82 FR 48127 - Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change To List and Trade Shares of the JPMorgan Equity Long/Short ETF Under NYSE Arca Rule 8.600-E

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 82, Issue 198 (October 16, 2017)

Page Range		48127-48135
FR Document		2017-22263

Federal Register, Volume 82 Issue 198 (Monday, October 16, 2017)

[Federal Register Volume 82, Number 198 (Monday, October 16, 2017)]
[Notices]
[Pages 48127-48135]
From the Federal Register Online [www.thefederalregister.org]
[FR Doc No: 2017-22263]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81842; File No. SR-NYSEArca-2017-87

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change To List and Trade Shares of the JPMorgan Equity
Long/Short ETF Under NYSE Arca Rule 8.600-E

October 10, 2017.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on September 26, 2017, NYSE Arca, Inc. (the ``Exchange'' or
``NYSE Arca'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

The Exchange proposes to list and trade shares of the following
under NYSE Arca Equities 8.600-E (``Managed Fund Shares''): JPMorgan
Equity Long/Short ETF. The proposed change is available on the
Exchange's Web site at www.nyse.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.

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

In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.

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

1. Purpose
The Exchange proposes to list and trade shares (``Shares'') of the
following under NYSE Arca Rule 8.600-E, which governs the listing and
trading of Managed Fund Shares \4\ on the Exchange: \5\ JPMorgan Equity
Long/Short ETF (the ``Fund'').\6\
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\4\ 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 Rule 5.2-E(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.
\5\ The Commission has previously approved listing and trading
on the Exchange of other series of the Trust that are actively
managed funds under Rule 8.600-E. See, e.g., Securities Exchange Act
Release Nos. 79683 (December 23, 2016) (SR-NYSEArca-2016-82) (order
approving a proposed rule change to list and trade shares of the
JPMorgan Diversified Event Driven ETF under NYSE Arca Equities Rule
8.600); 77904 (May 25, 2016) (SR-NYSEArca-2016-17) (order approving
a proposed rule change to list and trade of shares of the JPMorgan
Diversified Alternatives ETF under NYSE Arca Equities Rule 8.600).
\6\ The Trust is registered under the 1940 Act. On July 18,
2017, 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 the 1940 Act relating to
the Fund (File Nos. 333-191837 and 811-22903) (the ``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. 31990 (February 9, 2016) (``Exemptive
Order''). Investments made by the Fund will comply with the
conditions set forth in the Exemptive Order.
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The Fund is a series of J.P. Morgan Exchange-Traded Fund Trust
(``Trust''), a Delaware statutory trust. J.P. Morgan Investment
Management Inc. (``Adviser'' or ``Administrator'') will be the
investment adviser to the Fund and also provide administrative services
for and oversee the other service providers for the Fund. The Adviser
is a wholly-owned subsidiary of JPMorgan Asset Management Holdings
Inc., which is an indirect, wholly-owned subsidiary of JPMorgan Chase &
Co. (``JPMorgan Chase''), a bank holding company. JPMorgan Distribution
Services, Inc. (``Distributor'') will be the distributor of the Fund's
Shares.
Commentary .06 to Rule 8.600-E 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.\7\ 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 is not
registered as a broker-dealer but is affiliated with a broker-dealer
and has implemented and will maintain a fire wall with respect to such
broker-dealer affiliate regarding access to information concerning the
composition and/or changes to the portfolio. In the event (a) the
Adviser becomes registered as a broker-dealer or

[[Page 48128]]

newly affiliated with one or more broker-dealers, or (b) any new
adviser or sub-adviser is a registered broker-dealer or becomes
affiliated with a broker-dealer, it will implement and maintain 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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\7\ 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 its 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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JPMorgan Equity Long/Short ETF
According to the Registration Statement, the Fund will seek to
provide long-term total return. The Fund will seek to profit by
exploiting pricing inefficiencies between equity securities by
maintaining long and short positions. It will do so based on a
systematic investment process. The Adviser believes it has identified
(and will continue to identify) a set of investment return sources that
have a low correlation to each other and to traditional markets and
have distinct risk and return profiles (each a ``return factor'').
Under normal market conditions,\8\ the Fund will employ the
``Equity Long/Short'' strategy to access certain return factors. The
strategy will involve simultaneously investing in equities (i.e.,
investing long) that the Adviser believes are attractive based on
relevant return factors and selling equities (selling short) that the
Adviser believes are unattractive based on the relevant return factors.
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\8\ The term ``normal market conditions'' is defined in NYSE
Arca Rule 8.600-E(c)(5).
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Each return factor represents a potential source of investment
return that results from, among other things, assuming a particular
risk or taking advantage of a behavioral bias. According to the
Registration Statement, the Adviser believes that, in general, the
Fund's investment returns are attributable to the individual
contributions of the various return factors. By employing this return
factor based approach, the Fund seeks to provide positive total returns
over time while maintaining a relatively low correlation with
traditional markets.
The exposure to individual return factors may vary based on the
market opportunity of the individual return factors. For example, the
return factors that the Adviser may utilize include, but are not
limited to, the following:

Value--seek to purchase ``cheap'' stocks and sell short
``expensive'' stocks
Momentum--seek to purchase companies with positive earnings
revisions and strong price momentum and sell short stocks with negative
earnings revisions and weak price momentum
Size--seek to purchase small cap stocks and sell short large
cap stocks
Quality--seek to buy high quality stocks and sell short lower
ranked stocks

