[Federal Register Volume 83, Number 66 (Thursday, April 5, 2018)]
[Notices]
[Pages 14698-14703]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-06914]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82973; File No. SR-NYSEArca-2017-99]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Amendment No. 3 and Order Granting Accelerated Approval of a 
Proposed Rule Change, as Modified by Amendment No. 3, To List and Trade 
Shares of the Hartford Schroders Tax-Aware Bond ETF Under NYSE Arca 
Rule 8.600-E

March 30, 2018.

I. Introduction

    On October 11, 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 
Hartford Schroders Tax-Aware Bond ETF (``Fund'') under NYSE Arca Rule 
8.600-E. The proposed

[[Page 14699]]

rule change was published for comment in the Federal Register on 
October 31, 2017.\3\ On November 21, 2017, the Exchange filed Amendment 
No. 1 to the proposed rule change, which replaced and superseded the 
proposed rule change as originally filed. On December 14, 2017, 
pursuant to Section 19(b)(2) of the Act,\4\ the Commission designated a 
longer period within which to approve the proposed rule change, 
disapprove the proposed rule change, or institute proceedings to 
determine whether to disapprove the proposed rule change.\5\ On January 
18, 2018, the Exchange filed Amendment No. 2 to the proposed rule 
change, which replaced and superseded the proposed rule change as 
modified by Amendment No. 1.\6\ On January 26, 2018, the Commission 
published notice of Amendment No. 2 and instituted proceedings under 
Section 19(b)(2)(B) of the Act \7\ to determine whether to approve or 
disapprove the proposed rule change, as modified by Amendment No. 2.\8\ 
Thereafter, on January 26, 2018, the Exchange filed Amendment No. 3 to 
the proposed rule change, which replaced and superseded the proposed 
rule change as modified by Amendment Nos. 1 and 2.\9\ The Commission 
has received no comments on the proposed rule change. The Commission is 
publishing this notice to solicit comments on Amendment No. 3 from 
interested persons, and is approving the proposed rule change, as 
modified by Amendment No. 3, on an accelerated basis.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 81944 (October 25, 
2017), 82 FR 50461.
    \4\ 15 U.S.C. 78s(b)(2).
    \5\ See Securities Exchange Act Release No. 82323, 82 FR 60455 
(December 20, 2017). The Commission designated January 29, 2018 as 
the date by which the Commission shall either approve or disapprove, 
or institute proceedings to determine whether to disapprove, the 
proposed rule change.
    \6\ In Amendment No. 2, the Exchange: (1) Stated that State 
Street Bank and Trust Company will serve as transfer agent and 
custodian for the Fund; (2) removed certain conditions on the 
definition of the ``fire wall'' between the Sub-Adviser and its 
broker-dealer subsidiary; (3) represented that personnel who make 
decisions on the Fund's portfolio composition must be subject to 
procedures designed to prevent the use and dissemination of 
material, non-public information regarding the Fund's portfolio; (4) 
clarified that cash and cash equivalents are included in the Fund's 
principal investments and specified that for purposes of this 
filing, cash equivalents are the short-term instruments enumerated 
in Commentary .01(c) to NYSE Arca Rule 8.600-E; (5) provided 
additional information regarding the Fund's non-principal 
investments; (6) specified that restricted securities are included 
in the Fund's non-principal investments; (7) added an explanation 
regarding the Manager's belief that the creation and redemption 
cutoff time (1:00 p.m. Eastern Time) will not have a material impact 
on an authorized participant's arbitrage opportunities with respect 
to the Fund; (8) added a statement that the Manager represents that, 
to the extent the Trust effects the creation or redemption of Shares 
wholly or partially in cash, such transactions will be effected in 
the same manner for all authorized participants; (9) specified 
additional quantitative information relating to the Shares that will 
be included on the Fund's website; (10) supplemented the description 
of the availability of information for the Fund's investments; (11) 
defined the term ``periods of high cash inflows or outflows'' as 
used in this filing; (12) added a statement that the Manager 
represents that the fixed income weight of the Fund's portfolio, 
other than holdings in Municipal Securities, will meet the generic 
listing requirements of Commentary .01(b) to NYSE Arca Rule 8.600-E; 
(13) stated that the Manager will be the ``Reporting Authority'' for 
purposes of NYSE Arca Rule 8.600-E(d)(2)(B)(ii); and (14) made other 
clarifications, corrections, and technical changes. Amendment No. 2 
is available at https://www.sec.gov/comments/sr-nysearca-2017-99/nysearca201799-2935844-161848.pdf.
    \7\ 15 U.S.C. 78s(b)(2)(B).
    \8\ See Securities Exchange Act Release No. 82592, 83 FR 4704 
(February 1, 2018).
    \9\ Amendment No. 3 includes the changes made by Amendment No. 
2. In addition, in Amendment No. 3, the Exchange: (1) Removed as 
permitted investments of the Fund non-exchange-traded securities of 
other registered investment companies (i.e., mutual funds), as well 
as convertible and non-convertible preferred stocks traded over-the-
counter (``OTC'') or on U.S. and non-U.S. exchanges; (2) clarified 
that the Fund may hold fixed income restricted securities as part of 
its non-principal investments; (3) supplemented the description of 
the surveillance relating to the Shares; and (4) made other 
clarifications, corrections, and technical changes. Amendment No. 3 
is available at https://www.sec.gov/comments/sr-nysearca-2017-99/nysearca201799-2965793-161858.pdf.
---------------------------------------------------------------------------

