traded equity securities and futures contracts with other markets and other entities that are members of the ISG, and FINRA, on behalf of the Exchange, may obtain trading information regarding trading in the Shares, exchange-traded equity securities and futures contracts from such markets and other entities. In addition, the Exchange may obtain information regarding trading in the Shares, exchange-traded equity securities and futures contracts from markets and other entities that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. In addition, FINRA, on behalf of the Exchange, is able to access, as needed, trade information for certain fixed income securities held by the Fund reported to TRACE. The Fund may invest up to 20% of its net assets in the aggregate in non-agency CMBS, RMBS and ABS. The Fund may invest up to 20% of its assets in junior bank loans. The Fund may not purchase or hold illiquid assets if, in the aggregate, more than 15% of its net assets would be invested in illiquid assets. The Adviser and Sub-Adviser are not registered as broker-dealers but are affiliated with two broker-dealers and have implemented and will maintain a fire wall with respect to each such broker-dealer affiliate regarding access to information concerning the composition and/or changes to the portfolio. The proposed rule change is designed to promote just and equitable principles of trade and to protect investors and the public interest in that the Exchange will obtain a representation from the issuer of the Shares that the NAV per Share will be calculated daily and that the NAV and the Disclosed Portfolio will be made available to all market participants at the same time. In addition, a large amount of information is publicly available regarding the Fund and the Shares, thereby promoting market transparency. Quotation and last sale information for the Shares and the underlying U.S. exchange-traded equity securities will be available via the CTA high-speed line, and from the national securities exchange on which they are listed. The Fund will disclose on the Fund's Web site the following information regarding each portfolio holding, as applicable to the type of holding: ticker symbol, CUSIP number or other identifier, if any; a description of the holding (including the type of holding); the identity of the security, commodity, index or other asset or instrument underlying the holding, if any; quantity held (as measured by, for example, par value, notional value or number of shares, contracts or units); maturity date, if any; coupon rate, if any; effective date, if any; market value of the holding; and the percentage weighting of the holding in the Fund's portfolio. Moreover, prior to the commencement of trading, the Exchange will inform its Equity Trading Permit Holders in an Information Bulletin of the special characteristics and risks associated with trading the Shares. Trading in Shares of the Fund will be halted if the circuit breaker parameters in NYSE Arca Equities Rule 7.12 have been reached or because of market [[Page 36380]] conditions or for reasons that, in the view of the Exchange, make trading in the Shares inadvisable. Trading in the Shares will be subject to NYSE Arca Equities Rule 8.600(d)(2)(D), which sets forth circumstances under which Shares of the Fund may be halted. In addition, as noted above, investors will have ready access to information regarding the Fund's holdings, the IIV, the Disclosed Portfolio, and quotation and last sale information for the Shares. The proposed rule change is designed to perfect the mechanism of a free and open market and, in general, to protect investors and the public interest in that it will facilitate the listing and trading of an additional type of actively-managed exchange-traded product that will enhance competition among market participants, to the benefit of investors and the marketplace. As noted above, the Exchange has in place surveillance procedures relating to trading in the Shares and may obtain information via ISG from other exchanges that are members of ISG or with which the Exchange has entered into a comprehensive surveillance sharing agreement. In addition, as noted above, investors will have ready access to information regarding the Fund's holdings, the IIV, the Disclosed Portfolio, and quotation and last sale information for the Shares. B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purpose of the Act. The Exchange notes that the proposed rule change will facilitate the listing and trading of an additional type of actively-managed exchange-traded product that will enhance competition among market participants, to the benefit of investors and the marketplace. C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or such longer period up to 90 days after publication (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the self-regulatory organization consents, the Commission will: (A) by order approve or disapprove the proposed rule change, or (B) institute proceedings to determine whether the proposed rule change should be disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to [email protected]. Please include File Number SR-NYSEArca-2015-42 on the subject line. Paper Comments Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090. All submissions should refer to File Number SR-NYSEArca-2015-42. 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 Section, 100 F Street, NE., Washington, DC 20549 on official business days between 10:00 a.m. and 3:00 p.m. Copies of the filing will also be available for inspection and copying at the NYSE's principal office and on its Internet Web site at www.nyse.com. 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-2015-42 and should be submitted on or before July 15, 2015. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\37\ --------------------------------------------------------------------------- \37\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Brent J. Fields, Secretary. [FR Doc. 2015-15455 Filed 6-23-15; 8:45 am] BILLING CODE 8011-01-P
![36372 Federal Register / Vol. 80, No. 121 / Wednesday, June 24, 2015 / Notices
the securities were acquired, (2) the investment by the Fund of Funds in the For the Commission, by the Division of
identity of the underwriting syndicate’s Unaffiliated Fund. Any Sub-Adviser Investment Management, pursuant to
members, (3) the terms of the purchase, delegated authority.
