82 FR 15400 - Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a Proposed Rule Change, as Modified by Amendment Nos. 1, 3, and 4 Thereto, To List and Trade Shares of the ProShares UltraPro 3x Crude Oil ETF and ProShares UltraPro 3x Short Crude Oil ETF Under NYSE Arca Equities Rule 8.200

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 58 (March 28, 2017)

Page Range		15400-15404
FR Document		2017-06053

Federal Register, Volume 82 Issue 58 (Tuesday, March 28, 2017)

[Federal Register Volume 82, Number 58 (Tuesday, March 28, 2017)]
[Notices]
[Pages 15400-15404]
From the Federal Register Online [www.thefederalregister.org]
[FR Doc No: 2017-06053]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80296; File No. SR-NYSEArca-2017-07]

Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a
Proposed Rule Change, as Modified by Amendment Nos. 1, 3, and 4
Thereto, To List and Trade Shares of the ProShares UltraPro 3x Crude
Oil ETF and ProShares UltraPro 3x Short Crude Oil ETF Under NYSE Arca
Equities Rule 8.200

March 22, 2017.

I. Introduction

On January 26, 2017, NYSE Arca, Inc. (the ``Exchange'' or ``NYSE
Arca'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) \1\ of the Securities
Exchange Act of 1934 (``Act'' or ``Exchange Act'') \2\ and Rule 19b-4
thereunder,\3\ a proposed rule change to list and trade shares
(``Shares'') of the ProShares UltraPro 3x Crude Oil ETF and ProShares
UltraPro 3x Short Crude Oil ETF (each a ``Fund,'' and collectively the
``Funds'') under NYSE Arca Equities Rule 8.200. The proposed rule
change was published for comment in the Federal Register on February 7,
2017.\4\ On March 9, 2017, the Exchange filed Amendment No. 1 to the
proposed rule change.\5\ On March 10, 2017, the Exchange filed and
withdrew Amendment No. 2 to the proposed rule change,\6\ and filed
Amendment No. 3 to the proposed rule change.\7\ On March 20, 2017, the
Exchange filed Amendment No. 4 to the proposed rule change.\8\ The
Commission received no comments on the proposed rule change. This order
approves the proposed rule change, as modified by Amendment Nos. 1, 3,
and 4 thereto.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
\4\ See Securities Exchange Act Release No. 79917 (February 1,
2017), 82 FR 9620.
\5\ In Amendment No. 1, which amended and replaced the proposed
rule change in its entirety, the Exchange: (1) Supplemented its
description of the Funds' investments in over-the-counter (``OTC'')
transactions; (2) provided clarification and additional specificity
regarding the holding and settlement of futures contracts and
options on such futures; (3) provided additional details regarding
the calculation of the Bloomberg WTI Crude Oil Subindex\SM\; (4)
provided information regarding the calculation and dissemination of
the Indicative Fund Value of the Funds; (5) provided additional
clarification regarding the difference between the net asset value
calculation time and the creation and redemption cut-off time for
the Funds; (6) clarified the information that will be made available
on the Funds' Web site regarding the Funds and their portfolio
holdings; (7) supplemented its description of the Exchange's
surveillance procedures; (8) represented that the applicability of
Exchange listing rules specified in the proposed rule change shall
constitute continued listing requirements for listing the Shares on
the Exchange; (9) clarified the type of information that will be
available in the Information Bulletin regarding the Funds' portfolio
holdings; and (10) made other technical amendments. Amendment No. 1
to the proposed rule change is available at: https://www.sec.gov/comments/sr-nysearca-2017-07/nysearca201707-1630210-137426.pdf.
Amendment No. 1 is not subject to notice and comment because it is a
technical amendment that does not materially alter the substance of
the proposed rule change or raise any novel regulatory issues.
\6\ Notice of the Exchange's withdrawal of Amendment No. 2 is
available at: https://www.sec.gov/comments/sr-nysearca-2017-07/nysearca201707-1644096-147899.pdf.
\7\ In Amendment No. 3, which partially amended the proposed
rule change, as modified by Amendment No. 1 thereto, the Exchange
added a representation regarding the dissemination of the value of
the Bloomberg WTI Crude Oil Subindex\SM\. Amendment No. 3 to the
proposed rule change is available at: https://www.sec.gov/comments/sr-nysearca-2017-07/nysearca201707-1644096-147899.pdf. Amendment No.
3 is not subject to notice and comment because it is a technical
amendment that does not materially alter the substance of the
proposed rule change or raise any novel regulatory issues.
\8\ In Amendment No. 4, which partially amended the proposed
rule change, as modified by Amendment Nos. 1 and 3 thereto, the
Exchange: (1) Clarified its use of the term ``Futures Contracts''
and (2) provided additional clarification regarding the calculation
of the Indicative Fund Value. Amendment No. 4 to the proposed rule
change is available at: https://www.sec.gov/comments/sr-nysearca-2017-07/nysearca201707-1657390-148729.pdf. Amendment No. 4 is not
subject to notice and comment because it is a technical amendment
that does not materially alter the substance of the proposed rule
change or raise any novel regulatory issues.
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II. Exchange's Description of the Proposal \9\
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\9\ A more detailed description of the Funds, the Shares, and
the Benchmark, as well as investment risks, creation and redemption
procedures, net asset value (``NAV'') calculation, availability of
values and other information regarding the Funds' portfolio
holdings, and fees, among other things, is included in the
Registration Statement, as well as Amendment Nos. 1, 3, and 4, as
applicable. See infra note 11, and supra notes 5, 7, and 8,
respectively.
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The Exchange proposes to list and trade the Shares under NYSE Arca
Equities Rule 8.200, Commentary .02, which governs the listing and
trading of Trust Issued Receipts.\10\ Each Fund is a