II. Description of the Proposal, as Modified by Amendment No. 3 \10\
---------------------------------------------------------------------------

    \10\ For more information regarding the Fund and the Shares, see 
Amendment No. 3, supra note 9.
---------------------------------------------------------------------------

    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. The Fund is a series of the Hartford Funds 
Exchange-Traded Trust (``Trust''), which is registered with the 
Commission as an open-end management investment company.\11\
---------------------------------------------------------------------------

    \11\ The Trust is registered under the Investment Company Act of 
1940 (``1940 Act''). The Exchange states that on June 26, 2017, the 
Trust filed with the Commission its registration statement on Form 
N-1A under the Securities Act of 1933 and under the 1940 Act 
relating to the Fund (File Nos. 333-215165 and 811-23222). In 
addition, the Exchange states that the Commission has issued an 
order granting certain exemptive relief to the Trust under the 1940 
Act. See Investment Company Act Release No. 32454 (January 27, 2017) 
(File No. 812-13828-01).
---------------------------------------------------------------------------

    Hartford Funds Management Company, LLC (``Manager'') will be the 
investment manager to the Fund, and Schroder Investment Management 
North America Inc. (``Sub-Adviser'') will be the sub-adviser to the 
Fund and perform the daily investment of the assets for the Fund.\12\ 
ALPS Distributors, Inc. will be the principal underwriter to the Fund. 
State Street Bank and Trust Company will serve as transfer agent and 
custodian for the Fund.
---------------------------------------------------------------------------

    \12\ According to the Exchange, neither the Manager nor the Sub-
Adviser is registered as a broker-dealer, but each is affiliated 
with a broker-dealer. The Exchange states that the Manager and Sub-
Adviser each 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 addition, personnel who make decisions on the 
Fund's portfolio composition must be subject to procedures designed 
to prevent the use and dissemination of material, non-public 
information regarding the Fund's portfolio. In the event (a) the 
Manager or Sub-Adviser becomes registered as a broker-dealer or 
newly affiliated with a broker-dealer, or (b) any new adviser or 
sub-adviser to the Fund is a registered broker-dealer or becomes 
affiliated with a broker-dealer, the applicable adviser or sub-
adviser 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 
Fund's portfolio, and will be subject to procedures designed to 
prevent the use and dissemination of material, non-public 
information regarding such portfolio.
---------------------------------------------------------------------------

