
[Federal Register Volume 79, Number 46 (Monday, March 10, 2014)]
[Notices]
[Pages 13349-13353]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-05032]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71645; File No. SR-NYSEArca-2013-127]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Instituting 
Proceedings to Determine Whether to Approve or Disapprove Proposed Rule 
Change Relating to the Listing and Trading of Shares of Nine Series of 
the IndexIQ Active ETF Trust Under NYSE Arca Equities Rule 8.600

March 4, 2014.

I. Introduction

    On November 18, 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'' or ``Exchange Act'') \1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change to list and trade shares 
(``Shares'') of the IQ Long/Short Alpha ETF, IQ Bear U.S. Large Cap 
ETF, IQ Bear U.S. Small Cap ETF, IQ Bear International ETF, IQ Bear 
Emerging Markets ETF, IQ Bull U.S. Large Cap ETF, IQ Bull U.S. Small 
Cap ETF, IQ Bull International ETF, and IQ Bull Emerging Markets ETF 
(each a ``Fund'' and collectively, the ``Funds''). On November 26, 
2013, the Exchange filed Amendment No. 1 to the proposed rule 
change.\3\ The proposed rule change was published for comment in the 
Federal Register on December 4, 2013.\4\ The Commission received no 
comment letters on the proposed rule change. On January 15, 2014, 
pursuant to Section 19(b)(2) of the Act,\5\ the Commission designated a 
longer period within which to approve the proposed rule change, 
disapprove the proposed rule change, or institute proceedings to 
determine whether to disapprove the proposed rule change.\6\ This Order 
institutes proceedings under Section 19(b)(2)(B) of the Act \7\ to 
determine whether to approve or disapprove the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 clarified how certain holdings will be 
valued for purposes of calculating a fund's net asset value and 
where investors will be able to obtain pricing information for 
certain underlying holdings.
    \4\ See Securities Exchange Act Release No. 70954 (November 27, 
2013), 78 FR 72955 (``Notice'').
    \5\ 15 U.S.C. 78s(b)(2).
    \6\ See Securities Exchange Act Release No. 71309, 79 FR 3657 
(January 22, 2014). The Commission determined that it was 
appropriate to designate a longer period within which to take action 
on the proposed rule change so that it has sufficient time to 
consider the proposed rule change. Accordingly, the Commission 
designated March 4, 2014 as the date by which it should approve, 
disapprove, or institute proceedings to determine whether to 
disapprove the proposed rule change.
    \7\ 15 U.S.C. 78s(b)(2)(B).
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II. Description of the Proposal

    The Exchange proposes to list and trade the Shares under NYSE Arca 
Equities Rule 8.600, which governs the listing and trading of Managed 
Fund Shares. Each of the Funds is a series of the IndexIQ Active ETF 
Trust (``Trust''), which is registered under the Investment Company Act 
of 1940 (``1940 Act'').\8\ IndexIQ Advisors LLC (``Adviser'') is the 
investment adviser for the Funds. The Funds are described below. 
Additional information regarding the Trust, the Fund, and the Shares, 
including investment strategies, risks, creation and redemption 
procedures, fees, portfolio holdings disclosure policies, 
distributions, and taxes, among other things, is included in the Notice 
and Registration Statement, as applicable.\9\
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    \8\ The Exchange states that on September 12, 2013, the Trust 
filed with the Commission an amendment to its registration statement 
on Form N-1A relating to the Funds (File Nos. 333-183489 and 811-
22739) (``Registration Statement''). In addition, the Commission has 
issued an order granting certain exemptive relief to the Trusts 
under the 1940 Act. See Investment Company Act Release No. 30198 
(September 10, 2012) (File No. 812-13956) (``Exemptive Order'').
    \9\ See Notice and Registration Statement, supra notes 4 and 8, 
respectively.
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IQ Long/Short Alpha ETF

