
[Federal Register Volume 82, Number 129 (Friday, July 7, 2017)]
[Notices]
[Pages 31651-31656]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-14242]



[[Page 31651]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-81062; File No. SR-NYSEArca-2017-56]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change to Facilitate the Listing and Trading of 
Certain Series of Investment Company Units Listed Pursuant to NYSE Arca 
Equities Rule 5.2(j)(3)

June 30, 2017.
    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 June 19, 2017, 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 facilitate the listing and trading of 
certain series of Investment Company Units listed pursuant to NYSE Arca 
Equities Rule 5.2(j)(3). 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
    Pursuant to NYSE Arca Equities Rule 5.2(j)(3), the Exchange 
proposes to facilitate the listing and trading of certain series of 
Investment Company Units that do not otherwise meet the standards set 
forth in Commentary.02 to Rule 5.2(j)(3). Specifically, the Exchange 
proposes to facilitate the listing and trading of the following series 
of Investment Company Units based on a multistate index of fixed income 
municipal bond securities: iShares National Muni Bond ETF, iShares 
Short-Term National Muni Bond ETF, VanEck Vectors AMT-Free Intermediate 
Municipal Index ETF, VanEck Vectors AMT-Free Long Municipal Index ETF, 
VanEck Vectors AMT-Free Short Municipal Index ETF, VanEck Vectors High-
Yield Municipal Index ETF, VanEck Vectors Pre-Refunded Municipal Index 
ETF, PowerShares VRDO Tax-Free Weekly Portfolio, SPDR Nuveen Bloomberg 
Barclays Short Term Municipal Bond ETF and SPDR Nuveen Bloomberg 
Barclays Municipal Bond ETF (collectively, the ``Multistate Municipal 
Bond Funds'').
    In addition, the Exchange proposes to facilitate the listing and 
trading of the following series of Investment Company Units based on a 
single-state index of fixed income municipal bond securities: iShares 
California Muni Bond ETF and the iShares New York Muni Bond ETF 
(collectively, the ``Single-state Municipal Bond Funds'' and, together 
with the Multistate Municipal Bond Funds, the ``Municipal Bond 
Funds'').
    Each of the Municipal Bond Funds listed on the Exchange prior to 
2010 and is based on an index of fixed-income municipal bond 
securities. Commentary .02 to Rule 5.2(j)(3) sets forth the generic 
listing requirements for an index of fixed income securities underlying 
a series of Investment Company Units. One of the enumerated listing 
requirements is that component fixed income securities that, in the 
aggregate, account for at least 75% of the weight of the index each 
shall have a minimum principal amount outstanding of $100 million or 
more.\4\ The Exchange proposes to facilitate the listing and trading of 
the Municipal Bond Funds notwithstanding the fact that the indices on 
which they are based do not meet the requirements of Commentary 
.02(a)(2) to Rule 5.2(j)(3). Each of the indices on which the Municipal 
Bond Funds are based meet all of the other requirements of such 
rule.\5\
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    \4\ See Commentary .02(a)(2) to NYSE Arca Equities Rule 
5.2(j)(3).
    \5\ The Commission previously has approved proposed rule changes 
relating to listing and trading on the Exchange of Units based on 
municipal bond indexes. See Securities Exchange Act Release Nos. 
67985 (October 4, 2012), 77 FR 61804 (October 11, 2012) (SR-
NYSEArca-2012-92) (order approving proposed rule change relating to 