    According to the Exchange, the Fund will seek total return on an 
after-tax basis and will seek to achieve its investment objective by 
investing in a diversified portfolio of fixed income debt instruments 
of varying maturities.\13\
---------------------------------------------------------------------------

    \13\ In seeking to achieve the Fund's investment objective, the 
Sub-Adviser will employ a tax-aware investing strategy that attempts 
to realize total return for shareholders, primarily in the form of 
current income and price appreciation, by balancing investment 
considerations and tax considerations.
---------------------------------------------------------------------------

A. Principal Investments

    Under normal market conditions,\14\ the Fund will invest 
principally (that is, more than 50% of its assets) in the U.S. dollar-
denominated fixed income debt instruments described below, and in cash 
and cash equivalents.\15\
---------------------------------------------------------------------------

    \14\ The term ``normal market conditions'' is defined in NYSE 
Arca Rule 8.600-E(c)(5).
    \15\ For purposes of the filing, cash equivalents are the short-
term instruments enumerated in Commentary .01(c) to NYSE Arca Rule 
8.600-E.
---------------------------------------------------------------------------

    The fixed income debt instruments in which the Fund may invest as 
part of its principal investment strategy are securities issued or 
guaranteed by the U.S. government and its agencies, government-
sponsored enterprise securities, corporate bonds, agency mortgage-
backed securities (including ``to be announced'' or ``TBA'' 
transactions), agency asset-backed securities (``ABS''), ``Municipal 
Securities'' (as described below), sovereign debt, and debt securities 
issued by supranational organizations. They may pay fixed, variable, or 
floating interest rates.
    The Fund may invest in the following Municipal Securities: General 
obligation bonds, revenue (or limited obligation) bonds, private 
activity (or industrial development) bonds, bonds that are 
collateralized with agency and/or

[[Page 14700]]

treasury securities, municipal notes, municipal lease obligations, and 
municipal inverse floaters.

B. Other Investments

    While the Fund, under normal market conditions, will invest 
principally in the securities and financial instruments described 
above, the Fund may invest its remaining assets in the securities and 
financial instruments described below.
    The Fund may invest in U.S. and foreign non-agency ABS, which are 
securities backed by a pool of some underlying asset, including but not 
limited to home equity loans, installment sale contracts, credit card 
receivables, or other assets.
    The Fund may invest in U.S. and foreign non-agency mortgage-related 
securities. Mortgage-related securities may be composed of one or more 
classes and may be structured either as pass-through securities or 
collateralized debt obligations (which include collateralized bond 
obligations and collateralized loan obligations).
    The Fund may invest in U.S. exchange-traded closed-end funds and 
exchange-traded funds (``ETFs'').\16\
---------------------------------------------------------------------------

    \16\ For purposes of the filing, ETFs include 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). The 
ETFs all will be listed and traded in the U.S. on registered 
exchanges. The Fund will not invest in inverse or leveraged (e.g., 
+2x, -2x) index ETFs.
---------------------------------------------------------------------------

    The Fund may engage actively in transactions in derivatives 
(futures, options, swaps, and forward rate agreements) as described 
below. The Fund will normally use derivatives to supplement the 
effective management of its duration profile, to gain exposure to 
particular securities or markets, in connection with hedging 
transactions, or for purposes of efficient portfolio management, 
including managing cash flows or as part of the Fund's risk management 
process.
    The Fund may invest in U.S. and foreign exchange-traded and OTC put 
and call options. The Fund may engage in options transactions on any 
security, index, or instrument in which it may invest.
    The Fund may invest in U.S. and foreign exchange-traded and OTC 
currency options.
    The Fund may invest in U.S. and foreign exchange-traded futures 
contracts and options on futures contracts with respect to equity and 
debt securities, foreign currencies, aggregates of equity and debt 
securities (aggregates are composites of equity or debt securities that 
are not tied to a commonly known index), interest rates, indices, 
commodities, and other financial instruments.
    The Fund may enter into the following U.S. exchange-traded, foreign 
exchange-traded, and OTC swaps: Commodity swaps; total return swaps; 
currency swaps; credit default swaps (``CDS''); CDS index swaps 
(``CDX''); asset swaps; inflation swaps; event-linked swaps; interest 
rate swaps; swaps on specific securities or indices; and swaps on rates 
(such as mortgage prepayment rates). The Fund may invest in U.S. 
exchange-traded and OTC municipal derivatives (i.e., municipal credit 
default swaps, municipal market data derivatives, rate locks, caps, 
collars, and floors). The Fund may also enter into options on swap 
agreements (``swaptions'').\17\
---------------------------------------------------------------------------