[[Page 15401]]

series of the ProShares Trust II (``Trust''), a Delaware statutory
trust.\11\ The Trust and the Funds are managed and controlled by
ProShare Capital Management LLC (``ProShare Capital''). ProShare
Capital is registered as a commodity pool operator with the Commodity
Futures Trading Commission and is a member of the National Futures
Association. Brown Brothers Harriman & Co. will be the custodian,
registrar, and transfer agent, and administrator for the Funds. SEI
Investments Distribution Co. serves as distributor for the Funds.
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\10\ Commentary .02 to NYSE Arca Equities Rule 8.200 applies to
Trust Issued Receipts that invest in ``Financial Instruments.'' The
term ``Financial Instruments,'' as defined in Commentary .02(b)(4)
to NYSE Arca Equities Rule 8.200, means any combination of
investments, including cash; securities; options on securities and
indices; futures contracts; options on futures contracts; forward
contracts; equity caps, collars, and floors; and swap agreements.
\11\ The Trust is registered under the Securities Act of 1933
(15 U.S.C. 77a) (``Securities Act''). On December 9, 2016, the Trust
filed with the Commission a registration statement on Form S-1 under
the Securities Act relating to the Funds (File No. 333-214904)
(``Registration Statement''). The description of the operation of
the Trust and the Funds herein is based, in part, on the
Registration Statement.
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Overview of the Funds

The investment objective of the ProShares UltraPro 3x Crude Oil ETF
is to seek, on a daily basis,\12\ investment results that correspond
(before fees and expenses) to three times (3x) the performance of the
Bloomberg WTI Crude Oil Subindex\SM\ (``Benchmark'').\13\ The
investment objective of the ProShares UltraPro 3x Short Crude Oil ETF
is to seek, on a daily basis, investment results that correspond
(before fees and expenses) to three times (3x) the inverse of the
performance of the Benchmark. The Benchmark is intended to reflect the
performance of crude oil as measured by the price of futures contracts
of West Texas Intermediate sweet, light crude oil listed on the New
York Mercantile Exchange (``NYMEX''), including the impact of rolling,
without regard to income earned on cash positions.
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\12\ The Fund does not seek to achieve its investment objective
over a period greater than a single trading day. The Exchange states
that the return of a Fund for a period longer than a single trading
day is the result of its return for each day compounded over the
period and thus will usually differ from a Fund's multiple times the
return of the Benchmark for the same period. See Amendment No. 1,
supra note 5, at 5.
\13\ According to the Exchange, the Bloomberg WTI Crude Oil
Subindex\SM\ is a ``rolling index,'' which means that the Index
performance includes the impact of closing out futures contracts
that are nearing expiration and replacing them with futures
contracts with later expirations. The Exchange states that this
process is commonly referred to as ``rolling.'' See id. at 5 n.6.
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In seeking to achieve the Funds' investment objectives, ProShare
Capital will utilize a mathematical approach to determine the type,
quantity and mix of investment positions that ProShare Capital
believes, in combination, should produce daily returns consistent with
the Funds' respective objectives. ProShare Capital will rely on a pre-
determined model to generate orders that result in repositioning the
Funds' investments in accordance with their respective investment
objectives.

