80 FR 54357 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Amendment No. 1 to Proposed Rule Change To Amend NYSE Arca Equities Rule 5.2(j)(3), Commentary .02 Relating to Listing of Investment Company Units Based on Municipal Bond Indexes
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 80, Issue 174 (September 9, 2015)
Federal Register Volume 80, Issue 174 (September 9, 2015)
| Page Range | 54357-54362 | |
| FR Document | 2015-22604 |
[Federal Register Volume 80, Number 174 (Wednesday, September 9, 2015)] [Notices] [Pages 54357-54362] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2015-22604] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-75811; File No. SR-NYSEArca-2015-01] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Amendment No. 1 to Proposed Rule Change To Amend NYSE Arca Equities Rule 5.2(j)(3), Commentary .02 Relating to Listing of Investment Company Units Based on Municipal Bond Indexes September 2, 2015. On January 16, 2015, NYSE Arca, Inc. (``Exchange'') filed with the Securities and Exchange Commission (``Commission''), pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'' or ``Exchange Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to amend NYSE Arca Equities Rule 5.2(j)(3), Commentary .02 relating to the listing of Investment Company Units based on municipal bond indexes. The proposed rule change was published for comment in the Federal Register on February 4, 2015.\3\ On March 19, 2015, pursuant to section 19(b)(2) of the Act,\4\ the Commission designated a longer period within which to approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether to disapprove the proposed rule change.\5\ On May 4, 2015, the Commission published an order instituting proceedings under section 19(b)(2)(B) of the Act \6\ to determine whether to approve or disapprove the proposed rule change.\7\ On July 30, 2015, the Commission issued a notice of designation of a longer period for Commission action on proceedings to determine whether to approve or disapprove the proposed rule change.\8\ The Commission has received no comment letters on the proposed rule change. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ See Securities Exchange Act Release No. 74175 (Jan. 29, 2015), 80 FR 6150 (``Notice''). \4\ 15 U.S.C. 78s(b)(2). \5\ See Securities Exchange Act Release No. 74534, 80 FR 15834 (Mar. 25, 2015). The Commission designated a longer period within which to take action on the proposed rule change and designated May 5, 2015, as the date by which it should approve, disapprove, or institute proceedings to determine whether to disapprove the proposed rule change. \6\ 15 U.S.C. 78s(b)(2)(B). \7\ See Securities Exchange Act Release No. 74863 (May 4, 2015), 80 FR 26591 (May 8, 2015) (``Order Instituting Proceedings''). Specifically, the Commission instituted 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.'' See id. \8\ See Securities Exchange Act Release No. 75569, 80 FR 46627 (Aug. 5, 2015). The Commission designated a longer period within which to take action on the proposed rule change and designated October 2, 2015 as the date by which it should approve or disapprove the proposed rule change. --------------------------------------------------------------------------- Pursuant to section 19(b)(1) \9\ of the Act \10\ and Rule 19b-4 thereunder,\11\ notice is hereby given that, on August 28, 2015, the Exchange filed with the Commission Amendment No. 1 to the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange.\12\ The [[Page 54358]] Commission is publishing this notice to solicit comments from interested persons on the proposed rule change, as modified by Amendment No. 1. --------------------------------------------------------------------------- \9\ 15 U.S.C. 78s(b)(1). \10\ 15 U.S.C. 78a. \11\ 17 CFR 240.19b-4. \12\ Amendment No. 1 replaces SR-NYSEArca-2015-01 as originally filed and supersedes such filing in its entirety. In Amendment No. 1, the Exchange proposes to amend NYSE Arca Equities Rule 5.2(j)(3), Commentary .02(a)(2) to add the following criteria for listing on the Exchange, pursuant to Rule 19b-4(e) under the Act, of a series of Investment Company Units based on an index or portfolio of only municipal bond components: (1) 75% of the weight of the index or portfolio 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; (2) the average dollar amount outstanding of components of the index or portfolio shall be at least $10 million; (3) each component of the index or portfolio shall have a minimum principal amount outstanding of at least $2 million; (4) the index or portfolio must include at least 1,000 components; and (5) the index or portfolio must include a minimum of 13 non-affiliated issuers. Additionally, in Amendment No. 1, the Exchange proposes to remove municipal securities from the exempted securities excluded from the criterion in NYSE Arca Equities Rule 5.2(j)(3), Commentary .02(a)(5) that an underlying index or portfolio (excluding one consisting entirely of exempted securities) must include a minimum of 13 non- affiliated issuers. In Amendment No. 1, the Exchange also describes the bases for its proposed changes to the criteria in NYSE Arca Equities Rule 5.2(j)(3), Commentary .02; explains that the proposed criteria in proposed Commentary .02(a)(2)(B)(ii)-(v) would facilitate the generic listing of funds based on municipal bond index components that are sufficiently broad-based and liquid to deter manipulation; and makes technical changes to the filing. --------------------------------------------------------------------------- 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 5.2(j)(3), Commentary .02 relating to listing of Investment Company Units based on municipal bond indexes. 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 the Statutory Basis for, the Proposed Rule Change 1. Purpose NYSE Arca Equities Rule 5.2(j)(3) permits the listing and trading, including trading pursuant to unlisted trading privileges (``UTP''), of Investment Company Units (``Units'').\13\ NYSE Arca Equities Rule 5.2(j)(3), Commentary .02 provides for listing on the Exchange pursuant to Rule 19b-4(e) \14\ under the Act of a series of Units with an underlying index or portfolio of Fixed Income Securities \15\ meeting specified criteria.\16\ These ``generic'' listing criteria permit listing and trading on the Exchange of series of Units meeting such criteria without Commission approval of each individual product pursuant to Section 19(b)(2) of the Act.\17\ --------------------------------------------------------------------------- \13\ An Investment Company Unit is a security that represents an interest in a registered investment company that holds securities comprising, or otherwise based on or representing an interest in, an index or portfolio of securities (or holds securities in another registered investment company that holds securities comprising, or otherwise based on or representing an interest in, an index or portfolio of securities). See NYSE Arca Equities Rule 5.2(j)(3)(A). \14\ 17 CFR 240.19b-4(e). \15\ Fixed Income Securities are described in NYSE Arca Equities Rule 5.2(j)(3), Commentary .02 as debt securities that are notes, bonds, debentures or evidence of indebtedness that include, but are not limited to, U.S. Department of Treasury securities, government- sponsored entity securities, municipal securities, trust preferred securities, supranational debt and debt of a foreign country or a subdivision thereof. \16\ The Commission approved NYSE Arca Equities Rule 5.2(j)(3), Commentary .02 in Securities Exchange Act Release No. 55783 (May 17, 2007), 72 FR 29194 (May 24, 2007) (SR-NYSEArca-2007-36) (order approving generic listing standards for series of Units based on Fixed Income Indexes and Combination Indexes). The Commission also approved generic listing standards for the American Stock Exchange LLC (``Amex'') for Index Fund Shares based on Fixed Income Indexes and Combination Indexes in Securities Exchange Act Release No. 55437 (March 9, 2007), 72 FR 12233 (March 15, 2007) (SR-Amex-2006-118). The Commission has approved listing of exchange-traded funds based on a fixed income index or portfolio. See, e.g., Securities Exchange Act Release No. 48534 (September 24, 2003), 68 FR 56353 (September 30, 2003) (SR-Amex-2003-75) (order approving listing on Amex of eight series of iShares Lehman Bond Funds). \17\ 15 U.S.C. 78s(b)(2). --------------------------------------------------------------------------- NYSE Arca Equities Rule 5.2(j)(3), Commentary .02(a)(2) provides that, in order to be listed and traded pursuant to Rule 19b-4(e), components of an index or portfolio that in aggregate account for at least 75% of the weight of the index or portfolio each shall have a minimum original principal amount outstanding of $100 million or more.\18\ The Exchange proposes to amend its generic listing criteria applicable to Units to better apply to the listing of Units based on indexes that include municipal bonds because the features of such bonds differ from those of most other Fixed Income Securities.