81 FR 60759 - Self-Regulatory Organizations; NYSE Arca, Inc.; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change, as Modified by Amendment No. 1 Thereto, Regarding Use of Rule 144A Securities by the Fidelity Corporate Bond ETF, Fidelity Investment Grade Bond ETF, Fidelity Limited Term Bond ETF, and Fidelity Total Bond ETF
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 81, Issue 171 (September 2, 2016)
Federal Register Volume 81, Issue 171 (September 2, 2016)
| Page Range | 60759-60764 | |
| FR Document | 2016-21129 |
[Federal Register Volume 81, Number 171 (Friday, September 2, 2016)] [Notices] [Pages 60759-60764] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2016-21129] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-78712; File No. SR-NYSEArca-2016-70] Self-Regulatory Organizations; NYSE Arca, Inc.; Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change, as Modified by Amendment No. 1 Thereto, Regarding Use of Rule 144A Securities by the Fidelity Corporate Bond ETF, Fidelity Investment Grade Bond ETF, Fidelity Limited Term Bond ETF, and Fidelity Total Bond ETF August 29, 2016. I. Introduction On May 11, 2016, 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'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to permit the Fidelity Corporate Bond ETF, Fidelity Investment Grade Bond ETF, Fidelity Limited Term Bond ETF, and Fidelity Total Bond ETF (individually, ``Fund,'' and collectively, ``Funds'') to consider securities issued pursuant to Rule 144A under the Securities Act of 1933 (``Securities Act'') as debt securities eligible for principal investment. The proposed rule change was published for comment in the Federal Register on May 31, 2016.\3\ On June 30, 2016, 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 July 26, 2016, the Exchange filed Amendment No. 1 to the proposed rule change.\6\ The Commission [[Page 60760]] has received no comments on the proposed rule change. This order institutes proceedings under section 19(b)(2)(B) of the Act\7\ to determine whether to approve or disapprove the proposed rule change, as modified by Amendment No. 1 thereto. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ See Securities Exchange Act Release No. 77891 (May 24, 2016), 81 FR 34388 (``Notice''). \4\ 15 U.S.C. 78s(b)(2). \5\ See Securities Exchange Act Release No. 78207, 81 FR 44338 (Jul. 7, 2016). The Commission designated August 29, 2016 as the date by which the Commission shall either approve or disapprove, or institute proceedings to determine whether to disapprove, the proposed rule change. \6\ In Amendment No. 1, which amended and replaced the proposed rule change in its entirety, the Exchange: (a) Corrected certain aspects of the the investment descriptions for each Fund in accordance with the Prior Corporate Bond Releases and Prior Total Bond Releases (as defined herein); (b) confirmed that all of the Rule 144A securities in which a Fund invests will be corporate debt securities for which transactions are reported to TRACE (as defined herein); and (c) confirmed that FINRA (as defined herein), on behalf of the Exchange, is able to access, as needed, trade information for the Rule 144A securities as well as certain other fixed income securities held by the Funds reported to TRACE. Amendment No. 1 is available at: https://www.sec.gov/comments/sr-nysearca-2016-70/nysearca201670-1.pdf. Because Amendment No. 1 to the proposed rule change does not materially alter the substance of the proposed rule change or raise unique or novel regulatory issues, Amendment No. 1 is not subject to notice and comment. \7\ 15 U.S.C. 78s(b)(2)(B). --------------------------------------------------------------------------- II. Exchange's Description of the Proposal The Commission approved the listing and trading of shares (``Shares'') of the Funds under NYSE Arca Equities Rule 8.600,\8\ which governs the listing and trading of Managed Fund Shares. The Exchange proposes to amend the representation in the Prior Corporate Bond Notice and Prior Total Bond Notice to provide that each Fund may include Rule 144A securities within a Fund's principal investments in debt securities (i.e., debt securities in which at least 80% of a Fund's assets are invested). --------------------------------------------------------------------------- \8\ See Securities Exchange Act Release Nos. 72068 (May 1, 2014), 79 FR 25923 (May 6, 2014) (SR-NYSEArca-2014-47) (notice of filing of proposed rule change relating to listing and trading of Shares of Fidelity Corporate Bond ETF Managed Shares under NYSE Arca Equities Rule 8.600) (``Prior Corporate Bond Notice''); 72439 (Jun. 20, 2014), 79 FR 36361 (Jun. 26, 2014) (SR-NYSEArca-2014-47) (order approving proposed rule change relating to listing and trading of Shares of Fidelity Corporate Bond ETF Managed Shares under NYSE Arca Equities Rule 8.600) (``Prior Corporate Bond Order'' and, together with the Prior Corporate Bond Notice, ``Prior Corporate Bond Releases''); 72064 (May 1, 2014), 79 FR 25908 (May 6, 2014) (SR- NYSEArca-2014-46) (notice of filing of proposed rule change relating to listing and trading of Shares of Fidelity Investment Grade Bond ETF; Fidelity Limited Term Bond ETF; and Fidelity Total Bond ETF under NYSE Arca Equities Rule 8.600) (``Prior Total Bond Notice''); 72748 (Aug. 4, 2014), 79 FR 46484 (Aug. 8, 2014) (SR-NYSEArca-2014- 46) (order approving proposed rule change relating to listing and trading of Shares of the Fidelity Investment Grade Bond ETF, Fidelity Limited Term Bond ETF, and Fidelity Total Bond ETF under NYSE Arca Equities Rule 8.600) (``Prior Total Bond ETF Order'' and, together with the Prior Total Bond Notice, ``Prior Total Bond Releases''). --------------------------------------------------------------------------- A. Exchange's Description of the Funds Fidelity Investments Money Management, Inc. (``FIMM''), an affiliate of Fidelity Management & Research Company (``FMR''), is the manager (``Manager'') of each Fund. FMR Co., Inc. (``FMRC'') serves as a sub-adviser for the Fidelity Total Bond ETF. FMRC has day-to-day responsibility for choosing certain types of investments of foreign and domestic issuers for Fidelity Total Bond ETF. Other investment advisers, which also are affiliates of FMR, serve as sub-advisers to the Funds and assist FIMM with foreign investments, including Fidelity Management & Research (U.K.) Inc., Fidelity Management & Research (Hong Kong) Limited, and Fidelity Management & Research (Japan) Inc. (individually, ``Sub-Adviser,'' and together with FMRC, collectively ``Sub-Advisers''). Fidelity Distributors Corporation is the distributor for the Funds' Shares. The Funds are funds of Fidelity Merrimack Street Trust (``Trust''), a Massachusetts business trust.\9\ The Exchange represents that the Shares of the Fidelity Corporate Bond ETF, Fidelity Limited Term Bond ETF, and Fidelity Total Bond ETF are currently trading on the Exchange. --------------------------------------------------------------------------- \9\ The Trust is registered under the Investment Company Act of 1940 (``1940 Act''). According to the Exchange, on December 29, 2015, the Trust filed with the Commission an amendment to its registration statement on Form N-1A under the Securities Act and the 1940 Act relating to the Funds (File Nos. 333-186372 and 811-22796) (``Registration Statement''). In addition, the Exchange states that the Trust has obtained certain exemptive relief under the 1940 Act. See Investment Company Act Release No. 30513 (May 10, 2013) (File No. 812-14104). --------------------------------------------------------------------------- 1. Fidelity Corporate Bond ETF As described in the Prior Corporate Bond Notice, the Fidelity Corporate Bond ETF seeks a high level of current income. The Manager normally invests at least 80% of Fidelity Corporate Bond ETF assets in investment-grade corporate bonds and other corporate debt securities.