Investments of the Funds

Each Fund will seek to achieve its respective investment objective
by investing, under normal market conditions,\14\ substantially all of
its assets in futures contracts for West Texas Intermediate sweet,
light crude oil listed on the NYMEX, ICE Futures U.S. or other U.S.
exchanges (``Futures'') and listed options on such contracts
(``Options'' and, together with Futures, ``Futures Contracts''). The
Funds will not invest directly in oil. A Fund's investments in Futures
Contracts will be used to produce economically ``leveraged'' or
``inverse leveraged'' investment in a manner consistent with the
respective Fund's investment objective.
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\14\ The term ``normal market conditions'' includes, but is not
limited to, the absence of trading halts in the applicable financial
markets generally; operational issues (e.g., systems failure)
causing dissemination of inaccurate market information; or force
majeure type events such as natural or manmade disaster, act of God,
armed conflict, act of terrorism, riot or labor disruption or any
similar intervening circumstance. See id. at 6 n.9.
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In the event position, price or accountability limits are reached
with respect to Futures Contracts,\15\ each Fund may obtain exposure to
the Benchmark through investments in swap agreements and forward
contracts referencing such Benchmark (``Financial Instruments''). To
the extent that a Fund invests in Financial Instruments, it would first
make use of exchange-traded Financial Instruments, if available. If an
investment in exchange-traded Financial Instruments is unavailable,
then a Fund would invest in Financial Instruments that clear through
derivatives clearing organizations that satisfy the Trust's criteria,
if available. If an investment in cleared Financial Instruments is
unavailable, then a Fund would invest in other Financial Instruments,
including uncleared Financial Instruments in the OTC market. The Funds
may also invest in Financial Instruments if the market for a specific
Futures Contract experiences emergencies (e.g., natural disaster,
terrorist attack or an act of God) or disruptions (e.g., a trading
halt) that prevent or make it impractical for a Fund to obtain the
appropriate amount of investment exposure using Futures Contracts.
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\15\ Designated contract markets, such as the NYMEX and ICE
Futures U.S., have established accountability levels and position
limits on the maximum net long or net short Futures Contracts in
commodity interests that any person or group of persons under common
trading control (other than as a hedge, which an investment by a
Fund is not) may hold, own or control. These levels and position
limits apply to the Futures Contracts that each Fund would invest in
to meet its investment objective. In addition to accountability
levels and position limits, NYMEX and ICE Futures U.S. also set
price fluctuation limits on Futures Contracts. The price fluctuation
limit establishes the amount that the price of Futures may vary
either up or down from the previous day's settlement price. Options
do not have individual price limits but rather are linked to the
price limit of Futures. See id. at 6 n.10.
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Although each Fund, under normal market conditions, will invest
substantially all of its assets in Futures Contracts, each Fund will
also hold cash or cash equivalents, such as U.S. Treasury securities or
other high credit quality, short-term fixed-income or similar
securities (such as shares of money market funds and collateralized
repurchase agreements) pending investment in Futures Contracts or
Financial Instruments or as collateral for the Funds' investments.
The Exchange represents that, to the extent a Fund enters into swap
agreements and other OTC transactions, it will do so only with large,
established and well capitalized financial institutions that meet the
Sponsor's credit quality standards and monitoring policies. The
Exchange states that each Fund will use various techniques to minimize
credit risk including early termination or reset and payment, using
different counterparties and limiting the net amount due from any
individual counterparty.\16\
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\16\ See id. at 7.
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The Funds do not intend to hold Futures \17\ through expiration,
but instead intend to ``roll'' or close their respective positions
before expiration. When the market for these contracts is such that the
prices are higher in the more distant delivery months than in the
nearer delivery months, the sale during the course of the ``rolling
process'' of the more nearby contract would take place at a price that
is lower

