
[Federal Register Volume 79, Number 6 (Thursday, January 9, 2014)]
[Notices]
[Pages 1662-1665]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-00118]



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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71232; File No. SR-NYSEArca-2013-118]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Amendment No. 2 and Order Granting Accelerated Approval of a 
Proposed Rule Change, as Modified By Amendments Nos. 1 and 2, To List 
and Trade Shares of the Market Vectors Short High-Yield Municipal Index 
ETF Under NYSE Arca Equities Rule 5.2(j)(3), Commentary .02 January 3, 
2014.

I. Introduction

    On October 30, 2013, NYSE Arca, Inc. (``Exchange'' or ``NYSE 
Arca'') 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 
Market Vectors Short High-Yield Municipal Index ETF (``Fund'') under 
NYSE Arca Equities Rule 5.2(j)(3), Commentary .02. On November 8, 2013, 
the Exchange filed Amendment No. 1 to the proposal.\3\ The proposed 
rule change, as modified by Amendment No. 1 thereto, was published for 
comment in the Federal Register on November 19, 2013.\4\ On December 
31, 2013, the Exchange filed Amendment No. 2 to the proposal.\5\ The 
Commission received no comments on the proposal. This order approves on 
an accelerated basis the proposed rule change, as modified by 
Amendments No. 1 and 2 thereto.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ In Amendment No. 1, the Exchange: (1) Deleted a sentence 
relating to the Fund holding depositary receipts and to-be-announced 
transactions; (2) added a phrase that states that the Administrator, 
through the National Securities Clearing Corporation (``NSCC''), 
will make available Indicative Per Share Portfolio Value on a 
continuous basis throughout the day; (3) made clarifying changes to 
reflect that the Fund will limit itself to holding up to 15% of its 
net assets in illiquid assets, not just illiquid securities; and (4) 
modified certain cross-references.
    \4\ See Securities Exchange Act Release No. 70871 (November 14, 
2013), 78 FR 69503 (``Notice'').
    \5\ In Amendment No. 2, the Exchange deleted a sentence to 
clarify that Barclays Capital, Inc. (``Index Provider''), which 
publishes Barclays Municipal High Yield Short Duration Index (1) is 
a registered broker-dealer and has implemented a fire wall with 
respect to its relevant personnel regarding access to information 
concerning the composition and/or changes to the Barclays Municipal 
High Yield Short Duration Index; (2) is affiliated with a broker-
dealer and has implemented a fire wall with respect to its broker-
dealer affiliate regarding access to information concerning the 
composition and/or changes to the Barclays Municipal High Yield 
Short Duration Index; and (3) as well as its broker-dealer affiliate 
have implemented procedures designed to prevent the use and 
dissemination of material, non-public information regarding the 
Barclays Municipal High Yield Short Duration Index.
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II. Description of the Proposed Rule Change

    The Exchange proposes to list and trade the Shares under NYSE Arca 
Equities Rule 5.2(j)(3), Commentary .02, which governs the listing and 
trading of Investment Company Units (``Units'') based on fixed income 
securities indexes. The Fund is a series of the Market Vectors ETF 
Trust (``Trust'').\6\ Van Eck Associates Corporation will be the 
investment adviser (``Adviser'') for the Fund. Van Eck Securities 
Corporation will be the Fund's distributor and administrator for the 
Fund (``Administrator'') and will be responsible for certain clerical, 
recordkeeping and/or bookkeeping services. The Bank of New York Mellon 
will be the custodian of the Fund's assets and provides transfer agency 
and fund accounting services to the Fund.
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    \6\ On August 27, 2012, the Trust filed an amendment to its 
registration statement on Form N-1A under the Securities Act of 1933 
(15 U.S.C. 77a) and the Investment Company Act of 1940 (``1940 
Act'') (15 U.S.C. 80a-1) (File Nos. 333-123257 and 811-10325) (the 
``Registration Statement''). The description of the operation of the 
Trust and the Fund herein is based, in part, on the Registration 
Statement. In addition, the Commission has issued an order granting 
certain exemptive relief to the Trust under the 1940 Act. See 
Investment Company Act Release No. 28021 (October 24, 2007) (File 
No. 812-13426) (``Exemptive Order'').
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    The investment objective of the Fund will be to seek to replicate 
as closely as possible, before fees and expenses, the price and yield 
performance of the Barclays Municipal High Yield Short Duration Index 
(``Short High Yield Index'' or ``Index''). According to the Exchange, 
the Advisor will attempt to approximate the investment performance of 
the Index using a ``passive'' or indexing investment approach, and 
expects that, over time, the correlation between the Fund's performance 
(before fees and expenses) and that of the Index will be 95% or better. 
The Adviser will utilize a ``sampling'' methodology to achieve the 
Fund's objective.