\10\ Corporate debt securities are bonds and other debt securities issued by corporations and other business structures, as described in the Prior Corporate Bond Notice. --------------------------------------------------------------------------- \10\ According to the Exchange, investment-grade debt securities include all types of debt instruments, including corporate debt securities that are of medium and high-quality. An investment-grade rating means the security or issuer is rated investment-grade by a credit rating agency registered as a nationally recognized statistical rating organization with the Commission (for example, Moody's Investors Service, Inc.), or is unrated but considered to be of equivalent quality by the Fidelity Corporate Bond ETF's Manager or Sub-Advisers. --------------------------------------------------------------------------- The Fidelity Corporate Bond ETF may hold uninvested cash or may invest it in cash equivalents such as money market securities, or shares of short-term bond exchanged-traded funds registered under the 1940 Act (``ETFs''), or mutual funds or money market funds, including Fidelity central funds (special types of investment vehicles created by Fidelity for use by the Fidelity funds and other advisory clients). The Manager uses the Barclays U.S. Credit Bond Index as a guide in structuring the Fund and selecting its investments. FIMM manages the Fund to have similar overall interest rate risk to the Barclays U.S. Credit Bond Index. As stated in the Prior Corporate Bond Releases, in buying and selling securities for the Fund, the Manager analyzes the credit quality of the issuer, security-specific features, current valuation relative to alternatives in the market, short-term trading opportunities resulting from market inefficiencies, and potential future valuation. In managing the Fund's exposure to various risks, including interest rate risk, the Manager considers, among other things, the market's overall risk characteristics, the market's current pricing of those risks, information on the Fund's competitive universe and internal views of potential future market conditions. While the Manager normally invests at least 80% of assets of the Fund in investment grade corporate bonds and other corporate debt securities, as described above, the Manager may invest up to 20% of the Fund's assets in other securities and financial instruments, as summarized below. In addition to corporate debt securities, the debt securities in which the Fund may invest are U.S. Government securities; repurchase agreements and reverse repurchase agreements; mortgage- and other asset-backed securities; loans; loan participations, loan assignments, and other evidences of indebtedness, including letters of credit, revolving credit facilities, and other standby financing commitments; structured securities; stripped securities; municipal securities; sovereign debt obligations; obligations of international agencies or supranational entities; and other securities believed to have debt-like characteristics, including hybrid securities, which may offer characteristics similar to those of a bond security such as stated maturity and preference over equity in bankruptcy. The Fund may invest in restricted securities, which are subject to legal restrictions on their sale. Restricted securities generally can be sold in privately negotiated transactions, pursuant to an exemption from registration under the Securities Act, or in a registered public offering. 2. Fidelity Investment Grade Bond ETF As described in the Prior Total Bond Notice, the Fidelity Investment Grade Bond ETF (which has not yet commenced operation) will seek a high level of current income. The Manager normally will invest at least 80% of the [[Page 60761]] Fund's assets in investment-grade debt securities (those of medium and high quality). The debt securities in which the Fund may invest are corporate debt securities; U.S. Government securities; repurchase agreements and reverse repurchase agreements; money market securities; mortgage- and other asset-backed securities; senior loans; loan participations and loan assignments and other evidences of indebtedness, including letters of credit, revolving credit facilities and other standby financing commitments; stripped securities; municipal securities; sovereign debt obligations; and obligations of international agencies or supranational entities (collectively, ``Debt Securities''). As described in the Prior Total Bond Notice, the Fidelity Investment Grade Bond ETF may hold uninvested cash or may invest it in cash equivalents such as repurchase agreements, shares of short term bond ETFs, mutual funds, or money market funds, including Fidelity central funds (special types of investment vehicles created by Fidelity for use by the Fidelity funds and other advisory clients). The Manager will use the Barclays U.S. Aggregate Bond Index (``Aggregate Index'') as a guide in structuring the Fund and selecting its investments, and will manage the Fund to have similar overall interest rate risk to the Aggregate Index. As described in the Prior Total Bond Notice, the Manager will consider other factors when selecting the Fidelity Investment Grade Bond ETF's investments, including the credit quality of the issuer, security-specific features, current valuation relative to alternatives in the market, short-term trading opportunities resulting from market inefficiencies, and potential future valuation. In managing the Fidelity Investment Grade Bond ETF's exposure to various risks, including interest rate risk, the Manager will consider, among other things, the market's overall risk characteristics, the market's current pricing of those risks, information on the Fidelity Investment Grade Bond ETF's competitive universe, and internal views of potential future market conditions. 3. Fidelity Limited Term Bond ETF As described in the Prior Total Bond Notice, the Fidelity Limited Term Bond ETF seeks to provide a high rate of income. The Manager normally invests at least 80% of the Fidelity Limited Term Bond ETF's assets in investment-grade Debt Securities (those of medium and high quality). The Fidelity Limited Term Bond ETF may hold uninvested cash or may invest it in cash equivalents such as repurchase agreements, shares of short term bond ETFs, mutual funds, or money market funds, including Fidelity central funds (special types of investment vehicles created by Fidelity for use by the Fidelity funds and other advisory clients). The Manager uses the Fidelity Limited Term Composite Index (``Composite Index'') as a guide in structuring the Fund and selecting its investments. The Manager manages the Fidelity Limited Term Bond ETF to have similar overall interest rate risk to the Composite Index. The Manager considers other factors when selecting the Fidelity Limited Term Bond ETF's investments, including the credit quality of the issuer, security-specific features, current valuation relative to alternatives in the market, short-term trading opportunities resulting from market inefficiencies, and potential future valuation. In managing the Fidelity Limited Term Bond ETF's exposure to various risks, including interest rate risk, the Manager considers, among other things, the market's overall risk characteristics, the market's current pricing of those risks, information on the Fund's competitive universe, and internal views of potential future market conditions. 4. Fidelity Total Bond ETF As described in the Prior Total Bond Notice, the Fidelity Total Bond ETF seeks a high level of current income. The Manager normally invests at least 80% of the Fidelity Total Bond ETF's assets in Debt Securities. The Manager allocates the Fidelity Total Bond ETF's assets across investment-grade, high yield, and emerging market Debt Securities. The Manager may invest up to 20% of the Fund's assets in lower-quality Debt Securities. The Fidelity Total Bond ETF may hold uninvested cash or may invest it in cash equivalents such as repurchase agreements, shares of short term bond ETFs, mutual funds, or money market funds, including Fidelity central funds (special types of investment vehicles created by Fidelity for use by the Fidelity funds and other advisory clients). The Manager uses the Barclays U.S. Universal Bond Index (``Universal Index'') as a guide in structuring and selecting the investments of the Fidelity Total Bond ETF and selecting its investments, and in allocating the Fidelity Total Bond ETF's assets across the investment-grade, high yield, and emerging market asset classes. The Manager manages the Fidelity Total Bond ETF to have similar overall interest rate risk to the Universal Index. The Manager considers other factors when selecting the Fund's investments, including the credit quality of the issuer, security-specific features, current valuation relative to alternatives in the market, short-term trading opportunities resulting from market inefficiencies, and potential future valuation. In managing the Fund's exposure to various risks, including interest rate risk, the Manager considers, among other things, the market's overall risk characteristics, the market's current pricing of those risks, information on the Fund's competitive universe, and internal views of potential future market conditions. As described in the Prior Total Bond Notice, the Manager may invest the Fidelity Total Bond ETF's assets in Debt Securities of foreign issuers in addition to securities of domestic issuers. 