
[Federal Register Volume 80, Number 59 (Friday, March 27, 2015)]
[Notices]
[Pages 16477-16485]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-06991]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74562; File No. SR-NYSEArca-2015-15]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Relating to Listing and Trading of Shares of 
Principal EDGE Active Income ETF Under NYSE Arca Equities Rule 8.600

March 23, 2015.
    Pursuant to section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on March 12, 2015, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to list and trade shares of the following 
under NYSE Arca Equities Rule 8.600 (``Managed Fund Shares''): 
Principal EDGE Active Income ETF. The text of the proposed rule change 
is available on the Exchange's Web site at www.nyse.com, at the 
principal office of the Exchange, and at the Commission's Public 
Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to list and trade shares (``Shares'') of the 
following under NYSE Arca Equities Rule 8.600, which governs the 
listing and trading of Managed Fund Shares \4\ on the Exchange: \5\ 
Principal EDGE Active Income ETF (the ``Fund'').
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    \4\ A Managed Fund Share is a security that represents an 
interest in an investment company registered under the Investment 
Company Act of 1940 (15 U.S.C. 80a-1) (``1940 Act'') organized as an 
open-end investment company or similar entity that invests in a 
portfolio of securities selected by its investment adviser 
consistent with its investment objectives and policies. In contrast, 
an open-end investment company that issues Investment Company Units, 
listed and traded on the Exchange under NYSE Arca Equities Rule 
5.2(j)(3), seeks to provide investment results that correspond 
generally to the price and yield performance of a specific foreign 
or domestic stock index, fixed income securities index or 
combination thereof.
    \5\ The Commission has previously approved listing and trading 
on the Exchange of actively managed funds under Rule 8.600. See, 
e.g., Securities Exchange Act Release Nos. 57801 (May 8, 2008), 73 
FR 27878 (May 14, 2008) (SR-NYSEArca-2008-31) (order approving 
Exchange listing and trading of twelve actively-managed funds of the 
WisdomTree Trust); 66321 (February 3, 2012), 77 FR 6850 (February 9, 
2012) (SR-NYSEArca-2011-95) (order approving listing and trading of 
PIMCO Total Return Exchange Traded Fund); 66670 (March 28, 2012), 77 
FR 20087 (April 3, 2012) (SR-NYSEArca-2012-09) (order approving 
listing and trading of PIMCO Global Advantage Inflation-Linked Bond 
Strategy Fund).

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[[Page 16478]]

    The Fund is a series of the Principal Exchange-Traded Funds 
(``Trust''), a statutory trust organized under the laws of the State of 
Delaware and registered with the Commission as an open-end management 
investment company.\6\ The investment manager for the Fund will be 
Principal Management Corporation (the ``Adviser'' or ``PMC''). 
Principal Global Investors, LLC and Edge Asset Management, LLC will 
each serve as a sub-adviser and portfolio manager. Principal Global 
Investors, LLC and Edge Asset Management, LLC are each referred to as a 
``Sub-Adviser'' and collectively as the ``Sub-Advisers''. Commentary 
.06 to Rule 8.600 provides that, if the investment adviser to the 
investment company issuing Managed Fund Shares is affiliated with a 
broker-dealer, such investment adviser shall erect a ``fire wall'' 
between the investment adviser and the broker-dealer with respect to 
access to information concerning the composition and/or changes to such 
investment company portfolio.\7\ In addition, Commentary .06 further 
requires that personnel who make decisions on the open-end fund's 
portfolio composition must be subject to procedures designed to prevent 
the use and dissemination of material nonpublic information regarding 
the open-end fund's portfolio. The Adviser and Sub-Advisers are not 
registered as broker-dealers but are affiliated with three broker-
dealers and have implemented and will maintain a fire wall with respect 
to each such broker-dealer affiliate regarding access to information 
concerning the composition and/or changes to the portfolios. In the 
event (a) the Adviser or Sub-Advisers become registered broker-dealers 
or newly affiliated with one or more broker-dealers, or (b) any new 
adviser or sub-adviser is a registered broker-dealer or becomes 
affiliated with a broker-dealer, it will implement a fire wall with 
respect to its relevant personnel or its broker-dealer affiliate 
regarding access to information concerning the composition and/or 
changes to the portfolios, and will be subject to procedures designed 
to prevent the use and dissemination of material non-public information 
regarding such portfolios.
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    \6\ The Trust is registered under the 1940 Act. On February 6, 
2015, the Trust filed with the Commission a registration statement 
on Form N-1A under the Securities Act of 1933 (15 U.S.C. 77a) 
(``Securities Act'') and the 1940 Act relating to the Fund (File 
Nos. 333-201935 and 811-23029) (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 Adviser (as defined herein) under the 1940 Act. See Investment 
Company Act Release No. (30742) [sic] (File No. 812-14136) 
(``Exemptive Order''). The Fund will be offered in reliance upon the 
Exemptive Order issued to the Adviser.
    \7\ An investment adviser to an open-end fund is required to be 
registered under the Investment Advisers Act of 1940 (the ``Advisers 
Act''). As a result, the Adviser and Sub-Advisers and their related 
personnel are subject to the provisions of Rule 204A-1 under the 
Advisers Act relating to codes of ethics. This Rule requires 
investment advisers to adopt a code of ethics that reflects the 
fiduciary nature of the relationship to clients as well as 
compliance with other applicable securities laws. Accordingly, 
procedures designed to prevent the communication and misuse of non-
public information by an investment adviser must be consistent with 
Rule 204A-1 under the Advisers Act. In addition, Rule 206(4)-7 under 
the Advisers Act makes it unlawful for an investment adviser to 
provide investment advice to clients unless such investment adviser 
has (i) adopted and implemented written policies and procedures 
reasonably designed to prevent violation, by the investment adviser 
and its supervised persons, of the Advisers Act and the Commission 
rules adopted thereunder; (ii) implemented, at a minimum, an annual 
review regarding the adequacy of the policies and procedures 
established pursuant to subparagraph (i) above and the effectiveness 
of their implementation; and (iii) designated an individual (who is 
a supervised person) responsible for administering the policies and 
procedures adopted under subparagraph (i) above.
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Principal EDGE Active Income ETF
Principal Investments
    According to the Registration Statement, the Fund will seek to 
provide current income.
    The Fund will invest in a manner designed to provide shareholders 
with regular cash flow from their investment in the Fund. With regard 
to each investment category, the Fund will carry out its investment 
strategy by investing in the securities listed in each investment 
category below and/or through the purchase of shares issued by U.S. 
exchange-traded funds (``ETFs'') \8\ or other investment companies, 
including shares in unit investment trusts and open-end investment 
companies, that invest a majority of their assets in the securities 
listed in the Principal Investment categories below. The Fund under 
normal market circumstances \9\ will invest a majority of its net 
assets in the following financial instruments listed in (1) and (2), 
below:
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    \8\ For purposes of this filing, ETFs consist of Investment 
Company Units (as described in NYSE Arca Equities Rule 5.2(j)(3)), 
Portfolio Depositary Receipts (as described in NYSE Arca Equities 
Rule 8.100; Managed Fund Shares (as described in NYSE Arca Equities 
Rule 8.600); and closed-end funds. All ETFs will be listed and 
traded in the U.S. on a national securities exchange. While the Fund 
may invest in inverse ETFs, the Fund will not invest in leveraged 
(e.g., 2X, -2X, 3X or -3X) ETFs.
    \9\ With respect to the Fund, the term ``under normal market 
circumstances'' includes, but is not limited to, the absence of 
extreme volatility or trading halts in the equity and fixed income 
markets or the financial markets generally; events or circumstances 
causing a disruption in market liquidity or orderly markets; 
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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1. Investment Grade and Non-Investment Grade U.S. and Non-U.S. Fixed 
Income Securities
    Under normal market circumstances, at least 20% but no more than 
90% of the Fund's net assets will be invested in investment grade and 
non-investment grade fixed income securities \10\ which will consist of 
the following: U.S. Treasuries; agency securities; \11\ asset-backed 
securities; \12\ residential mortgage-backed securities; \13\ 
commercial mortgage-backed securities; \14\ zero-coupon securities; 
variable and floating rate instruments including inverse floaters; \15\ 
covered securities; \16\ sinking fund securities; \17\ equipment trust 
certificates; \18\ sovereign bonds; \19\ convertible bonds; \20\ pay-
in-kind securities; \21\ step-coupon