    The Exchange states that the investment objective of the IQ Long/
Short Alpha ETF is to seek capital appreciation. Under normal 
circumstances,\10\ at least 80% of the Fund's assets will be exposed to 
equity securities of U.S. large capitalization companies,\11\ by 
investing in exchange-traded funds (``ETFs''), in ``Financial 
Instruments,'' which are defined as swap agreements, options contracts, 
and futures contracts with economic characteristics similar to those of 
the ETFs for which they are substituted, or in both. The Exchange 
states that all options contracts and futures contracts will be listed 
on a U.S. national securities exchange or a non-U.S. securities 
exchange that is a member of the Intermarket Surveillance Group 
(``ISG'') or a party to a comprehensive surveillance sharing agreement 
with the Exchange.
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    \10\ The term ``under normal circumstances'' includes, but is 
not limited to, the absence of adverse market, economic, political, 
or other conditions, including extreme volatility or trading halts 
in the fixed income markets or the financial markets generally; 
operational issues causing dissemination of inaccurate market 
information; and 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. In certain situations or market conditions, a Fund may 
temporarily depart from its normal investment policies and 
strategies, provided that the alternative is consistent with the 
Fund's investment objective and is in the best interest of the Fund. 
For example, a Fund that typically takes short positions may hold 
little or no short positions for extended periods, or a Fund may 
hold a higher than normal proportion of its assets in cash in times 
of extreme market stress.
    \11\ The Exchange states that the Adviser considers ``large 
capitalization companies'' to have market capitalizations of at 
least $5 billion.
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    To implement its strategy, the Fund will hold long and short 
positions in ETFs providing exposure to certain sectors. Cash balances 
arising from the use of short selling and derivatives typically will be 
held in money market instruments.\12\
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    \12\ Money market instruments generally are short-term cash 
instruments that have a remaining maturity of 397 days or less and 
exhibit high quality credit profiles. These include U.S. Treasury 
Bills and repurchase agreements.
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IQ Bear U.S. Large Cap ETF

    The Exchange states that the investment objective of the IQ Bear 
U.S. Large Cap ETF is to seek capital appreciation. Under normal 
circumstances, at least 80% of the Fund's assets will be exposed to 
equity securities of U.S. large capitalization issuers by taking short 
positions in ETFs, Financial Instruments, or both. To implement its 
strategy, the Fund will primarily hold short positions in ETFs 
providing exposure to certain sectors. Cash balances arising from the 
use of short selling and derivatives typically will be held in money 
market instruments.

IQ Bear U.S. Small Cap ETF

    The Exchange states that the investment objective of the IQ Bear 
U.S. Small Cap ETF is to seek capital appreciation. Under normal 
circumstances, at least 80% of the Fund's assets will be exposed to 
equity securities of U.S. small capitalization companies \13\ by taking 
short positions in ETFs, Financial Instruments, or both. To implement 
its strategy, the Fund will hold short positions in ETFs providing

[[Page 13350]]

exposure to certain sectors. Cash balances arising from the use of 
short selling and derivatives typically will be held in money market 
instruments.
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    \13\ According to the Registration Statement, the Adviser will 
consider ``small capitalization companies'' to have market 
capitalizations of between $300 million and $2 billion.
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IQ Bear International ETF

    According to the Exchange, the investment objective of the IQ Bear 
International ETF is to seek capital appreciation. To implement this 
strategy, under normal circumstances, at least 80% of the Fund's assets 
will be exposed to equity securities of issuers domiciled in developed 
market countries \14\ by taking short positions in ETFs, Financial 
Instruments, or both. Cash balances arising from the use of short 
selling and derivatives typically will be held in money market 
instruments.
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    \14\ According to the Registration Statement, developed market 
countries generally include: Australia, Austria, Belgium, Denmark, 
Finland, France, Germany, Greece, Hong Kong, Ireland, Israel, Italy, 
Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, 
Spain, Sweden, Switzerland, and the United Kingdom. To the extent 
that the Adviser believes that countries should be added to or 
subtracted from the developed markets category, the Adviser may 
adjust the list of countries accordingly.
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IQ Bear Emerging Markets ETF

