
[Federal Register Volume 80, Number 244 (Monday, December 21, 2015)]
[Notices]
[Pages 79392-79394]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-31932]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76645; File No. SR-NYSEArca-2015-74]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a 
Proposed Rule Change Regarding a Change to the Underlying Index of the 
Market Vectors Short High Yield Municipal Index ETF

December 15, 2015.

I. Introduction

    On August 26, 2015, NYSE Arca, Inc. (``Exchange'') filed with the 
Securities and Exchange Commission (``Commission''), pursuant to 
section 19(b)(1) of the Securities Exchange Act of 1934 (``Exchange 
Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to 
reflect a change to the reference index relating to the Market Vectors 
Short High Yield Municipal Index ETF (``Fund''). The Commission 
published notice of the proposed rule change in the Federal Register on 
September 16, 2015.\3\ On October 16, 2015, the Commission designated a 
longer period within which to approve the proposed rule change, 
disapprove the proposed rule change, or institute proceedings to 
determine whether to disapprove the proposed rule change.\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\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 75888 (September 10, 
2015), 80 FR 55701 (``Notice'').
    \4\ See Securities Exchange Act Release No. 76174, 80 FR 64027 
(October 22, 2015). The Commission determined that it was 
appropriate to designate a longer period within which to take action 
on the proposed rule change so that it has sufficient time to 
consider the proposed rule change. Accordingly, the Commission 
designated December 15, 2015 as the date by which it should approve, 
disapprove, or institute proceedings to determine whether to 
disapprove the proposed rule change.
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II. The Exchange's Description of the Proposal

    The Commission approved listing and trading on the Exchange of 
shares (``Shares'') of the Fund under NYSE Arca Equities Rule 
5.2(j)(3), which governs the listing and trading of Investment Company 
Units (``Units'').\5\ Currently, the Shares are listed and traded on 
the Exchange. The Exchange submitted this proposed rule change because 
the underlying index will be changed and the index as modified would 
continue not to meet the ``generic'' listing requirement of Commentary 
.02(a)(2) to NYSE Arca Equities Rule 5.2(j)(3) in that, as of June 30, 
2015, only 30.10% of the weight of the Revised Index components had a 
minimum original principal amount outstanding of $100 million or 
more.\6\
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    \5\ See Securities Exchange Act Release No. 71232 (January 3, 
2014), 79 FR 1662 (January 9, 2014 (SR-NYSEArca-2013-118) (order 
approving listing and trading of shares of the Market Vectors Short 
High Yield Municipal Index ETF) (``Order''). See also Securities 
Exchange Act Release No. 70871 (November 14, 2013), 78 FR 69503 
(November 19, 2013) (SR-NYSEArca-2013-118) (notice of proposed rule 
change relating to listing and trading of shares of the Market 
Vectors Short High Yield Municipal Index ETF and, together with the 
Order, the ``Release''). The Exchange submitted that proposed rule 
change to permit listing and trading of the Shares because the index 
underlying the Fund did not meet all of the ``generic'' listing 
requirements of Commentary .02(a) to NYSE Arca Equities Rule 
5.2(j)(3) that are applicable to the listing of Units based on fixed 
income securities indexes. More specifically, the Index met all of 
the criteria except for those set forth in Commentary .02(a)(2), 
which requires that components that in the aggregate account for at 
least 75% of the weight of the index or portfolio each shall have a 
minimum original principal amount outstanding of $100 million or 
more.
    \6\ The Exchange states that the other generic listing criteria 
are satisfied. See Notice, supra note 3, 80 FR at 55703.
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    The investment objective of the Fund is to seek to replicate as 
closely as possible, before fees and expenses, the price and yield 
performance of the Barclays Municipal High Yield Short Duration Index 
(``Short High Yield Index'' or ``Index''). The Fund is a series of the 
Market Vectors ETF Trust. Van Eck Associates Corporation is the 
investment adviser and the

[[Page 79393]]

administrator for the Fund. Van Eck Securities Corporation is the 
Fund's distributor. The Bank of New York Mellon is the custodian of the 
Fund's assets and provides transfer agency and fund accounting services 
to the Fund.

