[Federal Register Volume 82, Number 223 (Tuesday, November 21, 2017)]
[Notices]
[Pages 55449-55453]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-25136]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82080; File No. SR-NYSEArca-2017-86]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting 
Approval of a Proposed Rule Change, as Modified by Amendment Nos. 1 and 
2, To List and Trade Shares of the JPMorgan Managed Futures ETF Under 
NYSE Arca Rule 8.600-E

November 15, 2017.

I. Introduction

    On September 14, 2017, NYSE Arca, Inc. (``Exchange'' or ``NYSE 
Arca'') 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 list and trade shares (``Shares'') of the 
JPMorgan Managed Futures ETF (``Fund'') under NYSE Arca Rule 8.600-E. 
The proposed rule change was published for comment in the Federal 
Register on October 5, 2017.\3\ On October 25, 2017, the Exchange filed 
Amendment No. 1 to the proposed rule change.\4\ On November 9, 2017, 
the Exchange filed Amendment No. 2 to the proposed rule change.\5\ The 
Commission

[[Page 55450]]

has received no comments on the proposed rule change. This order 
approves the proposed rule change, as modified by Amendment Nos. 1 and 
2.
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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. 81766 (September 29, 
2017), 82 FR 46566 (``Notice'').
    \4\ Amendment No. 1 to the proposed rule change replaced and 
superseded the original filing in its entirety. In Amendment No. 1, 
the Exchange clarified (i) the circumstances under which the Fund 
reserves the right to honor a redemption request by delivering a 
basket of securities or cash that differs from the Redemption 
Instruments (as defined in the Notice); and (ii) that quotation and 
last sale information for the Shares and for portfolio holdings of 
the Fund that are U.S. exchange-listed, including preferred stocks 
and REITs, will be available via the Consolidated Tape Association 
(``CTA'') high speed line. Amendment No. 1 is available at: https://www.sec.gov/comments/sr-nysearca-2017-86/nysearca201786-2655573-161380.pdf. Amendment No. 1 is not subject to notice and comment 
because it is a technical amendment that does not materially alter 
the substance of the proposed rule change or raise any novel 
regulatory issues.
    \5\ Amendment No. 2 to the proposed rule change replaces and 
supersedes the original filing, as modified by Amendment No. 1, in 
its entirety. In Amendment No. 2, the Exchange represented that: (i) 
Information regarding market price and trading volume for the Shares 
will be continually available on a real-time basis throughout the 
day on brokers' computer screens and other electronic services, and 
(ii) information regarding the previous day's closing price and 
trading volume information for the Shares will be published daily in 
the financial section of newspapers. Amendment No. 2 is available 
at: https://www.sec.gov/comments/sr-nysearca-2017-86/nysearca201786-2678501-161480.pdf. Amendment No. 2 is not subject to notice and 
comment because it is a technical amendment that does not materially 
alter the substance of the proposed rule change or raise any novel 
regulatory issues.
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II. The Exchange's Description of the Proposed Rule Change, as Modified 
by Amendment Nos. 1 and 2 \6\
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    \6\ The Commission notes that additional information regarding 
the Trust (as defined below), the Fund, its investments, and the 
Shares, including investment strategies, risks, creation and 
redemption procedures, fees, portfolio holdings disclosure policies, 
calculation of NAV, distributions, and taxes, among other things, 
can be found in the Notice, Amendment Nos. 1 and 2, and the 
Registration Statement (as defined below), as applicable. See 
Notice, supra note 3, Amendment No. 1, supra note 4, Amendment No. 
2, supra note 5, and Registration Statement, infra note 8.
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    The Exchange proposes to list and trade Shares of the Fund under 
NYSE Arca Rule 8.600-E, which governs the listing and trading of 
Managed Fund Shares \7\ on the Exchange. The Fund is a series of J.P. 
Morgan Exchange-Traded Fund Trust (``Trust''), a Delaware statutory 
trust.\8\ J.P. Morgan Investment Management Inc. (``Adviser'') will be 
the investment adviser to the Fund and will also provide administrative 
services for and oversee the other service providers for the Fund.\9\ 
JPMorgan Distribution Services, Inc. will be the distributor of the 
Fund's Shares.
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    \7\ A Managed Fund Share is a security that represents an 
interest in an investment company registered under the Investment 
Company Act of 1940 (``1940 Act'') organized as an open-end 
investment company or similar entity that invests in a portfolio of 
securities selected by its investment adviser consistent with its 
investment objectives and policies.
    \8\ The Trust is registered under the 1940 Act. On July 18, 
2017, the Trust filed with the Commission an amendment to its 
registration statement on Form N-1A under the Securities Act of 1933 
(``Securities Act'') and the 1940 Act relating to the Fund (File 
Nos. 333-191837 and 811-22903) (``Registration Statement''). In 
addition, the Commission has issued an order granting certain 
exemptive relief to the Trust under the 1940 Act. See Investment 
Company Act Release No. 31990 (February 9, 2016) (``Exemptive 
Order''). The Exchange represents that investments made by the Fund 
will comply with the conditions set forth in the Exemptive Order.
    \9\ The Adviser is a wholly-owned subsidiary of JPMorgan Asset 
Management Holdings Inc., which is an indirect, wholly-owned 
subsidiary of JPMorgan Chase & Co., a bank holding company. The 
Adviser is not registered as a broker-dealer but the Adviser is 
affiliated with a broker-dealer and has implemented and will 
maintain a ``fire wall'' with respect to such broker-dealer 
affiliate regarding access to information concerning the composition 
of and/or changes to the Fund's portfolio. In the event (a) the 
Adviser becomes registered as a broker-dealer or newly affiliated 
with a broker-dealer, or (b) any new adviser or sub-adviser is a 
registered broker-dealer or becomes affiliated with a broker-dealer, 
it will implement and maintain a fire wall with respect to its 
relevant personnel or broker-dealer affiliate regarding access to 
information concerning the composition of and/or changes to the 
portfolio, and will be subject to procedures designed to prevent the 
use and dissemination of material non-public information regarding 
such portfolio.
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A. Principal Investments

