82 FR 56311 - Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a Proposed Rule Change, as Modified by Amendments No. 1 and 2, To List and Trade Shares of the U.S. Equity Cumulative Dividends Fund-Series 2027 and the U.S. Equity Ex-Dividend Fund-Series 2027 Under NYSE Arca Rule 8.200-E, Commentary .02
SECURITIES AND EXCHANGE COMMISSION Federal Register Volume 82, Issue 227 (November 28, 2017)
Federal Register Volume 82, Issue 227 (November 28, 2017)
| Page Range | 56311-56315 | |
| FR Document | 2017-25606 |
[Federal Register Volume 82, Number 227 (Tuesday, November 28, 2017)] [Notices] [Pages 56311-56315] From the Federal Register Online [www.thefederalregister.org] [FR Doc No: 2017-25606] ----------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION [Release No. 34-82138; File No. SR-NYSEArca-2017-88] Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a Proposed Rule Change, as Modified by Amendments No. 1 and 2, To List and Trade Shares of the U.S. Equity Cumulative Dividends Fund--Series 2027 and the U.S. Equity Ex-Dividend Fund--Series 2027 Under NYSE Arca Rule 8.200-E, Commentary .02 November 21, 2017. I. Introduction On August 8, 2017, NYSE Arca, Inc. (``Exchange'') filed with the Securities and Exchange Commission (``Commission''), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to list and trade shares (``Shares'') of the U.S. Equity Cumulative Dividends Fund-- Series 2027 (``Dividend Fund'') and the U.S. Equity Ex-Dividend Fund-- Series 2027 (``Ex-Dividend Fund,'' each a ``Fund,'' and collectively the ``Funds'') under NYSE Arca Equities Rule 8.200, Commentary .02.\3\ The proposed rule change was published for comment in the Federal Register on August 28, 2017.\4\ On November 14, 2017, the Exchange filed Amendment No. 1 to the proposed rule change.\5\ On November 16, 2017, the Exchange filed Amendment No. 2 to the proposed rule change.\6\ The Commission has not received any comments on the proposed rule change. This order approves the proposed rule change, as modified by Amendments No.1 and 2 thereto. --------------------------------------------------------------------------- \1\ 15 U.S.C. 78s(b)(1). \2\ 17 CFR 240.19b-4. \3\ The Commission notes that, on August 17, 2017, the Commission approved a proposed rule change that, among other things, created a single rulebook of the Exchange. See Securities Exchange Act Release No. 81419, 82 FR 40044 (Aug. 23, 2017) (SR-NYSEArca- 2017-40). As a result, NYSE Arca Equities Rule 8.200 became NYSE Arca Rule 8.200-E. \4\ See Securities Exchange Act Release No. 81453 (Aug. 22, 2017), 82 FR 40816. \5\ In Amendment No. 1 (``Amendment No. 1''), which amended and replaced the proposed rule change in its entirety, the Exchange: (1) Changed the custodian of the Funds; (2) stated that the Dividend Fund will seek investment results that, before fees and expenses, correspond to the performance of the Solactive U.S. Cumulative Dividends Index Series 2027 over each calendar year; (3) clarified that the value of the Dividend Fund's Shares will be affected by the ordinary cash dividends that have been paid to date and general expectations in the market regarding the future levels of such dividends; (4) clarified that the Dividend Fund's exposure to dividend payments made by S&P 500 constituent companies will be based exclusively on its investments in annual S&P 500 dividend futures contracts; (5) clarified that pricing may be an example of a market factor pursuant to which the Dividend Fund may invest in quarterly S&P 500 dividend futures contracts; (6) clarified that the Ex-Dividend Fund will seek investment results that, before fees and expenses, correspond to the performance of the Solactive U.S. Equity Ex-Dividends Index--Series 2027 so as to provide shareholders with returns that are equivalent to the performance of 0.5 shares of SPDR[supreg] S&P 500[supreg] ETF less the value of current and future expected ordinary cash dividends to be paid on the S&P 500 constituent companies over the term of the Ex-Dividend Fund; (7) stated that the quarterly S&P 500 Index futures contracts are traded on the Chicago Mercantile Exchange (``CME''); (8) clarified that the Ex-Dividend Fund intends to track the performance of the Solactive Ex-Dividend Index by selling annual S&P dividend futures contracts; (9) represented that the Trust (defined herein) will issue and sell Shares of a Fund in one or more block size aggregations of 50,000 shares; (10) represented that an updated indicative fund value'' (``IFV'') will be calculated and disseminated by a third party service provider in accordance with the rules of the Exchange, and the IFV will be calculated by using the prior day's closing net asset value (``NAV'') per Share of a Fund as a base and updating that value throughout the trading day to reflect changes in the most recently reported trade prices for instruments traded by a Fund; and (11) made other technical changes. Because Amendment No. 1 made the clarifying changes and representations summarized above and does not raise unique or novel regulatory issues. Amendment No. 1 is not subject to notice and comment. \6\ In Amendment No. 2, which is a partial amendment, the Exchange updated the proposed rule change to reflect that the Registration Statement has been filed with the Commission. Because Amendment No. 2 simply deletes information regarding the draft registration statement and provides information related to the filed Registration Statement and does not raise unique or novel regulatory issues, Amendment No. 2 is not subject to notice and comment. --------------------------------------------------------------------------- II. The Exchange's Description of the Proposal \7\ --------------------------------------------------------------------------- \7\ Additional information regarding the Funds, the Trust, and the Shares can be found in Amendments No. 1 and 2 and the Registration Statement. See supra notes 5 and 6 and infra note 9. --------------------------------------------------------------------------- The Exchange proposes to list and trade the Shares under NYSE Arca Rule 8.200-E, Commentary .02, which governs the listing and trading of Trust Issued Receipts.\8\ Each Fund will be a [[Page 56312]] series of Metaurus Equity Component Trust (``Trust''), a Delaware statutory trust.