    According to the Exchange, the investment objective of the IQ Bear 
Emerging Markets ETF is to seek capital appreciation. To implement this 
strategy, under normal circumstances, at least 80% of the Fund's assets 
will be exposed to equity securities of issuers domiciled in emerging 
market countries \15\ by taking short positions in ETFs, Financial 
Instruments, or both. Cash balances arising from the use of short 
selling and derivatives typically will be held in money market 
instruments.
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    \15\ According to the Registration Statement, emerging market 
countries generally will include Brazil, Chile, China, Colombia, the 
Czech Republic, Egypt, Hungary, India, Indonesia, Malaysia, Mexico, 
Morocco, Peru, the Philippines, Poland, Russia, South Africa, South 
Korea, Taiwan, Thailand, and Turkey. To the extent that the Adviser 
believes that countries should be added to or subtracted from the 
emerging markets category, it may adjust the list of countries 
accordingly.
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IQ Bull U.S. Large Cap ETF

    The Exchange states that the investment objective of the IQ Bull 
U.S. Large Cap ETF is to seek capital appreciation. Under normal 
circumstances, at least 80% of the Fund's assets will be exposed to 
equity securities of U.S. large capitalization issuers by investing in 
ETFs, Financial Instruments, or both. To implement its strategy, the 
Fund will hold long positions in ETFs providing exposure to certain 
sectors. In addition, the Fund will employ the leverage inherent in the 
Financial Instruments to gain exposure to the ETFs in which it invests 
equal to as much as 200% of the net assets of the Fund. The leverage 
ratio will be uniform across all of the underlying ETFs, such that the 
relative weights of each sector will stay the same, but the overall 
exposure of the Fund will be increased. Cash balances arising from the 
use of short selling and derivatives typically will be held in money 
market instruments.

IQ Bull U.S. Small Cap ETF

    The Exchange states that the investment objective of the IQ Bull 
U.S. Small Cap ETF is to seek capital appreciation. Under normal 
circumstances, at least 80% of the Fund's assets will be exposed to 
equity securities of U.S. small capitalization issuers by investing in 
ETFs, Financial Instruments, or both. To implement its strategy, the 
Fund will hold long positions in ETFs providing exposure to certain 
sectors. In addition, the Fund will employ the leverage inherent in the 
Financial Instruments to gain exposure to the ETFs in which it invests 
equal to as much as 200% of the net assets of the Fund. The leverage 
ratio will be uniform across all of the underlying ETFs, such that the 
relative weights of each sector will stay the same, but the overall 
exposure of the Fund will be increased. Cash balances arising from the 
use of short selling and derivatives typically will be held in money 
market instruments.

IQ Bull International ETF

    According to the Exchange, the investment objective of the IQ Bull 
International ETF is to seek capital appreciation. Under normal 
circumstances, at least 80% of the Fund's assets will be exposed to 
equity securities of issuers domiciled in developed market countries by 
investing in ETFs, Financial Instruments, or both. To implement its 
strategy, the Fund will hold long positions in ETFs providing exposure 
to such countries. In addition, the Fund will employ the leverage 
inherent in the Financial Instruments to gain exposure to the ETFs in 
which it invests equal to as much as 200% of the net assets of the 
Fund. The leverage ratio will be uniform across all of the underlying 
ETFs, such that the relative weights of each sector will stay the same, 
but the overall exposure of the Fund will be increased. Cash balances 
arising from the use of short selling and derivatives typically will be 
held in money market instruments.