    According to the Exchange, the Fund will seek to provide long-term 
total return. Through the Adviser's systematic investment process, the 
Fund seeks to achieve its investment objective by investing globally to 
exploit opportunities across a broad range of asset classes. The Fund 
will invest its assets globally to gain exposure, either directly or 
through the use of derivatives, to equity securities (across market 
capitalizations) in developed markets, debt securities (including below 
investment grade or high yield debt securities), commodities (through 
its Subsidiary, as defined below), and currencies (including in 
emerging markets). The Fund may use both long and short positions 
(achieved primarily through the use of financial derivative 
instruments). The Adviser will make use of derivatives, including 
swaps, futures, options, and forward contracts, in implementing its 
strategies.
    According to the Exchange, under normal market conditions,\10\ the 
Fund will invest principally (i.e., at least 50% of the Fund's assets) 
in the securities and financial instruments described below, which may 
be represented by derivatives relating to such securities and financial 
instruments, as further discussed below.
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    \10\ The term ``normal market conditions'' is defined in NYSE 
Arca Rule 8.600-E(c)(5).
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    The Fund may purchase and sell U.S. and foreign exchange-traded 
commodity futures, equity futures, options on equity futures, bond 
futures, index futures, currency futures, and options on currency 
futures.
    The Fund may invest in over-the-counter (``OTC'') total return 
swaps on equities, fixed income, commodities, and foreign currencies; 
currency swaps; interest rate swaps; credit default swaps (``CDS''); 
CDS index swaps (``CDX'') and loan credit default index swaps 
(``LCDX'').
    The Fund may invest in the following forward and spot currency 
transactions: Non-deliverable forwards, foreign currency forward 
contracts,\11\ spot currency transactions, caps, and floors.
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    \11\ A foreign currency forward contract is a negotiated 
agreement between the contracting parties to exchange a specified 
amount of currency at a specified future time at a specified rate. 
The rate can be higher or lower than the spot rate between the 
currencies that are the subject of the contract.
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    The Fund may invest in cash and cash equivalents, which are 
investments in money market funds (including funds for which the 
Adviser and/or its affiliates may serve as investment adviser or 
administrator), bank obligations,\12\ and commercial paper.\13\
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    \12\ Bank obligations include the following: Bankers' 
acceptances, certificates of deposit and time deposits. Bankers' 
acceptances are bills of exchange or time drafts drawn on and 
accepted by a commercial bank. Maturities are generally six months 
or less. Certificates of deposit are negotiable certificates issued 
by a bank for a specified period of time and earning a specified 
return. Time deposits are non-negotiable receipts issued by a bank 
in exchange for the deposit of funds.
    \13\ Commercial paper consists of secured and unsecured short-
term promissory notes issued by corporations and other entities. 
Maturities generally vary from a few days to nine months.
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    The Fund may invest in U.S. Government obligations, which may 
include direct obligations of the U.S. Treasury, including Treasury 
bills, notes, and bonds, all of which are backed as to principal and 
interest payments by the full faith and credit of the United States, 
and separately traded principal and interest component parts of such 
obligations that are transferable through the Federal book-entry system 
known as Separate Trading of Registered Interest and Principal of 
Securities (``STRIPS'') and Coupons Under Book Entry Safekeeping 
(``CUBES'').
    The Fund may invest in U.S. and foreign corporate debt.