the listing and trading of iShares 2018 S&P AMT-Free Municipal 
Series and iShares 2019 S&P AMT-Free Municipal Series under NYSE 
Arca Equities Rule 5.2(j)(3), Commentary .02); 67729 (August 24, 
2012), 77 FR 52776 (August 30, 2012) (SR-NYSEArca-2012-92) (notice 
of proposed rule change relating to the listing and trading of 
iShares 2018 S&P AMT-Free Municipal Series and iShares 2019 S&P AMT-
Free Municipal Series under NYSE Arca Equities Rule 5.2(j)(3), 
Commentary .02) (``iShares 2018 Notice''); 72523, (July 2, 2014), 79 
FR 39016 (July 9, 2014) (SR-NYSEArca-2014-37) (order approving 
proposed rule change relating to the listing and trading of iShares 
2020 S&P AMT-Free Municipal Series under NYSE Arca Equities Rule 
5.2(j)(3), Commentary .02); 72172 (May 15, 2014), 79 FR 29241 (May 
21, 2014) (SR-NYSEArca-2014-37) (notice of proposed rule change 
relating to the listing and trading of iShares 2020 S&P AMT-Free 
Municipal Series under NYSE Arca Equities Rule 5.2(j)(3), Commentary 
.02) (``iShares 2020 Notice''); 72464 (June 25, 2014), 79 FR 37373 
(July 1, 2014) (File No. SR-NYSEArca-2014-45) (order approving 
proposed rule change governing the continued listing and trading of 
shares of the PowerShares Insured California Municipal Bond 
Portfolio, PowerShares Insured National Municipal Bond Portfolio, 
and PowerShares Insured New York Municipal Bond Portfolio) 
(``PowerShares Order''); 75468 (July 16, 2015), 80 FR 43500 (July 
22, 2015) (SR-NYSEArca-2015-25) (order approving proposed rule 
change relating to the listing and trading of iShares iBonds Dec 
2021 AMT-Free Muni Bond ETF and iShares iBonds Dec 2022 AMT-Free 
Muni Bond ETF under NYSE Arca Equities Rule 5.2(j)(3)) (``iShares 
2021/2022 Order''); 74730 (April 15, 2015), 76 FR 22234 (April 21, 
2015) (notice of proposed rule change relating to the listing and 
trading of iShares iBonds Dec 2021 AMT-Free Muni Bond ETF and 
iShares iBonds Dec 2022 AMT-Free Muni Bond ETF under NYSE Arca 
Equities Rule 5.2(j)(3), Commentary .02) (``iShares 2021/2022 
Notice''); 74730 75376 (July 7, 2015), 80 FR 40113 (July 13, 2015) 
(SR-NYSEArca-2015-18) (order approving proposed rule change relating 
to the listing and trading of Vanguard Tax-Exempt Bond Index Fund 
under NYSE Arca Equities Rule 5.2(j)(3)). The Commission also has 
issued a notice of filing and immediate effectiveness of a proposed 
rule change relating to listing and trading on the Exchange of 
shares of the iShares Taxable Municipal Bond Fund. See Securities 
Exchange Act Release No. 63176 (October 25, 2010), 75 FR 66815 
(October 29, 2010) (SR-NYSEArca-2010-94). The Commission has 
approved for Exchange listing and trading of shares of actively 
managed funds of [sic] that principally hold municipal bonds. See, 
e.g., Securities Exchange Act Release Nos. 60981 (November 10, 
2009), 74 FR 59594 (November 18, 2009) (SR-NYSEArca-2009-79) (order 
approving listing and trading of shares of the PIMCO Short-Term 
Municipal Bond Strategy Fund and PIMCO Intermediate Municipal Bond 
Strategy Fund); 79293 (November 10, 2016), 81 FR 81189 (November 17, 
2016) (SR-NYSEArca-2016-107) (order approving listing and trading of 
shares of Cumberland Municipal Bond ETF). The Commission also has 
approved listing and trading on the Exchange of shares of the SPDR 
Nuveen S&P High Yield Municipal Bond Fund under Commentary .02 of 
NYSE Arca Equities Rule 5.2(j)(3). See Securities Exchange Act 
Release No.63881 (February 9, 2011), 76 FR 9065 (February 16, 2011) 
(SR-NYSEArca-2010-120).