A. The Current Index

    The Index is a market-size-weighted index composed of publicly 
traded municipal bonds that cover the U.S. dollar-denominated high-
yield short-term tax-exempt bond market. A majority of the Index's 
constituents are from the revenue sector, with some constituents being 
from the general obligation sector. The revenue sector is divided into 
industry sectors that consist of, but may not be limited to, electric, 
health care, transportation, education, water and sewer, resource 
recovery, leasing, and special tax. The Index is calculated using a 
market-value weighting methodology, provided that the allocation to 
issuers from the territories of the United States, including: Puerto 
Rico, Guam, the U.S. Virgin Islands, American Samoa and the Northern 
Mariana Islands, each individually does not exceed 8%.

B. The Revised Index

    The Index Provider plans to revise the Index methodology as 
follows. The revised Short High Yield Index (``Revised Index'') will 
have a targeted 40% weight in the Muni High Yield/$100 Million Deal 
Size Index (reduced from a 50% weight). In addition, the Revised Index 
will have a 10% weight in the Muni A-Rated Index, which comprises 
investment grade components, as described below. The Revised Index will 
continue to have a 25% weight in the Muni High Yield/Under $100 Million 
Deal Size Index and a 25% weight in the Muni Baa-Rated/$100 Million 
Deal Size Index, as described in the Release.
    The Revised Index will comprise four total-return, market-size-
weighted benchmark indexes with target weights as follows:
     40% weight in Muni High Yield/$100 Million Deal Size 
Index. To be included in the Muni High Yield/$100 Million Deal Size 
Index, bonds must be unrated or rated Ba1/BB+ or lower by at least two 
of the following rating agencies, if all three rate the bond: Moody's 
Investors Service, Inc. (``Moody's''), Standard & Poor's, Inc. 
(``S&P''), and Fitch, Inc. (``Fitch''). If only two of the three 
agencies rate the security, the lower rating is used to determine index 
eligibility. If only one of the three agencies rates a security, the 
rating must be Ba1/BB+ or lower. Bonds in the Muni High Yield/$100 
Million Deal Size Index must have an outstanding par value of at least 
$3 million and be issued as part of a transaction of at least $100 
million.\7\
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    \7\ As described in the Release, currently 50% of the Index 
weight is in the Muni High Yield/$100 Million Deal Size Index.
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     25% weight in Muni High Yield/Under $100 Million Deal Size 
Index. To be included in the Muni High Yield/Under $100 Million Deal 
Size Index, bonds must be unrated or rated Ba1/BB+ or lower by at least 
two of the following rating agencies, if all three rate the bond: 
Moody's, S&P, and Fitch. If only two of the three agencies rate the 
security, the lower rating is used to determine index eligibility. If 
only one of the three agencies rates a security, the rating must be 
Ba1/BB+ or lower. Bonds in the Muni High Yield/Under $100 Million Deal 
Size Index must have an outstanding par value of at least $3 million 
and be issued as part of a transaction of under $100 million but over 
$20 million.\8\
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    \8\ The 25% weighting in the Muni High Yield/Under $100 Million 
Deal Size Index is identical to the weighting set forth in the 
Release.
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     25% weight in Muni Baa-Rated/$100 Million Deal Size Index. 
To be included in the Muni Baa-Rated/$100 Million Deal Size Index, 
bonds must have a Barclays credit-quality classification between Baa1/
BBB+ and Baa3/BBB-. Barclays credit-quality classification is based on 
the three rating agencies, Moody's, S&P, and Fitch. If two of the three 
agencies rate the bond equivalently, then that rating is used. If all 
three rate the bond differently, the middle rating is used. If only two 
of the three agencies rate the security, the lower rating is used to 
determine index eligibility. If only one of the three agencies rates a 
security, the rating must be Baa1/BBB+, Baa2/BBB, or Baa3/BBB-. The 
bonds must have an outstanding par value of at least $7 million and be 
issued as part of a transaction of at least $100 million.\9\
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    \9\ The 25% weighting in the Muni Baa-Rated/$100 Million Deal 
Size Index is identical to the weighting set forth in the Release.
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     10% weight in Muni A-Rated Index. To be included in the 
Muni A-Rated Index, bonds must have a Barclays credit-quality 
classification between A1/A+ and A3/A-. The Barclays credit-quality 
classification is based on the three rating agencies, Moody's, S&P, and 
Fitch. If two of the three agencies rate the bond equivalently, then 
that rating is used. If all three rate the bond differently, the middle 
rating is used. If only two of the three agencies rate the security, 
the lower rating is used to determine index eligibility. If only one of 
the three agencies rates a security, the rating must be A1/A+, A2/A, or 
A3/A-. The bonds must have an outstanding par value of at least $7 
million and be issued as part of a transaction of at least $75 million. 
Remarketed issues will not be allowed in the benchmark. All bonds must 
have a fixed rate, a dated-date (i.e., the date when interest begins to 
accrue) after December 31, 1990, and a nominal maturity of 1 to 12 
years. Taxable municipal bonds, bonds with floating rates, and 
derivatives will be excluded from the Revised Index.
    The composition of the Revised Index will be rebalanced monthly. 
Interest and principal payments earned by the component securities will 
be held in the Revised Index without a reinvestment return until month 
end, when they are removed from the Revised Index.
    Total returns will be calculated based on the sum of price changes, 
gain/loss on repayments of principal, and coupons received or accrued, 
expressed as a percentage of beginning market value. The Revised Index 
will be calculated and made available once a day.
    As of June 30, 2015, 69.73% of the weight of the Revised Index 
components was composed of individual maturities that were part of an 
entire municipal bond offering with a minimum original principal amount 
outstanding of $100 million or more for all maturities of the offering. 
In addition, the total dollar amount outstanding of issues in the 
Revised Index was approximately $224.6 billion, and the average dollar 
amount outstanding of issues in the Index was approximately $23.7 
million. Further, the most heavily weighted component represents 2.44% 
of the weight of the Revised Index, and the five most heavily weighted 
components represent 9.47% of the weight of the Revised Index.\10\
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    \10\ Commentary .02(a)(4) to NYSE Arca Equities Rule 5.2(j)(3) 
provides that no component fixed-income security (excluding Treasury 
Securities and GSE Securities, as defined therein) shall represent 
more than 30% of the weight of the index or portfolio, and the five 
most heavily weighted component fixed-income securities in the index 
or portfolio shall not in the aggregate account for more than 65% of 
the weight of the index or portfolio.
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    The Exchange believes that the Revised Index is sufficiently broad-
based to deter potential manipulation, notwithstanding that the Revised 
Index does not satisfy the criterion in NYSE Arca Equities Rule 
5.2(j)(3), Commentary .02 (a)(2), because it is composed of 
approximately 9,481 issues and 900 unique issuers. The Exchange also 
believes that the Revised Index securities are sufficiently liquid to 
deter potential manipulation in that a substantial portion (69.73%) of 
the

