[Federal Register Volume 83, Number 57 (Friday, March 23, 2018)]
[Notices]
[Pages 12824-12833]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-05903]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82899; File No. SR-NYSEArca-2018-15]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Regarding Investments of the PGIM Ultra Short 
Bond ETF, a Series of PGIM ETF Trust Under NYSE Arca Rule 8.600-E

March 19, 2018.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on March 6, 2018, 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 certain changes regarding investments of the 
PGIM Ultra Short Bond ETF (the ``Fund''), a series of PGIM ETF Trust 
(the ``Trust''), under NYSE Arca Rule 8.600-E (``Managed Fund 
Shares''). The proposed change is available on the Exchange's website 
at www.nyse.com, at the principal office of the Exchange, and at the 
Commission's Public Reference Room.

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

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

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

1. Purpose
    The Exchange proposes certain changes, described below under 
``Application of Generic Listing Requirements'', regarding investments 
of the Fund. The shares (``Shares'') of the Fund will be listed and 
traded on the Exchange under Commentary .01 to NYSE Arca Rule 8.600-E, 
which provides generic criteria applicable to the listing and trading 
of Managed Fund Shares.\4\ PGIM Investments LLC (the ``Adviser'') will 
be the investment adviser for the Fund. PGIM Fixed Income (the 
``Subadviser''), a unit of PGIM, Inc., will be the subadviser to the 
Fund. PIMS, the Adviser and the Subadviser are indirect wholly-owned 
subsidiaries of Prudential Financial, Inc. Brown Brothers Harriman & 
Co., which is unaffiliated with PIMS, the Adviser and the Subadviser, 
will serve as the custodian, administrator, and transfer agent 
(``Transfer Agent'') for the Fund.\5\ Prudential Investment Management 
Services LLC (``PIMS''), a registered broker-dealer, will act as the 
distributor (the ``Distributor'') for the Fund's Shares.
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    \4\ A Managed Fund Share is a security that represents an 
interest in an investment company registered under the Investment 
Company Act of 1940 (15 U.S.C. 80a-1) (the ``1940 Act'') organized 
as an open-end investment company or similar entity that invests in 
a portfolio of securities selected by its investment adviser 
consistent with its investment objectives and policies. In contrast, 
an open-end investment company that issues Investment Company Units, 
listed and traded on the Exchange under NYSE Arca Rule 5.2-E(j)(3), 
seeks to provide investment results that correspond generally to the 
price and yield performance of a specific foreign or domestic stock 
index, fixed income securities index or combination thereof.
    \5\ The Trust is registered under the 1940 Act. On January 8, 
2018, the Trust filed with the Commission its registration statement 
on Form N-1A under the Securities Act of 1933 (15 U.S.C. 77a) 
(``Securities Act''), and under the 1940 Act relating to the Fund 
(File Nos. 333-222469 and 811-23324) (``Registration Statement''). 
The Trust will file an amendment to the Registration Statement as 
necessary to conform to the representations in this filing. The 
description of the operation of the Trust and the Fund herein is 
based, in part, on the Registration Statement. In addition, the 
Commission has issued an order granting certain exemptive relief to 
the Trust under the1940 Act. See Investment Company Act Release No. 
31095 (June 24, 2014) (File No. 812-14267).
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    Commentary .06 to Rule 8.600-E provides that, if the investment 
adviser to the investment company issuing Managed Fund Shares is 
affiliated with a broker-dealer, such investment adviser

[[Page 12825]]

shall erect and maintain a ``fire wall'' between the investment adviser 
and the broker-dealer with respect to access to information concerning 
the composition and/or changes to such investment company portfolio. In 
addition, Commentary .06 further requires that personnel who make 
decisions on the open-end fund's portfolio composition must be subject 
to procedures designed to prevent the use and dissemination of material 
nonpublic information regarding the open-end fund's portfolio. 
Commentary .06 to Rule 8.600-E is similar to Commentary .03(a)(i) and 
(iii) to NYSE Arca Rule 5.2-E(j)(3); however, Commentary .06 in 
connection with the establishment and maintenance of a ``fire wall'' 
between the investment adviser and the broker-dealer reflects the 
applicable open-end fund's portfolio, not an underlying benchmark 
index, as is the case with index-based funds.
    The Adviser and the Subadviser are not registered as broker-dealers 
but are affiliated with PIMS, a broker-dealer, and have implemented and 
will maintain a ``fire wall'' with respect to such broker-dealer 
regarding access to information concerning the composition and/or 
changes to the Fund's portfolio. In the event (a) the Adviser or the 
Subadviser 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 and/or changes to the portfolio, 
and will be subject to procedures, each designed to prevent the use and 
dissemination of material non-public information regarding such 
portfolio.
PGIM Ultra Short Bond ETF
Principal Investments
    According to the Registration Statement, the investment objective 
of the Fund will be to seek to provide total return through a 
combination of current income and capital appreciation, consistent with 
preservation of capital. The Fund will seek to achieve its investment 
objective by investing primarily in a portfolio of U.S. dollar 
denominated short-term fixed, variable and floating rate debt 
instruments. Under normal market conditions,\6\ the Fund will invest at 
least 80% of its net assets (plus any borrowings for investment 
purposes) in a portfolio of financial instruments consisting of (i) the 
Principal Investment Instruments (defined below) and (ii) derivatives 
\7\ that (A) provide exposure to such Principal Investment Instruments, 
or (B) are used to enhance returns, manage portfolio duration, or 
manage the risk of securities price fluctuations, as further described 
below (together, the ``Principal Investments'').
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    \6\ The term ``normal market conditions'' is defined in NYSE 
Arca Rule 8.600-E(c)(5). In response to adverse market, economic or 
political conditions, the Fund may take a temporary defensive 
position and invest up to 100% of its assets in cash and money 
market instruments, which include shares of Money Market Funds 
(defined below), shares of the Affiliated Short Term Bond Fund 
(defined below), short-term obligations of, or securities guaranteed 
by, the U.S. Government, its agencies or instrumentalities, high-
quality obligations of U.S. or foreign banks and corporations, or 
any other securities or instruments.
    \7\ The Fund's investments in derivatives will include 
investments in both listed derivatives and over-the-counter 
(``OTC'') derivatives, as those terms are defined in Commentary 
.01(d) and (e) to NYSE Arca Rule 8.600-E.
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    The Fund may invest in ``Principal Investment Instruments'' 
consisting of the following instruments (each of which shall be 
denominated in U.S. dollars):
     U.S. Government securities, including bills, notes, bonds 
and other obligations issued or guaranteed by the U.S. Government, the 
U.S. Treasury or other agencies and instrumentalities of the U.S. 
Government, including inflation-indexed bonds issued by the U.S. 
Government, Treasury Inflation-Protected Securities (``TIPS''), and 
Separate Trading of Registered Interest and Principal of Securities 
(``STRIPS'');
     U.S. and non-U.S. corporate debt securities, including 
corporate bonds, debentures, notes, and other similar corporate debt 
instruments;
     U.S. and non-U.S. bank obligations, including certificates 
of deposit, bankers' acceptances, fixed time deposits and Eurodollar 
obligations;
     bills, notes, bonds and other obligations of foreign 
governments or supranational entities or their subdivisions, agencies, 
and instrumentalities;
     Asset-backed securities (``ABS''), including mortgage-
backed securities (``MBS''); \8\
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    \8\ The ABS (including MBS) in which the Fund will invest 
include both (i) ABS (including MBS) issued by the U.S. Government, 
an agency of the U.S. Government, or a government sponsored entity 
(``GSE'') and (ii) non-U.S. Government, non-agency, non-GSE and 
other privately issued ABS (including MBS) (``Private ABS/MBS''), 
provided that, as discussed below, the Fund will not invest more 
than 20% of the Fund's total assets in Private ABS/MBS.
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     debt securities issued by states or local governments and 
their agencies, authorities and other government-sponsored enterprises;
     loans (secured or unsecured) arranged through private 
negotiations between a U.S. or non-U.S. company as the borrower and one 
or more financial institutions as lenders, which investments can be in 
the form of loan participations or assignments;
     funding agreements;
     shares of ``Money Market Funds''; \9\
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    \9\ ``Money Market Funds'' include money market funds registered 
under the 1940 Act and money market funds that are not registered 
under the 1940 Act but that comply with Rule 2a-7 under the 1940 
Act.
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     shares of the Prudential Core Ultra Short Bond Fund \10\ 
or, if the Prudential Core Ultra Short Bond Fund is no longer offered 
with the same investment objective, shares of any successor fund or 
other affiliated open-end investment company registered under the 1940 
Act with a substantially similar investment objective (the ``Affiliated 
Short Term Bond Fund''); \11\
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    \10\ The Prudential Core Ultra Short Bond Fund is a series of 
Prudential Investment Portfolios 2, which is an open-end investment 
company registered under the 1940 Act. The Fund's Subadviser is also 
the subadviser to the Affiliated Short Term Bond Fund. The 
investment objective of the Prudential Core Ultra Short Bond Fund is 
to seek current income consistent with the preservation of capital 
and the maintenance of liquidity. Like Rule 2a-7 money market funds 
that are defined as cash equivalents pursuant to Commentary .01(c) 
to Rule 8.600-E, the Prudential Core Ultra Short Bond Fund invests 
primarily in money market obligations as defined by Rule 2a-7. Rule 
2a-7 defines money market obligations as obligations that mature in 
397 days or less. Additionally, the Prudential Core Ultra Short Bond 
Fund seeks investments that are expected to experience minimal 
fluctuations in value.
    \11\ The Fund's investment in the Affiliated Short Term Bond 
Fund is described further in ``Application of Generic Listing 
Requirements,'' infra.
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     commercial paper issued by U.S. and non-U.S. companies; 
and
     credit-linked securities and structured notes issued by 
U.S. or non-U.S. issuers that reference debt or fixed income securities 
or derivatives referencing debt or fixed income securities; and
     cash and cash equivalents.\12\
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    \12\ For purposes of this filing, the term ``cash equivalents'' 
includes the short-term instruments enumerated in Commentary .01(c) 
to NYSE Arca Rule 8.600-E. Under normal market conditions, the Fund 
may invest a significant portion of its assets in cash and cash 
equivalents.
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    The Fund may, without limitation, enter into repurchase 
arrangements, purchase and sale contracts and buybacks and dollar rolls 
and short sales. The Fund may also purchase securities and other 
instruments under when-issued, delayed delivery, to be announced or 
forward commitment transactions, where the securities or instruments 
will not be delivered or paid for immediately. To the extent required 
under applicable federal