[[Page 16479]]

securities; \22\ stripped securities; \23\ inflation-indexed bonds; 
inflation protected debt securities; bank loans; municipal bonds; and 
corporate bonds issued by U.S., supranational and non-U.S. issuers 
(including issuers located in emerging markets) and denominated in U.S. 
dollars.\24\ ``Investment grade'' securities are rated BBB- or higher 
by S&P or Baa3 or higher by Moody's Investors Service, Inc. 
(``Moody's'') or, if unrated, of comparable quality in the opinion of 
the Sub-Advisers.\25\ ``Non-investment grade'' securities are rated Ba1 
or lower by Moody's and BB+ or lower by Standard & Poor's Rating 
Services (``S&P''). If the security has been rated by only one of those 
agencies, that rating will determine whether the security is below 
investment grade. If the security has not been rated by either of those 
agencies, the Sub-Advisers will determine whether the security is of a 
quality comparable to those rated below investment grade.
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    \10\ The Fund will limit its investments in non-investment grade 
fixed income securities to 75% or less of the Fund's net assets.
    \11\ Agency securities are debt instruments issued by U.S. 
government-sponsored entities and other federally related entities 
such as the Federal National Mortgage Association (FNMA), Federal 
Home Loan Bank and the Federal Home Loan Bank (FHLB).
    \12\ Asset-backed securities are debt instruments secured by a 
loan, lease or receivables against assets.
    \13\ Residential mortgage-backed securities are debt instruments 
secured by a residential mortgage or a collection of mortgages.
    \14\ Commercial mortgage-backed securities are debt instruments 
secured by a loan on a commercial property.
    \15\ Inverse floaters are bonds or other types of debt 
instruments whose coupon rate has an inverse relationship to a 
benchmark rate.
    \16\ Covered securities are secured debt instruments generally 
issued by credit institutions and backed by a pool of assets, 
usually mortgages or public sector loans.
    \17\ Sinking fund securities are bonds or other types of debt 
instruments that are subject to periodic payments by the issuer to a 
trustee. The trustee uses the payments to retire part of the bond 
issuance by purchasing the bonds in the open market.
    \18\ Equipment trust certificates are debt instruments secured 
by equipment or other physical assets, with the title of the 
equipment or other physical assets held in trust for the holders of 
the debt instruments.
    \19\ Sovereign bonds are debt instruments issued by national 
governments.
    \20\ Convertible bonds are debt instruments that can be 
converted into common stock of the issuing company. Convertible 
bonds may trade over-the-counter (``OTC'') or on an exchange.
    \21\ Pay-in-kind securities are debt instruments that pay 
investors in the form of additional securities rather than cash.
    \22\ Step coupon securities are debt instruments that pay 
interest at predetermined rates which increase or decrease over 
time.
    \23\ Stripped Securities are securities composed of the separate 
income of principal components of a debt security. For example, 
stripped mortgage securities are created when the interest and 
principal components of a mortgage security are separated and sold 
as individual securities.
    \24\ Under normal market circumstances, the Fund will generally 
seek to invest in corporate bond issuances that have at least 
$100,000,000 par amount outstanding in developed countries and at 
least $200,000,000 par amount outstanding in emerging market 
countries.
    \25\ In determining whether a security is of ``comparable 
quality'', the Sub-Advisers will consider, for example, whether the 
issuer of the security has issued other rated securities; whether 
the obligations under the security are guaranteed by another entity 
and the rating of such guarantor (if any); whether and (if 
applicable) how the security is collateralized; other forms of 
credit enhancement (if any); the security's maturity date; liquidity 
features (if any); relevant cash flow(s); valuation features; other 
structural analysis; macroeconomic analysis and sector or industry 
analysis.
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2. Equity Securities Including U.S. and Non-U.S. Issues
    Under normal market circumstances, at least 20% but no more than 
90% of the Fund's net assets will be invested in a diversified 
portfolio of equity securities issued by companies located in the U.S. 
and/or foreign countries, including emerging markets, which trade on a 
U.S. or foreign exchange. The Fund may carry out its investment in 
foreign securities by purchasing American Depositary Receipts 
(``ADRs''), European Depositary Receipts (``EDRs'') and Global 
Depositary Receipts (``GDRs'', together with EDRs and ADRs, 
``Depositary Receipts'').\26\ The equity securities will be common 
stocks and preferred stocks as well as master limited partnerships 
(``MLPs'') and real estate investment trusts (``REITs'').
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    \26\ ADRs are receipts issued by an American bank or trust 
company evidencing ownership of underlying securities issued by a 
foreign issuer, and are designed for use in U.S. Securities markets. 
EDRs are receipts issued by European banks evidencing ownership of 
underlying securities traded outside of the bank's home country. 
GDRs are receipts issued by foreign banks evidencing ownership of 
underlying securities traded outside of the bank's home country. 
Depositary Receipts may be issued by sponsored or unsponsored 
programs. In sponsored programs, an issuer has made arrangements to 
