83 FR 51027 - Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting Approval of Proposed Rule Change, as Modified by Amendment Nos. 4 and 6, To List and Trade Shares of the Amplify BlackSwan Growth & Treasury Core ETF Under Commentary .02 to NYSE Arca Rule 5.2-E(j)(3)

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 196 (October 10, 2018)

Page Range		51027-51030
FR Document		2018-21901

Federal Register, Volume 83 Issue 196 (Wednesday, October 10, 2018)

[Federal Register Volume 83, Number 196 (Wednesday, October 10, 2018)]
[Notices]
[Pages 51027-51030]
From the Federal Register Online [www.thefederalregister.org]
[FR Doc No: 2018-21901]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84348; File No. SR-NYSEArca-2018-57]

Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting
Approval of Proposed Rule Change, as Modified by Amendment Nos. 4 and
6, To List and Trade Shares of the Amplify BlackSwan Growth & Treasury
Core ETF Under Commentary .02 to NYSE Arca Rule 5.2-E(j)(3)

October 3, 2018.

I. Introduction

On July 31, 2018, NYSE Arca, Inc. (``NYSE Arca'' or ``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 Amplify BlackSwan Growth &
Treasury Core ETF (``Fund'') under Commentary .02 to NYSE Arca Rule
5.2-E(j)(3). On August 10, 2018, the Exchange filed Amendment No. 1 to
the proposed rule change, which replaced and superseded the original
filing in its entirety. The proposed rule change, as modified by
Amendment No. 1, was published for comment in the Federal Register on
August 20, 2018.\3\ On September 10, 2018, the Exchange filed Amendment
No. 2 to the proposed rule change, which replaced and superseded the
proposed rule change, as modified by Amendment No. 1, in its entirety.
On September 24, 2018, the Exchange filed Amendment No. 3 to the
proposed rule change. On September 28, 2018, the Exchange filed
Amendment No. 4 to the proposed rule change, which replaced and
superseded the proposed rule change, as modified by Amendment Nos. 1,
2, and 3, in its entirety.\4\ On October 1, 2018, the Exchange
submitted and withdrew Amendment No. 5 to the proposed rule change. On
October 1, 2018, the Exchange also filed Amendment No. 6 to the
proposed rule change.\5\ The Commission received no comments on the
proposed rule change. This order grants approval of the proposed rule
change, as modified by Amendment Nos. 4 and 6.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 83845 (August 14,
2018), 83 FR 42188 (``Notice'').
\4\ In Amendment No. 4, the Exchange: (i) Amended the
description of the Fund's sub-advisers, the Index Provider (as
defined below), and the Index Committee (as defined below); (ii)
represented that the Index Provider has implemented and will
maintain procedures designed to prevent the use and dissemination of
material non-public information regarding the Index (as defined
below); (iii) amended the name of the Index; (iv) stated that the
Exchange believes that surveillances by other exchanges on which SPY
LEAPS trade should help to protect against market manipulation of
the Fund's Shares and SPY LEAPS; (v) clarified that statements and
representations in the filing regarding the description of, or
limitations on, the Index shall constitute continued listing
requirements for listing the Shares of the Fund on the Exchange;
(vi) stated that the value of the Index will be widely disseminated
by one or more major market data vendors at least once per day;
(vii) clarified the availability of certain information on the
Fund's website; and (viii) made certain technical and conforming
changes. Amendment No. 4 to the proposed rule change is available
at: https://www.sec.gov/comments/sr-nysearca-2018-57/nysearca201857.htm. Amendment No. 4 is not subject to notice and
comment because it does not materially alter the substance of the
proposed rule change or raise unique or novel regulatory issues.
\5\ In Amendment No. 6, the Exchange: (i) Clarified that the
Index Provider is not registered as an investment adviser and is not
affiliated with an investment adviser; and (ii) made certain
technical and conforming changes. Amendment No. 6 to the proposed
rule change is available at: https://www.sec.gov/comments/sr-nysearca-2018-57/nysearca201857.htm. Amendment No. 6 is not subject
to notice and comment because it does not materially alter the
substance of the proposed rule change or raise unique or novel
regulatory issues.
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II. Description of the Proposed Rule Change, as Modified by Amendment
Nos. 4 and 6 6
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\6\ For more information regarding the Fund and the Shares, see
Amendment No. 4, supra note 4 and Amendment No. 6, supra note 5.
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The Exchange proposes to list and trade the Shares under Commentary
.02 to NYSE Arca Rule 5.2-E(j)(3), which governs the listing and
trading of Investment Company Units on the Exchange. The Fund will be
an index-based exchange traded fund (``ETF''). The Shares will be
offered by the Amplify ETF Trust (``Trust''), which is registered with
the Commission as an investment company and has filed a registration
statement on Form N-1A (``Registration Statement'') with the Commission
on behalf of the Fund.\7\
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\7\ The Exchange states that, on June 26, 2018, the Trust filed
a Registration Statement on Form N-1A on behalf of the Fund (File
Nos. 333-207937 and 811-23108). In addition, the Exchange states
that the Commission has issued an order granting certain exemptive
relief to the Trust under the Investment Company Act of 1940 Act.
See Investment Company Act Release No. 31822 (September 14, 2015)
(File No. 812-14424).
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Amplify Investments LLC will be the Fund's investment adviser
(``Adviser''). CSAT Investment Advisory, L.P., d/b/a Exponential ETFs
and ARGI Investment Services LLC will be the Fund's sub-advisers
(``Sub-Advisers'').\8\ U.S. Bancorp Fund Services, LLC will be the
administrator, custodian, and fund accounting and transfer agent for
the Fund. Quasar Distributors LLC will serve as the distributor for the
Fund.
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\8\ The Exchange represents that 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 its
broker-dealer affiliate regarding access to information concerning
the composition of and/or changes to the Fund's portfolio. The
Exchange represents that the Sub-Advisers are not registered as a
broker-dealer or affiliated with a broker-dealer. The Exchange
further represents that, in the event (a) the Adviser or a Sub-
Adviser becomes registered as a broker-dealer or newly affiliated
with a broker-dealer, or (b) any new adviser or sub-adviser is a
registered broker-dealer or becomes affiliated with a broker-dealer,
it will implement and maintain a fire wall with respect to its
relevant personnel or its broker-dealer affiliate regarding access
to information concerning the composition of 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
the portfolio.
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A. The Fund's Underlying Index

