[Federal Register Volume 83, Number 112 (Monday, June 11, 2018)]
[Notices]
[Pages 27042-27050]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-12430]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83381; File No. SR-NYSEArca-2018-38]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Relating to the Index Methodology Applicable to 
Indexes Underlying iShares California AMT-Free Muni Bond ETF and 
iShares New York AMT-Free Muni Bond ETF

June 5, 2018.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given 
that, on May 21, 2018, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I, II, and III 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 changes relating to the index methodology 
applicable to the indexes underlying

[[Page 27043]]

shares of the following series of Investment Company Units that are 
currently listed and traded on the Exchange under NYSE Arca Rule 5.2-
E(j)(3): iShares California AMT-Free Muni Bond ETF and iShares New York 
AMT-Free Muni Bond ETF. 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 currently lists and trades shares (``Shares'') of the 
iShares California AMT-Free Muni Bond ETF (``CA Fund'') and iShares New 
York AMT-Free Muni Bond ETF (``NY Fund'' and, together with the CA 
Fund, the ``Funds'') \4\ under NYSE Arca Rule 5.2-E(j)(3), which 
governs the listing and trading of Investment Company Units (``Units'') 
based on fixed income securities indexes.\5\ The Funds are series of 
the iShares Trust (``Trust'').\6\ The Exchange is proposing changes 
relating to the index methodology applicable to indexes underlying 
Shares of the Funds, as described below.
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    \4\ On July 1, 2017 (as revised October 18, 2017), the Trust 
filed an amendment to its registration statement on Form N-1A under 
the Securities Act of 1933 (15 U.S.C. 77a) (``1933 Act'') and the 
Investment Company Act of 1940 (``1940 Act'') (15 U.S.C. 80a-1) 
(File Nos. 333-92935 and 811-09729) (the ``Registration 
Statement''). The description of the operation of the Trust and the 
Funds herein is based, in part, on the Registration Statement. The 
Commission has issued an order granting certain exemptive relief to 
the Trust under the 1940 Act. See Investment Company Act Release No. 
27608 (December 21, 2006) (File No. 812-13208) (``Exemptive 
Order'').
    \5\ The Funds were initially listed on the American Stock 
Exchange, Inc. (``Amex'') (now NYSE American LLC) on October 4, 2007 
pursuant to the generic listing criteria of Amex Rule 1000A. On 
October 6, 2008, the listings transferred from the Amex to NYSE 
Arca, which changes were effected pursuant to NYSE Arca Equities 
Rule 5.2(j)(3), Commentary .02.
    \6\ The Commission previously has approved proposed rule changes 
relating to listing and trading on the Exchange of Units based on 
municipal bond indexes. See Securities Exchange Act Release Nos. 
67985 (October 4, 2012), 77 FR 61804 (October 11, 2012) (SR-
NYSEArca-2012-92) (order approving proposed rule change relating to 
the listing and trading of iShares 2018 S&P AMT-Free Municipal 
Series and iShares 2019 S&P AMT-Free Municipal Series under NYSE 
Arca Equities Rule 5.2(j)(3), Commentary .02); 67729 (August 24, 
2012), 77 FR 52776 (August 30, 2012) (SR-NYSEArca-2012-92) (notice 
of proposed rule change relating to the listing and trading of 
iShares 2018 S&P AMT-Free Municipal Series and iShares 2019 S&P AMT-
Free Municipal Series under NYSE Arca Equities Rule 5.2(j)(3), 
Commentary .02); 72523, (July 2, 2014), 79 FR 39016 (July 9, 2014) 
(SR-NYSEArca-2014-37) (order approving proposed rule change relating 
to the listing and trading of iShares 2020 S&P AMT-Free Municipal 
Series under NYSE Arca Equities Rule 5.2(j)(3), Commentary .02); 
72172 (May 15, 2014), 79 FR 29241 (May 21, 2014) (SR-NYSEArca-2014-
37) (notice of proposed rule change relating to the listing and 
trading of iShares 2020 S&P AMT-Free Municipal Series under NYSE 
Arca Equities Rule 5.2(j)(3), Commentary .02); 72464 (June 25, 
2014), 79 FR 37373 (July 1, 2014) (File No. SR-NYSEArca-2014-45) 
(order approving proposed rule change governing the continued 
listing and trading of shares of the PowerShares Insured California 
Municipal Bond Portfolio, PowerShares Insured National Municipal 
Bond Portfolio, and PowerShares Insured New York Municipal Bond 
Portfolio); 75468 (July 16, 2015), 80 FR 43500 (July 22, 2015) (SR-
NYSEArca-2015-25) (order approving proposed rule change relating to 
the listing and trading of iShares iBonds Dec 2021 AMT-Free Muni 
Bond ETF and iShares iBonds Dec 2022 AMT-Free Muni Bond ETF under 
NYSE Arca Equities Rule 5.2(j)(3)); 74730 (April 15, 2015), 76 FR 
22234 (April 21, 2015) (notice of proposed rule change relating to 