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[[Page 31652]]

    The Exchange believes it is appropriate to facilitate the listing 
and trading of the Municipal Bond Funds because each such fund is based 
on a broad-based index of fixed income municipal bond securities that 
is not readily susceptible to manipulation. As of April 1, 2017, the 
indices on which the Municipal Bond Funds are based had the following 
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characteristics:

    1. The iShares National Muni Bond ETF is based on the S&P 
National AMT-Free Municipal Bond Index, which included 11,333 
component fixed income municipal bond securities from issuers in 47 
different states or U.S. territories. The most heavily weighted 
security in the index represented approximately 0.25% of the total 
weight of the index and the aggregate weight of the top five most 
heavily weighted securities in the index represented less than 1% of 
the total weight of the index. Approximately 99.29% of the weight of 
the 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 in the offering. Approximately 31.79% of the weight of 
the components in the index had a minimum original principal amount 
outstanding of $100 million or more. In addition, the total dollar 
amount outstanding of issues in the index was approximately 
$628,460,731,594 and the average dollar amount outstanding of issues 
in the index was approximately $55,454,048.
    2. The iShares Short Term National Muni Bond ETF is based on the 
S&P Short Term National AMT-Free Municipal Bond Index, which 
included 3,309 component fixed income municipal bond securities from 
issuers in 44 different states or U.S. territories. The most heavily 
weighted security in the index represented approximately 1% of the 
total weight of the index and the aggregate weight of the top five 
most heavily weighted securities in the index represented 
approximately 2% of the total weight of the index. Approximately 
98.22% of the weight of the 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 in the offering. 
Approximately 27.63% of the weight of the components in the index 
had a minimum original principal amount outstanding of $100 million 
or more. In addition, the total dollar amount outstanding of issues 
in the index was approximately $166,147,941,156 and the average 
dollar amount outstanding of issues in the index was approximately 
$50,210,922.
    3. The VanEck Vectors AMT-Free Intermediate Municipal Index ETF 
is based on the Bloomberg Barclays AMT-Free Intermediate Continuous 
Municipal Index, which included 17,272 component fixed income 
municipal bond securities from issuers in 50 different states or 
U.S. territories. The most heavily weighted security in the index 
represented less than 0.25% of the total weight of the index and the 
aggregate weight of the top five most heavily weighted securities in 
the index represented approximately 0.50% of the total weight of the 
index. Approximately 96.13% of the weight of the 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 in the 
offering. Approximately 7.75% of the weight of the components in the 
index had a minimum original principal amount outstanding of $100 
million or more. In addition, the total dollar amount outstanding of 
issues in the index was approximately $340,102,539,050 and the 
average dollar amount outstanding of issues in the index was 
approximately $19,690,976.
    4. The VanEck Vectors AMT-Free Long Municipal Index ETF is based 
on the Bloomberg Barclays AMT-Free Long Continuous Municipal Index, 
which included 7,657 component fixed income municipal bond 
securities from issuers in 50 different states or U.S. territories. 
The most heavily weighted security in the index represented less 
than 0.50% of the total weight of the index and the aggregate weight 
of the top five most heavily weighted securities in the index 
represented approximately 1.25% of the total weight of the index. 
Approximately 93.84% of the weight of the 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 in the 
offering. Approximately 32.34% of the weight of the components in 
