
[Federal Register Volume 82, Number 10 (Tuesday, January 17, 2017)]
[Notices]
[Pages 4950-4953]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-00780]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-79767; File No. SR-NYSEArca-2016-62]


Self-Regulatory Organizations; NYSEArca, Inc.; Order Granting 
Approval of Proposed Rule Change, as Modified by Amendment No. 1 
Thereto, Relating to a Change to the Underlying Index for the 
PowerShares Build America Bond Portfolio

January 10, 2017.

I. Introduction

    On May 3, 2016, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule change to: 
(1) Propose changes to the index underlying the PowerShares Build 
America Bond Portfolio (``Fund'') and the name of the Fund and (2) 
permit the continued listing and trading of the shares (``Shares'') of 
the Fund as a result of the changes to the index underlying the Fund. 
The proposed rule change was published for comment in the Federal 
Register on May 23, 2016.\3\
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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. 77849 (May 17, 
2016), 81 FR 32371 (``Notice'').
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    On June 27, 2016, pursuant to Section 19(b)(2) of the Act,\4\ the 
Commission designated a longer period within which to either approve 
the proposed rule change, disapprove the proposed rule change, or 
institute proceedings to determine whether to disapprove the proposed 
rule change.\5\ On August 12, 2016, the Commission instituted 
proceedings to determine whether to approve or disapprove the proposed 
rule change.\6\ On October 27, 2016, the Commission issued a notice of 
designation of a longer period for Commission action on proceedings to 
determine whether to approve or disapprove the proposed rule change.\7\ 
On January 4, 2017, the Exchange filed Amendment No. 1 to the proposed 
rule change.\8\ The Commission has received no comments on the proposed 
rule change. This order grants approval of the proposed rule change, as 
modified by Amendment No. 1 thereto.
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    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 78157, 81 FR 43327 
(July 1, 2016).
    \6\ See Securities Exchange Act Release No. 78564, 81 FR 55247 
(Aug. 18, 2016).
    \7\ See Securities Exchange Act Release No. 79173, 81 FR 76400 
(Nov. 2, 2016). The Commission designated January 18, 2017 as the 
date by which it should approve or disapprove the proposed rule 
change.
    \8\ In Amendment No. 1 to the proposed rule change, the 
Exchange: (a) Clarified that (i) in no event will the New Index (as 
defined herein) be composed of fewer than 500 issues, and (ii) FINRA 
(as defined herein) is able to access data obtained from the 
Municipal Securities Rulemaking Board relating to municipal bond 
trading activity for surveillance purposes in connection with 
trading in the Shares; (b) stated that that Adviser (as defined 
herein) represents that within a single municipal bond issuer, 
separate issues by the same issuer are likely to trade similarly to 
one another, and that individual CUSIPs within the New Index that 
share characteristics with other CUSIPs have a high yield to 
maturity correlation, and frequently have a correlation of one or 
close to one; and (c) made other technical edits and non-substantive 
corrections. Because Amendment No. 1 does not materially alter the 
substance of the proposed rule change or raise unique or novel 
regulatory issues, Amendment No. 1 is not subject to notice and 
comment. Amendment No. 1, which amended and replaced the original 
filing in its entirety, is available on the Commission's Web site 
at: https://www.sec.gov/comments/sr-nysearca-2016-62/nysearca201662-1460311-130254.pdf.
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II. Exchange's Description of the Proposal