will waive fees otherwise payable to the
and (4) the information or materials Sub-Adviser, directly or indirectly, by Brent J. Fields,
upon which the determinations of the the Fund of Funds in an amount at least Secretary.
Board of the Unaffiliated Investment equal to any compensation received by [FR Doc. 2015–15450 Filed 6–23–15; 8:45 am]
Company were made. the Sub-Adviser, or an affiliated person BILLING CODE 8011–01–P
8. Prior to its investment in shares of of the Sub-Adviser, from an Unaffiliated
an Unaffiliated Investment Company in
Fund, other than any advisory fees paid
excess of the limit set forth in section SECURITIES AND EXCHANGE
to the Sub-Adviser or its affiliated COMMISSION
12(d)(1)(A)(i) of the Act, the Fund of
Funds and the Unaffiliated Investment person by the Unaffiliated Investment
Company, in connection with the [Release No. 34–75247; File No. SR–
Company will execute a Participation NYSEArca–2015–42]
Agreement stating, without limitation, investment by the Fund of Funds in the
that their Boards and their investment Unaffiliated Fund made at the direction Self-Regulatory Organizations; NYSE
advisers understand the terms and of the Sub-Adviser. In the event that the Arca, Inc.; Notice of Filing of Proposed
conditions of the order and agree to Sub-Adviser waives fees, the benefit of Rule Change, as Modified by
fulfill their responsibilities under the the waiver will be passed through to the Amendment No. 1, Relating to the
order. At the time of its investment in Fund of Funds. Listing and Trading of Shares of
shares of an Unaffiliated Investment 11. Any sales charges and/or service Newfleet Multi-Sector Unconstrained
Company in excess of the limit set forth fees charged with respect to shares of a Bond ETF under NYSE Arca Equities
in section 12(d)(1)(A)(i), a Fund of Fund of Funds will not exceed the Rule 8.600
Funds will notify the Unaffiliated limits applicable to funds of funds set
Investment Company of the investment. June 18, 2015.
forth in NASD Conduct Rule 2830. Pursuant to section 19(b)(1) 1 of the
At such time, the Fund of Funds will
also transmit to the Unaffiliated 12. No Underlying Fund will acquire Securities Exchange Act of 1934 (the
Investment Company a list of the names securities of any other investment ‘‘Act’’) 2 and Rule 19b–4 thereunder,3
of each Fund of Funds Affiliate and company or company relying on section notice is hereby given that, on June 5,
Underwriting Affiliate. The Fund of 3(c)(1) or 3(c)(7) of the Act, in excess of 2015, NYSE Arca, Inc. (the ‘‘Exchange’’
Funds will notify the Unaffiliated the limits contained in section or ‘‘NYSE Arca’’) filed with the
Investment Company of any changes to 12(d)(1)(A) of the Act, except to the Securities and Exchange Commission
the list as soon as reasonably practicable extent that such Underlying Fund: (a) (the ‘‘Commission’’) the proposed rule
after a change occurs. The Unaffiliated Acquires such securities in compliance change as described in Items I and II
Investment Company and the Fund of with section 12(d)(1)(E) of the Act and below, which Items have been prepared
Funds will maintain and preserve a either is an Affiliated Fund or is in the by the self-regulatory organization. On
copy of the order, the Participation June 15, 2015, NYSE Arca filed
same ‘‘group of investment companies’’
Agreement, and the list with any Amendment No. 1 to the proposed rule
as its corresponding master fund; (b)
updated information for the duration of change.4 The Commission is publishing
receives securities of another
the investment and for a period of not this notice to solicit comments on the
investment company as a dividend or as proposed rule change from interested
less than six years thereafter, the first a result of a plan of reorganization of a
two years in an easily accessible place. persons.