\9\ Metaurus Advisors LLC (``Metaurus'' or ``Sponsor'') will be the sponsor, commodity pool operator and commodity trading advisor of each Fund. The Funds' administrator will be SEI Investments Global Fund Services, (``Administrator''), who will be responsible for the day-to-day administration of the Trust and the Funds, including valuing all of the portfolio holdings of the Funds and calculating the NAV of the Funds. The Bank of New York Mellon will serve as registrar and transfer agent for the Funds as well as custodian for the Funds. Each Fund is a commodity pool as defined in the Commodity Exchange Act \10\ and the applicable regulations of the Commodity Futures Trading Commission (``CFTC''). --------------------------------------------------------------------------- \8\ Commentary .02 to NYSE Arca Rule 8.200-E applies to Trust Issued Receipts that invest in ``Financial Instruments.'' The term ``Financial Instruments,'' as defined in Commentary .02(b)(4) to NYSE Arca Rule 8.200-E, 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. \9\ On November 15, 2017, the Trust filed with the Commission a registration statement on Form S-1 under the Securities Act of 1933 (15 U.S.C. 77a) relating to the Funds (File No. 333-221591) (``Registration Statement''). The description of the operation of the Trust and the Funds herein is based, in part, on the Registration Statement. \10\ 7 U.S.C. 1a(10). --------------------------------------------------------------------------- A. U.S. Equity Cumulative Dividends Fund--Series 2027 The Dividend Fund will seek investment results that, before fees and expenses, correspond to the performance of the Solactive U.S. Cumulative Dividends Index--Series 2027 (``Solactive Dividend Index'') over each calendar year. The Dividend Fund will be a term fund that will terminate on or prior to December 31, 2027. The Dividend Fund will seek to provide shareholders of the Dividend Fund with returns designed to replicate the dividends on constituent companies of the S&P 500 Index (``S&P 500''), without exposure to the underlying securities. The Dividend Fund intends primarily to invest its assets in the component instruments of the Solactive Dividend Index, as well as cash and cash equivalents.\11\ The component instruments of the Solactive Dividend Index consist of U.S. Treasury Securities (``Treasury Securities'') and long positions in annual futures contracts listed on the CME \12\ that provide exposure to dividends paid on the S&P 500 constituent companies (``Annual S&P 500 Dividend Futures Contracts'') \13\ pro rata for each year of the life of the Dividend Fund.\14\ The value of the Annual S&P 500 Dividend Futures Contracts, on which the value of the Dividend Fund will be based, will tend to increase if the actual dividends paid or expected to be paid by S&P 500 constituent companies in the periods tracked by the Annual S&P 500 Dividend Futures Contracts increase; the value of the Annual S&P 500 Dividend Futures Contracts will tend to decrease if the actual dividends paid or expected to be paid by S&P 500 constituent companies (as measured in the current year by the Dividend Points Index) decrease in the periods tracked by the Annual S&P 500 Dividend Futures Contracts. While the Dividend Fund will invest primarily in the component instruments of the Solactive Dividend Index, cash and cash equivalents, in certain instances, the Dividend Fund may invest in quarterly S&P 500 dividend futures contracts \15\ (``Quarterly S&P 500 Dividend Futures Contracts, and, together with the Annual S&P 500 Dividend Futures Contracts, the ``Dividend Futures Contracts''), rather than the Annual S&P 500 Dividend Futures Contracts if, in the judgment of Metaurus, utilizing such alternative maturity instruments would be in the best interest of the Dividend Fund (e.g., due to liquidity or similar market factors). --------------------------------------------------------------------------- \11\ Cash equivalents are short-term instruments with maturities of less than three months and shall include the following: (i) Certificates of deposit issued against funds deposited in a bank or savings and loan association; (ii) bankers' acceptances, which are short-term credit instruments used to finance commercial transactions; (iii) repurchase agreements and reverse repurchase agreements; (iv) bank time deposits, which are monies kept on deposit with banks or savings and loan associations for a stated period of time at a fixed rate of interest; (v) commercial paper, which are short-term unsecured promissory notes; (vi) Treasury Securities, and (vii) money market funds, including exchange-traded funds (``ETFs''). The ETFs in which a Fund may invest will be ETFs that invest principally in money market instruments, and all ETF shares will be listed and traded on national securities exchanges. \12\ CME Group, Inc. is a member of the Intermarket Surveillance Group (``ISG''). See note 8, infra. \13\ The Dividend Fund will hold the following Annual S&P 500 Dividend Futures Contracts: S&P 500 Annual Dividend Index Futures with annual expiry of 2018, 2019, 2020, 2021, 2022, 2023, 2024, 2025, 2026, and 2027. \14\ As a result, in addition to the Treasury Securities, cash and/or cash equivalents, the Dividend Fund is initially expected to hold each of the Annual S&P 500 Dividend Futures Contracts that are traded and expire during its ten-year term. Each year thereafter, until December 2027 when the Dividend Fund will terminate, the Dividend Fund will hold one less Annual S&P 500 Dividend Futures Contract due to expiry of the prior year's contract. \15\ The Dividend Fund will hold the following Quarterly S&P 500 Dividend Futures Contracts: S&P 500 Quarterly Dividend Index Futures with quarterly expiry of 2018, 2019, 2020, 2021, 2022, 2023, 2024, 2025, 2026, and 2027. These contracts trade on the CME. --------------------------------------------------------------------------- The Dividend Fund expects to pay monthly cash distributions to its shareholders throughout each calendar year. Such distributions will, on an annual basis, before fees and expenses, equal all or a substantial portion of the Dividend Fund's NAV attributable to the ordinary cash dividends accumulated by the S&P 500 Dividend Points Index (Annual) (``Dividend Points Index'') for the year (as reflected in the current year's Annual S&P 500 Dividend Futures Contracts held by the Dividend Fund).