IQ Bull Emerging Markets ETF

    According to the Exchange, the investment objective of the IQ Bull 
Emerging Markets ETF is to seek capital appreciation. Under normal 
circumstances, at least 80% of the Fund's assets will be exposed to 
equity securities of issuers domiciled in emerging market countries by 
investing in ETFs, Financial Instruments, or both. To implement its 
strategy, the Fund will hold long positions in ETFs providing exposure 
to such countries. In addition, the Fund will employ the leverage 
inherent in the Financial Instruments to gain exposure to the ETFs in 
which it invests equal to as much as 200% of the net assets of the 
Fund. The leverage ratio will be uniform across all of the underlying 
ETFs, such that the relative weights of each sector will stay the same, 
but the overall exposure of the Fund will be increased. Cash balances 
arising from the use of short selling and derivatives typically will be 
held in money market instruments.

Other Investments of the Funds

    Each Fund may invest a portion of its assets in high-quality money 
market instruments on an ongoing basis. The instruments in which each 
Fund may invest include: (1) Short-term obligations issued by the U.S. 
government; (2) negotiable certificates of deposit (``CDs''), fixed 
time deposits, and bankers' acceptances of U.S. and foreign banks and 
similar institutions; (3) commercial paper rated at the date of 
purchase ``Prime-1'' by Moody's Investors Service, Inc. or ``A-1+'' or 
``A-1'' by Standard & Poor's Ratings Group, Inc., a division of The 
McGraw-Hill Companies, Inc., or, if unrated, of comparable quality as 
determined by the Adviser; (4) repurchase agreements (only from or to a 
commercial bank or a broker-dealer, and only if the purchase is 
scheduled to occur within seven days or less); and (5) money market 
mutual funds. CDs are short-term negotiable obligations of commercial 
banks. Time deposits are non-negotiable deposits maintained in banking 
institutions for specified periods of time at stated interest rates. 
Bankers' acceptances are time drafts drawn on commercial banks by 
borrowers, usually in connection with international transactions.
    Each Fund may, from time to time, invest directly in non-ETF equity 
securities, including U.S.-listed and non-U.S. listed equity 
securities, provided that all equity securities in which the Funds may 
invest will be listed on a U.S. national securities exchange or a non-
U.S. securities exchange that is a member of the ISG or

[[Page 13351]]

a party to a comprehensive surveillance sharing agreement with the 
Exchange.
    In addition to ETFs, the Funds may invest in other U.S.-listed 
exchange-traded products including exchange-traded notes.
    Certain Funds may use American depositary receipts, European 
depositary receipts, and Global depositary receipts when, in the 
discretion of the Adviser, the use of such securities is warranted for 
liquidity, pricing, timing, or other reasons. No Fund will invest more 
than 10% of its net assets in unsponsored depositary receipts.