the index had a minimum original principal amount outstanding of 
$100 million or more. In addition, the total dollar amount 
outstanding of issues in the index was approximately 
$279,575,285,082 and the average dollar amount outstanding of issues 
in the index was approximately $36,512,379.
    5. The VanEck Vectors AMT-Free Short Municipal Index ETF is 
based on the Bloomberg Barclays AMT-Free Short Continuous Municipal 
Index, which included 7,229 component fixed income municipal bond 
securities from issuers in 48 different states or U.S. territories. 
The most heavily weighted security in the index represented 
approximately 1% of the total weight of the index and the aggregate 
weight of the top five most heavily weighted securities in the index 
represented approximately 2.25% of the total weight of the index. 
Approximately 94.4% of the weight of the 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 in the 
offering. Approximately 13.60% of the weight of the components in 
the index had a minimum original principal amount outstanding of 
$100 million or more. In addition, the total dollar amount 
outstanding of issues in the index was approximately 
$152,020,140,995 and the average dollar amount outstanding of issues 
in the index was approximately $21,026,299.
    6. The VanEck Vectors High-Yield Municipal Index ETF is based on 
the Bloomberg Barclays Municipal Custom High Yield Composite Index, 
which included 4,702 component fixed income municipal bond 
securities from issuers in 50 different states or U.S. territories. 
The most heavily weighted security in the index represented 
approximately 1.25% of the total weight of the index and the 
aggregate weight of the top five most heavily weighted securities in 
the index represented approximately 6% of the total weight of the 
index. Approximately 75.16% of the weight of the 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 in the 
offering. Approximately 43.26% of the weight of the components in 
the index had a minimum original principal amount outstanding of 
$100 million or more. In addition, the total dollar amount 
outstanding of issues in the index was approximately 
$224,318,153,150 and the average dollar amount outstanding of issues 
in the index was approximately $47,706,966.
    7. The VanEck Vectors Pre-Refunded Municipal Index ETF is based 
on the Bloomberg Barclays Municipal Pre-Refunded-Treasury-Escrowed 
Index, which included 3,691 component fixed income municipal bond 
securities from issuers in 50 different states or U.S. territories. 
The most heavily weighted security in the index represented 
approximately 0.50% of the total weight of the index and the 
aggregate weight of the top five most heavily weighted securities in 
the index represented approximately 2.25% of the total weight of the 
index. Approximately 93.70% of the weight of the 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 in the 
offering. Approximately 19.23% of the weight of the components in 
the index had a minimum original principal amount outstanding of 
$100 million or more. In addition, the total dollar amount 
outstanding of issues in the index was approximately $94,289,476,486 
and the average dollar amount outstanding of issues in the index was 
approximately $25,545,780.
    8. The PowerShares VRDO Tax-Free Weekly Portfolio is based on 
the Bloomberg US Municipal AMT-Free Weekly VRDO Index, which 
included 1,494 component fixed income municipal bond securities from 
issuers in 49 different states or U.S. territories. The most heavily 
weighted security in the index represented approximately 0.75% of 
the total weight of the index and the aggregate weight of the top 
five most heavily weighted securities in the index represented 
approximately 2.75% of the total weight of the index. Approximately 
44.76% of the weight of the 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 in the offering. 
Approximately 34.88% of the weight of the components in the index 
had a minimum original principal amount outstanding of $100 million 
or more. In addition, the total dollar amount outstanding