company (other than a plan devised for
9. Before approving any advisory I. Self-Regulatory Organization’s
the purpose of evading section 12(d)(1)
contract under section 15 of the Act, the Statement of the Terms of Substance of
Board of each Fund of Funds, including of the Act); or (c) acquires (or is deemed
to have acquired) securities of another the Proposed Rule Change
a majority of the Independent Trustees,
shall find that the advisory fees charged investment company pursuant to The Exchange proposes to list and
under the advisory contract are based on exemptive relief from the Commission trade shares of the following under
services provided that are in addition to, permitting such Underlying Fund to: (i) NYSE Arca Equities Rule 8.600
rather than duplicative of, services Acquire securities of one or more (‘‘Managed Fund Shares’’): Newfleet
provided under the advisory contract(s) investment companies for short-term Multi-Sector Unconstrained Bond ETF.
of any Underlying Fund in which the cash management purposes or (ii) The text of the proposed rule change is
Fund of Funds may invest. Such engage in inter-fund borrowing and available on the Exchange’s Web site at
finding, and the basis upon which the lending transactions. www.nyse.com, at the principal office of
finding was made, will be recorded fully the Exchange, and at the Commission’s
B. Other Investments by Section Public Reference Room.
in the minute books of the appropriate
12(d)(1)(G) Funds of Funds
Fund of Funds. II. Self-Regulatory Organization’s
10. The Adviser will waive fees Applicants agree that the order Statement of the Purpose of, and
otherwise payable to it by a Fund of granting the requested relief to permit Statutory Basis for, the Proposed Rule
Funds in an amount at least equal to any Section 12(d)(1)(G) Funds of Funds to Change
compensation (including fees received
invest in Other Investments shall be In its filing with the Commission, the
pursuant to any plan adopted by an
subject to the following condition: self-regulatory organization included
Unaffiliated Investment Company
1. Applicants will comply with all statements concerning the purpose of,
tkelley on DSK3SPTVN1PROD with NOTICES
pursuant to rule 12b–1 under the Act)
received from an Unaffiliated Fund by provisions of rule 12d1–2 under the Act, and basis for, the proposed rule change
the Adviser, or an affiliated person of except for paragraph (a)(2) to the extent 1 15 U.S.C.78s(b)(1).
the Adviser, other than any advisory that it restricts any Section 12(d)(1)(G) 2 15 U.S.C. 78a.
fees paid to the Adviser or its affiliated Fund of Funds from investing in Other 3 17 CFR 240.19b–4.
person by the Unaffiliated Investment Investments as described in the 4 Amendment No. 1 replaces and supersedes the
Company, in connection with the application. filing in its entirety.
VerDate Sep<11>2014 16:43 Jun 23, 2015 Jkt 235001 PO 00000 Frm 00057 Fmt 4703 Sfmt 4703 E:\FR\FM\24JNN1.SGM 24JNN1](https://thefederalregister.org/doc/80_FR_36493/page/1.svg)
![Federal Register / Vol. 80, No. 121 / Wednesday, June 24, 2015 / Notices 36373
and discussed any comments it received ‘‘Distributor’’) of Fund Shares on an its broker-dealer affiliate regarding
on the proposed rule change. The text agency basis.8 access to information concerning the
of those statements may be examined at The Bank of New York Mellon (the composition and/or changes to the
the places specified in Item IV below. ‘‘Administrator’’) will serve as the portfolio, and will be subject to
The Exchange has prepared summaries, administrator, custodian, transfer agent procedures designed to prevent the use
set forth in sections A, B, and C below, and fund accounting agent for the Fund. and dissemination of material non-
of the most significant parts of such Commentary .06 to Rule 8.600 public information regarding such
statements. provides that, if the investment adviser portfolio.
to the investment company issuing
A. Self-Regulatory Organization’s Managed Fund Shares is affiliated with Description of the Fund
Statement of the Purpose of, and the a broker-dealer, such investment adviser Principal Investments
Statutory Basis for, the Proposed Rule shall erect a ‘‘fire wall’’ between the
Change According to the Registration
investment adviser and the broker-
Statement, the Fund will, under normal
1. Purpose dealer with respect to access to
market conditions,10 invest at least
information concerning the composition
The Exchange proposes to list and eighty percent (80%) of the Fund’s net
and/or changes to such investment
trade shares (‘‘Shares’’) of the following assets in fixed income securities, across
company portfolio.9 In addition,
under NYSE Arca Equities Rule 8.600, all sectors of the fixed income market,
Commentary .06 further requires that
which governs the listing and trading of and in U.S. Treasury futures. The Fund
personnel who make decisions on the
Managed Fund Shares: 5 Newfleet Multi- may invest across the credit rating
open-end fund’s portfolio composition
Sector Unconstrained Bond ETF,6 a spectrum, which includes securities
must be subject to procedures designed
series of the ETFis Series Trust I rated below investment grade by a
to prevent the use and dissemination of
(‘‘Trust’’).7 nationally recognized statistical rating
material nonpublic information
organization (‘‘NRSRO’’). The Fund also
The investment adviser to the Fund regarding the open-end fund’s portfolio.