\16\ The Dividend Fund's exposure to dividend payments made by S&P 500 constituent companies will be based exclusively on its investments in the Annual S&P 500 Dividend Futures Contracts. --------------------------------------------------------------------------- \16\ The Dividend Points Index resets to zero on the third Friday of each December contemporaneously with the expiration of the applicable Annual S&P 500 Dividend Futures Contract. --------------------------------------------------------------------------- The Dividend Fund will not employ leverage \17\ to implement its investment strategy. The Dividend Fund may, however, enter into short- term loans and reverse repurchase agreements for liquidity purposes, including to fund distributions. --------------------------------------------------------------------------- \17\ Leverage means the use of loans, borrowings and extensions of credit from third parties for the purchase of investments. --------------------------------------------------------------------------- Solactive Dividend Index. The Solactive Dividend Index is an index that is owned, maintained, calculated and distributed by Solactive AG, an independent index sponsor and data provider (``Solactive'').\18\ The index aims to represent the discounted present value of all listed Annual S&P 500 Dividend Futures Contracts out to and including the December 2027 Annual S&P 500 Dividend Futures Contract. --------------------------------------------------------------------------- \18\ The Sponsor developed the algorithm on which the Solactive Dividend Index is based and licensed it to Solactive. Solactive is not affiliated with the Sponsor and is solely responsible for calculating the Solactive Dividend Index. --------------------------------------------------------------------------- To accomplish this, each Annual S&P 500 Dividend Futures Contract market price will be discounted by using the computed yield of a specified Treasury Security with a similar or prior maturity date as the corresponding Annual S&P 500 Dividend Futures Contract expiry. After annual expiry of an Annual S&P 500 Dividend Futures Contract, such futures contract and its corresponding Treasury Security will be removed from the Solactive Dividend Index during the annual rebalancing of the Solactive Dividend Index. All specifications and information relevant for calculating the Solactive Dividend Index are made available at http://www.solactive.de. The Solactive Dividend Index is calculated and published in United States dollars (``USD'') based on the prices of the components on the [[Page 56313]] applicable listing exchanges posted by quotation services or otherwise as determined by Solactive. The Solactive Dividend Index does not weigh the values of the index components. The value of the Solactive Dividend Index is widely disseminated every 15 seconds on each ``Business Day'' \19\ by major market data vendors during the NYSE Arca's Core Trading Session. --------------------------------------------------------------------------- \19\ A ``Business Day'' means any day on which the NYSE Arca is open for business, including any partial-day opening. --------------------------------------------------------------------------- The Exchange represents that a committee composed of staff from Solactive is responsible for decisions regarding the composition of the Solactive Dividend Index as well as any amendments to the index calculation methodology. Members of the committee can recommend changes to the index calculation methodology for calculating the Solactive Dividend Index and submit them to the committee for approval. Members of the committee are subject to procedures designed to prevent the use and dissemination of material non-public information regarding changes to the Solactive Dividend Index. B. U.S. Equity Ex-Dividend Fund--Series 2027 The Ex-Dividend Fund will be a term fund that will terminate on or prior to December 31, 2027. The Ex-Dividend Fund will seek investment results that, before fees and expenses, correspond to the performance of the Solactive U.S. Equity Ex-Dividends Index--Series 2027 (``Solactive Ex-Dividend Index'', and together with the Solactive Dividend Index, the ``Underlying Indexes'') so as to provide shareholders with returns that are equivalent to the performance of 0.5 shares of SPDR[supreg] S&P 500[supreg] ETF (``SPDRs'') \20\ less the value of current and future expected ordinary cash dividends to be paid on the S&P 500 constituent companies over the term of the Ex-Dividend Fund. --------------------------------------------------------------------------- \20\ Shares of SPDRs are listed and traded on the Exchange pursuant to NYSE Arca Equities Rule 8.100 (Portfolio Depositary Receipts). --------------------------------------------------------------------------- In seeking to track the Solactive Ex-Dividend Index, the Ex- Dividend Fund intends to replicate the returns of SPDRs through: (1) Owning long positions in quarterly S&P 500 Index futures contracts traded on the CME (``Quarterly S&P 500 Index Futures Contracts'') rather than shares of SPDRs; \21\ and (2) selling Annual S&P 500 Dividend Futures Contracts. The Ex-Dividend Fund may also hold Treasury Securities, cash, and cash equivalents. If in the best interest of the Ex-Dividend Fund, the Ex-Dividend Fund also may invest in annual S&P 500 Index futures contracts \22\ (``Annual S&P 500 Index Futures Contracts,'' and, together with the Quarterly S&P 500 Index Futures Contracts, the ``Index Futures Contracts'') and Quarterly S&P 500 Dividend Futures Contracts. --------------------------------------------------------------------------- \21\ The Quarterly S&P 500 Index Futures Contracts include: (i) S&P 500 Futures and (ii) E-mini S&P 500 Futures. These contracts trade on the CME. \22\ These contracts trade on the CME. --------------------------------------------------------------------------- The Ex-Dividend Fund will not employ leverage \23\ to implement its investment strategy. The Ex-Dividend Fund may, however, enter into short-term loans and reverse repurchase agreements for liquidity purposes. --------------------------------------------------------------------------- \23\ See supra note 7. --------------------------------------------------------------------------- Solactive Ex-Dividend Index The Solactive Ex-Dividend Index tracks the performance of SPDRs together with the performance of short positions in the Annual S&P 500 Dividend Futures Contracts for each year from the Ex-Dividend Fund's launch date through December 2027. The index is owned, maintained, calculated, and distributed by Solactive.