According to the Exchange, the Fund will seek investment results
that generally correspond (before fees and expenses) to the price and
yield of the S-Network BlackSwan Core Total Return Index (``Index'').
The Index was created and is maintained by S-Network Global Networks,
Inc. (``Index Provider'').\9\ The Index is also compiled and calculated
by the Index Provider.
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\9\ According to the Exchange, the Index Provider is not
registered as an investment adviser or broker-dealer and is not
affiliated with an investment adviser or broker-dealer. The Exchange
states that the Index Provider has implemented and will maintain
procedures designed to prevent the use and dissemination of material
non-public information regarding the Index. In addition, the
Exchange states that the Index Provider is not affiliated with the
Fund, the Adviser, or the Sub-Advisers.
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According to the Exchange, the Index is a rules-based, quantitative
index that seeks to provide capital protection against the
unpredictable, rare, and highly disruptive events that have come to be
referred to as ``Black Swans.'' The Index endeavors to provide
investment returns that correspond to those of the

[[Page 51028]]

S&P 500 Index, while mitigating against significant losses.
The Index is composed of U.S. Treasury securities and long-dated
call options (``LEAPS'') \10\ on the SPDR S&P 500 ETF Trust (``SPY'')
\11\ (which options are referred to herein as ``SPY LEAPS''). Twice a
year, in June and December, on the Index reconstitution and rebalance
date, the Index places 90% of its index market capitalization in the
portfolio of U.S. Treasury securities and 10% of its index market
capitalization in the portfolio of SPY LEAPS. The U.S. Treasury
portfolio of the Index is composed of 2-, 3-, 5-, 7-, 10-, and 30-year
U.S. Treasury securities that cumulatively provide a portfolio duration
that matches the initial duration of the 10-year U.S. Treasury
security.\12\ The SPY LEAPS portfolio of the Index is composed of in-
the-money SPY LEAPS that, at the time of purchase, have expirations of
at least one year and one day in the future and expire in either June
or December, as applicable.\13\
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\10\ LEAPS are long-term options traded on U.S. options
exchanges.
\11\ Shares of SPY are listed and traded on the Exchange.
\12\ The Exchange states that the treasury position holds 5% of
its allocated portion of Index market capitalization in a
``barbell'' portfolio of 2- and 30-year treasuries, and 95% of its
allocated portion of Index market capitalization in a core portfolio
that invests in 3-, 5-, 7-, 10-, and 30-year treasuries.
\13\ The Exchange states that the SPY LEAPS will generally have
a delta of 70 at the time of purchase, and should there not be a 70-
delta option, the closest option above 70 will be utilized. The
Exchange states that the options portion of the Index holds 5% of
the Index market capitalization in June 70-delta SPY LEAPS and 5% in
December 70-delta SPY LEAPS. At each June reconstitution, the Index
liquidates its existing June SPY LEAPS and purchases SPY LEAPS that
expire the following June. The December SPY LEAPS positions will
remain unchanged at each June reconstitution. At each December
reconstitution, the Index liquidates its existing December SPY LEAPS
and purchases SPY LEAPS that expire the following December. The June
SPY LEAPS positions will remain unchanged at each December
reconstitution. Net gains or losses derived from the reconstitutions
of the SPY LEAPS positions will be added to or subtracted from the
U.S. Treasury portfolio at each reconstitution.
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The Index is governed by a committee (``Index Committee'') that is
responsible for overseeing the activities of the Index Provider and
approving all changes to the Index related to its semi-annual
reconstitutions and rebalances. According to the Exchange, all members
of the Index Committee and their advisors must comply with the Index
Provider's code of conduct and ethics with respect to the disclosure
and use of material non-public information.