B. Other Investments

    While the Fund, under normal market conditions, will invest at 
least fifty percent (50%) of its assets in the securities and financial 
instruments described above, the Fund may invest its remaining assets 
in the other assets and financial instruments described below.
    The Fund may invest in U.S. and foreign exchange-traded call and 
put options on equities, equity indexes, and equity futures.
    The Fund will gain exposure to commodity markets by investing 
directly in commodity-related instruments or indirectly by investing up 
to 20% of its total assets in the Managed Futures Fund CS Ltd., a 
wholly owned subsidiary of the Fund organized under the laws of the 
Cayman Islands (``Subsidiary''). The Subsidiary is also advised by the 
Adviser. The Subsidiary will only invest in commodity- or cash-
management-related investments described above in the Principal 
Investments section. However, the Subsidiary (unlike the Fund) may 
invest without limitation in commodity-related investments, including 
derivative instruments linked to the value of a particular commodity, 
commodity index, or commodity futures contract, as described above. The

[[Page 55451]]

Subsidiary will otherwise be subject to the same investment 
restrictions as the Fund.
    The Fund may invest in U.S. exchange-listed preferred stock.
    The Fund may invest in real estate investment trusts (``REITs'') 
that are listed and traded on U.S. national securities exchanges.
    The Fund may invest in repurchase agreements and reverse repurchase 
agreements.
    The Fund may invest in sovereign obligations, which are investments 
in debt obligations issued or guaranteed by a foreign sovereign 
government or its agencies, authorities, or political subdivisions. The 
Fund may also invest in obligations of supranational entities, 
including securities designated or supported by governmental entities 
to promote economic reconstruction or development of international 
banking institutions and related government agencies.
    In addition to money market funds discussed in the Principal 
Investments section, the Fund may invest in shares of other non-
exchange-traded investment company securities, including investment 
company securities for which the Adviser and/or its affiliates may 
serve as investment adviser or administrator, to the extent permitted 
by Section 12(d)(1) of the 1940 Act and the rules thereunder and/or any 
applicable exemption or exemptive order under the 1940 Act with respect 
to such investments.

C. Investment Restrictions

    The Fund's investments, including investments in derivatives, will 
be consistent with the Fund's investment objective and will not be used 
to enhance leverage (although certain derivatives and other investments 
may result in leverage). That is, while the Fund will be permitted to 
borrow as permitted under the 1940 Act, the Fund's (and the 
Subsidiary's) investments will not be used to seek performance that is 
the multiple or inverse multiple (e.g., 2Xs and 3Xs) of the Fund's 
primary broad-based securities benchmark index (as defined in Form N-
1A).\14\
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    \14\ The Fund's broad-based securities benchmark index will be 
identified in a future amendment to the Registration Statement 
following the Fund's first full calendar year of performance.
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D. Application of Generic Listing Requirements