Additional return factors may be identified over time.
The Fund will generally invest its assets globally to gain
exposure, either directly or through the use of derivatives, to equity
securities (across market capitalizations) in developed markets. The
Fund may use both long positions (held directly or through the use of
derivative instruments) and short positions (achieved primarily through
the use of derivative instruments). The Fund generally will maintain a
total net long market exposure under normal market conditions, meaning
that the Fund's aggregate exposure will be greater to instruments that
the Adviser expects to outperform. However, the Fund may have net long
or net short exposure to one or more industry sectors, individual
markets and/or currencies. To the extent that the Fund hedges its
currency exposure into the U.S. dollar, it may reduce the effects of
currency fluctuations.
The Adviser will make use of derivatives, including swaps, futures,
options and forward contracts, in implementing its strategy (see ``The
Fund's Use of Derivatives'', below). Under normal market conditions,
the Adviser currently expects that a significant portion of the Fund's
exposure will be attained through the use of derivatives in addition to
its exposure through direct investment. Derivatives, which are
instruments that have a value based on another instrument, exchange
rate or index, will primarily be used as an efficient means of
implementing a particular strategy in order to gain exposure to a
desired return factor. For example, the Fund may use a total return
swap to establish both long and short positions in order to gain the
desired exposure rather than physically purchasing and selling short
each instrument. Derivatives may also be used to increase gain, to
effectively gain targeted exposure from its cash positions, to hedge
various investments and/or for risk management. As a result of the
Fund's use of derivatives and to serve as collateral, the Fund may hold
significant amounts of U.S. Treasury obligations, including Treasury
bills, bonds and notes and other obligations issued or guaranteed by
the U.S. Treasury, obligations of other sovereign governments or
supranational entities, other short-term investments, including money
market funds and foreign currencies in which certain derivatives are
denominated.
Under normal market conditions, at least 80% of the Fund's assets
will be invested in equity securities and in derivative instruments
that provide exposure to equity securities. ``Assets'' means net
assets, plus the amount of borrowings for investment purposes. The
amount that may be invested in any one instrument will vary and
generally depend on the return factors employed by the Adviser at that
time. As long as the Fund meets its 80% requirement, there are no other
stated percentage limitations on the amount that can be invested in any
one type of instrument, and the Adviser may, at times, focus on a
smaller number of instruments.\9\ The Fund is generally unconstrained
by any particular capitalization, style or sector and may invest in any
developed region or country. The Fund may have both long and short
exposure to these instruments. Given the complexity of the investments
and strategies of the Fund, the Adviser will make use of quantitative
models and information and data supplied by third parties to, among
other things, help determine the portfolio's weightings among various
investments and construct sets of transactions and investments.
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\9\ The Fund's investments would be subject to any applicable
percentage limitations in Commentary .01 to NYSE Arca Rule 8.600-E.
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The Fund will purchase a particular instrument when the Adviser
believes that such instrument will allow the Fund to gain the desired
exposure to a return factor. Conversely, the Fund will consider selling
a particular instrument when it no longer provides the desired exposure
to a return factor. In addition, investment decisions will take into
account a return factor's contribution to the Fund's overall
volatility. In allocating assets, the Adviser seeks to approximately
balance risk to the individual return factors over the long term,
although the exposure to individual return factors will vary based on,
among other things, the opportunity the Adviser sees in each individual
return factor.
Principal Investments
For purposes of calculating the percentage of principal investments
under this proposed rule change, under normal market conditions, at
least 80% of the Fund's assets will be invested in U.S. and foreign
exchange-traded equity

[[Page 48129]]

securities, derivatives instruments that provide exposure to such
equity securities, and currency forward transactions.
The Fund may invest in the following exchange-listed equity
securities: U.S. and foreign exchange-listed common stocks of U.S. and
foreign corporations, U.S. and foreign exchange-listed preferred stocks
of U.S. and foreign corporations, U.S. and foreign exchange-listed
warrants of U.S. and foreign corporations, U.S. and foreign exchange-
listed rights of U.S. and foreign corporations, and U.S. and foreign
exchange-listed master limited partnerships (``MLPs'').
The Fund may purchase and sell U.S. exchange-traded futures on U.S.
and foreign equities, U.S. exchange-traded options on U.S. and foreign
equity futures, and U.S. exchange-traded futures on U.S. and foreign
stock indexes.
The Fund may invest in over-the-counter (``OTC'') and U.S.
exchange-traded call and put options on equity securities and equity
securities indexes.
The Fund may invest in OTC total return swaps on U.S. and foreign
equities and U.S. and foreign equity indices.
The Fund may invest in forward currency transactions. Such
investments consist of non-deliverable forwards (``NDFs''), foreign
forward currency contracts,\10\ caps and floors.
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\10\ A foreign currency forward contract is a negotiated
agreement between the contracting parties to exchange a specified
amount of currency at a specified future time at a specified rate.
The rate can be higher or lower than the spot rate between the
currencies that are the subject of the contract.
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The Fund may invest in exchange-traded real estate investment
trusts (``REITs''). Exchange-listed REITs will be traded on U.S.
national securities exchanges and on non-U.S. exchanges.
The Fund may invest in U.S. and foreign exchange-listed and OTC
Depositary Receipts.\11\
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\11\ Depositary Receipts include American Depositary Receipts
(``ADRs''), Global Depositary Receipts (``GDRs'') and European
Depositary Receipts (``EDRs''). ADRs are receipts typically issued
by an American bank or trust company that evidence ownership of
underlying securities issued by a foreign corporation. EDRs are
receipts issued by a European bank or trust company evidencing
ownership of securities issued by a foreign corporation. GDRs are
receipts issued throughout the world that evidence a similar
arrangement. ADRs, EDRs and GDRs may trade in foreign currencies
that differ from the currency the underlying security for each ADR,
EDR or GDR principally trades in. Generally, ADRs, in registered
form, are designed for use in the U.S. securities markets. EDRs, in
registered form, are used to access European markets. GDRs, in
registered form, are tradable both in the United States and in
Europe and are designed for use throughout the world. No more than
10% of the net assets of the Fund will be invested in ADRs that are
not exchange-listed.
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The Fund may invest in OTC-traded convertible securities (bonds or
preferred stock that can convert to common stock).
The Fund may engage in short sales of equity securities.
Other Investments
While the Fund, under normal market conditions, will invest at
least eighty percent (80%) of its assets in the securities and
financial instruments described above, the Fund may invest its
remaining assets in other assets and financial instruments, as
described below.
The Fund may invest in cash and cash equivalents which are
investments in money market funds (including funds for which the
Adviser and/or its affiliates may serve as investment adviser or
administrator), bank obligations,\12\ and commercial paper.\13\
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\12\ Bank obligations include the following: Bankers'
acceptances, certificates of deposit and time deposits. Bankers'
acceptances are bills of exchange or time drafts drawn on and
accepted by a commercial bank. Maturities are generally six months
or less. Certificates of deposit are negotiable certificates issued
by a bank for a specified period of time and earning a specified
return. Time deposits are non-negotiable receipts issued by a bank
in exchange for the deposit of funds.
\13\ Commercial paper consists of secured and unsecured short-
term promissory notes issued by corporations and other entities.
Maturities generally vary from a few days to nine months.
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The Fund may invest in OTC-traded contingent value rights
(``CVRs'').
The Fund may invest in U.S. Government obligations, which may
include direct obligations of the U.S. Treasury, including Treasury
bills, notes and bonds, all of which are backed as to principal and
interest payments by the full faith and credit of the United States,
and separately traded principal and interest component parts of such
obligations that are transferable through the Federal book-entry system
known as Separate Trading of Registered Interest and Principal of
Securities (STRIPS) and Coupons Under Book Entry Safekeeping
(``CUBES'').
The Fund may invest in U.S. and foreign corporate debt.
The Fund may invest in sovereign obligations, which are investments
in debt obligations issued or guaranteed by a foreign sovereign
government or its agencies, authorities or political subdivisions. The
Fund may also invest in obligations of supranational entities including
securities designated or supported by governmental entities to promote
economic reconstruction or development of international banking
institutions and related government agencies.
The Fund may invest in spot currency transactions.
The Fund may invest in repurchase and reverse repurchase
agreements.
The Fund may invest in Rule 144A securities and Regulation S
securities.
Other Restrictions
The Fund's investments, including derivatives, will be consistent
with the Fund's investment objective and will not be used to enhance
leverage (although certain derivatives and other investments may result
in leverage). That is, while the Fund will be permitted to borrow as
permitted under the 1940 Act, the Fund's investments will not be used
to seek performance that is the multiple or inverse multiple (e.g., 2Xs
and 3Xs) of the Fund's primary broad-based securities benchmark index
(as defined in Form N-1A).\14\
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\14\ The Fund's broad-based securities benchmark index will be
identified in a future amendment to the Registration Statement
following the Fund's first full calendar year of performance.
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The Fund's Use of Derivatives
The Fund proposes to seek certain exposures through transactions in
the specific derivative instruments described above. The derivatives to
be used are futures, swaps, forwards and call and put options.
Derivatives, which are instruments that have a value based on another
instrument, exchange rate or index, may also be used as substitutes for
securities in which the Fund can invest. The Fund may use these
derivative instruments to increase gain, to effectively gain targeted
exposure from its cash positions, to hedge various investments and/or
for risk management.
Investments in derivative instruments will be made in accordance
with the 1940 Act and consistent with the Fund's investment objective
and policies. To limit the potential risk associated with such
transactions, the Fund will segregate or ``earmark'' assets determined
to be liquid by the Adviser in accordance with procedures established
by the Trust's Board of Trustees (the ``Board'') and in accordance with
the 1940 Act (or, as permitted by applicable regulation, enter into
certain offsetting positions) to cover its obligations under derivative
instruments. These procedures have been adopted consistent with Section
18 of the 1940 Act and related Commission guidance. In addition, the
Fund will include appropriate risk disclosure in its offering
documents, including leveraging risk. Leveraging risk is the risk that
certain transactions of the Fund, including the Fund's use of
derivatives, may give rise to leverage, causing the Fund to be more
volatile