the listing and trading of iShares iBonds Dec 2021 AMT-Free Muni 
Bond ETF and iShares iBonds Dec 2022 AMT-Free Muni Bond ETF under 
NYSE Arca Equities Rule 5.2(j)(3), Commentary .02); 74730 75376 
(July 7, 2015), 80 FR 40113 (July 13, 2015) (SR-NYSEArca-2015-18) 
(order approving proposed rule change relating to the listing and 
trading of Vanguard Tax-Exempt Bond Index Fund under NYSE Arca 
Equities Rule 5.2(j)(3)). The Commission also has issued a notice of 
filing and immediate effectiveness of a proposed rule change 
relating to listing and trading on the Exchange of shares of the 
iShares Taxable Municipal Bond Fund. See Securities Exchange Act 
Release No. 63176 (October 25, 2010), 75 FR 66815 (October 29, 2010) 
(SR-NYSEArca-2010-94). The Commission has approved for Exchange 
listing and trading of shares of actively managed funds of that 
principally hold municipal bonds. See, e.g., Securities Exchange Act 
Release Nos. 60981 (November 10, 2009), 74 FR 59594 (November 18, 
2009) (SR-NYSEArca-2009-79) (order approving listing and trading of 
shares of the PIMCO Short-Term Municipal Bond Strategy Fund and 
PIMCO Intermediate Municipal Bond Strategy Fund); 79293 (November 
10, 2016), 81 FR 81189 (November 17, 2016) (SR-NYSEArca-2016-107) 
(order approving listing and trading of shares of Cumberland 
Municipal Bond ETF). The Commission also has approved listing and 
trading on the Exchange of shares of the SPDR Nuveen S&P High Yield 
Municipal Bond Fund under Commentary .02 of NYSE Arca Equities Rule 
5.2(j)(3). See Securities Exchange Act Release No. 63881 (February 
9, 2011), 76 FR 9065 (February 16, 2011) (SR-NYSEArca-2010-120).
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    Blackrock Fund Advisors is the investment adviser (``BFA'' or 
``Adviser'') for the Funds.\7\ Blackrock Investments, LLC is the Funds' 
distributor (``Distributor''). State Street Bank and Trust Company is 
the administrator, custodian and fund accounting and transfer agent for 
each Fund.\8\
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    \7\ An investment adviser to an open-end fund is required to be 
registered under the Investment Advisers Act of 1940 (the ``Advisers 
Act''). As a result, the Adviser and its related personnel are 
subject to the provisions of Rule 204A-1 under the Advisers Act 
relating to codes of ethics. This Rule requires investment advisers 
to adopt a code of ethics that reflects the fiduciary nature of the 
relationship to clients as well as compliance with other applicable 
securities laws. Accordingly, procedures designed to prevent the 
communication and misuse of non-public information by an investment 
adviser must be consistent with Rule 204A-1 under the Advisers Act. 
In addition, Rule 206(4)-7 under the Advisers Act makes it unlawful 
for an investment adviser to provide investment advice to clients 
unless such investment adviser has (i) adopted and implemented 
written policies and procedures reasonably designed to prevent 
violation, by the investment adviser and its supervised persons, of 
the Advisers Act and the Commission rules adopted thereunder; (ii) 
implemented, at a minimum, an annual review regarding the adequacy 
of the policies and procedures established pursuant to subparagraph 
(i) above and the effectiveness of their implementation; and (iii) 
designated an individual (who is a supervised person) responsible 
for administering the policies and procedures adopted under 
subparagraph (i) above.
    \8\ The Commission approved continued listing and trading of 
Shares of the Funds in Securities Exchange Act Release Nos. 82295 
(December 12, 2017), 82 FR 60056 (December 18, 2017) (SR-NYSEArca-
2017-56) (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 Twelve Series of 
Investment Company Units Pursuant to NYSE Arca Rule 5.2-E(j)(3) 
(``Municipal Bond ETF Order''). In that filing, the Exchange 
proposed to facilitate the listing and trading of Shares of the 
Funds, in addition to other series of Units based on municipal bond 
indexes notwithstanding the fact that the indices on which they are 
based do not meet the requirements of Commentary .02(a)(2) to Rule 
5.2-E(j)(3). See ``Application of the Generic Listing Criteria'', 
infra.
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Changes to Indexes Underlying the Funds
    The index currently underlying the CA Fund is the S&P California 
AMT-Free Muni Bond Index (``CA Index'') and the index underlying the NY 
Fund is the S&P New York AMT-Free Muni Bond Index (``NY Index'', and, 
together with the CA Index, the ``Indexes''). S&P Dow Jones Indices 
LLC, the index provider (``Index Provider'') for the Indexes,\9\ 
previously proposed changes to the inclusion rules of both the CA Index 
and the NY Index.\10\ While no