[[Page 12826]]

securities laws (including the 1940 Act), rules, and interpretations 
thereof, the Fund will ``set aside'' liquid assets or engage in other 
measures to ``cover'' open positions held in connection with the 
foregoing types of transactions, as well as derivative transactions.
    The Fund may invest in derivatives to (i) provide exposure to the 
Principal Investment Instruments and (ii) enhance returns, manage 
portfolio duration, or (iii) manage the risk of securities price 
fluctuations. Derivatives that the Fund may enter into include: Over-
the-counter deliverable and non-deliverable foreign exchange forward 
contracts; listed futures contracts on securities (including Treasury 
Securities and foreign government securities), indices, interest rates, 
financial rates and currencies; listed or OTC options (including puts 
or calls) or swaptions (i.e., options to enter into a swap) on 
securities, indices, interest rates, financial rates, currencies and 
futures contracts; and listed or OTC swaps (including total return 
swaps) on securities, indices, interest rates, financial rates, 
currencies and debt and credit default swaps on single names, baskets 
and indices (both as protection seller and as protection buyer).
Other Investments
    While the Fund, under normal market conditions, invests at least 
80% of its investable assets in the Principal Investments described 
above, the Fund may invest its remaining assets in the following ``Non-
Principal Investments'':
     exchange-traded funds (``ETFs'') that provide exposure to 
the Principal Investment Instruments; \13\
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    \13\ For purposes of this filing, ETFs include Investment 
Company Units (as described in NYSE Arca Rule 5.2(j)(3)-E), 
Portfolio Depositary Receipts (as described in NYSE Arca Rule 8.100-
E), and Managed Fund Shares (as described in NYSE Arca Rule 8.600-
E). All ETFs in which the Fund will invest will be listed and traded 
on national securities exchanges.
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     convertible securities; \14\ and
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    \14\ Convertible securities entitle the holder to receive 
interest payments paid on corporate debt securities or the dividend 
preference on a preferred stock until such time as the convertible 
security matures or is redeemed or until the holder elects to 
exercise the conversion privilege.
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     securities and other instruments that would otherwise 
qualify as Principal Investment Instruments but for being denominated 
in non-U.S. currency.
Use of Derivatives by the Fund
    The Fund may invest in the types of derivatives described in the 
``Principal Investments'' section above to (i) provide exposure to the 
Principal Investment Instruments \15\ and (ii) enhance returns, manage 
portfolio duration, or (iii) manage the risk of securities price 
fluctuations. Investments in derivative instruments will be made in 
accordance with the 1940 Act and consistent with the Fund's investment 
objective and policies.
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    \15\ Because the markets for the Principal Investment 
Instruments, or the Principal Investment Instruments 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 to 
Principal Investment Instruments.
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    To limit the potential risk associated with such transactions, the 
Fund will enter into offsetting transactions or segregate or 
``earmark'' assets determined to be liquid by the Adviser in accordance 
with procedures established by the Trust's Board of Trustees (the 
``Board'') and in accordance with the 1940 Act or as permitted by 
applicable Commission guidance. 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. 
Leveraging risk is the risk that certain transactions of the Fund, 
including the Fund's use of derivatives, may give rise to leverage, 
causing the Fund to be more volatile than if it had not been leveraged.
Net Asset Value and Derivatives Valuation Methodology for Purposes of 
Determining Net Asset Value
    The net asset value (``NAV'') of the Shares of the Fund is 
determined once each day the New York Stock Exchange (the ``NYSE'') is 
open, as of the close of its regular trading session (normally 4:00 
p.m., Eastern Time (``E.T.'')). The per Share NAV of the Fund will be 
computed by dividing the net assets by the number of the Fund's Shares 
outstanding.
Impact on Arbitrage Mechanism
    The Adviser and the Subadviser believe there will be minimal, if 
any, impact to the arbitrage mechanism as a result of the Fund's use of 
derivatives. The Adviser and the Subadviser understand that market 
makers and participants should be able to value derivatives as long as 
the positions are disclosed with relevant information. The Adviser and 
the Subadviser believe that the price at which Shares of the Fund trade 
will continue to be disciplined by arbitrage opportunities created by 
the ability to purchase or redeem Shares of the Fund at their NAV, 
which should ensure that Shares of the Fund will not trade at a 
material discount or premium in relation to their NAV.
Creation and Redemption of Shares
    The Fund will issue and sell its Shares only in aggregations of at 
least 25,000 Shares (each aggregation is called a ``Creation Unit'') on 
a continuous basis through PIMS at the NAV next determined after 
receipt of an order in proper form on any Business Day.\16\
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    \16\ A ``Business Day'' with respect to the Fund is any day on 
which the Exchange is open for business.
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    The consideration for a purchase of Creation Units generally will 
consist of a cash deposit but may include the in-kind deposit of a 
portfolio of securities and other investments (the ``Deposit 
Instruments'') included in the Fund and an amount of cash computed as 
described below (the ``Cash Amount''). The Cash Amount together with 
the Deposit Instruments, as applicable, are referred to as the 
``Portfolio Deposit,'' which represents the minimum initial and 
subsequent investment amount for a Creation Unit of the Fund.
    The Cash Amount would be an amount equal to the difference between 
the NAV of the Shares (per Creation Unit) and the ``Deposit Amount,'' 
which is an amount equal to the aggregate market value of the Deposit 
Instruments, and serves to compensate for any differences between the 
NAV per Creation Unit and the Deposit Amount.
    The Transfer Agent, through the National Securities Clearing 
Corporation (``NSCC''), makes available on each Business Day, 
immediately prior to the opening of business on the Exchange (currently 
9:30 a.m. E.T.), the list of the names and the required number of 
securities for each Deposit Instrument to be included in the current 
Portfolio Deposit (based on information at the end of the previous 
Business Day), as well as information regarding the Cash Amount for the 
Fund. Such Portfolio Deposit is applicable, subject to any adjustments 
as described below, in order to effect creations of Creation Units of 
the Fund until such time as the next-announced Portfolio Deposit 
composition is made available.
    All orders to create Creation Units generally must be received by 
the Distributor no later than the closing time of the regular trading 
session on the Exchange (``Closing Time'') (ordinarily 4:00 p.m. E.T.) 
on the date such order is placed in order for creation of Creation 
Units to be effected based on the NAV of the Fund as determined on such 
date.