[[Page 31653]]

of issues in the index was approximately $68,489,564,000 and the 
average dollar amount outstanding of issues in the index was 
approximately $45,843,082.
    9. The SPDR Nuveen Bloomberg Barclays Short Term Municipal Bond 
ETF is based on the Bloomberg Barclays Managed Money Municipal Short 
Term Index, which included 4,263 component fixed income municipal 
bond securities from issuers in 44 different states or U.S. 
territories. The most heavily weighted security in the index 
represented approximately 0.75% of the total weight of the index and 
the aggregate weight of the top five most heavily weighted 
securities in the index represented approximately 2% of the total 
weight of the index. Approximately 94.54% of the weight of the 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 in the 
offering. Approximately 10.82% of the weight of the components in 
the index had a minimum original principal amount outstanding of 
$100 million or more. In addition, the total dollar amount 
outstanding of issues in the index was approximately $85,187,709,681 
and the average dollar amount outstanding of issues in the index was 
approximately $19,983,042.
    10. The SPDR Nuveen Bloomberg Barclays Municipal Bond ETF is 
based on the Bloomberg Barclays Municipal Managed Money Index, which 
included 22,247 component fixed income municipal bond securities 
from issuers in 48 different states or U.S. territories. The most 
heavily weighted security in the index represented less than 0.25% 
of the total weight of the index and the aggregate weight of the top 
five most heavily weighted securities in the index represented 
approximately 0.50% of the total weight of the index. Approximately 
95.05% of the weight of the 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 in the offering. 
Approximately 13.35% of the weight of the components in the index 
had a minimum original principal amount outstanding of $100 million 
or more. In addition, the total dollar amount outstanding of issues 
in the index was approximately $496,240,108,998 and the average 
dollar amount outstanding of issues in the index was approximately 
$22,305,934.
    11. The iShares California Muni Bond ETF is based on the S&P 
California AMT-Free Municipal Bond Index, which included 2,115 
component fixed income municipal bond securities from more than 150 
distinct municipal bond issuers in the State of California. The most 
heavily weighted security in the index represented approximately 
0.50% of the total weight of the index and the aggregate weight of 
the top five most heavily weighted securities in the index 
represented approximately 2.75% of the total weight of the index. 
Approximately 96.31% of the weight of the 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 in the 
offering. Approximately 38.89% of the weight of the components in 
the index had a minimum original principal amount outstanding of 
$100 million or more. In addition, the total dollar amount 
outstanding of issues in the index was approximately 
$137,796,471,640 and the average dollar amount outstanding of issues 
in the index was approximately $65,151,996.
    12. The iShares New York Muni Bond Fund is based on the S&P New 
York AMT-Free Municipal Bond Index, which included 2,191 component 
fixed income municipal bond securities from more than 20 distinct 
municipal bond issuers in the State of New York. The most heavily 
weighted security in the index represented approximately 1.50% of 
the total weight of the index and the aggregate weight of the top 
five most heavily weighted securities in the index represented 
approximately 4.25% of the total weight of the index. Approximately 