    The Exchange currently lists and trades Shares of the Fund \9\ 
under NYSE Arca Equities Rule 5.2(j)(3), Commentary .02, which governs 
the listing and trading of Investment Company Units (``Units'') based 
on fixed income securities indexes.\10\ The Fund is a series of the 
Trust. Invesco PowerShares Capital Management LLC is the investment 
adviser (``Adviser'') for the Fund. Invesco Distributors, Inc. is the 
Fund's distributor. The Bank of New York Mellon is the administrator, 
custodian, and fund accounting and transfer agent for the Fund.
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    \9\ The Exchange states that, on February 26, 2016, PowerShares 
Exchange-Traded Fund Trust II (``Trust'') filed a post-effective 
amendment on Form 485 under the Securities Act of 1933 (``Securities 
Act'') to its registration statement on Form N-1A under the 
Securities Act and the Investment Company Act of 1940 (``1940 Act'') 
(File Nos. 333-138490 and 811-21977) (``Registration Statement''). 
The Exchange states that the Trust has obtained certain exemptive 
relief under the 1940 Act (File No. 812-13335) (``Exemptive 
Order'').
    \10\ The Exchange states that the PowerShares Build America Bond 
Portfolio was initially listed on November 17, 2009 pursuant to the 
generic listing criteria of Commentary .02 to NYSE Arca Equities 
Rule 5.2(j)(3).
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    The Fund currently seeks investment results that generally 
correspond to the price and yield (before fees and expenses) of The 
Bank of America (``BofA'') Merrill Lynch Build America Bond Index 
(``Build America Bond Index''). The Fund generally invests at least 80% 
of its total assets in taxable municipal securities eligible to 
participate in the Build America Bond program created under the 
American Recovery and Reinvestment Act of 2009 or other legislation 
providing for the issuance of taxable municipal securities on which the 
issuer receives federal support of the interest paid (``Build America 
Bonds'') and that comprise the Build America Bond Index. The Build 
America Bond Index is designed to track the performance of U.S. dollar-
denominated investment grade taxable municipal debt publicly issued 
under the Build America Bond program by U.S. states and territories, 
and their political subdivisions, in the U.S. market. Qualifying 
securities must have a minimum amount outstanding of $1 million, at 
least 18 months remaining term to final maturity at the time of 
issuance, at least one year remaining term to final maturity, a fixed 
coupon schedule, and an investment grade rating (based on an average of 
Moody's Investors Services, Inc. (``Moody's''), Standard & Poor's, a 
division of The McGraw-Hill Company, Inc. (``S&P''), and Fitch Ratings, 
Inc. (``Fitch'')).
    The Trust has proposed to change the index underlying the Fund to 
the BofA Merrill Lynch US Taxable Municipal Securities Plus Index 
(``New Index'') and to change the name of the Fund to PowerShares 
Taxable Municipal Bond Portfolio. The Exchange represents that the New 
Index does not meet the generic listing criteria of NYSE Arca Equities 
Rule 5.2(j)(3). The Exchange submitted this proposed rule change to 
permit the continued listing of the Fund. The New Index meets all of 
the requirements of the generic listing criteria of NYSE Arca Equities 
Rule 5.2(j)(3), except for that set forth in Commentary .02(a)(2).\11\ 
Specifically, as of February 4, 2016, approximately 60.51% of the New 
Index weight was composed of individual maturities of $100 million or 
more (determined at the time of issuance).
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    \11\ Commentary .02(a)(2) to NYSE Arca Equities Rule 5.2(j)(3) 
provides 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.
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A. Changes to the Index Underlying the Fund

    According to the Exchange, the Fund currently has a non-fundamental 
policy to invest at least 80% of its net assets (plus the amount of any 
borrowings for investment purposes) in Build America

[[Page 4951]]