[[Page 12827]]

    In addition, the Trust reserves the right to accept a basket of 
securities or cash that differs from Deposit Instruments or to permit 
the substitution of an amount of cash (i.e., a ``cash in lieu'' amount) 
to be added to the Cash Amount to replace any Deposit Instrument which 
may, among other reasons, not be available in sufficient quantity for 
delivery, not be permitted to be re-registered in the name of the Trust 
as a result of an in-kind creation order pursuant to local law or 
market convention or which may not be eligible for transfer through the 
Clearing Process (defined below), or which may not be eligible for 
trading by a Participating Party (defined below).
    To be eligible to place orders with the Distributor to create 
Creation Units of the Fund, an entity or person either must be (1) a 
``Participating Party,'' i.e., a broker-dealer or other participant in 
the clearing process through the Continuous Net Settlement System of 
the NSCC (the ``Clearing Process''); or (2) a DTC Participant; which, 
in either case, must have executed an agreement with the Distributor 
(as it may be amended from time to time in accordance with its terms) 
(``Participant Agreement''). A Participating Party and DTC Participant 
are collectively referred to as an ``Authorized Participant.''
    A standard creation transaction fee is imposed to offset the 
transfer and other transaction costs associated with the issuance of 
Creation Units.
Redemption of Creation Units
    Shares may be redeemed only in Creation Units at their NAV next 
determined after receipt of a redemption request in proper form by 
PIMS, only on a Business Day and only through a Participating Party or 
DTC Participant who has executed a Participant Agreement. The Trust 
will not redeem Shares in amounts less than Creation Units. Beneficial 
owners also may sell Shares in the secondary market, but must 
accumulate enough Shares to constitute a Creation Unit in order to have 
such Shares redeemed by the Trust.
    The Transfer Agent, through NSCC, makes available immediately prior 
to the opening of business on the Exchange on each Business Day, the 
identity of the Fund's securities and/or an amount of cash that will be 
applicable (subject to possible amendment or correction) to redemption 
requests received in proper form on that day. The Fund's securities 
received on redemption (``Redemption Instruments'') may not be 
identical to Deposit Instruments that are applicable to creations of 
Creation Units. Unless cash redemptions are permitted or required for 
the Fund, the redemption proceeds for a Creation Unit generally consist 
of Redemption Instruments as announced by the Transfer Agent on the 
Business Day of the request for redemption, plus cash in an amount 
equal to the difference between the NAV of the Shares being redeemed, 
as next determined after a receipt of a request in proper form, and the 
value of the Redemption Instruments, less the fixed transaction fee and 
any variable transaction fees.
    In order to redeem Creation Units of the Fund, an Authorized 
Participant must submit an order to redeem for one or more Creation 
Units. An order to redeem Creation Units of a Fund using the Clearing 
Process generally must be submitted to the Distributor not later than 
4:00 p.m. E.T. on the Business Day of the request for redemption in 
order for such order to be effected based on the NAV of the Fund as 
next determined. An order to redeem Creation Units of the Fund using 
the NSCC Clearing Process made in proper form but received by the Fund 
after 4:00 p.m. E.T. will be deemed received on the next Business Day 
immediately following the day on which such order request is 
transmitted.
Application of Generic Listing Requirements
    The Exchange is submitting this proposed rule change because the 
changes described below would result in the portfolio for the Fund not 
meeting all of the ``generic'' listing requirements of Commentary .01 
to NYSE Arca Rule 8.600-E applicable to the listing of Managed Fund 
Shares. The Fund's portfolio would meet all such requirements except 
for those set forth in Commentary .01(b)(5) \17\ and Commentary 
.01(c).\18\ Specifically, the Exchange proposes that:
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    \17\ Commentary .01(b)(5) to NYSE Arca Rule 8.600-E provides 
that non-agency, non-government sponsored entity and privately 
issued mortgage-related and other asset-backed securities components 
of a portfolio may not account, in the aggregate, for more than 20% 
of the weight of the fixed income portion of the portfolio.
    \18\ Commentary .01(c) to NYSE Arca Rule 8.600-E provides that a 
fund may invest without limit in cash equivalents which include, 
among other investments, money market funds. Non-money market mutual 
funds are not included in the definition, and are not otherwise 
permitted as investments under Commentary .01.
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     The Fund will not comply with the requirement in 
Commentary .01(b)(5) that investments in non-agency, non-government 
sponsored entity and privately issued mortgage-related and other asset-
backed securities (i.e., Private ABS/MBS) not account, in the 
aggregate, for more than 20% of the weight of the fixed income portion 
of the portfolio. Instead, the Exchange proposes that Private ABS/MBS 
will, in the aggregate, not exceed more than 20% of the total assets of 
the Fund.
     The Fund will not comply with the requirement that 
securities that in aggregate account for at least 90% of the fixed 
income weight of the portfolio meet one of the criteria in Commentary 
.01(b)(4).\19\ Instead, the Exchange proposes that fixed income 
securities that do not meet any of the criteria in Commentary .01(b)(4) 
will not exceed 10% of the total assets of the Fund.
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    \19\ Commentary .01(b)(4) provides that component securities 
that in the aggregate account for at least 90% of the fixed income 
weight of the portfolio must be either: (a) From issuers that are 
required to file reports pursuant to Sections 13 and 15(d) of the 
Act; (b) from issuers that have a worldwide market value of its 
outstanding common equity held by non-affiliates of $700 million or 
more; (c) from issuers that have outstanding securities that are 
notes, bonds debentures, or evidence of indebtedness having a total 
remaining principal amount of at least $1 billion; (d) exempted 
securities as defined in Section 3(a)(12) of the Act; or (e) from 
issuers that are a government of a foreign country or a political 
subdivision of a foreign country.
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     The Fund may invest in shares of the Affiliated Short Term 
Bond Fund, which are equity securities. Therefore, to the extent the 
Fund invests in the Affiliated Short Term Bond Fund or other non-
exchange-traded open-end management investment company securities, the 
Fund will not comply with the requirements of Commentary .01(a)(1) to 
NYSE Arca Rule 8.600-E (U.S. Component Stocks) with respect to its 
equity securities holdings. Instead, the Exchange proposes that such 
securities not be required to meet the requirements of Commentary 
.01(a)(1)(A) through (E) to Rule 8.600-E.
    Deviations from the generic requirements are necessary for the Fund 
to achieve its investment objective in a manner that is cost-effective 
and that maximizes investors' returns. Further, the proposed 
alternative requirements are narrowly tailored to allow the Fund to 
achieve its investment objective in manner that is consistent with the 
principles of Section 6(b)(5) of the Act. As a result, it is in the 
public interest to approve listing and trading of Shares of the Fund on 
the Exchange pursuant to the requirements set forth herein.
    As noted above, the Fund will not comply with the requirement in 
Commentary .01(b)(5) that investments in non-agency, non-government 
sponsored entity and privately issued mortgage-related and other asset-
backed securities (i.e., Private ABS/MBS) not account, in the 
aggregate, for more than 20% of the weight of the fixed income portion 
of the portfolio. Instead, the