have its securities traded in the form of Depositary Receipts. In 
unsponsored programs, the issuer may not be directly involved in the 
creation of the program. Although regulatory requirements with 
respect to sponsored and unsponsored programs are generally similar, 
in some cases it may be easier to obtain financial information from 
an issuer that has participated in the creation of a sponsored 
program. Accordingly, there may be less information available 
regarding issuers of securities of underlying unsponsored programs, 
and there may not be a correlation between the availability of such 
information and the market value of the Depositary Receipts. The 
Fund may invest in sponsored or unsponsored ADRs; however, not more 
than 10% of the net assets of the Fund will be invested in non-
exchange-listed ADRs. Not more than 10% of the net assets of the 
Fund in the aggregate invested in exchange-traded equity securities 
shall consist of equity securities whose principal market is not a 
member of the Intermarket Surveillance Group (``ISG'') or party to a 
comprehensive surveillance sharing agreement (``CSSA'') with the 
Exchange. See note 47, infra.
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    The Fund may engage in short sales.\27\
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    \27\ The Fund may make short sales of securities: (i) To offset 
potential declines in long positions in similar securities, (ii) to 
increase the flexibility of the Fund; (iii) for investment return; 
and (iv) as part of a risk arbitrage strategy.
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Non-Principal Investments
    While the Fund, under normal market circumstances, will invest a 
majority of its assets in the securities and financial instruments 
described above, the Fund may invest in other securities and financial 
instruments, as described below. With regard to each non-principal 
investment category, the Fund may carry out its investment strategy by 
investing in the securities listed in each investment category below 
and/or through the purchase of shares issued by ETFs or other 
investment companies that invest a majority of their assets in the 
securities listed in the investment categories below.
    The Fund may invest in the following money market instruments: 
Commercial paper issued by U.S. and foreign corporations; bank 
obligations; certificates of deposit; time deposits and bankers' 
acceptances of U.S. commercial banks and overseas branches of U.S. 
commercial banks and foreign banks; and short-term corporate debt, all 
of which have, at the time of purchase, 397 days or less remaining to 
maturity issued by U.S. and foreign issuers.
    A portion of the Fund's assets may be invested in cross currency 
positions of the currencies of developed and emerging markets through 
spot foreign exchange currency contracts, forward foreign exchange 
currency contracts, and foreign exchange currency options that trade on 
U.S. exchanges.
    The Fund may invest in the following derivative instruments: 
Futures contracts (consisting of futures contracts based on equity or 
fixed income securities and/or equity or fixed income indices, 
commodities, interest rates and currencies); swap agreements on any of 
the following asset classes: Equity, fixed income, currency and 
interest rates (such swaps may be based on the price return or total 
return of the referenced asset); credit default swaps (consisting of 
credit default swaps in which the referenced asset is a single fixed 
income security or a group of fixed income securities); options 
(consisting of long and short positions in call options and put options 
on indices based on equities, fixed income securities, interest rates, 
currencies or commodities, individual securities or currencies, 
swaptions and options on futures contracts); and forward contracts 
(consisting of forward contracts based on equity or fixed income 
securities and/or equity or fixed income indices, currencies, interest 
rates, swap forwards and non-deliverable forwards).
    Futures contracts and options on futures contracts in which the 
Fund may invest will be traded on U.S. exchanges regulated by the 
Commodity Futures Trading Commission (``CFTC''),\28\ all of which will 
be members of the ISG or exchanges with which the Exchange has in place 
a CSSA. All other options contracts will be listed on a U.S. national 
securities exchange or a non-U.S. securities exchange that is a member 
of ISG or a party to a CSSA with the Exchange.
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    \28\ The Fund has claimed an exclusion from the definition of a 
``commodity pool operator'' under the Commodity Exchange Act 
(``CEA'') (7 U.S.C. 1) and is not subject to registration or 
regulation as a commodity pool operator under the CEA. The CFTC 
recently amended Rule 4.5 (``Exclusion for certain otherwise 
regulated persons from the definition of the term ``commodity pool 
operator''). Rule 4.5 provides that a mutual fund does not meet the 
definition of ``commodity pool operator'' if its use of futures 
contracts, options on futures contracts and swaps is sufficiently 
limited that the fund can fall within one of two exclusions set out 
in Rule 4.5. The Fund intends to limit its use of futures contracts, 
options on futures contracts and swaps to the degree necessary to 
fall within one of the two exclusions. If the Fund is unable to do 
so, it may incur expenses that are necessary to comply with the CEA 
and rules the CFTC has adopted under it.
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    The Fund may use repurchase agreements, reverse repurchase