\24\ --------------------------------------------------------------------------- \24\ The Sponsor developed the algorithm on which the Solactive Ex-Dividend Index is based and licensed it to Solactive. Solactive is not affiliated with the Sponsor and is solely responsible for calculating the Solactive Ex-Dividend Index. --------------------------------------------------------------------------- The Solactive Ex-Dividend Index aims to represent the current value of 0.5 shares of SPDRs, less the current value of ordinary cash dividends expected to be paid on the S&P 500, until the Ex-Dividend Fund's maturity. The current value of such dividends is represented by the Solactive Dividend Index. The Solactive Dividend Index aims to represent the discounted present value of all listed Annual S&P 500 Dividend Futures Contracts out to and including the December 2027 Annual S&P 500 Dividend Futures Contracts expiry. The Solactive Ex- Dividend Index includes shares of SPDRs and short positions in Annual S&P 500 Dividend Futures Contracts for each year from the Ex-Dividend Fund's launch date through December 2027. The Solactive Ex-Dividend Index, which is calculated and published in USD, is based on the most recent prices of the index components on the applicable listing exchanges posted by quotation services or otherwise as determined by Solactive. In calculating the index value, no weighting is applied to the components. All specifications and information relevant for calculating the Solactive Ex-Dividend Index are made available at http://www.solactive.de. The Solactive Ex-Dividend Index is widely disseminated every 15 seconds on each Business Day by major market data vendors during the NYSE Arca's Core Trading Session. A committee composed of staff from Solactive is responsible for decisions regarding the composition of the Solactive Ex-Dividend Index as well as any amendments to the index calculation methodology. Members of the committee can recommend changes to the index calculation methodology for calculating the Solactive Ex-Dividend Index and submit them to the committee for approval. Members of the committee are subject to procedures designed to prevent the use and dissemination of material non-public information regarding changes to the Solactive Ex- Dividend Index. III. Discussion and Commission Findings After careful review, the Commission finds that the Exchange's proposal to list and trade the Shares is consistent with the Act and the rules and regulations thereunder applicable to a national securities exchange.\25\ In particular, the Commission finds that the proposed rule change, as modified by Amendments No. 1 and 2, is consistent with Section 6(b)(5) of the Act,\26\ which requires, among other things, that the Exchange's rules be designed to prevent fraudulent and manipulative acts and practices, promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. The Commission also finds that the proposal to list and trade the Shares on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the Act,\27\ 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. --------------------------------------------------------------------------- \25\ 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). \26\ 15 U.S.C. 78f(b)(5). \27\ 15 U.S.C. 78k-1(a)(1)(C)(iii). --------------------------------------------------------------------------- The Commission 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. According to the Exchange, quotation and last-sale information regarding the Shares will be disseminated through the facilities of the Consolidated Tape Association [[Page 56314]] (``CTA''). The Funds' Web site, www.metaurus.com, will display the applicable end of day closing NAV. The daily holdings of each Fund will be available on the Funds' Web site before 9:30 a.m. E.T. each day. The Funds' Web site disclosure of portfolio holdings will be made daily and will include, as applicable: The composite value of the total portfolio; the quantity and type of each holding (including the ticker symbol, maturity date or other identifier, if any) and other descriptive information; the value of each Treasury Security and cash equivalent; and the amount of cash held in each Fund's portfolio. Accordingly, each investor will have access to the current daily holdings of each Fund through the Funds' Web site, which will be publicly accessible at no charge. This Web site disclosure of each Fund's daily holdings will occur at the same time as the disclosure by the Trust of the daily holdings to authorized participants so that all market participants are provided daily holdings information at the same time. The intraday, closing prices, and settlement prices of the S&P 500 Futures Contracts will be readily available from the CME Web site, automated quotation systems, published or other public sources, or major market data vendors. Pricing information for cash equivalents is available from major market data vendors. In addition, price information for the underlying money market ETFs is available from the applicable exchange. Quotation information from brokers and dealers or pricing services is available for Treasury Securities. Complete real- time data for the S&P 500 Futures Contracts is available by subscription through online information services. CME also provides delayed futures information on current and past trading sessions and market news free of charge on its Web site. Additionally, the Commission believes that the proposal to list and trade the Shares is reasonably designed 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 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 Indicative Fund Value (``IFV'') or the value of an Underlying Index occurs. If the interruption to the dissemination of the IFV, or the value of an Underlying Index, 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 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. The Commission believes that the proposed rule change is designed to prevent fraudulent and manipulative acts and practices because the Exchange has a general policy prohibiting the distribution of material, non-public information by its employees. Moreover, trading of the Shares will be subject to NYSE Arca Rule 8.200-E, 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. 