\19\ --------------------------------------------------------------------------- \18\ This Amendment No. 1 to SR-NYSEArca-2015-01 replaces SR- NYSEArca-2015-01 as originally filed and supersedes such filing in its entirety. \19\ The Commission previously has approved proposed rule changes relating to listing and trading on the Exchange of Units based on municipal bond indexes. See Securities Exchange Act Release Nos. 67985 (October 4, 2012), 77 FR 61804 (October 11, 2012) (SR- NYSEArca-2012-92) (order approving proposed rule change relating to the listing and trading of iShares 2018 S&P AMT-Free Municipal Series and iShares 2019 S&P AMT-Free Municipal Series under NYSE Arca Equities Rule 5.2(j)(3), Commentary .02); 67729 (August 24, 2012), 77 FR 52776 (August 30, 2012) (SR-NYSEArca-2012-92) (notice of proposed rule change relating to the listing and trading of iShares 2018 S&P AMT-Free Municipal Series and iShares 2019 S&P AMT- Free Municipal Series under NYSE Arca Equities Rule 5.2(j)(3), Commentary .02) (``iShares 2018 Notice''); 72523, (July 2, 2014), 79 FR 39016 (July 9, 2014) (SR-NYSEArca-2014-37) (order approving proposed rule change relating to the listing and trading of iShares 2020 S&P AMT-Free Municipal Series under NYSE Arca Equities Rule 5.2(j)(3), Commentary .02); 72172 (May 15, 2014), 79 FR 29241 (May 21, 2014) (SR-NYSEArca-2014-37) (notice of proposed rule change relating to the listing and trading of iShares 2020 S&P AMT-Free Municipal Series under NYSE Arca Equities Rule 5.2(j)(3), Commentary .02) (``iShares 2020 Notice''); 72464 (June 25, 2014), 79 FR 37373 (July 1, 2014) (File No. SR-NYSEArca-2014-45) (order approving proposed rule change governing the continued listing and trading of shares of the PowerShares Insured California Municipal Bond Portfolio, PowerShares Insured National Municipal Bond Portfolio, and PowerShares Insured New York Municipal Bond Portfolio) (``PowerShares Order''); 75468 (July 16, 2015), 80 FR 43500 (July 22, 2015) (SR-NYSEArca-2015-25) (order approving proposed rule change relating to the listing and trading of iShares iBonds Dec 2021 AMT-Free Muni Bond ETF and iShares iBonds Dec 2022 AMT-Free Muni Bond ETF under NYSE Arca Equities Rule 5.2(j)(3))(``iShares 2021/2022 Order''); 74730 (April 15, 2015), 76 FR 22234 (April 21, 2015) (notice of proposed rule change relating to the listing and trading of iShares iBonds Dec 2021 AMT-Free Muni Bond ETF and iShares iBonds Dec 2022 AMT-Free Muni Bond ETF under NYSE Arca Equities Rule 5.2(j)(3), Commentary .02) (``iShares 2021/2022 Notice''); 74730 [sic] 75376 (July 7, 2015), 80 FR 40113 (July 13, 2015) (SR-NYSEArca-2015-18) (order approving proposed rule change relating to the listing and trading of Vanguard Tax-Exempt Bond Index Fund under NYSE Arca Equities Rule 5.2(j)(3)). The Commission also has issued a notice of filing and immediate effectiveness of a proposed rule change relating to listing and trading on the Exchange of shares of the iShares Taxable Municipal Bond Fund. See Securities Exchange Act Release No. 63176 (October 25, 2010), 75 FR 66815 (October 29, 2010) (SR-NYSEArca-2010-94). The Commission has approved for Exchange listing and trading of shares of two actively managed funds of the PIMCO ETF Trust that principally hold municipal bonds. See Securities Exchange Act Release No. 60981 (November 10, 2009), 74 FR 59594 (November 18, 2009) (SR-NYSEArca-2009-79) (order approving listing and trading of shares of the PIMCO Short-Term Municipal Bond Strategy Fund and PIMCO Intermediate Municipal Bond Strategy Fund). The Commission also has approved listing and trading on the Exchange of shares of the SPDR Nuveen S&P High Yield Municipal Bond Fund under Commentary .02 of NYSE Arca Equities Rule 5.2(j)(3). See Securities Exchange Act Release No. 63881 (February 9, 2011), 76 FR 9065 (February 16, 2011) (SR-NYSEArca-2010-120). --------------------------------------------------------------------------- [[Page 54359]] The Exchange proposes to amend NYSE Arca Equities Rule 5.2(j)(3), Commentary .02(a)(2) to provide an alternative for Units based on an index or portfolio of municipal bond securities to the criterion that components that in the aggregate account for 75% of the weight of the index or portfolio have a minimum original principal amount outstanding of $100 million or more. Specifically, the Exchange proposes that, with respect to an index or portfolio of only municipal bond components, the index or portfolio shall meet the following criteria:75% of the weight of the index or portfolio 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 (the ``75% Requirement''); the average dollar amount outstanding of components of the index or portfolio shall be at least $10 million; each component of the index or portfolio shall have a minimum principal amount outstanding of at least $2 million; the index or portfolio must include at least 1,000 components; and the index or portfolio must include a minimum of 13 non- affiliated issuers. With respect to proposed Commentary .02(a)(2)(B)(i), the Exchange believes it is appropriate to calculate components of a municipal bond index differently from other Fixed Income Securities for purposes of the 75% weighting requirement because municipal bond offerings differ from U.S. Treasury, Government Sponsored Entities (``GSEs''), or other fixed income offerings in a variety of ways. 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 component bonds and the issuer and/or obligor on the related bonds. Such an offering is comprised of a number of specific maturity sizes and is based on a specified project or group of projects and funded by the same revenue or other funding sources identified in the official statement.\20\ The entire issue or offering that includes such maturity sizes (sometimes also 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.\21\ --------------------------------------------------------------------------- \20\ There are two principal types of municipal bonds--general obligation, which are issued to raise capital supported by the taxing power of the issuer, and revenue bonds, which fund projects supported by the income these projects generate. Multiple maturities allow municipal bond issuers to better match and manage the timing of revenues and expenses associated with municipal bond offerings and projects financed thereby, and allow issuers to reduce their cost of funding over time. This is especially important given the long-term nature of the projects that secure municipal bond offerings and intermittent cash flows generated from the projects or other revenue sources. The issuer is able to pay down the municipal bond offering, lowering the amount outstanding, and thereby paying less interest over the life of the issue in contrast to an issue with a term maturity. \21\ Financial information vendors provide deal size as well as maturity size. --------------------------------------------------------------------------- Because the individual municipal bond components of an index may predominantly have an original principal amount outstanding of less than $100 million (although part of a municipal bond offering of $100 million or greater), NYSE Arca Equities Rule 5.2(j)(3), Commentary .02 would not generally permit listing under Rule 19b-4(e) of Units based on a municipal bond index. The Exchange believes the proposed amendment to Commentary .02(a)(2) would facilitate listing of Units based on municipal bond indexes by permitting the Exchange, in applying its generic listing criteria, to take into account the aggregate size of the municipal bond offering, as set forth in the applicable official statement, of which an index or portfolio component is part. The Exchange notes that major municipal bond indexes, while they include individual bond maturities as index components, include ``deal size'' as a factor in the criteria for index constituents and additions. For example, the index methodology for the S&P National AMT- Free Municipal Bond Index specifies that each bond must be a constituent of a deal where the deal's original offering amount was at least $100 million.\22\ In addition, for Barclays Capital municipal bond indexes, the index methodology for the Barclays Capital Investment-Grade Municipal Index specifies that a bond in the index must be issued as part of a transaction of at least $75 million; and for the Barclays Capital High-Yield Municipal Index and the Barclays Capital Enhanced State Specific Indices, the bond constituents must be issued as part of a transaction of at least $20 million.\23\ --------------------------------------------------------------------------- \22\ Source: Standard & Poor's, available at www.us.spindices.com. \23\ Source: Barclays Capital Municipal Index Research. --------------------------------------------------------------------------- The Commission previously has approved listing and trading of Units where the applicable municipal index components did not individually meet the 75% percentage requirement of NYSE Arca Equities Rule 5.2(j)(3), Commentary .02(a)(2)(A).\24\ As stated in the iShares 2020 Notice, for example, the investment adviser (Blackrock Fund Advisors or ``BFA'') for the iShares 2020 S&P AMT-Free Municipal Series has represented that the nature of the municipal bond market and municipal bond instruments makes it feasible to categorize individual issues represented by CUSIPs (i.e., the specific identifying number for a security) into categories according to common characteristics-- specifically, rating, purpose, geographical region, and maturity. BFA represented that bonds that share similar characteristics tend to trade similarly to one another; therefore, within these categories, the issues may be considered fungible from a portfolio management perspective, allowing one CUSIP to be represented by another that shares similar characteristics for purposes of developing an investment strategy.