[[Page 15402]]

than the price of the more distant contract.\18\
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\17\ The Exchange states that out-of-the-money Options will be
held to expiration and will expire worthless. According to the
Exchange, Funds intend to hold in-the-money options to expiration,
which would occur before the expiration of Futures. In-the-money
Options are settled through receipt or delivery of Futures. With
respect to Futures positions established through the Options
settlement procedure, the Funds intend to close such positions by
entering into simultaneous offsetting Futures positions. The effects
of contango and backwardation on the price of Futures will impact
the price of Options to the same degree of any change in the price
of the underlying Futures. See id. at 7 n.11.
\18\ The Exchange states that this pattern of higher futures
prices for longer expiration Futures is referred to as ``contango.''
Alternatively, when the market for these contracts is such that the
prices are higher in the nearer months than in the more distant
months, the sale during the course of the ``rolling process'' of the
more nearby contract would take place at a price that is higher than
the price of the more distant contract. This pattern of higher
futures prices for shorter expiration Futures is referred to as
``backwardation.'' According to the Exchange, the presence of
contango in certain Futures at the time of rolling could adversely
affect a Fund with long positions, and positively affect a Fund with
short positions. Similarly, the presence of backwardation in certain
Futures at the time of rolling such contracts could adversely affect
a Fund with short positions and positively affect a Fund with long
positions. See id. at 7.
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The Exchange states that the Funds do not expect to have exposure
to Futures Contracts and Financial Instruments greater than three times
(3x) the Funds' net assets. Thus, the maximum margin held at a future
commission merchant would not exceed three times the margin requirement
for either Fund.\19\ The Exchange represents that not more than 10% of
the net assets of a Fund in the aggregate invested in Futures Contracts
shall consist of Futures Contracts whose principal market is not a
member of the Intermarket Surveillance Group (``ISG'') or is a market
with which the Exchange does not have a comprehensive surveillance
sharing agreement (``CSSA'').\20\
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\19\ See id.
\20\ See id. at 14.
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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 Exchange
Act and the rules and regulations thereunder applicable to a national
securities exchange.\21\ In particular, the Commission finds that the
proposed rule change, as modified by Amendment Nos. 1, 3, and 4
thereto, is consistent with Section 6(b)(5) of the Exchange Act,\22\
which requires, among other things, that the Exchange's rules be
designed to 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.
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\21\ 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).
\22\ 15 U.S.C. 78f(b)(5).
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The Commission finds that the proposal to list and trade the Shares
on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the
Exchange Act,\23\ 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. According to the
Exchange, quotation and last-sale information regarding the Shares will
be disseminated through the facilities of the Consolidated Tape
Association (``CTA''). Quotation information for cash equivalents, OTC
swaps and forward contracts may be obtained from brokers and dealers
who make markets in such instruments. Quotation information for
exchange-traded swaps will be available from the applicable exchange
and major market vendors. The intraday, closing prices, and settlement
prices of the Futures Contracts will be readily available from the
applicable futures exchange Web sites, automated quotation systems,
published or other public sources, or major market data vendors.
Complete real-time data for the Futures Contracts is available by
subscription through on-line information services. ICE Futures U.S. and
NYMEX also provide delayed futures and options on futures information
on current and past trading sessions and market news free of charge on
their respective Web sites. The specific contract specifications for