A. Primary Investments

    Normally,\7\ the Fund will invest at least 80% of its total assets 
in securities that compose the Short High Yield Index. Depositary 
receipts or to-be-announced transactions representing securities in the 
Short High Yield Index may be used by the Fund in seeking performance 
that corresponds to the Short High Yield Index, and in managing cash 
flows and may count towards the Fund's 80% policy.
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    \7\ According to the Exchange, the word ``normally'' means, 
without limitation, the absence of extreme volatility or trading 
halts in the equity markets or the financial markets generally; 
operational issues causing dissemination of inaccurate market 
information; or force majeure type events such as systems failure, 
natural or man-made disaster, act of God, armed conflict, act of 
terrorism, riot or labor disruption or any similar intervening 
circumstance.
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B. Other Investments

    While the Fund normally will invest at least 80% of its total 
assets in securities that compose the Index, the Fund may invest its 
remaining assets in other financial instruments, as described below.
    The Fund may invest in securities not included in the Short High 
Yield Index, money market instruments, including repurchase agreements 
or other funds which invest exclusively in money market instruments, 
convertible securities, structured notes (notes on which the amount of 
principal repayment and interest payments are based on the movement of 
one or more specified factors, such as the movement of a particular 
stock or stock index), and certain derivative instruments that are 
mentioned below. The Fund may also invest, to the extent permitted by 
the 1940 Act, in other affiliated and unaffiliated funds, such as open-
end or closed-end management investment companies, including other 
exchange-traded funds (``ETFs'').\8\
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    \8\ While the Fund may invest in inverse ETFs, the Fund will not 
invest in leveraged (e.g., 2X, -2X, 3X or -3X) ETFs.
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    The Fund may invest in repurchase agreements with commercial banks, 
brokers or dealers to generate income from its excess cash balances and 
to invest securities lending cash collateral.
    The Fund may use exchange-traded futures contracts and exchange-
traded or over-the-counter options thereon, together with positions in 
cash and money market instruments, to simulate full investment in the 
Index.
    The Fund may use cleared or non-cleared index, interest rate or 
credit default swap agreements. Swap agreements are contracts between 
parties in which one party agrees to make payments to the other party 
based on the change in market value or level of a specified index or 
asset.
    The Fund may invest in exchange-traded warrants, which are equity 
securities in the form of options issued by a corporation which give 
the holder the right to purchase stock, usually at a price that is 
higher than the market price at the time the warrant is issued.
    The Fund may invest in participation notes, which are issued by 
banks or

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broker-dealers and are designed to offer a return linked to the 
performance of a particular underlying equity security or market.
    The Fund will only enter into transactions in derivative 
instruments with counterparties that the Adviser reasonably believes 
are capable of performing under the contract and will post as 
collateral as required by the counterparty.\9\
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    \9\ According to the Exchange, the Fund will seek, where 
possible, to use counterparties, as applicable, whose financial 
status is such that the risk of default is reduced; however, the 
risk of losses resulting from default is still possible. The Adviser 
will evaluate the creditworthiness of counterparties on a regular 
basis. In addition to information provided by credit agencies, the 
Adviser will review approved counterparties using various factors, 
which may include the counterparty's reputation, the Adviser's past 
experience with the counterparty and the price/market actions of 
debt of the counterparty.
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    The Fund may hold up to an aggregate amount of 15% of its net 
assets in illiquid assets (calculated at the time of investment), 
including Rule 144A securities deemed illiquid by the Adviser, in 
accordance with Commission guidance.\10\ The Fund will monitor its 
portfolio liquidity on an ongoing basis to determine whether, in light 
of current circumstances, an adequate level of liquidity is being 
maintained, and will consider taking appropriate steps in order to 
maintain adequate liquidity if, through a change in values, net assets, 
or other circumstances, more than 15% of the Fund's net assets are held 
in illiquid assets. According to the Exchange, illiquid assets include 
securities subject to contractual or other restrictions on resale and 
other instruments that lack readily available markets as determined in 
accordance with Commission staff guidance.
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    \10\ According to the Exchange, in reaching liquidity decisions, 
the Adviser may consider the following factors: The frequency of 
trades and quotes for the security; the number of dealers wishing to 
purchase or sell the security and the number of other potential 
purchasers; dealer undertakings to make a market in the security; 
and the nature of the security and the nature of the marketplace 
trades (e.g., the time needed to dispose of the security, the method 
of soliciting offers, and the mechanics of transfer).
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    Additional information regarding the Shares, the Fund, and the 
Index, including procedures for creating and redeeming Shares, 
transaction fees and expenses, dividends, distributions, taxes, risks, 
and reports to be distributed to beneficial owners of the Shares can be 
found in the Notice,\11\ the Registration Statement,\12\ and on the Web 
site for the Fund (www.marketvectorsetfs.com).
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    \11\ See supra, note 4.
    \12\ See supra, note 6.
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C. The Need for the Proposed Rule Change and Exchange Representations 
Related Thereto

