81_FR_81411 81 FR 81189 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Amendment No. 2 to, and Order Granting Accelerated Approval of, a Proposed Rule Change, as Modified by Amendment No. 2 Thereto, Relating To Listing and Trading of Shares of Cumberland Municipal Bond ETF under NYSE Arca Equities Rule 8.600

81 FR 81189 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Amendment No. 2 to, and Order Granting Accelerated Approval of, a Proposed Rule Change, as Modified by Amendment No. 2 Thereto, Relating To Listing and Trading of Shares of Cumberland Municipal Bond ETF under NYSE Arca Equities Rule 8.600

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 222 (November 17, 2016)

Page Range81189-81199
FR Document2016-27603

Federal Register, Volume 81 Issue 222 (Thursday, November 17, 2016)
[Federal Register Volume 81, Number 222 (Thursday, November 17, 2016)]
[Notices]
[Pages 81189-81199]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-27603]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79293; File No. SR-NYSEArca-2016-107]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Amendment No. 2 to, and Order Granting Accelerated Approval of, a 
Proposed Rule Change, as Modified by Amendment No. 2 Thereto, Relating 
To Listing and Trading of Shares of Cumberland Municipal Bond ETF under 
NYSE Arca Equities Rule 8.600


DATE: November 10, 2016.

I. Introduction

    On July 26, 2016, NYSE Arca, Inc. 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 list and trade shares of the 
Cumberland Municipal Bond ETF (``Fund'') under NYSE Arca Equities Rule 
8.600. The proposed rule change was published for comment in the 
Federal Register on August 15, 2016.\3\ On September 15, 2016, the 
Exchange filed Amendment No. 1 to the proposed rule change.\4\ On 
September 27, 2016, pursuant to Section 19(b)(2) of the Act,\5\ 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.\6\ On November 8, 2016, the Exchange filed Amendment No. 2 to 
the proposed rule change.\7\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 78523 (Aug. 9, 
2016), 81 FR 54155 (``Notice'').
    \4\ In Amendment No. 1, which amended and replaced the proposed 
rule change in its entirety, the Exchange: (1) Described additional 
diversification requirements that would apply to the Fund's holdings 
in municipal bonds; (2) clarified the Fund's holdings in non-
exchange-traded investment company securities; and (3) corrected 
certain references to the regular trading session of the Exchange. 
Amendment No. 1 to the proposed rule change is available at: https://www.sec.gov/comments/sr-nysearca-2016-107/nysearca2016107-1.pdf.
    \5\ 15 U.S.C. 78s(b)(2).
    \6\ See Securities Exchange Act Release No. 78949, 81 FR 68078 
(Oct. 3, 2016). The Commission designated November 13, 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.
    \7\ In Amendment No. 2, which amended and replaced the proposed 
rule change, as modified by Amendment No. 1 thereto, in its 
entirety, the Exchange: (1) Described additional diversification 
criteria that would apply to the Fund's holdings in municipal bonds; 
and (2) clarified the Fund's holdings in non-exchange-traded or 
other investment company securities. Amendment No. 2 to the proposed 
rule change is available at: https://www.sec.gov/comments/sr-nysearca-2016-107/nysearca2016107.shtml.
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    The Commission has not received any comments on the proposed rule 
change. The Commission is publishing this notice to solicit comments on 
Amendment No. 2 from interested persons and is approving the proposed 
rule change, as modified by Amendment No. 2 thereto, on an accelerated 
basis.

II. The Exchange's Description of the Proposed Rule Change

    In its filing with the Commission, the Exchange 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 
Exchange has prepared summaries, set forth in sections A, B, and C 
below, of the most significant parts of such statements.

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

1. Purpose
    The Exchange proposes to list and trade shares (``Shares'') of the 
following under NYSE Arca Equities Rule 8.600, which governs the 
listing and trading of Managed Fund Shares: \8\ Cumberland Municipal 
Bond ETF (the ``Fund''),\9\ a

[[Page 81190]]

series of the ETFis Series Trust I (``Trust'').\10\
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    \8\ A Managed Fund Share is a security that represents an 
interest in an investment company registered under the Investment 
Company Act of 1940 (15 U.S.C. 80a-1) (``1940 Act'') organized as an 
open-end investment company or similar entity that invests in a 
portfolio of securities selected by its investment adviser 
consistent with its investment objectives and policies. In contrast, 
an open-end investment company that issues Investment Company Units, 
listed and traded on the Exchange under NYSE Arca Equities Rule 
5.2(j)(3), seeks to provide investment results that correspond 
generally to the price and yield performance of a specific foreign 
or domestic stock index, fixed income securities index or 
combination thereof.
    \9\ The Securities and Exchange Commission (``Commission'') has 
approved listing and trading on the Exchange of a number of actively 
managed funds under Rule 8.600. See, e.g., Securities Exchange Act 
Release Nos. 69591 (May 16, 2013), 78 FR 30372 (May 22, 2013) (SR-
NYSEArca-2013-33) (order approving Exchange listing and trading of 
International Bear ETF); 69061 (March 7, 2013), 78 FR 15990 (March 
13, 2013) (SR-NYSEArca-2013-01) (order approving Exchange listing 
and trading of Newfleet Multi-Sector Income ETF). The Commission has 
approved for Exchange listing and trading 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).
    \10\ The Trust is registered under the 1940 Act. On May 20, 
2015, the Trust filed with the Commission an amendment to its 
registration statement on Form N-1A under the Securities Act of 1933 
(15 U.S.C. 77a) (``Securities Act''), and under the 1940 Act 
relating to the Fund (File Nos. 333-187668 and 811-22819) 
(``Registration Statement''). The description of the operation of 
the Trust and the Fund herein is based, in part, on the Registration 
Statement. In addition, the Commission has issued an order granting 
certain exemptive relief to the Trust under the 1940 Act. See 
Investment Company Act Release No. 30607 (July 23, 2013) (File No. 
812-14080) (``Exemptive Order''). This Amendment No. 2 to SR-
NYSEArca-2016-107 replaces SR-NYSEArca-2016-107 as originally filed 
and Amendment No. 1 thereto and supersedes such filings in their 
entirety.
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    The investment adviser to the Fund will be Virtus ETF Advisers LLC 
(the ``Adviser''). The Fund's sub-adviser will be Cumberland Advisors 
Inc. (``Sub-Adviser''). Virtus ETF Solutions LLC will serve as the 
Fund's operational administrator. ETF Distributors LLC will serve as 
the distributor (the ``Distributor'') of Fund Shares on an agency 
basis. The Bank of New York Mellon (the ``Administrator'') will serve 
as the administrator, custodian, transfer agent and fund accounting 
agent for the Fund.
    Commentary .06 to Rule 8.600 provides that, if the investment 
adviser to the investment company issuing Managed Fund Shares is 
affiliated with a broker-dealer, such investment adviser shall erect a 
``fire wall'' between the investment adviser and the broker-dealer with 
respect to access to information concerning the composition and/or 
changes to such investment company portfolio.\11\ In addition, 
Commentary .06 further requires that personnel who make decisions on 
the open-end fund's portfolio composition must be subject to procedures 
designed to prevent the use and dissemination of material nonpublic 
information regarding the open-end fund's portfolio. The Adviser and 
Sub-Adviser are not registered as broker-dealers. The Adviser (but not 
the Sub-Adviser) is affiliated with one or more broker-dealers and the 
Adviser has implemented and will maintain a fire wall with respect to 
each such broker-dealer affiliate regarding access to information 
concerning the composition and/or changes to the portfolio. In the 
event (a) the Adviser or Sub-Adviser become registered broker-dealers 
or newly affiliated with a broker-dealer, or (b) any new adviser or 
sub-adviser is a registered broker-dealer or becomes affiliated with a 
broker-dealer, it will implement a fire wall with respect to its 
relevant personnel or its broker-dealer affiliate regarding access to 
information concerning the composition and/or changes to the portfolio, 
and will be subject to procedures designed to prevent the use and 
dissemination of material non-public information regarding such 
portfolio.
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    \11\ An investment adviser to an open-end fund is required to be 
registered under the Investment Advisers Act of 1940 (the ``Advisers 
Act''). As a result, the Adviser and Sub-Adviser and their related 
personnel are subject to the provisions of Rule 204A-1 under the 
Advisers Act relating to codes of ethics. This Rule requires 
investment advisers to adopt a code of ethics that reflects the 
fiduciary nature of the relationship to clients as well as 
compliance with other applicable securities laws. Accordingly, 
procedures designed to prevent the communication and misuse of non-
public information by an investment adviser must be consistent with 
Rule 204A-1 under the Advisers Act. In addition, Rule 206(4)-7 under 
the Advisers Act makes it unlawful for an investment adviser to 
provide investment advice to clients unless such investment adviser 
has (i) adopted and implemented written policies and procedures 
reasonably designed to prevent violation, by the investment adviser 
and its supervised persons, of the Advisers Act and the Commission 
rules adopted thereunder; (ii) implemented, at a minimum, an annual 
review regarding the adequacy of the policies and procedures 
established pursuant to subparagraph (i) above and the effectiveness 
of their implementation; and (iii) designated an individual (who is 
a supervised person) responsible for administering the policies and 
procedures adopted under subparagraph (i) above.
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Description of the Fund
Principal Investments
    According to the Registration Statement, the Fund will seek to 
provide a competitive level of current income exempt from federal 
income tax, while preserving capital. The Fund, under normal market 
conditions,\12\ will invest at least eighty percent (80%) of the Fund's 
net assets in debt securities whose interest is, in the opinion of bond 
counsel for the issuer at the time of issuance, exempt from U.S. 
federal income tax (``Municipal Bonds''). The Sub-Adviser will invest 
the Fund's assets using a barbell strategy, which means that the Sub-
Adviser will overweight the Fund's investments in Municipal Bonds with 
maturities on the short and long ends of the fixed income yield curve, 
while underweighting exposure to Municipal Bonds with intermediate 
maturities.
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    \12\ The term ``normal market conditions'' is defined in NYSE 
Arca Equities Rule 8.600(c)(5).
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    According to the Registration Statement, Municipal Bonds in which 
the Fund may invest include one or more of the following:
     General obligation bonds, which are typically backed by 
the full faith, credit, and taxing power of the issuer;
     revenue bonds, which are typically secured by revenues 
generated by the issuer;
     discount bonds, which may be originally issued at a 
discount to par value or sold at market price below par value;
     premium bonds, which are sold at a premium to par value;
     zero coupon bonds, which are issued at an original issue 
discount, with the full value, including accrued interest, paid at 
maturity; and
     private activity bonds, which are typically issued by or 
on behalf of local or state government for the purpose of financing the 
project of a private user.
    The Fund will have no target duration for its investment portfolio, 
and the Sub-Adviser may target a shorter or longer average portfolio 
duration based on the Sub-Adviser's forecast of interest rates and view 
of fixed-income markets generally.\13\ The Sub-Adviser will generally 
apply a heavier weight toward Municipal Bonds with shorter maturities 
during periods of high interest rates and longer maturities during 
periods of lower interest rates. At least 80% of the weight of the 
Fund's assets will be in Municipal Bonds with a modified duration of 15 
years or less.
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    \13\ Duration measures the interest rate sensitivity of a debt 
security by assessing and weighting the present value of the 
security's payment pattern. Generally, the longer the maturity, the 
greater the duration and, therefore, the greater effect interest 
rate changes have on the price of the security.
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    With respect to credit quality, under normal market conditions, at 
least 90% of the Fund's assets invested in Municipal Bonds will be in 
Municipal Bonds rated ``A'' or better by at least one major credit 
rating agency or, if unrated, deemed to be of comparable quality in the 
Adviser's opinion. From time to time, the Fund may concentrate in 
particular sectors; however, the Fund's investments will be diversified 
among a minimum of ten distinct Municipal Bond sectors.\14\ In 
addition, the Fund will limit its investments in Municipal Bonds in any 
single sector to 25% of the Fund's assets. The Fund may sell 
investments for a variety of reasons, such as to adjust the portfolio's 
average maturity, duration, or overall credit quality, or to shift 
assets into and out of higher-yielding or lower-yielding securities or 
certain sectors.
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    \14\ The Fund's investments in Municipal Bonds will include 
investments in state and local (e.g., county, city, town) Municipal 
Bonds relating to such sectors as the following: Dedicated tax; 
public power; tax increment; toll road; port revenue; airport 
revenue; water revenue; sewer revenue; higher education (colleges 
and universities); wastewater revenue; school districts; sales tax 
revenue; and pre-refunded bonds.
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    Under normal market conditions, each Municipal Bond held by the 
Fund

[[Page 81191]]

must be a constituent of a deal where the deal's original offering 
amount was at least $100 million. The Fund will hold a minimum of 75 
different Municipal Bonds. No Municipal Bond held by the Fund will 
exceed 4% of the weight of the Fund's portfolio and no single Municipal 
Bond issuer will account for more than 10% of the weight of the Fund's 
portfolio. The Fund will hold Municipal Bonds of a minimum of 40 non-
affiliated issuers diversified among issuers in at least 20 different 
states, with no more than 30% of the Fund's assets comprised of 
Municipal Bonds that provide exposure to any single state.\15\
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    \15\ For purposes of this restriction, each state and each 
separate political subdivision, agency, authority, or 
instrumentality of such state, each multi-state agency or authority, 
and each guarantor, if any, will be treated as separate issuers of 
Municipal Bonds.
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    According to the Registration Statement, under normal market 
conditions, at least 80% of the Fund's income will be exempt from 
federal income taxes. However, a significant portion of the Fund's 
income could be derived from securities subject to the alternative 
minimum tax.
Other Investments
    While the Fund, under normal market conditions, will invest at 
least eighty percent (80%) of its assets in Municipal Bonds, as 
described above, the Fund may invest its remaining assets in other 
assets and financial instruments, as described below.
    The Fund may invest in equity securities, both directly and 
indirectly through investment in shares of exchange-traded funds 
(``ETFs''),\16\ money market funds, and other types of securities and 
instruments described below. The equity portion of the Fund's portfolio 
may include common stocks traded on securities exchanges or in the 
over-the-counter (``OTC'') market. In addition to common stocks, the 
equity portion of the Fund's portfolio may also include exchange-traded 
and OTC preferred stocks, and exchange-traded and OTC warrants.\17\
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    \16\ The ETFs in which the Fund may invest will be registered 
under the 1940 Act and include Investment Company Units (as 
described in NYSE Arca Equities Rule 5.2(j)(3)); Portfolio 
Depositary Receipts (as described in NYSE Arca Equities Rule 8.100); 
and Managed Fund Shares (as described in NYSE Arca Equities Rule 
8.600). Such ETFs all will be listed and traded in the U.S. on 
registered exchanges.
    \17\ With respect to its exchange-traded equity securities 
investments, the Fund will normally invest in equity securities that 
are listed and traded on a U.S. exchange or in markets that are 
members of the Intermarket Surveillance Group (``ISG'') or parties 
to a comprehensive surveillance sharing agreement with the Exchange. 
In any case, not more than 10% of the net assets of the Fund in the 
aggregate invested in equity securities (except for money market 
funds) will consist of equity securities whose principal market is 
not a member of ISG or a market with which the Exchange does not 
have a comprehensive surveillance sharing agreement. See note 34, 
infra.
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    The Fund may purchase taxable municipal bonds when the Sub-Adviser 
believes they offer opportunities for the Fund, or variable rate demand 
notes (VRDNs) that pay interest monthly or quarterly based on a 
floating rate that is reset daily or weekly based on an index of short-
term municipal rates.
    The Fund may invest in exchange-traded and OTC securities 
convertible into common stock. Such securities are the following: 
Convertible bonds and convertible preferred stocks.\18\
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    \18\ The criteria in note 16 above also will apply to exchange-
traded convertible preferred stocks and exchange-traded stocks into 
which convertible bonds may be converted.
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    The Fund may invest directly and indirectly in cash equivalents, 
namely, money market instruments that are the following: U.S. 
Government obligations or corporate debt obligations (including those 
subject to repurchase agreements); banker's acceptances \19\ and 
certificates of deposit \20\ of domestic branches of banks, commercial 
paper,\21\ and master notes.\22\
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    \19\ Banker's acceptances are time drafts drawn on and 
``accepted'' by a bank. When a bank ``accepts'' such a time draft, 
it assumes liability for its payment. When the Fund acquires a 
banker's acceptance, the bank that ``accepted'' the time draft is 
liable for payment of interest and principal when due. The banker's 
acceptance carries the full faith and credit of such bank.
    \20\ A certificate of deposit is an unsecured, interest bearing 
debt obligation of a bank.
    \21\ Commercial paper is an unsecured, short-term debt 
obligation of a bank, corporation, or other borrower. Commercial 
paper maturity generally ranges from two to 270 days and is usually 
sold on a discounted basis rather than as an interest-bearing 
instrument. The Fund will invest directly in commercial paper only 
if it is rated in one of the top two rating categories by Moody's, 
S&P or Fitch or, if not rated, is of equivalent quality in the 
Adviser's opinion. Commercial paper may include master notes of the 
same quality. Master notes are unsecured obligations which are 
redeemable upon demand of the holder and which permit the investment 
of fluctuating amounts at varying rates of interest.
    \22\ Master notes may be acquired by the Fund through the master 
note program of the Fund's custodian bank.
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    In order to maintain sufficient liquidity, to implement investment 
strategies or for temporary defensive purposes, the Fund may invest a 
significant portion of its assets in shares of one or more money market 
funds. Generally, money market mutual funds are registered investment 
companies that seek to earn income consistent with the preservation of 
capital and maintenance of liquidity by investing primarily in high 
quality money market instruments.
    The Fund may invest in compliance with Section 12(d)(1)(E), (F) and 
(G) of the 1940 Act and the rules thereunder.\23\
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    \23\ 15 U.S.C. 80a-12(d)(1)(E), (F) and (G).
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    The Fund may write U.S. exchange-traded call and put options on 
securities, ETFs or security indexes to seek income or may purchase or 
write U.S. exchange-traded put or call options for hedging purposes.
    The Fund may purchase securities on a when-issued basis or for 
settlement at a future date (forward commitment) if the Fund holds 
sufficient liquid assets to meet the purchase price.
    Additionally, the Trust, on behalf of the Fund, has claimed an 
exclusion from the definition of the term ``commodity pool operator'' 
pursuant to Rule 4.5 under the Commodity Exchange Act, as amended (the 
``CEA''). Therefore, the Fund is not subject to regulation or 
registration as a commodity pool operator under the CEA.
Investment Restrictions
    The Fund may, from time to time, take temporary defensive positions 
that are inconsistent with its principal investment strategies in an 
attempt to respond to adverse market, economic, political or other 
conditions. In such circumstances, the Fund may also hold up to 100% of 
its portfolio in cash and cash equivalent positions.
    The Fund may hold up to an aggregate amount of 15% of its net 
assets in illiquid assets (calculated at the time of investment), 
consistent with Commission guidance. The Fund will monitor 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 the Fund's net assets are held 
in illiquid assets. Illiquid assets include securities subject to 
contractual or other restrictions on resale and other instruments that 
lack readily available markets as determined in accordance with 
Commission staff guidance.\24\
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    \24\ The Commission has stated that long-standing Commission 
guidelines have required open-end funds to hold no more than 15% of 
their net assets in illiquid securities and other illiquid assets. 
See Investment Company Act Release No. 28193 (March 11, 2008), 73 FR 
14618 (March 18, 2008), footnote 34. See also, Investment Company 
Act Release No. 5847 (October 21, 1969), 35 FR 19989 (December 31, 
1970) (Statement Regarding ``Restricted Securities''); Investment 
Company Act Release No. 18612 (March 12, 1992), 57 FR 9828 (March 
20, 1992) (Revisions of Guidelines to Form N-1A). A fund's portfolio 
security is illiquid if it cannot be disposed of in the ordinary 
course of business within seven days at approximately the value 
ascribed to it by the fund. See Investment Company Act Release No. 
14983 (March 12, 1986), 51 FR 9773 (March 21, 1986) (adopting 
amendments to Rule 2a-7 under the 1940 Act); Investment Company Act 
Release No. 17452 (April 23, 1990), 55 FR 17933 (April 30, 1990) 
(adopting Rule 144A under the 1933 Act).