Futures Contracts are also available on such Web sites, as well as
other financial informational sources. Intra-day price and closing
price level information for the Benchmark will be available from major
market data vendors.
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\23\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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The Funds' Web site, www.ProShares.com, will display the applicable
end of day closing NAV. Each Fund's total portfolio composition will be
disclosed each business day that the NYSE Arca is open for trading, on
the Funds' Web site. The Funds' Web site will also include a form of
the prospectus for the Funds that may be downloaded. The Web site will
include the Shares' ticker and CUSIP information, along with additional
quantitative information updated on a daily basis for each Fund.\24\
The Web site disclosure of portfolio holdings will be made daily and
will include, as applicable, (i) the name, quantity, value, expiration
and strike price of Futures and Options, (ii) the counterparty to and
value of swap agreements and forward contracts, and (ii) the aggregate
net value of other assets (i.e., Treasury securities, cash equivalents
and cash) held in each Fund's portfolio, if applicable.
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\24\ The Funds' Web site will include (1) daily trading volume,
the prior business day's reported NAV and closing price, and a
calculation of the premium and discount of the closing price or mid-
point of the bid/ask spread at the time of NAV calculation (``Bid/
Ask Price'') against the NAV; and (2) data in chart format
displaying the frequency distribution of discounts and premiums of
the daily closing price or Bid/Ask Price against the NAV, within
appropriate ranges, for at least each of the four previous calendar
quarters.
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The Benchmark will be disseminated by one or more major market data
vendors every 15 seconds during the NYSE Arca Core Trading Session of
9:30 a.m. to 4:00 p.m. Eastern Time (``E.T.''). The Indicative Fund
Value (``IFV'') \25\ per Share will be widely disseminated by one or
more major market data vendors every 15 seconds during the Exchange's
Core Trading Session.\26\ The Funds will compute their NAVs at 2:30
p.m. E.T., which is the designated closing time of the crude oil
futures listed on NYMEX,\27\ or an earlier time as set forth on
www.ProShares.com, if necessitated by the New York Stock Exchange LLC,
the Exchange, or other exchange material to the valuation or operation
of such Fund closing early. The NAV for the Shares will be disseminated
daily to all market participants at the same time.
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\25\ The IFV will be calculated by using the prior day's closing
NAV per Share of a Fund as a base and will be updating throughout
the Exchange's Core Trading Session to reflect changes in the
approximate aggregate per Share value of the investments held by a
Fund based on the most recently available prices for the Fund's
investments. According to the Exchange, there may be times when
trading in the Shares is occurring during the NYSE Arca Core Trading
Session, but trading in Futures is not occurring. This may occur
when, for example, a futures exchange and NYSE Arca have different
holiday schedules, a futures exchange closes prior to the close of
the NYSE Arca Core Trading Session, price fluctuation limits are
reached in Futures, or a futures exchange imposes any other
suspension or limitation on trading in Futures. In such instances,
the IFV would be static or priced at the applicable early cut-off
time of the exchange trading the applicable Futures. See Amendment
No. 1, supra note 5, at 9; Amendment No. 4, supra note 8.
\26\ The Exchange notes that several major market data vendors
display and/or make widely available IFVs taken from the CTA or
other data feeds. See Amendment No. 1, supra note 5, at 9 n.13.
\27\ The Exchange states that the daily value of the Benchmark
is calculated as of 2:30 p.m. E.T. to coincide with the designated
closing time. Futures Contracts, however, continue to trade past
2:30 p.m. E.T. and through the end of the NYSE Arca Core Trading
Session at 4:00 p.m. E.T. See id. at 8 n.12.
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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. If the Exchange becomes aware that the NAV with respect to the
Shares is not