\25\ Therefore, while a relatively low percentage of the weight of the applicable index components may be part of an aggregate size offering of $100 million or more, the nature of the municipal bond market makes such components relatively fungible for investment purposes when aggregated into categories such as ratings, purpose, geographical region, and maturity. In addition, BFA represented that, within a single municipal bond issuer, there are often multiple contemporaneous or sequential issuances that have the same rating, structure and maturity, but have different CUSIPs; these separate issues by the same issuer are also likely to trade similarly to one another. Individual CUSIPs within the applicable municipal bond index that share characteristics with other CUSIPs based on rating, purpose, geographical region, and maturity have a high yield to maturity correlation, and frequently have a correlation of one or close to one. Such correlation demonstrates that the CUSIPs within their respective category behave similarly. --------------------------------------------------------------------------- \24\ See note 19, supra. \25\ See also iShares 2021/2022 Notice, note 19, supra. --------------------------------------------------------------------------- Likewise, as noted above, the individual maturity sizes that comprise a municipal bond offering share a number of important features, including credit rating and the purpose and terms of the offering as set forth in the applicable official statement. As with individual CUSIPs in an index that share certain characteristics, as described above, the individual maturity sizes comprising the municipal bond offering can be expected to be [[Page 54360]] relatively fungible for investment purposes. 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 size of the municipal bond offering rather than the individual bond component does not raise concerns regarding pricing or liquidity of the applicable municipal bond index components or of the Units overlying the applicable index. With respect to the criteria in proposed Commentary .02(a)(2)(B)(ii) through (v), the Exchange believes such criteria would limit generic listing of funds based on municipal bond index components that are sufficiently broad-based and liquid to deter potential manipulation of the Units. In particular, the proposed requirement that the average dollar amount outstanding of components be at least $10 million is comparable to the average dollar amount outstanding for index components of municipal bond indexes underlying funds previously approved by the Commission for Exchange trading.\26\ The Exchange, in proposing the listing of these other funds, believed they would not be readily susceptible to manipulation and such funds are currently trading in a fair and orderly manner. Similarly, the proposed requirements that each component have a minimum principal amount outstanding of at least $2 million, combined with the 75% Requirement, would assure that individual maturities within an index or portfolio be of substantial size. The substantial size of a large proportion of components in the index or portfolio further deters the susceptibility of the Units to manipulation. Finally, the proposed requirement that an index or portfolio include at least 1,000 components and include a minimum of 13 non-affiliated issuers is comparable to the number of index components of municipal bond indexes underlying funds previously approved by the Commission for Exchange trading \27\ and the current requirement in Commentary .02(a)(5).\28\ These requirements would effectively require that index or portfolio components have a total dollar amount outstanding of at least $10 billion, which, would limit listing of Units under the [sic] Rule 19b-4(e) to those based on underlying indexes of substantial size and multiple securities. --------------------------------------------------------------------------- \26\ See, e.g., 2021/2022 Order and PowerShares Order, note 19, supra. \27\ See, e.g., PowerShares Order, note 19, supra. \28\ The Exchange notes that an index or portfolio underlying a series of Units also would be required to meet the requirement of NYSE Arca Equities Rule 5.2(j)(3), Commentary .02(a)(4) that ``[n]o component fixed-income security (excluding Treasury Securities and GSE Securities) shall represent more than 30% of the weight of the index or portfolio, and the five most heavily weighted component fixed-income securities in the index or portfolio shall not in the aggregate account for more than 65% of the weight of the index or portfolio''. --------------------------------------------------------------------------- In addition, because the Exchange's proposed alternative listing criteria for Units based on municipal bond indexes or portfolios would require a minimum of 13 non-affiliated issuers, the Exchange proposes to change NYSE Arca Equities Rule 5.2(j)(3), Commentary .02(a)(5) \29\ so that municipal securities could not be among the exempted securities in an index or portfolio underlying a Unit that is not subject to the minimum 13 non-affiliated issuer requirement. --------------------------------------------------------------------------- \29\ NYSE Arca Equities Rule 5.2(j)(3), Commentary .02(a)(5) provides that an underlying index or portfolio (excluding one consisting entirely of exempted securities) must include a minimum of 13 non-affiliated issuers. Municipal securities are exempted securities under Section 3(a)(12)(A) of the Act. --------------------------------------------------------------------------- 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with section 6(b) \30\ of the Act, in general, and furthers the objectives of section 6(b)(5),\31\ in particular, in that it is designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, and to remove impediments to and perfect the mechanisms of a free and open market and a national market system, and, in general, to protect investors and the public interest. --------------------------------------------------------------------------- \30\ 15 U.S.C. 78f(b). \31\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- The Exchange believes that the proposed rule change applicable to trading pursuant to generic listing and trading criteria, together with the Exchange's surveillance procedures applicable to trading in the securities covered by the proposed rules, serve to foster investor protection. The proposed rule change would also enhance market competition by assisting in bringing issues of Units with an underlying index of municipal securities to market more quickly, consistent with the Commission's adoption of Rule 19b-4(e) under the Act. The Commission has previously approved proposed rule changes relating to listing and trading on the Exchange of Units based on municipal bond indexes and issues of Managed Fund Shares that hold municipal bonds.\32\ With respect to proposed Commentary .02(a)(2)(B)(i), the Exchange notes that major municipal bond indexes, while they include individual bond maturities as index components, include ``deal size'' as a factor in the criteria for index constituents and additions. As noted above, municipal bonds that share similar characteristics tend to trade similarly to one another; therefore, within these categories, the issues may be considered fungible from a portfolio management perspective, allowing one CUSIP to be represented by another that shares similar characteristics for purposes of developing an investment strategy.\33\ Therefore, while a relatively low percentage of the weight of the applicable index components may be part of an offering with an aggregate size of $100 million or more, the nature of the municipal bond market makes such components relatively fungible for investment purposes when aggregated into categories such as ratings, purpose, geographical region, and maturity. As with individual CUSIPs in an index that share certain characteristics, as described above, the individual maturity sizes comprising a municipal bond offering can be expected to be relatively fungible for investment purposes. 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 municipal bond offering of which the municipal bond component is part. Thus, consideration of the municipal bond offering rather than the individual bond component does not raise concerns regarding pricing or liquidity of the applicable municipal bond index components or of the Units overlying the applicable index. In addition, financial information vendors provide deal size, as well as maturity size information, for each municipal bond issue. --------------------------------------------------------------------------- \32\ See note 19, supra. \33\ See iShares 2018 Notice, iShares 2020 Notice and iShares 2021/2022 Notice, note 19, supra. --------------------------------------------------------------------------- The Exchange believes that the proposed rule change is designed to prevent fraudulent and manipulative acts and practices in that Units based on an index or portfolio that includes municipal bond components would be listed and traded on the Exchange pursuant to the initial and continued listing criteria in NYSE Arca Equities Rule 5.2(j)(3). The proposed amendment to NYSE Arca Equities Rule 5.2(j)(3), Commentary .02(a)(2) would better accommodate listing of Units based on [[Page 54361]] indexes that include municipal bonds, in view of features of such bonds that differ from those of most other Fixed Income Securities. In connection with establishing compliance with NYSE Arca Equities Rule 5.2(j)(3), Commentary .02(a)(2), for an index or portfolio of municipal bond components that does not meet the requirement that components that in the aggregate account for least 75% of the weight of the index or portfolio each shall have a minimum original principal amount outstanding of $100 million or more, individual municipal bond components in an index or portfolio would be required to be part of an offering of substantial size (i.e., at least $100 million aggregate size). The Exchange believes that the $100 million minimum threshold would help ensure that a substantial percentage of the applicable index components are liquid. The proposed requirement that the average dollar amount outstanding of components be at least $10 million is comparable to the average dollar amount outstanding for index components of municipal bond indexes underlying funds previously approved by the Commission for Exchange trading.