[[Page 48130]]

than if it had not been leveraged.\15\ Because the markets for certain
assets, or the assets themselves, may be unavailable or cost
prohibitive as compared to derivative instruments, suitable derivative
transactions may be an efficient alternative for the Fund to obtain the
desired asset exposure.
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\15\ To mitigate leveraging risk, the Adviser will segregate or
``earmark'' liquid assets or otherwise cover the transactions that
may give rise to such risk.
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Creation and Redemption of Shares
The consideration for a purchase of Creation Units will generally
be cash, but may consist of an in-kind deposit of a designated
portfolio of equity securities and other investments (the ``Deposit
Instruments'') and an amount of cash computed as described below (the
``Cash Amount'') under some circumstances. The Cash Amount together
with the Deposit Instruments, as applicable, are referred to as the
``Portfolio Deposit,'' which represents the minimum initial and
subsequent investment amount for a Creation Unit of the Fund. The size
of a Creation Unit will be 50,000 Shares and will be subject to change.
In the event the Fund requires Deposit Instruments and a Cash
Amount in consideration for purchasing a Creation Unit, the function of
the Cash Amount is to compensate for any differences between the net
asset value (``NAV'') per Creation Unit and the Deposit Amount (as
defined below). The Cash Amount would be an amount equal to the
difference between the NAV of the Shares (per Creation Unit) and the
``Deposit Amount,'' which is an amount equal to the aggregate market
value of the Deposit Instruments. If the Cash Amount is a positive
number (the NAV per Creation Unit exceeds the Deposit Amount), the
Authorized Participant will deliver the Cash Amount. If the Cash Amount
is a negative number (the NAV per Creation Unit is less than the
Deposit Amount), the Authorized Participant will receive the Cash
Amount. 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 (``E.T.'')), the list of the names and the
required number of shares of each Deposit Instrument to be included in
the current Portfolio Deposit (based on information at the end of the
previous business day), as well as information regarding the Cash
Amount for the Fund. Such Portfolio Deposit is 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
Portfolio Deposit composition is made available.
The identity and number of the Deposit Instruments and Cash Amount
required for the Portfolio Deposit for the Fund changes as rebalancing
adjustments and corporate action events are reflected from time to time
by the Adviser with a view to the investment objective of the Fund. In
addition, the Trust reserves the right to accept a basket of securities
or cash that differs from Deposit Instruments or to permit the
substitution of an amount of cash (i.e., a ``cash in lieu'' amount) to
be added to the Cash Amount to replace any Deposit Instrument which
may, among other reasons, not be available in sufficient quantity for
delivery, not be permitted to be re-registered in the name of the Trust
as a result of an in-kind creation order pursuant to local law or
market convention or for other reasons as described in the Registration
Statement, or which may not be eligible for trading by a Participating
Party (defined below). In light of the foregoing, in order to seek to
replicate the in-kind creation order process, the Trust expects to
purchase the Deposit Instruments represented by the cash in lieu amount
in the secondary market.
Procedures for Creation of Creation Units
To be eligible to place orders with the Distributor to create
Creation Units of the Fund, an entity or person either must be (1) a
``Participating Party,'' i.e., a broker-dealer or other participant in
the clearing process through the Continuous Net Settlement System of
the NSCC; or (2) a Depositary Trust Company (``DTC'') Participant,
which, in either case, must have executed an agreement with the
Distributor (as it may be amended from time to time in accordance with
its terms) (``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 closing time of the regular trading
session on the Exchange (``Closing Time'') (ordinarily 4:00 p.m. E.T.),
in each case on the date such order is placed in order for creation of
Creation Units to be effected based on the NAV of the Fund as
determined on such date.
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, only on a business day and only through a Participating
Party or DTC Participant who has executed a Participant Agreement. The
Trust will not redeem Shares in amounts less than Creation Units. All
orders to redeem Creation Units must be received by the Distributor no
later than the Exchange Closing Time (ordinarily 4:00 p.m. E.T.).
Although the Fund will generally pay redemption proceeds in cash,
there may be instances when it will make redemptions in-kind. In these
instances, the Administrator, through NSCC, makes available immediately
prior to the opening of business on the Exchange (currently 9:30 a.m.
E.T.) on each day that the Exchange is open for business, the identity
of the Fund's assets and/or an amount of cash that will be applicable
(subject to possible amendment or correction) to redemption requests
received in proper form on that day. With respect to redemptions in-
kind, the redemption proceeds for a Creation Unit generally consist of
``Redemption Instruments'' (which are securities received on
redemption) as announced by the Administrator on the business day of
the request for redemption, 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 Redemption Instruments, less the redemption transaction fee and
variable fees described below.
Should the Redemption Instruments have a value greater than the NAV
of the Shares being redeemed, a compensating cash payment to the Trust
equal to the differential plus the applicable redemption transaction
fee will be required to be arranged for by or on behalf of the
redeeming shareholder. The Fund reserves the right to honor a
redemption request by delivering a basket of securities or cash that
differs from the Redemption Instruments if, among other reasons, such
instruments are not permitted to be re-registered in the name of the
customer as a result of an in-kind redemption order pursuant to local
law or market convention or for other reasons as described in the
Registration Statement, or which may not be eligible for trading by a
Participating Party.\16\
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\16\ 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.