[[Page 15403]]

disseminated to all market participants at the same time, it will halt
trading in the Shares until such time as the NAV is available to all
market participants. Further, the Exchange may halt trading during the
day in which an interruption to the dissemination of the IFV or the
value of the Benchmark occurs. If the interruption to the dissemination
of the IFV or the value of the Benchmark persists past the trading day
in which it occurred, the Exchange will halt trading no later than the
beginning of the trading day following the interruption. Trading in
Shares of a 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. The Exchange
states that it has a general policy prohibiting the distribution of
material, non-public information by its employees.\28\ Moreover,
trading of the Shares will be subject to NYSE Arca Equities Rule 8.200,
Commentary .02(e), which sets forth certain restrictions on Equity
Trading Permit (``ETP'') Holders acting as registered Market Makers in
Trust Issued Receipts to facilitate surveillance.
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\28\ See id. at 14.
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The Commission notes that the Exchange or the Financial Industry
Regulatory Authority (``FINRA''), on behalf of the Exchange, or both,
will communicate as needed regarding trading in the Shares and certain
Futures Contracts with other markets and other entities that are
members of the ISG, and the Exchange or FINRA, on behalf of the
Exchange, or both, may obtain trading information regarding trading in
the Shares and certain Futures Contracts from such markets and other
entities. In addition, the Exchange may obtain information regarding
trading in the Shares and certain Futures Contracts from markets and
other entities that are members of ISG or with which the Exchange has
in place a CSSA.\29\ The Exchange is also able to obtain information
regarding trading in the Shares, the physical commodities underlying
Futures Contracts through ETP Holders, in connection with such ETP
Holders' proprietary or customer trades which they effect through ETP
Holders on any relevant market. The Exchange can obtain market
surveillance information, including customer identity information, with
respect to transactions (including transactions in Futures Contracts)
occurring on US futures exchanges, which are members of the ISG.
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\29\ For a list of the current members of ISG, see
www.isgportal.org. According to the Exchange, not all components of
a Fund may trade on markets that are members of ISG or with which
the Exchange has in place a CSSA. See id. at 13 n.18.
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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. In support of this
proposal, the Exchange represented that:
(1) The Shares will conform to the initial and continued listing
criteria under NYSE Arca Equities Rule 8.200.
(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 the Exchange, as well as cross-market
surveillances administered by FINRA on behalf of the Exchange, which
are designed to detect violations of Exchange rules and applicable
federal securities laws, and 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.
(4) Prior to the commencement of trading, the Exchange will inform
its ETP Holders in an Information Bulletin of the special
characteristics and risks associated with trading the Shares.
Specifically, the Information Bulletin will discuss the following: (a)
The risks involved in trading the Shares during the Early and Late
Trading Sessions when an updated IFV will not be calculated or publicly
disseminated; (b) the procedures for purchases and redemptions of
Shares in Creation Units (and that Shares are not individually
redeemable); (c) NYSE Arca Equities Rule 9.2(a), which imposes a duty
of due diligence on its ETP Holders to learn the essential facts
relating to every customer prior to trading the Shares; (d) how
information regarding the IFV is disseminated; (e) how information
regarding portfolio holdings is disseminated; (f) the requirement that
ETP Holders deliver a prospectus to investors purchasing newly issued
Shares prior to or concurrently with the confirmation of a transaction;
and (g) trading information.
(5) For initial and continued listing, each Fund will be in
compliance with Rule 10A-3 under the Act,\30\ as provided by NYSE Arca
Equities Rule 5.3.
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\30\ 17 CFR 240.10A-3.
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(6) Each Fund will seek to achieve its respective investment
objective by investing, under normal market conditions, substantially
all of its assets in Futures Contracts.'' In the event position, price
or accountability limits are reached with respect to Futures Contracts,
each Fund may obtain exposure to the Benchmark through investments in
Financial Instruments. To the extent that a Fund invests in Financial
Instruments, it would first make use of exchange-traded Financial
Instruments, if available. If an investment in exchange-traded
Financial Instruments is unavailable, then a Fund would invest in
Financial Instruments that clear through derivatives clearing
organizations that satisfy the Trust's criteria, if available. If an
investment in cleared Financial Instruments is unavailable, then a Fund
would invest in other Financial Instruments, including uncleared
Financial Instruments in the OTC market.
(7) Not more than 10% of the net assets of a Fund in the aggregate
invested in Futures Contracts shall consist of Futures Contracts whose
principal market is not a member of the ISG or is a market with which
the Exchange does not have a CSSA.
(8) To the extent a Fund enters into swap agreements and other OTC
transactions, it will do so only with large, established and well
capitalized financial institutions that meet the Sponsor's credit
quality standards and monitoring policies. Each Fund will use various
techniques to minimize credit risk including early termination or reset
and payment, using different counterparties and limiting the net amount
due from any individual counterparty.
(9) A minimum of 100,000 Shares of each Fund will be outstanding at
the commencement of trading on the Exchange.
The Exchange represents that all statements and representations
made in this filing regarding (a) the description of the portfolios of
the Funds or Benchmark, (b) limitations on portfolio holdings or the
Benchmark, or (c) the applicability of Exchange listing rules specified
in this rule filing shall constitute continued listing requirements for
listing the Shares on the Exchange. The issuer has represented to the
Exchange that it will advise the Exchange of any failure by the Funds
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

[[Page 15404]]

requirements.\31\ If a Fund is not in compliance with the applicable
listing requirements, the Exchange will commence delisting procedures
under NYSE Arca Equities Rule 5.5(m).
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\31\ 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.
77499 (April 1, 2016), 81 FR 20428 (April 7, 2016) (Notice of Filing
of Amendment No. 2, and Order Granting Accelerated Approval of a
Proposed Rule Change, as Modified by Amendment No. 2, to List and
Trade Shares of the SPDR DoubleLine Short Duration Total Return
Tactical ETF of the SSgA Active Trust), available at: http://www.sec.gov/rules/sro/bats/2016/34-77499.pdf. In the context of this
representation, it is the Commission's view that ``monitor'' and
``surveil'' both mean ongoing oversight of the 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 and description of the Funds, including those set forth
above and in Amendment Nos. 1, 3, and 4. The Commission notes that the
Shares must comply with the requirements of NYSE Arca Equities Rule
8.200 and Commentary .02 thereto to be listed and traded on the
Exchange on an initial and continuing basis.
For the foregoing reasons, the Commission finds that the proposed
rule change, as modified by Amendment Nos. 1, 3, and 4 thereto, is
consistent with Section 6(b)(5) of the Act \32\ and the rules and
regulations thereunder applicable to a national securities exchange.
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\32\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion

