[Federal Register Volume 83, Number 234 (Thursday, December 6, 2018)]
[Notices]
[Pages 62915-62924]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-26514]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84696; File No. SR-NYSEArca-2018-82]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Regarding Certain Changes Relating to 
Investments of the PGIM Active High Yield Bond ETF

November 30, 2018.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on November 16, 2018, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, 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 certain changes regarding investments of the 
PGIM Active High Yield Bond ETF (the ``Fund''), a series of PGIM ETF 
Trust (the ``Trust''). Shares of the Fund currently are listed and 
traded on the Exchange under NYSE Arca Rule 8.600-E (``Managed Fund 
Shares''). The proposed change is available on the Exchange's website 
at www.nyse.com, at the principal office of the Exchange, and at the 
Commission's Public Reference Room.

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

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

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

1. Purpose
    The Exchange proposes certain changes, described below under 
``Application of Generic Listing Requirements'', regarding investments 
of the Fund. The shares (``Shares'') of the Fund are currently listed 
and traded on the Exchange under Commentary .01 to NYSE Arca Rule 
8.600-E,\4\ which provides generic criteria applicable to the listing 
and trading of Managed Fund Shares.\5\ PGIM Investments LLC (the 
``Adviser'') is the investment adviser for the Fund. PGIM Fixed Income 
(the ``Subadviser''), a unit of PGIM, Inc., is the subadviser to the 
Fund. PIMS, the Adviser and the Subadviser are indirect wholly-owned 
subsidiaries of Prudential Financial, Inc. Brown Brothers Harriman & 
Co., which is unaffiliated with PIMS, the Adviser and the Subadviser, 
serves as the custodian, administrator, and transfer agent (``Transfer 
Agent'') for the Fund.\6\ Prudential Investment Management Services LLC 
(``PIMS''), a registered broker-dealer, acts as the distributor (the 
``Distributor'') for the Fund's Shares.
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    \4\ Shares of the Fund commenced trading on the Exchange on 
April 10, 2018 pursuant to Commentary .01 to NYSE Arca Rule 8.600-E.
    \5\ A Managed Fund Share is a security that represents an 
interest in an investment company registered under the Investment 
Company Act of 1940 (15 U.S.C. 80a-1) (the ``1940 Act'') organized 
as an open-end investment company or similar entity that invests in 
a portfolio of securities selected by its investment adviser 
consistent with its investment objectives and policies. In contrast, 
an open-end investment company that issues Investment Company Units, 
listed and traded on the Exchange under NYSE Arca Rule 5.2-E(j)(3), 
seeks to provide investment results that correspond generally to the 
price and yield performance of a specific foreign or domestic stock 
index, fixed income securities index or combination thereof.
    \6\ The Trust is registered under the 1940 Act. On June 28, 
2018, the Trust filed with the Commission an amendment to its 
registration statement on Form N-1A under the Securities Act of 1933 
(15 U.S.C. 77a) (``Securities Act''), and under the 1940 Act 
relating to the Fund (File Nos. 333-222469 and 811-23324) 
(``Registration Statement''). The Trust will file an amendment to 
the Registration Statement as necessary to conform to the 
representations in this filing. The description of the operation of 
the Trust and the Fund herein is based, in part, on the Registration 
Statement. In addition, the Commission has issued an order granting 
certain exemptive relief to the Trust under the1940 Act. See 
Investment Company Act Release No. 31095 (June 24, 2014) (File No. 
812-14267).
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    Commentary .06 to Rule 8.600-E provides that, if the investment 
adviser to the investment company issuing Managed Fund Shares is 
affiliated with a broker-dealer, such investment adviser shall erect 
and maintain a ``fire wall'' between the investment adviser and the

[[Page 62916]]