B. The Fund's Principal Investments

Under normal market conditions,\14\ the Fund will invest at least
80% of its total assets in the securities that comprise the Index,
which, as described above, are U.S. Treasury securities and SPY LEAPS.
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\14\ The term ``normal market conditions'' is as that term is
defined in NYSE Arca Rule 8.600-E(c)(5).
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C. The Fund's Non-Principal Investments

While, under normal market conditions, the Fund will invest at
least 80% of its total assets in securities that comprise the Index,
the Fund may also hold cash and cash equivalents.\15\
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\15\ The term ``cash equivalents'' has the meaning specified in
Commentary .01(c) to NYSE Arca Rule 8.600-E.
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D. Application of Generic Listing Requirements

The Exchange represents that it has submitted the proposed rule
change because the Index does not meet all of the generic listing
requirements of Commentary .02(a) to NYSE Arca Rule 5.2-E(j)(3).
Specifically, because the Index includes SPY LEAPS, the Index does not
satisfy the requirement set forth in Commentary .02(a)(1) to NYSE Arca
Rule 5.2-E(j)(3), which states that the index or portfolio underlying a
series of Investment Company Units must consist of (i) only Fixed
Income Securities \16\ or (ii) Fixed Income Securities and cash. The
Exchange represents that, with the exception of the requirement in
Commentary .02(a)(1) to NYSE Arca Rule 5.2-E(j)(3), the Index and the
Fund will meet each of the initial and continued listing criteria in
NYSE Arca Rule 5.2-E(j)(3) and NYSE Arca Rule 5.5-E(g)(2).
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\16\ Commentary .02 to NYSE Arca Rule 5.2-E(j)(3) states that
``Fixed Income Securities'' are debt securities that are notes,
bonds, debentures or evidence of indebtedness that include, but are
not limited to, U.S. Department of Treasury securities, government-
sponsored entity securities, municipal securities, trust preferred
securities, supranational debt and debt of a foreign country or a
subdivision thereof.
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III. Discussion and Commission Findings

After careful review, the Commission finds that the proposed rule
change, as modified by Amendment Nos. 4 and 6, is consistent with the
Act and the rules and regulations thereunder applicable to a national
securities exchange.\17\ In particular, the Commission finds that the
proposed rule change, as modified by Amendment Nos. 4 and 6, is
consistent with Section 6(b)(5) of the Act,\18\ which requires, among
other things, that the Exchange's rules be 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 a national market system and,
in general, to protect investors and the public interest.
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\17\ 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).
\18\ 15 U.S.C. 78f(b)(5).
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As discussed above, the Shares do not qualify for generic listing
under Commentary .02 to NYSE Arca Rule 5.2-E(j)(3) because the Index
includes SPY LEAPS. The Commission notes that the Exchange represents
that, other than Commentary .02(a)(1) to NYSE Arca Rule 5.2-E(j)(3),
the Shares will meet the initial and continued listing criteria under
NYSE Arca Rules 5.2-E(j)(3) and 5.5-E(g)(2). The Commission also notes
that SPY LEAPS are traded on U.S. options exchanges, SPY is listed and
traded on the Exchange, and SPY is based on the S&P 500 Index.\19\
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\19\ The Exchange also notes that the S&P 500 Index would meet
the generic listing standards applicable to an index composed of
U.S. Component Stocks in Commentary .01(a) to NYSE Arca Rule 5.2-
E(j)(3).
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The Commission also finds that the proposal is consistent with
Section 11A(a)(1)(C)(iii) of the Act,\20\ which sets forth Congress's
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.
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\20\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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Quotation and last sale information for the Shares will be
available via the Consolidated Tape Association high-speed line.
Information regarding market price and trading volume for the Shares
will be continually available on a real-time basis throughout the day
on brokers' computer screens and other electronic services. Information
regarding the previous day's closing price and trading volume
information for the Shares will be published daily in the financial
section of newspapers. In addition, the Intraday Indicative Value
(``IIV'') (as defined in NYSE Arca Rule 5.2-E(j)(3), Commentary .02(c))
will be widely disseminated at least every 15 seconds during the Core
Trading Session by one or more major market data vendors.\21\ The value
of the Index will be widely disseminated by one or more major market
data vendors at least once per day. Information about the Index
constituents, the weighting of the

[[Page 51029]]