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[[Page 48131]]

Derivatives Valuation Methodology for Purposes of Determining Intra-Day
Indicative Value
On each business day, before commencement of trading in Fund Shares
on NYSE Arca, the Fund will disclose on its Web site the identities and
quantities of the portfolio instruments and other assets held by the
Fund that will form the basis for the Fund's calculation of NAV at the
end of the business day.
In order to provide additional information regarding the intra-day
value of Shares of the Fund, one or more major market data vendors will
disseminate every 15 seconds, during the Exchange's Core Trading
Session, through the facilities of the Consolidated Tape Association
(``CTA'') or other widely disseminated means, an updated Portfolio
Indicative Value (``PIV'') for the Fund as calculated by a third party
market data provider.
A third party market data provider will calculate the PIV for the
Fund. The third party market data provider may use market quotes if
available or may fair value securities against proxies (such as swap or
yield curves).
With respect to specific derivatives:
NDFs and foreign forward currency contracts may be valued
intraday using market quotes, or another proxy as determined to be
appropriate by the third party market data provider.
Futures may be valued intraday using the relevant futures
exchange data, or another proxy as determined to be appropriate by the
third party market data provider.
Total return swaps may be valued intraday using the
underlying asset price, or another proxy as determined to be
appropriate by the third party market data provider.
Exchange listed options may be valued intraday using the
relevant exchange data, or another proxy as determined to be
appropriate by the third party market data provider.
OTC options may be valued intraday through option
valuation models (e.g., Black-Scholes) or using exchange traded options
as a proxy, or another proxy as determined to be appropriate by the
third party market data provider.
Disclosed Portfolio
The Fund's disclosure of derivative positions in the applicable
Disclosed Portfolio includes information that market participants can
use to value these positions intraday. On a daily basis, the Fund will
disclose the information regarding the Disclosed Portfolio required
under NYSE Arca Rule 8.600-E (c)(2) to the extent applicable. The
Fund's Web site information will be publicly available at no charge.
Impact on Arbitrage Mechanism
The Adviser believes there will be minimal impact to the arbitrage
mechanism as a result of the use of derivatives. Market makers and
participants should be able to value derivatives as long as the
positions are disclosed with relevant information. The Adviser believes
that the price at which Shares trade will continue to be disciplined by
arbitrage opportunities created by the ability to purchase or redeem
creation Shares at their NAV, which should ensure that Shares will not
trade at a material discount or premium in relation to their NAV.
The Adviser does not believe there will be any significant impacts
to the settlement or operational aspects of the Fund's arbitrage
mechanism due to the use of derivatives. Because derivatives generally
are not eligible for in-kind transfer, they will typically be
substituted with a ``cash in lieu'' amount when the Fund processes
purchases or redemptions of creation units in-kind.
Application of Generic Listing Requirements
The Exchange is submitting this proposed rule change because the
portfolio for the Fund will not meet all of the ``generic'' listing
requirements of Commentary .01 to NYSE Arca Rule 8.600-E applicable to
the listing of Managed Fund Shares. The Fund's portfolio would meet all
such requirements except for those set forth in Commentary .01(e) to
NYSE Arca Rule 8.600-E \17\ and Commentary .01(b)(3) to NYSE Arca Rule
8.600-E.\18\
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\17\ Commentary .01(e) to NYSE Arca Rule 8.600-E provides that a
portfolio may hold OTC derivatives, including forwards, options and
swaps on commodities, currencies and financial instruments (e.g.,
stocks, fixed income, interest rates, and volatility) or a basket or
index of any of the foregoing; however, on both an initial and
continuing basis, no more than 20% of the assets in the portfolio
may be invested in OTC derivatives. For purposes of calculating this
limitation, a portfolio's investment in OTC derivatives will be
calculated as the aggregate gross notional value of the OTC
derivatives.
\18\ Commentary .01(b)(3) to NYSE Arca 8.600-E provides that an
underlying portfolio (excluding exempted securities) that includes
fixed income securities shall include a minimum of 13 non-affiliated
issuers, provided, however, that there shall be no minimum number of
non-affiliated issuers required for fixed income securities if at
least 70% of the weight of the portfolio consists of equity
securities as described in Commentary .01(a) to Rule 8.600-E.
---------------------------------------------------------------------------

With respect to Commentary .01(e), the aggregate gross notional
value of the Fund's investments in OTC derivatives may exceed 20% of
Fund assets, calculated based on the aggregate gross notional value of
such OTC derivatives.
The Adviser represents that it intends to engage in strategies that
utilize foreign currency forward transactions, total return swaps on
equities (which swaps may be traded OTC) and OTC options (as described
above) based on its investment strategies. Depending on market
conditions, the exposure due to these strategies may exceed 20% of the
Fund's assets. The Adviser represents further that the foreign exchange
forward market is OTC and total return swaps will be traded OTC, and,
as such, it is not possible to implement these strategies efficiently
using listed derivatives. In addition, use of OTC options on equity
securities and equity securities indexes may be an important means to
reduce risk in the Fund's equity investments, or, depending on market
conditions, to enhance returns of the such investments. If the Fund
were limited to investing up to 20% of assets in OTC derivatives, the
Fund would have to exclude or underweight these strategies and would be
less diversified, concentrating risk in the other strategies it will
utilize.
The Adviser represents that the Fund will follow an investment
strategy utilized within the JP Morgan Diversified Alternatives ETF,
shares of which have previously been approved by the Commission for
Exchange listing and trading.\19\ As noted above, the Fund may use the
derivative instruments described above to increase gain, to effectively
gain targeted exposure from its cash positions, to hedge various
investments and/or for risk management.
---------------------------------------------------------------------------

\19\ See note 5, supra.
---------------------------------------------------------------------------