[[Page 27044]]

future changes to the methodologies applicable to the Indexes have been 
announced by the Index Provider, the Exchange is proposing continued 
listing criteria to accommodate continued listing and trading of Shares 
of the Funds in accordance with possible future changes to the CA Index 
and NY Index methodologies, as described below, in the event such 
changes were to be implemented.\11\
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    \9\ The Index Provider is not a broker-dealer or affiliated with 
a broker-dealer and has implemented procedures designed to prevent 
the use and dissemination of material, non-public information 
regarding the Indexes.
    \10\ On November 7, 2014, S&P Dow Jones Indices (``S&P'') issued 
a press release announcing methodology changes for the Indexes to be 
implemented prior to the February 2015 month-end rebalances for such 
indexes (``S&P Announcement''). On April 3, 2015, S&P issued a press 
release cancelling the proposed methodology change. S&P would be 
expected to issue a press release prior to implementing any future 
material changes to the methodology that would include the 
implementation date for such changes. Any future material changes to 
the Indexes for the Funds would be reflected in an amendment to the 
Funds' Registration Statement.
    \11\ The Commission has approved the Exchange's proposed rule 
change to facilitate the continued listing and trading of shares of 
the Funds notwithstanding the fact that the indices on which they 
are based do not meet the requirements of Commentary .02(a)(2) to 
Rule 5.2(j)(3). Commentary .02 to Rule 5.2-E(j)(3) sets forth the 
generic listing requirements for an index of fixed income securities 
underlying a series of Units. One of the enumerated listing 
requirements is that component fixed income securities that, in the 
aggregate, account for at least 75% of the weight of the index each 
shall have a minimum principal amount outstanding of $100 million or 
more. (Commentary .02(a)(2) to NYSE Arca Rule 5.2-E(j)(3)). Each of 
the indices on which the Funds are based do not meet such 
requirement but meet all of the other requirements of such rule. See 
also Municipal Bond ETF Order, note 8, supra.
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The Funds and the Indexes
The iShares California AMT-Free Muni Bond ETF
    The CA Fund currently seeks to track the investment results of the 
CA Index, which measures the performance of the investment-grade 
segment of the California municipal bond market. As of December 29, 
2017, the CA Index included 2,229 component fixed income municipal bond 
securities from 206 distinct municipal bond issuers in the State of 
California. The most heavily weighted security in the index represented 
approximately 0.56% of the total weight of the index and the aggregate 
weight of the top five most heavily weighted securities in the index 
represented approximately 2.52% of the total weight of the index. 
Approximately 39.15% of the weight of the components in the index had a 
minimum original principal amount outstanding of $100 million or more. 
In addition, the total dollar amount outstanding of issues in the index 
was approximately $148,688,995,000 and the average dollar amount 
outstanding of issues in the index was approximately $66,706,593.
    Under normal market conditions,\12\ the CA Fund invests at least 
90% of its assets in the component securities of the CA Index. With 
respect to the remaining 10% of its assets, the CA Fund may invest in 
short-term debt instruments issued by state governments, municipalities 
or local authorities, cash, exchange-traded U.S. Treasury futures and 
municipal money market funds, as well as in municipal bond securities 
not included in the CA Index, but which the Adviser believes will help 
the CA Fund track the CA Index. The CA Index is a subset of the S&P 
National AMT-Free Municipal Bond Index\TM\ and is comprised of 
municipal bonds issued in the State of California. The CA Index 
includes municipal bonds from issuers in the State of California that 
are California state or local governments or agencies whose interest 
payments are exempt from U.S. federal and California state income taxes 
and the federal alternative minimum tax (``AMT''). Each bond in the 
current CA Index must be a constituent of an offering where the 
original offering amount of the constituent bonds in the aggregate was 
at least $100 million. The bond must have a total minimum par amount of 
$25 million to be eligible for inclusion. To remain in the CA Index, 
bonds must maintain a total minimum par amount greater than or equal to 
$25 million as of the next ``Rebalancing Date''.
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    \12\ The term ``normal market conditions'' includes, but is not 
limited to, the absence of trading halts in the applicable financial 
markets generally; operational issues (e.g., systems failure) 
causing dissemination of inaccurate market information; or force 
majeure type events such as natural or manmade disaster, act of God, 
armed conflict, act of terrorism, riot or labor disruption or any 
similar intervening circumstance.
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iShares New York AMT-Free Muni Bond ETF
    The NY Fund seeks to track the investment results of the NY Index, 
which measures the performance of the investment-grade segment of the 
New York municipal bond market. As of December 29, 2017, the NY Index 
included 2,404 component fixed income municipal bond securities from 42 
distinct municipal bond issuers in the State of New York. The most 
heavily weighted security in the NY Index represented approximately 
1.02% of the total weight of the index and the aggregate weight of the 
top five most heavily weighted securities in the NY Index represented 
approximately 2.17% of the total weight of the index. Approximately 
30.95% of the weight of the components in the index had a minimum 
original principal amount outstanding of $100 million or more.
    In addition, the total dollar amount outstanding of issues in the 
index was approximately $140,192,465,000 and the average dollar amount 
outstanding of issues in the index was approximately $58,389,198.
    Under normal market conditions, the NY Fund invests at least 90% of 
its assets in the component securities of the NY Index. With respect to 
the remaining 10% of its assets, the NY Fund may invest in short-term 
debt instruments issued by state governments, municipalities or local 
authorities, cash, exchange-traded U.S. Treasury futures and municipal 
money market funds, as well as in municipal bond securities not 
included in the NY Index, but which the Adviser believes will help the 
NY Fund track the NY Index.
    The NY Index also is a subset of the S&P National AMT-Free 
Municipal Bond Index\TM\ and is comprised of municipal bonds issued in 
the State of New York. The NY Index includes municipal bonds from 
issuers in the State of New York that are New York state or local 
governments or agencies whose interest payments are exempt from U.S. 
federal and New York state income taxes and the federal AMT. Each bond 
in the NY Index must be a constituent of an offering where the original 
offering amount of the constituent bonds in the aggregate was at least 
$100 million. The bond must have a minimum total par amount of $25 
million to be eligible for inclusion. To remain in the NY Index, bonds 
must maintain a minimum total par amount greater than or equal to $25 
million as of the next Rebalancing Date.
Requirements for the CA Index and NY Index
    The Adviser wishes to position the Funds to accommodate continued 
listing and trading of Shares of the Funds in the event that changes, 
consistent with those described below, are implemented in the Index 
methodologies.\13\
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    \13\ S&P announced changes to the Indexes in 2014, but such 
changes were not implemented. See note 10, supra. This proposed rule 
change is intended to accommodate continued listing and trading of 
the Funds based on the Indexes in the event the Indexes were to 
change consistent with the S&P Announcement.
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    On a continuous basis, the CA Index and NY Index will contain at 
least 500 component securities.\14\ In addition, at

[[Page 27045]]