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[[Page 81192]]

    The Fund will seek to qualify for treatment as a regulated 
investment company under the Internal Revenue Code of 1986.\25\
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    \25\ 26 U.S.C. 851.
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    The Fund's investments will be consistent with its investment 
objective and will not be used to provide multiple returns of a 
benchmark or to produce leveraged returns.
Creation and Redemption of Shares
    According to the Registration Statement, the Trust will issue and 
sell Shares of the Fund only in ``Creation Units'' on a continuous 
basis through the Distributor, at their net asset value (``NAV'') next 
determined after receipt, on any business day, for an order received in 
proper form. All orders to create Creation Units must be placed for one 
or more Creation Unit size aggregations of Shares (50,000 Shares per 
Creation Unit). The Creation Unit size is subject to change. Cash 
creations will be the default mechanism for creation of Shares.
    However, the Fund will retain the ability to utilize an in-kind 
mechanism for creation of Shares, upon approval of the Distributor. In 
such case, the consideration for purchase of a Creation Unit of the 
Fund generally will consist of an in-kind deposit of ``Deposit 
Securities'' for each Creation Unit constituting a substantial 
replication, or a representation, of the securities included in the 
Fund's portfolio and a ``Cash Component'' computed as described below. 
Together, the Deposit Securities and the Cash Component constitute the 
``Fund Deposit'', which represents the minimum initial and subsequent 
investment amount for a Creation Unit of the Fund. The Cash Component 
is an amount equal to the difference between the NAV of the Shares (per 
Creation Unit) and the market value of the Deposit Securities. If the 
Cash Component is a positive number (i.e., the NAV per Creation Unit 
exceeds the market value of the Deposit Securities), the Cash Component 
will be such positive amount. If the Cash Component is a negative 
number (i.e., the NAV per Creation Unit is less than the market value 
of the Deposit Securities), the Cash Component will be such negative 
amount, and the creator will be entitled to receive cash from the Fund 
in an amount equal to the Cash Component. The Cash Component serves the 
function of compensating for any differences between the NAV per 
Creation Unit and the market value of the Deposit Securities.
    The Administrator, through the National Securities Clearing 
Corporation (``NSCC''), will make available on each business day, 
immediately prior to the opening of business on the Exchange (currently 
9:30 a.m., Eastern Time), the list of the names and the required number 
of Shares of each Deposit Security to be included in the current Fund 
Deposit (based on information at the end of the previous business day) 
for the Fund. Such Fund Deposit will be applicable, subject to any 
adjustments as described below, in order to effect creations of 
Creation Units of the Fund until such time as the next-announced 
composition of the Deposit Securities is made available.
    The identity and number of Shares of the Deposit Securities 
required for the Fund Deposit for the Fund will change as rebalancing 
adjustments and corporate action events occur from time to time. In 
addition, the Trust reserves the right to permit or require the 
substitution of an amount of cash--i.e., a ``cash in lieu'' amount--to 
be added to the Cash Component to replace any Deposit Security that may 
not be available in sufficient quantity for delivery, that may not be 
eligible for transfer or that may not be eligible for trading by an 
``Authorized Participant'' (as described below) or the investor for 
which it is acting.
    In addition to the list of names and numbers of securities 
constituting the current Deposit Securities of the Fund Deposit, the 
Administrator, through NSCC, also will make available on each business 
day the estimated Cash Component, effective through and including the 
previous business day, per outstanding Creation Unit of the Fund.
Procedures for Creation of Creation Units
    To be eligible to place orders to create a Creation Unit of the 
Fund, an entity must be (i) a ``Participating Party'', i.e., a broker-
dealer or other participant in the clearing process through the 
Continuous Net Settlement System of NSCC (the ``Clearing Process'') or 
a clearing agency that is registered with the Commission, or (ii) a 
Depositary Trust Company (``DTC'') Participant and, in each case, must 
have executed an agreement with the Trust, the Distributor and the 
Administrator with respect to creations and redemptions of Creation 
Units (``Participant Agreement''). A Participating Party and DTC 
Participant are collectively referred to as an ``Authorized 
Participant''.
    All orders to create Creation Units must be received by the 
Distributor no later than the close of the Core Trading Session on the 
Exchange (ordinarily 4:00 p.m., Eastern Time), in each case on the date 
such order is placed in order for the creation of Creation Units to be 
effected based on the NAV of Shares of the Fund as next determined on 
such date after receipt of the order in proper form.
Redemption of Creation Units
    Shares may be redeemed only in Creation Units at their NAV next 
determined after receipt of a redemption request in proper form by the 
Distributor and the Fund through the Administrator and only on a 
business day. Cash redemptions will be the default mechanism for 
redemptions of Shares.
    However, the Fund will retain the ability to utilize an in-kind 
mechanism for redemption of Shares, upon approval of the Distributor. 
In such case, the redemption proceeds for a Creation Unit generally 
consist of Deposit Securities, as announced by the Administrator on the 
business day of the request for redemption received in proper form, 
plus cash in an amount equal to the difference between the NAV of the 
Shares being redeemed, as next determined after a receipt of a request 
in proper form, and the value of the Deposit Securities (the ``Cash 
Redemption Amount''), less a redemption transaction fee. In the event 
that the Deposit Securities have a value greater than the NAV of the 
Shares, a compensating cash payment equal to the differential is 
required to be made by or through an Authorized Participant by the 
redeeming shareholder.
    With respect to the Fund, the Administrator, through NSCC, will 
make available immediately prior to the opening of business on the 
Exchange (currently 9:30 a.m., Eastern Time) on each business day, the 
Deposit Securities that will be applicable (subject to possible 
amendment or correction) to redemption requests received in proper form 
on that day. Deposit Securities received on redemption may not be 
identical to Deposit Securities which are applicable to creations of 
Creation Units.
    If it is not possible to effect deliveries of the Deposit 
Securities, the Trust may in its discretion exercise its option to 
redeem such shares in cash, and the redeeming beneficial owner will be 
required to receive its redemption proceeds in cash. In addition, an 
investor may request a redemption in

[[Page 81193]]

cash which the Fund may, in its sole discretion, permit.\26\ In either 
case, the investor will receive a cash payment equal to the NAV of its 
Shares based on the NAV of Shares of the Fund next determined after the 
redemption request is received in proper form (minus a redemption 
transaction fee and additional charge for requested cash redemptions, 
to offset the Trust's brokerage and other transaction costs associated 
with the disposition of Deposit Securities).
---------------------------------------------------------------------------

    \26\ The Adviser represents that, to the extent the Trust 
effects the creation or redemption of Shares in cash, such 
transactions will be effected in the same manner for all Authorized 
Participants.
---------------------------------------------------------------------------

    The right of redemption may be suspended or the date of payment 
postponed with respect to the Fund (1) for any period during which the 
Exchange is closed (other than customary weekend and holiday closings); 
(2) for any period during which trading on the Exchange is suspended or 
restricted; (3) for any period during which an emergency exists as a 
result of which disposal of the Shares of the Fund or determination of 
the Shares' NAV is not reasonably practicable; or (4) in such other 
circumstance as is permitted by the Commission.
Net Asset Value
    The NAV per Share for the Fund will be computed by dividing the 
value of the net assets of the Fund (i.e., the value of its total 
assets less total liabilities) by the total number of Shares 
outstanding, rounded to the nearest cent. Expenses and fees, including 
the management fee, will be accrued daily and taken into account for 
purposes of determining NAV. The NAV of the Fund will be determined as 
of the close of the Core Trading Session on the Exchange (ordinarily 
4:00 p.m., Eastern Time) on each day that the Exchange is open. Any 
assets or liabilities denominated in currencies other than the U.S. 
dollar will be converted into U.S. dollars at the current market rates 
on the date of valuation as quoted by one or more sources.
    The pricing and valuation of portfolio securities will be 
determined in good faith in accordance with procedures approved by, and 
under the direction of, the Trust's Board of Trustees (``Board''). In 
determining the value of the Fund's assets, equity securities will be 
generally valued at market using quotations from the primary market in 
which they are traded. Debt securities (other than short-term 
investments) will be valued on the basis of broker quotes or valuations 
provided by a pricing service, which in determining value will utilize 
information regarding recent sales, market transactions in comparable 
securities, quotations from dealers, and various relationships between 
securities. Other assets, such as accrued interest, accrued dividends 
and cash also will be included in determining the NAV. The Fund 
normally will use third party pricing services to obtain portfolio 
security prices.
    Municipal Bonds, money market instruments, convertible bonds, 
taxable municipal bonds, and VRDNs will generally be valued at bid 
prices received from independent pricing services as of the announced 
closing time for trading in fixed-income instruments in the respective 
market.
    Exchange-traded equity securities, including common stocks, ETFs, 
preferred stocks, convertible preferred stocks and warrants, will be 
valued at market value, which will generally be determined using the 
last reported official closing or last trading price on the exchange or 
market on which the security is primarily traded at the time of 
valuation or, if no sale has occurred, at the last quoted bid price on 
the primary market or exchange on which they are traded. If market 
prices are unavailable or the Fund believes that they are unreliable, 
or when the value of a security has been materially affected by events 
occurring after the relevant market closes, the Fund will price those 
securities at fair value as determined in good faith using methods 
approved by the Trust's Board.
    Equity securities traded in the OTC market, including common 
stocks, preferred stocks, and warrants, will be valued at the last 
reported sale price on the valuation date. OTC traded convertible 
preferred stocks will be valued based on price quotations obtained from 
a broker-dealer who makes markets in such securities or other 
equivalent indications of value provided by a third-party pricing 
service. Securities of money market funds will be valued at NAV.
    Option contracts will be valued at their most recent sale price on 
the applicable exchange. If no such sales are reported, these contracts 
will be valued at their most recent bid price.
    To the extent the assets of the Fund are invested in other open-end 
investment companies that are registered under the 1940 Act, the Fund's 
NAV will be calculated based upon the NAVs reported by such registered 
open-end investment companies.
    Securities and assets for which market quotations are not readily 
available or which cannot be accurately valued using the Fund's normal 
pricing procedures will be valued by the Trust's Fair Value Pricing 
Committee at fair value as determined in good faith under policies 
approved by the Board. Fair value pricing may be used, for example, in 
situations where (i) portfolio securities, such as securities with 
small capitalizations, are so thinly traded that there have been no 
transactions for that security over an extended period of time; (ii) an 
event occurs after the close of the exchange on which a portfolio 
security is principally traded that is likely to change the value of 
the portfolio security prior to the Fund's NAV calculation; (iii) the 
exchange on which the portfolio security is principally traded closes 
early; or (iv) trading of the particular portfolio security is halted 
during the day and does not resume prior to the Fund's NAV calculation. 
The Board will monitor and evaluate the Fund's use of fair value 
pricing, and periodically reviews the results of any fair valuation 
under the Trust's policies.
Availability of Information
    The Fund's Web site (www.cumberetfs.com), which will be publicly 
available prior to the public offering of Shares, will include a form 
of the prospectus for the Fund that may be downloaded. The Fund's Web 
site will include additional quantitative information updated on a 
daily basis, including, for the Fund, (1) daily trading volume, the 
prior business day's reported closing price, NAV and mid-point of the 
bid/ask spread at the time of calculation of such NAV (the ``Bid/Ask 
Price''),\27\ and a calculation of the premium and discount of the Bid/
Ask Price against the NAV, and (2) data in chart format displaying the 
frequency distribution of discounts and premiums of the daily Bid/Ask 
Price against the NAV, within appropriate ranges, for each of the four 
previous calendar quarters. On each business day, before commencement 
of trading in Shares in the Core Trading Session on the Exchange 
(ordinarily 9:30 a.m., Eastern Time), the Fund's Web site will disclose 
the Disclosed Portfolio that will form the basis for the Fund's 
calculation of NAV at the end of the business day.\28\
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    \27\ The Bid/Ask Price of the Fund's Shares will be determined 
using the mid-point of the highest bid and the lowest offer on the 
Exchange as of the time of calculation of the Fund's NAV. The 
records relating to Bid/Ask Prices will be retained by the Fund and 
its service providers.
    \28\ Under accounting procedures followed by the Fund, trades 
made on the prior business day (``T'') will be booked and reflected 
in NAV on the current business day (``T+1''). Accordingly, the Fund 
will be able to disclose at the beginning of the business day the 
portfolio that will form the basis for the NAV calculation at the 
end of the business day.

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[[Page 81194]]

    The Fund will disclose on the Fund's Web site the following 
information regarding each portfolio holding, as applicable to the type 
of holding: Ticker symbol, CUSIP number or other identifier, if any; a 
description of the holding (including the type of holding); the 
identity of the security, index or other asset or instrument underlying 
the holding, if any; for options, the option strike price; quantity 
held (as measured by, for example, par value, notional value or number 
of shares, contracts or units); maturity date, if any; coupon rate, if 
any; effective date, if any; market value of the holding; and the 
percentage weighting of the holding in the Fund's portfolio. The Web 
site information will be publicly available at no charge.
    In addition, a basket composition file, which includes the security 
names and share quantities, if applicable, required to be delivered in 
exchange for the Fund's Shares, together with estimates and actual cash 
components, will be publicly disseminated daily prior to the opening of 
the Exchange via the NSCC. The basket represents one Creation Unit of 
the Fund. The NAV of Shares of the Fund will normally be determined as 
of the close of the Core Trading Session on the Exchange (ordinarily 
4:00 p.m., Eastern Time) on each business day. Authorized Participants 
may refer to the basket composition file for information regarding 
securities and financial instruments that may comprise the Fund's 
basket on a given day.
    The approximate value of the Fund's investments on a per-Share 
basis, the Indicative Intra-Day Value (``IIV''), will be disseminated 
every 15 seconds during the Exchange Core Trading Session (ordinarily 
9:30 a.m. to 4:00 p.m., Eastern Time). The IIV should not be viewed as 
a ``real-time'' update of NAV because the IIV will be calculated by an 
independent third party and may not be calculated in the exact same 
manner as NAV, which will be computed daily.
    The IIV for the Fund will be calculated by dividing the ``Estimated 
Fund Value'' as of the time of the calculation by the total number of 
outstanding Shares. ``Estimated Fund Value'' is the sum of the 
estimated amount of cash held in the Fund's portfolio, the estimated 
amount of accrued interest owing to the Fund and the estimated value of 
the securities held in the Fund's portfolio, minus the estimated amount 
of the Fund's liabilities. The IIV will be calculated based on the same 
portfolio holdings disclosed on the Fund's Web site. In determining the 
estimated value for each of the component securities, the IIV will use 
last sale, market prices or other methods that would be considered 
appropriate for pricing securities held by registered investment 
companies.
    Investors can also obtain the Trust's Statement of Additional 
Information (``SAI''), the Fund's shareholder reports, and its Form N-
CSR and Form N-SAR, filed twice a year. The Trust's SAI and Shareholder 
Reports will be available free upon request from the Trust, and those 
documents and the Form N-CSR and Form N-SAR may be viewed on-screen or 
downloaded from the Commission's Web site at www.sec.gov. Information 
regarding market price and trading volume of the Shares will be 
continually available on a real-time basis throughout the day on 
brokers' computer screens and other electronic services. Information 
regarding the previous day's closing price and trading volume 
information for the Shares will be published daily in the financial 
section of newspapers.
    Quotation and last sale information for the Shares and the 
underlying U.S. exchange-traded equity securities will be available via 
the Consolidated Tape Association (``CTA'') high-speed line, and from 
the national securities exchange on which they are listed. Price 
information regarding non-U.S. exchange-traded equity securities held 
by the Fund will be available from the exchanges trading such assets.
    Quotation information from brokers and dealers or pricing services 
will be available for Municipal Bonds, taxable municipal bonds, 
convertible bonds, OTC traded convertible preferred stocks, corporate 
debt obligations, VRDNs, and cash equivalents. Price information for 
money market funds will be available from the applicable investment 
company's Web site and from market data vendors. Intra-day and closing 
price information for OTC equity securities will be available from 
major market data vendors. Pricing information regarding each asset 
class in which the Fund will invest will generally be available through 
nationally recognized data service providers through subscription 
agreements. Quotation and last sale information for exchange-traded 
options will be available via the Options Price Reporting Authority and 
from the applicable U.S. options exchange. In addition, the IIV, (which 
is the Portfolio Indicative Value, as defined in NYSE Arca Equities 
Rule 8.600(c)(3)), will be widely disseminated at least every 15 
seconds during the Core Trading Session by one or more major market 
data vendors.\29\ The dissemination of the IIV, together with the 
Disclosed Portfolio, will allow investors to determine the value of the 
underlying portfolio of the Fund on a daily basis and will provide a 
close estimate of that value throughout the trading day.
---------------------------------------------------------------------------

    \29\ Currently, it is the Exchange's understanding that several 
major market data vendors display and/or make widely available IIVs 
taken from CTA or other data feeds.
---------------------------------------------------------------------------

Trading Halts
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares of the Fund.\30\ Trading in Shares of the Fund 
will be halted if the circuit breaker parameters in NYSE Arca Equities 
Rule 7.12 have been reached. Trading also may be halted because of 
market conditions or for reasons that, in the view of the Exchange, 
make trading in the Shares inadvisable. These may include: (1) The 
extent to which trading is not occurring in the securities and/or the 
financial instruments comprising the Disclosed Portfolio of the Fund; 
or (2) whether other unusual conditions or circumstances detrimental to 
the maintenance of a fair and orderly market are present. Trading in 
the Shares will be subject to NYSE Arca Equities Rule 8.600(d)(2)(D), 
which sets forth circumstances under which Shares of the Fund may be 
halted.
---------------------------------------------------------------------------

    \30\ See NYSE Arca Equities Rule 7.12, Commentary .04.
---------------------------------------------------------------------------

Trading Rules
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. Shares will trade on 
the NYSE Arca Marketplace from 4 a.m. to 8 p.m., Eastern Time in 
accordance with NYSE Arca Equities Rule 7.34 (Opening, Core, and Late 
Trading Sessions). The Exchange has appropriate rules to facilitate 
transactions in the Shares during all trading sessions. As provided in 
NYSE Arca Equities Rule 7.6, Commentary .03, the minimum price 
variation (``MPV'') for quoting and entry of orders in equity 
securities traded on the NYSE Arca Marketplace is $0.01, with the 
exception of securities that are priced less than $1.00 for which the 
MPV for order entry is $0.0001.
    The Shares will conform to the initial and continued listing 
criteria under NYSE Arca Equities Rule 8.600. Consistent with NYSE Arca 
Equities Rule 8.600(d)(2)(B)(ii), the Adviser will implement and 
maintain, or be subject to, procedures designed to prevent the

[[Page 81195]]

use and dissemination of material non-public information regarding the 
actual components of the Fund's portfolio. The Exchange represents 
that, for initial and/or continued listing, the Fund will be in 
compliance with Rule 10A-3 \31\ under the Act, as provided by NYSE Arca 
Equities Rule 5.3. A minimum of 100,000 Shares will be outstanding at 
the commencement of trading on the Exchange. The Exchange will obtain a 
representation from the issuer of the Shares that the NAV per Share 
will be calculated daily and that the NAV and the Disclosed Portfolio 
\32\ as defined in NYSE Arca Equities Rule 8.600(c)(2) will be made 
available to all market participants at the same time. The Fund's 
investments will be consistent with the Fund's investment objective and 
will not be used to enhance leverage.
---------------------------------------------------------------------------

    \31\ 17 CFR 240.10A-3.
    \32\ The term ``Disclosed Portfolio'' is defined in NYSE Arca 
Equities Rule 8.600(c)(2).
---------------------------------------------------------------------------