broker-dealer with respect to access to information concerning the 
composition and/or changes to such investment company portfolio. In 
addition, Commentary .06 further requires that personnel who make 
decisions on the open-end fund's portfolio composition must be subject 
to procedures designed to prevent the use and dissemination of material 
nonpublic information regarding the open-end fund's portfolio. 
Commentary .06 to Rule 8.600-E is similar to Commentary .03(a)(i) and 
(iii) to NYSE Arca Rule 5.2-E(j)(3); however, Commentary .06 in 
connection with the establishment and maintenance of a ``fire wall'' 
between the investment adviser and the broker-dealer reflects the 
applicable open-end fund's portfolio, not an underlying benchmark 
index, as is the case with index-based funds.
    The Adviser and the Subadviser are not registered as broker-dealers 
but are affiliated with PIMS, a broker-dealer, and have implemented and 
will maintain a ``fire wall'' with respect to such broker-dealer 
regarding access to information concerning the composition and/or 
changes to the Fund's portfolio. In the event (a) the Adviser or the 
Subadviser becomes registered as a broker-dealer or newly affiliated 
with a broker-dealer, or (b) any new adviser or sub-adviser is a 
registered broker-dealer or becomes affiliated with a broker-dealer, it 
will implement and maintain a ``fire wall'' with respect to its 
relevant personnel or broker-dealer affiliate regarding access to 
information concerning the composition and/or changes to the portfolio, 
and will be subject to procedures, each designed to prevent the use and 
dissemination of material non-public information regarding such 
portfolio.
PGIM Active High Yield Bond ETF
Principal Investments
    According to the Registration Statement, the investment objective 
of the Fund seeks to provide total return through a combination of 
current income and capital appreciation. The Fund seeks to achieve its 
investment objective by investing primarily in a portfolio of high 
yield bonds of companies and governments. Under normal market 
conditions,\7\ the Fund will invest at least 80% of its net assets in a 
diversified portfolio of high yield bonds and other investments 
consisting of (i) the Principal Investment Instruments (defined below) 
and (ii) derivatives \8\ that (A) provide exposure to such Principal 
Investment Instruments, or (B) are used to enhance returns, manage 
portfolio duration, or manage the risk of securities price 
fluctuations, as further described below (together, the ``Principal 
Investments'').
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    \7\ The term ``normal market conditions'' is defined in NYSE 
Arca Rule 8.600-E(c)(5). In response to adverse market, economic or 
political conditions, the Fund may take a temporary defensive 
position and invest up to 100% of its assets in cash and money 
market instruments, which include shares of ``Money Market Funds'' 
(defined below); shares of affiliated short-term bond funds; short-
term obligations of, or securities guaranteed by, the U.S. 
Government, its agencies or instrumentalities; high-quality 
obligations of U.S. or foreign banks and corporations; or any other 
securities or instruments.
    \8\ The Fund's investments in derivatives will include 
investments in both listed derivatives and over-the-counter 
(``OTC'') derivatives, as those terms are defined in Commentary 
.01(d) and (e) to NYSE Arca Rule 8.600-E.
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    The Fund may invest in ``Principal Investment Instruments'' 
consisting of the following fixed income instruments (each of which 
shall be denominated in U.S. dollars):
     fixed income instruments issued by the US Government, its 
agencies and instrumentalities;
     commercial paper;
     asset-backed securities;
     mortgage-backed securities,
     variable and floating rate instruments;
     bills, notes and other obligations issued by banks, 
corporations and other companies (including trust structures);
     convertible and non-convertible fixed income securities
     loan participations and assignments;
     obligations issued by non-U.S. banks, companies or non-
U.S. governments;
     municipal bonds and notes;
     shares of ``Money Market Funds''; \9\ and