    The Exchange proposes to list and trade the Shares under Commentary 
.01 to NYSE Arca Rule 8.600-E, which provides generic listing standards 
for Managed Fund Shares. Commentary .01(e) to NYSE Arca Rule 8.600-E 
currently requires that, on both an initial and ongoing basis, no more 
than 20% of the Fund's assets may be invested in OTC derivatives 
(calculated as the aggregate gross notional value of the OTC 
derivatives). The Exchange states that the portfolio for the Fund will 
not meet the generic listing requirement set forth in Commentary .01(e) 
to Rule 8.600-E. Specifically, the Exchange states that the aggregate 
gross notional value of the Fund's investments in OTC derivatives may 
exceed 20% of Fund assets, calculated based on the aggregate gross 
notional value of such OTC derivatives. The Exchange states that the 
Adviser intends to engage in strategies that utilize OTC foreign 
currency forward transactions and OTC swaps, as further described above 
in the Principal Investments section, and that, depending on market 
conditions, the exposure of the Fund to these strategies may exceed 20% 
of the Fund's assets.
    According to the Exchange, the Adviser represents that the foreign 
exchange forward market is OTC and swaps may be traded OTC, and, as 
such, it is not possible to implement these strategies efficiently 
using listed derivatives. Therefore, if the Fund was limited to 
investing 20% of its assets in OTC derivatives, the Fund would have to 
exclude or underweight these strategies and would be less diversified, 
concentrating risk in the other strategies it will utilize. In 
addition, the Exchange states that the Adviser represents that the Fund 
will follow an investment strategy utilized within the JP Morgan 
Diversified Alternative ETF, shares of which have previously been 
approved by the Commission for Exchange listing and trading.\15\
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    \15\ See Securities Exchange Act Release No. 77904 (May 25, 
2016), 81 FR 35101 (June 1, 2016) (SR-NYSEArca-2016-17) (order 
approving listing and trading of shares of the JPMorgan Diversified 
Alternative ETF under NYSE Arca Equities Rule 8.600).
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    The Exchange states that it believes that it is appropriate and in 
the public interest to allow the Fund to exceed the 20% limit on 
portfolio assets that may be invested in OTC derivatives in Commentary 
.01(e) to Rule 8.600 for several reasons. First, the Exchange states 
that the limit could result in the Fund being unable to fully pursue 
its investment objective while attempting to sufficiently mitigate 
investment risks. In addition, the Exchange represents that the Fund's 
investments in derivative instruments will be made in accordance with 
the 1940 Act and consistent with the Fund's investment objective and 
policies and, to limit the potential risk associated with such 
transactions, the Fund will segregate or ``earmark'' assets determined 
to be liquid by the Adviser in accordance with procedures established 
by the Trust's Board of Trustees and in accordance with the 1940 Act 
(or, as permitted by applicable regulation, enter into certain 
offsetting positions) to cover its obligations under derivative 
instruments. Furthermore, the Exchange represents that the Fund will 
include appropriate risk disclosure in its offering documents, 
including leveraging risk. The Exchange states that, because the 
markets for certain assets, or the assets themselves, may be 
unavailable or cost prohibitive as compared to derivative instruments, 
suitable derivative transactions may be an efficient alternative for 
the Fund to obtain the desired asset exposure. In addition, the 
Exchange states that OTC derivatives may be tailored more specifically 
to the assets held by the Fund than available listed derivatives.
    According to the Exchange, other than Commentary .01(e), the Fund's 
portfolio will meet all other requirements of NYSE Arca Rule 8.600-E.

III. Discussion and Commission's Findings

    After careful review, the Commission finds that the proposed rule 
change, as modified by Amendment Nos. 1 and 2, is consistent with the 
Act and the rules and regulations thereunder applicable to a national 
securities exchange.\16\ In particular, the Commission finds that the 
proposed rule change, as modified by Amendment Nos. 1 and 2, is 
consistent with Section 6(b)(5) of the Act,\17\ which requires, among 
other things, that the Exchange's rules be designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to remove impediments to and perfect the 
mechanism of a free and open market and a national market system, and, 
in general, to protect investors and the public interest.
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    \16\ In approving this proposed rule change, the Commission 
notes that it has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
    \17\ 15 U.S.C. 78f(b)(5).
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    As noted above, the Exchange proposes that more than 20% of the 
Fund's assets (calculated as the aggregate gross notional value) may be 
invested in OTC forwards and swaps.\18\