constituents, the Index's methodology, and the Index's rules will be
available on the Index Provider's website. Quotation and last sale
information for SPY LEAPS will be available from the exchange on which
they are traded and through the Options Price Reporting Authority. The
intraday, closing, and settlement prices of exchange-traded options
also will be available from the options exchanges, automated quotation
systems, published or other public sources, or online information
services. Price information on U.S. Treasury securities and cash
equivalents will be available from major broker-dealer firms or market
data vendors, automated quotation systems, published or other public
sources, or online information services.
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\21\ The Exchange states that all Fund holdings will be included
in calculating the IIV.
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The Fund's website, which will be publicly available prior to the
public offering of Shares, will include a form of the prospectus for
the Fund and additional data relating to the net asset value (``NAV'')
and other applicable quantitative information. On each business day,
before commencement of trading in Shares in the Core Trading Session on
the Exchange, the Fund will disclose on its website information
regarding each portfolio holding of the Fund. In addition, a portfolio
composition file, which will include the security names and quantities
of securities and other assets required to be delivered in exchange for
the Fund's Shares, together with estimates and actual cash components,
will be publicly disseminated prior to the opening of the Exchange via
the National Securities Clearing Corporation.
The Commission also believes that the proposal is reasonably
designed to promote fair disclosure of information that may be
necessary to price the Shares appropriately and to prevent trading when
a reasonable degree of transparency cannot be assured. 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 the
Shares inadvisable. In addition, trading in the Shares will be subject
to NYSE Arca Rule 5.5-E(g)(2)(b), which sets forth circumstances under
which Shares of the Fund may and/or will be halted. The Exchange will
obtain a representation from the issuer of the Shares that the NAV will
be calculated daily every day the New York Stock Exchange is open and
that the NAV will be made available to all market participants at the
same time. Under NYSE Arca Rule 7.18-E(d)(2), if the Exchange becomes
aware that the NAV is not being disseminated to all market participants
at the same time, it will halt trading until such time as the NAV is
available to all market participants.
In support of this proposal, the Exchange represents that:
(1) The Shares will conform to the initial and continued listing
criteria under NYSE Arca Rules 5.2-E(j)(3) and 5.5(E)(g)(2), except
that the Index will not meet the requirements of NYSE Arca Rule 5.2-
E(j)(3), Commentary .02(a)(1) in that the Index will include SPY LEAPS.
(2) The Shares will comply with all other requirements applicable
to Investment Company Units, including the dissemination of key
information such as the Index value, the NAV, and the IIV, rules
governing the trading of equity securities, trading hours, trading
halts, firewalls for the Index Provider, Adviser and Sub-Advisers,
surveillance, and the Information Bulletin, as set forth in Exchange
rules applicable to Investment Company Units and the orders approving
such rules.
(3) The Shares will be subject to the existing trading
surveillances administered by the Exchange and Financial Industry
Regulatory Authority (``FINRA'') on behalf of the Exchange, which are
designed to deter and detect violations of Exchange rules and
applicable federal securities laws relating to trading on the
Exchange.\22\
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\22\ The Exchange states that FINRA conducts cross-market
surveillances on behalf of the Exchange pursuant to a regulatory
services agreement, and that the Exchange is responsible for FINRA's
performance under this regulatory services agreement.
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(4) The Exchange, or FINRA on behalf of the Exchange, or both, will
communicate as needed regarding trading in the Shares and SPY LEAPS
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 in the Shares and SPY LEAPS from such markets and
other entities. In addition, the Exchange may obtain information
regarding trading in the Shares and SPY LEAPS from markets and other
entities that are members of ISG or with which the Exchange has in
place a comprehensive surveillance sharing agreement. Moreover, 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.
(5) 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.
(6) The Fund's investments will be consistent with its investment
objective and will not be used to enhance leverage. The Fund's
investments will not be used to seek performance that is the multiple
or inverse multiple (e.g., 2x or -2x) of the Index.
(7) For initial and continued listing, the Fund will be in
compliance with Rule 10A-3 under the Act.\23\
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\23\ 17 CFR 240.10A-3.
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(8) A minimum of 100,000 Shares for the Fund will be outstanding at
the commencement of trading on the Exchange.
(9) All statements and representations made in the filing regarding
(a) the description of the Index, portfolio or reference asset, (b)
limitations on the Index or portfolio holdings or reference assets, or
(c) the applicability of Exchange listing rules specified in the rule
filing shall constitute continued listing requirements for listing the
Shares of the Fund on the Exchange. In addition, the issuer is required
to notify 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 \24\ 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).
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\24\ The Commission notes that certain proposals for the listing
and trading of exchange-traded products 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, 20432 (April 7, 2016) (SR-BATS-
2016-04). In the context of this representation, it is the
Commission's view that ``monitor'' and ``surveil'' both mean ongoing
oversight of 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.
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This approval order is based on all of the Exchange's statements
and representations, including those set forth above and in Amendment
Nos. 4 and 6.
For the foregoing reasons, the Commission finds that the proposed
rule change, as modified by Amendment Nos. 4 and 6, is consistent with
Section 6(b)(5) of the Act \25\ and Section 11A(a)(1)(C)(iii) of the
Act \26\ and the rules and regulations thereunder applicable to a
national securities exchange.
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\25\ 15 U.S.C. 78f(b)(5).
\26\ 15 U.S.C. 78k-1(a)(1)(C)(iii).

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[[Page 51030]]

IV. Conclusion

It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\27\ that the proposed rule change (SR-NYSEArca-2018-57), as
modified by Amendment Nos. 4 and 6 be, and hereby is, approved.
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\27\ 15 U.S.C. 78s(b)(2).

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\28\
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\28\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-21901 Filed 10-9-18; 8:45 am]
BILLING CODE 8011-01-P

Federal Register / Vol. 83, No. 196 / Wednesday, October 10, 2018 / Notices 51027