least 90% of the weight of the CA Index will consist of securities that 
have an outstanding par value of at least $15 million and were issued 
as part of a transaction of at least $100 million; and at least 90% of 
the weight of the NY Index will consist of securities that have an 
outstanding par value of at least $5 million and were issued as part of 
a transaction of at least $20 million.\15\ At each monthly rebalancing, 
no one issuer can represent more than 25% of the weight of the 
applicable Index, and the aggregate weight of those issuers 
representing at least 5% of such Index cannot exceed 50% of the weight 
of the applicable Index.\16\
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    \14\ See Municipal Bond ETF Order, supra, note 8, in which the 
Commission approved continued listing and trading of Shares of the 
Funds and ten other series of Units where the applicable underlying 
bond index did not satisfy Commentary .02(a)(2) of Rule 5.2-E(j)(3), 
provided that such municipal bond index contained at least 500 
component securities on a continuous basis, in addition to 
satisfying other specified criteria. See also, Securities Exchange 
Act Release No. 79767 (January 10, 2017), 82 FR 4950 (January 17, 
2017) (SR-NYSEArca-2016-62) (order approving proposed rule change 
relating to the listing and trading of the PowerShares Build America 
Bond Portfolio).
    \15\ For comparison purposes, the Exchange notes that, in the 
Municipal Bond ETF Order, the Commission approved the continued 
listing and trading of shares of the VanEck Vectors High-Yield 
Municipal Index ETF based on the Bloomberg Barclays Municipal Custom 
High Yield Composite Index, which is comprised of three total 
return, market size weighted benchmark indices with weights as 
follows: (i) 50% weight in Muni High Yield/$100 Million Deal Size 
Index, (ii) 25% weight in Muni High Yield/Under $100 Million Deal 
Size Index, and (iii) 25% weight in Muni Baa Rated/$100 Million Deal 
Size Index. At least 90% of the weight of the Muni High Yield/$100 
Million Deal Size Index is comprised of securities that have an 
outstanding par value of at least $3 million and were issued as part 
of a transaction of at least $100 million. At least 90% of the 
weight of the Muni High Yield/Under $100 Million Deal Size Index is 
comprised of securities that have an outstanding par value of at 
least $3 million and were issued as part of a transaction of under 
$100 million but over $20 million. At least 90% of the weight of the 
Muni Baa Rated/$100 Million Deal Size Index is comprised of 
securities that have an outstanding par value of at least $7 million 
and were issued as part of a transaction of at least $100 million.
    \16\ The CA Index and NY Index would continue to meet the 
requirements of NYSE Arca Rule 5.2-E(j)(3), Commentary .02(a)(4), 
which provides that no component fixed-income security (excluding 
Treasury Securities and GSE Securities) shall represent more than 
30% of the Fixed Income Securities portion of the weight of the 
index or portfolio, and the five most heavily weighted component 
fixed-income securities in the index or portfolio shall not in the 
aggregate account for more than 65% of the Fixed Income Securities 
portion of the weight of the index or portfolio.
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Application of the Generic Listing Criteria
    The Exchange is submitting this proposed rule change to permit the 
continued listing and trading of Shares of each of the Funds in the 
event that the methodologies applicable to the Indexes are revised in a 
manner consistent with the descriptions above in ``Requirements for the 
CA Index and NY Index''.\17\ The Indexes would satisfy all of the 
requirements of the generic listing criteria of NYSE Arca Rule 5.2-
E(j)(3), except for those set forth in Commentary .02(a)(2).\18\
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    \17\ Specifically, in the event the NY Index methodology 
specifies a minimum par amount of between $5 million and $25 million 
with an original offering amount for bond components of $20 million 
or more; or, in the event the CA Index methodology specifies a 
minimum par amount of between $15 million and $25 million with an 
original offering amount for bond components of $100 million or 
more, such changes would be deemed consistent with the respective 
Index descriptions above.
    \18\ See note 11, supra.
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    The Exchange believes that, notwithstanding that the CA Index would 
not satisfy the criterion in NYSE Arca Rule 5.2-E(j)(3), Commentary 
.02(a)(2), the CA Index would be sufficiently broad-based to deter 
potential manipulation. As of December 29, 2017, the CA Index included 
2,229 component fixed income municipal bond securities from 206 
distinct municipal bond issuers in the State of California. The Adviser 
anticipates that the number of CA Index components would increase 
significantly if the methodology changes described above were 
implemented in that a reduction in the minimum par amount required for 
inclusion in the CA Index would permit a larger number of municipal 
bond issues to be eligible for inclusion. In addition, the CA Index 
securities would be sufficiently large to deter potential manipulation 
in view of the substantial total dollar amount outstanding and the 
average dollar amount outstanding of the CA Index issues, as referenced 
above.
    The Exchange believes that, notwithstanding that the NY Index would 
not satisfy the criterion in NYSE Arca Rule 5.2-E(j)(3), Commentary 
.02(a)(2), the NY Index would be sufficiently broad-based to deter 
potential manipulation. As of December 29, 2017, the NY Index included 
2,404 component fixed income municipal bond securities from 42 distinct 
municipal bond issuers in the State of New York. The Adviser 
anticipates that the number of NY Index components would increase 
significantly if the methodology changes described above were 
implemented in that a reduction in the minimum par amount required for 
inclusion in the NY Index would permit a larger number of municipal 
bond issues to be eligible for inclusion. In addition, the NY Index 
securities would be sufficiently large to deter potential manipulation 
in view of the substantial total dollar amount outstanding and the 
average dollar amount outstanding of NY Index issues, as referenced 
above.
    The Adviser represents that reducing the required par amount 
outstanding both allows for more diversity of issuers in an Index and 
would significantly expand the universe of municipal securities that a 
Fund could purchase, and, are a better representation of the securities 
that issuers bring to the municipal bond market in California and New 
York.
    With respect to each of the Funds, the value of each Index would be 
calculated and disseminated via a major market data vendor at least 
once daily; further, the components and percentage weightings of each 
Index also would be available from major market data vendors. In 
addition, the portfolio of securities held by each Fund are disclosed 
daily on the Funds' website at www.iShares.com.
    The Exchange represents that: (1) With respect to the Funds, except 
for Commentary .02(a)(2) to NYSE Arca Rule 5.2-E(j)(3), the Indexes 
currently satisfy all of the generic listing standards under NYSE Arca 
Rule 5.2-E(j)(3); (2) the continued listing standards under NYSE Arca 
Rules 5.2-E(j)(3) and 5.5(g)(2) applicable to Units shall apply to the 
Shares of the Funds; and (3) the Trust is required to comply with Rule 
10A-3 \19\ under the Act for the initial and continued listing of the 
Shares of the Funds. In addition, the Exchange represents that the 
Shares of the Funds will comply with all other requirements applicable 
to Units including, but not limited to, requirements relating to the 
dissemination of key information such as the value of the Indexes and 
the applicable Intraday Indicative Value (``IIV''),\20\ rules governing 
the trading of equity securities, trading hours, trading halts, 
surveillance, and the Information Bulletin to Equity Trading Permit 
Holders (``ETP Holders''), as set forth in Exchange rules applicable to 
Units and prior Commission orders approving the generic listing rules 
applicable to the listing and trading of Units.\21\
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    \19\ 17 CFR 240.10A-3.
    \20\ The IIV is widely disseminated by one or more major market 
data vendors at least every 15 seconds during the Exchange's Core 
Trading Session of 9:30 a.m. to 4:00 p.m., Eastern time. Currently, 
it is the Exchange's understanding that several major market data 
vendors display and/or make widely available IIVs taken from the CTA 
or other data feeds.
    \21\ See, e.g., Securities Exchange Act Release Nos. 55783 (May 
17, 2007), 72 FR 29194 (May 24, 2007) (SR-NYSEArca-2007-36) (order 
approving NYSE Arca generic listing standards for Units based on a 
fixed income index); 44551 (July 12, 2001), 66 FR 37716 (July 19, 
2001) (SR-PCX-2001-14) (order approving generic listing standards 
for Units and Portfolio Depositary Receipts); 41983 (October 6, 
1999), 64 FR 56008 (October 15, 1999) (SR-PCX-98-29) (order 
approving rules for listing and trading of Units).
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    Each of the Indexes is sponsored by the Index Provider, which is 
independent of the Funds and the Adviser. The Index Provider determines 
the composition and relative weightings of the securities in the 
Indexes and