    \17\ Options on swaps are traded OTC. In the event that there 
are exchange-traded options on swaps, the Fund may invest in these 
instruments.
---------------------------------------------------------------------------

    The Fund may enter into forward rate agreements.
    The Fund may invest in inflation-protected debt securities.
    The Fund may hold fixed income restricted securities, which are 
securities that cannot be offered for public resale unless registered 
under the applicable securities laws or that have a contractual 
restriction that prohibits or limits their resale.\18\
---------------------------------------------------------------------------

    \18\ Restricted securities include private placement securities 
that have not been registered under the applicable securities laws, 
such as Rule 144A securities, and securities of U.S. and non-U.S. 
issuers that are issued pursuant to Regulation S.
---------------------------------------------------------------------------

    With respect to any of the Fund's investments, the Fund may invest 
in when-issued and delayed delivery securities and forward commitments.

C. Investment Restrictions

    The Exchange represents that the Fund's investments will be 
consistent with its investment goal and will not be used to provide 
multiple returns of a benchmark or to produce leveraged returns.
    With respect to the Fund's investments in Municipal Securities, 
under normal market conditions, except for periods of high cash inflows 
or outflows,\19\ the Fund will satisfy the following criteria:
---------------------------------------------------------------------------

    \19\ ``Periods of high cash inflows or outflows'' as used in the 
filing means rolling periods of seven calendar days during which 
inflows or outflows of cash, in the aggregate, exceed 10% of the 
Fund's net assets as of the opening of business on the first day of 
such periods. During such periods, the Fund may depart from its 
principal investment strategies; for example, it may hold a higher 
than normal proportion of its assets in cash.
---------------------------------------------------------------------------

    1. The Fund will have a minimum of 20 non-affiliated issuers;
    2. No single Municipal Securities issuer will account for more than 
10% of the weight of the Fund's portfolio;
    3. No individual bond will account for more than 5% of the weight 
of the Fund's portfolio;
    4. The Fund will limit its investments in Municipal Securities of 
any one state or U.S. territory to 25% of the Fund's total assets, 
except that up to and including 40% of the Fund's total assets may be 
invested in Municipal Securities of issuers in each of California, New 
York, and Texas;
    5. The Fund's investments in Municipal Securities will be 
diversified among issuers in at least 10 states and U.S. territories; 
and
    6. The Fund will be diversified among a minimum of five different 
sectors of the Municipal Securities market.\20\
---------------------------------------------------------------------------

    \20\ The Fund's investments in Municipal Securities will include 
investments in state and local (e.g., county, city, town) Municipal 
Securities relating to such sectors as the following: Airports, 
bridges and highways, hospitals, housing, jails, mass 
transportation, nursing homes, parks, public buildings, recreational 
facilities, school facilities, streets, and water and sewer works.
---------------------------------------------------------------------------

    The Exchange states that pre-refunded bonds will be excluded from 
the above limits given that they have a high level of credit quality 
and liquidity.\21\
---------------------------------------------------------------------------