[[Page 55452]]

The Exchange states that limiting the Fund's investments in OTC 
derivatives to 20% of the Fund's assets could result in the Fund being 
unable to fully pursue its investment objective while attempting to 
sufficiently mitigate investment risks. The Exchange states that if the 
Fund were limited to investing up to 20% of assets in OTC derivatives, 
the Fund would have to exclude or underweight the strategies utilizing 
OTC forwards and OTC swaps and the Fund would be less diversified, 
concentrating risk in the other strategies it plans to utilize. The 
Exchange states that the Adviser represents that it is not possible to 
implement its investment strategies efficiently using listed 
derivatives because the foreign exchange forward market is OTC and 
swaps may be traded OTC. In addition, the Exchange states that suitable 
derivative transactions may be an efficient alternative for the Fund to 
obtain the desired asset exposure because the markets for certain 
assets, or the assets themselves, may be unavailable or cost 
prohibitive as compared to derivative instruments. Furthermore, the 
Exchange states that OTC derivatives may be tailored more specifically 
than the available listed derivatives to the assets held by the 
Fund.\19\ The Exchange represents that the Fund's disclosure of 
derivative positions in the Disclosed Portfolio will include 
information that market participants can use to value the derivative 
positions intraday. As proposed, on a daily basis, the Fund will 
disclose on its Web site the information regarding the Disclosed 
Portfolio required under NYSE Arca Rule 8.600-E(c)(2) to the extent 
applicable.\20\ The Web site information will be publicly available at 
no charge.
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    \18\ The Exchange states that investments in derivative 
instruments will be made in accordance with the 1940 Act and 
consistent with the Fund's investment objective and policies. To 
limit the potential risk associated with such transactions, the Fund 
will segregate or ``earmark'' assets determined to be liquid by the 
Adviser in accordance with procedures established by the Trust's 
Board of Trustees and in accordance with the 1940 Act (or, as 
permitted by applicable regulation, enter into certain offsetting 
positions) to cover its obligations under derivative instruments. 
These procedures have been adopted consistent with Section 18 of the 
1940 Act and related Commission guidance. In addition, the Fund has 
included appropriate risk disclosure in its offering documents, 
including leveraging risk.
    \19\ In addition, the Adviser represents that the Fund will 
follow an investment strategy utilized by the JP Morgan Diversified 
Alternatives ETF, shares of which were previously approved for 
Exchange listing and trading by the Commission pursuant to Section 
19(b)(2) of the Act. See supra note 15.
    \20\ NYSE Arca Rule 8.600-E(c)(2) requires that the Web site for 
each series of Managed Fund Shares disclose the following 
information regarding the Disclosed Portfolio, to the extent 
applicable: (A) Ticker symbol; (B) CUSIP or other identifier; (C) 
description of the holding; (D) with respect to holdings in 
derivatives, the identity of the security, commodity, index or other 
asset upon which the derivative is based; (E) the strike price for 
any options; (F) the quantity of each security or other asset held 
as measured by (i) par value, (ii) notional value, (iii) number of 
shares, (iv) number of contracts, and (v) number of units; (G) 
maturity date; (H) coupon rate; (I) effective date; (J) market 
value; and (K) percentage weighting of the holding in the portfolio.
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    The Commission also finds that the proposal is consistent with 
Section 11A(a)(1)(C)(iii) of the Act,\21\ which sets forth Congress's 
finding that it is in the public interest and appropriate for the 
protection of investors and the maintenance of fair and orderly markets 
to assure the availability to brokers, dealers, and investors of 
information with respect to quotations for, and transactions in, 
securities. Quotation and last-sale information for the Shares will be 
available via the CTA high-speed line. The Portfolio Indicative Value 
(``PIV'') for the Fund, as defined in NYSE Arca Rule 8.600-E(c)(3), 
will be widely disseminated by one or more major market data vendors at 