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 S&P 500 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 S&P 500 Futures Contracts from such markets and other entities. In addition, all S&P 500 Futures Contracts are traded on CME, an ISG member and the Exchange may obtain information regarding trading in the Shares and S&P 500 Futures Contracts from markets and other entities that are members of ISG.\28\ --------------------------------------------------------------------------- \28\ For a list of the current members of ISG, see www.isgportal.org. --------------------------------------------------------------------------- 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 Rule 8.200-E.\29\ --------------------------------------------------------------------------- \29\ See Amendment No. 1, supra note 5. --------------------------------------------------------------------------- (2) The Exchange has appropriate rules to facilitate transactions in the Shares during all trading sessions.\30\ --------------------------------------------------------------------------- \30\ See id. --------------------------------------------------------------------------- (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.\31\ --------------------------------------------------------------------------- \31\ See id. --------------------------------------------------------------------------- (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 Baskets (and that Shares are not individually redeemable); (c) NYSE Arca Rule 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; (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.\32\ --------------------------------------------------------------------------- \32\ See Amendment 1, supra note 5. --------------------------------------------------------------------------- (5) For initial and continued listing, each Fund will be in compliance with Rule 10A-3 under the Act,\33\ as provided by NYSE Arca Rule 5.3-E.\34\ --------------------------------------------------------------------------- \33\ 17 CFR 240.10A-3. \34\ See Amendment 1, supra note 5. --------------------------------------------------------------------------- (6) A minimum of 50,000 Shares of a Fund will be outstanding at the commencement of trading on the Exchange.\35\ --------------------------------------------------------------------------- \35\ See id. --------------------------------------------------------------------------- (7) All statements and representations made in this filing regarding (a) the description of the portfolios, indexes and reference assets, (b) limitations on portfolio holdings, indexes and reference assets, or (c) applicability of Exchange listing rules specified in this filing shall constitute continued listing requirements for listing the Shares on the Exchange.\36\ --------------------------------------------------------------------------- \36\ See id. --------------------------------------------------------------------------- (8) 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 requirements.\37\ If a Fund is not in [[Page 56315]] compliance with the applicable listing requirements, the Exchange will commence delisting procedures under NYSE Arca Rule 5.5-E(m). --------------------------------------------------------------------------- \37\ See id. 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), 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 each 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 Amendments No. 1 and 2. The Commission notes that the Shares must comply with the requirements of NYS Arca Rule 8.200-E, Commentary .02 thereto to be listed and traded in the Exchange on an initial and continuing basis. For the foregoing reasons, the Commission finds that the proposed rule change, as modified by Amendments No.1 and 2, is consistent with Section 6(b)(5) of the Act \38\ and the rules and regulations thereunder applicable to a national securities exchange. --------------------------------------------------------------------------- \38\ 15 U.S.C. 78f(b)(5). --------------------------------------------------------------------------- IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,\39\ that the proposed rule change (SR-NYSEArca-2017-88), as modified by Amendments No. 1 and 2, be, and it hereby is, approved. --------------------------------------------------------------------------- \39\ 15 U.S.C. 78s(b)(2). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.\40\ --------------------------------------------------------------------------- \40\ 17 CFR 200.30-3(a)(12). --------------------------------------------------------------------------- Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017-25606 Filed 11-27-17; 8:45 am] BILLING CODE 8011-01-P
![Federal Register / Vol. 82, No. 227 / Tuesday, November 28, 2017 / Notices 56311
conditional temporary exemption be of the structured finance product after November 16, 2017, the Exchange filed
extended or made permanent.27 The issuance, only in transactions that occur Amendment No. 2 to the proposed rule
Commission’s Extension Orders again outside the U.S., change.6 The Commission has not
solicited public comment on issues Until the earlier of (i) December 2, received any comments on the proposed
raised in connection with the 2019, or (ii) the compliance date set rule change. This order approves the
application of Rule 17g–5(a)(3) outside forth in any final rule that may be proposed rule change, as modified by
the United States. Commenters adopted by the Commission that Amendments No.1 and 2 thereto.
generally supported the exemption provides for a similar exemption.