[[Page 12828]]

Exchange proposes that Private ABS/MBS will, in the aggregate, not 
exceed more than 20% of the total assets of the Fund.
    The Exchange believes that this alternative requirement is 
appropriate because the Fund's investment in Private ABS/MBS is 
expected to provide the Fund with benefits associated with increased 
diversification, as Private ABS/MBS investments tend to be less 
correlated to interest rates than many other fixed income securities. 
The Fund's investment in Private ABS/MBS will be subject to the Fund's 
liquidity procedures as adopted by the Board, and the Adviser does not 
expect that investments in Private ABS/MBS of up to 20% of the total 
assets of the Fund will have any material impact on the liquidity of 
the Fund's investments. The Exchange notes that the Commission has 
previously approved the listing of actively managed ETFs that can 
invest 20% of their total assets in non-U.S. Government, non-agency, 
non-GSE and other privately issued ABS and MBS (i.e., Private ABS/
MBS).\20\ Thus, the Exchange believes that it is appropriate to expand 
the limit on the Fund's investments in Private ABS/MBS set forth in 
Commentary .01(b)(5) of the generic listing standards.
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    \20\ See, e.g., Securities Exchange Act Release Nos. 80946 (June 
15, 2017) 82 FR 28126 (June 20, 2017) (SR-NASDAQ-2017-039) 
(permitting the Guggenheim Limited Duration ETF to invest up to 20% 
of its total assets in privately-issued, non-agency and non-GSE ABS 
and MBS); 76412 (November 10, 2015), 80 FR 71880 (November 17, 2015) 
(SR-NYSEArca-2015-111) (permitting the RiverFront Strategic Income 
Fund to invest up to 20% of its assets in privately-issued, non-
agency and non-GSE ABS and MBS); 74814 (April 27, 2015), 80 FR 24986 
(May 1, 2015) (SR-NYSEArca-2014-017) (permitting the Guggenheim 
Enhanced Short Duration ETF to invest up to 20% of its assets in 
privately-issued, non-agency and non-GSE ABS and MBS); 74109 
(January 21, 2015), 80 FR 4327 (January 27, 2015) (SR-NYSEArca-2014-
134) (permitting the IQ Wilshire Alternative Strategies ETF to 
invest up to 20% of its total assets in MSB and other ABS, without 
any limit on the type of such MBS and ABS).
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    The Fund will not comply with the requirement that securities that 
in aggregate account for at least 90% of the fixed income weight of the 
portfolio meet one of the criteria in Commentary .01(b)(4).\21\ 
Instead, the Exchange proposes that fixed income securities that do not 
meet any of the criteria in Commentary .01(b)(4) will not exceed 10% of 
the total assets of the Fund. The Exchange notes that the Commission 
has previously approved the listing of Managed Fund Shares with similar 
investment objectives and strategies without imposing requirements that 
a certain percentage of such funds' securities meet one of the criteria 
set forth in Commentary .01(b)(4).\22\ Thus, the Exchange believes that 
it is appropriate to expand the limit on investments in fixed income 
securities that do not satisfy the criteria in Commentary .01(b)(4) of 
the generic listing standards, as described above.
---------------------------------------------------------------------------

    \21\ Commentary .01(b)(4) provides that component securities 
that in the aggregate account for at least 90% of the fixed income 
weight of the portfolio must be either: (a) From issuers that are 
required to file reports pursuant to Sections 13 and 15(d) of the 
Act; (b) from issuers that have a worldwide market value of its 
outstanding common equity held by non-affiliates of $700 million or 
more; (c) from issuers that have outstanding securities that are 
notes, bonds debentures, or evidence of indebtedness having a total 
remaining principal amount of at least $1 billion; (d) exempted 
securities as defined in Section 3(a)(12) of the Act; or (e) from 
issuers that are a government of a foreign country or a political 
subdivision of a foreign country.
    \22\ See, e.g., Exchange Act Release Nos. 67894 (September 20, 
2012) 77 FR 59227 (September 26, 2012) (SR-BATS-2012-033) (order 
approving the listing and trading of shares of the iShares Short 
Maturity Bond Fund); 70342 (September 6, 2013), 78 FR 56256 
(September 12, 2013) (SR-NYSEArca-2013-71) (order approving the 
listing and trading of shares of the SPDR SSgA Ultra Short Term Bond 
ETF, SPDR SSgA Conservative Ultra Short Term Bond ETF and SPDR SSgA 
Aggressive Ultra Short Term Bond ETF).
---------------------------------------------------------------------------

