
[Federal Register Volume 79, Number 126 (Tuesday, July 1, 2014)]
[Notices]
[Pages 37373-37376]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-15323]



[[Page 37373]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72464; File No. SR-NYSEArca-2014-45]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a 
Proposed Rule Change Governing the Continued Listing and Trading of 
Shares of the PowerShares Insured California Municipal Bond Portfolio, 
PowerShares Insured National Municipal Bond Portfolio, and PowerShares 
Insured New York Municipal Bond Portfolio

June 25, 2014.

I. Introduction

    On April 25, 2014, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 1934 
(``Exchange Act'') \2\ and Rule 19b-4 thereunder,\3\ a proposed rule 
change relating to the listing and trading of shares (``Shares'') of 
the following series of Investment Company Units (``Units''): 
PowerShares Insured California Municipal Bond Portfolio (``CA 
Portfolio''); PowerShares Insured National Municipal Bond Portfolio 
(``National Portfolio''); and PowerShares Insured New York Municipal 
Bond Portfolio (``NY Portfolio,'' and collectively ``Municipal Bond 
Portfolios'' or ``Funds''). The proposed rule change was published for 
comment in the Federal Register on May 15, 2014.\4\ The Commission 
received no comments on the proposal. This order approves the proposed 
rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
    \4\ See Securities Exchange Act Release No. 72139 (May 9, 2014), 
79 FR 27950 (``Notice'').
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II. Description of the Proposed Rule Change

    The Funds are series of the PowerShares Exchange-Traded Fund Trust 
II (``Trust'').\5\ Invesco PowerShares Capital Management LLC is the 
investment adviser (``Adviser'') for the Funds. Invesco Distributors, 
Inc. is the Funds' distributor. The Bank of New York Mellon is the 
administrator, custodian and fund accounting and transfer agent for 
each Fund.
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    \5\ On February 27, 2014, the Trust filed a post-effective 
amendment on Form 485 under the Securities Act of 1933 (15 U.S.C. 
77a) (``1933 Act'') to its registration statement on Form N-1A under 
the 1933 Act and the Investment Company Act of 1940 (``1940 Act'') 
(15 U.S.C. 80a-1) (File Nos. 333-138490 and 811-21977) (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. 27841 (May 25, 
2007) (File No. 812-13335) (``Exemptive Order'').
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    Currently, the Exchange lists and trades the Shares under NYSE Arca 
Equities Rule 5.2(j)(3), Commentary .02, which governs the listing and 
trading of Units based on fixed income securities indexes. As described 
further below, the Exchange states that it recently became aware that 
the indexes underlying the Funds do not meet all of the generic listing 
criteria applicable to these Units. Accordingly, by this proposed rule 
change, NYSE Arca seeks to permit the continued listing and trading of 
the Shares. Additionally, and as discussed further below, in the 
future, the Exchange expects that the indexes underlying the Funds will 
be changed again, and the Exchange states that those new indexes also 
fail to meet the generic listing criteria of NYSE Arca Equities Rule 
5.2(j)(3), Commentary .02. Accordingly, by this proposed rule change, 
NYSE Arca also seeks to permit the listing and trading of the Shares 
once the Funds transition to the new underlying indexes.