may invest in unrated securities. The
will be Etfis Capital LLC. (the The Adviser and Sub-Adviser are not
Fund has no target duration for its
‘‘Adviser’’). The Fund’s Sub-Adviser registered as broker-dealers but each is
investment portfolio and the Fund’s
will be Newfleet Asset Management LLC affiliated with one or more broker-
portfolio managers may target shorter or
(‘‘Sub-Adviser’’). ETF Issuer Solutions dealers and has implemented and will
longer durations in response to their
Inc. will serve as the Fund’s operational maintain a fire wall with respect to each
view of the fixed income markets
administrator. ETF Distributors LLC will such broker-dealer affiliate regarding
generally or any sector thereof.
serve as the distributor (the access to information concerning the The Fund’s investment objective will
composition and/or changes to the seek to provide a high level of current
5 A Managed Fund Share is a security that portfolio. In the event (a) the Adviser or income and, secondarily, capital
represents an interest in an investment company Sub-Adviser become registered broker-
registered under the Investment Company Act of appreciation. According to the
1940 (15 U.S.C. 80a–1) (‘‘1940 Act’’) organized as
dealers or newly affiliated with a Registration Statement, the Fund will
an open-end investment company or similar entity broker-dealer, or (b) any new adviser or apply a time-tested approach to credit
that invests in a portfolio of securities selected by sub-adviser is a registered broker-dealer research to capitalize on opportunities
its investment adviser consistent with its or becomes affiliated with a broker-
investment objectives and policies. In contrast, an across undervalued areas of the bond
open-end investment company that issues
dealer, it will implement a fire wall market. According to the Registration
Investment Company Units, listed and traded on with respect to its relevant personnel or Statement, under normal market
the Exchange under NYSE Arca Equities Rule conditions, the Sub-Adviser will seek to
5.2(j)(3), seeks to provide investment results that 8 This Amendment No. 1 to SR–NYSEArca–
correspond generally to the price and yield 201[5]–42 replaces SR–NYSEArca–201[5]–42 as
select securities using a sector rotation
performance of a specific foreign or domestic stock originally filed and supersedes such filing in its approach and seek to adjust the
index, fixed income securities index or combination entirety. proportion of Fund investments in
thereof. 9 An investment adviser to an open-end fund is
various sectors and sub-sectors in an
6 The Commission has approved listing and
required to be registered under the Investment effort to obtain higher relative returns.
trading on the Exchange of a number of actively Advisers Act of 1940 (the ‘‘Advisers Act’’). As a
managed funds under Rule 8.600. See, e.g., result, the Adviser and Sub-Adviser and their The Fund’s investable assets will
Securities Exchange Act Release Nos. 69591 (May related personnel are subject to the provisions of typically be allocated among various
16, 2013), 78 FR 30372 (May 22, 2013) (SR– Rule 204A–1 under the Advisers Act relating to sectors and sub-sectors of the fixed
NYSEArca–2013–33) (order approving Exchange codes of ethics. This Rule requires investment
listing and trading of International Bear ETF); 69061
income market using a top-down,
advisers to adopt a code of ethics that reflects the
(March 7, 2013), 78 FR 15990 (March 13, 2013) (SR– fiduciary nature of the relationship to clients as relative value approach that looks at
NYSEArca–2013–01) (order approving Exchange well as compliance with other applicable securities factors such as yield and spreads,
listing and trading of Newfleet Multi-Sector Income laws. Accordingly, procedures designed to prevent supply and demand, investment
ETF); and 67277 (June 27, 2012), 77 FR 39554 (July the communication and misuse of non-public
3, 2012) (SR–NYSEArca–2012–39) (order approving
environment, and sector fundamentals.