FOR FURTHER INFORMATION CONTACT: Exchange filed Amendment No. 3 to the registration statement on Form N–1A
David Dimitrious, Senior Special proposed rule change. On September 28, (‘‘Registration Statement’’) with the
Counsel, at (202) 551–5131, or Benjamin 2018, the Exchange filed Amendment Commission on behalf of the Fund.7
Bernstein, Special Counsel, at (202) No. 4 to the proposed rule change, Amplify Investments LLC will be the
551–5354, Division of Trading and which replaced and superseded the Fund’s investment adviser (‘‘Adviser’’).
Markets, Securities and Exchange proposed rule change, as modified by CSAT Investment Advisory, L.P., d/b/a
Commission, 100 F Street NE, Amendment Nos. 1, 2, and 3, in its Exponential ETFs and ARGI Investment
Washington DC 20549–7010. entirety.4 On October 1, 2018, the Services LLC will be the Fund’s sub-
SUPPLEMENTARY INFORMATION: In Exchange submitted and withdrew advisers (‘‘Sub-Advisers’’).8 U.S.
accordance with Section 10(a) of the Amendment No. 5 to the proposed rule Bancorp Fund Services, LLC will be the
Federal Advisory Committee Act, 5 change. On October 1, 2018, the administrator, custodian, and fund
U.S.C.-App. 1, and the regulations Exchange also filed Amendment No. 6 accounting and transfer agent for the
thereunder, Brett Redfearn, Designated to the proposed rule change.5 The Fund. Quasar Distributors LLC will
Federal Officer of the Committee, has Commission received no comments on serve as the distributor for the Fund.
ordered publication of this notice. the proposed rule change. This order A. The Fund’s Underlying Index
Dated: October 3, 2018.
grants approval of the proposed rule
change, as modified by Amendment According to the Exchange, the Fund
Brent J. Fields, will seek investment results that
Nos. 4 and 6.
Committee Management Officer. generally correspond (before fees and
[FR Doc. 2018–21953 Filed 10–9–18; 8:45 am] II. Description of the Proposed Rule expenses) to the price and yield of the
BILLING CODE 8011–01–P
Change, as Modified by Amendment S-Network BlackSwan Core Total
Nos. 4 and 6 6 Return Index (‘‘Index’’). The Index was
The Exchange proposes to list and created and is maintained by S-Network
SECURITIES AND EXCHANGE trade the Shares under Commentary .02 Global Networks, Inc. (‘‘Index
COMMISSION to NYSE Arca Rule 5.2–E(j)(3), which Provider’’).9 The Index is also compiled
[Release No. 34–84348; File No. SR– governs the listing and trading of and calculated by the Index Provider.
NYSEArca–2018–57] Investment Company Units on the According to the Exchange, the Index
Exchange. The Fund will be an index- is a rules-based, quantitative index that
Self-Regulatory Organizations; NYSE based exchange traded fund (‘‘ETF’’). seeks to provide capital protection
Arca, Inc.; Order Granting Approval of The Shares will be offered by the against the unpredictable, rare, and
Proposed Rule Change, as Modified by Amplify ETF Trust (‘‘Trust’’), which is highly disruptive events that have come
Amendment Nos. 4 and 6, To List and registered with the Commission as an to be referred to as ‘‘Black Swans.’’ The
Trade Shares of the Amplify investment company and has filed a Index endeavors to provide investment
BlackSwan Growth & Treasury Core returns that correspond to those of the
ETF Under Commentary .02 to NYSE 4 In Amendment No. 4, the Exchange: (i)

Arca Rule 5.2–E(j)(3) Amended the description of the Fund’s sub- 7 The Exchange states that, on June 26, 2018, the

advisers, the Index Provider (as defined below), and Trust filed a Registration Statement on Form N–1A
October 3, 2018. the Index Committee (as defined below); (ii) on behalf of the Fund (File Nos. 333–207937 and
represented that the Index Provider has 811–23108). In addition, the Exchange states that
I. Introduction implemented and will maintain procedures the Commission has issued an order granting
designed to prevent the use and dissemination of certain exemptive relief to the Trust under the
On July 31, 2018, NYSE Arca, Inc. material non-public information regarding the Investment Company Act of 1940 Act. See
(‘‘NYSE Arca’’ or ‘‘Exchange’’) filed Index (as defined below); (iii) amended the name Investment Company Act Release No. 31822