[[Page 27046]]

publishes information regarding the market value of the Indexes. The 
Index Provider is not a broker-dealer or affiliated with a broker-
dealer and has implemented procedures designed to prevent the use and 
dissemination of material, non-public information regarding the 
Indexes. In the event the Index Provider becomes registered as a 
broker-dealer or affiliated with a broker-dealer, the Index Provider 
will implement and maintain a ``fire wall'' with respect to its 
relevant personnel or broker-dealer affiliate regarding access to 
information concerning changes and adjustments to the Indexes.
    The current value of each of the Indexes is widely disseminated by 
one or more major market data vendors at least once per day, as 
required by NYSE Arca Rule 5.2-E(j)(3), Commentary .02(b)(ii). The IIVs 
for Shares of the Funds are disseminated by one or more major market 
data vendors, updated at least every 15 seconds during the Exchange's 
Core Trading Session, as required by NYSE Arca Rule 5.2-E(j)(3), 
Commentary .02 (c), and Commentary .01(c), respectively.
    With the exception of Commentary .02(a)(2) to NYSE Arca Rule 5.2-
E(j)(3), the CA Index and NY Index will meet all other requirements of 
Commentary .02(a) to NYSE Arca Rule 5.2-E(j)(3).
Availability of Information
    On each business day, before commencement of trading in Shares of 
each Fund in the Core Trading Session on the Exchange, a Fund discloses 
on its website the portfolio that will form the basis for a Fund's 
calculation of net asset value (``NAV'') at the end of the business 
day.\22\
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    \22\ Under accounting procedures followed by the Funds, trades 
made on the prior business day (``T'') will be booked and reflected 
in NAV on the current business day (``T+1''). Accordingly, the Funds 
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.
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    On a daily basis, each Fund discloses for each portfolio security 
or other financial instrument of a Fund the following information on 
the Funds' website: Ticker symbol (if applicable), name of security and 
financial instrument, a common identifier such as CUSIP or ISIN (if 
applicable), number of shares (if applicable), and dollar value of 
securities and financial instruments held in the portfolio, and 
percentage weighting of the security and financial instrument in the 
applicable portfolio. The website information is publicly available at 
no charge.
    The current value of the Indexes would be widely disseminated by 
one or more major market data vendors at least once per day, as 
required by NYSE Arca Rule 5.2-E(j)(3), Commentary .02 (b)(ii). The IIV 
for Shares of each Fund are disseminated by one or more major market 
data vendors, updated at least every 15 seconds during the Exchange's 
Core Trading Session, as required by NYSE Arca Rule 5.2-E(j)(3), 
Commentary .02(c).
    Investors can also obtain the Trust's Statement of Additional 
Information (``SAI''), the Funds' Shareholder Reports, and their Form 
N-CSR and Form N-SAR, filed twice a year. The Trust's SAI and 
Shareholder Reports are available free upon request from the Trust, and 
those documents and the Form N-CSR and Form N-SAR may be viewed on-
screen or downloaded from the Commission's website at www.sec.gov. 
Information regarding market price and trading volume of the Shares of 
each Fund are 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 are available 
via the Consolidate Tape Association (``CTA'') high speed line. Price 
information regarding municipal bonds is available from major market 
data vendors and third party pricing services. Trade price and other 
information relating to municipal bonds is available through the 
Municipal Securities Rulemaking Board's Electronic Municipal Market 
Access (``EMMA'') system.
Trading Rules
    The Exchange deems the Shares of each Fund to be equity securities, 
thus rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. Shares trade on the 
NYSE Arca Marketplace from 4:00 a.m. to 8:00 p.m., Eastern time in 
accordance with NYSE Arca Rule 7.34-E (Early, Core, and Late 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, Commentary .03, 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 Commentary .02(a)(2) to Rule 5.2(j)(3), The 
[sic] Shares of the Funds conform to the initial and continued listing 
criteria under NYSE Arca Rules 5.2-E(j)(3) and 5.5-E(g)(2), 
respectively. The Exchange represents that the Funds are in compliance 
with Rule 10A-3 \23\ under the Act, as provided by NYSE Arca Rule 5.3-
E. The Exchange has obtained a representation from the issuer of the 
Shares that the NAV per Share of each Fund is calculated daily and that 
the NAV per Share will be made available to all market participants at 
the same time.
---------------------------------------------------------------------------

    \23\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------

    All statements and representations made in this filing regarding 
(a) the description of the portfolio, or (b) limitations on portfolio 
holdings or reference assets shall constitute continued listing 
requirements for listing the Shares of the Funds on the Exchange.
    The issuer has represented to the Exchange that it will advise the 
Exchange of any failure by the Funds to comply with the continued 
listing requirements, and, pursuant to its obligations under Section 
19(g)(1) of the Act, the Exchange will monitor for compliance with the 
continued listing requirements. If a Fund is not in compliance with the 
applicable listing requirements, the Exchange will commence delisting 
procedures under NYSE Arca Rule 5.5-E(m).
Trading Halts
    The Exchange will halt trading in the Shares if the circuit breaker 
parameters of NYSE Arca Rule 7.12-E have been reached. In exercising 
its discretion to halt or suspend trading in the Shares, the Exchange 
may consider factors such as the extent to which trading in the 
underlying securities is not occurring or whether other unusual 
conditions or circumstances detrimental to the maintenance of a fair 
and orderly market are present, in addition to other factors that may 
be relevant. If the IIV (as defined in Commentary .01 to Rule 5.2-
E(j)(3)) or the value of an Index is not being disseminated as 
required, the Exchange may halt trading during the day in which the 
interruption to the dissemination of the IIV or the Index value occurs. 
If the interruption to the dissemination of the IIV or the Index value 
persists past the trading day in which it occurred, the Exchange will 
halt trading.
Surveillance
    The Exchange represents that trading in the Shares of each Fund 
will be subject to the existing trading surveillances, administered by 
the Financial Industry Regulatory Authority

[[Page 27047]]

(``FINRA'') on behalf of the Exchange, or by regulatory staff 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 of each Fund in all trading sessions and to deter and detect 
violations of Exchange rules and federal securities laws applicable to 
trading on the Exchange.\24\
---------------------------------------------------------------------------

    \24\ FINRA conducts cross-market surveillances on behalf of the 
Exchange pursuant to a regulatory services agreement. The Exchange 
is responsible for FINRA's performance under this regulatory 
services agreement.
---------------------------------------------------------------------------