Surveillance
    The Exchange represents that trading in the Shares will be subject 
to the existing trading surveillances, administered by the Financial 
Industry Regulatory Authority (``FINRA'') on behalf of the Exchange, or 
by regulatory staff of the Exchange, which are designed to detect 
violations of Exchange rules and applicable federal securities laws. 
The Exchange represents that these procedures are adequate to properly 
monitor Exchange trading of the Shares in all trading sessions and to 
deter and detect violations of Exchange rules and federal securities 
laws applicable to trading on the Exchange.\33\
---------------------------------------------------------------------------

    \33\ FINRA surveils trading on the Exchange pursuant to a 
regulatory services agreement. The Exchange is responsible for 
FINRA's performance under this regulatory services agreement.
---------------------------------------------------------------------------

    The surveillances referred to above generally focus on detecting 
securities trading outside their normal patterns, which could be 
indicative of manipulative or other violative activity. When such 
situations are detected, surveillance analysis follows and 
investigations are opened, where appropriate, to review the behavior of 
all relevant parties for all relevant trading violations.\34\
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    \34\ For a list of the current members of ISG, see 
www.isgportal.org. The Exchange notes that not all components of the 
Disclosed Portfolio may trade on markets that are members of ISG or 
with which the Exchange has in place a comprehensive surveillance 
sharing agreement.
---------------------------------------------------------------------------

    FINRA, on behalf of the Exchange, or regulatory staff of the 
Exchange, will communicate as needed regarding trading in the Shares, 
options and certain exchange-traded equity securities with other 
markets and other entities that are members of the ISG, and FINRA, on 
behalf of the Exchange, or regulatory staff of the Exchange, may obtain 
trading information regarding trading in the Shares, options and 
certain exchange-traded equity securities from such markets and other 
entities. In addition, the Exchange may obtain information regarding 
trading in the Shares, options and certain exchange-traded equity 
securities from markets and other entities that are members of ISG or 
with which the Exchange has in place a comprehensive surveillance 
sharing agreement. In addition, FINRA, on behalf of the Exchange, is 
able to access, as needed, trade information for certain fixed income 
securities held by the Fund reported to FINRA's Trade Reporting and 
Compliance Engine (``TRACE''). FINRA also can access data obtained from 
the Municipal Securities Rulemaking Board (``MSRB'') relating to 
municipal bond trading activity for surveillance purposes in connection 
with trading in the Shares.
    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
    All statements and representations made in this filing regarding 
(a) the description of the portfolio, (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 Fund on the Exchange.
    The issuer has represented to the Exchange that it will advise the 
Exchange of any failure by the Fund to comply with the continued 
listing requirements, and, pursuant to its obligations under Section 
19(g)(1) of the Act, the Exchange will monitor for compliance with the 
continued listing requirements. If the Fund is not in compliance with 
the applicable listing requirements, the Exchange will commence 
delisting procedures under NYSE Arca Equities Rule 5.5(m).
Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its 
Equity Trading Permit Holders in an Information Bulletin (``Bulletin'') 
of the special characteristics and risks associated with trading the 
Shares. Specifically, the Bulletin will discuss the following: (1) The 
procedures for purchases and redemptions of Shares in Creation Unit 
aggregations (and that Shares are not individually redeemable); (2) 
NYSE Arca Equities Rule 9.2(a), which imposes a duty of due diligence 
on its Equity Trading Permit Holders to learn the essential facts 
relating to every customer prior to trading the Shares; (3) the risks 
involved in trading the Shares during the Opening and Late Trading 
Sessions when an updated IIV will not be calculated or publicly 
disseminated; (4) how information regarding the IIV and the Disclosed 
Portfolio is disseminated; (5) the requirement that Equity Trading 
Permit Holders deliver a prospectus to investors purchasing newly 
issued Shares prior to or concurrently with the confirmation of a 
transaction; and (6) trading information.
    In addition, the Bulletin will reference that the Fund is subject 
to various fees and expenses described in the Registration Statement. 
The Bulletin will discuss any exemptive, no-action, and interpretive 
relief granted by the Commission from any rules under the Act. The 
Bulletin will also disclose that the NAV for the Shares will be 
calculated after 4:00 p.m., Eastern Time each trading day.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \35\ that an exchange have rules that 
are designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, to remove 
impediments to, and perfect the mechanism of a free and open market 
and, in general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \35\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares will be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria in NYSE Arca Equities Rule 
8.600. The Exchange has in place surveillance procedures that are 
adequate to properly monitor trading in the Shares in all trading 
sessions and to deter and detect violations of Exchange rules and 
applicable federal securities laws. FINRA, on behalf of the Exchange, 
or regulatory staff of the Exchange, will communicate as needed 
regarding trading in the Shares, options and certain exchange-traded 
equity securities with other markets and other entities that are 
members of the ISG, and FINRA, on behalf of the Exchange, or regulatory 
staff of the Exchange, may obtain trading information regarding trading 
in the Shares, options and certain exchange-traded equity securities 
from such markets and other entities. In addition, the Exchange may 
obtain information regarding trading in

[[Page 81196]]

the Shares, options and certain exchange-traded equity securities from 
markets and other entities that are members of ISG or with which the 
Exchange has in place a comprehensive surveillance sharing agreement. 
In addition, FINRA, on behalf of the Exchange, is able to access, as 
needed, trade information for certain fixed income securities held by 
the Fund reported to TRACE. FINRA also can access data obtained from 
the MSRB relating to municipal bond trading activity for surveillance 
purposes in connection with trading in the Shares. The Fund may not 
purchase or hold illiquid assets if, in the aggregate, more than 15% of 
its net assets would be invested in illiquid assets. The Adviser and 
Sub-Adviser are not registered as broker-dealers but the Adviser is 
affiliated with one or more broker-dealers and has implemented and will 
maintain a fire wall with respect to each such broker-dealer affiliate 
regarding access to information concerning the composition and/or 
changes to the portfolio. The Fund's investments in Municipal Bonds 
will be well-diversified in that, under normal market conditions, the 
Fund will hold a minimum of 75 different Municipal Bonds; no Municipal 
Bond held by the Fund will exceed 4% of the weight of the Fund's 
portfolio; no single Municipal Bond issuer will account for more than 
10% of the weight of the Fund's portfolio; and the Fund will hold 
Municipal Bonds of a minimum of 40 non-affiliated issuers, diversified 
among issuers in at least 20 different states, with no more than 30% of 
the Fund's assets comprised of Municipal Bonds that provide exposure to 
any single state. In addition, each Municipal Bond held by the Fund 
must be a constituent of a deal where the deal's original offering 
amount was at least $100 million. The Fund's investments will be 
diversified among a minimum of ten distinct Municipal Bond sectors and 
the Fund will limit its investments in Municipal Bonds in any single 
sector to 25% of the Fund's assets.
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest in 
that the Exchange will obtain a representation from the issuer of the 
Shares that the NAV per Share will be calculated daily and that the NAV 
and the Disclosed Portfolio will be made available to all market 
participants at the same time. In addition, a large amount of 
information is publicly available regarding the Fund and the Shares, 
thereby promoting market transparency. Quotation and last sale 
information for the Shares and the underlying U.S. exchange-traded 
equity securities will be available via the CTA high-speed line, and 
from the national securities exchange on which they are listed. The 
Fund will disclose on the Fund's Web site the following information 
regarding each portfolio holding, as applicable to the type of holding: 
Ticker symbol, CUSIP number or other identifier, if any; a description 
of the holding (including the type of holding); the identity of the 
security, index or other asset or instrument underlying the holding, if 
any; for options, the option strike price; quantity held (as measured 
by, for example, par value, notional value or number of shares, 
contracts or units); maturity date, if any; coupon rate, if any; 
effective date, if any; market value of the holding; and the percentage 
weighting of the holding in the Fund's portfolio. Moreover, prior to 
the commencement of trading, the Exchange will inform its Equity 
Trading Permit Holders in an Information Bulletin of the special 
characteristics and risks associated with trading the Shares. Trading 
in Shares of the Fund will be halted if the circuit breaker parameters 
in NYSE Arca Equities Rule 7.12 have been reached or because of market 
conditions or for reasons that, in the view of the Exchange, make 
trading in the Shares inadvisable. Trading in the Shares will be 
subject to NYSE Arca Equities Rule 8.600(d)(2)(D), which sets forth 
circumstances under which Shares of the Fund may be halted. In 
addition, as noted above, investors will have ready access to 
information regarding the Fund's holdings, the IIV, the Disclosed 
Portfolio, and quotation and last sale information for the Shares.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
an additional type of actively-managed exchange-traded product that 
principally holds municipal bonds and that will enhance competition 
among market participants, to the benefit of investors and the 
marketplace. As noted above, the Exchange has in place surveillance 
procedures relating to trading in the Shares and may obtain information 
via ISG from other exchanges that are members of ISG or with which the 
Exchange has entered into a comprehensive surveillance sharing 
agreement. In addition, as noted above, investors will have ready 
access to information regarding the Fund's holdings, the IIV, the 
Disclosed Portfolio, and quotation and last sale information for the 
Shares.

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

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

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Discussion and Commission Findings

    After careful review, the Commission finds that the Exchange's 
proposal to list and trade the Shares is consistent with the Act and 
the rules and regulations thereunder applicable to a national 
securities exchange.\36\ In particular, the Commission finds that the 
proposed rule change is consistent with Section 6(b)(5) of the Act,\37\ 
which requires, among other things, that the Exchange's rules be 
designed to prevent fraudulent and manipulative acts and practices, 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general, to protect investors and the public 
interest.
---------------------------------------------------------------------------

    \36\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \37\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Commission also finds that the proposal to list and trade the 
Shares on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of 
the Act,\38\ which sets forth Congress' finding that it is in the 
public interest and appropriate for the protection of investors and the 
maintenance of fair and orderly markets to assure the availability to 
brokers, dealers, and investors of information with respect to 
quotations for and transactions in securities. Quotation and last-sale 
information for the Shares and the underlying U.S. exchange-traded 
equity securities will be available via the CTA high-speed line, and 
from the

[[Page 81197]]

national securities exchange on which they are listed.
---------------------------------------------------------------------------

    \38\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
---------------------------------------------------------------------------

    The approximate value of the Fund's investments on a per-Share 
basis, the IIV (which is the Portfolio Indicative Value, as defined in 
NYSE Arca Equities Rule 8.600(c)(3)), will be disseminated every 15 
seconds during the Exchange Core Trading Session (ordinarily 9:30 a.m. 
to 4:00 p.m., Eastern Time) by one or more major market data 
vendors.\39\ On each business day, before commencement of trading in 
Shares in the Core Trading Session on the Exchange (ordinarily 9:30 
a.m., Eastern Time), the Fund's Web site will disclose the Disclosed 
Portfolio that will form the basis for the Fund's calculation of NAV at 
the end of the business day.\40\ In addition, a basket composition 
file, which includes the security names and share quantities, if 
applicable, required to be delivered in exchange for the Fund's Shares, 
together with estimates and actual cash components, will be publicly 
disseminated daily prior to the opening of the Exchange via the NSCC. 
The basket represents one Creation Unit of the Fund. The NAV of Shares 
of the Fund will normally be determined as of the close of the Core 
Trading Session on the Exchange (ordinarily 4:00 p.m., Eastern Time) on 
each business day. Authorized Participants may refer to the basket 
composition file for information regarding securities and financial 
instruments that may comprise the Fund's basket on a given day.
---------------------------------------------------------------------------

    \39\ The Exchange represents that several major market data 
vendors display and/or make widely available IIVs taken from CTA or 
other data feeds. According to the Exchange, the IIV for the Fund 
will be calculated by dividing the ``Estimated Fund Value'' as of 
the time of the calculation by the total number of outstanding 
Shares. ``Estimated Fund Value'' is the sum of the estimated amount 
of cash held in the Fund's portfolio, the estimated amount of 
accrued interest owing to the Fund, and the estimated value of the 
securities held in the Fund's portfolio, minus the estimated amount 
of the Fund's liabilities. The IIV will be calculated based on the 
same portfolio holdings disclosed on the Fund's Web site. In 
determining the estimated value for each of the component 
securities, the IIV will use last sale, market prices, or other 
methods that would be considered appropriate for pricing securities 
held by registered investment companies.
    \40\ The Fund will disclose on the Fund's Web site the following 
information regarding each portfolio holding, as applicable to the 
type of holding: Ticker symbol, CUSIP number or other identifier, if 
any; a description of the holding (including the type of holding); 
the identity of the security, index, or other asset or instrument 
underlying the holding, if any; for options, the option strike 
price; quantity held (as measured by, for example, par value, 
notional value or number of shares, contracts or units); maturity 
date, if any; coupon rate, if any; effective date, if any; market 
value of the holding; and the percentage weighting of the holding in 
the Fund's portfolio. The Web site information will be publicly 
available at no charge.
---------------------------------------------------------------------------

    Information regarding market price and trading volume of the Shares 
will be continually available on a real-time basis throughout the day 
on brokers' computer screens and other electronic services. Information 
regarding the previous day's closing price and trading volume 
information for the Shares will be published daily in the financial 
section of newspapers. In addition, price information regarding non-
U.S. exchange-traded equity securities held by the Fund will be 
available from the exchanges trading such assets. Quotation information 
from brokers and dealers or pricing services will be available for 
Municipal Bonds, taxable municipal bonds, convertible bonds, OTC traded 
convertible preferred stocks, corporate debt obligations, VRDNs, and 
cash equivalents. Price information for money market funds will be 
available from the applicable investment company's Web site and from 
market data vendors. Intra-day and closing price information for OTC 
equity securities will be available from major market data vendors. 
Pricing information regarding each asset class in which the Fund will 
invest will generally be available through nationally recognized data 
service providers through subscription agreements. Quotation and last-
sale information for exchange-traded options will be available via the 
Options Price Reporting Authority and from the applicable U.S. options 
exchange. The Fund's Web site will include a form of the prospectus for 
the Fund and additional data relating to NAV and other applicable 
quantitative information.
    The Commission further believes that the proposal to list and trade 
the Shares is reasonably designed to promote fair disclosure of 
information that may be necessary to price the Shares appropriately and 
to prevent trading when a reasonable degree of transparency cannot be 
assured. The Exchange will obtain a representation from the issuer of 
the Shares that the NAV per Share will be calculated daily and that the 
NAV and the Disclosed Portfolio will be made available to all market 
participants at the same time. Trading in Shares of the Fund will be 
halted if the circuit breaker parameters in NYSE Arca Equities Rule 
7.12 have been reached or because of market conditions or for reasons 
that, in the view of the Exchange, make trading in the Shares 
inadvisable,\41\ and trading in the Shares will be subject to NYSE Arca 
Equities Rule 8.600(d)(2)(D), which sets forth additional circumstances 
under which Shares of the Fund may be halted.
---------------------------------------------------------------------------

    \41\ These reasons may include: (1) The extent to which trading 
is not occurring in the securities or financial instruments 
comprising the Disclosed Portfolio of the Fund; or (2) whether other 
unusual conditions or circumstances detrimental to the maintenance 
of a fair and orderly market are present. With respect to trading 
halts, the Exchange may consider all relevant factors in exercising 
its discretion to halt or suspend trading in the Shares of the Fund.
---------------------------------------------------------------------------

    The Exchange represents that it has a general policy prohibiting 
the distribution of material, non-public information by its employees. 
In addition, Commentary .06 to NYSE Arca Equities Rule 8.600 further 
requires that personnel who make decisions on the open-end fund's 
portfolio composition must be subject to procedures designed to prevent 
the use and dissemination of material, non-public information regarding 
the open-end fund's portfolio. The Exchange represents that the Adviser 
and Sub-Adviser are not registered as broker-dealers; however, the 
Adviser (but not the Sub-Adviser) is affiliated with one or more 
broker-dealers, and the Adviser has implemented and will maintain a 
fire wall with respect to each such broker-dealer affiliate regarding 
access to information concerning the composition of, or changes to, the 
portfolio.\42\
---------------------------------------------------------------------------

    \42\ See supra note 11.
---------------------------------------------------------------------------

    Prior to the commencement of trading, the Exchange will inform its 
Equity Trading Permit Holders in a Bulletin of the special 
characteristics and risks associated with trading the Shares. The 
Exchange represents that trading in the Shares will be subject to the 
existing trading surveillances, administered by the FINRA on behalf of 
the Exchange, or by regulatory staff of the Exchange, which are 
designed to detect violations of Exchange rules and applicable federal 
securities laws.\43\ The Commission believes that the Exchange's 
initial and continued listing requirements, combined with the Fund's 
investment criteria that would apply to Municipal Bonds in the 
portfolio, are designed to mitigate the potential for price 
manipulation of the Shares.
---------------------------------------------------------------------------

    \43\ The Exchange states that FINRA surveils trading on the 
Exchange pursuant to a regulatory services agreement and that the 
Exchange is responsible for FINRA's performance under this 
regulatory services agreement. See supra note 33.
---------------------------------------------------------------------------

    The Exchange represents that it deems the Shares to be equity 
securities, thus rendering the trading of the Shares subject to the 
Exchange's existing rules governing the trading of equity securities.
    In support of this proposal, the Exchange has made the following 
additional representations:

[[Page 81198]]

    (1) The Shares will conform to the initial and continued listing 
criteria under NYSE Arca Equities Rule 8.600.
    (2) The Exchange has appropriate rules to facilitate transactions 
in the Shares during all trading sessions.
    (3) Trading in the Shares will be subject to the existing trading 
surveillances, administered by FINRA on behalf of the Exchange, or by 
regulatory staff of the Exchange, which are designed to detect 
violations of Exchange rules and applicable federal securities laws. 
The Exchange represents that these procedures are adequate to properly 
monitor Exchange trading of the Shares in all trading sessions and to 
deter and detect violations of Exchange rules and federal securities 
laws applicable to trading on the Exchange. These surveillances focus 
on detecting securities trading outside their normal patterns, which 
could be indicative of manipulative or other violative activity. When 
such situations are detected, surveillance analysis follows and 
investigations are opened, where appropriate, to review the behavior of 
all relevant parties for all relevant trading violations.
    (4) FINRA, on behalf of the Exchange, or regulatory staff of the 
Exchange, will communicate as needed regarding trading in the Shares, 
options, and certain exchange-traded equity securities with other 
markets and other entities that are members of the ISG, and FINRA, on 
behalf of the Exchange, or regulatory staff of the Exchange, may obtain 
trading information regarding trading in the Shares, options, and 
certain exchange-traded equity securities from such markets and other 
entities. In addition, the Exchange may obtain information regarding 
trading in the Shares, options, and certain exchange-traded equity 
securities from markets and other entities that are members of ISG or 
with which the Exchange has in place a comprehensive surveillance 
sharing agreement. In addition, FINRA, on behalf of the Exchange, is 
able to access, as needed, trade information for certain fixed income 
securities held by the Fund reported to FINRA's Trade Reporting and 
Compliance Engine. FINRA also can access data obtained from the 
Municipal Securities Rulemaking Board relating to municipal bond 
trading activity for surveillance purposes in connection with trading 
in the Shares.
    (5) Prior to the commencement of trading, the Exchange will inform 
its Equity Trading Permit Holders in a Bulletin of the special 
characteristics and risks associated with trading the Shares. 
Specifically, the Bulletin will discuss the following: (a) The 
procedures for purchases and redemptions of Shares in Creation Unit 
aggregations (and that Shares are not individually redeemable); (b) 
NYSE Arca Equities Rule 9.2(a), which imposes a duty of due diligence 
on its Equity Trading Permit Holders to learn the essential facts 
relating to every customer prior to trading the Shares; (c) the risks 
involved in trading the Shares during the Opening and Late Trading 
Sessions when an updated IIV will not be calculated or publicly 
disseminated; (d) how information regarding the IIV and the Disclosed 
Portfolio is disseminated; (e) the requirement that Equity Trading 
Permit Holders deliver a prospectus to investors purchasing newly 
issued Shares prior to or concurrently with the confirmation of a 
transaction; and (f) trading information. The Bulletin will also 
discuss any exemptive, no-action, and interpretive relief granted by 
the Commission from any rules under the Act.
    (6) For initial and continued listing, the Fund must be in 
compliance with Rule 10A-3 under the Act.\44\
---------------------------------------------------------------------------