[[Page 16480]]

agreements, and mortgage dollar rolls for temporary or emergency 
purposes or to earn additional income on portfolio securities, such as 
Treasury bills or notes. In a reverse repurchase agreement, the Fund 
sells a portfolio security to another party, such as a bank or broker-
dealer, in return for cash and agrees to repurchase the instrument at a 
particular price and time. While a reverse repurchase agreement is 
outstanding, the Fund will maintain cash or appropriate liquid assets 
to cover its obligation under the agreement. The Fund will enter into 
reverse repurchase agreements only with parties that the Sub-Advisers 
deems creditworthy.
    The Fund may invest in restricted securities (Rule 144A 
securities), which are subject to legal restrictions on their sale. 
Restricted securities generally can be sold in privately negotiated 
transactions, pursuant to an exemption from registration under the 
Securities Act, or in a registered public offering.
Other Restrictions
    The Fund will limit its investment in non-government sponsored 
residential mortgage-backed securities, commercial mortgage-backed 
securities and asset-backed securities (including equipment trust 
certificates) as well as bank loans and illiquid restricted securities, 
in the aggregate, to 20% or less of the Fund's net assets.
    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 the Fund's net assets are held 
in illiquid assets. 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.\29\
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    \29\ 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. 28193 (March 11, 2008), 73 FR 
14618 (March 18, 2008), footnote 34. 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 fund. 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).
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    The Fund will be classified as a ``diversified'' investment company 
under the 1940 Act.\30\
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    \30\ The diversification standard is set forth in section 
5(b)(1) of the 1940 Act.
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    The Fund intends to qualify for and to elect treatment as a 
separate regulated investment company (``RIC'') under subchapter M of 
the Internal Revenue Code.\31\ Furthermore, the Fund may not 
concentrate investments in a particular industry or group of 
industries, as concentration is defined under the 1940 Act, the rules 
or regulations thereunder or any exemption therefrom, as such statute, 
rules or regulations may be amended or interpreted from time to 
time.\32\
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    \31\ 26 U.S.C. 851 et seq.
    \32\ The Commission has defined concentration as investing more 
than 25% of an investment company's total assets in an industry or 
group of industries, with certain exceptions such as with respect to 
investments in obligations issued or guaranteed by the U.S. 
Government or its agencies and instrumentalities, or tax-exempt 
obligations of state or municipal governments and their political 
subdivisions. See, e.g., Investment Company Act Release No. 9011 
(October 30, 1975), 40 FR 54241 (November 21, 1975).
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    The Fund's investments will be consistent with its investment 
objective and will not be used to enhance leverage.
Net Asset Value
    According to the Registration Statement, the Fund's net asset value 
per Share (``NAV'') will be the value of a single Share. The NAV of 
Shares of the Fund will be computed by adding the value of the Fund's 
investments, cash, and other assets, subtracting its liabilities, and 
dividing the result by the number of Shares outstanding.
    According to the Registration Statement, the Fund's Board of 
Trustees has delegated day-to-day valuation oversight responsibilities 
to PMC. PMC has established a Valuation Committee (``Valuation 
Committee'') to fulfill these oversight responsibilities.
    Generally, the Fund will value its portfolio securities and assets 
as follows:
    In computing the Fund's NAV, the Fund's fixed income securities 
(including defaulted debt,\33\ and restricted securities) 
(collectively, ``OTC-Traded Securities'') will be valued based on price 
quotations obtained from a third-party pricing service or from a 
broker-dealer who makes markets in such securities. Any such third-
party pricing service may use a variety of methodologies to value some 
or all such securities to determine the market price. For example, the 
prices of securities with characteristics similar to those held by the 
Fund may be used to assist with the pricing process. In addition, the 
pricing service may use proprietary pricing models. The Fund's OTC-
Traded Securities will generally be valued at bid prices.
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    \33\ According to PMC, when a bond defaults and the issuer 
enters into bankruptcy, a market often continues to exist for the 
bond (normally at a steep discount to its face value). Buyers 
typically value the defaulted bond based on expected restructuring 
outcomes or liquidation distributions. Market quotations provided by 
broker-dealers or pricing services reflect these market indicators.
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    Debt securities with remaining maturities of sixty days or less for 
which market quotations and information furnished by a third party 
pricing service are not readily available will be valued at amortized 
cost, which approximates current value.
    Exchange traded equity securities, including ETFs, certain 
Depositary Receipts, exchange-traded REITs, exchange-traded preferred 
stock, and exchange-traded convertible bonds, will be valued at market 
value, which will generally be determined using the last reported 
official closing or last trading price on the exchange or market on 
which the security is primarily traded at the time of valuation or, if 
no sale has occurred, at the last quoted bid price on the primary 
market or exchange on which they are traded. Unsponsored ADRs will be 
valued at the last reported sale price from the OTC Bulletin Board or 
OTC Link LLC on the valuation date.
    Investment company securities (other than ETFs) will be valued at 
NAV.
    Exchange-traded futures contracts will be valued at the settlement 
or closing price determined by the applicable exchange.
    Exchange-traded option contracts, including options on futures, 
will be valued at their most recent sale price. If no such sales are 
reported, these contracts will be valued at their most recent bid 
price.
    Except as discussed below, non-exchange-traded derivatives, 
including swaps and swaptions, will normally be valued on the basis of 
quotes obtained from a third party broker-dealer who makes markets in 
such securities or on the basis of quotes obtained from an independent 
third-party pricing service. The Fund's OTC-traded derivative 
instruments will generally be valued at bid prices. Certain OTC-traded