5. Other Investments of the Funds While, as described above, the Manager normally invests at least 80% of assets of Fidelity Limited Term Bond ETF in investment-grade Debt Securities (and will normally invest at least 80% of assets of the Fidelity Investment Grade Bond ETF in investment-grade Debt Securities), and the Manager normally invests at least 80% of assets of the Fidelity Total Bond ETF in Debt Securities, the Manager may invest up to 20% of a Fund's assets in other securities and financial instruments (``Other Investments,'' as described in the Prior Total Bond Notice). As described in the Prior Corporate Bond Notice and Prior Total Bond Notice, as part of a Fund's Other Investments, (i.e., up to 20% of a Fund's assets), each Fund may invest in restricted securities, which are subject to legal restrictions on their sale.\11\ --------------------------------------------------------------------------- \11\ Restricted securities are subject to legal restrictions on their sale. Restricted securities generally can be sold in privately negotiated transactions, pursuant to an exemption from registration under the Securities Act, or in a registered public offering. Rule 144A securities are securities which, while privately placed, are eligible for purchase and resale pursuant to Rule 144A. Rule 144A permits certain qualified institutional buyers, such as a Fund, to trade in privately placed securities even though such securities are not registered under the Securities Act. --------------------------------------------------------------------------- B. Exchange's Description of the Proposed Change to the Principal Investments of the Funds The Exchange proposes that each Fund may include Rule 144A securities within a Fund's principal investments in debt securities (i.e., debt securities in which at least 80% of a Fund's assets are invested). As discussed below, the Exchange believes it is appropriate for Rule 144A securities to be included as [[Page 60762]] principal investments of a Fund in view of (1) the high level of liquidity in the market for such securities compared to other debt securities asset classes, and (2) the high level of transparency in the market for Rule 144A securities, particularly in light of reporting of transaction data in such securities through the Trade Reporting and Compliance Engine (``TRACE'') operated by the Financial Industry Regulatory Authority (``FINRA''). All of the Rule 144A securities in which a Fund invests will be corporate debt securities for which transactions are reported in TRACE. FMR has represented to the Exchange that Rule 144A securities account for approximately 20% of daily trading volume in U.S. corporate bonds. Dealers trade and report transactions in Rule 144A securities in the same manner as registered corporate bonds. While the average number of daily trades and U.S. dollar volume in registered corporate bonds is much higher than in Rule 144A securities, the average lot size is higher for Rule 144A securities.\12\ Specifically, the average lot size for 144A securities for the period January 1, 2015 through August 31, 2015 was approximately $2.2 million, compared to an average lot size for the same period of approximately $500,000 for registered corporate bonds. --------------------------------------------------------------------------- \12\ Source: MarketAxess Trace Data. For example, for the period January 1, 2015 through August 31, 2015, for registered bonds and Rule 144A securities with $1 billion to $1.999 billion the average daily dollar volume outstanding was approximately $6.8 billion and $1.7 billion, respectively, and the average lot size was $666,647 and $2,398,292, respectively. --------------------------------------------------------------------------- In addition, in 2013, the Commission approved FINRA rules relating to dissemination of information regarding transactions in Rule 144A securities in TRACE.\13\ In approving FINRA's proposed rule change to amend its rules regarding dissemination of Rule 144A transactions, the Commission stated: --------------------------------------------------------------------------- \13\ See Securities Exchange Act Release Nos. 70009 (Jul. 19, 2013), 78 FR 44997 (Jul. 25, 2103) (SR-FINRA-2013-029) (notice of filing of a proposed rule change relating to the dissemination of transactions in TRACE-Eligible securities effected pursuant to Rule 144A); 70345 (Sept. 6, 2013), 78 FR 56251 (Sept. 12, 2013) (SR- FINRA-2013-029) (order approving proposed rule change relating to the dissemination of transactions in TRACE-Eligible securities effected pursuant to Rule 144A). In the proposed rule change, FINRA proposed to amend FINRA Rule 6750 to provide for the dissemination of Rule 144A transactions, provided the asset type (e.g., corporate bonds) currently is subject to dissemination under FINRA Rule 6750; to amend the dissemination protocols to extend the dissemination caps currently applicable to the non-Rule 144A transactions in such asset type (e.g., non-Rule 144A corporate bond transactions) to Rule 144A transactions in such securities; to amend FINRA Rule 7730 to establish a data set for real-time Rule 144A transaction data and a second data set for historic Rule 144A transaction data; to amend the definition of ``Historic TRACE Data'' to reference the three data sets currently included therein and the proposed fourth data set; and to make other clarifying and technical amendments. FINRA Rule 6730(a) requires any transaction in a TRACE-Eligible security to be reported to TRACE as soon as practicable, but no later than within 15 minutes of the transaction, subject to specified exceptions. FINRA Rule 6730(c) requires the trade report to contain information on size, price, time of execution, amount of commission, the date of settlement, and other information. Real-time dissemination of last-sale information could aid dealers in deriving better quotations, because they would know the prices at which other market participants had recently transacted in the same or similar instruments. This information could aid all market participants in evaluating current quotations, because they could inquire why dealer quotations might differ from the prices of recently executed transactions. Furthermore, post-trade transparency affords market participants a means of testing whether dealer quotations before the last sale were close to the price at which the last sale was executed. In this manner, post-trade transparency can promote price competition between dealers and more efficient price discovery and ultimately lower transaction costs in the market for --------------------------------------------------------------------------- Rule 144A securities. Transactions executed by FINRA members became subject to dissemination through FINRA's TRACE on June 30, 2014, thus providing a level of transparency to the Rule 144A market comparable to that of registered bonds.\14\ --------------------------------------------------------------------------- \14\ In its June 30, 2014 press release ``FINRA Brings 144A Corporate Debt Transactions Into the Light,'' FINRA stated: ``144A transactions--resales of restricted corporate debt securities to large institutions called qualified institutional buyers (QIBs)-- account for a significant portion of the volume in corporate debt securities. In the first quarter of 2014, 144A transactions comprised nearly 13 percent of the average daily volume in investment-grade corporate debt, and nearly 30 percent of the average daily volume in high-yield corporate debt. 144A transactions comprised nearly 20 percent of the average daily volume in the corporate debt market as a whole. Through the Trade Reporting and Compliance Engine (TRACE), FINRA will disseminate 144A transactions subject to the same dissemination caps that are currently in effect for non-144A transactions. The same dissemination cap for investment-grade corporate bonds ($5 million) applies to both 144A and non-144A corporate bond transactions, and the $1 million dissemination cap for high-yield corporate bonds similarly applies to both 144A and non-144A transactions. 