\34\ --------------------------------------------------------------------------- \34\ See, e.g., 2021/2022 Order and PowerShares Order, note 19, supra. --------------------------------------------------------------------------- The proposed requirement that that [sic] each component have a minimum principal amount outstanding of at least $2 million, combined with the 75% Requirement, would assure that individual maturities within an index or portfolio be of substantial size. The proposed requirement that an index or portfolio include at least 1,000 components is comparable to the number of index components of municipal bond indexes underlying funds previously approved by the Commission for Exchange trading.\35\ Such requirement would effectively require that index or portfolio components have a total dollar amount outstanding of at least $10 billion, which would facilitate listing of Units based on underlying indexes of substantial size. The proposed requirement that an index or portfolio include a minimum of 13 non-affiliated issuers, which is based on the existing requirement in Commentary .02(a)(5), would facilitate generic listing of Units that are diversified and broad-based. --------------------------------------------------------------------------- \35\ See, e.g., PowerShares Order, note 19, supra. --------------------------------------------------------------------------- Finally, the proposed amendment to NYSE Arca Equities Rule 5.2(j)(3), Commentary .02(a)(5) to exclude municipal securities from the types of exempted securities in an index or portfolio that is excepted from the requirement that an index or portfolio underlying a Unit have at least 13 non-affiliated issuers would require that the index or portfolio include a minimum of 13 non-affiliated issuers as set forth in proposed Commentary .02(a)(2)(B)(v). The proposed rule change is designed to perfect the mechanism of a free and open market and, in general, to foster cooperation and coordination with persons engaged in facilitating transactions in securities, and to remove impediments to and perfect the mechanisms of a free and open market and a national market system, and, in general, to protect investors and the public interest in that it would facilitate the listing and trading of additional types of exchange- traded funds that hold municipal bonds pursuant to the generic listing criteria of NYSE Arca Equities Rule 5.2(j)(3), Commentary .02, and thus would enhance competition among market participants, to the benefit of investors and the marketplace. The Exchange is proposing to modify the criteria for qualifying Units based on a Fixed Income Securities index or portfolio that includes municipal bond components by applying the same quantitative threshold (i.e., $100 million or more) to the aggregate size of the municipal bond offering as the threshold that applies to component Fixed Income Securities generally, as set forth in current Rule 5.2(j)(3), Commentary .02(a)(2). The Exchange believes that applying the $100 million threshold to the aggregate size of the municipal bond offering rather than to individual maturities of the offering is appropriate in view of differences in the characteristics of municipal bond issuances from issuances of other Fixed Income Securities, as described above, while, at the same time, assuring that any individual municipal bond component is part of an offering of substantial size (i.e., at least $100 million aggregate size). In addition, the Exchange believes that the proposed criteria in proposed Commentary .02(a)(2)(B)(ii) through (v) would facilitate generic listing of funds based on municipal bond index components that are sufficiently broad-based and liquid to deter potential manipulation. B. Self-Regulatory Organization's Statement on Burden on Competition The Exchange does not believe that the proposed rule change would impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The proposed rule change is not intended to address competition among exchanges. The Exchange believes that the proposed rule change would remove a burden on competition for issuers of municipal bond offerings to provide that the Exchange's rules regarding the listing and trading of Units pursuant to Commentary .02 of Rule 5.2(j)(3) are evaluated on a similar basis to other fixed income offerings. As discussed above, because the ``deal size'' associated with a municipal bond offering is deemed the relevant basis for determining pricing and liquidity of maturity sizes of municipal bond components that comprise an index, the Exchange believes that the proposed rule change addresses the unique characteristics of municipal bond offerings as compared to other fixed income products in a manner consistent with the existing requirements of Commentary .02(a)(2) of Rule 5.2(j)(3). 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. Solicitation of 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, 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 rule-comments@sec.gov. Please include File Number SR-NYSEArca-2015-01 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-2015-01. 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 [[Page 54362]] 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 such filing will also 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 -2015-01 and should be submitted on or before September 21, 2015.\36\ --------------------------------------------------------------------------- \36\ The Commission believes that a 10-day comment period is reasonable, given the requirement that the Commission act on the proposed rule change by October 2, 2015. A 10-day period will provide adequate time for comment. See supra notes 7 and 8. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\37\ --------------------------------------------------------------------------- \37\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Robert W. Errett, Deputy Secretary. [FR Doc. 2015-22604 Filed 9-8-15; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 80, No. 174 / Wednesday, September 9, 2015 / Notices 54357
rolling period, the Board, including a distribution record date,5 expressed as a Rule 19b–4 thereunder,2 a proposed rule
majority of the Independent Directors: percentage of NAV as of such date, is no change to amend NYSE Arca Equities
(1) Will request and evaluate, and the more than 1 percentage point greater Rule 5.2(j)(3), Commentary .02 relating
Adviser will furnish, such information than the Fund’s average annual total to the listing of Investment Company
as may be reasonably necessary to make return for the 5-year period ending on Units based on municipal bond indexes.
an informed determination of whether such date; 6 and The proposed rule change was
the Distribution Policy should be (ii) the transmittal letter published for comment in the Federal
continued or continued after accompanying any registration Register on February 4, 2015.3 On
amendment; statement filed with the Commission in March 19, 2015, pursuant to section
(2) will determine whether connection with such offering discloses 19(b)(2) of the Act,4 the Commission
continuation, or continuation after that the Fund has received an order designated a longer period within which
amendment, of the Distribution Policy is under section 19(b) to permit it to make to approve the proposed rule change,
consistent with the Fund’s investment periodic distributions of long-term disapprove the proposed rule change, or
objective(s) and policies and is in the capital gains with respect to its common institute proceedings to determine
best interests of the Fund and its shares as frequently as twelve times whether to disapprove the proposed
shareholders, after considering the each year, and as frequently as rule change.5 On May 4, 2015, the
information in condition 5(b)(i)(1) distributions are specified by or Commission published an order
above; including, without limitation: determined in accordance with the instituting proceedings under section
(A) Whether the Distribution Policy is terms of any outstanding preferred 19(b)(2)(B) of the Act 6 to determine
accomplishing its purpose(s); shares as such Fund may issue. whether to approve or disapprove the
(B) the reasonably foreseeable 7. Amendments to Rule 19b–1. proposed rule change.7 On July 30,
material effects of the Distribution The requested order will expire on the 2015, the Commission issued a notice of
Policy on the Fund’s long-term total effective date of any amendment to rule designation of a longer period for
return in relation to the market price 19b–1 that provides relief permitting Commission action on proceedings to
and NAV of the Fund’s common shares; certain closed-end investment determine whether to approve or
and companies to make periodic disapprove the proposed rule change.8
(C) the Fund’s current distribution distributions of long-term capital gains The Commission has received no
rate, as described in condition 5(b) with respect to their outstanding comment letters on the proposed rule
above, compared with the Fund’s common shares as frequently as twelve change.
average annual taxable income or total times each year. Pursuant to section 19(b)(1) 9 of the
return over the two-year period, as Act 10 and Rule 19b–4 thereunder,11
For the Commission, by the Division of notice is hereby given that, on August
described in condition 5(b), or such Investment Management, under delegated
longer period as the Board deems 28, 2015, the Exchange filed with the
authority.
appropriate; and Commission Amendment No. 1 to the
Robert W. Errett, proposed rule change as described in
(3) based upon that determination, Deputy Secretary.