least every 15 seconds during the Exchange's Core Trading Session.\22\ 
Information regarding market price and trading volume for the Shares 
will be continually available on a real-time basis throughout the day 
on brokers' computer screens and other electronic services. Information 
regarding the previous day's closing price and trading volume 
information for the Shares will be published daily in the financial 
section of newspapers.
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    \21\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \22\ Currently, it is the Exchange's understanding that several 
major market data vendors display and/or make widely available PIVs 
taken from the CTA or other data feeds.
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    Quotation and last sale information for portfolio holdings of the 
Fund that are U.S. exchange-listed, including preferred stocks and 
REITs, will be available via the CTA high speed line and from the 
exchanges on which they are listed. Quotation and last sale information 
for U.S. and foreign exchange-traded futures will be available from the 
exchanges on which they are listed. Quotation and last sale information 
for exchange-listed options cleared via the Options Clearing 
Corporation will be available via the Options Price Reporting 
Authority. Price information for preferred stocks will also be 
available from one or more major market data vendors or from broker-
dealers. Quotation information for cash equivalents, swaps, obligations 
of supranational agencies, non-exchange-listed investment company 
securities (including money market funds), U.S. Government obligations, 
U.S. Government agency obligations, sovereign obligations, repurchase 
agreements, reverse repurchase agreements, and U.S. and foreign 
corporate debt may be obtained from brokers and dealers who make 
markets in such securities or through nationally recognized pricing 
services through subscription agreements. The U.S. dollar value of 
foreign securities, instruments, and currencies can be derived by using 
foreign currency exchange rate quotations obtained from nationally 
recognized pricing services. Forwards and spot currency price 
information will be available from major market data vendors. In 
addition, the Fund's Web site, which will be publicly available prior 
to the public offering of the Shares, will include a form of the 
prospectus for the Fund and additional data relating to NAV and other 
applicable quantitative information.
    The Commission also believes that the proposal is reasonably 
designed to promote fair disclosure of information that may be 
necessary to price the Shares appropriately and to prevent trading when 
a reasonable degree of transparency cannot be assured. The Exchange 
will obtain a representation from the issuer of the Shares that the NAV 
per Share will be calculated daily and that the NAV and the Disclosed 
Portfolio will be made available to all market participants at the same 
time. Trading in Shares of the Fund will be halted if the circuit-
breaker parameters in NYSE Arca Rule 7.12-E have been reached. Trading 
also may be halted because of market conditions or for reasons that, in 
the view of the Exchange, make trading in the Shares inadvisable. 
Moreover, trading in the Shares will be subject to NYSE Arca Rule 
8.600-E(d)(2)(D), which sets forth circumstances under which Shares of 
the Fund may be halted.
    The Exchange states that it has a general policy prohibiting the 
distribution of material, non-public information by its employees. The 
Exchange states that the Adviser is not registered as a broker-dealer 
but the Adviser is affiliated with a broker-dealer and has implemented 
and will maintain a ``fire wall'' with respect to that broker-dealer 
regarding access to information concerning the composition of and/or 
changes to the Fund's portfolio.\23\ Further, the Commission notes that 
the Reporting Authority that provides the Disclosed Portfolio must 
implement and maintain, or be subject to, procedures designed to 
prevent the use and dissemination of material, non-public information 
regarding the actual components of the portfolio.\24\
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    \23\ The Exchange also represents that an investment adviser to 
an open-end fund is required to be registered under the Investment 
Advisers Act of 1940.
    \24\ See NYSE Arca Rule 8.600-E(d)(2)(B)(ii).