With respect to Commentary .01(b)(3), the Fund's investment in
fixed income securities, including corporate debt and OTC-traded
convertible securities, will not meet the requirement that a portfolio
(excluding exempted securities) that includes fixed income securities
shall include a minimum of 13 non-affiliated issuers. The Fund's
investment in corporate debt will not exceed 5% of the Fund's assets
and the Fund's investment in OTC-traded convertible securities also
will not exceed 5% of the Fund's assets. The Adviser believes that it
is appropriate to permit a small investment in corporate debt and OTC-
traded convertible securities in order to permit the Fund to diversify
its investments to enhance investor returns. Because such investments
would be de minimis, it would be difficult for the Fund to

[[Page 48132]]

diversify such investments in order to comply with the requirement that
fixed income securities include at least 13 non-affiliated issuers.
The Exchange notes that, other than Commentary .01(e) and
Commentary .01(b)(3) to Rule 8.600-E, the Fund will meet all other
requirements of Rule 8.600-E.
Availability of Information
The Fund's Web site (www.jpmorganfunds.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''),\20\ and a calculation of the premium and discount of the Bid/
Ask Price against the NAV, and (2) data in chart format displaying the
frequency distribution of discounts and premiums of the daily Bid/Ask
Price against the NAV, within appropriate ranges, for each of the four
previous calendar quarters. On each business day, before commencement
of trading in Shares in the Core Trading Session on the Exchange, the
Adviser will disclose on the Fund's Web site the Disclosed Portfolio
for the Fund as defined in NYSE Arca Rule 8.600-E(c)(2) that will form
the basis for the Fund's calculation of NAV at the end of the business
day.\21\
---------------------------------------------------------------------------

\20\ 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.
\21\ Under accounting procedures to be 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.
---------------------------------------------------------------------------

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 are 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.
Quotation and last sale information for the Shares and for
portfolio holdings of the Fund that are U.S. exchange-listed, including
certain options (as described above), common stocks, warrants, rights,
MLPs, preferred stocks, REITs, and Depositary Receipts will be
available via the CTA high speed line. Quotation and last sale
information for such U.S. exchange-listed securities, as well as U.S.
exchange-traded futures will be available from the exchange on which
they are listed. Quotation and last sale information for exchange-
listed options cleared via the Options Clearing Corporation will be
available via the Options Price Reporting Authority. Quotation and last
sale information for foreign exchange-listed equity securities will be
available from the exchanges on which they trade and from major market
data vendors, as applicable. Price information for preferred stocks
will be available from one or more major market data vendors or from
broker-dealers.
Quotation information for OTC options, cash equivalents, swaps,
obligations of supranational agencies, money market funds, U.S.
Government obligations, U.S. Government agency obligations, sovereign
obligations, repurchase and reverse repurchase agreements, and U.S. and
foreign corporate debt may be obtained from brokers and dealers who
make markets in such securities or through nationally recognized
pricing services through subscription agreements. The U.S. dollar value
of foreign securities, instruments and currencies can be derived by
using foreign currency exchange rate quotations obtained from
nationally recognized pricing services. Forwards and spot currency
price information will be available from major market data vendors.
Price information for OTC Depositary Receipts, CVRs, convertible
securities, 144A securities and Regulation S securities is available
from major market data vendors.
In addition, the PIV, as defined in NYSE Arca Rule 8.600-E(c)(3),
will be widely disseminated by one or more major market data vendors at
least every 15 seconds during the Core Trading Session.\22\ The
dissemination of the PIV, together with the Disclosed Portfolio, will
allow investors to determine the approximate 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.
---------------------------------------------------------------------------

\22\ Currently, it is the Exchange's understanding that several
major market data vendors display and/or make widely available PIVs
taken from the 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.\23\ Trading in Shares of the Fund
will be halted if the circuit breaker parameters in NYSE Arca Rule
7.12-E 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 of the Fund inadvisable.
---------------------------------------------------------------------------

\23\ See NYSE Arca Rule 7.12-E.
---------------------------------------------------------------------------

Trading in the Shares will be subject to NYSE Arca Rule 8.600-
E(d)(2)(D), which sets forth circumstances under which Shares of the
Fund may be halted.
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 4:00 a.m. to 8:00 p.m. E.T. in
accordance with NYSE Arca Rule 7.34-E (Early, 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 Rule 7.6-E, 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 of the Fund will conform to the initial and continued
listing criteria under NYSE Arca Rule 8.600-E. The Exchange represents
that, for initial and/or continued listing, the Fund will be in
compliance with Rule 10A-3 \24\ under the Act, as provided by NYSE Arca
Rule 5.3-E. A minimum of 100,000 Shares of the Fund will be outstanding
at the commencement of trading on the Exchange. The Exchange will
obtain a representation from the issuer of the Shares of the Fund that
the NAV and the Disclosed Portfolio will be made available to all
market participants at the same time.
---------------------------------------------------------------------------

\24\ 17 CFR 240 10A-3.
---------------------------------------------------------------------------

Surveillance
The Exchange represents that trading in the Shares will be subject
to the existing trading surveillances administered by the Exchange, as
well as cross-market surveillances administered by the Financial
Industry Regulatory Authority (``FINRA'') on behalf of the Exchange,
which are designed to detect violations of Exchange rules and
applicable federal securities laws.\25\ The Exchange

[[Page 48133]]

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 applicable federal securities
laws.
---------------------------------------------------------------------------

\25\ FINRA conducts cross-market surveillances on behalf of the
Exchange pursuant to a regulatory services agreement. The Exchange
is responsible for FINRA's performance under this regulatory
services agreement.
---------------------------------------------------------------------------

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.
The Exchange or FINRA, on behalf of the Exchange, or both, will
communicate as needed regarding trading in the Shares, certain
exchange-listed equity securities, certain futures, and certain
exchange-traded options with other markets and other entities that are
members of the Intermarket Surveillance Group (``ISG''), and the
Exchange or FINRA, on behalf of the Exchange, or both, may obtain
trading information regarding trading such securities and financial
instruments from such markets and other entities. In addition, the
Exchange may obtain information regarding trading in such securities
and financial instruments from markets and other entities that are
members of ISG or with which the Exchange has in place a comprehensive
surveillance sharing agreement.\26\ 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'').
---------------------------------------------------------------------------

\26\ For a list of the current members of ISG, see
www.isgportal.org. The Exchange notes that not all components of the
Disclosed Portfolio for the Fund may trade on markets that are
members of ISG or with which the Exchange has in place a
comprehensive surveillance sharing agreement.
---------------------------------------------------------------------------