II. The Exchange’s Description of the
regarding such application of the rule, By the Commission. Proposal 7
with some commenters requesting that Brent J. Fields,
the exemption be made permanent.28 The Exchange proposes to list and
Secretary. trade the Shares under NYSE Arca Rule
Given the continued concerns about
[FR Doc. 2017–25646 Filed 11–27–17; 8:45 am] 8.200–E, Commentary .02, which
potential disruptions of local
securitization markets, the staff of the BILLING CODE 8011–01–P governs the listing and trading of Trust
Commission is considering Issued Receipts.8 Each Fund will be a
recommending that the Commission
SECURITIES AND EXCHANGE before fees and expenses, correspond to the
propose an amendment to Rule 17g–
COMMISSION performance of the Solactive U.S. Cumulative
5(a)(3) that would provide for a Dividends Index Series 2027 over each calendar
permanent exemption with respect to [Release No. 34–82138; File No. SR– year; (3) clarified that the value of the Dividend
credit ratings satisfying the conditions NYSEArca–2017–88] Fund’s Shares will be affected by the ordinary cash
of the exemption. In order to provide dividends that have been paid to date and general
Self-Regulatory Organizations; NYSE expectations in the market regarding the future
time for the Commission to consider any levels of such dividends; (4) clarified that the
such a recommendation and to avoid Arca, Inc.; Order Approving a
Dividend Fund’s exposure to dividend payments
any disruption if the exemption were Proposed Rule Change, as Modified by made by S&P 500 constituent companies will be
allowed to expire, the Commission Amendments No. 1 and 2, To List and based exclusively on its investments in annual S&P
Trade Shares of the U.S. Equity 500 dividend futures contracts; (5) clarified that
believes that it is necessary and pricing may be an example of a market factor
appropriate in the public interest, and Cumulative Dividends Fund—Series
pursuant to which the Dividend Fund may invest
consistent with the protection of 2027 and the U.S. Equity Ex-Dividend in quarterly S&P 500 dividend futures contracts; (6)
investors, to extend the conditional Fund—Series 2027 Under NYSE Arca clarified that the Ex-Dividend Fund will seek
Rule 8.200–E, Commentary .02 investment results that, before fees and expenses,
temporary exemption until the earlier of correspond to the performance of the Solactive U.S.
(i) December 2, 2019, or (ii) the November 21, 2017. Equity Ex-Dividends Index—Series 2027 so as to
compliance date set forth in any final provide shareholders with returns that are
rule that may be adopted by the I. Introduction equivalent to the performance of 0.5 shares of
SPDR® S&P 500® ETF less the value of current and
Commission that provides for a similar On August 8, 2017, NYSE Arca, Inc. future expected ordinary cash dividends to be paid
exemption. (‘‘Exchange’’) filed with the Securities on the S&P 500 constituent companies over the
and Exchange Commission term of the Ex-Dividend Fund; (7) stated that the
IV. Conclusion quarterly S&P 500 Index futures contracts are traded
(‘‘Commission’’), pursuant to Section on the Chicago Mercantile Exchange (‘‘CME’’); (8)
Accordingly, 19(b)(1) of the Securities Exchange Act clarified that the Ex-Dividend Fund intends to track
It is hereby ordered, pursuant to of 1934 (‘‘Act’’) 1 and Rule 19b–4 the performance of the Solactive Ex-Dividend Index
Section 36 of the Exchange Act, that a thereunder,2 a proposed rule change to by selling annual S&P dividend futures contracts;
nationally recognized statistical rating list and trade shares (‘‘Shares’’) of the (9) represented that the Trust (defined herein) will
organization is exempt from the issue and sell Shares of a Fund in one or more block
U.S. Equity Cumulative Dividends size aggregations of 50,000 shares; (10) represented
requirements in Rule 17g–5(a)(3) (17 Fund—Series 2027 (‘‘Dividend Fund’’) that an updated indicative fund value’’ (‘‘IFV’’) will
CFR 240.17g–5(a)(3)) for credit ratings and the U.S. Equity Ex-Dividend be calculated and disseminated by a third party
where: Fund—Series 2027 (‘‘Ex-Dividend service provider in accordance with the rules of the
(1) The issuer of the security or Exchange, and the IFV will be calculated by using
Fund,’’ each a ‘‘Fund,’’ and collectively the prior day’s closing net asset value (‘‘NAV’’) per
money market instrument is not a U.S. the ‘‘Funds’’) under NYSE Arca Equities Share of a Fund as a base and updating that value
person (as defined under Securities Act Rule 8.200, Commentary .02.3 The throughout the trading day to reflect changes in the
Rule 902(k)); and proposed rule change was published for most recently reported trade prices for instruments
(2) The nationally recognized traded by a Fund; and (11) made other technical
comment in the Federal Register on changes. Because Amendment No. 1 made the
statistical rating organization has a August 28, 2017.4 On November 14, clarifying changes and representations summarized
reasonable basis to conclude that the 2017, the Exchange filed Amendment above and does not raise unique or novel regulatory
structured finance product will be No. 1 to the proposed rule change.5 On issues. Amendment No. 1 is not subject to notice
offered and sold upon issuance, and that and comment.