Investment Restrictions

    Each Fund will seek to qualify for treatment as a regulated 
investment company under Subchapter M of the Internal Revenue Code of 
1986, as amended.\16\
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    \16\ 26 U.S.C. 151.
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    A Fund may hold up to an aggregate amount of 15% of its net assets 
in illiquid securities (calculated at the time of investment), 
including Rule 144A Securities.\17\ The Funds will monitor their 
portfolio liquidity on an ongoing basis to determine whether, in the 
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 a Fund's net assets are held 
in illiquid securities and other illiquid assets.
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    \17\ The Commission has stated that long-standing Commission 
guidelines have required open-end funds to hold no more than 15% of 
their net assets in illiquid securities and other illiquid assets. 
See Investment Company Act Release No. 8901 (March 11, 2008), 73 FR 
14618, 14621 n.34 (March 18, 2008). See also, Investment Company Act 
Release No. 5847 (October 21, 1969), 35 FR 19989 (December 31, 1970) 
(Statement Regarding ``Restricted Securities''); Investment Company 
Act Release No. 18612 (March 12, 1992), 57 FR 9828 (March 20, 1992) 
(Revisions of Guidelines to Form N-1A). A fund's portfolio security 
is illiquid if it cannot be disposed of in the ordinary course of 
business within seven days at approximately the value ascribed to it 
by the ETF. See Investment Company Act Release No. 14983 (March 12, 
1986), 51 FR 9773 (March 21, 1986) (adopting amendments to Rule 2a-7 
under the 1940 Act); Investment Company Act Release No. 17452 (April 
23, 1990), 55 FR 17933 (April 30, 1990) (adopting Rule 144A under 
the Securities Act of 1933).
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    According to the Registration Statement, the strategy of 
overweighting and underweighting sectors to maximize opportunities for 
capital appreciation may result in a Fund investing greater than 25% of 
its total assets, directly or indirectly, through underlying ETFs, in 
the equity securities of companies operating in one or more sectors. 
Sectors comprise multiple individual industries. According to the 
Registration Statement, a Fund will not invest more than 25% of its 
total assets, directly or indirectly, through underlying ETFs, in an 
individual industry, as defined by the Standard Industrial 
Classification Codes utilized by the Division of Corporate Finance of 
the Commission.\18\ This limitation does not apply to investments in 
securities issued or guaranteed by the U.S. Government, its agencies or 
instrumentalities, or shares of investment companies.
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    \18\ See Form N-1A, Item 9. The Commission has taken the 
position that a fund is concentrated if it invests more than 25% of 
the value of its total assets in any one industry. See, e.g., 
Investment Company Act Release No. 9011 (October 30, 1975), 40 FR 
54241 (November 21, 1975).
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    According to the Registration Statement, a Fund may not purchase or 
sell commodities or commodity contracts unless acquired as a result of 
ownership of securities or other instruments issued by persons that 
purchase or sell commodities or commodities contracts, but this shall 
not prevent the Fund from purchasing, selling, and entering into 
financial futures contracts (including futures contracts on indices of 
securities, interest rates, and currencies), options on financial 
futures contracts (including futures contracts on indices of 
securities, interest rates, and currencies), warrants, swaps, forward 
contracts, foreign currency spot and forward contracts, or other 
derivative instruments that are not related to physical commodities.

Availability of Information

    The Exchange states that the Funds' Web site will include 
quantitative information for the Funds, updated on a daily basis. This 
information will include: (1) Daily trading volume, the prior business 
day's reported closing price, NAV and mid-point of the bid/ask spread 
at the time of calculation of such NAV (the ``Bid/Ask Price''),\19\ and 
a calculation of the premium and discount of the Bid/Ask Price against 
the NAV, and (2) data in chart format displaying the frequency 
distribution of discounts and premiums of the daily Bid/Ask Price 
against the NAV, within appropriate ranges, for each of the four 
previous calendar quarters.
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    \19\ The Bid/Ask Price of the Funds will be determined using the 
midpoint of the highest bid and the lowest offer on the Exchange as 
of the time of calculation of the Funds' NAV. The records relating 
to Bid/Ask Prices will be retained by the Funds and their service 
providers.
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    On each business day, before commencement of trading in Shares in 
the Core Trading Session (9:30 a.m. E.T. to 4:00 p.m. E.T.) on the 
Exchange, the Funds will disclose on their Web site the Disclosed 
Portfolio that will form the basis for the Funds' calculation of NAV at 
the end of the business day.\20\ On a daily basis, the Funds will 
disclose on www.indexiq.com for each portfolio security and other 
financial instrument of the Funds the following information: Ticker 
symbol, name of security and financial instrument, number of shares (if 
applicable) and dollar value of each security and financial instrument 
held in the portfolio, and percentage weighting of each security and 
financial instrument in the portfolio.
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    \20\ Under accounting procedures followed by the Funds, trades 
made on the prior business day (``T'') will be booked and reflected 
in NAV on the current business day (``T+1''). Accordingly, the Funds 
will be able to disclose at the beginning of the business day the 
portfolio that will form the basis for the NAV calculation at the 
end of the business day.
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    In addition, a basket composition file, which includes the security 
names and share quantities required to be delivered in exchange for 
Fund Shares, together with estimates and actual cash components, will 
be publicly disseminated daily prior to the opening of the NYSE via the 
NSCC. The basket represents one Creation Unit of each Fund.
    The Exchange states that 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. 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. Quotation and last sale 
information for the Shares and the ETF shares underlying the Shares 
will be available via the Consolidated Tape Association (``CTA'') high-
speed line. Quotation and last sale information for options contracts 
will be available via the Options Price Reporting Authority. 
Information regarding the equity securities and other portfolio 
securities held by each Fund will be available from the national 
securities exchange trading such securities, automated quotation 
systems, published or other public sources, or on-line information 
services such as Bloomberg or Reuters or any future service provider. 
Given that any swap used by a Fund will be priced based on underlying 
securities that are publicly traded, the pricing information for such 
underlying securities also will be available from the national 
securities exchange trading such securities, automated quotation 
systems, published or other public sources, or on-line information 
services such as Bloomberg or Reuters or any future service provider. 
In addition, the