It is therefore ordered, pursuant to Section 19(b)(2) of the
Exchange Act,\33\ that the proposed rule change (SR-NYSEArca-2017-07),
as modified by Amendment Nos. 1, 3, and 4 thereto, be, and it hereby
is, approved.
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\33\ 15 U.S.C. 78s(b)(2).

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\34\
---------------------------------------------------------------------------

\34\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-06053 Filed 3-27-17; 8:45 am]
BILLING CODE 8011-01-P

15404 Federal Register / Vol. 82, No. 58 / Tuesday, March 28, 2017 / Notices

requirements.31 If a Fund is not in SECURITIES AND EXCHANGE I. Rule 608(a)
compliance with the applicable listing COMMISSION A. Purpose of the Amendments
requirements, the Exchange will
commence delisting procedures under [Release No. 34–80300; File No. SR–CTA/ 1. Background
NYSE Arca Equities Rule 5.5(m). CQ–2017–02] In October 2014, the Participants
This approval order is based on all of amended the Plans’ fee schedules to
the Exchange’s representations and Consolidated Tape Association; Notice establish fees for non-display uses of
description of the Funds, including of Filing and Immediate Effectiveness data and to reduce the device fees
those set forth above and in Amendment of the Twenty-Second Charges assessed on professional subscribers.5 In
Nos. 1, 3, and 4. The Commission notes Amendment to the Second so doing, the Participants determined
that the Shares must comply with the Restatement of the CTA Plan and the that such a change provided an
Thirteenth Charges Amendment to the equitable allocation of fees to the
requirements of NYSE Arca Equities
Restated CQ Plan industry that would reflect the value of
Rule 8.200 and Commentary .02 thereto
non-display data usage (subject to the
to be listed and traded on the Exchange March 23, 2017. non-display fees) versus display data
on an initial and continuing basis.
Pursuant to Section 11A of the usage (subject to the lower device fees).
For the foregoing reasons, the Securities Exchange Act of 1934 At that time, non-display use was
Commission finds that the proposed (‘‘Act’’),1 and Rule 608 thereunder,2 defined as consisting of accessing,
rule change, as modified by Amendment notice is hereby given that on March 2, processing, or consuming real-time
Nos. 1, 3, and 4 thereto, is consistent 2017, the Consolidated Tape Network A or Network B quotation
with Section 6(b)(5) of the Act 32 and the Association (‘‘CTA’’) Plan participants information or last sale price
rules and regulations thereunder (‘‘Participants’’) 3 filed with the information, whether delivered via
applicable to a national securities Securities and Exchange Commission direct and/or redistributor data feeds,
exchange. (‘‘Commission’’) a proposal to amend for a purpose other than in support of
the Second Restatement of the CTA Plan a data recipient’s display or further
IV. Conclusion and the Restated Consolidated internal or external distribution. The
It is therefore ordered, pursuant to Quotation (‘‘CQ’’) Plan (‘‘Plans’’).4 Participants established three categories
Section 19(b)(2) of the Exchange Act,33 These amendments represent the of non-display uses of market data:
twenty-second Charges Amendment to • Category 1 applies when a data
that the proposed rule change (SR–
the CTA Plan and the thirteenth Charges recipient makes non-display uses of
NYSEArca–2017–07), as modified by real-time market data on its own behalf.
Amendment Nos. 1, 3, and 4 thereto, be, Amendment to the CQ Plan
(‘‘Amendments’’). The Amendments • Category 2 applies when a data
and it hereby is, approved. recipient makes non-display uses of
seek to amend the Plans’ fee schedule as
For the Commission, by the Division of well as the non-display use policy to real-time market data on behalf of its
Trading and Markets, pursuant to delegated clarify the applicability on the non- clients.
authority.34 display fee, the device fee, and the • Category 3 applies when a data
Eduardo A. Aleman, access fee. recipient makes non-display uses of
Assistant Secretary.
real-time market data for the purpose of
The Commission is publishing this internally matching buy and sell orders
[FR Doc. 2017–06053 Filed 3–27–17; 8:45 am] notice to solicit comments from within an organization.
BILLING CODE 8011–01–P interested persons on the proposed Data recipients can be charged for
Amendments. each of the three categories of non-
display uses. Category 3 is the only non-
1 15 U.S.C. 78k–1. display fee that can be charged multiple
2 17 CFR 242.608.
3 The Participants are: BATS Exchange, Inc.,
times; a data recipient would be charged
BATS–Y Exchange, Inc., Chicago Board Options for each ATS, exchange, or ECN
31 The Commission notes that certain other Exchange, Inc., Chicago Stock Exchange, Inc., operated by the data recipient. In the
proposals for the listing and trading of Managed
EDGA Exchange, Inc., EDGX Exchange, Inc., October 2014 Non-Display Filing, the
Financial Industry Regulatory Authority, Inc., Participants also provided the following
Fund Shares include a representation that the International Securities Exchange, LLC, Investors’
exchange will ‘‘surveil’’ for compliance with the Exchange LLC, NASDAQ OMX BX, Inc., NASDAQ non-exhaustive list of examples of non-
continued listing requirements. See, e.g., Securities OMX PHLX, Inc., Nasdaq Stock Market LLC, display use:
Exchange Act Release No. 77499 (April 1, 2016), 81 National Stock Exchange, New York Stock • Any trading in any asset class;
FR 20428 (April 7, 2016) (Notice of Filing of Exchange LLC, NYSE MKT LLC, and NYSE Arca, • Automated order or quote
Amendment No. 2, and Order Granting Accelerated Inc.
4 See Securities Exchange Act Release Nos. 10787
generation and/or order pegging;
Approval of a Proposed Rule Change, as Modified
(May 10, 1974), 39 FR 17799 (May 20, 1974)
• Price referencing for algorithmic
by Amendment No. 2, to List and Trade Shares of
(declaring the CTA Plan effective); 15009 (July 28, trading;
the SPDR DoubleLine Short Duration Total Return
Tactical ETF of the SSgA Active Trust), available 1978), 43 FR 34851 (August 7, 1978) (temporarily • Price referencing for smart order
authorizing the CQ Plan); and 16518 (January 22, routing;
at: http://www.sec.gov/rules/sro/bats/2016/34-
77499.pdf. In the context of this representation, it
1980), 45 FR 6521 (January 28, 1980) (permanently • Operations control programs;
authorizing the CQ Plan). The most recent
is the Commission’s view that ‘‘monitor’’ and restatement of both Plans was in 1995. The CTA • Investment analysis;
‘‘surveil’’ both mean ongoing oversight of the Plan, pursuant to which markets collect and • Order verification;
sradovich on DSK3GMQ082PROD with NOTICES