with the Securities and Exchange of the Index; (iv) stated that the Exchange believes (September 14, 2015) (File No. 812–14424).
that surveillances by other exchanges on which SPY 8 The Exchange represents that the Adviser is not
Commission (‘‘Commission’’), pursuant LEAPS trade should help to protect against market registered as a broker-dealer but is affiliated with
to Section 19(b)(1) of the Securities manipulation of the Fund’s Shares and SPY LEAPS; a broker-dealer and has implemented and will
Exchange Act of 1934 (‘‘Act’’) 1 and Rule (v) clarified that statements and representations in maintain a fire wall with respect to its broker-dealer
19b–4 thereunder,2 a proposed rule the filing regarding the description of, or limitations affiliate regarding access to information concerning
on, the Index shall constitute continued listing the composition of and/or changes to the Fund’s
change to list and trade shares requirements for listing the Shares of the Fund on portfolio. The Exchange represents that the Sub-
(‘‘Shares’’) of the Amplify BlackSwan the Exchange; (vi) stated that the value of the Index Advisers are not registered as a broker-dealer or
Growth & Treasury Core ETF (‘‘Fund’’) will be widely disseminated by one or more major affiliated with a broker-dealer. The Exchange
under Commentary .02 to NYSE Arca market data vendors at least once per day; (vii) further represents that, in the event (a) the Adviser
Rule 5.2–E(j)(3). On August 10, 2018, clarified the availability of certain information on or a Sub-Adviser becomes registered as a broker-
the Fund’s website; and (viii) made certain dealer or newly affiliated with a broker-dealer, or
the Exchange filed Amendment No. 1 to technical and conforming changes. Amendment No. (b) any new adviser or sub-adviser is a registered
the proposed rule change, which 4 to the proposed rule change is available at: broker-dealer or becomes affiliated with a broker-
replaced and superseded the original https://www.sec.gov/comments/sr-nysearca-2018- dealer, it will implement and maintain a fire wall
filing in its entirety. The proposed rule 57/nysearca201857.htm. Amendment No. 4 is not with respect to its relevant personnel or its broker-
subject to notice and comment because it does not dealer affiliate regarding access to information
change, as modified by Amendment No. materially alter the substance of the proposed rule concerning the composition of and/or changes to
1, was published for comment in the change or raise unique or novel regulatory issues. the portfolio, and will be subject to procedures
Federal Register on August 20, 2018.3 5 In Amendment No. 6, the Exchange: (i) Clarified designed to prevent the use and dissemination of
On September 10, 2018, the Exchange that the Index Provider is not registered as an material non-public information regarding the
investment adviser and is not affiliated with an portfolio.
filed Amendment No. 2 to the proposed investment adviser; and (ii) made certain technical 9 According to the Exchange, the Index Provider
rule change, which replaced and and conforming changes. Amendment No. 6 to the is not registered as an investment adviser or broker-
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superseded the proposed rule change, as proposed rule change is available at: https:// dealer and is not affiliated with an investment
modified by Amendment No. 1, in its www.sec.gov/comments/sr-nysearca-2018-57/ adviser or broker-dealer. The Exchange states that
nysearca201857.htm. Amendment No. 6 is not the Index Provider has implemented and will
entirety. On September 24, 2018, the subject to notice and comment because it does not maintain procedures designed to prevent the use
materially alter the substance of the proposed rule and dissemination of material non-public
1 15 U.S.C. 78s(b)(1). change or raise unique or novel regulatory issues. information regarding the Index. In addition, the
2 17 CFR 240.19b–4. 6 For more information regarding the Fund and Exchange states that the Index Provider is not
3 See Securities Exchange Act Release No. 83845 the Shares, see Amendment No. 4, supra note 4 and affiliated with the Fund, the Adviser, or the Sub-
(August 14, 2018), 83 FR 42188 (‘‘Notice’’). Amendment No. 6, supra note 5. Advisers.