Bonds. Moreover, as stated in the Registration Statement, the Fund 
complies with that non-fundamental policy because it also is required 
generally to invest at least 80% of the value of its total assets in 
the Build America Bonds that comprise the Build America Bond Index, in 
accordance with the terms of the relief set forth in the Trust's 
Exemptive Order.
    However, in response to a changing market environment that includes 
a reduction in the number of Build America Bonds, the Adviser has 
proposed that the Fund's underlying index be changed from one that is 
focused on Build America Bonds to one that is more broadly focused on 
taxable municipal debt in general, and which may include Build America 
Bonds. Changing the Fund's underlying index would require changing the 
non-fundamental policy set forth above. Accordingly, before the Fund 
can change its underlying index, the Registration Statement states that 
the Fund's board of trustees (``Board'') must approve the underlying 
index change, and the Fund must provide shareholders with sixty days 
written notice of the change.
    Thus, after this proposed rule change is approved, the Trust 
represents that it intends to seek to obtain Board approval and provide 
the requisite shareholder notice. Subject to that Board approval and 
shareholder notice, the Fund intends to change its underlying index to 
one that is composed of taxable municipal securities, including both 
Build America Bonds and non-Build America Bonds. Following such change, 
the proposed underlying index for the Fund will be the New Index.
    According to the Exchange, the change in the Fund's underlying 
index is designed to enable the Fund to expand its range of investments 
in light of a diminishing supply of Build America Bonds; otherwise, 
there is no other change to the Fund's investment strategies or 
objective. After such change, the Fund's investment objective will be 
to seek investment results that generally correspond (before fees and 
expenses) to the price and yield of the New Index. The Fund's new non-
fundamental investment policy will be to invest at least 80% of its net 
assets (plus borrowings for investment purposes) in taxable municipal 
securities. In addition, the Fund generally will invest at least 80% of 
its total assets in the securities that will compose the New Index, in 
accordance with the terms of the Trust's Exemptive Order. However, the 
Fund may invest up to 20% of its total assets in securities not 
included in the New Index, money market instruments, including 
repurchase agreements or other funds that invest exclusively in money 
market instruments (subject to applicable limitations under the 1940 
Act or exemptions therefrom), convertible securities and structured 
notes (notes on which the amount of principal repayment and interest 
payments is based on the movement of one or more specified factors, 
such as the movement of a particular security or securities index), all 
to the extent that the Adviser believes investment in such instruments 
will facilitate the Fund's ability to achieve its new investment 
objective. In addition, the Fund intends to change its name to 
``PowerShares Taxable Municipal Bond Portfolio.'' \12\
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    \12\ The Exchange represents that the changes described herein 
with respect to use of the New Index will be effective upon: (1) 
Approval by the Trust's Board; (2) shareholders' receipt of sixty 
days written notice of the proposed change; and (3) completing a 
filing with the Commission of another amendment to the Trust's 
Registration Statement, or a prospectus supplement reflecting these 
changes. According to the Exchange, the Adviser has managed and will 
continue to manage the Fund 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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B. Description of the New Index \13\
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    \13\ The Exchange states that the description of the New Index 
is based on information provided by BofA Merrill Lynch, which is the 
``Index Provider'' with respect to the Underlying Index and the New 
Index. 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 New Index.
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    The New Index tracks the performance of U.S. dollar denominated 
taxable municipal debt publicly issued by U.S. states and territories, 
and their political subdivisions, in the U.S. domestic market. 
Qualifying securities must be subject to U.S. federal taxes and must 
have at least 18 months to maturity at point of issuance, at least one 
year remaining term to final maturity, a fixed coupon schedule 
(including zero coupon bonds), and an investment grade rating (based on 
an average of Moody's, S&P, and Fitch). The call date on which a pre-
refunded bond will be redeemed is used for purposes of determining 
qualification with respect to final maturity requirements. For Build 
America Bonds to qualify for inclusion, the securities must have a 
minimum amount outstanding of $1 million and be only ``direct pay'' 
(i.e., a direct federal subsidy is paid to the issuer); ``tax-credit'' 
(i.e., where the investor receives a tax credit on the interest 
payments) Build America Bonds are excluded. For all other securities, 
minimum size requirements vary based on the initial term to final 
maturity at time of issuance. Securities with an initial term to final 
maturity greater than or equal to one year and less than five years 
must have a current amount outstanding of at least $10 million. 
Securities with an initial term to final maturity greater than or equal 
to five years and less than ten years must have a current amount 
outstanding of at least $15 million. Securities with an initial term to 
final maturity of ten years or more must have a current amount 
outstanding of at least $25 million. Local bonds issued by U.S. 
territories within their jurisdictions that are tax exempt within the 
U.S. territory but not elsewhere are excluded from the New Index. All 
Rule 144A securities, both with and without registration rights, and 
securities in legal default are excluded from the New Index. New Index 
constituents are capitalization-weighted based on their current amount 
outstanding times the market price plus accrued interest. Accrued 
interest is calculated assuming next-day settlement. Cash flows from 
bond payments that are received during the month are retained in the 
New Index until the end of the month and then are removed as part of 
the rebalancing. Cash does not earn any reinvestment income while it is 
held in the New Index.\14\ The New Index is rebalanced on the last 
calendar day of the month, based on information available up to and 
including the third business day before the last business day of the 
month. No changes are made to constituent holdings other than on month 
end rebalancing dates.
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    \14\ Information concerning constituent bond prices, timing, and 
conventions is provided in the BofA Merrill Lynch Bond Index Guide, 
which can be accessed on Bloomberg.
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    As of February 4, 2016, approximately 84.39% of the weight of the 
New 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, as of February 4, 2016, the total dollar 
amount outstanding of issues in the New Index was approximately 
$281,589,346,769, and the average dollar amount outstanding of issues 
in the New Index was approximately $ 27,808,547. Further, the most 
heavily weighted component represents 2.27% of the weight of the New 
Index, and the five most heavily weighted components represent 6.33% of 
the weight of the New Index.\15\ The

[[Page 4952]]