will approve or disapprove the Items I and II below, which Items have
[FR Doc. 2015–22602 Filed 9–8–15; 8:45 am] been prepared by the Exchange.12 The
continuation, or continuation after
BILLING CODE 8011–01–P
amendment, of the Distribution Policy; 2 17 CFR 240.19b–4.
and 3 See Securities Exchange Act Release No. 74175
(ii) The Board will record the SECURITIES AND EXCHANGE (Jan. 29, 2015), 80 FR 6150 (‘‘Notice’’).
information considered by it, including COMMISSION 4 15 U.S.C. 78s(b)(2).
its consideration of the factors listed in 5 See Securities Exchange Act Release No. 74534,
condition 5(b)(i)(2) above, and the basis [Release No. 34–75811; File No. SR– 80 FR 15834 (Mar. 25, 2015). The Commission
NYSEArca–2015–01] designated a longer period within which to take
for its approval or disapproval of the action on the proposed rule change and designated
continuation, or continuation after May 5, 2015, as the date by which it should
amendment, of the Distribution Policy Self-Regulatory Organizations; NYSE approve, disapprove, or institute proceedings to
in its meeting minutes, which must be Arca, Inc.; Notice of Filing of determine whether to disapprove the proposed rule
Amendment No. 1 to Proposed Rule change.
made and preserved for a period of not 6 15 U.S.C. 78s(b)(2)(B).
less than six years from the date of such Change To Amend NYSE Arca Equities
7 See Securities Exchange Act Release No. 74863
meeting, the first two years in an easily Rule 5.2(j)(3), Commentary .02 Relating
(May 4, 2015), 80 FR 26591 (May 8, 2015) (‘‘Order
accessible place. to Listing of Investment Company Instituting Proceedings’’). Specifically, the
6. Public Offerings. The Fund will not Units Based on Municipal Bond Commission instituted proceedings to allow for
Indexes additional analysis of the proposed rule change’s
make a public offering of its common consistency with Section 6(b)(5) of the Act, which
shares other than: September 2, 2015. requires, among other things, that the rules of a
(a) A rights offering below NAV to On January 16, 2015, NYSE Arca, Inc. national securities exchange be ‘‘designed to
holders of the Fund’s common shares; prevent fraudulent and manipulative acts and
(‘‘Exchange’’) filed with the Securities practices, to promote just and equitable principles
(b) an offering in connection with a and Exchange Commission of trade,’’ and ‘‘to protect investors and the public
dividend reinvestment plan, merger, (‘‘Commission’’), pursuant to section interest.’’ See id.
consolidation, acquisition, spin-off or 19(b)(1) of the Securities Exchange Act
8 See Securities Exchange Act Release No. 75569,
reorganization of the Fund; or 80 FR 46627 (Aug. 5, 2015). The Commission
of 1934 (‘‘Act’’ or ‘‘Exchange Act’’) 1 and designated a longer period within which to take
(c) an offering other than an offering action on the proposed rule change and designated
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described in conditions 6(a) and 6(b) 5 If the Fund has been in operation fewer than six October 2, 2015 as the date by which it should
above, provided that, with respect to months, the measured period will begin approve or disapprove the proposed rule change.
such other offering: immediately following the Fund’s first public 9 15 U.S.C. 78s(b)(1).
(i) The Fund’s annualized distribution offering. 10 15 U.S.C. 78a.
6 If the Fund has been in operation fewer than five 11 17 CFR 240.19b–4.
rate for the six months ending on the
years, the measured period will begin immediately 12 Amendment No. 1 replaces SR–NYSEArca–
last day of the month ended following the Fund’s first public offering. 2015–01 as originally filed and supersedes such
immediately prior to the most recent 1 15 U.S.C. 78s(b)(1). Continued
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![54358 Federal Register / Vol. 80, No. 174 / Wednesday, September 9, 2015 / Notices
Commission is publishing this notice to A. Self-Regulatory Organization’s The Exchange proposes to amend its
solicit comments from interested Statement of the Purpose of, and the generic listing criteria applicable to
persons on the proposed rule change, as Statutory Basis for, the Proposed Rule Units to better apply to the listing of
modified by Amendment No. 1. Change Units based on indexes that include
municipal bonds because the features of
I. Self-Regulatory Organization’s 1. Purpose
such bonds differ from those of most
Statement of the Terms of Substance of NYSE Arca Equities Rule 5.2(j)(3) other Fixed Income Securities.19
the Proposed Rule Change permits the listing and trading,
including trading pursuant to unlisted originally filed and supersedes such filing in its
The Exchange proposes to amend trading privileges (‘‘UTP’’), of entirety.
NYSE Arca Equities Rule 5.2(j)(3), Investment Company Units (‘‘Units’’).13 19 The Commission previously has approved
Commentary .02 relating to listing of NYSE Arca Equities Rule 5.2(j)(3), proposed rule changes relating to listing and trading
on the Exchange of Units based on municipal bond
Investment Company Units based on Commentary .02 provides for listing on indexes. See Securities Exchange Act Release Nos.
municipal bond indexes. The text of the the Exchange pursuant to Rule 19b– 67985 (October 4, 2012), 77 FR 61804 (October 11,
proposed rule change is available on the 4(e) 14 under the Act of a series of Units 2012) (SR–NYSEArca–2012–92) (order approving
Exchange’s Web site at www.nyse.com, with an underlying index or portfolio of proposed rule change relating to the listing and
trading of iShares 2018 S&P AMT-Free Municipal
at the principal office of the Exchange, Fixed Income Securities 15 meeting Series and iShares 2019 S&P AMT-Free Municipal
and at the Commission’s Public specified criteria.16 These ‘‘generic’’ Series under NYSE Arca Equities Rule 5.2(j)(3),
Reference Room. listing criteria permit listing and trading Commentary .02); 67729 (August 24, 2012), 77 FR
on the Exchange of series of Units 52776 (August 30, 2012) (SR–NYSEArca–2012–92)
II. Self-Regulatory Organization’s (notice of proposed rule change relating to the
meeting such criteria without listing and trading of iShares 2018 S&P AMT-Free
Statement of the Purpose of, and Commission approval of each Municipal Series and iShares 2019 S&P AMT-Free
Statutory Basis for, the Proposed Rule individual product pursuant to Section Municipal Series under NYSE Arca Equities Rule
Change 19(b)(2) of the Act.17 5.2(j)(3), Commentary .02) (‘‘iShares 2018 Notice’’);
NYSE Arca Equities Rule 5.2(j)(3), 72523, (July 2, 2014), 79 FR 39016 (July 9, 2014)
In its filing with the Commission, the (SR–NYSEArca–2014–37) (order approving
Commentary .02(a)(2) provides that, in proposed rule change relating to the listing and
self-regulatory organization included order to be listed and traded pursuant trading of iShares 2020 S&P AMT-Free Municipal
statements concerning the purpose of, to Rule 19b–4(e), components of an Series under NYSE Arca Equities Rule 5.2(j)(3),
and basis for, the proposed rule change index or portfolio that in aggregate Commentary .02); 72172 (May 15, 2014), 79 FR
29241 (May 21, 2014) (SR–NYSEArca–2014–37)
and discussed any comments it received account for at least 75% of the weight (notice of proposed rule change relating to the
on the proposed rule change. The text of the index or portfolio each shall have listing and trading of iShares 2020 S&P AMT-Free
of those statements may be examined at a minimum original principal amount Municipal Series under NYSE Arca Equities Rule
outstanding of $100 million or more.18 5.2(j)(3), Commentary .02) (‘‘iShares 2020 Notice’’);
the places specified in Item IV below. 72464 (June 25, 2014), 79 FR 37373 (July 1, 2014)
The Exchange has prepared summaries, (File No. SR–NYSEArca–2014–45) (order approving
13 An Investment Company Unit is a security that
set forth in sections A, B, and C below, proposed rule change governing the continued
represents an interest in a registered investment listing and trading of shares of the PowerShares
of the most significant parts of such company that holds securities comprising, or Insured California Municipal Bond Portfolio,
statements. otherwise based on or representing an interest in, PowerShares Insured National Municipal Bond
an index or portfolio of securities (or holds Portfolio, and PowerShares Insured New York
securities in another registered investment Municipal Bond Portfolio) (‘‘PowerShares Order’’);
filing in its entirety. In Amendment No. 1, the company that holds securities comprising, or
Exchange proposes to amend NYSE Arca Equities 75468 (July 16, 2015), 80 FR 43500 (July 22, 2015)
otherwise based on or representing an interest in, (SR–NYSEArca–2015–25) (order approving
Rule 5.2(j)(3), Commentary .02(a)(2) to add the an index or portfolio of securities). See NYSE Arca proposed rule change relating to the listing and
following criteria for listing on the Exchange, Equities Rule 5.2(j)(3)(A). trading of iShares iBonds Dec 2021 AMT-Free Muni
pursuant to Rule 19b–4(e) under the Act, of a series 14 17 CFR 240.19b–4(e).