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51028 Federal Register / Vol. 83, No. 196 / Wednesday, October 10, 2018 / Notices

S&P 500 Index, while mitigating against B. The Fund’s Principal Investments Act,18 which requires, among other
significant losses. Under normal market conditions,14 things, that the Exchange’s rules be
The Index is composed of U.S. the Fund will invest at least 80% of its designed to prevent fraudulent and
Treasury securities and long-dated call total assets in the securities that manipulative acts and practices, to
comprise the Index, which, as described promote just and equitable principles of
options (‘‘LEAPS’’) 10 on the SPDR S&P
above, are U.S. Treasury securities and trade, to remove impediments to and
500 ETF Trust (‘‘SPY’’) 11 (which
SPY LEAPS. perfect the mechanism of a free and
options are referred to herein as ‘‘SPY open market and a national market
LEAPS’’). Twice a year, in June and C. The Fund’s Non-Principal system and, in general, to protect
December, on the Index reconstitution Investments investors and the public interest.
and rebalance date, the Index places While, under normal market As discussed above, the Shares do not
90% of its index market capitalization conditions, the Fund will invest at least qualify for generic listing under
in the portfolio of U.S. Treasury 80% of its total assets in securities that Commentary .02 to NYSE Arca Rule
securities and 10% of its index market comprise the Index, the Fund may also 5.2–E(j)(3) because the Index includes
capitalization in the portfolio of SPY hold cash and cash equivalents.15 SPY LEAPS. The Commission notes that
LEAPS. The U.S. Treasury portfolio of the Exchange represents that, other than
the Index is composed of 2-, 3-, 5-, 7- D. Application of Generic Listing Commentary .02(a)(1) to NYSE Arca
, 10-, and 30-year U.S. Treasury Requirements Rule 5.2–E(j)(3), the Shares will meet
securities that cumulatively provide a The Exchange represents that it has the initial and continued listing criteria
portfolio duration that matches the submitted the proposed rule change under NYSE Arca Rules 5.2–E(j)(3) and
initial duration of the 10-year U.S. because the Index does not meet all of 5.5–E(g)(2). The Commission also notes
Treasury security.12 The SPY LEAPS the generic listing requirements of that SPY LEAPS are traded on U.S.
portfolio of the Index is composed of in- Commentary .02(a) to NYSE Arca Rule options exchanges, SPY is listed and
5.2–E(j)(3). Specifically, because the traded on the Exchange, and SPY is
the-money SPY LEAPS that, at the time
Index includes SPY LEAPS, the Index based on the S&P 500 Index.19
of purchase, have expirations of at least The Commission also finds that the
does not satisfy the requirement set
one year and one day in the future and proposal is consistent with Section
forth in Commentary .02(a)(1) to NYSE
expire in either June or December, as Arca Rule 5.2–E(j)(3), which states that 11A(a)(1)(C)(iii) of the Act,20 which sets
applicable.13 the index or portfolio underlying a forth Congress’s finding that it is in the
The Index is governed by a committee series of Investment Company Units public interest and appropriate for the
(‘‘Index Committee’’) that is responsible must consist of (i) only Fixed Income protection of investors and the
for overseeing the activities of the Index Securities 16 or (ii) Fixed Income maintenance of fair and orderly markets
Provider and approving all changes to Securities and cash. The Exchange to assure the availability to brokers,
the Index related to its semi-annual represents that, with the exception of dealers, and investors of information
reconstitutions and rebalances. the requirement in Commentary with respect to quotations for and
According to the Exchange, all members .02(a)(1) to NYSE Arca Rule 5.2–E(j)(3), transactions in securities.
of the Index Committee and their the Index and the Fund will meet each Quotation and last sale information
advisors must comply with the Index of the initial and continued listing for the Shares will be available via the
criteria in NYSE Arca Rule 5.2–E(j)(3) Consolidated Tape Association high-
Provider’s code of conduct and ethics
and NYSE Arca Rule 5.5–E(g)(2). speed line. Information regarding
with respect to the disclosure and use
market price and trading volume for the
of material non-public information. III. Discussion and Commission
Shares will be continually available on
Findings
10 LEAPS are long-term options traded on U.S.
a real-time basis throughout the day on
After careful review, the Commission brokers’ computer screens and other
options exchanges.
11 Shares of SPY are listed and traded on the
finds that the proposed rule change, as electronic services. Information
Exchange.
modified by Amendment Nos. 4 and 6, regarding the previous day’s closing
12 The Exchange states that the treasury position is consistent with the Act and the rules price and trading volume information
holds 5% of its allocated portion of Index market and regulations thereunder applicable to for the Shares will be published daily in
capitalization in a ‘‘barbell’’ portfolio of 2- and 30- a national securities exchange.17 In the financial section of newspapers. In
year treasuries, and 95% of its allocated portion of particular, the Commission finds that addition, the Intraday Indicative Value
Index market capitalization in a core portfolio that the proposed rule change, as modified
invests in 3-, 5-, 7-, 10-, and 30-year treasuries. (‘‘IIV’’) (as defined in NYSE Arca Rule
13 The Exchange states that the SPY LEAPS will
by Amendment Nos. 4 and 6, is 5.2–E(j)(3), Commentary .02(c)) will be
generally have a delta of 70 at the time of purchase, consistent with Section 6(b)(5) of the widely disseminated at least every 15
and should there not be a 70-delta option, the seconds during the Core Trading
closest option above 70 will be utilized. The 14 The term ‘‘normal market conditions’’ is as that
Session by one or more major market
Exchange states that the options portion of the term is defined in NYSE Arca Rule 8.600–E(c)(5).
Index holds 5% of the Index market capitalization 15 The term ‘‘cash equivalents’’ has the meaning
data vendors.21 The value of the Index
in June 70-delta SPY LEAPS and 5% in December specified in Commentary .01(c) to NYSE Arca Rule will be widely disseminated by one or
70-delta SPY LEAPS. At each June reconstitution, 8.600–E. more major market data vendors at least
the Index liquidates its existing June SPY LEAPS 16 Commentary .02 to NYSE Arca Rule 5.2–E(j)(3)
once per day. Information about the
and purchases SPY LEAPS that expire the following states that ‘‘Fixed Income Securities’’ are debt
June. The December SPY LEAPS positions will
Index constituents, the weighting of the
securities that are notes, bonds, debentures or
remain unchanged at each June reconstitution. At evidence of indebtedness that include, but are not
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18 15 U.S.C. 78f(b)(5).
each December reconstitution, the Index liquidates limited to, U.S. Department of Treasury securities,
19 The Exchange also notes that the S&P 500
its existing December SPY LEAPS and purchases government-sponsored entity securities, municipal
SPY LEAPS that expire the following December. securities, trust preferred securities, supranational Index would meet the generic listing standards
The June SPY LEAPS positions will remain debt and debt of a foreign country or a subdivision applicable to an index composed of U.S.
unchanged at each December reconstitution. Net thereof. Component Stocks in Commentary .01(a) to NYSE
gains or losses derived from the reconstitutions of 17 In approving this proposed rule change, the Arca Rule 5.2–E(j)(3).
20 15 U.S.C. 78k–1(a)(1)(C)(iii).
the SPY LEAPS positions will be added to or Commission has considered the proposed rule’s
subtracted from the U.S. Treasury portfolio at each impact on efficiency, competition, and capital 21 The Exchange states that all Fund holdings will

reconstitution. formation. See 15 U.S.C. 78c(f). be included in calculating the IIV.

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51030 Federal Register / Vol. 83, No. 196 / Wednesday, October 10, 2018 / Notices