[[Page 79394]]

Revised Index weight is composed of maturities that are part of a 
minimum original principal amount outstanding of $100 million or more, 
and in view of the substantial total dollar amount outstanding and the 
average dollar amount outstanding of Revised Index issues, as 
referenced above. In addition, the Exchange notes that the average 
daily notional trading volume for Revised Index components for the 
period from June 30, 2014 to June 30, 2015 was approximately $323.6 
million, and the sum of the notional trading volumes for the same 
period was $82.2 billion.
    The Revised Index value, calculated and disseminated at least once 
daily, as well as the components of the Revised Index and their 
percentage weighting, will be available from major market data vendors. 
In addition, the portfolio of securities held by the Fund will be 
disclosed daily on the Fund's Web site at www.marketvectorsetfs.com.
    The Exchange represents that: (1) Except for Commentary .02(a)(2) 
to NYSE Arca Equities Rule 5.2(j)(3), the Shares 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; and (3) the Trust is required to comply with Rule 10A-3 under 
the Act \11\ for the initial and continued listing of the Shares. In 
addition, the Exchange represents that the Shares will comply with all 
other requirements applicable to Units including, but not limited to, 
requirements relating to the dissemination of key information such as 
the value of the Revised Index and the applicable Intraday Indicative 
Value (``IIV''); \12\ rules governing the trading of equity securities, 
trading hours, trading halts, surveillance, and the Information 
Bulletin to Equity Trading Permit Holders (``ETP Holders''), as set 
forth in Exchange rules applicable to Units; and prior Commission 
orders approving the generic listing rules applicable to the listing 
and trading of Units.\13\
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    \11\ 17 CFR 240.10A-3.
    \12\ The IIV will be widely disseminated by one or more major 
market data vendors at least every 15 seconds during the Exchange's 
Core Trading Session of 9:30 a.m. to 4:00 p.m., Eastern time. 
Currently, it is the Exchange's understanding that several major 
market data vendors display or make widely available IIVs taken from 
the Consolidated Tape Association or other data feeds.
    \13\ See, e.g., Securities Exchange Act Release Nos. 55783 (May 
17, 2007), 72 FR 29194 (May 24, 2007) (SR-NYSEArca-2007-36) (order 
approving NYSE Arca generic listing standards for Units based on a 
fixed income index); 44551 (July 12, 2001), 66 FR 37716 (July 19, 
2001) (SR-PCX-2001-14) (order approving generic listing standards 
for Units and Portfolio Depositary Receipts); 41983 (October 6, 
1999), 64 FR 56008 (October 15, 1999) (SR-PCX-98-29) (order 
approving rules for listing and trading of Units).
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    The value of the Revised Index will be widely disseminated by one 
or more major market data vendors at least once per day, as required by 
NYSE Arca Equities Rule 5.2(j)(3), Commentary .02(b)(ii). The IIV for 
the Shares will be disseminated by one or more major market data 
vendors, 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).