Exchange also states that the New Index is composed of approximately 
10,126 issues and 1,811 unique issuers, and that in no event will the 
New Index be composed of fewer than 500 issues. According to the 
proposal, within a single municipal bond issuer, separate issues by the 
same issuer are likely to trade similarly to one another, and 
individual CUSIPs within the New Index that share characteristics with 
other CUSIPs have a high yield to maturity correlation, and frequently 
have a correlation of one or close to one. All components of the New 
Index have at least an investment grade composite rating of BBB3 or 
higher (based on an average of S&P, Moody's, and Fitch).
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    \15\ 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 represents that: (1) With respect to the New Index, 
except for Commentary .02(a)(2) to NYSE Arca Equities Rule 5.2(j)(3), 
the Shares of the New Index 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 
Fund; and (3) the Trust is required to comply with Rule 10A-3 under the 
Act \16\ for the initial and continued listing of the Shares of the 
Fund. In addition, the Exchange represents that the Shares of the Fund 
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 New Index and the applicable 
Intraday Indicative Value (``IIV''),\17\ rules governing the trading of 
equity securities, trading hours, trading halts, surveillance, 
information barriers, 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.\18\
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    \16\ 17 CFR 240.10A-3.
    \17\ 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. 
According to the Exchange, several major market data vendors display 
and/or make widely available IIVs taken from the Consolidated Tape 
Association (``CTA'') or other data feeds.
    \18\ See, e.g., Securities Exchange Act Release Nos. 55783 (May 
17, 2007), 72 FR 29194 (May 24, 2007) (SR-NYSEArca-2007-36) (order 
approving NYSE Arca generic listing standards for Units based on a 
fixed income index); 44551 (July 12, 2001), 66 FR 37716 (July 19, 
2001) (SR-PCX-2001-14) (order approving generic listing standards 
for Units and Portfolio Depositary Receipts); 41983 (October 6, 
1999), 64 FR 56008 (October 15, 1999) (SR-PCX-98-29) (order 
approving rules for listing and trading of Units).
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III. Discussion and Commission's Findings

    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of Section 6 of the Act \19\ 
and the rules and regulations thereunder applicable to a national 
securities exchange.\20\ In particular, the Commission finds that the 
proposal is consistent with Section 6(b)(5) of the Act,\21\ which 
requires, among other things, that the Exchange's rules be designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest.
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    \19\ 15 U.S.C. 78f.
    \20\ 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).
    \21\ 17 U.S.C. 78f(b)(5).
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    The Commission also finds that the proposal to list and trade the 
Shares on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of 
the Act,\22\ 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. The current value of 
the New Index is 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). In addition, the IIV for the Shares 
of the Fund is disseminated by one or more major market data vendors 
and is 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). The components and percentage weightings of the New 
Index are available from major market data vendors, and the portfolio 
of securities held by the Fund is disclosed daily on the Fund's Web 
site. The Exchange also represents that information regarding market 
price and trading volume of the Shares will be continually available on 
a real-time basis throughout the day on brokers' computer screens and 
other electronic services, and quotation and last-sale information will 
be available via the CTA high-speed line. Moreover, trade price and 
other information relating to municipal bonds are available through the 
Municipal Securities Rulemaking Board's Electronic Municipal Market 
Access (``EMMA'') system. The Web site for the Fund will include the 
prospectus for the Fund and additional data relating to net asset value 
(``NAV'') and other applicable quantitative information.
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    \22\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    The Commission believes that the proposal to list and trade the 
Shares is reasonably designed to promote fair disclosure of information 
that may be necessary to price the Shares appropriately and to prevent 
trading when a reasonable degree of transparency cannot be assured. 
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. 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. If the IIV and the New 
Index value are not being disseminated as required, the Exchange may 
halt trading during the day in which the interruption to the 
dissemination of the IIV or New Index value occurs. If the interruption 
to the dissemination of the IIV or New Index value persists past the 
trading day in which it occurred, the Exchange will halt trading. 
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 7.34, which sets forth 
circumstances under which Shares of the Fund may be halted.\23\ The 
Exchange states that trade price and other information relating to 
municipal bonds is available through the Municipal Securities 
Rulemaking Board's Electronic Municipal Market Access system.
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    \23\ 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.
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    Based on the Exchange's representations, the Commission believes 
that the New Index is

[[Page 4953]]