    The Fund may invest in shares of the Affiliated Short Term Bond 
Fund, which are equity securities. Therefore, to the extent the Fund 
invests in the Affiliated Short Term Bond Fund or other non-exchange-
traded open-end management investment company securities, the Fund will 
not comply with the requirements of Commentary .01(a)(1) to NYSE Arca 
Rule 8.600-E (U.S. Component Stocks) with respect to its equity 
securities holdings. The Exchange believes, however, that it is 
appropriate and in the public interest to approve listing and trading 
of Shares of the Fund notwithstanding that the Fund's holdings in such 
securities would not meet the requirements of Commentary .01(a)(1)(A) 
through (E) to Rule 8.600-E.\23\ Investments in the Affiliated Short 
Term Bond Fund and other non-exchange-traded open-end management 
investment company securities will not exceed 25% of the total assets 
of the Fund. The Fund's investment in the Affiliated Short Term Bond 
Fund will be utilized in order to obtain income on short-term cash 
balances while awaiting attractive investment opportunities, to provide 
liquidity in preparation for anticipated redemptions or for defensive 
purposes, which will allow the Fund to obtain the benefits of a more 
diversified portfolio available in the Affiliated Short Term Bond Fund 
than might otherwise be available through direct investments in Money 
Market Funds.\24\
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    \23\ Commentary .01(a) to Rule 8.600-E specifies the equity 
securities accommodated by the generic criteria in Commentary 
.01(a), namely, U.S. Component Stocks (as described in Rule 5.2-
E(j)(3)) and Non-U.S. Component Stocks (as described in Rule 5.2-
E(j)(3)). Commentary .01(a)(1) to Rule 8.600-E (U.S. Component 
Stocks) provides that the component stocks of the equity portion of 
a portfolio that are U.S. Component Stocks shall meet the following 
criteria initially and on a continuing basis: (A) Component stocks 
(excluding Derivative Securities Products and Index-Linked 
Securities) that in the aggregate account for at least 90% of the 
equity weight of the portfolio (excluding such Derivative Securities 
Products and Index-Linked Securities) each shall have a minimum 
market value of at least $75 million; (B) Component stocks 
(excluding Derivative Securities Products and Index-Linked 
Securities) that in the aggregate account for at least 70% of the 
equity weight of the portfolio (excluding such Derivative Securities 
Products and Index-Linked Securities) each shall have a minimum 
monthly trading volume of 250,000 shares, or minimum notional volume 
traded per month of $25,000,000, averaged over the last six months; 
(C) The most heavily weighted component stock (excluding Derivative 
Securities Products and Index-Linked Securities) shall not exceed 
30% of the equity weight of the portfolio, and, to the extent 
applicable, the five most heavily weighted component stocks 
(excluding Derivative Securities Products and Index-Linked 
Securities) shall not exceed 65% of the equity weight of the 
portfolio; (D) Where the equity portion of the portfolio does not 
include Non-U.S. Component Stocks, the equity portion of the 
portfolio shall include a minimum of 13 component stocks; provided, 
however, that there shall be no minimum number of component stocks 
if (i) one or more series of Derivative Securities Products or 
Index-Linked Securities constitute, at least in part, components 
underlying a series of Managed Fund Shares, or (ii) one or more 
series of Derivative Securities Products or Index-Linked Securities 
account for 100% of the equity weight of the portfolio of a series 
of Managed Fund Shares; and (E) Except as provided herein, equity 
securities in the portfolio shall be U.S. Component Stocks listed on 
a national securities exchange and shall be NMS Stocks as defined in 
Rule 600 of Regulation NMS under the Securities Exchange Act of 
1934.
    \24\ For purposes of this section of the filing, non-exchange-
traded securities of other registered investment companies do not 
include money market funds, which are cash equivalents under 
Commentary .01(c) to Rule 8.600-E and for which there is no 
limitation in the percentage of the portfolio invested in such 
securities. In addition, the Commission has issued orders granting 
exemptive relief under the 1940 Act that apply to the Trust. See 
Investment Company Act Release No. 24179 (December 1, 1999) (File 
No. 812-11354) with respect to investments by a fund in money market 
or ultra-short bond funds for cash management purposes) and 
Investment Company Act Release No. 30200 (September 11, 2012) (File 
No. 812-13993) with respect to investments by a fund in other 
registered investment companies.
---------------------------------------------------------------------------

    Moreover, such investments, which may include mutual funds that 
invest, for example, principally in fixed income securities, would be 
utilized to help the Fund meet its investment objective and to equitize 
cash in the short term. The Fund will invest in such securities only to 
the extent that those investments would be consistent with the 
requirements of Section 12(d)(1) of the 1940 Act and the rules 
thereunder.\25\

[[Page 12829]]

Because such securities must satisfy applicable 1940 Act 
diversification requirements, and have a net asset value based on the 
value of securities and financial assets the investment company holds, 
the Exchange believes it is both unnecessary and inappropriate to apply 
to such investment company securities the criteria in Commentary 
.01(a)(1).
---------------------------------------------------------------------------

    \25\ The Commission has previously approved proposed rule 
changes under Section 19(b) of the Act for series of Managed Fund 
Shares that may invest in non-exchange traded investment company 
securities to the extent permitted by Section 12(d)(1) of the 1940 
Act and the rules thereunder. See, e.g., Securities Exchange Act 
Release No. 78414 (July 26, 2016), 81 FR 50576 (August 1, 2016) (SR-
NYSEArca-2016-79) (order approving listing and trading of shares of 
the Virtus Japan Alpha ETF under NYSE Arca Rule 8.600-E).
---------------------------------------------------------------------------

    The Exchange notes that Commentary .01(a)(1)(A) through (D) to Rule 
8.600-E exclude certain ``Derivative Securities Products'' that are 
exchange-traded investment company securities, including Investment 
Company Units (as described in NYSE Arca Rule 5.2-E(j)(3)), Portfolio 
Depositary Receipts (as described in NYSE Arca Rule 8.100-E)) and 
Managed Fund Shares (as described in NYSE Arca Rule 8.600-E)).\26\ In 
its 2008 Approval Order approving amendments to Commentary .01(a) to 
Rule 5.2(j)(3) to exclude Derivative Securities Products from certain 
provisions of Commentary .01(a) (which exclusions are similar to those 
in Commentary .01(a)(1) to Rule 8.600-E), the Commission stated that 
``based on the trading characteristics of Derivative Securities 
Products, it may be difficult for component Derivative Securities 
Products to satisfy certain quantitative index criteria, such as the 
minimum market value and trading volume limitations.'' The Exchange 
notes that it would be difficult or impossible to apply to mutual fund 
shares certain of the generic quantitative criteria (e.g., market 
capitalization, trading volume, or portfolio criteria) in Commentary 
.01 (A) through (D) applicable to U.S. Component Stocks. For example, 
the requirements for U.S. Component Stocks in Commentary .01(a)(1)(B) 
that there be minimum monthly trading volume of 250,000 shares, or 
minimum notional volume traded per month of $25,000,000, averaged over 
the last six months are tailored to exchange-traded securities (i.e., 
U.S. Component Stocks) and not to mutual fund shares, which do not 
trade in the secondary market and for which no such volume information 
is reported. In addition, Commentary .01(a)(1)(A) relating to minimum 
market value of portfolio component stocks, Commentary .01(a)(1)(C) 
relating to weighting of portfolio component stocks, and Commentary 
.01(a)(1)(D) relating to minimum number of portfolio components are not 
appropriately applied to open-end management investment company 
securities; open-end investment companies hold multiple individual 
securities as disclosed publicly in accordance with the 1940 Act, and 
application of Commentary .01(A) through (D) would not serve the 
purposes served with respect to U.S. Component Stocks, namely, to 
establish minimum liquidity and diversification criteria for U.S. 
Component Stocks held by series of Managed Fund Shares.
---------------------------------------------------------------------------