Bond ETF and iShares iBonds Dec 2022 AMT-Free
of Investment Company Units based on an index or 15 Fixed Income Securities are described in NYSE
Muni Bond ETF under NYSE Arca Equities Rule
portfolio of only municipal bond components: (1) Arca Equities Rule 5.2(j)(3), Commentary .02 as debt 5.2(j)(3))(‘‘iShares 2021/2022 Order’’); 74730 (April
75% of the weight of the index or portfolio shall securities that are notes, bonds, debentures or 15, 2015), 76 FR 22234 (April 21, 2015) (notice of
be issued in an offering with an aggregate size, as evidence of indebtedness that include, but are not proposed rule change relating to the listing and
set forth in the official statement of the offering, of limited to, U.S. Department of Treasury securities, trading of iShares iBonds Dec 2021 AMT-Free Muni
$100 million or more; (2) the average dollar amount government-sponsored entity securities, municipal Bond ETF and iShares iBonds Dec 2022 AMT-Free
securities, trust preferred securities, supranational Muni Bond ETF under NYSE Arca Equities Rule
outstanding of components of the index or portfolio
debt and debt of a foreign country or a subdivision 5.2(j)(3), Commentary .02) (‘‘iShares 2021/2022
shall be at least $10 million; (3) each component of thereof.
the index or portfolio shall have a minimum Notice’’); 74730 [sic] 75376 (July 7, 2015), 80 FR
16 The Commission approved NYSE Arca Equities
40113 (July 13, 2015) (SR–NYSEArca–2015–18)
principal amount outstanding of at least $2 million; Rule 5.2(j)(3), Commentary .02 in Securities (order approving proposed rule change relating to
(4) the index or portfolio must include at least 1,000 Exchange Act Release No. 55783 (May 17, 2007), 72 the listing and trading of Vanguard Tax-Exempt
components; and (5) the index or portfolio must FR 29194 (May 24, 2007) (SR–NYSEArca–2007–36) Bond Index Fund under NYSE Arca Equities Rule
include a minimum of 13 non-affiliated issuers. (order approving generic listing standards for series 5.2(j)(3)). The Commission also has issued a notice
Additionally, in Amendment No. 1, the Exchange of Units based on Fixed Income Indexes and of filing and immediate effectiveness of a proposed
proposes to remove municipal securities from the Combination Indexes). The Commission also rule change relating to listing and trading on the
exempted securities excluded from the criterion in approved generic listing standards for the American Exchange of shares of the iShares Taxable
NYSE Arca Equities Rule 5.2(j)(3), Commentary Stock Exchange LLC (‘‘Amex’’) for Index Fund Municipal Bond Fund. See Securities Exchange Act
.02(a)(5) that an underlying index or portfolio Shares based on Fixed Income Indexes and Release No. 63176 (October 25, 2010), 75 FR 66815
(excluding one consisting entirely of exempted Combination Indexes in Securities Exchange Act (October 29, 2010) (SR–NYSEArca–2010–94). The
Release No. 55437 (March 9, 2007), 72 FR 12233 Commission has approved for Exchange listing and
securities) must include a minimum of 13 non-
(March 15, 2007) (SR–Amex–2006–118). The trading of shares of two actively managed funds of
affiliated issuers. In Amendment No. 1, the Commission has approved listing of exchange-
Exchange also describes the bases for its proposed the PIMCO ETF Trust that principally hold
traded funds based on a fixed income index or
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municipal bonds. See Securities Exchange Act
changes to the criteria in NYSE Arca Equities Rule portfolio. See, e.g., Securities Exchange Act Release Release No. 60981 (November 10, 2009), 74 FR
5.2(j)(3), Commentary .02; explains that the No. 48534 (September 24, 2003), 68 FR 56353 59594 (November 18, 2009) (SR–NYSEArca–2009–
proposed criteria in proposed Commentary (September 30, 2003) (SR–Amex–2003–75) (order 79) (order approving listing and trading of shares
.02(a)(2)(B)(ii)–(v) would facilitate the generic approving listing on Amex of eight series of iShares of the PIMCO Short-Term Municipal Bond Strategy
listing of funds based on municipal bond index Lehman Bond Funds). Fund and PIMCO Intermediate Municipal Bond
components that are sufficiently broad-based and 17 15 U.S.C. 78s(b)(2).
Strategy Fund). The Commission also has approved
liquid to deter manipulation; and makes technical 18 This Amendment No. 1 to SR–NYSEArca– listing and trading on the Exchange of shares of the
changes to the filing. 2015–01 replaces SR–NYSEArca–2015–01 as SPDR Nuveen S&P High Yield Municipal Bond
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![54360 Federal Register / Vol. 80, No. 174 / Wednesday, September 9, 2015 / Notices
relatively fungible for investment These requirements would effectively Fund Shares that hold municipal
purposes. The Exchange believes that require that index or portfolio bonds.32 With respect to proposed
the proposed rule change is reasonable components have a total dollar amount Commentary .02(a)(2)(B)(i), the
and appropriate in that pricing and outstanding of at least $10 billion, Exchange notes that major municipal
liquidity of such maturity sizes is which, would limit listing of Units bond indexes, while they include
predominately based on the common under the [sic] Rule 19b–4(e) to those individual bond maturities as index
characteristics of the aggregate issue of based on underlying indexes of components, include ‘‘deal size’’ as a
which the municipal bond is part. Thus, substantial size and multiple securities. factor in the criteria for index
consideration of the aggregate size of the In addition, because the Exchange’s constituents and additions. As noted
municipal bond offering rather than the proposed alternative listing criteria for above, municipal bonds that share
individual bond component does not Units based on municipal bond indexes similar characteristics tend to trade
raise concerns regarding pricing or or portfolios would require a minimum similarly to one another; therefore,
liquidity of the applicable municipal of 13 non-affiliated issuers, the within these categories, the issues may
bond index components or of the Units Exchange proposes to change NYSE be considered fungible from a portfolio
overlying the applicable index. Arca Equities Rule 5.2(j)(3), management perspective, allowing one
Commentary .02(a)(5) 29 so that CUSIP to be represented by another that
With respect to the criteria in
municipal securities could not be shares similar characteristics for
proposed Commentary .02(a)(2)(B)(ii)
among the exempted securities in an purposes of developing an investment
through (v), the Exchange believes such
index or portfolio underlying a Unit that strategy.33 Therefore, while a relatively
criteria would limit generic listing of is not subject to the minimum 13 non- low percentage of the weight of the
funds based on municipal bond index affiliated issuer requirement. applicable index components may be
components that are sufficiently broad-
2. Statutory Basis part of an offering with an aggregate size
based and liquid to deter potential
of $100 million or more, the nature of
manipulation of the Units. In particular, The Exchange believes that the the municipal bond market makes such
the proposed requirement that the proposed rule change is consistent with components relatively fungible for
average dollar amount outstanding of section 6(b) 30 of the Act, in general, and investment purposes when aggregated
components be at least $10 million is furthers the objectives of section into categories such as ratings, purpose,
comparable to the average dollar 6(b)(5),31 in particular, in that it is geographical region, and maturity. As
amount outstanding for index designed to prevent fraudulent and with individual CUSIPs in an index that
components of municipal bond indexes manipulative acts and practices, to share certain characteristics, as
underlying funds previously approved promote just and equitable principles of described above, the individual
by the Commission for Exchange trade, to foster cooperation and maturity sizes comprising a municipal
trading.26 The Exchange, in proposing coordination with persons engaged in bond offering can be expected to be
the listing of these other funds, believed facilitating transactions in securities, relatively fungible for investment
they would not be readily susceptible to and to remove impediments to and purposes. The Exchange believes that
manipulation and such funds are perfect the mechanisms of a free and the proposed rule change is reasonable
currently trading in a fair and orderly open market and a national market and appropriate in that pricing and
manner. Similarly, the proposed system, and, in general, to protect liquidity of such maturity sizes is
requirements that each component have investors and the public interest. predominately based on the common
a minimum principal amount The Exchange believes that the characteristics of the municipal bond
outstanding of at least $2 million, proposed rule change applicable to offering of which the municipal bond
combined with the 75% Requirement, trading pursuant to generic listing and component is part. Thus, consideration
would assure that individual maturities trading criteria, together with the of the municipal bond offering rather
within an index or portfolio be of Exchange’s surveillance procedures than the individual bond component
substantial size. The substantial size of applicable to trading in the securities does not raise concerns regarding
a large proportion of components in the covered by the proposed rules, serve to pricing or liquidity of the applicable
index or portfolio further deters the foster investor protection. The proposed municipal bond index components or of
susceptibility of the Units to rule change would also enhance market the Units overlying the applicable
manipulation. Finally, the proposed competition by assisting in bringing index. In addition, financial information
requirement that an index or portfolio issues of Units with an underlying vendors provide deal size, as well as
include at least 1,000 components and index of municipal securities to market maturity size information, for each
include a minimum of 13 non-affiliated more quickly, consistent with the municipal bond issue.