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    \9\ ``Money Market Funds'' include money market funds registered 
under the 1940 Act and money market funds that are not registered 
under the 1940 Act but that comply with Rule 2a-7 under the 1940 
Act.
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     shares of the Prudential Core Ultra Short Bond Fund \10\ 
or, if the Prudential Core Ultra Short Bond Fund is no longer offered 
with the same investment objective, shares of any successor fund or 
other affiliated open-end investment company registered under the 1940 
Act with a substantially similar investment objective (the ``Affiliated 
Short Term Bond Fund'').\11\
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    \10\ The Prudential Core Ultra Short Bond Fund is a series of 
Prudential Investment Portfolios 2, which is an open-end investment 
company registered under the 1940 Act. Shares of the Prudential Core 
Ultra Short Bond Fund are available for purchase only by certain 
affiliated investment companies managed and certain other 
institutional investors. The Fund's Subadviser is also the 
subadviser to the Affiliated Short Term Bond Fund. The investment 
objective of the Prudential Core Ultra Short Bond Fund is to seek 
current income consistent with the preservation of capital and the 
maintenance of liquidity. Like Rule 2a-7 money market funds that are 
defined as cash equivalents pursuant to Commentary .01(c) to Rule 
8.600-E, the Prudential Core Ultra Short Bond Fund invests primarily 
in money market obligations as defined by Rule 2a-7. Rule 2a-7 
defines money market obligations as obligations that mature in 397 
days or less. Additionally, the Prudential Core Ultra Short Bond 
Fund seeks investments that are expected to experience minimal 
fluctuations in value. See the registration statement for the 
Prudential Core Ultra Short Bond Fund on Form N-1A, dated March 29, 
2018 (File No. 811-09999), available at https://www.sec.gov/Archives/edgar/data/1099692/000006759018000388/pip2posami.htm.
    \11\ The Fund's investment in the Affiliated Short Term Bond 
Fund is described further in ``Application of Generic Listing 
Requirements,'' infra.
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    The Fund may hold cash and cash equivalents.\12\
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    \12\ For purposes of this filing, the term ``cash equivalents'' 
includes the short-term instruments enumerated in Commentary .01(c) 
to NYSE Arca Rule 8.600-E. Under normal market conditions, the Fund 
may invest a significant portion of its assets in cash and cash 
equivalents.
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    The Fund may, without limitation, enter into dollar rolls and short 
sales of Principal Investment Instruments. The Fund may also purchase 
securities and other instruments under when-issued, delayed delivery, 
to be announced or forward commitment transactions. The Fund will ``set 
aside'' liquid assets or engage in other measures to ``cover'' open 
positions held in connection with the foregoing types of transactions, 
as well as derivative transactions.
    The Fund may invest in derivatives to (i) provide exposure to the 
Principal Investment Instruments and (ii) enhance returns, manage 
portfolio duration, or (iii) manage the risk of securities price 
fluctuations. Derivatives that the Fund may enter into include only: 
OTC deliverable and non-deliverable foreign exchange forward contracts; 
listed futures contracts on one or more Principal Investment 
Instruments securities (including Treasury Securities and foreign 
government securities), indices relating to one or more Principal 
Investment Instruments, interest rates, financial rates and currencies; 
listed or OTC options (including puts or calls) or swaptions (i.e., 
options to enter into a swap) on one or more Principal Investment 
Instruments, indices relating to one or more Principal Investment 
Instruments, interest rates, financial rates, currencies and futures 
contracts on one or more Principal Investment Instruments; and listed 
or OTC swaps (including total return swaps) on securities, indices 
relating to one or more Principal Investment Instruments, interest 
rates, financial rates, currencies and debt and credit default swaps on 
single names, baskets and indices on one or more Principal Investment