[[Page 16481]]

derivative instruments, such as interest rate swaps and credit default 
swaps, will be valued at the mean price.
    Prices described above will be obtained from pricing services that 
have been approved by the Fund's Board of Trustees. A number of 
independent third party pricing services are available and the Fund may 
use more than one of these services. The Fund may also discontinue the 
use of any pricing service at any time. PMC will engage in oversight 
activities with respect to the Fund's pricing services, which includes, 
among other things, testing the prices provided by pricing services 
prior to calculation of the Fund's NAV, conducting periodic due 
diligence meetings, and periodically reviewing the methodologies and 
inputs used by these services.
    Foreign securities and instruments will be valued in their local 
currency following the methodologies described above. Typically, 
foreign securities, instruments and currencies will be translated to 
U.S. dollars, based on foreign currency exchange rate quotations 
supplied by a pricing service as of the close of the New York Stock 
Exchange (``NYSE''), which will use a proprietary model to determine 
the exchange rate.
    Forward foreign currency exchange contracts will be valued at an 
interpolated rate based on days to maturity between the closest 
preceding and subsequent settlement period. Such interpolated rates are 
derived from foreign currency exchange rate quotations reported by an 
independent third-party pricing service.
    Other portfolio securities and assets for which market quotations, 
official closing prices, or information furnished by a pricing service 
are not readily available or, in the opinion of the Valuation 
Committee, are deemed unreliable will be fair valued in good faith by 
the Valuation Committee in accordance with applicable fair value 
pricing policies. For example, if, in the opinion of the Valuation 
Committee, a security's value has been materially affected by events 
occurring before the Fund's pricing time but after the close of the 
exchange or market on which the security is principally traded, that 
security will be fair valued in good faith by the Valuation Committee 
in accordance with applicable fair value pricing policies.
    In fair valuing a security, the Valuation Committee may consider 
factors including price movements in futures contracts and ADRs, market 
and trading trends, the bid/ask quotes of brokers, and off-exchange 
institutional trading.
Creation and Redemption of Shares
    According to the Registration Statement, the Fund will issue and 
redeem Shares on a continuous basis at NAV per Share in aggregations of 
a specified number of Shares called ``Creation Units.'' Creation Units 
generally will be issued in exchange for portfolio securities and/or 
cash. Shares are not individually redeemable, but are redeemable only 
in Creation Unit aggregations, and in exchange for portfolio securities 
and/or cash. A Creation Unit of the Fund will consist of a block of 
50,000 Shares. The size of a Creation Unit is subject to change. 
Shareholders who are not ``Authorized Participants'' (as defined below) 
will not be able to purchase or redeem Shares directly with or from the 
Fund.
    All orders to purchase Creation Units must be placed with a 
Distributor by or through a party (the ``Authorized Participant'') that 
has entered into a participant agreement with the Distributor 
(``Participant Agreement'') with respect to the creation and redemption 
of Creation Units. An Authorized Participant is either: (a) A broker or 
dealer registered under the Act or other participant in the Continuous 
Net Settlement System of the National Securities Clearing Corporation 
(``NSCC''), a clearing agency registered with the Commission and 
affiliated with the Depository Trust Company (``DTC''); or (b) a 
participant in the DTC (such participant, a ``DTC Participant'').
    Shares of the Fund will be purchased and redeemed in Creation Units 
and generally on an ``in- kind'' basis. Except where the purchase or 
redemption will include cash under the limited circumstances specified 
below, purchasers will be required to purchase Creation Units by making 
an in-kind deposit of specified instruments (``Deposit Instruments''), 
and shareholders redeeming their Shares will receive an in-kind 
transfer of specified instruments (``Redemption Instruments''). On any 
given business day, the names and quantities of the instruments that 
constitute the Deposit Instruments and the names and quantities of the 
instruments that constitute the Redemption Instruments will be 
identical, and these instruments may be referred to, in the case of 
either a purchase or a redemption, as the ``Creation Basket''. In 
addition, the Creation Basket will correspond pro rata to the positions 
in the Fund's portfolio (including cash positions),\34\ except: (a) In 
the case of bonds, for minor differences when it is impossible to break 
up bonds beyond certain minimum sizes needed for transfer and 
settlement; (b) for minor differences when rounding is necessary to 
eliminate fractional shares or lots that are not tradeable round lots; 
\35\ or (c) To-Be-Announced (``TBA'') transactions,\36\ short positions 
and other positions that cannot be transferred in kind \37\ will be 
excluded from the Creation Basket.\38\ If there is a difference between 
the NAV attributable to a Creation Unit and the aggregate market value 
of the Creation Basket exchanged for the Creation Unit, the party 
conveying instruments with the lower value will pay to the other an 
amount in cash equal to that difference (the ``Balancing Amount'').
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    \34\ The portfolio used for this purpose will be the same 
portfolio used to calculate the Fund's NAV for that business day.
    \35\ A tradeable round lot for a security will be the standard 
unit of trading in that particular type of security in its primary 
market.
    \36\ A TBA Transaction is a method of trading mortgage-backed 
securities. In a TBA Transaction, the buyer and seller agree upon 
general trade parameters such as agency, settlement date, par amount 
and price. The actual pools delivered generally are determined two 
days prior to the settlement date.
    \37\ This includes instruments that can be transferred in kind 
only with the consent of the counterparty to the extent the Fund 
does not intend to seek such consents.
    \38\ Because these instruments will be excluded from the 
Creation Basket, their value will be reflected in the determination 
of the Balancing Amount (defined below).
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    Purchases and redemptions of Creation Units may be made in whole or 
in part on a cash basis, rather than in kind, solely under specified 
circumstances.\39\ The Adviser represents that, to the extent the Trust 
effects the creation and redemption of Shares in cash, such 
transactions will be effected in the same manner for all Authorized 
Participants.
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    \39\ In determining whether the Fund will sell or redeem 
Creation Units entirely on a cash or in-kind basis (whether for a 
given day or a given order), the key consideration will be the 
benefit that would accrue to the Fund and its investors. Purchases 
of Creation Units either on an all cash basis or in-kind are 
expected to be neutral to the Fund from a tax perspective. In 
contrast, cash redemptions typically require selling portfolio 
positions, which may result in adverse tax consequences for the 
remaining Fund shareholders that would not occur with an in-kind 
redemption. As a result, tax considerations may warrant in-kind 
redemptions.
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    An investor purchasing or redeeming a Creation Unit from the Fund 
may be charged a Transaction Fee to protect existing shareholders of 
the Fund from the dilutive costs associated with the purchase and 
redemption of Creation Units.\40\
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    \40\ Where the Fund permits an in-kind purchaser or redeemer to 
deposit or receive cash in lieu of one or more Deposit or Redemption 
Instruments, the purchaser or redeemer may be assessed a higher 
Transaction Fee to offset the transaction cost to the Fund of buying 
or selling those particular Deposit or Redemption Instruments.