The Funds' Current Underling Indexes

    The Exchange states that, on May 28, 2009, the municipal bond 
indexes underlying the CA Portfolio; the National Portfolio; and the NY 
Portfolio were changed to the Merrill Lynch California Insured Long-
Term Core Plus Municipal Securities Index, the Merrill Lynch National 
Insured Long-Term Core Plus Municipal Securities Index, and the Merrill 
Lynch New York Insured Long-Term Core Plus Municipal Securities Index, 
respectively.\6\ According to the Exchange, on September 25, 2009, the 
names of the indexes underlying the Municipal Bond Portfolios again 
were changed to the BofA Merrill Lynch California Insured Long-Term 
Core Plus Municipal Securities Index (``CA Index''), the BofA Merrill 
Lynch National Insured Long-Term Core Plus Municipal Securities Index 
(``National Index''), and the BofA Merrill Lynch New York Insured Long-
Term Core Plus Municipal Securities Index, respectively \7\ (``NY 
Index'', and collectively, ``Municipal Bond Indexes'').\8\
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    \6\ See Notice, supra note 4, 79 FR at 27951. The changes to the 
indexes underlying the Municipal Bond Portfolios were reflected in a 
supplement on Form 497 under the 1933 Act, dated May 28, 2009 (``May 
28, 2009 Supplement'') to the Municipal Bond Portfolios' prospectus 
dated February 27, 2009. See Notice, supra note 4, 79 FR at 27951, 
n.7. The previous names of the indexes underlying the Municipal Bond 
Portfolios were the Merrill Lynch California Insured Long-Term Core 
Municipal Securities Index, Merrill Lynch National Insured Long-Term 
Core Municipal Securities Index, and Merrill Lynch New York Insured 
Long-Term Core Municipal Securities Index, respectively. See Notice, 
supra note 4, 79 FR at 27951, n.7.
    \7\ BofA Merrill Lynch is the index provider (``Index 
Provider'') with respect to the Municipal Bond Indexes and the ``New 
Municipal Bond Indexes,'' which are described below. The Index 
Provider is a broker-dealer and has implemented a firewall with 
respect to and will maintain procedures designed to prevent the use 
and dissemination of material non-public information regarding the 
Municipal Bond Indexes and New Municipal Bond Indexes. See Notice, 
supra note 4, 79 FR at 27951, n.8.
    \8\ The September 25, 2009, name changes were reflected in a 
supplement dated September 25, 2009 to the Municipal Bond 
Portfolios' prospectus dated February 27, 2009. See Notice, supra 
note 4, 79 FR at 27951, n.9.
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    According to the Exchange, the Municipal Bond Indexes meet all of 
the applicable requirements for the generic listing under NYSE Arca 
Equities Rule 5.2(j)(3) except for the requirement of Commentary 
.02(a)(2), which requires that components that in the aggregate account 
for 75% or more of the weight of the index or portfolio each have a 
minimum original principal amount outstanding of $100 million or more. 
Specifically, as of March 6, 2014, approximately 34.84%, and 37.16%, 
and 59.22% of the weight of the components of the CA Index, National 
Index and NY Index, respectively, had a minimum original principal 
amount outstanding of $100 million or more.\9\
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    \9\ See id.
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The CA Portfolio

    The CA Portfolio seeks investment results that generally correspond 
(before fees and expenses) to the price and yield performance of the CA 
Index.\10\ The CA Index is designed to track the performance of U.S. 
dollar-denominated, investment grade, tax-exempt debt publicly issued 
by California or U.S. territories (including Puerto Rico), or their 
political subdivisions, in the U.S. domestic market and includes 
approximately 267 bonds (as of January 31, 2014). The CA Index is 
adjusted monthly.
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    \10\ Normally, the CA Portfolio invests at least 80% of its 
total assets in the securities that compose the CA Index and 
generally expects to so invest at least 90% of its total assets. The 
CA Portfolio reserves the right to invest up to 20% of its assets in 
certain futures, options and swap contracts, cash and cash 
equivalents, including money market funds, as well as in municipal 
securities not included in the CA Index to the extent that the 
Adviser believes investment in such instruments will facilitate the 
CA Portfolio's ability to achieve its investment objective.
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    As of January 31, 2014, the total dollar amount outstanding of 
issues in the CA Index was approximately $17.201 billion and the 
average dollar amount outstanding of issues in the CA Index was 
approximately $64.42 million. The most heavily weighted component

[[Page 37374]]

represented 3.53% of the weight of the CA Index and the five most 
heavily weighted components represented 9.94% of the weight of the CA 
Index. The CA Index is composed of approximately 267 issues and 127 
unique issuers. In addition, the average daily notional trading volume 
for CA Index components for the calendar year 2013 was approximately 
$27.45 million and the sum of the notional trading volumes for the same 
period was approximately $6.9 billion.