    \44\ See 17 CFR 240.10A-3.
---------------------------------------------------------------------------

    (7) At least 80% of the weight of the Fund's assets will be in 
Municipal Bonds with a modified duration of 15 years or less. With 
respect to credit quality, under normal market conditions, at least 90% 
of the Fund's assets invested in Municipal Bonds will be in Municipal 
Bonds rated ``A'' or better by at least one major credit rating agency 
or, if unrated, deemed to be of comparable quality in the Adviser's 
opinion.
    (8) The Fund's Municipal Bond investments will be diversified among 
a minimum of ten distinct Municipal Bond sectors.\45\ In addition, the 
Fund will limit its investments in Municipal Bonds in any single sector 
to 25% of the Fund's assets.
---------------------------------------------------------------------------

    \45\ The Fund's investments in Municipal Bonds will include 
investments in state and local (e.g., county, city, town) Municipal 
Bonds relating to such sectors as the following: Dedicated tax; 
public power; tax increment; toll road; port revenue; airport 
revenue; water revenue; sewer revenue; higher education (colleges 
and universities); wastewater revenue; school districts; sales tax 
revenue; and pre-refunded bonds.
---------------------------------------------------------------------------

    (9) Under normal market conditions, each Municipal Bond held by the 
Fund must be a constituent of a deal where the deal's original offering 
amount was at least $100 million. The Fund will hold a minimum of 75 
different Municipal Bonds. No Municipal Bond held by the Fund will 
exceed 4% of the weight of the Fund's portfolio and no single Municipal 
Bond issuer will account for more than 10% of the weight of the Fund's 
portfolio. The Fund will hold Municipal Bonds of a minimum of 40 non-
affiliated issuers diversified among issuers in at least 20 different 
states, with no more than 30% of the Fund's assets comprised of 
Municipal Bonds that provide exposure to any single state.\46\
---------------------------------------------------------------------------

    \46\ For purposes of this restriction, each state and each 
separate political subdivision, agency, authority, or 
instrumentality of such state, each multi-state agency or authority, 
and each guarantor, if any, will be treated as separate issuers of 
Municipal Bonds.
---------------------------------------------------------------------------

    (10) The ETFs in which the Fund may invest will be registered under 
the 1940 Act and will be listed and traded in the U.S. on registered 
exchanges. With respect to its exchange-traded equity securities 
investments (including exchange-traded convertible preferred stocks and 
exchange-traded stocks into which convertible bonds may be converted), 
the Fund will normally invest in equity securities that are listed and 
traded on a U.S. exchange or in markets that are members of the ISG or 
parties to a comprehensive surveillance sharing agreement with the 
Exchange. In any case, not more than 10% of the net assets of the Fund 
in the aggregate invested in equity securities (except for money market 
funds) will consist of equity securities whose principal market is not 
a member of ISG or a market with which the Exchange does not have a 
comprehensive surveillance sharing agreement.
    (11) The Fund may hold up to an aggregate amount of 15% of its net 
assets in illiquid assets (calculated at the time of investment), 
consistent with Commission guidance. The Fund will monitor 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 the Fund's net assets are held 
in illiquid assets. Illiquid assets include securities subject to 
contractual or other restrictions on resale and other instruments that 
lack readily available markets as determined in accordance with 
Commission staff guidance.
    (12) The Fund's investments will be consistent with its investment 
objective and will not be used to provide multiple returns of a 
benchmark or to produce leveraged returns.
    The Exchange also represents that all statements and 
representations made in this filing regarding (a) the description of 
the portfolio, (b) limitations on portfolio holdings or reference 
assets, or (c) the applicability of Exchange rules

[[Page 81199]]

and surveillance procedures shall constitute continued listing 
requirements for listing the Shares of the Fund on the Exchange.
    The issuer has represented to the Exchange that it will advise the 
Exchange of any failure by the Fund to comply with the continued 
listing requirements, and, pursuant to its obligations under Section 
19(g)(1) of the Act, the Exchange will monitor for compliance with the 
continued listing requirements.\47\ If the Fund is not in compliance 
with the applicable listing requirements, the Exchange will commence 
delisting procedures under NYSE Arca Equities Rule 5.5(m).
---------------------------------------------------------------------------

    \47\ The Commission notes that certain other proposals for the 
listing and trading of Managed Fund Shares include a representation 
that the exchange will ``surveil'' for compliance with the continued 
listing requirements. See, e.g., Securities Exchange Act Release No. 
78005 (Jun. 7, 2016), 81 FR 38247 (Jun. 13, 2016) (SR-BATS-2015-
100). In the context of this representation, it is the Commission's 
view that ``monitor'' and ``surveil'' both mean ongoing oversight of 
a fund's compliance with the continued listing requirements. 
Therefore, the Commission does not view ``monitor'' as a more or 
less stringent obligation than ``surveil'' with respect to the 
continued listing requirements.
---------------------------------------------------------------------------

    This approval order is based on all of the Exchange's 
representations, including those set forth above and in the Notice, and 
the Exchange's description of the Fund. The Commission notes that the 
Fund and the Shares must comply with the requirements of NYSE Arca 
Equities Rule 8.600 to be listed and traded on the Exchange.
    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with Section 6(b)(5) of the Act \48\ and the 
rules and regulations thereunder applicable to a national securities 
exchange.
---------------------------------------------------------------------------

    \48\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

IV. Solicitation of Comments on Amendment No. 2 to the Proposed Rule 
Change

    Interested persons are invited to submit written data, views, and 
arguments concerning whether Amendment No. 2 to the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2016-107 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-2016-107. 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-2016-107 and should 
be submitted on or before December 8, 2016.

V. Accelerated Approval of Proposed Rule Change as Modified by 
Amendment No. 2 Thereto

    The Commission finds good cause to approve the proposed rule 
change, as modified by Amendment No. 2 thereto, prior to the thirtieth 
day after the date of publication of notice of the filing of Amendment 
No. 2 in the Federal Register. Amendment No. 2 supplements the proposed 
rule change by, among other things, incorporating additional 
diversification criteria to the Fund's investments in Municipal Bonds. 
Specifically, the Exchange represents that the Fund would adhere to 
certain investment restrictions, including but not limited to, the 
following:
    (1) The Fund's Municipal Bond investments will be diversified among 
a minimum of ten distinct Municipal Bond sectors.
    (2) The Fund will limit its investments in Municipal Bonds in any 
single sector to 25% of the Fund's assets.
    (3) Each Municipal Bond held by the Fund must be a constituent of a 
deal where the deal's original offering amount was at least $100 
million.
    (4) The Fund will hold a minimum of 75 different Municipal Bonds.
    (5) No Municipal Bond held by the Fund will exceed 4% of the weight 
of the Fund's portfolio, and no single Municipal Bond issuer will 
account for more than 10% of the weight of the Fund's portfolio.
    (6) The Fund will hold Municipal Bonds of a minimum of 40 non-
affiliated issuers diversified among issuers in at least 20 different 
states, with no more than 30% of the Fund's assets comprised of 
Municipal Bonds that provide exposure to any single state.
    The Commission believes that the addition of these investment 
restrictions helps to ensure that the proposed listing and trading of 
the Shares is consistent with the portion of Section 6(b)(5) of the 
Act,\49\ which requires that the rules of a national securities 
exchange must be designed to, among other things, prevent fraudulent 
and manipulative acts and practices and, in general, to protect 
investors and the public interest. Accordingly, the Commission finds 
good cause, pursuant to Section 19(b)(2) of the Act,\50\ to approve the 
proposed rule change, as modified by Amendment No. 2 thereto, on an 
accelerated basis.
---------------------------------------------------------------------------

    \49\ 15 U.S.C. 78f(b)(5).
    \50\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\51\ that the proposed rule change (SR-NYSEArca-2016-107), as 
modified by Amendment No. 2 thereto, be, and it hereby is, approved on 
an accelerated basis.
---------------------------------------------------------------------------

    \51\ Id.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\52\
---------------------------------------------------------------------------

    \52\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Brent J. Fields,
Secretary.
[FR Doc. 2016-27603 Filed 11-16-16; 8:45 am]
 BILLING CODE 8011-01-P



                                                                                Federal Register / Vol. 81, No. 222 / Thursday, November 17, 2016 / Notices                                                    81189

                                                    Electronic Comments                                       SECURITIES AND EXCHANGE                                 The Commission has not received any
                                                                                                              COMMISSION                                            comments on the proposed rule change.
                                                      • Use the Commission’s Internet                                                                               The Commission is publishing this
                                                    comment form (http://www.sec.gov/                         [Release No. 34–79293; File No. SR–                   notice to solicit comments on
                                                    rules/sro.shtml); or                                      NYSEArca–2016–107]                                    Amendment No. 2 from interested
                                                      • Send an email to rule-comments@                       Self-Regulatory Organizations; NYSE
                                                                                                                                                                    persons and is approving the proposed
                                                    sec.gov. Please include File Number SR–                                                                         rule change, as modified by Amendment
                                                                                                              Arca, Inc.; Notice of Filing of
                                                    NYSE–2016–73 on the subject line.                                                                               No. 2 thereto, on an accelerated basis.
                                                                                                              Amendment No. 2 to, and Order
                                                    Paper Comments                                            Granting Accelerated Approval of, a                   II. The Exchange’s Description of the
                                                                                                              Proposed Rule Change, as Modified by                  Proposed Rule Change
                                                      • Send paper comments in triplicate                     Amendment No. 2 Thereto, Relating To                     In its filing with the Commission, the
                                                    to Brent J. Fields, Secretary, Securities                 Listing and Trading of Shares of                      Exchange included statements
                                                    and Exchange Commission, 100 F Street                     Cumberland Municipal Bond ETF                         concerning the purpose of, and basis for,
                                                    NE., Washington, DC 20549–1090.                           under NYSE Arca Equities Rule 8.600                   the proposed rule change and discussed
                                                                                                                                                                    any comments it received on the
                                                    All submissions should refer to File                      DATE:    November 10, 2016.                           proposed rule change. The Exchange
                                                    Number SR–NYSE–2016–73. This file
                                                                                                              I. Introduction                                       has prepared summaries, set forth in
                                                    number should be included on the                                                                                sections A, B, and C below, of the most
                                                    subject line if email is used. To help the                   On July 26, 2016, NYSE Arca, Inc.                  significant parts of such statements.
                                                    Commission process and review your                        filed with the Securities and Exchange
                                                    comments more efficiently, please use                     Commission (‘‘Commission’’), pursuant                 A. Self-Regulatory Organization’s
                                                    only one method. The Commission will                      to Section 19(b)(1) of the Securities                 Statement of the Purpose of, and
                                                    post all comments on the Commission’s                     Exchange Act of 1934 (‘‘Act’’) 1 and Rule             Statutory Basis for, the Proposed Rule
                                                    Internet Web site (http://www.sec.gov/                    19b–4 thereunder,2 a proposed rule                    Change
                                                    rules/sro.shtml). Copies of the                           change to list and trade shares of the                1. Purpose
                                                    submission, all subsequent                                Cumberland Municipal Bond ETF
                                                                                                              (‘‘Fund’’) under NYSE Arca Equities                      The Exchange proposes to list and
                                                    amendments, all written statements                                                                              trade shares (‘‘Shares’’) of the following
                                                    with respect to the proposed rule                         Rule 8.600. The proposed rule change
                                                                                                              was published for comment in the                      under NYSE Arca Equities Rule 8.600,
                                                    change that are filed with the                                                                                  which governs the listing and trading of
                                                    Commission, and all written                               Federal Register on August 15, 2016.3
                                                                                                                                                                    Managed Fund Shares: 8 Cumberland
                                                    communications relating to the                            On September 15, 2016, the Exchange
                                                                                                                                                                    Municipal Bond ETF (the ‘‘Fund’’),9 a
                                                                                                              filed Amendment No. 1 to the proposed
                                                    proposed rule change between the
                                                                                                              rule change.4 On September 27, 2016,
                                                    Commission and any person, other than                                                                           holdings in non-exchange-traded or other
                                                                                                              pursuant to Section 19(b)(2) of the Act,5             investment company securities. Amendment No. 2
                                                    those that may be withheld from the                       the Commission designated a longer                    to the proposed rule change is available at: https://
                                                    public in accordance with the                             period within which to approve the                    www.sec.gov/comments/sr-nysearca-2016-107/
                                                    provisions of 5 U.S.C. 552, will be                       proposed rule change, disapprove the                  nysearca2016107.shtml.
                                                                                                                                                                       8 A Managed Fund Share is a security that
                                                    available for Web site viewing and                        proposed rule change, or institute                    represents an interest in an investment company
                                                    printing in the Commission’s Public                       proceedings to determine whether to                   registered under the Investment Company Act of
                                                    Reference Room, 100 F Street NE.,                         disapprove the proposed rule change.6                 1940 (15 U.S.C. 80a–1) (‘‘1940 Act’’) organized as
                                                    Washington, DC 20549 on official                          On November 8, 2016, the Exchange                     an open-end investment company or similar entity
                                                                                                                                                                    that invests in a portfolio of securities selected by
                                                    business days between the hours of                        filed Amendment No. 2 to the proposed                 its investment adviser consistent with its
                                                    10:00 a.m. and 3:00 p.m. Copies of such                   rule change.7                                         investment objectives and policies. In contrast, an
                                                    filing also will be available for                                                                               open-end investment company that issues
                                                    inspection and copying at the principal                     1 15  U.S.C. 78s(b)(1).                             Investment Company Units, listed and traded on
                                                                                                                2 17                                                the Exchange under NYSE Arca Equities Rule
                                                    office of the Exchange. All comments                              CFR 240.19b–4.
                                                                                                                 3 See Securities Exchange Act Release No. 78523
                                                                                                                                                                    5.2(j)(3), seeks to provide investment results that
                                                    received will be posted without change;                   (Aug. 9, 2016), 81 FR 54155 (‘‘Notice’’).
                                                                                                                                                                    correspond generally to the price and yield
                                                    the Commission does not edit personal                                                                           performance of a specific foreign or domestic stock
                                                                                                                 4 In Amendment No. 1, which amended and
                                                                                                                                                                    index, fixed income securities index or combination
                                                    identifying information from                              replaced the proposed rule change in its entirety,    thereof.
                                                    submissions. You should submit only                       the Exchange: (1) Described additional                   9 The Securities and Exchange Commission
                                                                                                              diversification requirements that would apply to
                                                    information that you wish to make                         the Fund’s holdings in municipal bonds; (2)
                                                                                                                                                                    (‘‘Commission’’) has approved listing and trading
                                                                                                                                                                    on the Exchange of a number of actively managed
                                                    available publicly. All submissions                       clarified the Fund’s holdings in non-exchange-        funds under Rule 8.600. See, e.g., Securities
                                                    should refer to File Number SR–NYSE–                      traded investment company securities; and (3)         Exchange Act Release Nos. 69591 (May 16, 2013),
                                                    2016–73, and should be submitted on or                    corrected certain references to the regular trading   78 FR 30372 (May 22, 2013) (SR–NYSEArca–2013–
                                                                                                              session of the Exchange. Amendment No. 1 to the       33) (order approving Exchange listing and trading
                                                    before December 8, 2016.                                  proposed rule change is available at: https://        of International Bear ETF); 69061 (March 7, 2013),
                                                      For the Commission, by the Division of                  www.sec.gov/comments/sr-nysearca-2016-107/            78 FR 15990 (March 13, 2013) (SR–NYSEArca–
                                                                                                              nysearca2016107-1.pdf.                                2013–01) (order approving Exchange listing and
                                                    Trading and Markets, pursuant to delegated                   5 15 U.S.C. 78s(b)(2).
                                                                                                                                                                    trading of Newfleet Multi-Sector Income ETF). The
                                                    authority.16                                                 6 See Securities Exchange Act Release No. 78949,
                                                                                                                                                                    Commission has approved for Exchange listing and
                                                    Brent J. Fields,                                          81 FR 68078 (Oct. 3, 2016). The Commission
asabaliauskas on DSK3SPTVN1PROD with NOTICES




                                                                                                                                                                    trading shares of two actively managed funds of the
                                                                                                              designated November 13, 2016, as the date by          PIMCO ETF Trust that principally hold municipal
                                                    Secretary.                                                which the Commission shall either approve or          bonds. See Securities Exchange Act Release No.
                                                    [FR Doc. 2016–27596 Filed 11–16–16; 8:45 am]              disapprove, or institute proceedings to determine     60981 (November 10, 2009), 74 FR 59594
                                                    BILLING CODE 8011–01–P
                                                                                                              whether to disapprove, the proposed rule change.      (November 18, 2009) (SR–NYSEArca–2009–79)
                                                                                                                 7 In Amendment No. 2, which amended and            (order approving listing and trading of shares of the
                                                                                                              replaced the proposed rule change, as modified by     PIMCO Short-Term Municipal Bond Strategy Fund
                                                                                                              Amendment No. 1 thereto, in its entirety, the         and PIMCO Intermediate Municipal Bond Strategy
                                                                                                              Exchange: (1) Described additional diversification    Fund). The Commission also has approved listing
                                                                                                              criteria that would apply to the Fund’s holdings in   and trading on the Exchange of shares of the SPDR
                                                      16 17   CFR 200.30–3(a)(12).                            municipal bonds; and (2) clarified the Fund’s                                                    Continued




                                               VerDate Sep<11>2014     21:24 Nov 16, 2016   Jkt 241001   PO 00000   Frm 00137   Fmt 4703   Sfmt 4703   E:\FR\FM\17NON1.SGM   17NON1