issuers is comparable to the number of Commission’s adoption of Rule 19b–4(e) The Exchange believes that the
index components of municipal bond under the Act. proposed rule change is designed to
indexes underlying funds previously The Commission has previously
prevent fraudulent and manipulative
approved by the Commission for approved proposed rule changes
acts and practices in that Units based on
Exchange trading 27 and the current relating to listing and trading on the
an index or portfolio that includes
requirement in Commentary .02(a)(5).28 Exchange of Units based on municipal
municipal bond components would be
bond indexes and issues of Managed
listed and traded on the Exchange
26 See, e.g., 2021/2022 Order and PowerShares
Order, note 19, supra. portfolio shall not in the aggregate account for more
pursuant to the initial and continued
27 See, e.g., PowerShares Order, note 19, supra. than 65% of the weight of the index or portfolio’’. listing criteria in NYSE Arca Equities
29 NYSE Arca Equities Rule 5.2(j)(3), Commentary Rule 5.2(j)(3). The proposed amendment
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28 The Exchange notes that an index or portfolio
underlying a series of Units also would be required .02(a)(5) provides that an underlying index or to NYSE Arca Equities Rule 5.2(j)(3),
to meet the requirement of NYSE Arca Equities Rule portfolio (excluding one consisting entirely of Commentary .02(a)(2) would better
5.2(j)(3), Commentary .02(a)(4) that ‘‘[n]o exempted securities) must include a minimum of 13
component fixed-income security (excluding non-affiliated issuers. Municipal securities are accommodate listing of Units based on
Treasury Securities and GSE Securities) shall exempted securities under Section 3(a)(12)(A) of the
represent more than 30% of the weight of the index Act. 32 Seenote 19, supra.
30 15 U.S.C. 78f(b).
or portfolio, and the five most heavily weighted 33 SeeiShares 2018 Notice, iShares 2020 Notice
component fixed-income securities in the index or 31 15 U.S.C. 78f(b)(5). and iShares 2021/2022 Notice, note 19, supra.
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![Federal Register / Vol. 80, No. 174 / Wednesday, September 9, 2015 / Notices 54361
indexes that include municipal bonds, requirement that an index or portfolio burden on competition for issuers of
in view of features of such bonds that underlying a Unit have at least 13 non- municipal bond offerings to provide that
differ from those of most other Fixed affiliated issuers would require that the the Exchange’s rules regarding the
Income Securities. In connection with index or portfolio include a minimum of listing and trading of Units pursuant to
establishing compliance with NYSE 13 non-affiliated issuers as set forth in Commentary .02 of Rule 5.2(j)(3) are
Arca Equities Rule 5.2(j)(3), proposed Commentary .02(a)(2)(B)(v). evaluated on a similar basis to other
Commentary .02(a)(2), for an index or The proposed rule change is designed fixed income offerings. As discussed
portfolio of municipal bond components to perfect the mechanism of a free and above, because the ‘‘deal size’’
that does not meet the requirement that open market and, in general, to foster associated with a municipal bond
components that in the aggregate cooperation and coordination with offering is deemed the relevant basis for
account for least 75% of the weight of persons engaged in facilitating determining pricing and liquidity of
the index or portfolio each shall have a transactions in securities, and to remove maturity sizes of municipal bond
minimum original principal amount impediments to and perfect the components that comprise an index, the
outstanding of $100 million or more, mechanisms of a free and open market Exchange believes that the proposed
individual municipal bond components and a national market system, and, in rule change addresses the unique
in an index or portfolio would be general, to protect investors and the characteristics of municipal bond
required to be part of an offering of public interest in that it would facilitate offerings as compared to other fixed
substantial size (i.e., at least $100 the listing and trading of additional income products in a manner consistent
million aggregate size). The Exchange types of exchange-traded funds that with the existing requirements of
believes that the $100 million minimum hold municipal bonds pursuant to the Commentary .02(a)(2) of Rule 5.2(j)(3).
threshold would help ensure that a generic listing criteria of NYSE Arca
substantial percentage of the applicable Equities Rule 5.2(j)(3), Commentary .02, C. Self-Regulatory Organization’s
index components are liquid. The and thus would enhance competition Statement on Comments on the
proposed requirement that the average among market participants, to the Proposed Rule Change Received From
dollar amount outstanding of benefit of investors and the marketplace. Members, Participants, or Others
components be at least $10 million is The Exchange is proposing to modify No written comments were solicited
comparable to the average dollar the criteria for qualifying Units based on or received with respect to the proposed
amount outstanding for index a Fixed Income Securities index or rule change.
components of municipal bond indexes portfolio that includes municipal bond
components by applying the same III. Solicitation of Comments
underlying funds previously approved
by the Commission for Exchange quantitative threshold (i.e., $100 million Interested persons are invited to
trading.34 or more) to the aggregate size of the submit written data, views, and
The proposed requirement that that municipal bond offering as the arguments concerning the foregoing,
[sic] each component have a minimum threshold that applies to component including whether the proposed rule
principal amount outstanding of at least Fixed Income Securities generally, as set change, as modified by Amendment No.
$2 million, combined with the 75% forth in current Rule 5.2(j)(3), 1, is consistent with the Act. Comments
Requirement, would assure that Commentary .02(a)(2). The Exchange may be submitted by any of the
individual maturities within an index or believes that applying the $100 million following methods:
portfolio be of substantial size. The threshold to the aggregate size of the
Electronic Comments
proposed requirement that an index or municipal bond offering rather than to
portfolio include at least 1,000 individual maturities of the offering is • Use the Commission’s Internet
components is comparable to the appropriate in view of differences in the comment form (http://www.sec.gov/
number of index components of characteristics of municipal bond rules/sro.shtml); or
municipal bond indexes underlying issuances from issuances of other Fixed • Send an email to rule-comments@
funds previously approved by the Income Securities, as described above, sec.gov. Please include File Number SR–
Commission for Exchange trading.35 while, at the same time, assuring that NYSEArca–2015–01 on the subject line.