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[[Page 55453]]

    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. In support of this 
proposal, the Exchange represents that:
    (1) Other than Commentary .01(e), the Fund's portfolio will meet 
all other requirements of NYSE Arca Rule 8.600-E.
    (2) The aggregate gross notional value of the Fund's investments in 
OTC derivatives may exceed 20% of Fund assets, calculated based on the 
aggregate gross notional value of such OTC derivatives.
    (3) A minimum of 100,000 Shares of the Fund will be outstanding at 
the commencement of trading on the Exchange.
    (4) 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, and 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 applicable federal securities laws.
    (5) The Exchange or FINRA, on behalf of the Exchange, or both, will 
communicate as needed regarding trading in the Shares, exchange-listed 
equity securities, certain futures, and certain exchange-traded options 
with other markets and other entities that are members of the 
Intermarket Surveillance Group (``ISG''), and the Exchange or FINRA, on 
behalf of the Exchange, or both, may obtain trading information 
regarding trading in such securities and financial instruments from 
such markets and other entities. In addition, the Exchange may obtain 
information regarding trading in such securities and financial 
instruments from markets and other entities that are members of ISG or 
with which the Exchange has in place a comprehensive surveillance 
sharing agreement. FINRA, on behalf of the Exchange, is able to access, 
as needed, trade information for certain fixed income securities held 
by the Fund reported to FINRA's Trade Reporting and Compliance Engine.
    (6) Prior to the commencement of trading, the Exchange will inform 
its Equity Trading Permit Holders in an Information Bulletin of the 
special characteristics and risks associated with trading the Shares. 
Specifically, the Information Bulletin will discuss: (a) The procedures 
for purchases and redemptions of Shares in creation units (and that 
Shares are not individually redeemable); (b) NYSE Arca Rule 9.2-E(a), 
which imposes a duty of due diligence on its Equity Trading Permit 
Holders to learn the essential facts relating to every customer prior 
to trading the Shares; (c) the risks involved in trading the Shares 
during the Early and Late Trading Sessions when an updated PIV will not 
be calculated or publicly disseminated; (d) how information regarding 
the PIV and the Disclosed Portfolio is disseminated; (e) the 
requirement that Equity Trading Permit Holders deliver a prospectus to 
investors purchasing newly issued Shares prior to or concurrently with 
the confirmation of a transaction; and (f) trading information. In 
addition, the Information Bulletin will discuss any exemptive, no-
action, and interpretive relief granted by the Commission from any 
rules under the Act.
    (7) The Exchange has appropriate rules to facilitate transactions 
in the Shares during all trading sessions.
    (8) For initial and continued listing, the Fund will be in 
compliance with Rule 10A-3 under the Act.\25\
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    \25\ See 17 CFR 240.10A-3.
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    (9) The Fund's investments, including derivatives, will be 
consistent with the Fund's investment objective and will not be used to 
enhance leverage. That is, while the Fund will be permitted to borrow 
as permitted under the 1940 Act, the Fund's (and the Subsidiary's) 
investments will not be used to seek performance that is the multiple 
or inverse multiple (e.g., 2Xs and 3Xs) of the Fund's primary broad-
based securities benchmark index (as defined in Form N-1A).
    The Exchange represents that all statements and representations 
made in the filing regarding (1) the description of the portfolio; (2) 
limitations on portfolio holdings or reference assets; or (3) the 
applicability of Exchange listing rules specified in the rule filing 
constitute continued listing requirements for listing the Shares on the 
Exchange. In addition, the issuer 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 \26\ for 
compliance with the continued listing requirements. If the Fund is not 
in compliance with the applicable listing requirements, the Exchange 
will commence delisting procedures under NYSE Arca Rule 5.5-E(m).
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    \26\ The Commission notes that certain proposals for the listing 
and trading of exchange-traded products include a representation 
that the exchange will ``surveil'' for compliance with the continued 
listing requirements. See, e.g., Securities Exchange Act Release No. 
77499 (April 1, 2016), 81 FR 20428, 20432 (April 7, 2016) (SR-BATS-
2016-04). In the context of this representation, it is the 
Commission's view that ``monitor'' and ``surveil'' both mean ongoing 
oversight of 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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    This approval order is based on all of the Exchange's statements 
and representations, including those set forth above and in Amendment 
Nos. 1 and 2.
    For the foregoing reasons, the Commission finds that the proposed 
rule change, as modified by Amendment Nos. 1 and 2, is consistent with 
Section 6(b)(5) of the Act \27\ and Section 11A(a)(1)(C)(iii) of the 
Act \28\ and the rules and regulations thereunder applicable to a 
national securities exchange.
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    \27\ 15 U.S.C. 78f(b)(5).
    \28\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\29\ that the proposed rule change (SR-NYSEArca-2017-86), as 
modified by Amendment Nos. 1 and 2, be, and it hereby is, approved on 
an accelerated basis.
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    \29\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\30\
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    \30\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-25136 Filed 11-20-17; 8:45 am]
BILLING CODE 8011-01-P