    \21\ The Exchange states that pre-refunded bonds (also known as 
refunded or escrow-secured bonds) have a high level of credit 
quality and liquidity because the issuer ``pre-refunds'' the bond by 
setting aside in advance all or a portion of the amount to be paid 
to the bondholders when the bond is called. Generally, an issuer 
uses the proceeds from a new bond issue to buy high grade, interest 
bearing debt securities, including direct obligations of the U.S. 
government, which are then deposited in an irrevocable escrow 
account held by a trustee bank to secure all future payments of 
principal and interest on the pre-refunded bonds.
---------------------------------------------------------------------------

D. Application of Generic Listing Requirements

    The Exchange proposes to list and trade the Shares under NYSE Arca 
Rule 8.600-E, which includes generic listing requirements for Managed 
Fund Shares. According to the Exchange, the Fund's portfolio will not 
meet all of the generic listing requirements of Commentary .01 to NYSE 
Arca Rule 8.600-E. Specifically, the Exchange states that the Fund's 
portfolio will meet all such requirements except for those set forth in 
Commentary .01(b)(1) with respect to Municipal Securities.
    Commentary .01(b)(1) to NYSE Arca Rule 8.600-E requires that, on 
both an initial and continuing basis, components that in the aggregate 
account for at least 75% of the fixed income weight of the portfolio 
each have a minimum original principal amount outstanding of $100 
million or more. The Exchange states that the Fund would not meet this 
requirement, as a

[[Page 14701]]

result principally of the Fund's investments in Municipal Securities. 
The Exchange represents that the Fund's investments in Municipal 
Securities would be subject to the requirements described in Section 
II.C. above.
    The Exchange represents that, other than Commentary .01(b)(1) with 
respect to Municipal Securities, 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 No. 3, is consistent with the Act and 
the rules and regulations thereunder applicable to a national 
securities exchange.\22\ In particular, the Commission finds that the 
proposed rule change, as modified by Amendment No. 3, is consistent 
with Section 6(b)(5) of the Act,\23\ 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.
---------------------------------------------------------------------------

    \22\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \23\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    As noted above, the Fund's investments in Municipal Securities 
would not comply with Commentary .01(b)(1) to NYSE Arca Rule 8.600-E. 
The Exchange represents that the Fund would invest in various types of 
fixed income debt instruments, including Municipal Securities. 
According to the Exchange, permitting the Shares to be listed and 
traded on the Exchange, notwithstanding that, as a result principally 
of the Fund's investments in Municipal Securities, the Fund would not 
comply with Commentary .01(b)(1), would provide the Fund with greater 
ability to select from a broad range of fixed income securities that 
would support the Fund's investment goal.
    The Commission notes that, as proposed, under normal market 
conditions, except for periods of high cash inflows or outflows, the 
Fund will satisfy the following criteria with respect to Municipal 
Securities: (1) The Fund will have a minimum of 20 non-affiliated 
issuers; (2) no single Municipal Securities issuer will account for 
more than 10% of the weight of the Fund's portfolio; (3) no individual 
bond will account for more than 5% of the weight of the Fund's 
portfolio; (4) the Fund will limit its investments in Municipal 
Securities of any one state or U.S. territory to 25% of the Fund's 
total assets, except that up to and including 40% of the Fund's total 
assets may be invested in Municipal Securities of issuers in each of 
California, New York, and Texas; (5) the Fund's investments in 
Municipal Securities will be diversified among issuers in at least 10 
states and U.S. territories; and (6) the Fund will be diversified among 
a minimum of five different sectors of the Municipal Securities 
market.\24\ The Commission also notes that, other than Commentary 
.01(b)(1) with respect to Municipal Securities, the Fund will meet all 
the requirements of NYSE Arca Rule 8.600-E. The Commission believes 
that these proposed initial and continued listing requirements, 
including the requirements with respect to Municipal Securities, are 
designed to mitigate the potential for manipulation of the Shares.
---------------------------------------------------------------------------

    \24\ The Exchange states that pre-refunded bonds will be 
excluded from the above limits given that they have a high level of 
credit quality and liquidity.
---------------------------------------------------------------------------