information by an investment adviser must be
Exchange listing and trading of the Global Alpha & consistent with Rule 204A–1 under the Advisers The Sub-Adviser will then typically
Beta ETF). Act. In addition, Rule 206(4)–7 under the Advisers
7 The Trust is registered under the 1940 Act. On Act makes it unlawful for an investment adviser to 10 The term ‘‘under normal market conditions’’
January 26, 2015, the Trust filed with the provide investment advice to clients unless such includes, but is not limited to, the absence of
Commission an amendment to its registration investment adviser has (i) adopted and extreme volatility or trading halts in the fixed
statement on Form N–1A under the Securities Act implemented written policies and procedures income markets or the financial markets generally;
of 1933 (15 U.S.C. 77a) (‘‘Securities Act’’), and reasonably designed to prevent violation, by the operational issues causing dissemination of
under the 1940 Act relating to the Fund (File Nos. investment adviser and its supervised persons, of inaccurate market information; or force majeure
333–187668 and 811–22819) (‘‘Registration the Advisers Act and the Commission rules adopted type events such as systems failure, natural or man-
tkelley on DSK3SPTVN1PROD with NOTICES
Statement’’). The description of the operation of the thereunder; (ii) implemented, at a minimum, an made disaster, act of God, armed conflict, act of
Trust and the Fund herein is based, in part, on the annual review regarding the adequacy of the terrorism, riot or labor disruption or any similar
Registration Statement. In addition, the policies and procedures established pursuant to intervening circumstance. In the absence of normal
Commission has issued an order granting certain subparagraph (i) above and the effectiveness of their market conditions, the Fund may invest 100% of its
exemptive relief to the Trust under the 1940 Act. implementation; and (iii) designated an individual total assets, without limitation, in cash or cash
See Investment Company Act Release No. 30607 (who is a supervised person) responsible for equivalents. The Fund may be invested in this
(July 23, 2013) (File No. 812–14080) (‘‘Exemptive administering the policies and procedures adopted manner for extended periods depending on the Sub-
Order’’). under subparagraph (i) above. Adviser’s assessment of market conditions.
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![36380 Federal Register / Vol. 80, No. 121 / Wednesday, June 24, 2015 / Notices
conditions or for reasons that, in the or (ii) as to which the self-regulatory should be submitted on or before July
view of the Exchange, make trading in organization consents, the Commission 15, 2015.
the Shares inadvisable. Trading in the will: For the Commission, by the Division of
Shares will be subject to NYSE Arca (A) by order approve or disapprove Trading and Markets, pursuant to delegated
Equities Rule 8.600(d)(2)(D), which sets the proposed rule change, or authority.37
forth circumstances under which Shares (B) institute proceedings to determine Brent J. Fields,
of the Fund may be halted. In addition, whether the proposed rule change Secretary.
as noted above, investors will have should be disapproved.
[FR Doc. 2015–15455 Filed 6–23–15; 8:45 am]
ready access to information regarding IV. Solicitation of Comments BILLING CODE 8011–01–P
the Fund’s holdings, the IIV, the
Disclosed Portfolio, and quotation and Interested persons are invited to
last sale information for the Shares. submit written data, views, and
arguments concerning the foregoing, SECURITIES AND EXCHANGE
The proposed rule change is designed COMMISSION
to perfect the mechanism of a free and including whether the proposed rule
open market and, in general, to protect change is consistent with the Act. [Release No. 34–75244; File No. SR–
investors and the public interest in that Comments may be submitted by any of NYSEArca-2015–23]
it will facilitate the listing and trading the following methods:
Self-Regulatory Organizations; NYSE
of an additional type of actively- Electronic Comments Arca, Inc.; Order Granting Approval of
managed exchange-traded product that
will enhance competition among market • Use the Commission’s Internet Proposed Rule Change, as Modified by
comment form (http://www.sec.gov/ Amendment Nos. 1 and 3 Thereto,
participants, to the benefit of investors Relating to the Listing and Trading of
and the marketplace. As noted above, rules/sro.shtml); or
• Send an email to rule-comments@ Shares of the ALPS Enhanced Put
the Exchange has in place surveillance Write Strategy ETF Under NYSE Arca
sec.gov. Please include File Number SR–
procedures relating to trading in the Equities Rule 8.600
NYSEArca–2015–42 on the subject line.