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Portfolio Indicative Value of the Funds, as defined in NYSE Arca 
Equities Rule 8.600(c)(3), will be widely disseminated by one or more 
major market data vendors at least every 15 seconds during the Core 
Trading Session.

Surveillance

    The Exchange states that trading in the Shares will be subject to 
the existing trading surveillances, administered by the Financial 
Industry Regulatory Authority (``FINRA'') on behalf of the Exchange, 
which are designed to detect violations of Exchange rules and 
applicable federal securities laws.\21\ The Exchange represents that 
these procedures are adequate to properly monitor Exchange trading of 
the Shares in all trading sessions and to detect and help deter 
violations of Exchange rules and applicable federal securities laws.
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    \21\ FINRA surveils trading on the Exchange pursuant to a 
regulatory services agreement. The Exchange is responsible for 
FINRA's performance under this regulatory services agreement.
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    The surveillances referred to above generally focus on detecting 
securities trading outside their normal patterns, which could be 
indicative of manipulative or other violative activity. When such 
situations are detected, surveillance analysis follows and 
investigations are opened, where appropriate, to review the behavior of 
all relevant parties for all relevant trading violations. FINRA, on 
behalf of the Exchange, will communicate as needed regarding trading in 
the Shares with other markets and other entities that are members of 
the ISG, and FINRA, on behalf of the Exchange, may obtain trading 
information regarding trading in the Shares from such markets and other 
entities. In addition, the Exchange may obtain information regarding 
trading in the Shares from markets and other entities that are members 
of ISG or with which the Exchange has in place a comprehensive 
surveillance sharing agreement.\22\
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    \22\ For a list of the current members of ISG, see 
www.isgportal.org. The Exchange notes that not all components of the 
Disclosed Portfolio for the Fund may trade on markets that are 
members of ISG or with which the Exchange has in place a 
comprehensive surveillance sharing agreement.
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    In addition, the Exchange states that it has a general policy 
prohibiting the distribution of material, non-public information by its 
employees.