    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 
communicate as needed regarding trading in the Shares with other 
markets and other entities that are members of the Intermarket 
Surveillance Group (``ISG''), and the Exchange or FINRA, on behalf of 
the Exchange, or both, may obtain trading information regarding trading 
in the Shares from such markets and other entities. In addition, the 
Exchange may obtain information regarding trading in the Shares from 
markets and other entities that are members of ISG or with which the 
Exchange has in place a comprehensive surveillance sharing agreement. 
In addition, FINRA, on behalf of the Exchange, is able to access, as 
needed, trade information for certain fixed income securities held by a 
Fund reported to FINRA's Trade Reporting and Compliance Engine 
(``TRACE''). FINRA also can access data obtained from the Municipal 
Securities Rulemaking Board (``MSRB'') relating to municipal bond 
trading activity for surveillance purposes in connection with trading 
in the Shares.
Information Bulletin
    Prior to any implementation of changes to the Municipal Bond Index 
methodologies as described above, the Exchange would inform its ETP 
Holders in an Information Bulletin (``Bulletin'') of the special 
characteristics and risks associated with trading the Shares. 
Specifically, the Bulletin would discuss the following: (1) The 
procedures for purchases and redemptions of Shares in Creation Unit 
aggregations (and that Shares are not individually redeemable); (2) 
NYSE Arca Rule 9.2-E(a), which imposes a duty of due diligence on its 
ETP Holders to learn the essential facts relating to every customer 
prior to trading the Shares; (3) the risks involved in trading the 
Shares during the Opening and Late Trading Sessions when an updated IIV 
will not be calculated or publicly disseminated; (4) how information 
regarding the IIV is disseminated; (5) the requirement that ETP Holders 
deliver a prospectus to investors purchasing newly issued Shares prior 
to or concurrently with the confirmation of a transaction; (6) trading 
information; and (7) changes to the Indexes.
    In addition, the Bulletin would reference that each Fund is subject 
to various fees and expenses described in the Registration Statement. 
The Bulletin would discuss any exemptive, no-action, and interpretive 
relief granted by the Commission from any rules under the Act. The 
Bulletin would also disclose that the NAV for the Shares is calculated 
after 4:00 p.m., Eastern time each trading day.
    Based on the characteristics of each Index as described above, the 
Exchange believes it is appropriate to facilitate the listing and 
trading of the Funds. Each Index satisfies all of the generic listing 
requirements for Units based on a fixed income index, except for the 
minimum principal amount outstanding requirement of Commentary 
.02(a)(2) to Rule 5.2-E(j)(3).
    A fundamental purpose behind the minimum principal amount 
outstanding requirement is to ensure that component securities of an 
index are sufficiently liquid such that the potential for index 
manipulation is reduced. Each Index will be well-diversified to protect 
against index manipulation. On a continuous basis, each Index will 
contain at least 500 component securities. In addition, at least 90% of 
the weight of the CA Index will consist of securities that have an 
outstanding par value of at least $15 million and were issued as part 
of a transaction of at least $100 million; and at least 90% of the 
weight of the NY Index will consist of securities that have an 
outstanding par value of at least $5 million and were issued as part of 
a transaction of at least $20 million. At each monthly rebalancing, no 
one issuer can represent more than 25% of the weight of the applicable 
Index, and the aggregate weight of those issuers representing at least 
5% of such Index cannot exceed 50% of the weight of the applicable 
Index.\25\ The Exchange believes that this significant diversification 
and the lack of concentration among constituent securities provide a 
strong degree of protection against Index manipulation.
---------------------------------------------------------------------------

    \25\ The Commission has previously approved a proposed rule 
change relating to the listing and trading on the Exchange of a 
series of Units based on a municipal bond index that did not satisfy 
Commentary .02(a)(2) of Rule 5.2-E(j)(3) provided that such 
municipal bond index contained at least 500 component securities on 
a continuous basis. See Securities Exchange Act Release No. 79767 
(January 10, 2017), 82 FR 4950 (January 17, 2017) (SR-NYSEArca-2016-
62) (order approving proposed rule change relating to the listing 
and trading of the PowerShares Build America Bond Portfolio). The 
total dollar amount of issues in the index underlying the 
PowerShares Build America Bond Portfolio was approximately 
$281,589,346,769 and the average dollar amount outstanding of issues 
in the index was approximately $27,808,547. Those metrics are 
comparable to the metrics of the indices underlying the Funds.
---------------------------------------------------------------------------

    In addition, the Exchange represents that: (1) Except for 
Commentary .02(a)(2) to Rule 5.2-E(j)(3), each Index will satisfy all 
of the generic listing standards under Rule 5.2-E(j)(3); (2) the 
continued listing standards under Rules 5.2-E(j)(3) (except for 
Commentary .02(a)(2)) and 5.5-E(g)(2) applicable to Units will apply to 
the Shares of each Fund; and (3) the issuer of each Fund is required to 
comply with Rule 10A-3 \26\ under the Act for the initial and continued 
listing of the Shares of each Fund.
---------------------------------------------------------------------------

    \26\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------

    In addition, the Exchange represents that the Shares of each Fund 
will comply with all other requirements applicable to Units including, 
but not limited to, requirements relating to the dissemination of key 
information such as the value of the underlying Index and the 
applicable rules governing the trading of equity securities, trading 
hours, trading halts, surveillance, information barriers and the 
Information Bulletin to ETP Holders, as set forth in Exchange rules 
applicable to Units and prior Commission orders approving the generic 
listing rules applicable to the listing and trading of Units.\27\
---------------------------------------------------------------------------

    \27\ See note 21, supra.
---------------------------------------------------------------------------

    The current value of each Index is widely disseminated by one or 
more major market data vendors at least once per day, as required by 
NYSE Arca Rule 5.2-E(j)(3), Commentary .02(b)(ii). The IIV for Shares 
of each Fund is disseminated by one or more major market data vendors, 
updated at least every 15 seconds during the Exchange's Core Trading 
Session, as required by NYSE Arca Rule 5.2-E(j)(3), Commentary .02(c). 
In addition, the portfolio of securities held by each Fund is disclosed 
daily on each Fund's