98.63% of the weight of the 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 in the offering. 
Approximately 34.50% of the weight of the components in the index 
had a minimum original principal amount outstanding of $100 million 
or more. In addition, the total dollar amount outstanding of issues 
in the index was approximately $124,381,556,872 and the average 
dollar amount outstanding of issues in the index was approximately 
$56,769,309.

    Based on the characteristics of each index as described above, the 
Exchange believes it is appropriate to facilitate the listing and 
trading of the Municipal Bond Funds. Each index underlying the 
Municipal Bond Funds satisfies all of the generic listing requirements 
for Investment Company Units based on a fixed income index, except for 
the minimum principal amount outstanding requirement of Commentary 
.02(a)(2) to Rule 5.2(j)(3). A fundamental purpose behind the minimum 
principal amount outstanding requirement is to ensure that component 
securities of an index are sufficiently liquid such that the potential 
for index manipulation is reduced.
    As described above, each index underlying the Multistate Municipal 
Bond Funds is broad-based and currently includes, on average, more than 
8,000 component securities. Whereas the generic listing rules require 
that an index contain securities from a minimum of 13 non-affiliated 
issuers,\6\ each index underlying the Multistate Municipal Bond Funds 
currently includes securities issued by municipal entities in more than 
40 states or U.S. territories. Further, whereas the generic listing 
rules permit a single component security to represent up to 30% of the 
weight of an index and the top five component securities to, in 
aggregate, represent up to 65% of the weight of an index,\7\ no single 
security currently represents more than approximately 1.5% of the 
weight of any index underlying the Multistate Municipal Bond Funds. 
Similarly, the aggregate weight of the five most heavily weighted 
securities in each index does not exceed approximately 6%. The Exchange 
believes that this significant diversification and the lack of 
concentration among constituent securities provides a strong degree of 
protection against index manipulation.
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    \6\ See Commentary .02(a)(5) to NYSE Arca Equities Rule 
5.2(j)(3).
    \7\ See Commentary .02(a)(4) to NYSE Arca Equities Rule 
5.2(j)(3).
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    Each index on which the Single-state Municipal Bond Funds is based 
is similarly well diversified to protect against index manipulation. On 
average, the indices underlying the Single-state Municipal Bond Funds 
include more than 1,500 securities. Each index includes securities from 
at least 20 distinct municipal bond issuers and the most heavily 
weighted security in any of the indices underlying the Single-state 
Municipal Bond Funds represents approximately 2% and the aggregate 
weight of the five most heavily weighted securities in any of the 
indices represents approximately 6.25% of the total index weight.
    On a continuous basis, each index underlying a Municipal Bond Fund 
will contain at least 500 component securities.\8\ In addition, the 
Exchange represents that: (1) Except for Commentary .02(a)(2) to Rule 
5.2(j)(3), each index currently satisfies all of the generic listing 
standards under Rule 5.2(j)(3); (2) the continued listing standards 
under Rules 5.2(j)(3) (except for Commentary .02(a)(2)) and 5.5(g)(2) 
applicable to Investment Company Units will apply to the shares of each 
Municipal Bond Fund; and (3) the issuer of each Municipal Bond Fund is