The National Portfolio

    The National Portfolio seeks investment results that generally 
correspond (before fees and expenses) to the price and yield 
performance of the National Index. The National Index is designed to 
track the performance of U.S. dollar-denominated investment grade 
insured tax-exempt debt publicly issued by U.S. states and territories 
(including Puerto Rico), or their political subdivision, in the U.S. 
domestic market and includes approximately 1,238 bonds (as of January 
31, 2014). The National Index is adjusted monthly.\11\
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    \11\ Generally, the National Portfolio will invest at least 80% 
of its total assets in the securities that compose the National 
Index and generally expects to so invest at least 90% of its total 
assets. The National Portfolio reserves the right to invest up to 
20% of its assets in certain futures, options and swap contracts, 
cash and cash equivalents, including money market funds, as well as 
in municipal securities not included in the National Index to the 
extent that the Adviser believes such investments will facilitate 
the National Portfolio's ability to achieve its investment 
objective.
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    As of January 31, 2014, the total dollar amount outstanding of 
issues in the National Index was approximately $78.69 billion and the 
average dollar amount outstanding of issues in the National Index was 
approximately $63.56 million. Further, the most heavily weighted 
component represented 0.88% of the weight of the National Index and the 
five most heavily weighted components represented 3.51% of the weight 
of the National Index. The National Index is composed of approximately 
1,238 issues and 521 unique issuers. In addition, the average daily 
notional trading volume for National Index components for the calendar 
year 2013 was approximately $101.99 million and the sum of the notional 
trading volumes for the same period was approximately $25.7 billion.

The NY Portfolio

    According to the Registration Statement, the NY Portfolio seeks 
investment results that generally correspond (before fees and expenses) 
to the price and yield performance of the NY Index. The NY Index is 
designed to track the performance of U.S. dollar-denominated, 
investment grade, tax-exempt debt publicly issued by New York or U.S. 
territories (including Puerto Rico), or their political subdivisions, 
included in the U.S. domestic market and includes approximately 130 
bonds (as of January 31, 2014). The NY Index is adjusted monthly.\12\
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    \12\ Normally, the NY Portfolio will invest at least 80% of its 
total assets in the securities that compose the NY Index. The NY 
Portfolio reserves the right to invest up to 20% of its assets in 
certain futures, options and swap contracts, cash and cash 
equivalents, including money market funds, as well as in municipal 
securities not included in the NY Index to the extent that the 
Adviser believes such investments will facilitate the NY Portfolio's 
ability to achieve its investment objective.
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    As of January 31, 2014, the total dollar amount outstanding of 
issues in the NY Index was approximately $17.76 billion and the average 
dollar amount outstanding of issues in the NY Index was approximately 
$90.58 million. Further, the most heavily weighted component 
represented 6.14% of the weight of the NY Index and the five most 
heavily weighted components represented 20.15% of the weight of the NY 
Index. The NY Index is composed of approximately 130 issues and 25 
unique issuers. In addition, the average daily notional trading volume 
for NY Index components for the calendar year 2013 was approximately 
$19.41 million and the sum of the notional trading volumes for the same 
period was approximately $4.89 billion.