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
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 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 Rule 5.5-E(m).
Information Bulletin
Prior to the commencement of trading, the Exchange will inform its
Equity Trading Permit (``ETP'') Holders in an Information Bulletin
(``Bulletin'') of the special characteristics and risks associated with
trading the Shares of the Fund. Specifically, the Bulletin will discuss
the following: (1) The procedures for purchases and redemptions of
Shares in Creation Units (and that Shares are not individually
redeemable); (2) NYSE Arca 9.2-E(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; (3) the risks involved in
trading the Shares during the Early and Late Trading Sessions when an
updated PIV will not be calculated or publicly disseminated; (4) how
information regarding the PIV and the Disclosed Portfolio is
disseminated; (5) 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 (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 of the Fund
will be calculated after 4:00 p.m. E.T. each trading day.
2. Statutory Basis
The basis under the Act for this proposed rule change is the
requirement under Section 6(b)(5) \27\ 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.
---------------------------------------------------------------------------

\27\ 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 Rule 8.600-E. The
Adviser is not registered as a broker-dealer but is affiliated with a
broker-dealer and has implemented and will maintain a fire wall with
respect to such broker-dealer affiliate regarding access to information
concerning the composition and/or changes to the portfolio. The
Exchange represents that 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. 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 applicable federal securities laws. The Exchange or
FINRA, on behalf of the Exchange, or both, will communicate as needed
regarding trading in the Shares, certain exchange-listed equity
securities, certain futures, and certain exchange-traded options 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 such securities and financial
instruments from such markets and other entities. In addition, the
Exchange may obtain information regarding trading in such securities
and financial instruments from markets and other entities that are
members of ISG or with which the Exchange has in place a comprehensive
surveillance sharing agreement. 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 TRACE.
The PIV, as defined in NYSE Arca Rule 8.600-E(c)(3), will be widely
disseminated by one or more major market data vendors at least every 15
seconds during the Core Trading Session. The Fund may hold up to an
aggregate amount of 15% of its net assets in illiquid assets
(calculated at the time of investment), deemed illiquid by the Adviser,
consistent with Commission guidance.
The Shares of the Fund will conform to the initial and continued
listing criteria under NYSE Arca Rule 8.600-E. The Exchange represents
that, for initial and/or continued listing, the Fund will be in
compliance with Rule 10A-3 under the Act, as provided by NYSE

[[Page 48134]]

Arca Rule 5.3-E. A minimum of 100,000 Shares of the Fund will be
outstanding at the commencement of trading on the Exchange. The
Exchange will obtain a representation from the issuer of the Shares of
the Fund 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. The Fund's portfolio holdings
will be disclosed on its Web site daily after the close of trading on
the Exchange and prior to the opening of trading on the Exchange the
following day. On a daily basis, the Fund will disclose the information
regarding the Disclosed Portfolio required under NYSE Arca Rule 8.600-E
(c)(2) to the extent applicable. The Fund's Web site information will
be publicly available at no charge.
Investors can also obtain the Trust's 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 are 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. Quotation and last sale information for the Shares and for
portfolio holdings of the Fund that are U.S. exchange listed, including
common stocks, preferred stocks, MLPs, REITs, and U.S. exchange-traded
ADRs will be available via the CTA high speed line.
The Exchange believes that it is appropriate and in the public
interest to allow the Fund to exceed the 20% limit in Commentary .01(e)
to Rule 8.600-E of portfolio assets that may be invested in OTC
derivatives. Because the Fund, in furtherance of its investment
objective, may invest a substantial percentage of its investments in
foreign currency forward transactions, total return swaps on equities
(which will be traded OTC) and OTC options (as described above), the
20% limit in Commentary .01(e) to Rule 8.600 could result in the Fund
being unable to fully pursue its investment objective while attempting
to sufficiently mitigate investment risks. The inability of the Fund to
adequately hedge its holdings would effectively limit the Fund's
ability to invest in certain instruments, or could expose the Fund to
additional investment risk. In addition, use of OTC options on equity
securities and equity securities indexes may be an important means to
reduce risk in the Fund's equity investments. As noted above, the
Fund's investments in derivative instruments will be made in accordance
with the 1940 Act and consistent with the Fund's investment objective
and policies. To limit the potential risk associated with such
transactions, the Fund will segregate or ``earmark'' assets determined
to be liquid by the Adviser in accordance with procedures established
by the Trust's Board and in accordance with the 1940 Act (or, as
permitted by applicable regulation, enter into certain offsetting
positions) to cover its obligations under derivative instruments. These
procedures have been adopted consistent with Section 18 of the 1940 Act
and related Commission guidance. In addition, the Fund will include
appropriate risk disclosure in its offering documents, including
leveraging risk. To mitigate leveraging risk, the Adviser will
segregate or ``earmark'' liquid assets or otherwise cover the
transactions that may give rise to such risk. Because the markets for
certain assets, or the assets themselves, may be unavailable or cost
prohibitive as compared to derivative instruments, suitable derivative
transactions may be an efficient alternative for the Fund to obtain the
desired asset exposure. In addition, OTC derivatives may be tailored
more specifically to the assets held by the Fund than available listed
derivatives. If the Fund were limited to investing up to 20% of assets
in OTC derivatives, the Fund would have to exclude or underweight these
strategies and would be less diversified, concentrating risk in the
other strategies it will utilize. The Adviser also represents that the
Fund will follow an investment strategy utilized within the JP Morgan
Diversified Alternatives ETF, shares of which have previously been
approved by the Commission for Exchange listing and trading pursuant to
Section 19(b)(2) of the Act.\28\ The Exchange further believes that the
Fund would be placed at a competitive disadvantage to the JP Morgan
Diversified Alternatives ETF other, [sic] if the Fund's portfolio could
not exceed the 20% limit in Commentary .01(e) to Rule 8.600 of
portfolio assets that may be invested in OTC derivatives, as described
above.
---------------------------------------------------------------------------

\28\ See note 5, supra.
---------------------------------------------------------------------------

With respect to Commentary .01(b)(3) to Rule 8.600-E, the Exchange
believes that it is appropriate and in the public interest to allow the
Fund to hold fixed income securities that include fewer than 13 non-
affiliated issuers because the Fund's investment in corporate debt will
not exceed 5% of the Fund's assets and the Fund's investment in OTC-
traded convertible securities also will not exceed 5% of the Fund's
assets. Such investments would be de minimis and, therefore, it could
be difficult for the Fund to diversify such investments in order to
comply with the requirement that fixed income securities include at
least 13 non-affiliated issuers. Because the Fund's investment in such
fixed income securities would constitute only a small portion of the
Fund's portfolio, the Exchange believes the Fund would not be
susceptible to manipulation.
The Exchange notes that, other than Commentary .01(e) and
Commentary .01(b)(3) to Rule 8.600-E, the Fund will meet all other
requirements of Rule 8.600-E.
The Web site for the Fund will include a form of the prospectus for
the Fund and additional data relating to NAV and other applicable
quantitative information. Moreover, 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 of the Fund. Trading in Shares of the Fund will be
halted if the circuit breaker parameters in NYSE Arca Rule 7.12-E have
been reached or because of market conditions or for reasons that, in
the view of the Exchange, make trading in the Shares inadvisable, and
trading in the Shares will be subject to NYSE Arca Rule 8.600-
E(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 PIV, the
Disclosed Portfolio, and quotation and last sale information for the
Shares. The Fund's investments, including derivatives, will be
consistent with the Fund's investment objective and will not be used to
enhance leverage (although certain derivatives and other investments
may result in leverage). That is, while the Fund will be permitted to
borrow as permitted under the 1940 Act, the Fund's investments will not
be used to seek performance that is the multiple or inverse multiple
(e.g., 2Xs and 3Xs) of the Fund's primary broad-based securities
benchmark index (as defined in Form N-1A).
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
that holds fixed income securities, equity securities and derivatives
and that will enhance competition among market participants, to the
benefit of