[[Page 31654]]

required to comply with Rule 10A-3 \9\ under the Act for the initial 
and continued listing of the shares of each Municipal Bond Fund. In 
addition, the Exchange represents that the shares of each Municipal 
Bond Fund will comply with all other requirements applicable to 
Investment Company Units including, but not limited to, requirements 
relating to the dissemination of key information such as the value of 
the underlying index and the applicable Intraday Indicative Value 
(``IIV''),\10\ 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 Investment 
Company Units and prior Commission orders approving the generic listing 
rules applicable to the listing and trading of Investment Company 
Units.\11\
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    \8\ The Commission has previously approved a proposed rule 
change relating to the listing and trading on the Exchange of a 
series of Investment Company Units based on a municipal bond index 
that did not satisfy Commentary .02(a)(2) of Rule 5.2(j)(3) provided 
that such municipal bond index contained at least 500 component 
securities on a continuous basis. See Securities Exchange Act 
Release No. 79767 (January 10, 2017), 82 FR 4950 (January 17, 2017) 
(SR-NYSEArca-2016-62) (order approving proposed rule change relating 
to the listing and trading of the PowerShares Build America Bond 
Portfolio). The total dollar amount of issues in the index 
underlying the PowerShares Build America Bond Portfolio was 
approximately $281,589,346,769 and the average dollar amount 
outstanding of issues in the index was approximately $27,808,547. 
Those metrics are comparable to the metrics of the indices 
underlying the Municipal Bond Funds.
    \9\ 17 CFR 240.10A-3.
    \10\ 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 and/or make widely available IIVs taken 
from the Consolidated Tape Association (``CTA'') or other data 
feeds.
    \11\ 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 current value of each index underlying the Municipal Bond Funds 
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). The IIV for shares of each Municipal Bond Fund 
is 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). In 
addition, the portfolio of securities held by each Municipal Bond Fund 
is disclosed daily on each Municipal Bond Fund's Web site.
    The Exchange notes that each of the Municipal Bond Funds has been 
listed on the Exchange for at least eight years \12\ and that, during 
such time, the Exchange has not become aware of any potential 
manipulation of the underlying indices. Further, the Exchange's 
existing rules require that the Municipal Bond Funds notify the 
Exchange of any material change to the methodology used to determine 
the composition of the index.\13\ Therefore, if the methodology of an 
index underlying the Municipal Bond Funds was changed in a manner that 
would materially alter its existing composition, the Exchange would 
have advance notice and would evaluate the index, as modified, to 
determine whether it was sufficiently broad-based and well diversified.
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    \12\ The VanEck Vectors High-Yield Municipal Index ETF is the 
most recently listed of the Multistate Municipal Bond Funds and 
listed on the Exchange on February 5, 2009.
    \13\ See NYSE Arca Equities Rule 5.3(i)(1)(i)(P).
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2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \14\ 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.
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    \14\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
shares of each Municipal Bond Fund will be listed and traded on the 
Exchange pursuant to the initial and continued listing criteria in NYSE 
Arca Equities Rule 5.2(j)(3) (except for Commentary .02(a)(2)). The 
Exchange represents that trading in the shares of each Municipal Bond 
Fund 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.\15\ 
The Exchange represents that these procedures are adequate to properly 
monitor Exchange trading of the shares of each Municipal Bond Fund in 
all trading sessions and to deter and detect violations of Exchange 
rules and federal securities laws applicable to trading on the 
Exchange. The Exchange or FINRA, on behalf of the Exchange, or both, 
will communicate as needed regarding trading in the shares of each 
Municipal Bond Fund 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 of each 
Municipal Bond Fund 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 of each Municipal Bond Fund. 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'').
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    \15\ 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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    As discussed above, the Exchange believes that each index 
underlying the Municipal Bond Funds is sufficiently broad-based to 
deter potential manipulation. Each index underlying the Multistate 
Municipal Bond Funds currently includes, on average, more than 8,000 
component securities. Whereas the generic listing rules require that an 
index contain securities from a minimum of 13 non-affiliated 
issuers,\16\ each index underlying the Multistate Municipal Bond Funds 
currently includes securities issued by municipal entities in more than 
40 states or U.S. territories. Further, whereas the generic listing 
rules permit a single component security to represent up to 30% of the 
weight of an index and the top five component securities to, in 
aggregate, represent up to 65% of the weight of an index,\17\ no single 
security currently represents more than approximately 1.5% of the 
weight of any index underlying the Multistate Municipal Bond Funds. 
Similarly, the aggregate weight of the five most heavily weighted 
securities in each index does not exceed approximately 6%.
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    \16\ See Commentary .02(a)(5) to NYSE Arca Equities Rule 
5.2(j)(3).
    \17\ See Commentary .02(a)(4) to NYSE Arca Equities Rule 
5.2(j)(3).
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    Further, the indices underlying the Single-state Municipal Bond 
Funds include, on average, more than 1,500 securities. Each such index 
includes securities from at least 20 distinct municipal bond issuers 
and the most heavily weighted security in any of the indices underlying 
the Single-state Municipal Bond Funds represents approximately 2% and 
the aggregate weight of the five most heavily weighted securities in 
any of the indices represents approximately 6.25% of the total index 
weight.