144A transactions are also subject to the same 15-minute reporting requirement as non-144A corporate debt transactions.'' See also FINRA Regulatory Notice 13- 35 October 2013. --------------------------------------------------------------------------- The Exchange notes that, while the proposed rule change would categorize Rule 144A securities within a Fund's principal investments in debt securities, any investments in Rule 144A securities, of course, would be required to comply with restrictions under the 1940 Act and rules thereunder relating to investment in illiquid assets. As stated in the Prior Corporate Bond Notice and Prior Total Bond Notice, each 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 securities deemed illiquid by the Manager or Sub-Advisers. Each Fund monitors its portfolio liquidity on an ongoing basis to determine whether, in light of current circumstances, an adequate level of liquidity is being maintained, and will consider taking appropriate steps in order to maintain adequate liquidity if, through a change in values, net assets, or other circumstances, more than 15% of a Fund's net assets are held in illiquid assets. Illiquid assets include assets subject to contractual or other restrictions on resale and other instruments that lack readily available markets as determined in accordance with Commission staff guidance.\15\ --------------------------------------------------------------------------- \15\ In its recent rulemaking proposal relating to open-end fund liquidity risk management programs, the Commission noted that ``[s]ecurities offered pursuant to rule 144A under the Securities Act may be considered liquid depending on certain factors.'' The Commission, citing to the ``Statement Regarding `Restricted Securities''' noted: ``The Commission stated [in the ``Statement Regarding `Restricted Securities'''] that `determination of the liquidity of Rule 144A securities in the portfolio of an investment company issuing redeemable securities is a question of fact for the board of directors to determine, based upon the trading markets for the specific security' and noted that the board should consider the unregistered nature of a rule 144A security as one of the factors it evaluates in determining its liquidity.'' See Release Nos. 33-9922; IC-31835; File Nos. S7-16-15; S7-08-15 (Sept. 22, 2015); n.94. --------------------------------------------------------------------------- Moreover, as stated in the Prior Corporate Bond Notice and Prior Total Bond Notice, each Fund does not currently intend to purchase any asset if, as a result, more than 10% of its net assets would be invested in assets that are deemed to be illiquid because they are subject to legal or contractual restrictions on resale or because they cannot be sold or disposed of in the ordinary course of business at approximately the prices at which they are valued. For purposes of a Fund's illiquid assets limitation discussed above, if through a change in values, net assets, or other circumstances, a Fund were in a position where more than 10% of its net assets were invested in illiquid assets, it would consider appropriate steps to protect liquidity. The Prior Corporate Bond Notice and Prior Total Bond Notice stated that various factors may be considered in determining the liquidity of a Fund's investments, including: (1) The frequency of trades and quotes for the asset; (2) the number of dealers wishing to purchase or sell the asset and the number of other potential purchasers; (3) dealer undertakings to make a market in the asset; and (4) the nature [[Page 60763]] of the asset and the nature of the marketplace in which it trades (including any demand, put or tender features, the mechanics and other requirements for transfer, any letters of credit or other credit enhancement features, any ratings, the number of holders, the method of soliciting offers, the time required to dispose of the security, and the ability to assign or offset the rights and obligations of the asset). The Exchange believes that the size of the Rule 144A market (approximately 20% of daily trading volume in U.S. corporate bonds), the active participation of multiple dealers utilizing trading protocols that are similar to those in the corporate bond market, and the transparency of the 144A market resulting from reporting of Rule 144A transactions in TRACE will deter manipulation in trading the Shares. The Exchange notes that all of the Rule 144A securities in which a Fund invests will be corporate debt securities for which transactions are reported in TRACE. The Exchange represents that, except for the change described above, all other representations made in the Prior Corporate Bond Releases and the Prior Total Bond Releases remain unchanged. The Funds will continue to comply with all initial and continued listing requirements under NYSE Arca Equities Rule 8.600. The Exchange further represents that the trading in the Shares will be subject to the existing trading surveillances administered by the Exchange, as well as cross-market surveillances administered by FINRA, on behalf of the Exchange, which are designed to detect violations of Exchange rules and applicable federal securities laws.\16\ 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 securities laws applicable to trading on the Exchange. The Exchange or FINRA, on behalf of the Exchange, or both, will communicate as needed regarding trading in the Shares and underlying exchange-traded options, futures, exchange-traded equity securities (including ADRs, EDRs, and GDRs), and other exchange-traded instruments with other markets and other entities that are members of the ISG, and the Exchange or FINRA, on behalf of the Exchange, or both, may obtain trading information regarding trading in the Shares and underlying exchange-traded options, futures, exchange-traded equity securities (including ADRs, EDRs, and GDRs), and other exchange-traded instruments from such markets and other entities. The Exchange may obtain information regarding trading in the Shares and underlying exchange-traded options, futures, exchange-traded equity securities (including ADRs, EDRs, and GDRs), and other exchange-traded instruments from markets and other entities that are members of ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement.\17\ FINRA, on behalf of the Exchange, is able to access, as needed, trade information for the Rule 144A securities as well as certain other fixed income securities held by the Funds reported to TRACE. In addition, as stated in the Prior Corporate Bond Releases and the Prior Total Bond Releases, investors have ready access to information regarding the Funds' holdings, the Portfolio Indicative Value, the Disclosed Portfolio, and quotation and last-sale information for the Shares. --------------------------------------------------------------------------- \16\ FINRA conducts cross-market surveillances on behalf of the Exchange pursuant to a regulatory services agreement. The Exchange is responsible for FINRA's performance under this regulatory services agreement. \17\ For a list of the current members of ISG, see www.isgportal.org. The Exchange notes that not all of the components of the portfolio for a Fund may trade on exchanges that are members of the ISG or with which the Exchange has in place a comprehensive surveillance sharing agreement. --------------------------------------------------------------------------- The Exchange also represents that all statements and representations made in this filing and the Prior Corporate Bond Releases and Prior Total Bond Releases regarding (a) the description of the Funds' respective portfolios, (b) limitations on portfolio holdings or reference assets, or (c) the applicability of Exchange rules and surveillance procedures shall constitute continued listing requirements for listing the Shares of the Funds on the Exchange. The Adviser has represented