Fund’s compliance with the continued listing disseminate last sale price information for non- • Surveillance programs;
requirements. Therefore, the Commission does not NASDAQ listed securities, is a ‘‘transaction • Risk management;
view ‘‘monitor’’ as a more or less stringent reporting plan’’ under Rule 601 under the Act, 17 • Compliance; and
CFR 242.601, and a ‘‘national market system plan’’
obligation than ‘‘surveil’’ with respect to the
under Rule 608 under the Act, 17 CFR 242.608. The • Portfolio valuation.
continued listing requirements.
32 15 U.S.C. 78f(b)(5).
CQ Plan, pursuant to which markets collect and
disseminate bid/ask quotation information for listed 5 See Securities Exchange Act Release No. 73278
33 15 U.S.C. 78s(b)(2).
securities, is a ‘‘national market system plan’’ under (October 1, 2014), 79 FR 60536 (October 7, 2014)
34 17 CFR 200.30–3(a)(12). Rule 608 under the Act, 17 CFR 242.608. (‘‘October 2014 Non-Display Filing’’).

VerDate Sep<11>2014 17:14 Mar 27, 2017 Jkt 241001 PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 E:\FR\FM\28MRN1.SGM 28MRN1

Document Created: 2017-03-28 00:31:51
Document Modified: 2017-03-28 00:31:51

Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
FR Citation		82 FR 15400