[[Page 31655]]

    On a continuous basis, each index underlying a Municipal Bond Fund 
will contain at least 500 component securities.
    The Exchange believes that, within a single municipal bond issuer, 
separate issues by the same issuer are likely to trade similarly to one 
another. In addition, the Exchange believes that individual CUSIPs 
within each index underlying the Municipal Bond Funds that share 
characteristics with other CUSIPs have a high yield to maturity 
correlation, and frequently have a correlation of one or close to one.
    In support of its proposed rule change, the Exchange notes that the 
Commission has previously approved a rule change to facilitate the 
listing and trading of series of Investment Company Units based on an 
index of municipal bond securities that did not otherwise meet the 
generic listing requirements of NYSE Arca Rule 5.2(j)(3). For example, 
the Commission previous [sic] approved the listing and trading of the 
PowerShares Insured California Municipal Bond Portfolio, PowerShares 
Insured National Municipal Bond Portfolio and the PowerShares Insured 
New York Municipal Bond Portfolio (the ``PowerShares Municipal Bond 
Funds'') notwithstanding the fact that the index underlying each fund 
did not satisfy the criteria of Commentary .02(a)(2) to Rule 
5.2(j)(3).\18\ In finding such proposal to be consistent with the Act 
and the rules regulations thereunder, the Commission noted that each 
underlying index was sufficiently broad-based to deter potential 
manipulation. The Exchange believes that each of the indices underlying 
the Municipal Bond Funds shares comparable characteristics to the 
indices underlying the PowerShares Municipal Bond Funds.
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    \18\ See Securities Exchange Act Release No. 72464 (June 25, 
2014), 79 FR 37373 (July 1, 2014) (File No. SR-NYSEArca-2014-45).
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    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest in 
that a large amount of information is publicly available regarding the 
Municipal Bond Funds, thereby promoting market transparency. Each 
Municipal Bond Fund's portfolio holdings will be disclosed on such 
Municipal Bond Fund's Web site daily after the close of trading on the 
Exchange and prior to the opening of trading on the Exchange the 
following day. Moreover, the IIV for shares of each Municipal Bond Fund 
will be widely disseminated by one or more major market data vendors at 
least every 15 seconds during the Exchange's Core Trading Session. The 
current value of each index underlying the Municipal Bond Funds will be 
disseminated by one or more major market data vendors at least once per 
day. Information regarding market price and trading volume of the 
shares of each Municipal Bond Fund 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. The Web site for each 
Municipal Bond Fund will include the prospectus for such Municipal Bond 
Fund and additional data relating to net asset value (``NAV'') and 
other applicable quantitative information. If the Exchange becomes 
aware that a Municipal Bond Fund's NAV is not being disseminated to all 
market participants at the same time, it will halt trading in the 
shares of such Municipal Bond Fund until such time as the NAV is 
available to all market participants. 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 a Municipal Bond 
Fund. 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 a particular Municipal Bond Fund inadvisable. If the IIV and index 
value are not being disseminated for a particular Municipal Bond Fund 
as required, the Corporation may halt trading during the day in which 
the interruption to the dissemination of the IIV or index value occurs. 
If the interruption to the dissemination of an IIV or index value 
persists past the trading day in which it occurred, the Corporation 
will halt trading. Trading in the shares of a Municipal Bond 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 of a 
particular Municipal Bond Fund inadvisable, and trading in the shares 
of each Municipal Bond Fund will be subject to NYSE Arca Equities Rule 
7.34, which sets forth circumstances under which such shares may be 
halted. In addition, investors will have ready access to information 
regarding the applicable IIV, and quotation and last sale information 
for the shares of each Municipal Bond Fund. Trade price and other 
information relating to municipal bonds is available through the 
Municipal Securities Rulemaking Board's Electronic Municipal Market 
Access (``EMMA'') system.
    All statements and representations made in this filing regarding 
(a) the description of each Municipal Bond Fund's portfolio, (b) 
limitations on portfolio holdings or reference assets, or (c) the 
applicability of Exchange listing rules specified in this rule filing 
shall constitute continued listing requirements for listing the shares 
of each Municipal Bond Fund on the Exchange. Each issuer of the 
Municipal Bond Funds is required to advise the Exchange of any failure 
by its Municipal Bond 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. If a Municipal Bond Fund is not in compliance 
with the applicable listing requirements, the Exchange will commence 
delisting procedures under NYSE Arca Rule 5.5(m).
    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 
exchange-traded products that principally hold municipal bonds and that 
will enhance competition among market participants, to the benefit of 
investors and the marketplace. The Exchange has in place surveillance 
procedures relating to trading in the shares of each Municipal Bond 
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, investors 
will have ready access to information regarding the IIV and quotation 
and last sale information for the shares of each Municipal Bond 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 not necessary or appropriate in 
furtherance of the purposes of the Act, as amended. The Exchange notes 
that the proposed rule change will facilitate the listing and trading 
of exchange-traded products that hold municipal securities and that 
will enhance competition among market participants, to the benefit of 
investors and the marketplace.

[[Page 31656]]

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.

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-2017-56 in 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-2017-56. This 
file number should be included in 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 the 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-2017-56 and should 
be submitted on or before July 28, 2017.
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    \19\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
Brent J. Fields,
Secretary.
[FR Doc. 2017-14242 Filed 7-6-17; 8:45 am]
 BILLING CODE 8011-01-P