    The Commission also finds that the proposal is consistent with 
Section 11A(a)(1)(C)(iii) of the Act,\25\ 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 Consolidated Tape Association (``CTA'') high-speed 
line. The iNAV (which is the Portfolio Indicative Value, 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.\26\ 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 
publicly available and will be published daily in the financial section 
of newspapers.
---------------------------------------------------------------------------

    \25\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
    \26\ Currently, it is the Exchange's understanding that several 
major market data vendors display and/or make widely available 
Portfolio Indicative Values taken from the CTA or other data feeds.
---------------------------------------------------------------------------

    Quotation and last sale information for ETFs will be available via 
the CTA high-speed line, and from the national securities exchanges on 
which they are listed. U.S. exchange-traded options quotation and last 
sale information is available via the Options Price Reporting 
Authority. Foreign exchange-traded options, U.S. and foreign exchange-
traded futures contracts and options on futures contracts, U.S. and 
foreign exchange-traded swaps (if applicable), and exchange-traded 
municipal derivatives price information is available from the 
applicable U.S. or foreign exchange and major market data vendors. 
Quotation information from brokers and dealers or pricing services will 
be available for Municipal Securities. Price information for money 
market funds and other investment company securities (other than ETFs) 
will be available from the applicable investment company's website and 
from market data vendors. Pricing information regarding fixed income 
debt instruments, cash equivalents, OTC options, OTC swaps, swaptions, 
restricted securities, non-agency ABS, non-agency mortgage-related 
securities, forward rate agreements, OTC municipal derivatives, CDX, 
and inflation-protected debt securities will generally be available 
through nationally recognized data service providers through 
subscription agreements. One source of price information for municipal 
securities is the Electronic Municipal Market Access, which is 
administered by the Municipal Securities Rulemaking Board.
    In addition, the Fund's website will include the Fund's prospectus 
and additional data relating to net asset value (``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 (as defined in NYSE Arca Rule 8.600-E(c)(2)) will be made 
available to all market participants at the same time. Trading in the 
Shares 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 the Shares may be halted.

[[Page 14702]]

    The Exchange states that it has a general policy prohibiting the 
distribution of material, non-public information by its employees. The 
Exchange states that neither the Manager nor the Sub-Adviser is 
registered as a broker-dealer, but each is affiliated with a broker-
dealer. The Exchange states that the Manager and Sub-Adviser each 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.\27\ Further, the 
Exchange states that, consistent with NYSE Arca Rule 8.600-
E(d)(2)(B)(ii), the Manager will 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 
Fund's portfolio.\28\
---------------------------------------------------------------------------

    \27\ 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.
    \28\ The Exchange states that the Manager will be the Reporting 
Authority for purposes of NYSE Arca Rule 8.600-E(d)(2)(B)(ii).
---------------------------------------------------------------------------

    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(b)(1) with respect to Municipal 
Securities, the Fund will meet all the requirements of NYSE Arca Rule 
8.600-E. The Fund's investments in Municipal Securities will be subject 
to the requirements described in Section II.C. above.
    (2) A minimum of 100,000 Shares will be outstanding at the 
commencement of trading on the Exchange.
    (3) Trading in the Shares will be subject to the existing trading 
surveillances, administered by the Financial Industry Regulatory 
Authority (``FINRA'') on behalf of the Exchange, or by regulatory staff 
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 federal securities laws 
applicable to trading on the Exchange.\29\
---------------------------------------------------------------------------

    \29\ The Exchange states that FINRA conducts cross-market 
surveillances on behalf of the Exchange pursuant to a regulatory 
services agreement, and that the Exchange is responsible for FINRA's 
performance under this regulatory services agreement.
---------------------------------------------------------------------------