Such requirement would effectively any individual municipal bond Paper Comments
require that index or portfolio component is part of an offering of
substantial size (i.e., at least $100 • Send paper comments in triplicate
components have a total dollar amount to Secretary, Securities and Exchange
outstanding of at least $10 billion, million aggregate size). In addition, the
Exchange believes that the proposed Commission, 100 F Street NE.,
which would facilitate listing of Units Washington, DC 20549–1090.
based on underlying indexes of criteria in proposed Commentary
substantial size. The proposed .02(a)(2)(B)(ii) through (v) would All submissions should refer to File
requirement that an index or portfolio facilitate generic listing of funds based Number SR–NYSEArca–2015–01. This
include a minimum of 13 non-affiliated on municipal bond index components file number should be included on the
issuers, which is based on the existing that are sufficiently broad-based and subject line if email is used. To help the
requirement in Commentary .02(a)(5), liquid to deter potential manipulation. Commission process and review your
would facilitate generic listing of Units comments more efficiently, please use
B. Self-Regulatory Organization’s only one method. The Commission will
that are diversified and broad-based. Statement on Burden on Competition
Finally, the proposed amendment to post all comments on the Commission’s
NYSE Arca Equities Rule 5.2(j)(3), The Exchange does not believe that Internet Web site (http://www.sec.gov/
Commentary .02(a)(5) to exclude the proposed rule change would impose rules/sro.shtml). Copies of the
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municipal securities from the types of any burden on competition that is not submission, all subsequent
exempted securities in an index or necessary or appropriate in furtherance amendments, all written statements
portfolio that is excepted from the of the purposes of the Act. The with respect to the proposed rule
proposed rule change is not intended to change that are filed with the
34 See, e.g., 2021/2022 Order and PowerShares address competition among exchanges. Commission, and all written
Order, note 19, supra. The Exchange believes that the communications relating to the
35 See, e.g., PowerShares Order, note 19, supra. proposed rule change would remove a proposed rule change between the
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![54362 Federal Register / Vol. 80, No. 174 / Wednesday, September 9, 2015 / Notices
Commission and any person, other than I. Self-Regulatory Organization’s Section 202.06 of the Manual gives
those that may be withheld from the Statement of the Terms of Substance of the Exchange authority to halt trading in
public in accordance with the the Proposed Rule Change a listed company’s security under
provisions of 5 U.S.C. 552, will be certain circumstances. Currently, the
available for Web site viewing and The Exchange proposes to amend Exchange may impose a regulatory
printing in the Commission’s Public section 202.06 of the NYSE Listed trading halt when a listed company
Reference Room, 100 F Street NE., Company Manual (the ‘‘Manual’’) to announces material news 3 shortly
Washington, DC 20549, on official expand the pre-market hours during before the opening of trading on the
business days between the hours of which listed companies are required to Exchange or during the Exchange
10:00 a.m. and 3:00 p.m. Copies of such notify the Exchange prior to trading session (currently 9:30 a.m. to
filing will also be available for disseminating material news, to permit 4:00 p.m.). When that happens, the
inspection and copying at the principal the Exchange to halt trading in certain Exchange will typically institute a
office of the Exchange. All comments additional circumstances, including regulatory halt in trading, which halts
received will be posted without change; when it needs to obtain more trading on all market centers, to ensure
the Commission does not edit personal information about a listed company full dissemination of the news to
identifying information from news release, and to provide guidance investors. The Exchange proposes to
submissions. You should submit only related to the release of material news expand the hours and circumstances
information that you wish to make after the close of trading on the under which it can declare a regulatory
available publicly. All submissions Exchange. The text of the proposed rule trading halt.
should refer to File Number SR– change is available on the Exchange’s
Web site at www.nyse.com, at the Regulatory Trading Halts
NYSEArca –2015–01 and should be
submitted on or before September 21, principal office of the Exchange, and at Currently, section 202.06 of the
2015.36 the Commission’s Public Reference Manual requires listed companies to
Room. notify the Exchange at least ten minutes
For the Commission, by the Division of in advance of releasing material news if
Trading and Markets, pursuant to delegated II. Self-Regulatory Organization’s
such release will take place shortly
authority.37 Statement of the Purpose of, and
before the opening of trading on the
Robert W. Errett, Statutory Basis for, the Proposed Rule
Exchange or during Exchange market
Deputy Secretary. Change
hours (the ‘‘Material News Policy’’).4
[FR Doc. 2015–22604 Filed 9–8–15; 8:45 am] In its filing with the Commission, the The Exchange proposes to amend
BILLING CODE 8011–01–P self-regulatory organization included section 202.06 to require companies to
statements concerning the purpose of, comply with the Material News Policy
and basis for, the proposed rule change between 7:00 a.m. and 4:00 p.m. Eastern
SECURITIES AND EXCHANGE and discussed any comments it received Time. In the Exchange’s experience,
COMMISSION on the proposed rule change. The text most companies release news related to
of those statements may be examined at corporate actions and other material
[Release No. 34–75809; File No. SR–NYSE–
2015–38] the places specified in Item IV below. events between 7:00 a.m. and 9:30 a.m.
The Exchange has prepared summaries, Although trading on the Exchange does
Self-Regulatory Organizations; New set forth in sections A, B, and C below, not begin until 9:30 a.m., the Exchange
York Stock Exchange LLC; Notice of of the most significant parts of such believes that material news released
Filing and Immediate Effectiveness of statements. between 7:00 a.m. and 9:30 a.m. has the
Proposed Rule Change Amending potential to cause volatility in both
A. Self-Regulatory Organization’s price and volume during pre-market
Section 202.06 of the NYSE Listed Statement of the Purpose of, and
Company Manual trading that occurs on other market
Statutory Basis for, the Proposed Rule centers as well as once trading opens on
September 2, 2015. Change the Exchange. However, because there is
Pursuant to section 19(b)(1) of the 1. Purpose a lower volume of trading in such pre-
Securities Exchange Act of 1934 market hours, the Exchange believes
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 The NYSE proposes to amend section that a listed company is most well
notice is hereby given that on August 202.06 of the Manual to (i) expand the positioned to determine whether a
27, 2015, New York Stock Exchange pre-market hours during which listed trading halt is appropriate given the
LLC (‘‘NYSE’’ or ‘‘Exchange’’) filed with companies are required to notify the news it intends to release. Therefore, to
the Securities and Exchange Exchange prior to disseminating facilitate an orderly opening and ensure
Commission (‘‘Commission’’) the material news, and (ii) provide the thorough dissemination of material
proposed rule change as described in Exchange with authority to halt trading news, the Exchange believes it is
Items I and II below, which Items have (a) during pre-market hours at the beneficial to require companies to
been prepared by the Exchange. The request of a listed company, (b) when comply with the Material News Policy
Commission is publishing this notice to the Exchange believes it is necessary to
solicit comments on the proposed rule request certain information from listed 3 The Exchange considers material news to be any
change from interested persons. companies, and (c) when an Exchange- news that is reasonably likely to have a material
listed security is also listed on another impact on the price or trading volume of a listed
national or foreign securities exchange security.
36 The Commission believes that a 10-day
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4 At the time section 202.06 of the Manual was
comment period is reasonable, given the and such other exchange halts trading in last amended, the Exchange had an off-hours
requirement that the Commission act on the such security for regulatory reasons. The trading session in which securities could be traded
proposed rule change by October 2, 2015. A 10-day Exchange also proposes to amend at Exchange closing prices after the Exchange’s 4:00
period will provide adequate time for comment. See p.m. close until 5:00 p.m. As such off-hour trading
supra notes 7 and 8. section 202.06 of the Manual to provide
session no longer exists, the Exchange proposes to
37 17 CFR 200.30–3(a)(12). guidance related to the release of amend Section 202.06 of the Manual to specify that
1 15 U.S.C. 78s(b)(1). material news after the close of trading the Exchange’s market hours end at 4:00 p.m.
2 17 CFR 240.19b–4. on the Exchange. Eastern Time.
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Document Created: 2015-12-15 09:53:11
Document Modified: 2015-12-15 09:53:11
| 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 54357 |
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