to the Exchange that it will advise the Exchange of any failure by a Fund to comply with the continued listing requirements, and, pursuant to its obligations under section 19(g)(1) of the Act, the Exchange will monitor for compliance with the continued listing requirements. If a Fund is not in compliance with the applicable listing requirements, the Exchange will commence delisting procedures under NYSE Arca Equities Rule 5.5(m). III. Proceedings To Determine Whether To Approve or Disapprove SR- NYSEArca-2016-70 and Grounds for Disapproval Under Consideration The Commission is instituting proceedings pursuant to section 19(b)(2)(B) of the Act \18\ to determine whether the proposed rule change, as modified by Amendment No. 1 thereto, should be approved or disapproved. Institution of such proceedings is appropriate at this time in view of the legal and policy issues raised by the proposed rule change. Institution of proceedings does not indicate that the Commission has reached any conclusions with respect to any of the issues involved. Rather, as described below, the Commission seeks and encourages interested persons to provide comments on the proposed rule change. --------------------------------------------------------------------------- \18\ 15 U.S.C. 78s(b)(2)(B). --------------------------------------------------------------------------- Pursuant to section 19(b)(2)(B) of the Act,\19\ the Commission is providing notice of the grounds for disapproval under consideration. The Commission is instituting proceedings to allow for additional analysis of the proposed rule change's consistency with section 6(b)(5) of the Act, which requires, among other things, that the rules of a national securities exchange be ``designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade,'' and ``to protect investors and the public interest.'' \20\ --------------------------------------------------------------------------- \19\ Id. \20\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- IV. Procedure: Request for Written Comments The Commission requests that interested persons provide written submissions of their views, data, and arguments with respect to the issues identified above, as well as any other concerns they may have with the proposal, as modified by Amendment No. 1. In particular, the Commission invites the written views of interested persons concerning whether the proposal, as modified by Amendment No. 1, is consistent with section 6(b)(5) or any other provision of the Act, or the rules and regulations thereunder. Although there do not appear to be any issues relevant to approval or disapproval that would be facilitated by an oral presentation of views, data, and arguments, the Commission will consider, pursuant to Rule 19b-4, any request for an opportunity to make an oral presentation.\21\ --------------------------------------------------------------------------- \21\ Section 19(b)(2) of the Act, as amended by the Securities Act Amendments of 1975, Public Law 94-29 (June 4, 1975), grants the Commission flexibility to determine what type of proceeding--either oral or notice and opportunity for written comments--is appropriate for consideration of a particular proposal by a self-regulatory organization. See Securities Act Amendments of 1975, Senate Comm. on Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st Sess. 30 (1975). --------------------------------------------------------------------------- [[Page 60764]] Interested persons are invited to submit written data, views, and arguments regarding whether the proposal should be approved or disapproved by September 23, 2016. Any person who wishes to file a rebuttal to any other person's submission must file that rebuttal by October 7, 2016. The Commission asks that commenters address the sufficiency of the Exchange's statements in support of the proposal, which are set forth in the Notice,\22\ as modified by Amendment No. 1 thereto,\23\ in addition to any other comments they may wish to submit about the proposed rule change. --------------------------------------------------------------------------- \22\ See supra note 3. \23\ See supra note 6. --------------------------------------------------------------------------- The Commission generally seeks comment on whether the Exchange's representations relating to the proposed portfolio holdings in Rule 144A securities are sufficient to prevent the susceptibility of the Funds to manipulation and are thereby consistent with the requirements of section 6(b)(5) of the Act, which, among other things, requires that the rules of an exchange be designed to prevent fraudulent and manipulative acts and practices and to protect investors and the public interest. In particular, the Commission seeks comment on the following: As described above, the Exchange has proposed that each Fund be permitted to include Rule 144A securities within a Fund's principal investments in debt securities. As a result of the proposed change, each Fund would be permitted to invest 100% of its principal investments in Rule 144A securities. The Exchange also provides that all of the Rule 144A securities in which a Fund invests will be corporate debt securities for which transactions are reported in TRACE. Rule 144A securities are restricted securities, which, as described above, are subject to legal restrictions on their sale and generally are sold in privately negotiated transactions, pursuant to an exemption from registration under the Securities Act, or in a registered public offering. The Exchange has not proposed additional quantitative criteria with respect to minimum liquidity or minimum diversification measures to be applied to the Rule 144A securities. Do commenters have views on whether the specific Rule 144A securities in which each Fund may invest would be sufficiently liquid and sufficiently diversified so as to reduce the extent to which Managed Fund Shares holding principally restricted securities may be susceptible to manipulation? Comments may be submitted by any of the following methods: Electronic CommentsUse the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or Send an email to [email protected]. Please include File Number SR-NYSEArca-2016-70 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-2016-70. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission's Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR-NYSEArca-2016-70 and should be submitted on or before September 23, 2016. Rebuttal comments should be submitted by October 7, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\24\ --------------------------------------------------------------------------- \24\ 17 CFR 200.30-3(a)(57). --------------------------------------------------------------------------- Robert W. Errett, Deputy Secretary. [FR Doc. 2016-21129 Filed 9-1-16; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 81, No. 171 / Friday, September 2, 2016 / Notices 60759
Investment Management, Chief exemption from the Disclosure SECURITIES AND EXCHANGE
Counsel’s Office). Requirements to permit each COMMISSION
SUPPLEMENTARY INFORMATION: The Subadvised Series to disclose (as both a [Release No. 34–78712; File No. SR–
following is a summary of the dollar amount and a percentage of the NYSEArca–2016–70]
application. The complete application Subadvised Series’ net assets): (a) The
may be obtained via the Commission’s aggregate fees paid to the Adviser and Self-Regulatory Organizations; NYSE
Web site by searching for the file any Affiliated Sub-Advisers; and (b) the Arca, Inc.; Order Instituting
number, or an applicant using the aggregate fees paid to Sub-Advisers Proceedings To Determine Whether To
Company name box, at http:// other than Affiliated Sub-Advisers Approve or Disapprove a Proposed
www.sec.gov/search/search.htm or by (collectively, ‘‘Aggregate Fee Rule Change, as Modified by
calling (202) 551–8090. Disclosure’’). For any Subadvised Series Amendment No. 1 Thereto, Regarding
Summary of the Application that employs an Affiliated Sub-Adviser, Use of Rule 144A Securities by the
the Subadvised Series will provide Fidelity Corporate Bond ETF, Fidelity
1. The Adviser will serve as the Investment Grade Bond ETF, Fidelity
investment adviser to the Subadvised separate disclosure of any fees paid to
Limited Term Bond ETF, and Fidelity
Series pursuant to an investment the Affiliated Sub-Adviser.