Shares and may obtain information via
ISG from other exchanges that are Paper Comments June 18, 2015.
members of ISG or with which the • Send paper comments in triplicate I. Introduction
Exchange has entered into a to Brent J. Fields, Secretary, Securities
comprehensive surveillance sharing On April 15, 2015, NYSE Arca, Inc.
and Exchange Commission, 100 F Street
agreement. In addition, as noted above, (‘‘Exchange’’) filed with the Securities
NE., Washington, DC 20549–1090.
investors will have ready access to and Exchange Commission
All submissions should refer to File (‘‘Commission’’), pursuant to section
information regarding the Fund’s Number SR–NYSEArca–2015–42. This
holdings, the IIV, the Disclosed 19(b)(1) of the Securities Exchange Act
file number should be included on the of 1934 (‘‘Act’’ or ‘‘Exchange Act’’) 1 and
Portfolio, and quotation and last sale subject line if email is used. To help the
information for the Shares. Rule 19b–4 thereunder,2 a proposed rule
Commission process and review your change to list and trade shares
B. Self-Regulatory Organization’s comments more efficiently, please use (‘‘Shares’’) of the ALPS Enhanced Put
Statement on Burden on Competition only one method. The Commission will Write Strategy ETF (‘‘Fund’’) under
The Exchange does not believe that post all comments on the Commission’s NYSE Arca Equities Rule 8.600, which
the proposed rule change will impose Internet Web site (http://www.sec.gov/ governs the listing and trading of
any burden on competition that is not rules/sro.shtml). Copies of the Managed Fund Shares. The proposed
necessary or appropriate in furtherance submission, all subsequent rule change was published for comment
of the purpose of the Act. The Exchange amendments, all written statements in the Federal Register on May 5, 2015.3
notes that the proposed rule change will with respect to the proposed rule On May 12, 2015, the Exchange filed
facilitate the listing and trading of an change that are filed with the Amendment No. 1 to the proposed rule
additional type of actively-managed Commission, and all written change.4 On May 19, 2015, the
exchange-traded product that will communications relating to the Exchange filed Amendment No. 2 to the
enhance competition among market proposed rule change between the proposed rule change, but withdrew
participants, to the benefit of investors Commission and any person, other than that amendment on May 20, 2015.5 On
and the marketplace. those that may be withheld from the May 20, 2015, the Exchange filed
public in accordance with the Amendment No. 3 to the proposed rule
C. Self-Regulatory Organization’s provisions of 5 U.S.C. 552, will be change.6 The Commission received no
Statement on Comments on the available for Web site viewing and
Proposed Rule Change Received From printing in the Commission’s Public 37 17 CFR 200.30–3(a)(12).
Members, Participants, or Others Reference Section, 100 F Street, NE., 1 15 U.S.C. 78s(b)(1).
No written comments were solicited Washington, DC 20549 on official 2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 74839
or received with respect to the proposed business days between 10:00 a.m. and
(Apr. 29, 2015), 80 FR 25729 (‘‘Notice’’).
rule change. 3:00 p.m. Copies of the filing will also 4 Amendment No. 1 to the proposed rule change
be available for inspection and copying replaced and superseded the original filing in its
III. Date of Effectiveness of the at the NYSE’s principal office and on its entirety.
Proposed Rule Change and Timing for Internet Web site at www.nyse.com. All 5 The Exchange withdrew Amendment No. 2 to
Commission Action comments received will be posted the proposed rule change due to certain errors.
6 Amendment No. 3 to the proposed rule change
tkelley on DSK3SPTVN1PROD with NOTICES
Within 45 days of the date of without change; the Commission does corrected typographical errors and clarified that any
publication of this notice in the Federal not edit personal identifying futures and options on futures utilized by the Fund
Register or such longer period up to 90 information from submissions. You will be U.S. exchange-traded futures contracts on
days after publication (i) as the should submit only information that the S&P 500 Index and U.S. exchange-traded
options on futures contracts on the S&P 500 Index.
Commission may designate if it finds you wish to make available publicly. All Amendment Nos. 1 and 3 are available at: http://
such longer period to be appropriate submissions should refer to File www.sec.gov/comments/sr-nysearca-2015–23/
and publishes its reasons for so finding Number SR–NYSEArca–2015–42 and nysearca201523.shtml.
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Document Created: 2015-12-15 14:09:26
Document Modified: 2015-12-15 14:09:26
| 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 36372 |
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