Future Changes to the Funds and the Indexes Underlying the Funds

    As stated above, currently the Municipal Bond Indexes underlie the 
Municipal Bond Portfolios. The Trust has proposed to its shareholders 
to, among other things, change the indexes underlying the Funds (and 
the name of the Funds). On May 10, 2013, the Trust filed with the 
Commission on Schedule 14A a definitive proxy statement and notice of 
shareholders meeting calling a meeting on June 20, 2013 (``Proxy 
Statement'').\13\ According to the shareholder proposal, each Fund 
would change its underlying index to one that is composed of both 
insured and uninsured municipal securities. Following such change, the 
proposed underlying indexes for the Funds would be: the BofA Merrill 
Lynch California Long-Term Core Plus Municipal Securities Index (``New 
CA Index''); BofA Merrill Lynch National Long-Term Core Plus Municipal 
Index (``New National Index''); and BofA Merrill Lynch New York Long-
Term Core Plus Municipal Securities Index (``New NY Index,'' and 
collectively, ``New Municipal Bond Indexes,'' and together with the 
Municipal Bond Indexes, the ``Underlying Indexes'').
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    \13\ See Definitive Proxy Statement dated May 10, 2013 on 
Schedule 14A (Proxy Statement Pursuant to Section 14(a) of the Act) 
(File No. 811-21977).
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    In addition, each Fund would change its name by removing the word 
``Insured'' and adding the term ``AMT-Free'' to reflect that the 
proposed underlying indexes would include primarily municipal 
securities that are exempt from the alternative minimum tax. \14\ After 
such change, the names of the Funds would be PowerShares California 
AMT-Free Municipal Bond Portfolio (``New CA Portfolio''), PowerShares 
National AMT-Free Municipal Bond Portfolio (``New National Portfolio'') 
and PowerShares New York AMT-Free Municipal Bond Portfolio (``New NY 
Portfolio''), respectively. All components of each of the Municipal 
Bond Indexes and New Municipal Bond Indexes currently are rated as 
investment grade (A3 or higher by Moody's Investors Service).\15\
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    \14\ In connection with the addition of the term ``AMT-Free'' to 
each Fund's name, the Trust's Board of Trustees has adopted a non-
fundamental investment policy for each Fund normally to invest at 
least 80% of its net assets, including the amount of any borrowings 
for investment purposes, in municipal securities that are exempt 
from the federal alternative minimum tax.
    \15\ See Notice, supra, note 4 at 27955.
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    The shareholders of each Fund have approved these changes 
contingent upon approval of this proposed rule change.\16\
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    \16\ The changes described herein with respect to use of the New 
Municipal Bond Indexes would be effective upon filing with the 
Commission of another amendment to the Trust's Registration 
Statement, or a prospectus supplement reflecting these changes. The 
Adviser represents that the Adviser and Sub-Adviser have managed and 
will continue to manage the Funds in the manner described in the 
Registration Statement and will not implement the changes described 
herein until this proposed rule change is operative.
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    Currently, the New Municipal Bond Indexes do not meet the generic 
listing criteria of NYSE Arca Equities Rule 5.2(j)(3). Accordingly, the 
Exchange submitted this proposed rule change to permit the continued 
listing and trading the Shares in the event they overlie the New 
Municipal Bond Indexes. Specifically, the Exchange states that the New 
Municipal Bond Indexes meet all of the requirements of the generic 
listing criteria of NYSE Arca Equities Rule 5.2(j)(3), except for those 
set forth in Commentary .02(a)(2); \17\ as of January 31, 2014, 
approximately 59.51%, 46.90%, and 60.63% of the weight of the 
components of the New CA Index, New National Index and New NY Index,

[[Page 37375]]

respectively, had a minimum original principal amount outstanding of 
$100 million or more.
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    \17\ See text following n.8, supra (describing the requirement 
of Commentary .02(a)(2)).
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The New CA Portfolio

    The New CA Portfolio would generally seek investment results that 
correspond (before fees and expenses) to the price and yield 
performance of the New CA Index.\18\ The New CA Index is designed to 
track the performance of U.S. dollar-denominated, investment grade, 
tax-exempt debt publicly issued by California or U.S. territories 
(including Puerto Rico), or their political subdivisions, in the U.S. 
domestic market and includes approximately 1,086 bonds (as of January 
31, 2014). The New CA Index is adjusted monthly.
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    \18\ Normally, the New CA Portfolio would invest at least 80% of 
its total assets in the securities that compose the New CA Index, 
and generally expects to so invest at least 90% of its total assets. 
The New CA Portfolio reserves the right to invest up to 20% of its 
assets in certain futures, options and swap contracts, cash and cash 
equivalents, including money market funds, as well as in municipal 
securities not included in the New CA Index to the extent that the 
Adviser believes investment in such instruments would facilitate the 
New CA Portfolio's ability to achieve its investment objective.
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    As of January 31, 2014, the total dollar amount outstanding of 
issues in the New CA Index was approximately $100.76 billion and the 
average dollar amount outstanding of issues in the Index was 
approximately $92.81 million. Further, the most heavily weighted 
component represented 1.39% of the weight of the New CA Index and the 
five most heavily weighted components represented 5.17% of the weight 
of the CA Index. The New CA Index is composed of approximately 1,086 
issues and 229 unique issuers. In addition, the average daily notional 
trading volume for New CA Index components for the calendar year 2013 
was approximately $364.22 million and the sum of the notional trading 
volumes for the same period was approximately $91.78 billion.