[[Page 27048]]

website. Further, the website for each Fund will contain the applicable 
fund's prospectus and additional data relating to net asset value 
(``NAV'') and other applicable quantitative information. The Exchange 
has obtained a representation from each Fund issuer that the applicable 
NAV per Share will be calculated daily and will be made available to 
all market participants at the same time. The Indexes are not 
maintained by a broker-dealer.
    The Exchange notes that each of the Funds has been listed on the 
Exchange or on the American Stock Exchange, Inc. (now NYSE American 
LLC) for over ten years and that, during such time, the Exchange has 
not become aware of any potential manipulation of the Indexes. Further, 
the Exchange's existing rules require that the Funds notify the 
Exchange of any material change to the methodology used to determine 
the composition of each Index.\28\ Therefore, if the methodology of an 
Index was changed in a manner that would materially alter its existing 
composition, the Exchange would have advance notice and would evaluate 
such Index, as modified, to determine whether it was sufficiently 
broad-based and well diversified.
---------------------------------------------------------------------------

    \28\ See NYSE Arca Rule 5.3-E(i)(1)(i)(P).
---------------------------------------------------------------------------

2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \29\ 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.
---------------------------------------------------------------------------

    \29\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    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 5.2-E(j)(3). 
The Exchange represents that trading in the Shares will be subject to 
the existing trading 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 applicable federal securities laws. FINRA, on 
behalf of the Exchange, will communicate as needed regarding trading in 
the Shares with other markets that are members of the ISG or with which 
the Exchange has in place a comprehensive surveillance sharing 
agreement. FINRA also can access data obtained from the MSRB relating 
to municipal bond trading activity for surveillance purposes in 
connection with trading in the Shares. FINRA, on behalf of the 
Exchange, is able to access, as needed, trade information for certain 
fixed income securities held by a Fund reported to FINRA's TRACE.
    The Index Provider is not a broker-dealer or affiliated with a 
broker-dealer and has implemented procedures designed to prevent the 
use and dissemination of material, non-public information regarding the 
Indexes. In the event the Index Provider becomes registered as a 
broker-dealer or affiliated with a broker-dealer, the Index Provider 
will implement and maintain a ``fire wall'' with respect to its 
relevant personnel or broker-dealer affiliate regarding access to 
information concerning changes and adjustments to the Indexes.
    The Index values, calculated and disseminated at least once daily, 
as well as the components of the Indexes and their respective 
percentage weightings, will be available from major market data 
vendors. In addition, the portfolio of securities held by the Funds 
will be disclosed on the Funds' website. The IIV for Shares of the 
Funds will be disseminated by one or more major market data vendors, 
updated at least every 15 seconds during the Exchange's Core Trading 
Session.
    Based on the characteristics of each Index as described above, the 
Exchange believes it is appropriate to facilitate the listing and 
trading of the Funds. Each Index satisfies all of the generic listing 
requirements for Units based on a fixed income index, except for the 
minimum principal amount outstanding requirement of Commentary 
.02(a)(2) to Rule 5.2-E(j)(3).
    Each Index will be well-diversified to protect against index 
manipulation. On a continuous basis, each Index will contain at least 
500 component securities. In addition, at least 90% of the weight of 
the CA Index will consist of securities that have an outstanding par 
value of at least $15 million and were issued as part of a transaction 
of at least $100 million; and at least 90% of the weight of the NY 
Index will consist of securities that have an outstanding par value of 
at least $5 million and were issued as part of a transaction of at 
least $20 million. At each monthly rebalancing, no one issuer can 
represent more than 25% of the weight of the applicable Index, and the 
aggregate weight of those issuers representing at least 5% of such 
Index cannot exceed 50% of the weight of the applicable Index. The 
Exchange believes that this significant diversification and the lack of 
concentration among constituent securities provides a strong degree of 
protection against Index manipulation.
    The Adviser anticipates that the number of CA Index components 
would increase significantly if the methodology changes described above 
were implemented in that a reduction in the minimum par amount required 
for inclusion in the CA Index would permit a larger number of municipal 
bond issues to be eligible for inclusion. In addition, the CA Index 
securities would be sufficiently large to deter potential manipulation 
in view of the substantial total dollar amount outstanding and the 
average dollar amount outstanding of the CA Index issues.
    The Exchange believes that, notwithstanding that the NY Index would 
not satisfy the criterion in NYSE Arca Rule 5.2-E(j)(3), Commentary 
.02(a)(2), the NY Index would be sufficiently broad-based to deter 
potential manipulation. As of December 29, 2017, the NY Index included 
2,404 component fixed income municipal bond securities from 42 distinct 
municipal bond issuers in the State of New York. The Adviser 
anticipates that the number of NY Index components would increase 
significantly if the methodology changes described above were 
implemented in that a reduction in the minimum par amount required for 
inclusion in the NY Index would permit a larger number of municipal 
bond issues to be eligible for inclusion. The Adviser represents that 
reducing the required par amount outstanding both allows for more 
diversity of issuers in an Index and would significantly expand the 
universe of municipal securities that a Fund could purchase, and are a 
better representation of the securities that issuers bring to the 
municipal bond market in California and New York. In addition, the NY 
Index securities would be sufficiently large to deter potential 
manipulation in view of the substantial total dollar amount outstanding 
and the average dollar amount outstanding of NY Index issues.
    On a continuous basis, each Index will (i) contain at least 500 
component securities and (ii) comply with the parameters described 
under the heading ``Requirements for the CA Index and NY Index'' set 
forth above. The requirement that no one issuer can represent more than 
25% of the weight of the applicable

[[Page 27049]]

Index, and individual issuers that represent at least 5% of the weight 
of the applicable Index cannot account for more than 50% of the weight 
of such Index in the aggregate will help assure that Index constituents 
are not unduly concentrated among a relatively small number of 
individual issuers. In addition, the Exchange represents that: (1) 
Except for Commentary .02(a)(2) to Rule 5.2-E(j)(3), each Index 
currently satisfies all of the generic listing standards under Rule 
5.2-E(j)(3); (2) the continued listing standards under Rules 5.2-
E(j)(3) (except for Commentary .02(a)(2)) and 5.5-E(g)(2) applicable to 
Units will apply to the Shares of each Fund; and (3) the issuer of each 
Fund is required to comply with Rule 10A-3 \30\ under the Act for the 
initial and continued listing of the Shares of each Fund. In addition, 
the Exchange represents that the Shares of each Fund will comply with 
all other requirements applicable to Units including, but not limited 
to, requirements relating to the dissemination of key information such 
as the value of each Index, IIV, the applicable rules governing the 
trading of equity securities, trading hours, trading halts, 
surveillance, information barriers and the Information Bulletin to ETP 
Holders, as set forth in Exchange rules applicable to Units and prior 
Commission orders approving the generic listing rules applicable to the 
listing and trading of Units.\31\
---------------------------------------------------------------------------