    Commentary .02(a) to NYSE Arca Equities Rule 5.2(j)(3) permits the 
generic listing of Units that meet all of the initial and continued 
listing requirements of the rule. According to the Exchange, the Shares 
satisfy all of the generic listing criteria except for those set forth 
in Commentary .02(a)(2), which requires that components that in the 
aggregate account for at least 75% of the weight of the index or 
portfolio each shall have a minimum original principal amount 
outstanding of $100 million or more. Accordingly, the Exchange filed 
this proposed rule change seeking to list and trade the Shares.
    The Exchange represents that: (1) Except for Commentary .02(a)(2) 
to NYSE Arca Equities Rule 5.2(j)(3), the Shares satisfy all of the 
generic listing standards under NYSE Arca Equities Rule 5.2(j)(3); (2) 
the continued listing standards under NYSE Arca Equities Rules 
5.2(j)(3) and 5.5(g)(2) applicable to Units shall apply to the Shares; 
and (3) the Trust is required to comply with Rule 10A-3 under the Act 
\13\ for the initial and continued listing of the Shares. In addition, 
the Exchange represents that the Shares will comply with all other 
requirements applicable to Units including, but not limited to, 
requirements relating to the dissemination of key information such as 
the value of the Index and the applicable Intraday Indicative Value 
(``IIV''),\14\ rules governing the trading of equity securities, 
trading hours, trading halts, surveillance, and the Information 
Bulletin (``Bulletin'') to Equity Trading Permit Holders (``ETP 
Holders''), as set forth in Exchange rules applicable to Units and 
prior Commission orders approving the generic listing rules applicable 
to the listing and trading of Units.\15\
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    \13\ 17 CFR 240.10A-3.
    \14\ The IIV will be widely disseminated by one or more major 
market data vendors at least every 15 seconds during the Exchange's 
Core Trading Session of 9:30 a.m. to 4:00 p.m., Eastern time. The 
Exchange states that it understands that several major market data 
vendors display or make widely available IIVs taken from the 
Consolidated Tape Association (``CTA'') or other data feeds.
    \15\ See, e.g., Securities Exchange Act Release Nos. 55783 (May 
17, 2007), 72 FR 29194 (May 24, 2007) (SR-NYSEArca-2007-36) (order 
approving NYSE Arca generic listing standards for Units based on a 
fixed income index); 44551 (July 12, 2001), 66 FR 37716 (July 19, 
2001) (SR-PCX-2001-14) (order approving generic listing standards 
for Units and Portfolio Depositary Receipts); 41983 (October 6, 
1999), 64 FR 56008 (October 15, 1999) (SR-PCX-98-29) (order 
approving rules for listing and trading of Units).
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III. Discussion and Commission's Findings

    The Commission has carefully reviewed the proposed rule change and 
finds that it is consistent with the requirements of Section 6 of the 
Act \16\ and the rules and regulations thereunder applicable to a 
national securities exchange.\17\ In particular, the Commission finds 
that the proposal 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 foster cooperation 
and coordination with persons engaged in facilitating transactions in 
securities, 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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    \16\ 15 U.S.C. 78f.
    \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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    The Commission notes that the Exchange represents that the Shares 
will comply with all requirements applicable to Units including, but 
not limited to, requirements relating to the dissemination of key 
information such as the value of the Index and the applicable IIV,\19\ 
rules governing the trading of equity securities, trading hours, 
trading halts, surveillance, and the Bulletin to ETP Holders, as set 
forth in Exchange rules applicable to Units and prior Commission orders 
approving the generic listing rules applicable to the listing and 
trading of Units.\20\
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    \19\ The IIV will be widely disseminated by one or more major 
market data vendors at least every 15 seconds during the Exchange's 
Core Trading Session of 9:30 a.m. to 4:00 p.m., Eastern time. The 
Exchange states that it understands that currently several major 
market data vendors display and/or make widely available IIVs taken 
from the CTA or other data feeds.
    \20\ See, e.g., Securities Exchange Act Release Nos. 55783 (May 
17, 2007), 72 FR 29194 (May 24, 2007) (SR-NYSEArca-2007-36) (order 
approving NYSE Arca generic listing standards for Units based on a 
fixed income index); 44551 (July 12, 2001), 66 FR 37716 (July 19, 
2001) (SR-PCX-2001-14) (order approving generic listing standards 
for Units and Portfolio Depositary Receipts); 41983 (October 6, 
1999), 64 FR 56008 (October 15, 1999) (SR-PCX-98-29) (order 
approving rules for listing and trading of Units).
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    Except for Commentary .02(a)(2) to NYSE Arca Equities Rule 
5.2(j)(3), the Shares satisfy all other requirements for generic 
listing under the rule. Although, according to the Exchange only 15.66% 
of the weight of the Index components, as of November 27, 2012, had a 
minimum original principal amount