                                                    81190                     Federal Register / Vol. 81, No. 222 / Thursday, November 17, 2016 / Notices

                                                    series of the ETFis Series Trust I                      Commentary .06 further requires that                     • revenue bonds, which are typically
                                                    (‘‘Trust’’).10                                          personnel who make decisions on the                   secured by revenues generated by the
                                                       The investment adviser to the Fund                   open-end fund’s portfolio composition                 issuer;
                                                    will be Virtus ETF Advisers LLC (the                    must be subject to procedures designed                   • discount bonds, which may be
                                                    ‘‘Adviser’’). The Fund’s sub-adviser will               to prevent the use and dissemination of               originally issued at a discount to par
                                                    be Cumberland Advisors Inc. (‘‘Sub-                     material nonpublic information                        value or sold at market price below par
                                                    Adviser’’). Virtus ETF Solutions LLC                    regarding the open-end fund’s portfolio.              value;
                                                    will serve as the Fund’s operational                    The Adviser and Sub-Adviser are not                      • premium bonds, which are sold at
                                                    administrator. ETF Distributors LLC will                registered as broker-dealers. The                     a premium to par value;
                                                    serve as the distributor (the                           Adviser (but not the Sub-Adviser) is                     • zero coupon bonds, which are
                                                    ‘‘Distributor’’) of Fund Shares on an                   affiliated with one or more broker-                   issued at an original issue discount,
                                                    agency basis. The Bank of New York                      dealers and the Adviser has                           with the full value, including accrued
                                                    Mellon (the ‘‘Administrator’’) will serve               implemented and will maintain a fire                  interest, paid at maturity; and
                                                    as the administrator, custodian, transfer               wall with respect to each such broker-                   • private activity bonds, which are
                                                    agent and fund accounting agent for the                 dealer affiliate regarding access to                  typically issued by or on behalf of local
                                                    Fund.                                                   information concerning the composition                or state government for the purpose of
                                                       Commentary .06 to Rule 8.600                         and/or changes to the portfolio. In the               financing the project of a private user.
                                                    provides that, if the investment adviser                                                                         The Fund will have no target duration
                                                                                                            event (a) the Adviser or Sub-Adviser
                                                    to the investment company issuing                                                                             for its investment portfolio, and the
                                                                                                            become registered broker-dealers or
                                                    Managed Fund Shares is affiliated with                                                                        Sub-Adviser may target a shorter or
                                                                                                            newly affiliated with a broker-dealer, or
                                                                                                                                                                  longer average portfolio duration based
                                                    a broker-dealer, such investment adviser                (b) any new adviser or sub-adviser is a
                                                                                                                                                                  on the Sub-Adviser’s forecast of interest
                                                    shall erect a ‘‘fire wall’’ between the                 registered broker-dealer or becomes
                                                                                                                                                                  rates and view of fixed-income markets
                                                    investment adviser and the broker-                      affiliated with a broker-dealer, it will
                                                                                                                                                                  generally.13 The Sub-Adviser will
                                                    dealer with respect to access to                        implement a fire wall with respect to its
                                                                                                                                                                  generally apply a heavier weight toward
                                                    information concerning the composition                  relevant personnel or its broker-dealer
                                                                                                                                                                  Municipal Bonds with shorter
                                                    and/or changes to such investment                       affiliate regarding access to information
                                                                                                                                                                  maturities during periods of high
                                                    company portfolio.11 In addition,                       concerning the composition and/or
                                                                                                                                                                  interest rates and longer maturities
                                                                                                            changes to the portfolio, and will be                 during periods of lower interest rates. At
                                                    Nuveen S&P High Yield Municipal Bond Fund               subject to procedures designed to                     least 80% of the weight of the Fund’s
                                                    under Commentary .02 of NYSE Arca Equities Rule         prevent the use and dissemination of
                                                    5.2(j)(3). See Securities Exchange Act Release                                                                assets will be in Municipal Bonds with
                                                    No.63881 (February 9, 2011), 76 FR 9065 (February       material non-public information                       a modified duration of 15 years or less.
                                                    16, 2011) (SR–NYSEArca–2010–120).                       regarding such portfolio.                                With respect to credit quality, under
                                                       10 The Trust is registered under the 1940 Act. On

                                                    May 20, 2015, the Trust filed with the Commission       Description of the Fund                               normal market conditions, at least 90%
                                                    an amendment to its registration statement on Form                                                            of the Fund’s assets invested in
                                                                                                            Principal Investments                                 Municipal Bonds will be in Municipal
                                                    N–1A under the Securities Act of 1933 (15 U.S.C.
                                                    77a) (‘‘Securities Act’’), and under the 1940 Act          According to the Registration                      Bonds rated ‘‘A’’ or better by at least one
                                                    relating to the Fund (File Nos. 333–187668 and          Statement, the Fund will seek to                      major credit rating agency or, if unrated,
                                                    811–22819) (‘‘Registration Statement’’). The
                                                    description of the operation of the Trust and the
                                                                                                            provide a competitive level of current                deemed to be of comparable quality in
                                                    Fund herein is based, in part, on the Registration      income exempt from federal income tax,                the Adviser’s opinion. From time to
                                                    Statement. In addition, the Commission has issued       while preserving capital. The Fund,                   time, the Fund may concentrate in
                                                    an order granting certain exemptive relief to the       under normal market conditions,12 will                particular sectors; however, the Fund’s
                                                    Trust under the 1940 Act. See Investment Company
                                                    Act Release No. 30607 (July 23, 2013) (File No. 812–
                                                                                                            invest at least eighty percent (80%) of               investments will be diversified among a
                                                    14080) (‘‘Exemptive Order’’). This Amendment No.        the Fund’s net assets in debt securities              minimum of ten distinct Municipal
                                                    2 to SR–NYSEArca–2016–107 replaces SR–                  whose interest is, in the opinion of bond             Bond sectors.14 In addition, the Fund
                                                    NYSEArca–2016–107 as originally filed and               counsel for the issuer at the time of                 will limit its investments in Municipal
                                                    Amendment No. 1 thereto and supersedes such
                                                    filings in their entirety.
                                                                                                            issuance, exempt from U.S. federal                    Bonds in any single sector to 25% of the
                                                       11 An investment adviser to an open-end fund is      income tax (‘‘Municipal Bonds’’). The                 Fund’s assets. The Fund may sell
                                                    required to be registered under the Investment          Sub-Adviser will invest the Fund’s                    investments for a variety of reasons,
                                                    Advisers Act of 1940 (the ‘‘Advisers Act’’). As a       assets using a barbell strategy, which                such as to adjust the portfolio’s average
                                                    result, the Adviser and Sub-Adviser and their           means that the Sub-Adviser will                       maturity, duration, or overall credit
                                                    related personnel are subject to the provisions of
                                                    Rule 204A–1 under the Advisers Act relating to          overweight the Fund’s investments in                  quality, or to shift assets into and out of
                                                    codes of ethics. This Rule requires investment          Municipal Bonds with maturities on the                higher-yielding or lower-yielding
                                                    advisers to adopt a code of ethics that reflects the    short and long ends of the fixed income               securities or certain sectors.
                                                    fiduciary nature of the relationship to clients as      yield curve, while underweighting                        Under normal market conditions,
                                                    well as compliance with other applicable securities
                                                    laws. Accordingly, procedures designed to prevent       exposure to Municipal Bonds with                      each Municipal Bond held by the Fund
                                                    the communication and misuse of non-public              intermediate maturities.
                                                    information by an investment adviser must be               According to the Registration                        13 Duration measures the interest rate sensitivity

                                                    consistent with Rule 204A–1 under the Advisers          Statement, Municipal Bonds in which                   of a debt security by assessing and weighting the
                                                    Act. In addition, Rule 206(4)–7 under the Advisers                                                            present value of the security’s payment pattern.
                                                    Act makes it unlawful for an investment adviser to
                                                                                                            the Fund may invest include one or                    Generally, the longer the maturity, the greater the
                                                                                                            more of the following:                                duration and, therefore, the greater effect interest
asabaliauskas on DSK3SPTVN1PROD with NOTICES




                                                    provide investment advice to clients unless such
                                                    investment adviser has (i) adopted and                     • General obligation bonds, which are              rate changes have on the price of the security.
                                                    implemented written policies and procedures                                                                     14 The Fund’s investments in Municipal Bonds
                                                                                                            typically backed by the full faith, credit,
                                                    reasonably designed to prevent violation, by the                                                              will include investments in state and local (e.g.,
                                                    investment adviser and its supervised persons, of
                                                                                                            and taxing power of the issuer;                       county, city, town) Municipal Bonds relating to
                                                    the Advisers Act and the Commission rules adopted                                                             such sectors as the following: Dedicated tax; public
                                                    thereunder; (ii) implemented, at a minimum, an          (who is a supervised person) responsible for          power; tax increment; toll road; port revenue;
                                                    annual review regarding the adequacy of the             administering the policies and procedures adopted     airport revenue; water revenue; sewer revenue;
                                                    policies and procedures established pursuant to         under subparagraph (i) above.                         higher education (colleges and universities);
                                                    subparagraph (i) above and the effectiveness of their     12 The term ‘‘normal market conditions’’ is         wastewater revenue; school districts; sales tax
                                                    implementation; and (iii) designated an individual      defined in NYSE Arca Equities Rule 8.600(c)(5).       revenue; and pre-refunded bonds.



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                                                                               Federal Register / Vol. 81, No. 222 / Thursday, November 17, 2016 / Notices                                                         81191

                                                    must be a constituent of a deal where                       The Fund may purchase taxable                              The Fund may invest in compliance
                                                    the deal’s original offering amount was                  municipal bonds when the Sub-Adviser                       with Section 12(d)(1)(E), (F) and (G) of
                                                    at least $100 million. The Fund will                     believes they offer opportunities for the                  the 1940 Act and the rules thereunder.23
                                                    hold a minimum of 75 different                           Fund, or variable rate demand notes                           The Fund may write U.S. exchange-
                                                    Municipal Bonds. No Municipal Bond                       (VRDNs) that pay interest monthly or                       traded call and put options on
                                                    held by the Fund will exceed 4% of the                   quarterly based on a floating rate that is                 securities, ETFs or security indexes to
                                                    weight of the Fund’s portfolio and no                    reset daily or weekly based on an index                    seek income or may purchase or write
                                                    single Municipal Bond issuer will                        of short-term municipal rates.                             U.S. exchange-traded put or call options
                                                    account for more than 10% of the                            The Fund may invest in exchange-                        for hedging purposes.
                                                    weight of the Fund’s portfolio. The                      traded and OTC securities convertible                         The Fund may purchase securities on
                                                    Fund will hold Municipal Bonds of a                      into common stock. Such securities are                     a when-issued basis or for settlement at
                                                    minimum of 40 non-affiliated issuers                     the following: Convertible bonds and                       a future date (forward commitment) if
                                                    diversified among issuers in at least 20                 convertible preferred stocks.18                            the Fund holds sufficient liquid assets
                                                    different states, with no more than 30%                     The Fund may invest directly and                        to meet the purchase price.
                                                    of the Fund’s assets comprised of                        indirectly in cash equivalents, namely,                       Additionally, the Trust, on behalf of
                                                    Municipal Bonds that provide exposure                    money market instruments that are the                      the Fund, has claimed an exclusion
                                                    to any single state.15                                   following: U.S. Government obligations                     from the definition of the term
                                                       According to the Registration                         or corporate debt obligations (including                   ‘‘commodity pool operator’’ pursuant to
                                                    Statement, under normal market                           those subject to repurchase agreements);                   Rule 4.5 under the Commodity
                                                    conditions, at least 80% of the Fund’s                   banker’s acceptances 19 and certificates                   Exchange Act, as amended (the ‘‘CEA’’).
                                                    income will be exempt from federal                       of deposit 20 of domestic branches of                      Therefore, the Fund is not subject to
                                                    income taxes. However, a significant                     banks, commercial paper,21 and master                      regulation or registration as a
                                                    portion of the Fund’s income could be                    notes.22                                                   commodity pool operator under the
                                                    derived from securities subject to the                      In order to maintain sufficient                         CEA.
                                                    alternative minimum tax.                                 liquidity, to implement investment                         Investment Restrictions
                                                    Other Investments                                        strategies or for temporary defensive
                                                                                                             purposes, the Fund may invest a                               The Fund may, from time to time,
                                                       While the Fund, under normal market                   significant portion of its assets in shares                take temporary defensive positions that
                                                    conditions, will invest at least eighty                  of one or more money market funds.                         are inconsistent with its principal
                                                    percent (80%) of its assets in Municipal                 Generally, money market mutual funds                       investment strategies in an attempt to
                                                    Bonds, as described above, the Fund                      are registered investment companies                        respond to adverse market, economic,
                                                    may invest its remaining assets in other                 that seek to earn income consistent with                   political or other conditions. In such
                                                    assets and financial instruments, as                     the preservation of capital and                            circumstances, the Fund may also hold
                                                    described below.                                         maintenance of liquidity by investing                      up to 100% of its portfolio in cash and
                                                       The Fund may invest in equity                                                                                    cash equivalent positions.
                                                                                                             primarily in high quality money market
                                                    securities, both directly and indirectly                                                                               The Fund may hold up to an aggregate
                                                                                                             instruments.
                                                    through investment in shares of                                                                                     amount of 15% of its net assets in
                                                    exchange-traded funds (‘‘ETFs’’),16                                                                                 illiquid assets (calculated at the time of
                                                                                                             aggregate invested in equity securities (except for
                                                    money market funds, and other types of                   money market funds) will consist of equity                 investment), consistent with
                                                    securities and instruments described                     securities whose principal market is not a member          Commission guidance. The Fund will
                                                    below. The equity portion of the Fund’s                  of ISG or a market with which the Exchange does            monitor its portfolio liquidity on an
                                                    portfolio may include common stocks                      not have a comprehensive surveillance sharing
                                                                                                             agreement. See note 34, infra.                             ongoing basis to determine whether, in
                                                    traded on securities exchanges or in the                    18 The criteria in note 16 above also will apply        light of current circumstances, an
                                                    over-the-counter (‘‘OTC’’) market. In                    to exchange-traded convertible preferred stocks and        adequate level of liquidity is being
                                                    addition to common stocks, the equity                    exchange-traded stocks into which convertible              maintained, and will consider taking
                                                    portion of the Fund’s portfolio may also                 bonds may be converted.
                                                                                                                                                                        appropriate steps in order to maintain
                                                                                                                19 Banker’s acceptances are time drafts drawn on
                                                    include exchange-traded and OTC                                                                                     adequate liquidity if, through a change
                                                                                                             and ‘‘accepted’’ by a bank. When a bank ‘‘accepts’’
                                                    preferred stocks, and exchange-traded                    such a time draft, it assumes liability for its            in values, net assets, or other
                                                    and OTC warrants.17                                      payment. When the Fund acquires a banker’s                 circumstances, more than 15% of the
                                                                                                             acceptance, the bank that ‘‘accepted’’ the time draft      Fund’s net assets are held in illiquid
                                                       15 For purposes of this restriction, each state and   is liable for payment of interest and principal when
                                                    each separate political subdivision, agency,             due. The banker’s acceptance carries the full faith        assets. Illiquid assets include securities
                                                    authority, or instrumentality of such state, each        and credit of such bank.                                   subject to contractual or other
                                                    multi-state agency or authority, and each guarantor,        20 A certificate of deposit is an unsecured, interest   restrictions on resale and other
                                                    if any, will be treated as separate issuers of           bearing debt obligation of a bank.                         instruments that lack readily available
                                                    Municipal Bonds.                                            21 Commercial paper is an unsecured, short-term
                                                       16 The ETFs in which the Fund may invest will
                                                                                                                                                                        markets as determined in accordance
                                                                                                             debt obligation of a bank, corporation, or other
                                                    be registered under the 1940 Act and include             borrower. Commercial paper maturity generally              with Commission staff guidance.24
                                                    Investment Company Units (as described in NYSE           ranges from two to 270 days and is usually sold on
                                                    Arca Equities Rule 5.2(j)(3)); Portfolio Depositary      a discounted basis rather than as an interest-bearing        23 15  U.S.C. 80a–12(d)(1)(E), (F) and (G).
                                                    Receipts (as described in NYSE Arca Equities Rule        instrument. The Fund will invest directly in                 24 The  Commission has stated that long-standing
                                                    8.100); and Managed Fund Shares (as described in         commercial paper only if it is rated in one of the         Commission guidelines have required open-end
                                                    NYSE Arca Equities Rule 8.600). Such ETFs all will       top two rating categories by Moody’s, S&P or Fitch
asabaliauskas on DSK3SPTVN1PROD with NOTICES




                                                                                                                                                                        funds to hold no more than 15% of their net assets
                                                    be listed and traded in the U.S. on registered           or, if not rated, is of equivalent quality in the          in illiquid securities and other illiquid assets. See
                                                    exchanges.                                               Adviser’s opinion. Commercial paper may include            Investment Company Act Release No. 28193 (March
                                                       17 With respect to its exchange-traded equity         master notes of the same quality. Master notes are         11, 2008), 73 FR 14618 (March 18, 2008), footnote
                                                    securities investments, the Fund will normally           unsecured obligations which are redeemable upon            34. See also, Investment Company Act Release No.
                                                    invest in equity securities that are listed and traded   demand of the holder and which permit the                  5847 (October 21, 1969), 35 FR 19989 (December
                                                    on a U.S. exchange or in markets that are members        investment of fluctuating amounts at varying rates         31, 1970) (Statement Regarding ‘‘Restricted
                                                    of the Intermarket Surveillance Group (‘‘ISG’’) or       of interest.                                               Securities’’); Investment Company Act Release No.
                                                    parties to a comprehensive surveillance sharing             22 Master notes may be acquired by the Fund             18612 (March 12, 1992), 57 FR 9828 (March 20,
                                                    agreement with the Exchange. In any case, not more       through the master note program of the Fund’s              1992) (Revisions of Guidelines to Form N–1A). A
                                                    than 10% of the net assets of the Fund in the            custodian bank.                                                                                        Continued




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                                                    81192                     Federal Register / Vol. 81, No. 222 / Thursday, November 17, 2016 / Notices

                                                       The Fund will seek to qualify for                    Fund in an amount equal to the Cash                   DTC Participant are collectively referred
                                                    treatment as a regulated investment                     Component. The Cash Component                         to as an ‘‘Authorized Participant’’.
                                                    company under the Internal Revenue                      serves the function of compensating for                  All orders to create Creation Units
                                                    Code of 1986.25                                         any differences between the NAV per                   must be received by the Distributor no
                                                       The Fund’s investments will be                       Creation Unit and the market value of                 later than the close of the Core Trading
                                                    consistent with its investment objective                the Deposit Securities.                               Session on the Exchange (ordinarily
                                                    and will not be used to provide multiple                   The Administrator, through the                     4:00 p.m., Eastern Time), in each case
                                                    returns of a benchmark or to produce                    National Securities Clearing Corporation              on the date such order is placed in order
                                                    leveraged returns.                                      (‘‘NSCC’’), will make available on each               for the creation of Creation Units to be
                                                                                                            business day, immediately prior to the                effected based on the NAV of Shares of
                                                    Creation and Redemption of Shares
                                                                                                            opening of business on the Exchange                   the Fund as next determined on such
                                                       According to the Registration                        (currently 9:30 a.m., Eastern Time), the              date after receipt of the order in proper
                                                    Statement, the Trust will issue and sell                list of the names and the required                    form.
                                                    Shares of the Fund only in ‘‘Creation                   number of Shares of each Deposit
                                                    Units’’ on a continuous basis through                                                                         Redemption of Creation Units
                                                                                                            Security to be included in the current
                                                    the Distributor, at their net asset value               Fund Deposit (based on information at                   Shares may be redeemed only in
                                                    (‘‘NAV’’) next determined after receipt,                the end of the previous business day) for             Creation Units at their NAV next
                                                    on any business day, for an order                       the Fund. Such Fund Deposit will be                   determined after receipt of a redemption
                                                    received in proper form. All orders to                  applicable, subject to any adjustments                request in proper form by the
                                                    create Creation Units must be placed for                as described below, in order to effect                Distributor and the Fund through the
                                                    one or more Creation Unit size                          creations of Creation Units of the Fund               Administrator and only on a business
                                                    aggregations of Shares (50,000 Shares                   until such time as the next-announced                 day. Cash redemptions will be the
                                                    per Creation Unit). The Creation Unit                   composition of the Deposit Securities is              default mechanism for redemptions of
                                                    size is subject to change. Cash creations               made available.                                       Shares.
                                                    will be the default mechanism for                          The identity and number of Shares of                 However, the Fund will retain the
                                                    creation of Shares.                                     the Deposit Securities required for the               ability to utilize an in-kind mechanism
                                                       However, the Fund will retain the                    Fund Deposit for the Fund will change                 for redemption of Shares, upon approval
                                                    ability to utilize an in-kind mechanism                 as rebalancing adjustments and                        of the Distributor. In such case, the
                                                    for creation of Shares, upon approval of                corporate action events occur from time               redemption proceeds for a Creation Unit
                                                    the Distributor. In such case, the                      to time. In addition, the Trust reserves              generally consist of Deposit Securities,
                                                    consideration for purchase of a Creation                the right to permit or require the                    as announced by the Administrator on
                                                    Unit of the Fund generally will consist                 substitution of an amount of cash—i.e.,               the business day of the request for
                                                    of an in-kind deposit of ‘‘Deposit                      a ‘‘cash in lieu’’ amount—to be added to              redemption received in proper form,
                                                    Securities’’ for each Creation Unit                     the Cash Component to replace any                     plus cash in an amount equal to the
                                                    constituting a substantial replication, or              Deposit Security that may not be                      difference between the NAV of the
                                                    a representation, of the securities                     available in sufficient quantity for                  Shares being redeemed, as next
                                                    included in the Fund’s portfolio and a                  delivery, that may not be eligible for                determined after a receipt of a request
                                                    ‘‘Cash Component’’ computed as                          transfer or that may not be eligible for              in proper form, and the value of the
                                                    described below. Together, the Deposit                  trading by an ‘‘Authorized Participant’’              Deposit Securities (the ‘‘Cash
                                                    Securities and the Cash Component                       (as described below) or the investor for              Redemption Amount’’), less a
                                                    constitute the ‘‘Fund Deposit’’, which                  which it is acting.                                   redemption transaction fee. In the event
                                                    represents the minimum initial and                         In addition to the list of names and               that the Deposit Securities have a value
                                                    subsequent investment amount for a                      numbers of securities constituting the                greater than the NAV of the Shares, a
                                                    Creation Unit of the Fund. The Cash                     current Deposit Securities of the Fund                compensating cash payment equal to the
                                                    Component is an amount equal to the                     Deposit, the Administrator, through                   differential is required to be made by or
                                                    difference between the NAV of the                       NSCC, also will make available on each                through an Authorized Participant by
                                                    Shares (per Creation Unit) and the                      business day the estimated Cash                       the redeeming shareholder.
                                                    market value of the Deposit Securities.                 Component, effective through and                        With respect to the Fund, the
                                                    If the Cash Component is a positive                     including the previous business day, per              Administrator, through NSCC, will
                                                    number (i.e., the NAV per Creation Unit                 outstanding Creation Unit of the Fund.                make available immediately prior to the
                                                    exceeds the market value of the Deposit                                                                       opening of business on the Exchange
                                                    Securities), the Cash Component will be                 Procedures for Creation of Creation                   (currently 9:30 a.m., Eastern Time) on
                                                    such positive amount. If the Cash                       Units                                                 each business day, the Deposit
                                                    Component is a negative number (i.e.,                     To be eligible to place orders to create            Securities that will be applicable
                                                    the NAV per Creation Unit is less than                  a Creation Unit of the Fund, an entity                (subject to possible amendment or
                                                    the market value of the Deposit                         must be (i) a ‘‘Participating Party’’, i.e.,          correction) to redemption requests
                                                    Securities), the Cash Component will be                 a broker-dealer or other participant in               received in proper form on that day.
                                                    such negative amount, and the creator                   the clearing process through the                      Deposit Securities received on
                                                    will be entitled to receive cash from the               Continuous Net Settlement System of                   redemption may not be identical to
                                                                                                            NSCC (the ‘‘Clearing Process’’) or a                  Deposit Securities which are applicable
                                                    fund’s portfolio security is illiquid if it cannot be   clearing agency that is registered with               to creations of Creation Units.
asabaliauskas on DSK3SPTVN1PROD with NOTICES