Total Bond ETF
advisory agreement with the Trust (the 3. Applicants agree that any order
‘‘Investment Management granting the requested relief will be August 29, 2016.
Agreement’’).1 The Adviser will provide subject to the terms and conditions I. Introduction
the Subadvised Series with continuous stated in the application. Such terms
and comprehensive investment On May 11, 2016, NYSE Arca, Inc.
and conditions provide for, among other (‘‘Exchange’’) filed with the Securities
management services subject to the safeguards, appropriate disclosure to
supervision of, and policies established and Exchange Commission
Subadvised Series shareholders and (‘‘Commission’’), pursuant to section
by, each Subadvised Series’ board of notification about sub-advisory changes
trustees (‘‘Board’’). The Investment 19(b)(1) of the Securities Exchange Act
and enhanced Board oversight to protect of 1934 (‘‘Act’’) 1 and Rule 19b–4
Management Agreement permits the
the interests of the Subadvised Series’ thereunder,2 a proposed rule change to
Adviser, subject to the approval of the
Board, to delegate to one or more sub- shareholders. permit the Fidelity Corporate Bond ETF,
advisers (each, a ‘‘Sub-Adviser’’ and 4. Section 6(c) of the Act provides that Fidelity Investment Grade Bond ETF,
collectively, the ‘‘Sub-Advisers’’) the the Commission may exempt any Fidelity Limited Term Bond ETF, and
responsibility to provide the day-to-day person, security, or transaction or any Fidelity Total Bond ETF (individually,
portfolio investment management of class or classes of persons, securities, or ‘‘Fund,’’ and collectively, ‘‘Funds’’) to
each Subadvised Series, subject to the transactions from any provisions of the consider securities issued pursuant to
supervision and direction of the Rule 144A under the Securities Act of
Act, or any rule thereunder, if such
Adviser. The primary responsibility for 1933 (‘‘Securities Act’’) as debt
relief is necessary or appropriate in the
managing the Subadvised Series will securities eligible for principal
public interest and consistent with the investment. The proposed rule change
remain vested in the Adviser. The protection of investors and purposes
Adviser will hire, evaluate, allocate was published for comment in the
fairly intended by the policy and Federal Register on May 31, 2016.3 On
assets to and oversee the Sub-Advisers, provisions of the Act. Applicants
including determining whether a Sub- June 30, 2016, pursuant to section
believe that the requested relief meets 19(b)(2) of the Act,4 the Commission
Adviser should be terminated, at all
this standard because, as further designated a longer period within which
times subject to the authority of the
Board. explained in the application, the to approve the proposed rule change,
2. Applicants request an exemption to Investment Management Agreements disapprove the proposed rule change, or
permit the Adviser, subject to Board will remain subject to shareholder institute proceedings to determine
approval, to hire certain Sub-Advisers approval, while the role of the Sub- whether to disapprove the proposed
pursuant to Sub-Advisory Agreements Advisers is substantially similar to that rule change.5 On July 26, 2016, the
and materially amend existing Sub- of individual portfolio managers, so that Exchange filed Amendment No. 1 to the
Advisory Agreements without obtaining requiring shareholder approval of Sub- proposed rule change.6 The Commission
the shareholder approval required under Advisory Agreements would impose
1 15 U.S.C. 78s(b)(1).
section 15(a) of the Act and rule 18f–2 unnecessary delays and expenses on the 2 17 CFR 240.19b–4.
under the Act.2 Applicants also seek an Subadvised Series. Applicants believe 3 See Securities Exchange Act Release No. 77891
that the requested relief from the (May 24, 2016), 81 FR 34388 (‘‘Notice’’).
1 Applicants request relief with respect to any
Disclosure Requirements meets this 4 15 U.S.C. 78s(b)(2).
existing and any future series of the Trust and any
other registered open-end management company or standard because it will improve the 5 See Securities Exchange Act Release No. 78207,
81 FR 44338 (Jul. 7, 2016). The Commission
series thereof that: (a) Is advised by the Adviser or Adviser’s ability to negotiate fees paid designated August 29, 2016 as the date by which
its successor or by a person controlling, controlled to the Sub-Advisers that are more
by, or under common control with the Adviser or the Commission shall either approve or disapprove,
its successor (each, also an ‘‘Adviser’’); (b) uses the advantageous for the Subadvised Series. or institute proceedings to determine whether to
manager of managers structure described in the disapprove, the proposed rule change.
For the Commission, by the Division of 6 In Amendment No. 1, which amended and
application; and (c) complies with the terms and
conditions of the application (each, a ‘‘Subadvised Investment Management, under delegated replaced the proposed rule change in its entirety,
Series’’). For purposes of the requested order, authority. the Exchange: (a) Corrected certain aspects of the
mstockstill on DSK3G9T082PROD with NOTICES
‘‘successor’’ is limited to an entity that results from the investment descriptions for each Fund in
a reorganization into another jurisdiction or a
Robert W. Errett, accordance with the Prior Corporate Bond Releases
change in the type of business organization. Deputy Secretary. and Prior Total Bond Releases (as defined herein);
2 The requested relief will not extend to any sub-
[FR Doc. 2016–21133 Filed 9–1–16; 8:45 am] (b) confirmed that all of the Rule 144A securities
adviser that is an affiliated person, as defined in in which a Fund invests will be corporate debt
section 2(a)(3) of the Act, of the Subadvised Series, BILLING CODE 8011–01–P securities for which transactions are reported to
the Trust or the Adviser, other than by reason of TRACE (as defined herein); and (c) confirmed that
serving as a sub-adviser to one or more of the FINRA (as defined herein), on behalf of the
Subadvised Series (‘‘Affiliated Sub-Adviser’’). Continued
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![60762 Federal Register / Vol. 81, No. 171 / Friday, September 2, 2016 / Notices
principal investments of a Fund in view proposed rule change to amend its rules amount of 15% of its net assets in
of (1) the high level of liquidity in the regarding dissemination of Rule 144A illiquid assets (calculated at the time of
market for such securities compared to transactions, the Commission stated: investment), including Rule 144A
other debt securities asset classes, and Real-time dissemination of last-sale securities deemed illiquid by the
(2) the high level of transparency in the information could aid dealers in deriving Manager or Sub-Advisers. Each Fund
market for Rule 144A securities, better quotations, because they would know monitors its portfolio liquidity on an
particularly in light of reporting of the prices at which other market participants ongoing basis to determine whether, in
transaction data in such securities had recently transacted in the same or similar light of current circumstances, an
through the Trade Reporting and instruments. This information could aid all adequate level of liquidity is being
market participants in evaluating current
Compliance Engine (‘‘TRACE’’) operated quotations, because they could inquire why
maintained, and will consider taking
by the Financial Industry Regulatory dealer quotations might differ from the prices appropriate steps in order to maintain
Authority (‘‘FINRA’’). All of the Rule of recently executed transactions. adequate liquidity if, through a change
144A securities in which a Fund invests Furthermore, post-trade transparency affords in values, net assets, or other