[[Page 1664]]

outstanding of $100 million or more, the Exchange provided statistical 
support for its assertion that Index is sufficiently broad-based to 
deter potential manipulation. According to the Exchange, the most 
heavily weighted component of the Index represents 2.67% of the weight 
of the Index, and the five most heavily weighted components represent 
10.67% of the weight of the Index.\21\ Additionally, the Exchange 
states: (1) The total dollar amount outstanding of issues in the Index 
was approximately $757 billion; (2) the average dollar amount 
outstanding of issues in the Index was approximately $394 million; and 
(3) the Index is composed of approximately 1,935 issues and 530 unique 
issuers.\22\ Additionally, the Exchange represents that the Index 
Provider, a registered broker-dealer, has implemented a fire wall with 
respect to its relevant personnel regarding access to information 
concerning the composition of or changes to the Index. The Index 
Provider is also affiliated with a broker-dealer and has implemented a 
fire wall with respect to its broker-dealer affiliate regarding access 
to information concerning the composition of or changes to the Index. 
The Index Provider and its broker-dealer affiliate have implemented 
procedures designed to prevent the use and dissemination of material, 
non-public information regarding the Index.\23\ For these reasons, the 
Commission believes that the Exchange has met its burden of showing 
that the proposed rule change is consistent with Section 6(b)(5) of the 
Act which requires, among other things, that the Exchange's rules be 
designed to prevent fraudulent and manipulative acts and practices.
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    \21\ See Notice, supra note 4, 78 FR 69505. The Commission notes 
that Commentary .02(a)(4) to NYSE Arca Equities Rule 5.2(j)(3) 
requires that no component fixed-income security (excluding Treasury 
Securities and GSE Securities, as defined therein) represent more 
than 30% of the weight of the index or portfolio and that the five 
most heavily weighted component fixed-income securities in the index 
or portfolio shall not in the aggregate account for more than 65% of 
the weight of the index or portfolio.
    \22\ See Notice, supra note 4, 78 FR 69505.
    \23\ See supra note 7.
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    The Commission finds that the proposal to list and trade the Shares 
on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the 
Act,\24\ which sets forth Congress' finding that it is in the public 
interest and appropriate for the protection of investors and the 
maintenance of fair and orderly markets to assure the availability to 
brokers, dealers, and investors of information with respect to 
quotations for, and transactions in, securities. Quotation and last-
sale information for the Shares will be available via the CTA high-
speed line. In addition, information regarding market price and trading 
volume of the Shares will be continually available on a real-time basis 
throughout the day on brokers' computer screens and other electronic 
services.
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    \24\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    The Commission further believes that the proposal to list and trade 
the Shares is reasonably designed to promote fair disclosure of 
information that may be necessary to price the Shares appropriately and 
to prevent trading when a reasonable degree of transparency cannot be 
assured. The IIV of the Shares will be widely disseminated by one or 
more major market data vendors at least every 15 seconds during the 
Exchange's Core Trading Session (9:30 a.m., Eastern time to 4:00 p.m., 
Eastern time), as required by NYSE Arca Equities Rule 5.2(j)(3), 
Commentary .02 (c).\25\ The current value of the Index will be widely 
disseminated by one or more major market data vendors at least once per 
day, as required by NYSE Arca Equities Rule 5.2(j)(3), Commentary .02 
(b)(ii). The components of the Index and their percentage weighting 
will be available from major market data vendors. In addition, the 
portfolio of securities held by the Fund will be disclosed daily on the 
Fund's Web site at www.marketvectorsetfs.com after the close of trading 
on the Exchange and prior to the opening of trading on the Exchange the 
following day. The Administrator, through the NSCC, will make available 
on each business day, immediately prior to the opening of business on 
the Exchange (currently 9:30 a.m. Eastern time), the list of securities 
needed to create Shares, as well as the list of securities to be 
delivered in connection with Share redemptions.
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    \25\ According to the Exchange, several major market data 
vendors display or make widely available IIVs taken from CTA or 
other data feeds.
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    In support of this proposal, the Exchange has made representations, 
including:
    (1) 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.
    (2) The Shares will conform to the initial and continued listing 
criteria under NYSE Arca Equities Rule 5.2(j)(3) and 5.5(g)(2).
    (3) The Exchange has in place surveillance procedures that are 
adequate to properly monitor trading in the Shares in all trading 
sessions and to deter and detect violations of Exchange rules and 
applicable federal securities laws.
    (4) The Financial Industry Regulatory Authority, on behalf of the 
Exchange, will communicate as needed regarding trading in the Shares 
with other markets that are members of the ISG or with which the 
Exchange has in place a comprehensive surveillance sharing agreement.
    (5) The Fund may hold up to an aggregate amount of 15% of its net 
assets in illiquid assets (calculated at the time of investment), 
including Rule 144A securities deemed illiquid by the Adviser, 
consistent with Commission guidance. The Fund will monitor its 
portfolio liquidity on an ongoing basis to determine whether, in light 
of current circumstances, an adequate level of liquidity is being 
maintained, and will consider taking appropriate steps in order to 
maintain adequate liquidity if, through a change in values, net assets, 
or other circumstances, more than 15% of its net assets are held in 
illiquid securities.\26\
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    \26\ See Amendment No. 1, supra note 3.
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    This approval order is based on the Exchange's representations. For 
the foregoing reasons, the Commission finds that the proposed rule 
change is consistent with Section 6(b)(5) of the Act \27\ and Section 
11A(a)(1)(C)(iii) of the Act \28\ and the rules and regulations 
thereunder applicable to a national securities exchange.
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    \27\ 15 U.S.C. 78f(b)(5).
    \28\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File No. SR-NYSEArca-2013-118 on the subject line.