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[[Page 16482]]

    The Fund will make available, prior to the opening of trading on 
the NYSE (currently 9:30 a.m. Eastern Time), through the NSCC the names 
and quantities of the instruments comprising the Creation Basket, as 
well as the estimated Balancing Amount (if any), for that day. The 
published Creation Basket will apply with respect to purchases or 
redemptions until a new Creation Basket is announced on the following 
business day, and there will be no intra-day changes to the Creation 
Basket, except to correct errors in the published Creation Basket.
Availability of Information
    The Funds' [sic] Web site (www.principalfunds.com), which will be 
publicly available prior to the public offering of Shares, will include 
a form of the prospectus for the Fund that may be downloaded. The 
Fund's Web site will include additional quantitative information 
updated on a daily basis, including, for the Fund, (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''),\41\ 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. On each business day, 
before commencement of trading in Shares in the Core Trading Session on 
the Exchange, the Adviser will disclose on the Fund's Web site the 
Disclosed Portfolio for the Fund as defined in NYSE Arca Equities Rule 
8.600(c)(2) that will form the basis for the Fund's calculation of NAV 
at the end of the business day.\42\
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    \41\ The Bid/Ask Price of the Fund's Shares will be determined 
using the mid-point of the highest bid and the lowest offer on the 
Exchange as of the time of calculation of the Fund's NAV. The 
records relating to Bid/Ask Prices will be retained by each Fund and 
its service providers.
    \42\ Under accounting procedures to be followed by the Fund, 
trades made on the prior business day (``T'') will be booked and 
reflected in NAV on the current business day (``T+1''). Accordingly, 
the Fund 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.
---------------------------------------------------------------------------

    The Fund's portfolio holdings will be disclosed on its Web site 
daily after the close of trading on the Exchange and prior to the 
opening of trading on the Exchange the following day.
    The Fund's disclosure of derivative positions in the Disclosed 
Portfolio will include information that market participants can use to 
value these positions intraday. On a daily basis, the Fund will 
disclose on the Fund's Web site the following information regarding 
each portfolio holding, as applicable to the type of holding: Ticker 
symbol, CUSIP number or other identifier, if any; a description of the 
holding (including the type of holding, such as the type of swap); the 
identity of the security, commodity, index or other asset or instrument 
underlying the holding, if any; for options, the option strike price; 
quantity held (as measured by, for example, par value, notional value 
or number of shares, contracts or units); maturity date, if any; coupon 
rate, if any; effective date, if any; market value of the holding; and 
the percentage weighting of the holding in the Fund's portfolio. The 
Web site information will be publicly available at no charge.
    Investors can also obtain the Trust's Statement of Additional 
Information (``SAI''), the Fund's Shareholder Reports, and its Form N-
CSR and Form N-SAR, filed twice a year. The Trust's SAI and Shareholder 
Reports are available free upon request from the Trust, and those 
documents and the Form N-CSR and Form N-SAR may be viewed on-screen or 
downloaded from the Commission's Web site at www.sec.gov.
    Quotation and last sale information for the portfolio holdings of 
the Fund that are U.S. exchange listed, including ETFs and U.S. 
exchange-traded ADRs and exchange-traded REITs, exchange-traded 
preferred stock, and exchange-traded convertible securities, and 
exchange-traded MLPs will be available via the Consolidated Tape 
Association (``CTA'') high speed line. Quotation and last sale 
information for such U.S. exchange-listed securities, as well as 
futures will be available from the exchange on which they are listed. 
Quotation and last sale information for exchange-listed options cleared 
via the Options Clearing Corporation will be available via the Options 
Price Reporting Authority.
    Quotation information for OTC-Traded Securities, OTC-traded 
derivative instruments (including swaps, swaptions, forwards and 
currency-related derivatives), investment company securities (excluding 
ETFs), Rule 144A securities, U.S. Treasuries, agency securities, asset-
backed securities, residential mortgage-backed securities, commercial 
mortgage-backed securities, zero-coupon securities, variable and 
floating rate instruments including inverse floaters, covered 
securities, sinking fund securities, equipment trust certificates, 
sovereign bonds, convertible bonds, pay-in-kind securities, step-coupon 
securities, stripped securities, inflation-indexed bonds, inflation 
protected debt securities, bank loans, municipal bonds, corporate 
bonds, and money market instruments may be obtained from brokers and 
dealers who make markets in such securities or through nationally 
recognized pricing services through subscription agreements. The U.S. 
dollar value of foreign securities, instruments and currencies can be 
derived by using foreign currency exchange rate quotations obtained 
from nationally recognized pricing services.
    In addition, the Portfolio Indicative Value (``PIV''), 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.\43\ The dissemination of the PIV, together 
with the Disclosed Portfolio, will allow investors to determine the 
approximate value of the underlying portfolio of the Fund on a daily 
basis and will provide a close estimate of that value throughout the 
trading day.
---------------------------------------------------------------------------