will be corporate debt securities for market participants a means of testing circumstances, more than 15% of a
which transactions are reported in whether dealer quotations before the last sale Fund’s net assets are held in illiquid
TRACE. were close to the price at which the last sale assets. Illiquid assets include assets
was executed. In this manner, post-trade
FMR has represented to the Exchange subject to contractual or other
transparency can promote price competition
that Rule 144A securities account for between dealers and more efficient price restrictions on resale and other
approximately 20% of daily trading discovery and ultimately lower transaction instruments that lack readily available
volume in U.S. corporate bonds. Dealers costs in the market for Rule 144A securities. markets as determined in accordance
trade and report transactions in Rule Transactions executed by FINRA with Commission staff guidance.15
144A securities in the same manner as Moreover, as stated in the Prior
members became subject to
registered corporate bonds. While the Corporate Bond Notice and Prior Total
dissemination through FINRA’s TRACE
average number of daily trades and U.S. Bond Notice, each Fund does not
on June 30, 2014, thus providing a level
dollar volume in registered corporate currently intend to purchase any asset
of transparency to the Rule 144A market
bonds is much higher than in Rule 144A if, as a result, more than 10% of its net
comparable to that of registered
securities, the average lot size is higher bonds.14 assets would be invested in assets that
for Rule 144A securities.12 Specifically, The Exchange notes that, while the are deemed to be illiquid because they
the average lot size for 144A securities proposed rule change would categorize are subject to legal or contractual
for the period January 1, 2015 through Rule 144A securities within a Fund’s restrictions on resale or because they
August 31, 2015 was approximately $2.2 principal investments in debt securities, cannot be sold or disposed of in the
million, compared to an average lot size any investments in Rule 144A ordinary course of business at
for the same period of approximately securities, of course, would be required approximately the prices at which they
$500,000 for registered corporate bonds. to comply with restrictions under the are valued. For purposes of a Fund’s
In addition, in 2013, the Commission 1940 Act and rules thereunder relating illiquid assets limitation discussed
approved FINRA rules relating to to investment in illiquid assets. As above, if through a change in values, net
dissemination of information regarding stated in the Prior Corporate Bond assets, or other circumstances, a Fund
transactions in Rule 144A securities in Notice and Prior Total Bond Notice, were in a position where more than
TRACE.13 In approving FINRA’s each Fund may hold up to an aggregate 10% of its net assets were invested in
illiquid assets, it would consider
12 Source: MarketAxess Trace Data. For example,
FINRA Rule 6730(a) requires any transaction in a appropriate steps to protect liquidity.
for the period January 1, 2015 through August 31, TRACE-Eligible security to be reported to TRACE as The Prior Corporate Bond Notice and
2015, for registered bonds and Rule 144A securities soon as practicable, but no later than within 15
with $1 billion to $1.999 billion the average daily
Prior Total Bond Notice stated that
minutes of the transaction, subject to specified
dollar volume outstanding was approximately $6.8 exceptions. FINRA Rule 6730(c) requires the trade
various factors may be considered in
billion and $1.7 billion, respectively, and the report to contain information on size, price, time of determining the liquidity of a Fund’s
average lot size was $666,647 and $2,398,292, execution, amount of commission, the date of investments, including: (1) The
respectively. settlement, and other information.
13 See Securities Exchange Act Release Nos.
frequency of trades and quotes for the
14 In its June 30, 2014 press release ‘‘FINRA
70009 (Jul. 19, 2013), 78 FR 44997 (Jul. 25, 2103) asset; (2) the number of dealers wishing
Brings 144A Corporate Debt Transactions Into the
(SR–FINRA–2013–029) (notice of filing of a Light,’’ FINRA stated: ‘‘144A transactions—resales to purchase or sell the asset and the
proposed rule change relating to the dissemination of restricted corporate debt securities to large number of other potential purchasers;
of transactions in TRACE-Eligible securities effected institutions called qualified institutional buyers (3) dealer undertakings to make a
pursuant to Rule 144A); 70345 (Sept. 6, 2013), 78 (QIBs)—account for a significant portion of the
FR 56251 (Sept. 12, 2013) (SR–FINRA–2013–029) volume in corporate debt securities. In the first
market in the asset; and (4) the nature
(order approving proposed rule change relating to quarter of 2014, 144A transactions comprised
the dissemination of transactions in TRACE-Eligible nearly 13 percent of the average daily volume in 15 In its recent rulemaking proposal relating to
securities effected pursuant to Rule 144A). In the investment-grade corporate debt, and nearly 30 open-end fund liquidity risk management programs,
proposed rule change, FINRA proposed to amend percent of the average daily volume in high-yield the Commission noted that ‘‘[s]ecurities offered
FINRA Rule 6750 to provide for the dissemination corporate debt. 144A transactions comprised nearly pursuant to rule 144A under the Securities Act may
of Rule 144A transactions, provided the asset type 20 percent of the average daily volume in the be considered liquid depending on certain factors.’’
(e.g., corporate bonds) currently is subject to corporate debt market as a whole. Through the The Commission, citing to the ‘‘Statement
dissemination under FINRA Rule 6750; to amend Trade Reporting and Compliance Engine (TRACE), Regarding ‘Restricted Securities’’’ noted: ‘‘The
the dissemination protocols to extend the FINRA will disseminate 144A transactions subject Commission stated [in the ‘‘Statement Regarding
dissemination caps currently applicable to the non- to the same dissemination caps that are currently ‘Restricted Securities’’’] that ‘determination of the
Rule 144A transactions in such asset type (e.g., non- in effect for non-144A transactions. The same liquidity of Rule 144A securities in the portfolio of
mstockstill on DSK3G9T082PROD with NOTICES
Rule 144A corporate bond transactions) to Rule dissemination cap for investment-grade corporate an investment company issuing redeemable
144A transactions in such securities; to amend bonds ($5 million) applies to both 144A and non- securities is a question of fact for the board of
FINRA Rule 7730 to establish a data set for real- 144A corporate bond transactions, and the $1 directors to determine, based upon the trading
time Rule 144A transaction data and a second data million dissemination cap for high-yield corporate markets for the specific security’ and noted that the
set for historic Rule 144A transaction data; to bonds similarly applies to both 144A and non-144A board should consider the unregistered nature of a
amend the definition of ‘‘Historic TRACE Data’’ to transactions. 144A transactions are also subject to rule 144A security as one of the factors it evaluates
reference the three data sets currently included the same 15-minute reporting requirement as non- in determining its liquidity.’’ See Release Nos. 33–
therein and the proposed fourth data set; and to 144A corporate debt transactions.’’ See also FINRA 9922; IC–31835; File Nos. S7–16–15; S7–08–15
make other clarifying and technical amendments. Regulatory Notice 13–35 October 2013. (Sept. 22, 2015); n.94.