Paper Comments

     Send paper comments in triplicate to Elizabeth M. Murphy, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File No. SR-NYSEArca-2013-118. This 
file number should be included on the subject line if email is used. To 
help the

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Commission process and review your comments more efficiently, please 
use only one method. The Commission will post all comments on the 
Commission's Web site (http://www.sec.gov/rules/sro.shtml). Copies of 
the submission, all subsequent amendments, all written statements with 
respect to the proposed rule change that are filed with the Commission, 
and all written communications relating to the proposed rule change 
between the Commission and any person, other than those that may be 
withheld from the public in accordance with the provisions of 5 U.S.C. 
552, will be available for Web site viewing and printing in the 
Commission's Public Reference Room, 100 F Street NE., Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change; the Commission does not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File No. SR-NYSEArca-2013-118 and should be 
submitted on or before January 30, 2014.

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

    As discussed above,\29\ through Amendment No. 2, the Exchange 
revises the proposed rule change by providing greater detail about how 
the Funds' NAVs are calculated and the availability of price 
information regarding the Funds' holdings. The Commission believes that 
Amendment No. 2 provides more support for the Exchange's contention 
that its proposed rule change consistent with the Section 6(b)(5) of 
the Act.\30\ In particular, Amendment No. 2 clarified that: (1) The 
Index Provider is a registered broker-dealer and has implemented a fire 
wall with respect to its relevant personnel regarding access to 
information concerning the composition and/or changes to the Index; (2) 
the Index Provider is affiliated with a broker-dealer and has 
implemented a fire wall with respect to its broker-dealer affiliate 
regarding access to information concerning the composition and/or 
changes to the Index; and (3) the Index Provider and its broker-dealer 
affiliate have implemented procedures designed to prevent the use and 
dissemination of material, non-public information regarding the Index. 
Accordingly, the Commission finds good cause, pursuant to Section 
19(b)(2) of the Act,\31\ to approve the proposed rule change, as 
modified by Amendments Nos. 1 and 2, prior to the 30th day after the 
date of publication of notice in the Federal Register.
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    \29\ See note 5, supra.
    \30\ 15 U.S.C. 78s(b)(5).
    \31\ 15 U.S.C. 78s(b)(2).
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\32\ that the proposed rule change (SR-NYSEArca-2013-118) as 
modified by Amendments No. 1 and 2 thereto be, and it hereby is, 
approved on an accelerated basis.
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    \32\ 15 U.S.C. 78s(b)(2).
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    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\33\
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    \33\ 17 CFR 200.30-3(a)(12).

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-00118 Filed 1-8-14; 8:45 am]
BILLING CODE 8011-01-P