    \26\ The Commission initially approved the Exchange's proposed 
rule change to exclude ``Derivative Securities Products'' (i.e., 
Investment Company Units and securities described in Section 2 of 
Rule 8) and ``Index-Linked Securities (as described in Rule 5.2-
E(j)(6)) from Commentary .01(a)(A)(1) through (4) to Rule 5.2-
E(j)(3) in Securities Exchange Act Release No. 57751 (May 1, 2008), 
73 FR 25818 (May 7, 2008) (SR-NYSEArca-2008-29) (Order Granting 
Approval of a Proposed Rule Change, as Modified by Amendment No. 1 
Thereto, to Amend the Eligibility Criteria for Components of an 
Index Underlying Investment Company Units) (``2008 Approval 
Order''). See also Securities Exchange Act Release No. 57561 (March 
26, 2008), 73 FR 17390 (April 1, 2008) (Notice of Filing of Proposed 
Rule Change and Amendment No. 1 Thereto to Amend the Eligibility 
Criteria for Components of an Index Underlying Investment Company 
Units). The Commission subsequently approved generic criteria 
applicable to listing and trading of Managed Fund Shares, including 
exclusions for Derivative Securities Products and Index-Linked 
Securities in Commentary .01(a)(1)(A) through (D), in Securities 
Exchange Act Release No. 78397 (July 22, 2016), 81 FR 49320 (July 
27, 2016) (Order Granting Approval of Proposed Rule Change, as 
Modified by Amendment No. 7 Thereto, Amending NYSE Arca Rule 8.600-E 
To Adopt Generic Listing Standards for Managed Fund Shares). See 
also Amendment No. 7 to SR-NYSEArca-2015-110, available at https://www.sec.gov/comments/sr-nysearca-2015-110/nysearca2015110-9.pdf.
---------------------------------------------------------------------------

    The Exchange notes that the Commission has previously approved the 
listing of Managed Fund Shares with similar investment objectives and 
strategies where such funds were permitted to invest in the shares of 
other registered investment companies that are not ETFs or money market 
funds.\27\ Thus, the Exchange believes that it is appropriate to permit 
the Fund to invest up to 25% of its total assets in the Affiliated 
Short Term Bond Fund or other non-exchange-traded open-end management 
investment company securities.
---------------------------------------------------------------------------

    \27\ See, e.g., Exchange Act Release Nos. 79053 (October 5, 
2016), 81 FR 70468 (October 12, 2016) (SR-BatsBZX-2016-35) 
(permitting the JPMorgan Global Bond Opportunities ETF to invest in 
``investment company securities that are not ETFs''); 74297 
(February 18, 2015), 80 FR 9788 (February 24, 2015) (SR-BATS-2014-
056) (permitting the U.S. Fixed Income Balanced Risk ETF to invest 
in ``exchange traded and non-exchange traded investment companies 
(including investment companies advised by the Adviser or its 
affiliates) that invest in such Fixed Income Securities'').
---------------------------------------------------------------------------

    The Exchange accordingly believes that it is appropriate and in the 
public interest to approve listing and trading of Shares of the Fund on 
the Exchange notwithstanding that the Fund would not meet the 
requirements of Commentary .01(a)(1), (b)(4) and (b)(5) to Rule 8.600-
E. The Exchange notes that, other than Commentary .01(b)(4) and (b)(5) 
to Rule 8.600-E, the Fund's portfolio will meet all other requirements 
of Rule 8.600.
Availability of Information
    The Fund's website (www.pgiminvestments.com) will include the 
prospectus for the Fund that may be downloaded. The Fund's website will 
include additional quantitative information updated on a daily basis 
including, for the Fund, (1) daily trading volume, the prior Business 
Day's reported closing price, NAV and midpoint of the bid/ask spread at 
the time of calculation of such NAV (the ``Bid/Ask Price''),\28\ and a 
calculation of the premium and discount of the Bid/Ask Price against 
the NAV, and (2) data in chart format displaying the frequency 
distribution of discounts and premiums of the daily Bid/Ask Price 
against the NAV, within appropriate ranges, for each of the four 
previous calendar quarters. On each Business Day, before commencement 
of trading in Shares in the Core Trading Session on the Exchange, the 
Fund will disclose on its website the Disclosed Portfolio as defined in 
NYSE Arca Rule 8.600-E(c)(2) that forms the basis for the Fund's 
calculation of NAV at the end of the Business Day.\29\
---------------------------------------------------------------------------

    \28\ The Bid/Ask Price of the Fund's Shares will be determined 
using the mid-point of the highest bid and the lowest offer on the 
Exchange as of the time of calculation of the Fund's NAV. The 
records relating to Bid/Ask Prices will be retained by the Fund and 
its service providers.
    \29\ Under accounting procedures followed by the Fund, trades 
made on the prior Business Day (``T'') will be booked and reflected 
in NAV on the current Business Day (``T+1''). Accordingly, the Fund 
will be able to disclose at the beginning of the Business Day the 
portfolio that will form the basis for the NAV calculation at the 
end of the Business Day.
---------------------------------------------------------------------------

    On a daily basis, the Fund will disclose the information required 
under NYSE Arca Rule 8.600-E(c)(2) to the extent applicable. The 
website information will be publicly available at no charge.
    In addition, a basket composition file, which includes the security 
names and share quantities, if applicable, required to be delivered in 
exchange for the Fund's Shares, together with estimates and actual cash 
components, will be publicly disseminated daily prior to the opening of 
the Exchange via the NSCC. The basket represents one Creation Unit of 
the Fund. Authorized Participants may refer to the basket composition 
file

[[Page 12830]]

for information regarding Fixed Income Instruments, and any other 
instrument that may comprise the Fund's basket on a given day.
    Investors can also obtain the Trust's Statement of Additional 
Information (``SAI''), the Fund's Shareholder Reports, and the Fund's 
Forms N-CSR and Forms N-SAR, filed twice a year. The Fund's SAI and 
Shareholder Reports will be available free upon request from the Trust, 
and those documents and the Form N-CSR, Form N-PX and Form N-SAR may be 
viewed on-screen or downloaded from the Commission's website at 
www.sec.gov.
    Intra-day and closing price information regarding exchange-traded 
options will be available from the exchange on which such instruments 
are traded. Intra-day and closing price information regarding the 
Principal Investment Instruments also will be available from major 
market data vendors. Price information relating to OTC options and 
swaps will be available from major market data vendors. Intra-day price 
information for exchange-traded derivative instruments will be 
available from the applicable exchange and from major market data 
vendors. For exchange-listed securities (including ETFs), intraday 
price quotations will generally be available from broker-dealers and 
trading platforms (as applicable). Intraday and other price information 
for the fixed income securities in which the Fund will invest will be 
available through subscription services, such as Bloomberg, Markit and 
Thomson Reuters, which can be accessed by Authorized Participants and 
other market participants. Additionally, the Trade Reporting and 
Compliance Engine (``TRACE'') of the Financial Industry Regulatory 
Authority (``FINRA'') will be a source of price information for 
corporate bonds, privately-issued securities, MBS and ABS, to the 
extent transactions in such securities are reported to TRACE.\30\  
Money market funds and the Affiliated Short Term Bond Fund are 
typically priced once each Business Day and their prices will be 
available through the applicable fund's website or from major market 
data vendors. Electronic Municipal Market Access (``EMMA'') will be a 
source of price information for municipal bonds. Price information 
regarding U.S. government securities, repurchase agreements, reverse 
repurchase agreements and cash equivalents generally may be obtained 
from brokers and dealers who make markets in such securities or through 
nationally recognized pricing services through subscription agreements.
---------------------------------------------------------------------------