sufficiently broad-based to deter potential manipulation. The Exchange 
represents that, as of February 4, 2016, approximately 84.39% of the 
weight of the New 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, as of February 4, 
2016, the total dollar amount outstanding of issues in the New Index 
was approximately $281,589,346,769, and the average dollar amount 
outstanding of issues in the Index was approximately $ 27,808,547. 
Further, the most heavily weighted component represented 2.27% of the 
weight of the New Index, and the five most heavily weighted components 
represented 6.33% of the weight of the New Index.\24\ The Exchange also 
represents that the New Index is composed of approximately 10,126 
issues and 1,811 unique issuers, and that in no event will the New 
Index be composed of fewer than 500 issues.
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    \24\ See supra note 15.
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    In support of this proposal, the Exchange has also made 
representations, including:
    (1) The Adviser has managed and will continue to manage the Fund in 
the manner described in the Registration Statement, and it will not 
implement the changes described herein until this proposed rule change 
is operative.
    (2) 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 New Index.
    (3) With respect to the New Index, except for Commentary .02(a)(2) 
to NYSE Arca Equities Rule 5.2(j)(3), the Shares of Fund overlying the 
New Index would satisfy all of the current generic listing standards 
under NYSE Arca Equities Rule 5.2(j)(3).
    (4) 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 Fund overlying the New Index.
    (5) The Trust is required to comply with Rule 10A-3 under the Act 
\25\ for the initial and continued listing of the Shares of the Fund 
overlying the New Index.
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    \25\ 17 CFR 240.10A-3.
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    (6) The Shares of the Fund overlying the New Index 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 New Index and the applicable IIV,\26\ rules 
governing the trading of equity securities, trading hours, trading 
halts, surveillance, information barriers, and the Information Bulletin 
to ETP Holders, as set forth in Exchange rules applicable to Units and 
prior Commission orders approving the generic listing rules applicable 
to the listing and trading of Units.\27\
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    \26\ See supra note 17.
    \27\ See supra note 18 and accompanying text.
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    (7) The Exchange represents that trading in the Shares will be 
subject to the existing trading surveillances administered by the 
Exchange, as well as cross-market surveillances administered by the 
Financial Industry Regulatory Authority (``FINRA'') on behalf of the 
Exchange, which are designed to detect violations of Exchange rules and 
federal securities laws applicable to trading on the Exchange.\28\ 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.
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    \28\ The Exchange represents that FINRA conducts cross-market 
surveillances on behalf of the Exchange pursuant to a regulatory 
services agreement. The Exchange is responsible for FINRA's 
performance under this regulatory services agreement.
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    (8) The Exchange or FINRA, on behalf of the Exchange, or both, will 
communicate as needed regarding trading in the Shares with other 
markets that are members of the Intermarket Surveillance Group 
(``ISG''). In addition, the Exchange will communicate as needed 
regarding trading in the Shares with other markets that are members of 
the ISG or with which the Exchange has in place a comprehensive 
surveillance sharing agreement. FINRA also can access data obtained 
from the Municipal Securities Rulemaking Board relating to municipal 
bond trading activity for surveillance purposes in connection with 
trading in the Shares.
    The Exchange represents that all statements and representations 
made in this proposal regarding (a) the description of the Fund's 
portfolio, (b) limitations on portfolio holdings or reference assets, 
or (c) the applicability of Exchange rules and surveillance procedures 
shall constitute continued listing requirements for listing the Shares 
on the Exchange. The Adviser has represented to the Exchange that it 
will advise the Exchange of any failure by the Fund to comply with the 
continued listing requirements, and, pursuant to its obligations under 
Section 19(g)(1) of the Act, the Exchange will monitor for compliance 
with the continued listing requirements.\29\ If the Fund is not in 
compliance with the applicable listing requirements, the Exchange will 
commence delisting procedures under NYSE Arca Equities Rule 5.5(m). 
This approval order is based on all of the Exchange's representations, 
including those set forth above and in the Notice, as modified by 
Amendment No. 1 thereto, and the Exchange's description of the Funds.
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    \29\ The Commission notes that certain other proposals for the 
listing and trading of Managed Fund Shares include a representation 
that the exchange will ``surveil'' for compliance with the continued 
listing requirements. See, e.g., Securities Exchange Act Release No. 
78005 (Jun. 7, 2016), 81 FR 38247 (Jun. 13, 2016) (SR-BATS-2015-
100). In the context of this representation, it is the Commission's 
view that ``monitor'' and ``surveil'' both mean ongoing oversight of 
a fund's compliance with the continued listing requirements. 
Therefore, the Commission does not view ``monitor'' as a more or 
less stringent obligation than ``surveil'' with respect to the 
continued listing requirements.
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    For the foregoing reasons, the Commission finds that the proposed 
rule change, as modified by Amendment No. 1 thereto, is consistent with 
Section 6(b)(5) of the Act \30\ and the rules and regulations 
thereunder applicable to a national securities exchange.
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    \30\ 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 
Act,\31\ that the proposed rule change (SR-NYSEArca-2016-62), as 
modified by Amendment No. 1 thereto, be, and it hereby is, approved.
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    \31\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\32\
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    \32\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-00780 Filed 1-13-17; 8:45 am]
 BILLING CODE 8011-01-P