                                                    disposed of in the ordinary course of business          the Commission, or (ii) a Depositary                    If it is not possible to effect deliveries
                                                    within seven days at approximately the value
                                                    ascribed to it by the fund. See Investment Company      Trust Company (‘‘DTC’’) Participant                   of the Deposit Securities, the Trust may
                                                    Act Release No. 14983 (March 12, 1986), 51 FR           and, in each case, must have executed                 in its discretion exercise its option to
                                                    9773 (March 21, 1986) (adopting amendments to           an agreement with the Trust, the                      redeem such shares in cash, and the
                                                    Rule 2a–7 under the 1940 Act); Investment               Distributor and the Administrator with                redeeming beneficial owner will be
                                                    Company Act Release No. 17452 (April 23, 1990),
                                                    55 FR 17933 (April 30, 1990) (adopting Rule 144A        respect to creations and redemptions of               required to receive its redemption
                                                    under the 1933 Act).                                    Creation Units (‘‘Participant                         proceeds in cash. In addition, an
                                                      25 26 U.S.C. 851.                                     Agreement’’). A Participating Party and               investor may request a redemption in


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                                                                               Federal Register / Vol. 81, No. 222 / Thursday, November 17, 2016 / Notices                                                   81193

                                                    cash which the Fund may, in its sole                    service, which in determining value will              using the Fund’s normal pricing
                                                    discretion, permit.26 In either case, the               utilize information regarding recent                  procedures will be valued by the Trust’s
                                                    investor will receive a cash payment                    sales, market transactions in comparable              Fair Value Pricing Committee at fair
                                                    equal to the NAV of its Shares based on                 securities, quotations from dealers, and              value as determined in good faith under
                                                    the NAV of Shares of the Fund next                      various relationships between                         policies approved by the Board. Fair
                                                    determined after the redemption request                 securities. Other assets, such as accrued             value pricing may be used, for example,
                                                    is received in proper form (minus a                     interest, accrued dividends and cash                  in situations where (i) portfolio
                                                    redemption transaction fee and                          also will be included in determining the              securities, such as securities with small
                                                    additional charge for requested cash                    NAV. The Fund normally will use third                 capitalizations, are so thinly traded that
                                                    redemptions, to offset the Trust’s                      party pricing services to obtain portfolio            there have been no transactions for that
                                                    brokerage and other transaction costs                   security prices.                                      security over an extended period of
                                                    associated with the disposition of                         Municipal Bonds, money market                      time; (ii) an event occurs after the close
                                                    Deposit Securities).                                    instruments, convertible bonds, taxable               of the exchange on which a portfolio
                                                       The right of redemption may be                       municipal bonds, and VRDNs will                       security is principally traded that is
                                                    suspended or the date of payment                        generally be valued at bid prices                     likely to change the value of the
                                                    postponed with respect to the Fund (1)                  received from independent pricing                     portfolio security prior to the Fund’s
                                                    for any period during which the                         services as of the announced closing                  NAV calculation; (iii) the exchange on
                                                    Exchange is closed (other than                          time for trading in fixed-income                      which the portfolio security is
                                                    customary weekend and holiday                           instruments in the respective market.                 principally traded closes early; or (iv)
                                                    closings); (2) for any period during                       Exchange-traded equity securities,                 trading of the particular portfolio
                                                    which trading on the Exchange is                        including common stocks, ETFs,                        security is halted during the day and
                                                    suspended or restricted; (3) for any                    preferred stocks, convertible preferred               does not resume prior to the Fund’s
                                                    period during which an emergency                        stocks and warrants, will be valued at                NAV calculation. The Board will
                                                    exists as a result of which disposal of                 market value, which will generally be                 monitor and evaluate the Fund’s use of
                                                    the Shares of the Fund or determination                 determined using the last reported                    fair value pricing, and periodically
                                                    of the Shares’ NAV is not reasonably                    official closing or last trading price on             reviews the results of any fair valuation
                                                    practicable; or (4) in such other                       the exchange or market on which the                   under the Trust’s policies.
                                                    circumstance as is permitted by the                     security is primarily traded at the time
                                                                                                            of valuation or, if no sale has occurred,             Availability of Information
                                                    Commission.
                                                                                                            at the last quoted bid price on the                     The Fund’s Web site
                                                    Net Asset Value                                         primary market or exchange on which                   (www.cumberetfs.com), which will be
                                                       The NAV per Share for the Fund will                  they are traded. If market prices are                 publicly available prior to the public
                                                    be computed by dividing the value of                    unavailable or the Fund believes that                 offering of Shares, will include a form
                                                    the net assets of the Fund (i.e., the value             they are unreliable, or when the value                of the prospectus for the Fund that may
                                                    of its total assets less total liabilities) by          of a security has been materially                     be downloaded. The Fund’s Web site
                                                    the total number of Shares outstanding,                 affected by events occurring after the                will include additional quantitative
                                                    rounded to the nearest cent. Expenses                   relevant market closes, the Fund will                 information updated on a daily basis,
                                                    and fees, including the management fee,                 price those securities at fair value as               including, for the Fund, (1) daily trading
                                                                                                            determined in good faith using methods                volume, the prior business day’s
                                                    will be accrued daily and taken into
                                                                                                            approved by the Trust’s Board.                        reported closing price, NAV and mid-
                                                    account for purposes of determining
                                                                                                               Equity securities traded in the OTC                point of the bid/ask spread at the time
                                                    NAV. The NAV of the Fund will be
                                                                                                            market, including common stocks,                      of calculation of such NAV (the ‘‘Bid/
                                                    determined as of the close of the Core
                                                                                                            preferred stocks, and warrants, will be               Ask Price’’),27 and a calculation of the
                                                    Trading Session on the Exchange
                                                                                                            valued at the last reported sale price on             premium and discount of the Bid/Ask
                                                    (ordinarily 4:00 p.m., Eastern Time) on
                                                                                                            the valuation date. OTC traded                        Price against the NAV, and (2) data in
                                                    each day that the Exchange is open. Any
                                                                                                            convertible preferred stocks will be                  chart format displaying the frequency
                                                    assets or liabilities denominated in
                                                                                                            valued based on price quotations                      distribution of discounts and premiums
                                                    currencies other than the U.S. dollar
                                                                                                            obtained from a broker-dealer who                     of the daily Bid/Ask Price against the
                                                    will be converted into U.S. dollars at the
                                                                                                            makes markets in such securities or                   NAV, within appropriate ranges, for
                                                    current market rates on the date of
                                                                                                            other equivalent indications of value                 each of the four previous calendar
                                                    valuation as quoted by one or more
                                                                                                            provided by a third-party pricing                     quarters. On each business day, before
                                                    sources.
                                                                                                            service. Securities of money market                   commencement of trading in Shares in
                                                       The pricing and valuation of portfolio
                                                                                                            funds will be valued at NAV.                          the Core Trading Session on the
                                                    securities will be determined in good
                                                                                                               Option contracts will be valued at                 Exchange (ordinarily 9:30 a.m., Eastern
                                                    faith in accordance with procedures
                                                                                                            their most recent sale price on the                   Time), the Fund’s Web site will disclose
                                                    approved by, and under the direction of,
                                                                                                            applicable exchange. If no such sales are             the Disclosed Portfolio that will form
                                                    the Trust’s Board of Trustees (‘‘Board’’).
                                                                                                            reported, these contracts will be valued              the basis for the Fund’s calculation of
                                                    In determining the value of the Fund’s
                                                                                                            at their most recent bid price.                       NAV at the end of the business day.28
                                                    assets, equity securities will be                          To the extent the assets of the Fund
                                                    generally valued at market using                        are invested in other open-end                          27 The Bid/Ask Price of the Fund’s Shares will be
                                                    quotations from the primary market in                   investment companies that are                         determined using the mid-point of the highest bid
asabaliauskas on DSK3SPTVN1PROD with NOTICES




                                                    which they are traded. Debt securities                  registered under the 1940 Act, the                    and the lowest offer on the Exchange as of the time
                                                    (other than short-term investments) will                                                                      of calculation of the Fund’s NAV. The records
                                                                                                            Fund’s NAV will be calculated based                   relating to Bid/Ask Prices will be retained by the
                                                    be valued on the basis of broker quotes                 upon the NAVs reported by such                        Fund and its service providers.
                                                    or valuations provided by a pricing                     registered open-end investment                          28 Under accounting procedures followed by the

                                                                                                            companies.                                            Fund, trades made on the prior business day (‘‘T’’)
                                                      26 The Adviser represents that, to the extent the                                                           will be booked and reflected in NAV on the current
                                                    Trust effects the creation or redemption of Shares
                                                                                                               Securities and assets for which market             business day (‘‘T+1’’). Accordingly, the Fund will
                                                    in cash, such transactions will be effected in the      quotations are not readily available or               be able to disclose at the beginning of the business
                                                    same manner for all Authorized Participants.            which cannot be accurately valued                                                                Continued




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                                                    81194                      Federal Register / Vol. 81, No. 222 / Thursday, November 17, 2016 / Notices

                                                       The Fund will disclose on the Fund’s                   determining the estimated value for                   data vendors.29 The dissemination of
                                                    Web site the following information                        each of the component securities, the                 the IIV, together with the Disclosed
                                                    regarding each portfolio holding, as                      IIV will use last sale, market prices or              Portfolio, will allow investors to
                                                    applicable to the type of holding: Ticker                 other methods that would be considered                determine the value of the underlying
                                                    symbol, CUSIP number or other                             appropriate for pricing securities held               portfolio of the Fund on a daily basis
                                                    identifier, if any; a description of the                  by registered investment companies.                   and will provide a close estimate of that
                                                    holding (including the type of holding);                     Investors can also obtain the Trust’s              value throughout the trading day.
                                                    the identity of the security, index or                    Statement of Additional Information                   Trading Halts
                                                    other asset or instrument underlying the                  (‘‘SAI’’), the Fund’s shareholder reports,
                                                    holding, if any; for options, the option                  and its Form N–CSR and Form N–SAR,                       With respect to trading halts, the
                                                    strike price; quantity held (as measured                  filed twice a year. The Trust’s SAI and               Exchange may consider all relevant
                                                    by, for example, par value, notional                      Shareholder Reports will be available                 factors in exercising its discretion to
                                                    value or number of shares, contracts or                   free upon request from the Trust, and                 halt or suspend trading in the Shares of
                                                    units); maturity date, if any; coupon                     those documents and the Form N–CSR                    the Fund.30 Trading in Shares of the
                                                    rate, if any; effective date, if any; market              and Form N–SAR may be viewed on-                      Fund will be halted if the circuit breaker
                                                    value of the holding; and the percentage                  screen or downloaded from the                         parameters in NYSE Arca Equities Rule
                                                    weighting of the holding in the Fund’s                    Commission’s Web site at www.sec.gov.                 7.12 have been reached. Trading also
                                                    portfolio. The Web site information will                  Information regarding market price and                may be halted because of market
                                                    be publicly available at no charge.                       trading volume of the Shares will be                  conditions or for reasons that, in the
                                                       In addition, a basket composition file,                continually available on a real-time                  view of the Exchange, make trading in
                                                    which includes the security names and                     basis throughout the day on brokers’                  the Shares inadvisable. These may
                                                    share quantities, if applicable, required                 computer screens and other electronic                 include: (1) The extent to which trading
                                                    to be delivered in exchange for the                       services. Information regarding the                   is not occurring in the securities and/or
                                                    Fund’s Shares, together with estimates                    previous day’s closing price and trading              the financial instruments comprising
                                                    and actual cash components, will be                       volume information for the Shares will                the Disclosed Portfolio of the Fund; or
                                                    publicly disseminated daily prior to the                  be published daily in the financial                   (2) whether other unusual conditions or
                                                    opening of the Exchange via the NSCC.                     section of newspapers.                                circumstances detrimental to the
                                                    The basket represents one Creation Unit                      Quotation and last sale information                maintenance of a fair and orderly
                                                    of the Fund. The NAV of Shares of the                     for the Shares and the underlying U.S.                market are present. Trading in the
                                                    Fund will normally be determined as of                                                                          Shares will be subject to NYSE Arca
                                                                                                              exchange-traded equity securities will
                                                    the close of the Core Trading Session on                                                                        Equities Rule 8.600(d)(2)(D), which sets
                                                                                                              be available via the Consolidated Tape
                                                    the Exchange (ordinarily 4:00 p.m.,                                                                             forth circumstances under which Shares
                                                                                                              Association (‘‘CTA’’) high-speed line,
                                                    Eastern Time) on each business day.                                                                             of the Fund may be halted.
                                                                                                              and from the national securities
                                                    Authorized Participants may refer to the                  exchange on which they are listed. Price              Trading Rules
                                                    basket composition file for information                   information regarding non-U.S.
                                                    regarding securities and financial                                                                                 The Exchange deems the Shares to be
                                                                                                              exchange-traded equity securities held                equity securities, thus rendering trading
                                                    instruments that may comprise the                         by the Fund will be available from the
                                                    Fund’s basket on a given day.                                                                                   in the Shares subject to the Exchange’s
                                                                                                              exchanges trading such assets.                        existing rules governing the trading of
                                                       The approximate value of the Fund’s
                                                                                                                 Quotation information from brokers                 equity securities. Shares will trade on
                                                    investments on a per-Share basis, the
                                                                                                              and dealers or pricing services will be               the NYSE Arca Marketplace from 4 a.m.
                                                    Indicative Intra-Day Value (‘‘IIV’’), will
                                                                                                              available for Municipal Bonds, taxable                to 8 p.m., Eastern Time in accordance
                                                    be disseminated every 15 seconds
                                                                                                              municipal bonds, convertible bonds,                   with NYSE Arca Equities Rule 7.34
                                                    during the Exchange Core Trading
                                                                                                              OTC traded convertible preferred stocks,              (Opening, Core, and Late Trading
                                                    Session (ordinarily 9:30 a.m. to 4:00
                                                                                                              corporate debt obligations, VRDNs, and                Sessions). The Exchange has
                                                    p.m., Eastern Time). The IIV should not
                                                                                                              cash equivalents. Price information for               appropriate rules to facilitate
                                                    be viewed as a ‘‘real-time’’ update of
                                                                                                              money market funds will be available                  transactions in the Shares during all
                                                    NAV because the IIV will be calculated
                                                                                                              from the applicable investment                        trading sessions. As provided in NYSE
                                                    by an independent third party and may
                                                                                                              company’s Web site and from market                    Arca Equities Rule 7.6, Commentary .03,
                                                    not be calculated in the exact same
                                                                                                              data vendors. Intra-day and closing                   the minimum price variation (‘‘MPV’’)
                                                    manner as NAV, which will be
                                                                                                              price information for OTC equity                      for quoting and entry of orders in equity
                                                    computed daily.
                                                                                                              securities will be available from major               securities traded on the NYSE Arca
                                                       The IIV for the Fund will be
                                                                                                              market data vendors. Pricing                          Marketplace is $0.01, with the exception
                                                    calculated by dividing the ‘‘Estimated
                                                                                                              information regarding each asset class in             of securities that are priced less than
                                                    Fund Value’’ as of the time of the
                                                                                                              which the Fund will invest will                       $1.00 for which the MPV for order entry
                                                    calculation by the total number of
                                                                                                              generally be available through                        is $0.0001.
                                                    outstanding Shares. ‘‘Estimated Fund
                                                                                                              nationally recognized data service                       The Shares will conform to the initial
                                                    Value’’ is the sum of the estimated
                                                                                                              providers through subscription                        and continued listing criteria under
                                                    amount of cash held in the Fund’s
                                                                                                              agreements. Quotation and last sale                   NYSE Arca Equities Rule 8.600.
                                                    portfolio, the estimated amount of
                                                                                                              information for exchange-traded options               Consistent with NYSE Arca Equities
                                                    accrued interest owing to the Fund and
                                                                                                              will be available via the Options Price               Rule 8.600(d)(2)(B)(ii), the Adviser will
asabaliauskas on DSK3SPTVN1PROD with NOTICES




                                                    the estimated value of the securities
                                                                                                              Reporting Authority and from the                      implement and maintain, or be subject
                                                    held in the Fund’s portfolio, minus the
                                                                                                              applicable U.S. options exchange. In                  to, procedures designed to prevent the
                                                    estimated amount of the Fund’s
                                                                                                              addition, the IIV, (which is the Portfolio
                                                    liabilities. The IIV will be calculated
                                                                                                              Indicative Value, as defined in NYSE                    29 Currently, it is the Exchange’s understanding
                                                    based on the same portfolio holdings
                                                                                                              Arca Equities Rule 8.600(c)(3)), will be              that several major market data vendors display and/
                                                    disclosed on the Fund’s Web site. In                                                                            or make widely available IIVs taken from CTA or
                                                                                                              widely disseminated at least every 15
                                                                                                                                                                    other data feeds.
                                                    day the portfolio that will form the basis for the
                                                                                                              seconds during the Core Trading                         30 See NYSE Arca Equities Rule 7.12,

                                                    NAV calculation at the end of the business day.           Session by one or more major market                   Commentary .04.