    \30\ Broker-dealers that are FINRA member firms have an 
obligation to report transactions in specified debt securities to 
TRACE to the extent required under applicable FINRA rules. 
Generally, such debt securities will have at issuance a maturity 
that exceeds one calendar year. For fixed income securities that are 
not reported to TRACE, (i) intraday price quotations will generally 
be available from broker-dealers and trading platforms (as 
applicable) and (ii) price information will be available from feeds 
from market data vendors, published or other public sources, or 
online information services, as described above.
---------------------------------------------------------------------------

    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. 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.
    Quotation and last sale information for the Shares will be 
available via the Consolidated Tape Association (``CTA'') high-speed 
line. Exchange-traded options quotation and last sale information for 
options cleared via the Options Clearing Corporation (``OCC'') are 
available via the Options Price Reporting Authority (``OPRA''). In 
addition, the Portfolio Indicative Value (`` PIV''), 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 Core 
Trading Session.
Trading Halts
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares of the Fund. 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. These may include: (1) The extent to 
which trading is not occurring in the securities and/or the financial 
instruments comprising the Disclosed Portfolio of the Fund; or (2) 
whether other unusual conditions or circumstances detrimental to the 
maintenance of a fair and orderly market are present. Trading in the 
Shares will be subject to NYSE Arca Rule 8.600-E(d)(2)(D), which sets 
forth circumstances under which Shares of the Fund may be halted.
Trading Rules
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. Shares will trade on 
the NYSE Arca Marketplace from 4:00 a.m. to 8:00 p.m. E.T. in 
accordance with NYSE Arca Rule 7.34-E (Trading Sessions). The Exchange 
has appropriate rules to facilitate transactions in the Shares during 
all trading sessions. As provided in NYSE Arca Rule 7.6-E, the minimum 
price variation (``MPV'') for quoting and entry of orders in equity 
securities traded on the NYSE Arca Marketplace is $0.01, with the 
exception of securities that are priced less than $1.00 for which the 
MPV for order entry is $0.0001.
    With the exception of the requirements of Commentary .01(b)(5) and 
Commentary .01(c) as described above under ``Application of Generic 
Listing Requirements'', the Shares of the Fund will conform to the 
initial and continued listing criteria under NYSE Arca Rule 8.600-E. 
The Exchange represents that for initial and/or continued listing, the 
Fund will be in compliance with Rule 10A-3 under the Act, as provided 
by NYSE Arca Rule 5.3-E. A minimum of 100,000 Shares will be 
outstanding at the commencement of trading on the Exchange. The 
Exchange has obtained 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.
Surveillance
    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 FINRA on behalf of 
the Exchange, which are designed to detect violations of Exchange rules 
and applicable federal securities laws. 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.
    The surveillances referred to above generally focus on detecting 
securities trading outside their normal patterns, which could be 
indicative of manipulative or other violative activity. When such 
situations are detected, surveillance analysis follows and 
investigations are opened, where appropriate, to review the behavior of 
all relevant parties for all relevant trading violations.
    The Exchange or FINRA, on behalf of the Exchange, or both, will

[[Page 12831]]

communicate as needed regarding trading in the Shares, certain 
exchange-traded options and certain futures with other markets and 
other entities that are members of the ISG, and the Exchange or FINRA, 
on behalf of the Exchange, or both, may obtain trading information 
regarding trading in the Shares, certain exchange-traded options and 
certain futures from such markets and other entities. In addition, the 
Exchange may obtain information regarding trading in the Shares, 
certain exchange-traded options and certain futures from markets and 
other entities that are members of ISG or with which the Exchange has 
in place a comprehensive surveillance sharing agreement (``CSSA''). The 
Exchange is able to access from FINRA, as needed, trade information for 
certain fixed income securities held by the Fund reported to TRACE. 
FINRA also can access data obtained from the Municipal Securities 
Rulemaking Board (``MSRB'') relating to certain municipal bond trading 
activity for surveillance purposes in connection with trading in the 
Shares.
    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
    All statements and representations made in this filing regarding 
(a) the description of the 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 on the Exchange.
    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 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(m)-E.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) of the Act 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.
    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares will be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria in NYSE Arca Rule 8.600-E. The 
Exchange has in place surveillance procedures that are adequate to 
properly monitor trading in 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. The Adviser and Subadviser 
are not registered as broker-dealers, but the Adviser and Subadviser 
are affiliated with a broker-dealer and have implemented and will 
maintain a ``fire wall'' with respect to such broker-dealer regarding 
access to information concerning the composition and/or changes to the 
Fund's portfolio. The Exchange or FINRA, on behalf of the Exchange, or 
both, will communicate as needed regarding trading in the Shares, 
certain exchange-traded options and certain futures with other markets 
and other entities that are members of the ISG, and the Exchange or 
FINRA, on behalf of the Exchange, or both, may obtain trading 
information regarding trading in the Shares, certain exchange-traded 
options and certain futures from such markets and other entities. In 
addition, the Exchange may obtain information regarding trading in the 
Shares, certain exchange-traded options and certain futures with other 
markets and other entities that are members of the ISG, or with which 
the Exchange has in place a comprehensive surveillance sharing 
agreement. The Exchange is able to access from FINRA, as needed, trade 
information for certain fixed income securities held by the Fund 
reported to FINRA's TRACE. FINRA also can access data obtained from the 
MSRB relating to certain municipal bond trading activity for 
surveillance purposes in connection with trading in the Shares.
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest in 
that 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. In addition, a large amount of 
information is publicly available regarding the Fund and the Shares, 
thereby promoting market transparency. The website for the Fund 
includes a form of the prospectus for the Fund and additional data 
relating to NAV and other applicable quantitative information. Trading 
in Shares of the Fund will be halted if the circuit breaker parameters 
in NYSE Arca Rule 7.12-E 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 Rule 8.600-E(d)(2)(D), which sets forth 
circumstances under which trading in the Shares of the Fund may be 
halted. In addition, as noted above, investors have ready access to 
information regarding the Fund's holdings, the PIV, the Disclosed 
Portfolio, and quotation and last sale information for the Shares. In 
the aggregate, at least 90% of the weight of the Fund's holdings 
invested in futures, exchange-traded options, and listed swaps shall, 
on both an initial and continuing basis, consist of futures, options, 
and swaps for which the Exchange may obtain information from other 
members or affiliates of the ISG or for which the principal market is a 
market with which the Exchange has a CSSA. For purposes of calculating 
this limitation, a portfolio's investment in listed derivatives will be 
calculated as the aggregate gross notional value of the listed 
derivatives.
    As described above, deviations from the generic requirements of 
Commentary .01(a) are necessary for the Fund to achieve its investment 
objective in a manner that is cost-effective and that maximizes 
investors' returns. Further, the proposed alternative requirements are 
narrowly tailored to allow the Fund to achieve its investment objective 
in manner that is consistent with the principles of Section 6(b)(5) of 
the Act. As a result, it is in the public interest to approve listing 
and trading of Shares of the Fund on the Exchange pursuant to the 
requirements set forth herein.
    As discussed above, the Fund will not comply with the requirement 
in Commentary .01(b)(5) that investments in non-agency, non-government 
sponsored entity and privately issued mortgage-related and other asset-
backed securities (i.e., Private ABS/MBS) not account, in the 
aggregate, for more than 20% of the weight of the fixed income portion 
of the portfolio. Instead, the Exchange proposes that Private ABS/MBS 
will, in the aggregate, not exceed more than 20% of the total assets of 
the Fund.
    The Exchange believes that this alternative requirement is 
appropriate because the Fund's investment in Private ABS/MBS is 
expected to provide the Fund with benefits associated with increased 
diversification, as Private ABS/MBS investments tend to be less 
correlated to interest rates than many other fixed income securities. 
The