The New National Portfolio

    The New National Portfolio generally would seek investment results 
that correspond (before fees and expenses) to the price and yield 
performance of the New National Index.\19\ The New National Index is 
designed to track the performance of U.S. dollar-denominated investment 
grade tax-exempt debt publicly issued by U.S. states or U.S. 
territories (including Puerto Rico), or its political subdivision, in 
the U.S. domestic market and includes approximately 5,476 bonds (as of 
January 31, 2014). The New National Index is adjusted monthly.
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    \19\ Normally, the New National Portfolio would invest at least 
80% of its total assets in the securities that compose the New 
National Index and generally expects to so invest at least 90% of 
its total assets. The New National Portfolio reserves the right to 
invest up to 20% of its assets in certain futures, options and swap 
contracts, cash and cash equivalents, including money market funds, 
as well as in municipal securities not included in the New National 
Index to the extent that the Adviser believes such investments would 
facilitate the New National Portfolio's ability to achieve its 
investment objective.
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    As of January 31, 2014, the total dollar amount outstanding of 
issues in the New National Index was approximately $ 394.04 billion and 
the average dollar amount outstanding of issues in the New National 
Index was approximately $71.96 million. Additionally, the most heavily 
weighted component represented 0.34% of the weight of the New National 
Index and the five most heavily weighted components represented 1.47% 
of the weight of the New National Index. The New National Index is 
composed of approximately 5,476 issues and 1,259 unique issuers. 
Further, the average daily notional trading volume for New National 
Index components for the calendar year 2013 was approximately $1.26 
billion and the sum of the notional trading volumes for the same period 
was approximately $317.73 billion.

The New NY Portfolio

    The New NY Portfolio would seek investment results that correspond 
(before fees and expenses) generally to the price and yield performance 
of the New NY Index.\20\ The New NY Index is designed to track the 
performance of U.S. dollar-denominated, investment grade, tax-exempt 
debt publicly issued by New York or U.S. territories (including Puerto 
Rico), or their political subdivisions, included in the U.S. domestic 
market includes approximately 952 bonds (as of January 31, 2014).
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    \20\ Normally, the New NY Portfolio would invest at least 80% of 
its total assets in the securities that compose the New NY Index. 
The New NY Portfolio reserves the right to invest up to 20% of its 
assets in certain futures, options and swap contracts, cash and cash 
equivalents, including money market funds, as well as in municipal 
securities not included in the New NY Index to the extent that the 
Adviser believes such investments will facilitate the New NY 
Portfolio's ability to achieve its investment objective.
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    As of January 31, 2014, the total dollar amount outstanding of 
issues in the New NY Index was approximately $86.75 billion and the 
average dollar amount outstanding of issues in the New NY Index was 
approximately $91.13 million. Further, the most heavily weighted 
component represents 1.61% of the weight of the New NY Index and the 
five most heavily weighted components represented 5.07% of the weight 
of the New NY Index. The New NY Index is composed of approximately 952 
issues and 67 unique issuers. In addition, the average daily notional 
trading volume for New NY Index components for the calendar year 2013 
was approximately $334.68 million and the sum of the notional trading 
volumes for the same period was approximately $84.34 billion.
    Additional information regarding the Trust, the Funds, the 
Underlying Indexes, 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 Statements, as applicable.\21\
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    \21\ See Notice and Registration Statement, supra notes 4 and 5, 
respectively.
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the Exchange's 
proposal to continue listing and trading the Shares is consistent with 
the Exchange Act and the rules and regulations thereunder applicable to 
a national securities exchange.\22\ In particular, the Commission finds 
that the proposed rule change is consistent with Section 6(b)(5) of the 
Exchange Act,\23\ 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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    \22\ 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).
    \23\ 15 U.S.C. 78f(b)(5).
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    The Commission finds that the proposal to continue trading the 
Shares on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of 
the Exchange 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 is available via the Consolidated Tape 
Association (``CTA'') high-speed line.\25\ The values of Underlying 
Indexes are calculated and disseminated at least once daily,

[[Page 37376]]