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                                                                              Federal Register / Vol. 81, No. 222 / Thursday, November 17, 2016 / Notices                                            81195

                                                    use and dissemination of material non-                  securities with other markets and other               on its Equity Trading Permit Holders to
                                                    public information regarding the actual                 entities that are members of the ISG, and             learn the essential facts relating to every
                                                    components of the Fund’s portfolio. The                 FINRA, on behalf of the Exchange, or                  customer prior to trading the Shares; (3)
                                                    Exchange represents that, for initial                   regulatory staff of the Exchange, may                 the risks involved in trading the Shares
                                                    and/or continued listing, the Fund will                 obtain trading information regarding                  during the Opening and Late Trading
                                                    be in compliance with Rule 10A–3 31                     trading in the Shares, options and                    Sessions when an updated IIV will not
                                                    under the Act, as provided by NYSE                      certain exchange-traded equity                        be calculated or publicly disseminated;
                                                    Arca Equities Rule 5.3. A minimum of                    securities from such markets and other                (4) how information regarding the IIV
                                                    100,000 Shares will be outstanding at                   entities. In addition, the Exchange may               and the Disclosed Portfolio is
                                                    the commencement of trading on the                      obtain information regarding trading in               disseminated; (5) the requirement that
                                                    Exchange. The Exchange will obtain a                    the Shares, options and certain                       Equity Trading Permit Holders deliver a
                                                    representation from the issuer of the                   exchange-traded equity securities from                prospectus to investors purchasing
                                                    Shares that the NAV per Share will be                   markets and other entities that are                   newly issued Shares prior to or
                                                    calculated daily and that the NAV and                   members of ISG or with which the                      concurrently with the confirmation of a
                                                    the Disclosed Portfolio 32 as defined in                Exchange has in place a comprehensive                 transaction; and (6) trading information.
                                                    NYSE Arca Equities Rule 8.600(c)(2)                     surveillance sharing agreement. In                       In addition, the Bulletin will
                                                    will be made available to all market                    addition, FINRA, on behalf of the                     reference that the Fund is subject to
                                                    participants at the same time. The                      Exchange, is able to access, as needed,               various fees and expenses described in
                                                    Fund’s investments will be consistent                   trade information for certain fixed                   the Registration Statement. The Bulletin
                                                    with the Fund’s investment objective                    income securities held by the Fund                    will discuss any exemptive, no-action,
                                                    and will not be used to enhance                         reported to FINRA’s Trade Reporting                   and interpretive relief granted by the
                                                    leverage.                                               and Compliance Engine (‘‘TRACE’’).                    Commission from any rules under the
                                                                                                            FINRA also can access data obtained                   Act. The Bulletin will also disclose that
                                                    Surveillance                                                                                                  the NAV for the Shares will be
                                                                                                            from the Municipal Securities
                                                       The Exchange represents that trading                 Rulemaking Board (‘‘MSRB’’) relating to               calculated after 4:00 p.m., Eastern Time
                                                    in the Shares will be subject to the                    municipal bond trading activity for                   each trading day.
                                                    existing trading surveillances,                         surveillance purposes in connection
                                                    administered by the Financial Industry                                                                        2. Statutory Basis
                                                                                                            with trading in the Shares.
                                                    Regulatory Authority (‘‘FINRA’’) on                        In addition, the Exchange also has a                  The basis under the Act for this
                                                    behalf of the Exchange, or by regulatory                general policy prohibiting the                        proposed rule change is the requirement
                                                    staff of the Exchange, which are                        distribution of material, non-public                  under Section 6(b)(5) 35 that an
                                                    designed to detect violations of                        information by its employees.                         exchange have rules that are designed to
                                                    Exchange rules and applicable federal                      All statements and representations                 prevent fraudulent and manipulative
                                                    securities laws. The Exchange                           made in this filing regarding (a) the                 acts and practices, to promote just and
                                                    represents that these procedures are                    description of the portfolio, (b)                     equitable principles of trade, to remove
                                                    adequate to properly monitor Exchange                   limitations on portfolio holdings or                  impediments to, and perfect the
                                                    trading of the Shares in all trading                    reference assets, or (c) the applicability            mechanism of a free and open market
                                                    sessions and to deter and detect                        of Exchange rules and surveillance                    and, in general, to protect investors and
                                                    violations of Exchange rules and federal                procedures shall constitute continued                 the public interest.
                                                    securities laws applicable to trading on                listing requirements for listing the                     The Exchange believes that the
                                                    the Exchange.33                                         Shares of the Fund on the Exchange.                   proposed rule change is designed to
                                                       The surveillances referred to above                     The issuer has represented to the                  prevent fraudulent and manipulative
                                                    generally focus on detecting securities                 Exchange that it will advise the                      acts and practices in that the Shares will
                                                    trading outside their normal patterns,                  Exchange of any failure by the Fund to                be listed and traded on the Exchange
                                                    which could be indicative of                            comply with the continued listing                     pursuant to the initial and continued
                                                    manipulative or other violative activity.               requirements, and, pursuant to its                    listing criteria in NYSE Arca Equities
                                                    When such situations are detected,                      obligations under Section 19(g)(1) of the             Rule 8.600. The Exchange has in place
                                                    surveillance analysis follows and                       Act, the Exchange will monitor for                    surveillance procedures that are
                                                    investigations are opened, where                        compliance with the continued listing                 adequate to properly monitor trading in
                                                    appropriate, to review the behavior of                  requirements. If the Fund is not in                   the Shares in all trading sessions and to
                                                    all relevant parties for all relevant                   compliance with the applicable listing                deter and detect violations of Exchange
                                                    trading violations.34                                   requirements, the Exchange will                       rules and applicable federal securities
                                                       FINRA, on behalf of the Exchange, or                 commence delisting procedures under                   laws. FINRA, on behalf of the Exchange,
                                                    regulatory staff of the Exchange, will                  NYSE Arca Equities Rule 5.5(m).                       or regulatory staff of the Exchange, will
                                                    communicate as needed regarding                                                                               communicate as needed regarding
                                                                                                            Information Bulletin                                  trading in the Shares, options and
                                                    trading in the Shares, options and
                                                    certain exchange-traded equity                             Prior to the commencement of                       certain exchange-traded equity
                                                                                                            trading, the Exchange will inform its                 securities with other markets and other
                                                      31 17 CFR 240.10A–3.                                  Equity Trading Permit Holders in an                   entities that are members of the ISG, and
                                                      32 The term ‘‘Disclosed Portfolio’’ is defined in     Information Bulletin (‘‘Bulletin’’) of the            FINRA, on behalf of the Exchange, or
                                                    NYSE Arca Equities Rule 8.600(c)(2).                    special characteristics and risks                     regulatory staff of the Exchange, may
asabaliauskas on DSK3SPTVN1PROD with NOTICES




                                                      33 FINRA surveils trading on the Exchange
                                                                                                            associated with trading the Shares.                   obtain trading information regarding
                                                    pursuant to a regulatory services agreement. The
                                                    Exchange is responsible for FINRA’s performance         Specifically, the Bulletin will discuss               trading in the Shares, options and
                                                    under this regulatory services agreement.               the following: (1) The procedures for                 certain exchange-traded equity
                                                      34 For a list of the current members of ISG, see      purchases and redemptions of Shares in                securities from such markets and other
                                                    www.isgportal.org. The Exchange notes that not all      Creation Unit aggregations (and that                  entities. In addition, the Exchange may
                                                    components of the Disclosed Portfolio may trade on
                                                    markets that are members of ISG or with which the
                                                                                                            Shares are not individually redeemable);              obtain information regarding trading in
                                                    Exchange has in place a comprehensive                   (2) NYSE Arca Equities Rule 9.2(a),
                                                    surveillance sharing agreement.                         which imposes a duty of due diligence                   35 15   U.S.C. 78f(b)(5).



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                                                    81196                     Federal Register / Vol. 81, No. 222 / Thursday, November 17, 2016 / Notices

                                                    the Shares, options and certain                         sale information for the Shares and the               Portfolio, and quotation and last sale
                                                    exchange-traded equity securities from                  underlying U.S. exchange-traded equity                information for the Shares.
                                                    markets and other entities that are                     securities will be available via the CTA              B. Self-Regulatory Organization’s
                                                    members of ISG or with which the                        high-speed line, and from the national                Statement on Burden on Competition
                                                    Exchange has in place a comprehensive                   securities exchange on which they are
                                                    surveillance sharing agreement. In                      listed. The Fund will disclose on the                   The Exchange does not believe that
                                                    addition, FINRA, on behalf of the                       Fund’s Web site the following                         the proposed rule change will impose
                                                    Exchange, is able to access, as needed,                 information regarding each portfolio                  any burden on competition that is not
                                                    trade information for certain fixed                     holding, as applicable to the type of                 necessary or appropriate in furtherance
                                                    income securities held by the Fund                                                                            of the purpose of the Act. The Exchange
                                                                                                            holding: Ticker symbol, CUSIP number
                                                    reported to TRACE. FINRA also can                                                                             notes that the proposed rule change will
                                                                                                            or other identifier, if any; a description
                                                    access data obtained from the MSRB                                                                            facilitate the listing and trading of an
                                                                                                            of the holding (including the type of
                                                    relating to municipal bond trading                                                                            additional type of actively-managed
                                                                                                            holding); the identity of the security,               exchange-traded product that
                                                    activity for surveillance purposes in                   index or other asset or instrument
                                                    connection with trading in the Shares.                                                                        principally holds municipal bonds and
                                                                                                            underlying the holding, if any; for                   that will enhance competition among
                                                    The Fund may not purchase or hold                       options, the option strike price; quantity
                                                    illiquid assets if, in the aggregate, more                                                                    market participants, to the benefit of
                                                                                                            held (as measured by, for example, par                investors and the marketplace.
                                                    than 15% of its net assets would be                     value, notional value or number of
                                                    invested in illiquid assets. The Adviser                shares, contracts or units); maturity                 C. Self-Regulatory Organization’s
                                                    and Sub-Adviser are not registered as                   date, if any; coupon rate, if any;                    Statement on Comments on the
                                                    broker-dealers but the Adviser is                       effective date, if any; market value of the           Proposed Rule Change Received From
                                                    affiliated with one or more broker-                     holding; and the percentage weighting                 Members, Participants or Others
                                                    dealers and has implemented and will                    of the holding in the Fund’s portfolio.                 No written comments were solicited
                                                    maintain a fire wall with respect to each               Moreover, prior to the commencement                   or received with respect to the proposed
                                                    such broker-dealer affiliate regarding                                                                        rule change.
                                                                                                            of trading, the Exchange will inform its
                                                    access to information concerning the
                                                                                                            Equity Trading Permit Holders in an                   III. Discussion and Commission
                                                    composition and/or changes to the
                                                                                                            Information Bulletin of the special                   Findings
                                                    portfolio. The Fund’s investments in
                                                                                                            characteristics and risks associated with
                                                    Municipal Bonds will be well-                                                                                    After careful review, the Commission
                                                                                                            trading the Shares. Trading in Shares of
                                                    diversified in that, under normal market                                                                      finds that the Exchange’s proposal to list
                                                                                                            the Fund will be halted if the circuit
                                                    conditions, the Fund will hold a                                                                              and trade the Shares is consistent with
                                                                                                            breaker parameters in NYSE Arca
                                                    minimum of 75 different Municipal                                                                             the Act and the rules and regulations
                                                                                                            Equities Rule 7.12 have been reached or
                                                    Bonds; no Municipal Bond held by the                                                                          thereunder applicable to a national
                                                                                                            because of market conditions or for
                                                    Fund will exceed 4% of the weight of                                                                          securities exchange.36 In particular, the
                                                                                                            reasons that, in the view of the
                                                    the Fund’s portfolio; no single                                                                               Commission finds that the proposed
                                                    Municipal Bond issuer will account for                  Exchange, make trading in the Shares
                                                                                                            inadvisable. Trading in the Shares will               rule change is consistent with Section
                                                    more than 10% of the weight of the                                                                            6(b)(5) of the Act,37 which requires,
                                                    Fund’s portfolio; and the Fund will hold                be subject to NYSE Arca Equities Rule
                                                                                                                                                                  among other things, that the Exchange’s
                                                    Municipal Bonds of a minimum of 40                      8.600(d)(2)(D), which sets forth
                                                                                                                                                                  rules be designed to prevent fraudulent
                                                    non-affiliated issuers, diversified among               circumstances under which Shares of
                                                                                                                                                                  and manipulative acts and practices,
                                                    issuers in at least 20 different states,                the Fund may be halted. In addition, as
                                                                                                                                                                  promote just and equitable principles of
                                                    with no more than 30% of the Fund’s                     noted above, investors will have ready
                                                                                                                                                                  trade, to remove impediments to and
                                                    assets comprised of Municipal Bonds                     access to information regarding the
                                                                                                                                                                  perfect the mechanism of a free and
                                                    that provide exposure to any single                     Fund’s holdings, the IIV, the Disclosed
                                                                                                                                                                  open market and a national market
                                                    state. In addition, each Municipal Bond                 Portfolio, and quotation and last sale
                                                                                                                                                                  system, and, in general, to protect
                                                    held by the Fund must be a constituent                  information for the Shares.
                                                                                                                                                                  investors and the public interest.
                                                    of a deal where the deal’s original                        The proposed rule change is designed                  The Commission also finds that the
                                                    offering amount was at least $100                       to perfect the mechanism of a free and                proposal to list and trade the Shares on
                                                    million. The Fund’s investments will be                 open market and, in general, to protect               the Exchange is consistent with Section
                                                    diversified among a minimum of ten                      investors and the public interest in that             11A(a)(1)(C)(iii) of the Act,38 which sets
                                                    distinct Municipal Bond sectors and the                 it will facilitate the listing and trading            forth Congress’ finding that it is in the
                                                    Fund will limit its investments in                      of an additional type of actively-                    public interest and appropriate for the
                                                    Municipal Bonds in any single sector to                 managed exchange-traded product that                  protection of investors and the
                                                    25% of the Fund’s assets.                               principally holds municipal bonds and                 maintenance of fair and orderly markets
                                                       The proposed rule change is designed                 that will enhance competition among                   to assure the availability to brokers,
                                                    to promote just and equitable principles                market participants, to the benefit of                dealers, and investors of information
                                                    of trade and to protect investors and the               investors and the marketplace. As noted               with respect to quotations for and
                                                    public interest in that the Exchange will               above, the Exchange has in place                      transactions in securities. Quotation and
                                                    obtain a representation from the issuer                 surveillance procedures relating to                   last-sale information for the Shares and
                                                    of the Shares that the NAV per Share                    trading in the Shares and may obtain                  the underlying U.S. exchange-traded
asabaliauskas on DSK3SPTVN1PROD with NOTICES




                                                    will be calculated daily and that the                   information via ISG from other                        equity securities will be available via
                                                    NAV and the Disclosed Portfolio will be                 exchanges that are members of ISG or                  the CTA high-speed line, and from the
                                                    made available to all market                            with which the Exchange has entered
                                                    participants at the same time. In                       into a comprehensive surveillance                       36 In approving this proposed rule change, the

                                                                                                                                                                  Commission has considered the proposed rule’s
                                                    addition, a large amount of information                 sharing agreement. In addition, as noted              impact on efficiency, competition, and capital
                                                    is publicly available regarding the Fund                above, investors will have ready access               formation. See 15 U.S.C. 78c(f).
                                                    and the Shares, thereby promoting                       to information regarding the Fund’s                     37 15 U.S.C. 78f(b)(5).

                                                    market transparency. Quotation and last                 holdings, the IIV, the Disclosed                        38 15 U.S.C. 78k–1(a)(1)(C)(iii).




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                                                                               Federal Register / Vol. 81, No. 222 / Thursday, November 17, 2016 / Notices                                                      81197

                                                    national securities exchange on which                     continually available on a real-time                   the Shares will be subject to NYSE Arca
                                                    they are listed.                                          basis throughout the day on brokers’                   Equities Rule 8.600(d)(2)(D), which sets
                                                      The approximate value of the Fund’s                     computer screens and other electronic                  forth additional circumstances under
                                                    investments on a per-Share basis, the                     services. Information regarding the                    which Shares of the Fund may be
                                                    IIV (which is the Portfolio Indicative                    previous day’s closing price and trading               halted.
                                                    Value, as defined in NYSE Arca Equities                   volume information for the Shares will                    The Exchange represents that it has a
                                                    Rule 8.600(c)(3)), will be disseminated                   be published daily in the financial                    general policy prohibiting the
                                                    every 15 seconds during the Exchange                      section of newspapers. In addition,
                                                                                                                                                                     distribution of material, non-public
                                                    Core Trading Session (ordinarily 9:30                     price information regarding non-U.S.
                                                                                                                                                                     information by its employees. In
                                                    a.m. to 4:00 p.m., Eastern Time) by one                   exchange-traded equity securities held
                                                    or more major market data vendors.39                                                                             addition, Commentary .06 to NYSE Arca
                                                                                                              by the Fund will be available from the
                                                    On each business day, before                                                                                     Equities Rule 8.600 further requires that
                                                                                                              exchanges trading such assets.
                                                    commencement of trading in Shares in                                                                             personnel who make decisions on the
                                                                                                              Quotation information from brokers and
                                                    the Core Trading Session on the                           dealers or pricing services will be                    open-end fund’s portfolio composition
                                                    Exchange (ordinarily 9:30 a.m., Eastern                   available for Municipal Bonds, taxable                 must be subject to procedures designed
                                                    Time), the Fund’s Web site will disclose                  municipal bonds, convertible bonds,                    to prevent the use and dissemination of
                                                    the Disclosed Portfolio that will form                    OTC traded convertible preferred stocks,               material, non-public information
                                                    the basis for the Fund’s calculation of                   corporate debt obligations, VRDNs, and                 regarding the open-end fund’s portfolio.
                                                    NAV at the end of the business day.40                     cash equivalents. Price information for                The Exchange represents that the
                                                    In addition, a basket composition file,                   money market funds will be available                   Adviser and Sub-Adviser are not
                                                    which includes the security names and                     from the applicable investment                         registered as broker-dealers; however,
                                                    share quantities, if applicable, required                 company’s Web site and from market                     the Adviser (but not the Sub-Adviser) is
                                                    to be delivered in exchange for the                       data vendors. Intra-day and closing                    affiliated with one or more broker-
                                                    Fund’s Shares, together with estimates                    price information for OTC equity                       dealers, and the Adviser has
                                                    and actual cash components, will be                       securities will be available from major                implemented and will maintain a fire
                                                    publicly disseminated daily prior to the                  market data vendors. Pricing                           wall with respect to each such broker-
                                                    opening of the Exchange via the NSCC.                     information regarding each asset class in              dealer affiliate regarding access to
                                                    The basket represents one Creation Unit                   which the Fund will invest will                        information concerning the composition
                                                    of the Fund. The NAV of Shares of the                     generally be available through                         of, or changes to, the portfolio.42
                                                    Fund will normally be determined as of                    nationally recognized data service                        Prior to the commencement of
                                                    the close of the Core Trading Session on                  providers through subscription                         trading, the Exchange will inform its
                                                    the Exchange (ordinarily 4:00 p.m.,                       agreements. Quotation and last-sale                    Equity Trading Permit Holders in a
                                                    Eastern Time) on each business day.                       information for exchange-traded options                Bulletin of the special characteristics
                                                    Authorized Participants may refer to the                  will be available via the Options Price                and risks associated with trading the
                                                    basket composition file for information                   Reporting Authority and from the                       Shares. The Exchange represents that
                                                    regarding securities and financial                        applicable U.S. options exchange. The                  trading in the Shares will be subject to
                                                    instruments that may comprise the                         Fund’s Web site will include a form of                 the existing trading surveillances,
                                                    Fund’s basket on a given day.                             the prospectus for the Fund and                        administered by the FINRA on behalf of
                                                      Information regarding market price                      additional data relating to NAV and                    the Exchange, or by regulatory staff of
                                                    and trading volume of the Shares will be                  other applicable quantitative                          the Exchange, which are designed to
                                                                                                              information.                                           detect violations of Exchange rules and
                                                       39 The Exchange represents that several major             The Commission further believes that                applicable federal securities laws.43 The
                                                    market data vendors display and/or make widely            the proposal to list and trade the Shares              Commission believes that the
                                                    available IIVs taken from CTA or other data feeds.        is reasonably designed to promote fair
                                                    According to the Exchange, the IIV for the Fund                                                                  Exchange’s initial and continued listing
                                                    will be calculated by dividing the ‘‘Estimated Fund
                                                                                                              disclosure of information that may be                  requirements, combined with the
                                                    Value’’ as of the time of the calculation by the total    necessary to price the Shares                          Fund’s investment criteria that would
                                                    number of outstanding Shares. ‘‘Estimated Fund            appropriately and to prevent trading                   apply to Municipal Bonds in the
                                                    Value’’ is the sum of the estimated amount of cash        when a reasonable degree of
                                                    held in the Fund’s portfolio, the estimated amount                                                               portfolio, are designed to mitigate the
                                                    of accrued interest owing to the Fund, and the
                                                                                                              transparency cannot be assured. The                    potential for price manipulation of the
                                                    estimated value of the securities held in the Fund’s      Exchange will obtain a representation                  Shares.
                                                    portfolio, minus the estimated amount of the Fund’s       from the issuer of the Shares that the
                                                    liabilities. The IIV will be calculated based on the      NAV per Share will be calculated daily                    The Exchange represents that it deems
                                                    same portfolio holdings disclosed on the Fund’s
                                                                                                              and that the NAV and the Disclosed                     the Shares to be equity securities, thus
                                                    Web site. In determining the estimated value for                                                                 rendering the trading of the Shares
                                                    each of the component securities, the IIV will use        Portfolio will be made available to all
                                                    last sale, market prices, or other methods that           market participants at the same time.                  subject to the Exchange’s existing rules
                                                    would be considered appropriate for pricing               Trading in Shares of the Fund will be                  governing the trading of equity
                                                    securities held by registered investment companies.
                                                                                                              halted if the circuit breaker parameters               securities.
                                                       40 The Fund will disclose on the Fund’s Web site