[[Page 48135]]

investors and the marketplace. As noted above, the Exchange has in
place surveillance procedures relating to trading in the Shares of the
Fund 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 PIV, the Disclosed Portfolio for the Fund, and
quotation and last sale information for the Shares of the Fund.

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 holds
fixed income securities, equity securities and derivatives 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. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove the proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.

IV. Solicitation of Comments

Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NYSEArca-2017-87 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-2017-87. 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-2017-87 and should
be submitted on or before November 6, 2017.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\29\
---------------------------------------------------------------------------

\29\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-22263 Filed 10-13-17; 8:45 am]
BILLING CODE 8011-01-P

48128 Federal Register / Vol. 82, No. 198 / Monday, October 16, 2017 / Notices

newly affiliated with one or more • Momentum—seek to purchase issued or guaranteed by the U.S.
broker-dealers, or (b) any new adviser or companies with positive earnings Treasury, obligations of other sovereign
sub-adviser is a registered broker-dealer revisions and strong price momentum governments or supranational entities,
or becomes affiliated with a broker- and sell short stocks with negative other short-term investments, including
dealer, it will implement and maintain earnings revisions and weak price money market funds and foreign
a fire wall with respect to its relevant momentum currencies in which certain derivatives
personnel or its broker-dealer affiliate • Size—seek to purchase small cap are denominated.
regarding access to information stocks and sell short large cap stocks Under normal market conditions, at
concerning the composition and/or • Quality—seek to buy high quality least 80% of the Fund’s assets will be
changes to the portfolio, and will be stocks and sell short lower ranked invested in equity securities and in
subject to procedures designed to stocks derivative instruments that provide
prevent the use and dissemination of Additional return factors may be exposure to equity securities. ‘‘Assets’’
material non-public information identified over time. means net assets, plus the amount of
regarding such portfolio. The Fund will generally invest its borrowings for investment purposes.
JPMorgan Equity Long/Short ETF assets globally to gain exposure, either The amount that may be invested in any
directly or through the use of one instrument will vary and generally
According to the Registration depend on the return factors employed
derivatives, to equity securities (across
Statement, the Fund will seek to by the Adviser at that time. As long as
market capitalizations) in developed
provide long-term total return. The the Fund meets its 80% requirement,
Fund will seek to profit by exploiting markets. The Fund may use both long
positions (held directly or through the there are no other stated percentage
pricing inefficiencies between equity limitations on the amount that can be
securities by maintaining long and short use of derivative instruments) and short
positions (achieved primarily through invested in any one type of instrument,
positions. It will do so based on a and the Adviser may, at times, focus on
systematic investment process. The the use of derivative instruments). The
Fund generally will maintain a total net a smaller number of instruments.9 The
Adviser believes it has identified (and Fund is generally unconstrained by any
will continue to identify) a set of long market exposure under normal
market conditions, meaning that the particular capitalization, style or sector
investment return sources that have a and may invest in any developed region
low correlation to each other and to Fund’s aggregate exposure will be
greater to instruments that the Adviser or country. The Fund may have both
traditional markets and have distinct long and short exposure to these
risk and return profiles (each a ‘‘return expects to outperform. However, the
Fund may have net long or net short instruments. Given the complexity of
factor’’). the investments and strategies of the
Under normal market conditions,8 the exposure to one or more industry
sectors, individual markets and/or Fund, the Adviser will make use of
Fund will employ the ‘‘Equity Long/ quantitative models and information
Short’’ strategy to access certain return currencies. To the extent that the Fund
hedges its currency exposure into the and data supplied by third parties to,
factors. The strategy will involve among other things, help determine the
simultaneously investing in equities U.S. dollar, it may reduce the effects of
currency fluctuations. portfolio’s weightings among various
(i.e., investing long) that the Adviser investments and construct sets of
believes are attractive based on relevant The Adviser will make use of
derivatives, including swaps, futures, transactions and investments.
return factors and selling equities The Fund will purchase a particular
(selling short) that the Adviser believes options and forward contracts, in
implementing its strategy (see ‘‘The instrument when the Adviser believes
are unattractive based on the relevant that such instrument will allow the
return factors. Fund’s Use of Derivatives’’, below).
Under normal market conditions, the Fund to gain the desired exposure to a
Each return factor represents a return factor. Conversely, the Fund will
potential source of investment return Adviser currently expects that a
significant portion of the Fund’s consider selling a particular instrument
that results from, among other things, when it no longer provides the desired
assuming a particular risk or taking exposure will be attained through the
use of derivatives in addition to its exposure to a return factor. In addition,
advantage of a behavioral bias. investment decisions will take into
According to the Registration Statement, exposure through direct investment.
Derivatives, which are instruments that account a return factor’s contribution to
the Adviser believes that, in general, the the Fund’s overall volatility. In
Fund’s investment returns are have a value based on another
instrument, exchange rate or index, will allocating assets, the Adviser seeks to
attributable to the individual approximately balance risk to the
contributions of the various return primarily be used as an efficient means
of implementing a particular strategy in individual return factors over the long
factors. By employing this return factor term, although the exposure to
based approach, the Fund seeks to order to gain exposure to a desired
return factor. For example, the Fund individual return factors will vary based
provide positive total returns over time on, among other things, the opportunity
while maintaining a relatively low may use a total return swap to establish
both long and short positions in order the Adviser sees in each individual
correlation with traditional markets. return factor.
The exposure to individual return to gain the desired exposure rather than
factors may vary based on the market physically purchasing and selling short Principal Investments
opportunity of the individual return each instrument. Derivatives may also
For purposes of calculating the
factors. For example, the return factors be used to increase gain, to effectively
percentage of principal investments
that the Adviser may utilize include, but gain targeted exposure from its cash
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under this proposed rule change, under
are not limited to, the following: positions, to hedge various investments
normal market conditions, at least 80%
• Value—seek to purchase ‘‘cheap’’ and/or for risk management. As a result
of the Fund’s assets will be invested in
stocks and sell short ‘‘expensive’’ of the Fund’s use of derivatives and to
U.S. and foreign exchange-traded equity
stocks serve as collateral, the Fund may hold
significant amounts of U.S. Treasury 9 The Fund’s investments would be subject to any
8 Theterm ‘‘normal market conditions’’ is defined obligations, including Treasury bills, applicable percentage limitations in Commentary
in NYSE Arca Rule 8.600–E(c)(5). bonds and notes and other obligations .01 to NYSE Arca Rule 8.600–E.