6 In Amendment No. 2, which is a partial
any arranger linked to the structured 1 15 U.S.C. 78s(b)(1). amendment, the Exchange updated the proposed
finance product will effect transactions 2 17 CFR 240.19b–4. rule change to reflect that the Registration
3 The Commission notes that, on August 17, 2017, Statement has been filed with the Commission.
27 See Japan FSA Letter; SFJ Letter; AFME Letter; the Commission approved a proposed rule change Because Amendment No. 2 simply deletes
JCR Letter; ASF/AuSF Letter. that, among other things, created a single rulebook information regarding the draft registration
28 Comment letters received in response to the of the Exchange. See Securities Exchange Act statement and provides information related to the
requests for comment regarding the application of Release No. 81419, 82 FR 40044 (Aug. 23, 2017) filed Registration Statement and does not raise
Rule 17g–5(a)(3) to transactions outside the United (SR–NYSEArca–2017–40). As a result, NYSE Arca unique or novel regulatory issues, Amendment No.
ethrower on DSK3G9T082PROD with NOTICES
States are available at https://www.sec.gov/ Equities Rule 8.200 became NYSE Arca Rule 8.200– 2 is not subject to notice and comment.
comments/s7-04-09/s70409.shtml. See, e.g., Letter E. 7 Additional information regarding the Funds, the
4 See Securities Exchange Act Release No. 81453 Trust, and the Shares can be found in Amendments
from Richard Hopkin, Managing Director & Head of
Fixed Income, Association for Financial Markets in (Aug. 22, 2017), 82 FR 40816. No. 1 and 2 and the Registration Statement. See
Europe, dated Nov. 1, 2017; Letter from Richard 5 In Amendment No. 1 (‘‘Amendment No. 1’’), supra notes 5 and 6 and infra note 9.
Johns, Executive Director, Structured Finance which amended and replaced the proposed rule 8 Commentary .02 to NYSE Arca Rule 8.200–E
Industry Group, and Chris Dalton, Chief Executive change in its entirety, the Exchange: (1) Changed applies to Trust Issued Receipts that invest in
Officer, Australian Securitisation Forum, dated Jul. the custodian of the Funds; (2) stated that the ‘‘Financial Instruments.’’ The term ‘‘Financial
19, 2017. Dividend Fund will seek investment results that, Continued
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![Federal Register / Vol. 82, No. 227 / Tuesday, November 28, 2017 / Notices 56315
compliance with the applicable listing (‘‘Act’’),1 and Rule 19b–4 thereunder,2 bid and offer, and that will execute
requirements, the Exchange will notice is hereby given that on November upon entry only in circumstances where
commence delisting procedures under 9, 2017, The Nasdaq Stock Market LLC economically beneficial to the party
NYSE Arca Rule 5.5–E(m). (‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the entering the Order. Today, MPPOs are
This approval order is based on all of Securities and Exchange Commission available during Market Hours only, and
the Exchange’s representations and (‘‘Commission’’) the proposed rule MPPOs remaining on the Nasdaq Book
description of the Funds, including change as described in Items I and II at 4:00 p.m. ET are cancelled by the
those set forth above and in below, which Items have been prepared System. Due to how the Exchange
Amendments No. 1 and 2. The by the Exchange. The Commission is currently processes these cancel
Commission notes that the Shares must publishing this notice to solicit messages, however, Rule 4702(b)(5)(C)
comply with the requirements of NYS comments on the proposed rule change also provides that an MPPO may
Arca Rule 8.200–E, Commentary .02 from interested persons. participate in the Nasdaq Closing Cross
thereto to be listed and traded in the I. Self-Regulatory Organization’s if the Nasdaq Closing Cross occurs prior
Exchange on an initial and continuing Statement of the Terms of Substance of to the cancellation message being fully
basis. the Proposed Rule Change processed. The Exchange believes that it
For the foregoing reasons, the would be beneficial to members and
Commission finds that the proposed The Exchange proposes to amend
investors to completely prevent MPPOs
rule change, as modified by Rule 4702(b)(5) to provide that
from executing in the Nasdaq Closing
Amendments No.1 and 2, is consistent Midpoint Peg Post-Only Orders may not
Cross rather than having their
with Section 6(b)(5) of the Act 38 and the participate in the Nasdaq Closing Cross,
and to make other technical changes participation determined by whether the
rules and regulations thereunder cancel message is processed prior to the
applicable to a national securities with respect to Order Types flagged for
the Nasdaq Closing Cross pursuant to Nasdaq Closing Cross. The Exchange
exchange. therefore proposes to eliminate language
Rule 4702(b)(12).