    \30\ 17 CFR 240.10A-3.
    \31\ See note 21, supra.
---------------------------------------------------------------------------

    The current value of each Index is widely disseminated by one or 
more major market data vendors at least once per day, as required by 
NYSE Arca Rule 5.2-E(j)(3), Commentary .02(b)(ii). The IIV for Shares 
of each Fund is disseminated by one or more major market data vendors, 
updated at least every 15 seconds during the Exchange's Core Trading 
Session, as required by NYSE Arca Rule 5.2-E(j)(3), Commentary .02(c). 
In addition, the portfolio of securities held by each Fund is disclosed 
daily on each Fund's website. Further, the website for each Fund will 
contain the applicable Fund's prospectus and additional data relating 
to NAV and other applicable quantitative information.
    In support of its proposed rule change, the Exchange notes that the 
Commission has previously approved a rule change to facilitate the 
listing and trading of series of Units based on an index of municipal 
bond securities that did not otherwise meet the generic listing 
requirements of NYSE Arca Rule 5.2-E(j)(3). As noted above, the 
Commission has approved listing and trading of Shares of the Funds, in 
addition to ten other series of Units based on municipal bond indexes 
notwithstanding the fact that the indices on which they are based do 
not meet the requirements of Commentary .02(a)(2) to Rule 5.2-
E(j)(3).\32\ Each of the indices on which the Funds and other series of 
Units are based meet all other requirements of such rule. In its order 
approving continued listing and trading of Shares of the Funds and the 
other series of Units, the Commission stated that, based on the 
Exchange's representations, the Commission believes that the indexes 
underlying such funds are sufficiently designed to deter potential 
manipulation. In addition, the Commission previously approved the 
listing and trading of the PowerShares Insured California Municipal 
Bond Portfolio, PowerShares Insured National Municipal Bond Portfolio 
and the PowerShares Insured New York Municipal Bond Portfolio, 
notwithstanding the fact that the index underlying each fund did not 
satisfy the criteria of Commentary .02(a)(2) to Rule 5.2-E(j)(3).\33\ 
In finding such proposal to be consistent with the Act and the rules 
regulations thereunder, the Commission noted that each underlying index 
was sufficiently broad-based to deter potential manipulation. The 
Exchange believes that each of the CA Index and NY Index shares 
comparable characteristics to the series of Units that are the subject 
of the Commission's order approving listing and trading of Shares of 
the Funds and ten other series of Units,\34\ and the Commission's order 
approving listing and trading of shares of the PowerShares Municipal 
Bond Funds.\35\ The Exchange, therefore, believes, the CA Index and NY 
Index are sufficiently broad-based to deter potential manipulation.
---------------------------------------------------------------------------

    \32\ See note 8, supra.
    \33\ See Securities Exchange Act Release No. 72464 (June 25, 
2014), 79 FR 37373 (July 1, 2014) (SR-NYSEArca-2014-45).
    \34\ See notes 8 and 14, supra.
    \35\ See note 14, supra.
---------------------------------------------------------------------------

    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest. 
In addition, a large amount of information is publicly available 
regarding the Funds and the Shares, thereby promoting market 
transparency. The Funds' portfolio holdings will be disclosed on the 
Funds' website daily after the close of trading on the Exchange and 
prior to the opening of trading on the Exchange the following day. 
Moreover, the IIV will be widely disseminated by one or more major 
market data vendors at least every 15 seconds during the Exchange's 
Core Trading Session. The current value of the Index will be 
disseminated by one or more major market data vendors at least once per 
day. Information regarding market price and trading volume of the 
Shares will be continually available on a real-time basis throughout 
the day on brokers' computer screens and other electronic services, and 
quotation and last sale information will be available via the CTA high-
speed line. The website for the Funds will include the prospectus for 
the Funds and additional data relating to NAV and other applicable 
quantitative information. Moreover, prior to the commencement of 
trading, the Exchange will inform its ETP Holders in an Information 
Bulletin of the special characteristics and risks associated with 
trading the Shares. If the Exchange becomes aware that the NAV is not 
being disseminated to all market participants at the same time, it will 
halt trading in the Shares until such time as the NAV is available to 
all market participants. 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 Funds. 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. If the IIV or the 
Index values are not being disseminated as required, the Exchange may 
halt trading during the day in which the interruption to the 
dissemination of the applicable IIV or an Index value occurs. If the 
interruption to the dissemination of the applicable IIV or an Index 
value persists past the trading day in which it occurred, the Exchange 
will halt trading. Trading in Shares of the Funds will be halted if the 
circuit breaker parameters in NYSE Arca's 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. In addition, 
investors will have ready access to information regarding the IIV, and 
quotation and last sale information for the 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 
additional types of exchange-traded products based on municipal bond 
indexes that will enhance competition among market participants, to the 
benefit of investors and the marketplace. The Exchange has in place 
surveillance procedures relating to trading in the

[[Page 27050]]

Shares and may obtain information via ISG from other exchanges that are 
members of ISG or with which the Exchange has entered into a 
comprehensive surveillance sharing agreement. In addition, investors 
will have ready access to information regarding the IIV and quotation 
and last sale information for the Shares. Trade price and other 
information relating to municipal bonds is available through the MSRB's 
EMMA system.

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 continued listing and trading 
of exchange-traded products that hold municipal securities and that 
will enhance competition among market participants, to the benefit of 
investors and the marketplace.

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 up to 90 days (i) as the Commission may designate 
if it finds such longer period to be appropriate and publishes its 
reasons for so finding or (ii) as to which the self-regulatory 
organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) institute proceedings to determine whether the proposed rule 
change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-NYSEArca-2018-38 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-2018-38. 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-2018-38 and should be submitted 
on or before July 2, 2018.

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

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

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-12430 Filed 6-8-18; 8:45 am]
 BILLING CODE 8011-01-P