[[Page 12832]]

Fund's investment in Private ABS/MBS will be subject to the Fund's 
liquidity procedures as adopted by the Board, and the Adviser does not 
expect that investments in Private ABS/MBS of up to 20% of the total 
assets of the Fund will have any material impact on the liquidity of 
the Fund's investments. The Exchange notes that the Commission has 
previously approved the listing of actively managed ETFs that can 
invest 20% of their total assets in non-U.S. Government, non-agency, 
non-GSE and other privately issued ABS and MBS (i.e., Private ABS/
MBS).\31\ Thus, the Exchange believes that it is appropriate to expand 
the limit on the Fund's investments in Private ABS/MBS set forth in 
Commentary .01(b)(5) of the generic listing standards.
---------------------------------------------------------------------------

    \31\ See note 18, supra.
---------------------------------------------------------------------------

    The Fund will not comply with the requirement that securities that 
in aggregate account for at least 90% of the fixed income weight of the 
portfolio meet one of the criteria in Commentary .01(b)(4). Instead, 
the Exchange proposes that fixed income securities that do not meet any 
of the criteria in Commentary .01(b)(4) will not exceed 10% of the 
total assets of the Fund. The Exchange notes that the Commission has 
previously approved the listing of Managed Fund Shares with similar 
investment objectives and strategies without imposing requirements that 
a certain percentage of such funds' securities meet one of the criteria 
set forth in Commentary .01(b)(4). Thus, the Exchange believes that it 
is appropriate to expand the limit on investments in fixed income 
securities that do not satisfy the criteria in Commentary .01(b)(4) of 
the generic listing standards, as described above.
    The Fund may invest in shares of the Affiliated Short Term Bond 
Fund, which are equity securities. Therefore, to the extent the Fund 
invests in the Affiliated Short Term Bond Fund or other non-exchange-
traded open-end management investment company securities, the Fund will 
not comply with the requirements of Commentary .01(a)(1) to NYSE Arca 
Rule 8.600-E (U.S. Component Stocks) with respect to its equity 
securities holdings. The Exchange believes, however, that it is 
appropriate and in the public interest to approve listing and trading 
of Shares of the Fund notwithstanding that the Fund's holdings in such 
securities would not meet the requirements of Commentary .01(a)(1)(A) 
through (E) to Rule 8.600-E. The Fund's investment in the Affiliated 
Short Term Bond Fund or other non-exchange-traded open-end management 
investment company securities will not exceed 25% of the total assets 
of the Fund. The Fund's investment in the Affiliated Short Term Bond 
Fund will be utilized in order to obtain income on short-term cash 
balances while awaiting attractive investment opportunities, to provide 
liquidity in preparation for anticipated redemptions or for defensive 
purposes, which will allow the Fund to obtain the benefits of a more 
diversified portfolio available in the Affiliated Short Term Bond Fund 
than might otherwise be available through direct investments in Money 
Market Funds. Moreover, such investments, which may include mutual 
funds that invest, for example, principally in fixed income securities, 
would be utilized to help the Fund meet its investment objective and to 
equitize cash in the short term. The Fund will invest in such 
securities only to the extent that those investments would be 
consistent with the requirements of Section 12(d)(1) of the 1940 Act 
and the rules thereunder. Because such securities must satisfy 
applicable 1940 Act diversification requirements, and have a net asset 
value based on the value of securities and financial assets the 
investment company holds, the Exchange believes it is both unnecessary 
and inappropriate to apply to such investment company securities the 
criteria in Commentary .01(a)(1).
    The Exchange notes that it would be difficult or impossible to 
apply to mutual fund shares certain of the generic quantitative 
criteria (e.g., market capitalization, trading volume, or portfolio 
criteria) in Commentary .01 (A) through (D) applicable to U.S. 
Component Stocks. For example, the requirements for U.S. Component 
Stocks in Commentary .01(a)(1)(B) that there be minimum monthly trading 
volume of 250,000 shares, or minimum notional volume traded per month 
of $25,000,000, averaged over the last six months are tailored to 
exchange-traded securities (i.e., U.S. Component Stocks) and not to 
mutual fund shares, which do not trade in the secondary market and for 
which no such volume information is reported. In addition, Commentary 
.01(a)(1)(A) relating to minimum market value of portfolio component 
stocks, Commentary .01(a)(1)(C) relating to weighting of portfolio 
component stocks, and Commentary .01(a)(1)(D) relating to minimum 
number of portfolio components are not appropriately applied to open-
end management investment company securities; open-end investment 
companies hold multiple individual securities as disclosed publicly in 
accordance with the 1940 Act, and application of Commentary .01(A) 
through (D) would not serve the purposes served with respect to U.S. 
Component Stocks, namely, to establish minimum liquidity and 
diversification criteria for U.S. Component Stocks held by series of 
Managed Fund Shares.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
an additional type of actively managed ETF that will enhance 
competition among market participants, to the benefit of investors and 
the marketplace. As noted above, the Exchange has in place surveillance 
procedures relating to trading in the Shares and may obtain information 
via ISG from other exchanges that are members of ISG or with which the 
Exchange has entered into a CSSA. In addition, as noted above, 
investors have ready access to information regarding the Fund's 
holdings, the PIV, the Disclosed Portfolio, and quotation and last sale 
information for the Shares.

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

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

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

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

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

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

[[Page 12833]]

    (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 [email protected]. Please include 
File Number SR-NYSEArca-2018-15 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-NYSEArca-2018-15. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (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 website 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 also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-NYSEArca-2018-15, and should be 
submitted on or before April 13, 2018.

    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. 2018-05903 Filed 3-22-18; 8:45 am]
 BILLING CODE 8011-01-P