    (4) The Exchange or FINRA, on behalf of the Exchange, or both, will 
communicate as needed regarding trading in the Shares, ETFs, exchange-
traded closed-end funds, exchange-traded municipal derivatives, certain 
exchange-traded options, and certain exchange-traded futures with other 
markets and other entities that are members of the Intermarket 
Surveillance Group, and the Exchange or FINRA, on behalf of the 
Exchange, or both, may obtain trading information regarding trading in 
the Shares, ETFs, exchange-traded closed-end funds, exchange-traded 
municipal derivatives, certain exchange-traded options, and certain 
exchange-traded futures from such markets and other entities. In 
addition, the Exchange may obtain information regarding trading in the 
Shares, ETFs, exchange-traded closed-end funds, exchange-traded 
municipal derivatives, certain exchange-traded options, and certain 
exchange-traded futures from markets and other entities 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. FINRA also 
can access data obtained from the Municipal Securities Rulemaking Board 
relating to municipal bond trading activity for surveillance purposes 
in connection with trading in the Shares.
    (5) 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 unit aggregations 
(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 iNAV 
will not be calculated or publicly disseminated; (d) how information 
regarding the iNAV 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.
    (6) The Exchange has appropriate rules to facilitate transactions 
in the Shares during all trading sessions.
    (7) For initial and continued listing, the Fund will be in 
compliance with Rule 10A-3 under the Act.\30\
---------------------------------------------------------------------------

    \30\ See 17 CFR 240.10A-3.
---------------------------------------------------------------------------

    (8) The Fund's investments will be consistent with its investment 
goal and will not be used to provide multiple returns of a benchmark or 
to produce leveraged returns.
    The Exchange represents that all statements and representations 
made in the filing regarding: (1) The description of the portfolio or 
reference asset; (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 must notify 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 \31\ 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).
---------------------------------------------------------------------------

    \31\ 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.
---------------------------------------------------------------------------

    This approval order is based on all of the Exchange's statements 
and representations, including those set forth above and in Amendment 
No. 3.
    For the foregoing reasons, the Commission finds that the proposed 
rule change, as modified by Amendment No. 3, is consistent with Section 
6(b)(5) of the Act \32\ and Section 11A(a)(1)(C)(iii) of the Act \33\ 
and the rules and regulations thereunder applicable to a national 
securities exchange.
---------------------------------------------------------------------------

    \32\ 15 U.S.C. 78f(b)(5).
    \33\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
---------------------------------------------------------------------------

IV. Solicitation of Comments on Amendment No. 3 to the Proposed Rule 
Change

    Interested persons are invited to submit written data, views, and 
arguments concerning whether Amendment No. 3 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

[[Page 14703]]

     Send an email to [email protected]. Please include 
File Number SR-NYSEArca-2017-99 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-2017-99. 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-2017-99, and should be 
submitted on or before April 26, 2018.

V. Accelerated Approval of Proposed Rule Change, as Modified by 
Amendment No. 3

    The Commission finds good cause to approve the proposed rule 
change, as modified by Amendment No. 3, prior to the thirtieth day 
after the date of publication of notice of the filing of Amendment No. 
3 in the Federal Register. The Commission notes that Amendment No. 3 
clarified the application of NYSE Arca Rule 8.600-E to the Fund's 
investments. Amendment No. 3 also provided other clarifications and 
additional information to the proposed rule change. The changes and 
additional information in Amendment No. 3 assisted the Commission in 
finding that the proposal is consistent with the Act. Accordingly, the 
Commission finds good cause, pursuant to Section 19(b)(2) of the 
Act,\34\ to approve the proposed rule change, as modified by Amendment 
No. 3, on an accelerated basis.
---------------------------------------------------------------------------

    \34\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\35\ that the proposed rule change (SR-NYSEArca-2017-99), as 
modified by Amendment No. 3 be, and hereby is, approved on an 
accelerated basis.
---------------------------------------------------------------------------

    \35\ Id.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\36\
---------------------------------------------------------------------------

    \36\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo Aleman,
Assistant Secretary.
[FR Doc. 2018-06914 Filed 4-4-18; 8:45 am]
 BILLING CODE 8011-01-P