                                                    the following information regarding each portfolio        in NYSE Arca Equities Rule 7.12 have                      In support of this proposal, the
                                                    holding, as applicable to the type of holding: Ticker     been reached or because of market                      Exchange has made the following
                                                    symbol, CUSIP number or other identifier, if any;         conditions or for reasons that, in the                 additional representations:
asabaliauskas on DSK3SPTVN1PROD with NOTICES




                                                    a description of the holding (including the type of       view of the Exchange, make trading in
                                                    holding); the identity of the security, index, or other
                                                    asset or instrument underlying the holding, if any;       the Shares inadvisable,41 and trading in               may consider all relevant factors in exercising its
                                                    for options, the option strike price; quantity held (as                                                          discretion to halt or suspend trading in the Shares
                                                    measured by, for example, par value, notional value          41 These reasons may include: (1) The extent to     of the Fund.
                                                                                                                                                                        42 See supra note 11.
                                                    or number of shares, contracts or units); maturity        which trading is not occurring in the securities or
                                                    date, if any; coupon rate, if any; effective date, if     financial instruments comprising the Disclosed            43 The Exchange states that FINRA surveils

                                                    any; market value of the holding; and the                 Portfolio of the Fund; or (2) whether other unusual    trading on the Exchange pursuant to a regulatory
                                                    percentage weighting of the holding in the Fund’s         conditions or circumstances detrimental to the         services agreement and that the Exchange is
                                                    portfolio. The Web site information will be publicly      maintenance of a fair and orderly market are           responsible for FINRA’s performance under this
                                                    available at no charge.                                   present. With respect to trading halts, the Exchange   regulatory services agreement. See supra note 33.



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                                                    81198                     Federal Register / Vol. 81, No. 222 / Thursday, November 17, 2016 / Notices

                                                       (1) The Shares will conform to the                   procedures for purchases and                           Fund will hold Municipal Bonds of a
                                                    initial and continued listing criteria                  redemptions of Shares in Creation Unit                 minimum of 40 non-affiliated issuers
                                                    under NYSE Arca Equities Rule 8.600.                    aggregations (and that Shares are not                  diversified among issuers in at least 20
                                                       (2) The Exchange has appropriate                     individually redeemable); (b) NYSE                     different states, with no more than 30%
                                                    rules to facilitate transactions in the                 Arca Equities Rule 9.2(a), which                       of the Fund’s assets comprised of
                                                    Shares during all trading sessions.                     imposes a duty of due diligence on its                 Municipal Bonds that provide exposure
                                                       (3) Trading in the Shares will be                    Equity Trading Permit Holders to learn                 to any single state.46
                                                    subject to the existing trading                         the essential facts relating to every                     (10) The ETFs in which the Fund may
                                                    surveillances, administered by FINRA                    customer prior to trading the Shares; (c)              invest will be registered under the 1940
                                                    on behalf of the Exchange, or by                        the risks involved in trading the Shares               Act and will be listed and traded in the
                                                    regulatory staff of the Exchange, which                 during the Opening and Late Trading                    U.S. on registered exchanges. With
                                                    are designed to detect violations of                    Sessions when an updated IIV will not                  respect to its exchange-traded equity
                                                    Exchange rules and applicable federal                   be calculated or publicly disseminated;                securities investments (including
                                                    securities laws. The Exchange                           (d) how information regarding the IIV                  exchange-traded convertible preferred
                                                    represents that these procedures are                    and the Disclosed Portfolio is                         stocks and exchange-traded stocks into
                                                    adequate to properly monitor Exchange                   disseminated; (e) the requirement that                 which convertible bonds may be
                                                    trading of the Shares in all trading                    Equity Trading Permit Holders deliver a                converted), the Fund will normally
                                                    sessions and to deter and detect                        prospectus to investors purchasing                     invest in equity securities that are listed
                                                    violations of Exchange rules and federal                newly issued Shares prior to or                        and traded on a U.S. exchange or in
                                                    securities laws applicable to trading on                concurrently with the confirmation of a                markets that are members of the ISG or
                                                    the Exchange. These surveillances focus                 transaction; and (f) trading information.              parties to a comprehensive surveillance
                                                    on detecting securities trading outside                 The Bulletin will also discuss any                     sharing agreement with the Exchange. In
                                                    their normal patterns, which could be                   exemptive, no-action, and interpretive                 any case, not more than 10% of the net
                                                    indicative of manipulative or other                     relief granted by the Commission from                  assets of the Fund in the aggregate
                                                    violative activity. When such situations                any rules under the Act.                               invested in equity securities (except for
                                                    are detected, surveillance analysis                        (6) For initial and continued listing,              money market funds) will consist of
                                                    follows and investigations are opened,                  the Fund must be in compliance with                    equity securities whose principal
                                                    where appropriate, to review the                        Rule 10A–3 under the Act.44                            market is not a member of ISG or a
                                                    behavior of all relevant parties for all                   (7) At least 80% of the weight of the               market with which the Exchange does
                                                    relevant trading violations.                            Fund’s assets will be in Municipal                     not have a comprehensive surveillance
                                                       (4) FINRA, on behalf of the Exchange,                                                                       sharing agreement.
                                                                                                            Bonds with a modified duration of 15
                                                    or regulatory staff of the Exchange, will                                                                         (11) The Fund may hold up to an
                                                                                                            years or less. With respect to credit
                                                    communicate as needed regarding                                                                                aggregate amount of 15% of its net
                                                                                                            quality, under normal market
                                                    trading in the Shares, options, and                                                                            assets in illiquid assets (calculated at
                                                                                                            conditions, at least 90% of the Fund’s
                                                    certain exchange-traded equity                                                                                 the time of investment), consistent with
                                                    securities with other markets and other                 assets invested in Municipal Bonds will
                                                                                                                                                                   Commission guidance. The Fund will
                                                    entities that are members of the ISG, and               be in Municipal Bonds rated ‘‘A’’ or
                                                                                                                                                                   monitor its portfolio liquidity on an
                                                    FINRA, on behalf of the Exchange, or                    better by at least one major credit rating
                                                                                                                                                                   ongoing basis to determine whether, in
                                                    regulatory staff of the Exchange, may                   agency or, if unrated, deemed to be of
                                                                                                                                                                   light of current circumstances, an
                                                    obtain trading information regarding                    comparable quality in the Adviser’s
                                                                                                                                                                   adequate level of liquidity is being
                                                    trading in the Shares, options, and                     opinion.
                                                                                                                                                                   maintained, and will consider taking
                                                    certain exchange-traded equity                             (8) The Fund’s Municipal Bond
                                                                                                                                                                   appropriate steps in order to maintain
                                                    securities from such markets and other                  investments will be diversified among a                adequate liquidity if, through a change
                                                    entities. In addition, the Exchange may                 minimum of ten distinct Municipal                      in values, net assets, or other
                                                    obtain information regarding trading in                 Bond sectors.45 In addition, the Fund                  circumstances, more than 15% of the
                                                    the Shares, options, and certain                        will limit its investments in Municipal                Fund’s net assets are held in illiquid
                                                    exchange-traded equity securities from                  Bonds in any single sector to 25% of the               assets. Illiquid assets include securities
                                                    markets and other entities that are                     Fund’s assets.                                         subject to contractual or other
                                                    members of ISG or with which the                           (9) Under normal market conditions,                 restrictions on resale and other
                                                    Exchange has in place a comprehensive                   each Municipal Bond held by the Fund                   instruments that lack readily available
                                                    surveillance sharing agreement. In                      must be a constituent of a deal where                  markets as determined in accordance
                                                    addition, FINRA, on behalf of the                       the deal’s original offering amount was                with Commission staff guidance.
                                                    Exchange, is able to access, as needed,                 at least $100 million. The Fund will                      (12) The Fund’s investments will be
                                                    trade information for certain fixed                     hold a minimum of 75 different                         consistent with its investment objective
                                                    income securities held by the Fund                      Municipal Bonds. No Municipal Bond                     and will not be used to provide multiple
                                                    reported to FINRA’s Trade Reporting                     held by the Fund will exceed 4% of the                 returns of a benchmark or to produce
                                                    and Compliance Engine. FINRA also can                   weight of the Fund’s portfolio and no                  leveraged returns.
                                                    access data obtained from the Municipal                 single Municipal Bond issuer will                         The Exchange also represents that all
                                                    Securities Rulemaking Board relating to                 account for more than 10% of the                       statements and representations made in
                                                    municipal bond trading activity for                     weight of the Fund’s portfolio. The                    this filing regarding (a) the description
                                                    surveillance purposes in connection                                                                            of the portfolio, (b) limitations on
asabaliauskas on DSK3SPTVN1PROD with NOTICES




                                                                                                              44 See 17 CFR 240.10A–3.
                                                    with trading in the Shares.                               45 The
                                                                                                                                                                   portfolio holdings or reference assets, or
                                                                                                                      Fund’s investments in Municipal Bonds
                                                       (5) Prior to the commencement of                     will include investments in state and local (e.g.,     (c) the applicability of Exchange rules
                                                    trading, the Exchange will inform its                   county, city, town) Municipal Bonds relating to
                                                    Equity Trading Permit Holders in a                      such sectors as the following: Dedicated tax; public      46 For purposes of this restriction, each state and

                                                    Bulletin of the special characteristics                 power; tax increment; toll road; port revenue;         each separate political subdivision, agency,
                                                                                                            airport revenue; water revenue; sewer revenue;         authority, or instrumentality of such state, each
                                                    and risks associated with trading the                   higher education (colleges and universities);          multi-state agency or authority, and each guarantor,
                                                    Shares. Specifically, the Bulletin will                 wastewater revenue; school districts; sales tax        if any, will be treated as separate issuers of
                                                    discuss the following: (a) The                          revenue; and pre-refunded bonds.                       Municipal Bonds.



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                                                                              Federal Register / Vol. 81, No. 222 / Thursday, November 17, 2016 / Notices                                                81199

                                                    and surveillance procedures shall                       Paper Comments                                        minimum of ten distinct Municipal
                                                    constitute continued listing                                                                                  Bond sectors.
                                                    requirements for listing the Shares of                    • Send paper comments in triplicate
                                                                                                            to Secretary, Securities and Exchange                    (2) The Fund will limit its
                                                    the Fund on the Exchange.                                                                                     investments in Municipal Bonds in any
                                                                                                            Commission, 100 F Street NE.,
                                                      The issuer has represented to the                     Washington, DC 20549–1090.                            single sector to 25% of the Fund’s
                                                    Exchange that it will advise the                                                                              assets.
                                                    Exchange of any failure by the Fund to                  All submissions should refer to File
                                                                                                            Number SR–NYSEArca–2016–107. This                        (3) Each Municipal Bond held by the
                                                    comply with the continued listing
                                                                                                            file number should be included on the                 Fund must be a constituent of a deal
                                                    requirements, and, pursuant to its
                                                    obligations under Section 19(g)(1) of the               subject line if email is used. To help the            where the deal’s original offering
                                                    Act, the Exchange will monitor for                      Commission process and review your                    amount was at least $100 million.
                                                    compliance with the continued listing                   comments more efficiently, please use                    (4) The Fund will hold a minimum of
                                                    requirements.47 If the Fund is not in                   only one method. The Commission will                  75 different Municipal Bonds.
                                                    compliance with the applicable listing                  post all comments on the Commission’s
                                                                                                            Internet Web site (http://www.sec.gov/                   (5) No Municipal Bond held by the
                                                    requirements, the Exchange will                                                                               Fund will exceed 4% of the weight of
                                                    commence delisting procedures under                     rules/sro.shtml). Copies of the
                                                                                                            submission, all subsequent                            the Fund’s portfolio, and no single
                                                    NYSE Arca Equities Rule 5.5(m).                                                                               Municipal Bond issuer will account for
                                                                                                            amendments, all written statements
                                                      This approval order is based on all of                with respect to the proposed rule                     more than 10% of the weight of the
                                                    the Exchange’s representations,                         change that are filed with the                        Fund’s portfolio.
                                                    including those set forth above and in                  Commission, and all written                              (6) The Fund will hold Municipal
                                                    the Notice, and the Exchange’s                          communications relating to the                        Bonds of a minimum of 40 non-
                                                    description of the Fund. The                            proposed rule change between the
                                                    Commission notes that the Fund and the                                                                        affiliated issuers diversified among
                                                                                                            Commission and any person, other than                 issuers in at least 20 different states,
                                                    Shares must comply with the                             those that may be withheld from the
                                                    requirements of NYSE Arca Equities                                                                            with no more than 30% of the Fund’s
                                                                                                            public in accordance with the                         assets comprised of Municipal Bonds
                                                    Rule 8.600 to be listed and traded on the               provisions of 5 U.S.C. 552, will be
                                                    Exchange.                                                                                                     that provide exposure to any single
                                                                                                            available for Web site viewing and                    state.
                                                      For the foregoing reasons, the                        printing in the Commission’s Public
                                                    Commission finds that the proposed                      Reference Room, 100 F Street NE.,                        The Commission believes that the
                                                    rule change is consistent with Section                  Washington, DC 20549, on official                     addition of these investment restrictions
                                                    6(b)(5) of the Act 48 and the rules and                 business days between the hours of                    helps to ensure that the proposed listing
                                                    regulations thereunder applicable to a                  10:00 a.m. and 3:00 p.m. Copies of the                and trading of the Shares is consistent
                                                    national securities exchange.                           filing also will be available for                     with the portion of Section 6(b)(5) of the
                                                                                                            inspection and copying at the principal               Act,49 which requires that the rules of
                                                    IV. Solicitation of Comments on
                                                                                                            office of the Exchange. All comments                  a national securities exchange must be
                                                    Amendment No. 2 to the Proposed Rule
                                                                                                            received will be posted without change;               designed to, among other things,
                                                    Change
                                                                                                            the Commission does not edit personal                 prevent fraudulent and manipulative
                                                      Interested persons are invited to                     identifying information from                          acts and practices and, in general, to
                                                    submit written data, views, and                         submissions. You should submit only                   protect investors and the public interest.
                                                    arguments concerning whether                            information that you wish to make                     Accordingly, the Commission finds
                                                    Amendment No. 2 to the proposed rule                    available publicly. All submissions                   good cause, pursuant to Section 19(b)(2)
                                                    change is consistent with the Act.                      should refer to File Number SR–                       of the Act,50 to approve the proposed
                                                    Comments may be submitted by any of                     NYSEArca–2016–107 and should be                       rule change, as modified by Amendment
                                                    the following methods:                                  submitted on or before December 8,                    No. 2 thereto, on an accelerated basis.
                                                                                                            2016.
                                                    Electronic Comments                                                                                           VI. Conclusion
                                                                                                            V. Accelerated Approval of Proposed
                                                       • Use the Commission’s Internet                      Rule Change as Modified by                              It is therefore ordered, pursuant to
                                                    comment form (http://www.sec.gov/                       Amendment No. 2 Thereto                               Section 19(b)(2) of the Act,51 that the
                                                    rules/sro.shtml); or                                                                                          proposed rule change (SR–NYSEArca–
                                                                                                              The Commission finds good cause to
                                                       • Send an email to rule-comments@                    approve the proposed rule change, as                  2016–107), as modified by Amendment
                                                    sec.gov. Please include File Number SR–                 modified by Amendment No. 2 thereto,                  No. 2 thereto, be, and it hereby is,
                                                    NYSEArca–2016–107 on the subject                        prior to the thirtieth day after the date             approved on an accelerated basis.
                                                    line.                                                   of publication of notice of the filing of               For the Commission, by the Division of
                                                                                                            Amendment No. 2 in the Federal                        Trading and Markets, pursuant to delegated
                                                      47 The Commission notes that certain other
                                                                                                            Register. Amendment No. 2                             authority.52
                                                    proposals for the listing and trading of Managed        supplements the proposed rule change
                                                    Fund Shares include a representation that the                                                                 Brent J. Fields,
                                                    exchange will ‘‘surveil’’ for compliance with the       by, among other things, incorporating
                                                                                                                                                                  Secretary.
                                                    continued listing requirements. See, e.g., Securities   additional diversification criteria to the
asabaliauskas on DSK3SPTVN1PROD with NOTICES




                                                                                                                                                                  [FR Doc. 2016–27603 Filed 11–16–16; 8:45 am]
                                                    Exchange Act Release No. 78005 (Jun. 7, 2016), 81       Fund’s investments in Municipal
                                                    FR 38247 (Jun. 13, 2016) (SR–BATS–2015–100). In         Bonds. Specifically, the Exchange                     BILLING CODE 8011–01–P
                                                    the context of this representation, it is the
                                                    Commission’s view that ‘‘monitor’’ and ‘‘surveil’’      represents that the Fund would adhere
                                                    both mean ongoing oversight of a fund’s compliance      to certain investment restrictions,
                                                    with the continued listing requirements. Therefore,     including but not limited to, the                       49 15    U.S.C. 78f(b)(5).
                                                    the Commission does not view ‘‘monitor’’ as a more      following:                                              50 15    U.S.C. 78s(b)(2).
                                                    or less stringent obligation than ‘‘surveil’’ with
                                                    respect to the continued listing requirements.            (1) The Fund’s Municipal Bond                         51 Id.

                                                      48 15 U.S.C. 78f(b)(5).                               investments will be diversified among a                 52 17    CFR 200.30–3(a)(12).



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Document Created: 2016-11-17 02:59:41
Document Modified: 2016-11-17 02:59:41
CategoryRegulatory Information
CollectionFederal Register
sudoc ClassAE 2.7:
GS 4.107:
AE 2.106:
PublisherOffice of the Federal Register, National Archives and Records Administration
SectionNotices
DatesNovember 10, 2016.
FR Citation81 FR 81189 

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