    \43\ Currently, it is the Exchange's understanding that several 
major market data vendors display and/or make widely available PIVs 
taken from the CTA or other data feeds.
---------------------------------------------------------------------------

Trading Halts
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares of the Fund.\44\ Trading in Shares of the Fund 
will be halted if the circuit breaker parameters in NYSE Arca Equities 
Rule 7.12 have been reached. Trading also may be halted because of 
market conditions or for reasons that, in the view of the Exchange, 
make trading in the Shares of the Fund inadvisable. These may include: 
(1) The extent to which trading is not occurring in the securities and/
or the financial instruments comprising the Disclosed Portfolio of the 
Fund; or (2) whether other unusual conditions or circumstances 
detrimental to the maintenance of a fair and orderly market are 
present. Trading in the Shares will be subject to NYSE Arca Equities 
Rule 8.600(d)(2)(D), which sets forth circumstances under which Shares 
of the Fund may be halted.
---------------------------------------------------------------------------

    \44\ See NYSE Arca Equities Rule 7.12.
---------------------------------------------------------------------------

Trading Rules
    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. Shares will trade on 
the NYSE Arca Marketplace from 4:00 a.m. to 8:00 p.m. Eastern Time in

[[Page 16483]]

accordance with NYSE Arca Equities Rule 7.34 (Opening, Core, and Late 
Trading Sessions). The Exchange has appropriate rules to facilitate 
transactions in the Shares during all trading sessions. As provided in 
NYSE Arca Equities Rule 7.6, Commentary .03, the minimum price 
variation (``MPV'') for quoting and entry of orders in equity 
securities traded on the NYSE Arca Marketplace is $0.01, with the 
exception of securities that are priced less than $1.00 for which the 
MPV for order entry is $0.0001.
    The Shares of the Fund will conform to the initial and continued 
listing criteria under NYSE Arca Equities Rule 8.600. The Exchange 
represents that, for initial and/or continued listing, the Fund will be 
in compliance with Rule 10A-3 \45\ under the Act, as provided by NYSE 
Arca Equities Rule 5.3. A minimum of 100,000 Shares of the Fund will be 
outstanding at the commencement of trading on the Exchange. The 
Exchange will obtain a representation from the issuer of the Shares of 
the Fund that the NAV and the Disclosed Portfolio will be made 
available to all market participants at the same time.
---------------------------------------------------------------------------

    \45\ 17 CFR 240 10A-3.
---------------------------------------------------------------------------

Surveillance
    The Exchange represents that trading in the Shares of the Fund 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.\46\ The Exchange represents that 
these procedures are adequate to properly monitor Exchange trading of 
the Shares in all trading sessions and to deter and detect violations 
of Exchange rules and federal securities laws applicable to trading on 
the Exchange.
---------------------------------------------------------------------------

    \46\ 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.
---------------------------------------------------------------------------

    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, ETFs, other exchange-traded equity 
securities (including exchange-listed Depositary Receipts), options, 
futures, and options on futures 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 such financial 
instruments, as applicable, from such markets and other entities. In 
addition, the Exchange may obtain information regarding trading in such 
financial instruments, as applicable, from markets and other entities 
that are members of ISG or with which the Exchange has in place a 
comprehensive surveillance sharing agreement.\47\ FINRA, on behalf of 
the Exchange, is able to access, as needed, trade information for 
certain fixed income securities held by the Fund reported to FINRA's 
Trade Reporting and Compliance Engine (``TRACE'').
---------------------------------------------------------------------------

    \47\ 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.
---------------------------------------------------------------------------

    Not more than 10% of the net assets of the Fund in the aggregate 
invested in exchange-traded equity securities shall consist of equity 
securities whose principal market is not a member of the ISG or party 
to a CSSA with the Exchange.
    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its 
Equity Trading Permit (``ETP'') Holders in an Information Bulletin 
(``Bulletin'') of the special characteristics and risks associated with 
trading the Shares of the Fund. Specifically, the Bulletin will discuss 
the following: (1) The procedures for purchases and redemptions of 
Shares in Creation Units (and that Shares are not individually 
redeemable); (2) NYSE Arca Equities Rule 9.2(a), which imposes a duty 
of due diligence on its ETP Holders to learn the essential facts 
relating to every customer prior to trading the Shares; (3) the risks 
involved in trading the Shares during the Opening and Late Trading 
Sessions when an updated PIV will not be calculated or publicly 
disseminated; (4) how information regarding the PIV and the Disclosed 
Portfolio is disseminated; (5) the requirement that ETP Holders deliver 
a prospectus to investors purchasing newly issued Shares prior to or 
concurrently with the confirmation of a transaction; and (6) trading 
information.
    In addition, the Bulletin will reference that the Fund is subject 
to various fees and expenses described in the Registration Statement. 
The Bulletin will discuss any exemptive, no-action, and interpretive 
relief granted by the Commission from any rules under the Act. The 
Bulletin will also disclose that the NAV for the Shares of the Fund 
will be calculated after 4:00 p.m. Eastern Time each trading day.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under section 6(b)(5) \48\ that an exchange have rules that 
are 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, in general, to protect investors and the public interest.
---------------------------------------------------------------------------