IV. Conclusion The text of the proposed rule change indicating that MPPOs may participate
is available on the Exchange’s Web site in the Nasdaq Closing Cross if the
It is therefore ordered, pursuant to Nasdaq Closing Cross for the security
Section 19(b)(2) of the Act,39 that the at http://nasdaq.cchwallstreet.com, at
the principal office of the Exchange, and occurs prior to the cancellation message
proposed rule change (SR–NYSEArca– being fully processed, and instead
2017–88), as modified by Amendments at the Commission’s Public Reference
Room. provide that MPPOs may not participate
No. 1 and 2, be, and it hereby is, in the Nasdaq Closing Cross. In
approved. II. Self-Regulatory Organization’s connection with this change, the
For the Commission, by the Division of Statement of the Purpose of, and Exchange also proposes to remove
Trading and Markets, pursuant to delegated Statutory Basis for, the Proposed Rule language indicating that the trading
authority.40 Change system ‘‘attempts to’’ cancel MPPOs
Eduardo A. Aleman, In its filing with the Commission, the prior to the commencement of the
Assistant Secretary. Exchange included statements Nasdaq Closing Cross as the ‘‘attempts
[FR Doc. 2017–25606 Filed 11–27–17; 8:45 am] concerning the purpose of and basis for to’’ language is no longer necessary with
BILLING CODE 8011–01–P the proposed rule change and discussed the elimination of the race condition
any comments it received on the described above. With this change
proposed rule change. The text of these members will have more certainty with
SECURITIES AND EXCHANGE statements may be examined at the respect to MPPO handling for the
COMMISSION places specified in Item IV below. The Nasdaq Closing Cross since no MPPOs
[Release No. 34–82152; File No. SR–
Exchange has prepared summaries, set will be allowed to participate, which is
NASDAQ–2017–122] forth in sections A, B, and C below, of consistent with how the Exchange
the most significant aspects of such believes members want these order
Self-Regulatory Organizations; The statements. treated. In addition, since the Exchange
Nasdaq Stock Market LLC; Notice of A. Self-Regulatory Organization’s is explicitly addressing MPPO
Filing and Immediate Effectiveness of Statement of the Purpose of, and availability for the Nasdaq Closing Cross
Proposed Rule Change To Amend Rule Statutory Basis for, the Proposed Rule in this rule, the Exchange also proposes
4702 Change to add language indicating that MPPOs
may not participate in the Nasdaq
November 22, 2017. 1. Purpose Opening Cross. MPPOs are excluded
Pursuant to Section 19(b)(1) of the from the Nasdaq Opening Cross today as
The purpose of the proposed rule
Securities Exchange Act of 1934 they can only be entered during Market
change is to amend Rule 4702(b)(5) to
provide that Midpoint Peg Post-Only Hours and are cancelled at the end of
the exchange will ‘‘surveil’’ for compliance with the the trading day. Furthermore, Rule
continued listing requirements. See, e.g., Securities Orders (‘‘MPPOs’’) may not participate
Exchange Act Release No. 77499 (April 1, 2016), 81 in the Nasdaq Closing Cross, and to 4703(l) provides that Order Types
FR 20428 (April 7, 2016), available at: http:// make other technical changes with except Supplemental Orders participate
www.sec.gov/rules/sro/bats/2016/34-77499.pdf. In respect to Order Types flagged for the in the Nasdaq Opening Cross and/or the
the context of this representation, it is the Nasdaq Closing Cross if the Order has a
Commission’s view that ‘‘monitor’’ and ‘‘surveil’’ Nasdaq Closing Cross pursuant to Rule
both mean ongoing oversight of each Fund’s 4702(b)(12). Time-in-Force that would cause the
ethrower on DSK3G9T082PROD with NOTICES
compliance with the continued listing An ‘‘MPPO’’ is defined in Rule Order to be in effect at the time of the
requirements. Therefore, the Commission does not 4702(b)(5) as an Order Type with a Non- Nasdaq Opening Cross and/or Nasdaq
view ‘‘monitor’’ as a more or less stringent Closing Cross. Since MPPOs will not be
obligation than ‘‘surveil’’ with respect to the Display Order Attribute that is priced at
continued listing requirements. the midpoint between the national best permitted to participate in the Nasdaq
38 15 U.S.C. 78f(b)(5). Opening Cross or Nasdaq Closing Cross
39 15 U.S.C. 78s(b)(2). 1 15 U.S.C. 78s(b)(1). under any circumstances, the Exchange
40 17 CFR 200.30–3(a)(12). 2 17 CFR 240.19b–4. proposes to amend Rule 4703(l) to state
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Document Created: 2017-11-28 01:51:05
Document Modified: 2017-11-28 01:51:05
| 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 56311 |
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