III. Proceedings to Determine Whether to Approve or Disapprove SR-
NYSEArca-2013-127 and Grounds for Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Act \23\ to determine whether the proposed rule 
change should be approved or disapproved. Institution of such 
proceedings is appropriate at this time in view of the legal and policy 
issues raised by the proposed rule change, as discussed below. 
Institution of proceedings does not indicate that the Commission has 
reached any conclusions with respect to any of the issues involved. 
Rather, as described below, the Commission seeks and encourages 
interested persons to provide comments on the proposed rule change.
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    \23\ 15 U.S.C. 78s(b)(2)(B).
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    Pursuant to Section 19(b)(2)(B) of the Act,\24\ the Commission is 
providing notice of the grounds for disapproval under consideration. As 
discussed above, under the proposal each Fund, under normal market 
circumstances, would seek to invest (or, as applicable, to take short 
positions as to) at least 80% of its total assets in ETFs, Financial 
Instruments, or both. With respect to the Funds, Financial Instruments 
are swap agreements, options contracts, and futures contracts with 
economic characteristics similar to those of the ETFs for which they 
are substituted. In the Notice, the Exchange included a description of 
the information that would be made available about the Financial 
Instruments positions in the Disclosed Portfolio.\25\ Also in the 
Notice, the Exchange discussed its surveillance of the listing and 
trading of the Shares on the Exchange. The Commission believes that the 
proposed rule change raises issues regarding the sufficiency of the 
information that would be included in the Disclosed Portfolio to price 
the over-the-counter (``OTC'') derivative instruments, and the impact 
of those OTC derivatives on arbitrage and hedging activities.
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    \24\ Id.
    \25\ Under NYSE Arca's rules, ``Disclosed Portfolio'' means the 
identities and quantities of the securities and other assets held by 
the fund that will form the basis for the fund's calculation of net 
asset value at the end of the business day. See NYSE Arca Equities 
Rule 8.600(c)(2).
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    Accordingly, the Commission is instituting proceedings to allow for 
additional analysis of the proposed rule change's consistency with 
Section 6(b)(5) of the Exchange Act, which requires, among other 
things, that the rules of a national securities exchange be ``designed 
to prevent fraudulent and manipulative acts and practices, to promote 
just and equitable principles of trade,'' and ``to protect investors 
and the public interest.'' \26\
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    \26\ 15 U.S.C. 78f(b)(5).
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IV. Procedure: Request for Written Comments

    The Commission requests that interested persons provide written 
submissions of their views, data, and arguments with respect to the 
concerns identified above, as well as any other concerns they may have 
with the proposal. In particular, the Commission invites the written 
views of interested persons concerning whether the proposal is 
consistent with Section 6(b)(5) or any other provision of the Act, or 
the rules and regulations thereunder. Although there do not appear to 
be any issues relevant to approval or disapproval which would be 
facilitated by an oral presentation of views, data, and arguments, the 
Commission will consider, pursuant to Rule 19b-4, any request for an 
opportunity to make an oral presentation.\27\
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    \27\ Section 19(b)(2) of the Act, as amended by the Securities 
Act Amendments of 1975, Public Law 94-29 (June 4, 1975), grants the 
Commission flexibility to determine what type of proceeding--either 
oral or notice and opportunity for written comments--is appropriate 
for consideration of a particular proposal by a self-regulatory 
organization. See Securities Act Amendments of 1975, Senate Comm. on 
Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st 
Sess. 30 (1975).
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    Interested persons are invited to submit written data, views, and 
arguments regarding whether the proposal should be approved or 
disapproved by March 31, 2014. Any person who wishes to file a rebuttal 
to any other person's submission must file that rebuttal by April 14, 
2014.
    The Commission asks that commenters address the sufficiency and 
merit of the Exchange's statements in support of the proposal, in 
addition to any other comments they may wish to submit about the 
proposed rule change. In particular, the Commission seeks comment on 
the following:
    1. In the proposed rule change, the Exchange states that the Funds' 
daily disclosure of their holdings, including derivatives, will include 
the following: Ticker symbol, name of security and financial 
instrument, number of shares (if applicable) and dollar value of each 
security and financial instrument held in the portfolio, and percentage 
weighting of each security and financial instrument in the portfolio. 
Is this information sufficient for market makers and other market 
participants to value the Funds' OTC derivatives? Why or why not? What 
type of information must be included in Disclosed Portfolio for market 
participants to be able to value the derivatives positions intraday?
    2. The Exchange has not made any assertions regarding the potential

[[Page 13353]]

extensive use of derivatives on impact on the arbitrage mechanism. Will 
the OTC derivatives held by the Funds negatively impact the arbitrage 
mechanism? Why or why not?
    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 Number SR-NYSEArca-2013-127 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 Numbers SR-NYSEArca-2013-127. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of these filings also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSEArca-2013-127 and should 
be submitted on or before March 31, 2014. Rebuttal comments should be 
submitted by April 14, 2014.

    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)(57).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-05032 Filed 3-7-14; 8:45 am]
BILLING CODE 8011-01-P