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Federal Register / Vol. 82, No. 198 / Monday, October 16, 2017 / Notices 48135

investors and the marketplace. As noted Electronic Comments SECURITIES AND EXCHANGE
above, the Exchange has in place COMMISSION
surveillance procedures relating to • Use the Commission’s Internet
comment form (http://www.sec.gov/ [Release No. 34–81841; File No. SR–MSRB–
trading in the Shares of the Fund and 2017–07]
may obtain information via ISG from rules/sro.shtml); or
other exchanges that are members of ISG • Send an email to rule-comments@ Self-Regulatory Organizations;
or with which the Exchange has entered sec.gov. Please include File Number SR– Municipal Securities Rulemaking
into a comprehensive surveillance NYSEArca–2017–87 on the subject line. Board; Notice of Filing and Immediate
sharing agreement. In addition, as noted Effectiveness of a Proposed Rule
above, investors will have ready access Paper Comments Change to MSRB Rule A–11, on
to information regarding the Fund’s Assessments for Municipal Advisor
• Send paper comments in triplicate
holdings, the PIV, the Disclosed Professionals, To Amend the Annual
to Secretary, Securities and Exchange
Portfolio for the Fund, and quotation Municipal Advisor Professional Fee
and last sale information for the Shares Commission, 100 F Street NE.,
of the Fund. Washington, DC 20549–1090. October 10, 2017.
All submissions should refer to File Pursuant to Section 19(b)(1) of the
B. Self-Regulatory Organization’s Securities Exchange Act of 1934 (the
Statement on Burden on Competition Number SR–NYSEArca–2017–87. This
file number should be included on the ‘‘Act’’ or ‘‘Exchange Act’’) 1 and Rule
The Exchange does not believe that subject line if email is used. To help the 19b–4 thereunder,2 notice is hereby
the proposed rule change will impose given that on September 29, 2017 the
Commission process and review your
any burden on competition that is not Municipal Securities Rulemaking Board
comments more efficiently, please use
necessary or appropriate in furtherance (‘‘MSRB’’ or ‘‘Board’’) filed with the
only one method. The Commission will Securities and Exchange Commission
of the purpose of the Act. The Exchange post all comments on the Commission’s
notes that the proposed rule change will (‘‘Commission’’ or ‘‘SEC’’) the proposed
Internet Web site (http://www.sec.gov/ rule change as described in Items I, II,
facilitate the listing and trading of an rules/sro.shtml). Copies of the
additional type of actively-managed and III below, which Items have been
submission, all subsequent prepared by the MSRB. The
exchange-traded product that holds amendments, all written statements
fixed income securities, equity Commission is publishing this notice to
with respect to the proposed rule solicit comments on the proposed rule
securities and derivatives and that will
change that are filed with the change from interested persons.
enhance competition among market
Commission, and all written
participants, to the benefit of investors I. Self-Regulatory Organization’s
and the marketplace. communications relating to the
Statement of the Terms of Substance of
proposed rule change between the
C. Self-Regulatory Organization’s the Proposed Rule Change
Commission and any person, other than
Statement on Comments on the those that may be withheld from the The MSRB filed with the Commission
Proposed Rule Change Received From public in accordance with the a proposed rule change to amend MSRB
Members, Participants, or Others provisions of 5 U.S.C. 552, will be Rule A–11, on assessments for
available for Web site viewing and municipal advisor professionals, to
No written comments were solicited increase the annual municipal advisor
or received with respect to the proposed printing in the Commission’s Public
Reference Room, 100 F Street NE., professional fee from $300 to $500 and
rule change. make other technical changes (the
Washington, DC 20549 on official
III. Date of Effectiveness of the ‘‘proposed rule change’’). The MSRB has
business days between the hours of
Proposed Rule Change and Timing for designated the proposed rule change for
10:00 a.m. and 3:00 p.m. Copies of the immediate effectiveness. The MSRB will
Commission Action filing also will be available for send the first invoice at the new fee
Within 45 days of the date of inspection and copying at the principal level to firms in April 2018 for payment
publication of this notice in the Federal office of the Exchange. All comments by April 30, 2018.
Register or within such longer period received will be posted without change; The text of the proposed rule change
up to 90 days (i) as the Commission may the Commission does not edit personal is available on the MSRB’s Web site at
designate if it finds such longer period identifying information from www.msrb.org/Rules-and-
to be appropriate and publishes its submissions. You should submit only Interpretations/SEC-Filings/2017-
reasons for so finding or (ii) as to which information that you wish to make Filings.aspx, at the MSRB’s principal
the self-regulatory organization available publicly. All submissions office, and at the Commission’s Public
consents, the Commission will: should refer to File Number SR– Reference Room.
(A) By order approve or disapprove NYSEArca–2017–87 and should be II. Self-Regulatory Organization’s
the proposed rule change, or submitted on or before November 6, Statement of the Purpose of, and
(B) institute proceedings to determine 2017. Statutory Basis for, the Proposed Rule
whether the proposed rule change For the Commission, by the Division of Change
should be disapproved. Trading and Markets, pursuant to delegated In its filing with the Commission, the
authority.29 MSRB included statements concerning
IV. Solicitation of Comments
Eduardo A. Aleman, the purpose of and basis for the
ethrower on DSK3G9T082PROD with NOTICES

Interested persons are invited to Assistant Secretary. proposed rule change and discussed any
submit written data, views, and [FR Doc. 2017–22263 Filed 10–13–17; 8:45 am] comments it received on the proposed
arguments concerning the foregoing, rule change. The text of these statements
BILLING CODE 8011–01–P
including whether the proposed rule may be examined at the places specified
change is consistent with the Act.
Comments may be submitted by any of 1 15 U.S.C. 78s(b)(1).
the following methods: 29 17 CFR 200.30–3(a)(12). 2 17 CFR 240.19b–4.

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Document Created: 2017-10-14 01:42:26
Document Modified: 2017-10-14 01:42:26

Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
FR Citation		82 FR 48127