III. Discussion and Commission Findings

    After careful review, the Commission finds that the Exchange's 
proposal to permit the Fund to track the Revised Index is consistent 
with the Exchange Act and the rules and regulations thereunder 
applicable to a national securities exchange.\14\ In particular, the 
Commission finds that the proposed rule change is consistent with 
section 6(b)(5) of the Exchange Act,\15\ which requires, among other 
things, that the Exchange's rules be designed 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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    \14\ 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).
    \15\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that the Revised Index is unlikely to be 
more susceptible to manipulation than the existing Index. The weight of 
the Revised Index components with a minimum original principal amount 
outstanding of $100 million or more was 30.10% as of June 30, 2015,\16\ 
which is heavier than the weight of such components in the Index as of 
November 27, 2012.\17\ Additionally, the number of components and the 
number of unique issuers is greater for the Revised Index than for the 
Index.\18\ Further, the average daily notional trading volume was much 
greater for Revised Index components than for Index components.\19\
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    \16\ See Notice, supra note 3, 80 FR at 55703.
    \17\ See Order, supra note 4, 79 FR at 1663-4 (``only 15.66% of 
the weight of the Index components, as of November 27, 2012, had a 
minimum original principal amount outstanding of $100 million or 
more'').
    \18\ As of June 30, 2015, the Revised Index was composed of 
9,481 issues and 900 unique issuers. See Notice, supra note 3, 80 FR 
at 55704. As of November 27, 2012, the Index was composed of 1,935 
issues and 530 unique issuers. See Order, supra note 4, 79 FR at 
1664.
    \19\ Between June 30, 2014, and June 30, 2015, the average daily 
notional trading volume for Revised Index components was 
approximately $323.6 million. See Notice, supra note 3, 80 FR at 
55704. The average daily notional trading volume for Index 
components between October 31, 2011, and October 31, 2012 was 
$2,839,895. See Securities Exchange Act Release No. 71232, supra 
note 4, 78 FR at 69505.
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    The Commission notes that the Exchange represents that: (1) The 
Shares and the Revised Index satisfy all of the requirements for 
generic listing standards under NYSE Arca Equities Rule 5.2(j)(3) 
except for Commentary .02(a)(2) to NYSE Arca Equities Rule 5.2(j)(3); 
and (2) except as noted, all other representations made in support of 
the Release remain unchanged.
    For the foregoing reasons, the Commission finds that the proposed 
rule change is consistent with section 6(b)(5) of the Exchange Act \20\ 
and the rules and regulations thereunder applicable to a national 
securities exchange.
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    \20\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Exchange Act,\21\ that the proposed rule change (SR-NYSEArca-2015-74), 
be, and it hereby is, approved.
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    \21\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
Robert W. Errett,
Deputy Secretary.
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    \22\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2015-31932 Filed 12-18-15; 8:45 am]
BILLING CODE 8011-01-P