and the components of the Underlying Indexes and their respective 
percentage weightings are available from major market data vendors.\26\ 
The intraday indicative values (``IIVs'') for the Shares are 
disseminated by one or more major market data vendors and updated at 
least every 15 seconds during the Exchange's Core Trading Session, as 
required by NYSE Arca Equities Rule 5.2(j)(3), Commentary .02(c).\27\ 
Information regarding market price and trading volume of the Shares is 
continually available on a real-time basis throughout the day on 
brokers' computer screens and other electronic services.\28\ The Funds' 
Web site (www.invescopowershares.com) includes a form of the prospectus 
for the Funds, information relating to net asset value (``NAV''), and 
other applicable quantitative information.\29\ The Funds' portfolio 
holdings are disclosed on the Funds' Web site daily after the close of 
trading on the Exchange and prior to the opening of trading on the 
Exchange the following day.\30\
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    \24\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \25\ See Notice, supra note 4 at 27957.
    \26\ See id.
    \27\ See id. at 27956.
    \28\ See id. at 27958.
    \29\ See id. at 27957.
    \30\ See id.
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    The Commission 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. The Exchange states that the 
Index Provider is a broker-dealer and has implemented a firewall and 
will maintain procedures designed to prevent the use and dissemination 
of material, non-public information regarding the Underlying 
Indexes.\31\
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    \31\ See id. at 27956.
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    With respect to trading halts, if the Exchange becomes aware that 
the NAV is not being disseminated to all market participants at the 
same time, it will halt trading in the Shares until such time as the 
NAV is available to all market participants.\32\ In addition, the 
Exchange may consider all relevant factors in exercising its discretion 
to halt or suspend trading in the Shares of the Funds.\33\ Trading may 
be halted because of market conditions or for reasons that, in the view 
of the Exchange, make trading in the Shares inadvisable.\34\ The 
Exchange represents that, if the IIV or the values of the Underlying 
Indexes are not being disseminated as required, the Exchange may halt 
trading during the day in which the interruption to the dissemination 
of the applicable IIV or values of the Underlying Indexes occurs.\35\ 
If the interruption to the dissemination of the applicable IIV or 
values of the Underlying Indexes persists past the trading day in which 
it occurred, the Exchange will halt trading.\36\ Moreover, trading in 
the Shares will be halted if the circuit breaker parameters in NYSE 
Arca Equities Rule 7.12 have been reached or because of market 
conditions or for reasons that, in the view of the Exchange, make 
trading in the Shares inadvisable, and trading in the Shares will be 
subject to NYSE Arca Equities Rule 7.34, which sets forth circumstances 
under which Shares may be halted.\37\
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    \32\ See id.
    \33\ See id.
    \34\ See id.
    \35\ See id.
    \36\ See id.
    \37\ See id.
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    The Exchange states that it 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.\38\ The Exchange may obtain 
information via the Intermarket Surveillance Group (``ISG'') from other 
exchanges that are members of ISG or with which the Exchange has 
entered into a comprehensive surveillance sharing agreement.\39\ Based 
on the Exchange's representations regarding the number of issues and 
issuers in each index, the total and average dollar amount outstanding 
of the index components, the average daily notional trading volume for 
the index components in 2013, the total notional trading volume for the 
index components in 2013, and the concentration of the components in 
each index, the Commission believes that the Underlying Indexes are 
sufficiently broad-based and liquid to deter potential manipulation.
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    \38\ See id.
    \39\ See id.
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    In support of this proposal, the Exchange has made additional 
representations, including:
    (1) Except for Commentary .02(a)(2) to NYSE Arca Equities Rule 
5.2(j)(3), the Shares of the Funds currently 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 
of the Funds.
    (3) 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 Underlying 
Indexes and the applicable value of the IIV, rules governing the 
trading of equity securities, trading hours, trading halts, 
surveillance, information barriers, and the Information Bulletin to 
Equity Trading Permit Holders (each as described in more detail herein 
and in the Notice and Registration Statements, as applicable), 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.
    (4) For continued listing of the Shares, the Trust is required to 
comply with Rule 10A-3 under the Exchange Act.
    (5) Each Fund generally will invest at least 80% of its assets in 
the securities that compose each Fund's respective underlying index.
    (6) Each Fund may at times invest up to 20% of its assets in 
certain futures, options and swap contracts, cash and cash equivalents, 
including money market funds, as well as in municipal securities not 
included in a Fund's respective underlying index to the extent that the 
Adviser believes investment in such instruments will facilitate the 
Fund's ability to achieve its investment objective.
    This order is based on all of the Exchange's representations, 
including those set forth above and in the Notice.
    Lastly, the Commission notes that the approval of this proposed 
rule change permits only the prospective continued listing of the 
Shares. No retroactive relief is granted to the Exchange regarding its 
listing and trading of the Shares during the time period in which not 
all of the generic listing criteria in Commentary .02 to NYSE Arca 
Equities Rule 5.2(j)(3) were satisfied.
    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with the Exchange Act.

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Exchange Act,\40\ that the proposed rule change (SR-NYSEArca-2014-45), 
be, and it hereby is, approved.
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    \40\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\41\
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    \41\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-15323 Filed 6-30-14; 8:45 am]
BILLING CODE 8011-01-P