IV. Conclusion because ETP Holders do not engage in respective qualification examinations
It is therefore ordered, pursuant to the type of business that would require required for ETP Holders that engage in
Section 19(b)(2) of the Act,27 that the such registration. As such, the Exchange trading activities on the Exchange; (iii)
proposed rule change (SR–NYSEArca– is amending current Rule 2.2 regarding harmonize the Exchange’s qualification,
2018–57), as modified by Amendment continuing education requirements to registration and examination rules with
Nos. 4 and 6 be, and hereby is, reflect the FINRA rule; adopting those of FINRA 5 so as to promote
approved. Commentary .08 to current Rule 2.2 uniform standards across the securities
regarding fingerprint information; industry; and (iv) add new definitions of
For the Commission, by the Division of terms and make other conforming
adopting new Rule 2.1210 regarding
Trading and Markets, pursuant to delegated
authority.28 registration requirements and related changes to enhance the
Commentary to new Rule 2.1210; comprehensiveness and clarity of the
Eduardo A. Aleman,
adopting new Rule 2.1220 regarding Exchange’s rules.6 The proposed
Assistant Secretary.
registration categories 4 and related changes are discussed below.
[FR Doc. 2018–21901 Filed 10–9–18; 8:45 am]
Commentary to new Rule 2.1220; and A. Amendments to Rule 2.2(c)
BILLING CODE 8011–01–P
adopting new Rule 2.1230 regarding
associated persons exempt from Rule 2.2(c)(1) currently provides,
registration and related Commentary to among other things, that an ETP Holder
SECURITIES AND EXCHANGE shall register with the Exchange as a
new Rule 2.1230. Each of these rule
COMMISSION Principal any Person who meets the
changes, which are [sic] described in
[Release No. 34–84350; File No. SR– more detail below, would become definition of a Principal as described in
NYSENAT–2018–21] operative on October 1, 2018. The Rule 1.1 and that each such Principal
proposed rule change is available on the must be registered as such through the
Self-Regulatory Organizations; NYSE Exchange’s website at www.nyse.com, at FINRA Central Registration Depository
National, Inc.; Notice of Filing and the principal office of the Exchange, and System (‘‘CRD’’), and must pass the
Immediate Effectiveness of at the Commission’s Public Reference general Securities Principal (Series 24)
Amendments to Rules Regarding Room. examination. The current rule further
Qualification, Registration and provides that a Principal must pass the
Continuing Education Applicable to II. Self-Regulatory Organization’s Series 7 examination or an equivalent
Equity Trading Permit Holders Statement of the Purpose of, and foreign examination module as a
Statutory Basis for, the Proposed Rule prerequisite to taking the Series 24
Pursuant to Section 19(b)(1) 1 of the Change examination. The Exchange proposes to
Securities Exchange Act of 1934 (the
In its filing with the Commission, the amend the current rule to reflect the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
self-regulatory organization included change of the prerequisite examination
notice is hereby given that on
statements concerning the purpose of, requirements for Principals registered
September 27, 2018, NYSE National,
and basis for, the proposed rule change with the Exchange. The amended rule
Inc. (the ‘‘Exchange’’ or ‘‘NYSE
and discussed any comments it received provides that the Exchange would
National’’) filed with the Securities and
on the proposed rule change. The text require the Series 7 examination and the
Exchange Commission (the
of those statements may be examined at Securities Industry Essentials
‘‘Commission’’) the proposed rule
the places specified in Item IV below. examination as a prerequisite to taking
change as described in Items I and II
The Exchange has prepared summaries, the Series 24 examination and would no
below, which Items have been prepared
set forth in sections A, B, and C below, longer accept a foreign examination
by the self-regulatory organization. The
of the most significant parts of such module as a prerequisite given the
Commission is publishing this notice to
statements. elimination of the foreign examination
solicit comments on the proposed rule
module in the FINRA Filing.
change from interested persons. A. Self-Regulatory Organization’s Rule 2.2(c)(2) currently provides,
I. Self-Regulatory Organization’s Statement of the Purpose of, and the among other things, that each ETP
Statement of the Terms of Substance of Statutory Basis for, the Proposed Rule Holder, other than a sole proprietorship
the Proposed Rule Change Change or a proprietary trading firm that has 25
The Exchange proposes amendments 1. Purpose or fewer Authorized Traders, is required
to the Exchange’s rules regarding to register at least two Principals with
The Exchange proposes to amend its the Exchange. Per the rule, a sole
qualification, registration and qualification, registration, and
continuing education requirements proprietorship or a proprietary trading
continuing education requirements firm with 25 or fewer Authorized
applicable to Equity Trading Permit applicable to ETP Holders. The
(‘‘ETP’’) Holders. To the extent the Traders is required to register one
proposed amendments are intended to: Principal with the Exchange. The
Exchange’s rule proposal is intended to (i) Provide transparency and clarity with
harmonize with Financial Regulatory respect to the Exchange’s registration, 5 See Securities Exchange Act Release No. 81098
Authority, Inc. (‘‘FINRA’’) rules and qualification and examination (July 7, 2017), 82 FR 32419 (July 13, 2017) (SR–
thus promote consistency within the requirements; (ii) amend its rules FINRA–2017–007) (Approval Order) (the ‘‘FINRA
securities industry, the Exchange is only relating to categories of registration and
Filing’’). The Exchange notes that in order to
adopting rules that are relevant to the maintain consistency with the FINRA Filing, the
Exchange proposes to incorporate certain terms
Exchange’s ETP Holders. The Exchange 4 The relevant principal registration categories the from the relevant FINRA rule into the Exchange’s
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is not adopting registration categories Exchange proposes to adopt are (1) Principal; (2) rule that may not be applicable to all ETP Holders.
that are not applicable to ETP Holders General Securities Principal; (3) Compliance For example, while ETP Holders may not be
Officer; (4) Financial and Operations Principal and engaged in ‘‘investment banking’’ activity, the
27 15 Introducing Broker-Dealer Financial and Operations Exchange proposes to adopt that term within these
U.S.C. 78s(b)(2). registration rules to conform them to the FINRA
28 17
Principal; (5) Securities Trader Principal; and (6)
CFR 200.30–3(a)(12). General Securities Sales Supervisor. The relevant rules.
1 15 U.S.C. 78s(b)(1).
representative registration categories the Exchange 6 The conforming changes the Exchange proposes
2 15 U.S.C. 78a.
proposes to adopt are (1) Representative; (2) General would substitute the term ‘‘ETP Holder’’ for
3 17 CFR 240.19b–4. Securities Representative; and (3) Securities Trader. ‘‘member’’ and the term ‘‘Exchange’’ for ‘‘FINRA.’’

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Document Created: 2018-10-10 17:35:57
Document Modified: 2018-10-10 17:35:57

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		83 FR 51027