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![60764 Federal Register / Vol. 81, No. 171 / Friday, September 2, 2016 / Notices
Interested persons are invited to Comments may be submitted by any SECURITIES AND EXCHANGE
submit written data, views, and of the following methods: COMMISSION
arguments regarding whether the
proposal should be approved or Electronic Comments [File No. 500–1]
disapproved by September 23, 2016. • Use the Commission’s Internet In the Matter of Luxeyard, Inc., and
Any person who wishes to file a rebuttal comment form (http://www.sec.gov/
to any other person’s submission must SuperDirectories, Inc.; Order of
rules/sro.shtml); or Suspension of Trading
file that rebuttal by October 7, 2016. The
Commission asks that commenters • Send an email to rule-comments@
August 31, 2016.
address the sufficiency of the sec.gov. Please include File Number SR–
NYSEArca–2016–70 on the subject line. It appears to the Securities and
Exchange’s statements in support of the Exchange Commission that there is a
proposal, which are set forth in the Paper Comments lack of current and accurate information
Notice,22 as modified by Amendment concerning the securities of Luxeyard,
No. 1 thereto,23 in addition to any other • Send paper comments in triplicate Inc. (CIK No. 1493587), a Delaware
comments they may wish to submit to Secretary, Securities and Exchange corporation with its principal place of
about the proposed rule change. Commission, 100 F Street NE., business listed as Los Angeles,
The Commission generally seeks Washington, DC 20549–1090. California, with stock quoted on OTC
comment on whether the Exchange’s Link (previously, ‘‘Pink Sheets’’)
representations relating to the proposed All submissions should refer to File
Number SR–NYSEArca–2016–70. This operated by OTC Markets Group, Inc.
portfolio holdings in Rule 144A
file number should be included on the (‘‘OTC Link’’) under the ticker symbol
securities are sufficient to prevent the
subject line if email is used. To help the LUXR, because it has not filed any
susceptibility of the Funds to
Commission process and review your periodic reports since April 9, 2013. On
manipulation and are thereby consistent
comments more efficiently, please use August 19, 2015, Luxeyard, Inc. was
with the requirements of section 6(b)(5)
only one method. The Commission will sent a delinquency letter by the Division
of the Act, which, among other things,
post all comments on the Commission’s of Corporation Finance requesting
requires that the rules of an exchange be
Internet Web site (http://www.sec.gov/ compliance with its periodic filing
designed to prevent fraudulent and
rules/sro.shtml). Copies of the obligations, but did not receive the
manipulative acts and practices and to
submission, all subsequent delinquency letter due to its failure to
protect investors and the public interest.
amendments, all written statements maintain a valid address on file with the
In particular, the Commission seeks
with respect to the proposed rule Commission as required by Commission
comment on the following:
change that are filed with the rules (Rule 301 of Regulation S–T, 17
As described above, the Exchange has
Commission, and all written CFR 232.301 and Section 5.4 of EDGAR
proposed that each Fund be permitted
communications relating to the Filer Manual).
to include Rule 144A securities within
proposed rule change between the It appears to the Securities and
a Fund’s principal investments in debt
Commission and any person, other than Exchange Commission that there is a
securities. As a result of the proposed
those that may be withheld from the lack of current and accurate information
change, each Fund would be permitted
public in accordance with the concerning the securities of
to invest 100% of its principal
provisions of 5 U.S.C. 552, will be SuperDirectories, Inc. (CIK No.
investments in Rule 144A securities.
available for Web site viewing and 1338624), a delinquent Wyoming
The Exchange also provides that all of
printing in the Commission’s Public corporation with its principal place of
the Rule 144A securities in which a
Reference Room, 100 F Street NE., business listed as Merrill, New York,
Fund invests will be corporate debt
Washington, DC 20549, on official with stock quoted on OTC Link under
securities for which transactions are
business days between the hours of the ticker symbol SDIR, because it has
reported in TRACE. Rule 144A
10:00 a.m. and 3:00 p.m. Copies of the not filed any periodic reports since the
securities are restricted securities,
filing also will be available for period ended June 30, 2014. On
which, as described above, are subject to
inspection and copying at the principal September 25, 2015, SuperDirectories,
legal restrictions on their sale and
office of the Exchange. All comments Inc. was sent a delinquency letter by the
generally are sold in privately
received will be posted without change; Division of Corporation Finance
negotiated transactions, pursuant to an
the Commission does not edit personal requesting compliance with its periodic
exemption from registration under the
identifying information from filing obligations, but did not receive
Securities Act, or in a registered public
submissions. You should submit only the delinquency letter due to its failure
offering. The Exchange has not
information that you wish to make to maintain a valid address on file with
proposed additional quantitative criteria
available publicly. All submissions the Commission as required by
with respect to minimum liquidity or
should refer to File Number SR– Commission rules (Rule 301 of
minimum diversification measures to be
NYSEArca–2016–70 and should be Regulation S–T, 17 CFR 232.301 and
applied to the Rule 144A securities. Do
submitted on or before September 23, Section 5.4 of EDGAR Filer Manual).
commenters have views on whether the
2016. Rebuttal comments should be The Commission is of the opinion that
specific Rule 144A securities in which
submitted by October 7, 2016. the public interest and the protection of
each Fund may invest would be
investors require a suspension of trading
sufficiently liquid and sufficiently For the Commission, by the Division of
in the securities of the above-listed
diversified so as to reduce the extent to Trading and Markets, pursuant to delegated
company.
mstockstill on DSK3G9T082PROD with NOTICES
which Managed Fund Shares holding authority.24
Therefore, it is ordered, pursuant to
principally restricted securities may be Robert W. Errett,
Section 12(k) of the Securities Exchange
susceptible to manipulation? Deputy Secretary. Act of 1934, that trading in the
[FR Doc. 2016–21129 Filed 9–1–16; 8:45 am] securities of the above-listed company is
Affairs, S. Rep. No. 75, 94th Cong., 1st Sess. 30
(1975). BILLING CODE 8011–01–P suspended for the period from 9:30 a.m.
22 See supra note 3. EDT on August 31, 2016, through 11:59
23 See supra note 6. 24 17 CFR 200.30–3(a)(57). p.m. EDT on September 14, 2016.
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Document Created: 2018-02-09 11:55:17
Document Modified: 2018-02-09 11:55:17
| 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 | 81 FR 60759 |
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