    \48\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares will be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria in NYSE Arca Equities Rule 
8.600. The Adviser and Sub-Advisers are not registered as broker-
dealers but are affiliated with three broker-dealers and have 
implemented and will maintain a fire wall with respect to each such 
broker-dealer affiliate regarding access to information concerning the 
composition and/or changes to the portfolios. The Exchange has in place 
surveillance procedures that are adequate to properly monitor trading 
in the Shares of the Fund in all trading sessions and to deter and 
detect violations of Exchange rules and federal securities laws 
applicable to trading on the Exchange. FINRA, on behalf of the 
Exchange, will communicate as needed regarding trading in the Shares, 
ETFs, other exchange-traded equity securities (including exchange-
listed Depositary Receipts), options, futures, and options on futures 
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 such financial instruments, as applicable, from 
such markets and other entities. In addition, the Exchange may obtain 
information regarding trading in such financial instruments, as 
applicable, from markets and other entities that are members of ISG or 
with which the Exchange has in place a comprehensive surveillance 
sharing agreement. FINRA, on behalf of the Exchange, is able to access, 
as needed,

[[Page 16484]]

trade information for certain fixed income securities held by the Fund 
reported to FINRA's TRACE. Not more than 10% of the net assets of the 
Fund in the aggregate invested in exchange-traded equity securities 
shall consist of equity securities whose principal market is not a 
member of the ISG or party to a CSSA with the Exchange. While the Fund 
may invest in inverse ETFs, the Fund will not invest in leveraged 
(e.g., 2X, -2X, 3X or -3X) ETFs. The Fund's investments will be 
consistent with its investment objective and will not be used to 
enhance leverage. The Fund will limit its investment in non-government 
sponsored residential mortgage-backed securities, commercial mortgage-
backed securities and asset-backed securities, in the aggregate, to 20% 
or less of the Fund's net assets. The PIV, 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. 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 Shares of the Fund will conform to the initial and continued 
listing criteria under NYSE Arca Equities Rule 8.600. The Exchange 
represents that, for initial and/or continued listing, the Fund will be 
in compliance with Rule 10A-3 under the Act, as provided by NYSE Arca 
Equities Rule 5.3. A minimum of 100,000 Shares of the Fund will be 
outstanding at the commencement of trading on the Exchange. The 
Exchange will obtain a representation from the issuer of the Shares of 
the Fund that the NAV per Share will be calculated daily and that the 
NAV and the Disclosed Portfolio will be made available to all market 
participants at the same time. In addition, a large amount of 
information is publicly available regarding the Fund and the respective 
Shares, thereby promoting market transparency. The Fund's portfolio 
holdings will be disclosed on its Web site daily after the close of 
trading on the Exchange and prior to the opening of trading on the 
Exchange the following day. On a daily basis, the Fund will disclose on 
its Web site the following information regarding each portfolio 
holding, as applicable to the type of holding: Ticker symbol, CUSIP 
number or other identifier, if any; a description of the holding 
(including the type of holding); the identity of the security, 
commodity, index or other asset or instrument underlying the holding, 
if any; quantity held (as measured by, for example, par value, notional 
value or number of shares, contracts or units); maturity date, if any; 
coupon rate, if any; effective date, if any; market value of the 
holding; and the percentage weighting of the holding in the Fund's 
portfolio. The Web site information will be publicly available at no 
charge.
    Investors can also obtain the Trust's Statement of Additional 
Information (``SAI''), the Fund's Shareholder Reports, and its Form N-
CSR and Form N-SAR, filed twice a year. The Trust's SAI and Shareholder 
Reports are available free upon request from the Trust, and those 
documents and the Form N-CSR and Form N-SAR may be viewed on-screen or 
downloaded from the Commission's Web site at www.sec.gov. Quotation and 
last sale information for the portfolio holdings of the Fund that are 
U.S. exchange listed, including ETFs and U.S. exchange-traded ADRs and 
exchange-traded REITs, exchange-traded preferred stock, exchange-traded 
convertible securities, and exchange-traded MLPs will be available via 
the CTA high speed line. Quotation and last sale information for such 
U.S. exchange-listed securities, as well as futures will be available 
from the exchange on which they are listed. Quotation and last sale 
information for exchange-listed options cleared via the Options 
Clearing Corporation will be available via the Options Price Reporting 
Authority.
    The Web site for the Fund will include a form of the prospectus for 
the Fund and additional data relating to NAV and other applicable 
quantitative information. Moreover, prior to the commencement of 
trading, the Exchange will inform its ETP Holders in an Information 
Bulletin of the special characteristics and risks associated with 
trading the Shares of the Funds [sic]. Trading in Shares of the Fund 
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 8.600(d)(2)(D), which sets forth circumstances under 
which Shares of the Fund may be halted. In addition, as noted above, 
investors will have ready access to information regarding the Fund's 
holdings, the PIV, the Disclosed Portfolio, and quotation and last sale 
information for the Shares. The Fund's investments will be consistent 
with the Fund's investment objective and will not be used to enhance 
leverage.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
an additional type of actively-managed exchange-traded product that 
will enhance competition among market participants, to the benefit of 
investors and the marketplace. As noted above, the Exchange has in 
place surveillance procedures relating to trading in the Shares of the 
Fund and may obtain information via ISG from other exchanges that are 
members of ISG or with which the Exchange has entered into a 
comprehensive surveillance sharing agreement. In addition, as noted 
above, investors will have ready access to information regarding each 
Fund's holdings, the PIV, the Disclosed Portfolio for the Fund, and 
quotation and last sale information for the Shares of the Fund.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purpose of the Act. The Exchange notes that the 
proposed rule change will facilitate the listing and trading of an 
additional type of actively-managed exchange-traded product that holds 
fixed income and equity securities and that will enhance competition 
among market participants, to the benefit of investors and the 
marketplace.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) by order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

[[Page 16485]]

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change 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 Number SR-NYSEArca-2015-15 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEArca-2015-15. 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 such filing will also 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-2015-15 and should 
be submitted on or before April 17, 2015.
---------------------------------------------------------------------------

    \49\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\49\
Brent J. Fields,
Secretary.
[FR Doc. 2015-06991 Filed 3-26-15; 8:45 am]
 BILLING CODE 8011-01-P