[[Page 62917]]

Instruments (both as protection seller and as protection buyer).
Other Investments
    While the Fund, under normal market conditions, invests at least 
80% of its investable assets in the Principal Investments described 
above, the Fund may invest its remaining assets in the following ``Non-
Principal Investments''.
    The Fund may hold exchange-traded funds (``ETFs'') that provide 
exposure to Principal Investment Instruments.\13\
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    \13\ For purposes of this filing, ETFs include Investment 
Company Units (as described in NYSE Arca Rule 5.2(j)(3)-E), 
Portfolio Depositary Receipts (as described in NYSE Arca Rule 8.100-
E), and Managed Fund Shares (as described in NYSE Arca Rule 8.600-
E). All ETFs in which the Fund invests will be listed and traded on 
national securities exchanges.
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    The Fund may hold convertible and non-convertible securities 
preferred stocks traded in the OTC market or listed on an exchange.
    The Fund may hold warrants traded in the OTC market or listed on an 
exchange.
    The Fund may hold ``Work Out Securities,'' \14\ which may be 
acquired by the Fund incidental to the purchase or ownership of the 
Fund's Principal Investments or in connection with a reorganization of 
an issuer.
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    \14\ For purposes of this filing, Work Out Securities include 
U.S. or foreign equity securities of any type acquired in connection 
with restructurings or incidental to the purchase or ownership 
related to issuers of Principal Investment Instruments held by the 
Fund. Work Out Securities are generally traded OTC, but may be 
traded on a U.S. or foreign exchange.
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    The Fund may invest in securities and other instruments that would 
otherwise qualify as Principal Investment Instruments but for being 
denominated in non-U.S. currency.
Investment Restrictions
    In addition to shares of the Affiliated Short Term Bond Fund or 
Money Market Funds referenced above in ``Principal Investments'', the 
Fund may invest up to 10% of the total assets of the Fund in shares of 
other non-exchange-traded open-end management investment company 
securities, including investment company securities for which the 
Adviser and/or its affiliates may serve as investment adviser or 
administrator.
    Not more than 10% of the Fund's assets in the aggregate will be 
held in convertible and non-convertible preferred stocks, warrants and 
Work Out Securities.
Use of Derivatives by the Fund
    The Fund may invest in the types of derivatives described in the 
``Principal Investments'' section above to (i) provide exposure to the 
Principal Investment Instruments,\15\ (ii) enhance returns and manage 
portfolio duration, or (iii) manage the risk of securities price 
fluctuations. Investments in derivative instruments will be consistent 
with the Fund's investment objective and policies.
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    \15\ Because the markets for the Principal Investment 
Instruments, or the Principal Investment Instruments themselves, may 
be unavailable or cost prohibitive as compared to derivative 
instruments, suitable derivative transactions may be an efficient 
alternative for the Fund to obtain the desired asset exposure to 
Principal Investment Instruments.
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    To limit the potential risk associated with such transactions, the 
Fund may enter into offsetting transactions or segregate or ``earmark'' 
assets determined to be liquid by the Adviser in accordance with 
procedures established by the Trust's Board of Trustees (the 
``Board''). In addition, the Fund has included appropriate risk 
disclosure in its offering documents, including leveraging risk. 
Leveraging risk is the risk that certain transactions of the Fund, 
including the Fund's use of derivatives, may give rise to leverage, 
causing the Fund to be more volatile than if it had not been leveraged.
Impact on Arbitrage Mechanism
    The Adviser and the Subadviser believe there will be minimal, if 
any, impact to the arbitrage mechanism as a result of the Fund's use of 
derivatives. The Adviser and the Subadviser understand that market 
makers and participants should be able to value derivatives as long as 
the positions are disclosed with relevant information. The Adviser and 
the Subadviser believe that the price at which Shares of the Fund trade 
will continue to be disciplined by arbitrage opportunities created by 
the ability to purchase or redeem Shares of the Fund at their NAV, 
which should ensure that Shares of the Fund will not trade at a 
material discount or premium in relation to their NAV.
Creation and Redemption of Shares
    The Fund issues and sells Shares only in aggregations of at least 
25,000 Shares (each aggregation is called a ``Creation Unit'') on a 
continuous basis through PIMS at the NAV next determined after receipt 
of an order in proper form on any Business Day.\16\
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    \16\ A ``Business Day'' with respect to the Fund is any day on 
which the Exchange is open for business.
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    The consideration for a purchase of Creation Units generally will 
consist of a cash deposit but may include the in-kind deposit of a 
portfolio of securities and other investments (the ``Deposit 
Instruments'') included in the Fund and an amount of cash computed as 
described below (the ``Cash Amount''). The Cash Amount together with 
the Deposit Instruments, as applicable, are referred to as the 
``Portfolio Deposit,'' which represents the minimum initial and 
subsequent investment amount for a Creation Unit of the Fund.
    The Cash Amount would be an amount equal to the difference between 
the NAV of the Shares (per Creation Unit) and the ``Deposit Amount,'' 
which is an amount equal to the aggregate market value of the Deposit 
Instruments, and serves to compensate for any differences between the 
NAV per Creation Unit and the Deposit Amount.
    The Transfer Agent, through the National Securities Clearing 
Corporation (``NSCC''), makes available on each Business Day, 
immediately prior to the opening of business on the Exchange (currently 
9:30 a.m. E.T.), the list of the names and the required number of 
securities for each Deposit Instrument to be included in the current 
Portfolio Deposit (based on information at the end of the previous 
Business Day), as well as information regarding the Cash Amount for the 
Fund. Such Portfolio Deposit is applicable, subject to any adjustments 
as described below, in order to effect creations of Creation Units of 
the Fund until such time as the next-announced Portfolio Deposit 
composition is made available.
    All orders to create Creation Units generally must be received by 
the Distributor no later than the closing time of the regular trading 
session on the Exchange (``Closing Time'') (ordinarily 4:00 p.m. E.T.) 
on the date such order is placed in order for creation of Creation 
Units to be effected based on the NAV of the Fund as determined on such 
date.
    In addition, the Trust reserves the right to accept a basket of 
securities or cash that differs from Deposit Instruments or to permit 
the substitution of an amount of cash (i.e., a ``cash in lieu'' amount) 
to be added to the Cash Amount to replace any Deposit Instrument which 
may, among other reasons, not be available in sufficient quantity for 
delivery, not be permitted to be re-registered in the name of the Trust 
as a result of an in-kind creation order pursuant to local law or 
market convention or which may not be eligible for transfer through the 
Clearing Process (defined below), or which may not be eligible for 
trading by a Participating Party (defined below).
    To be eligible to place orders with the Distributor to create 
Creation Units of the Fund, an entity or person either must be (1) a 
``Participating Party,'' i.e., a broker-dealer or other participant in

[[Page 62918]]

the clearing process through the Continuous Net Settlement System of 
the NSCC (the ``Clearing Process''); or (2) a DTC Participant; which, 
in either case, must have executed an agreement with the Distributor 
(as it may be amended from time to time in accordance with its terms) 
(``Participant Agreement''). A Participating Party and DTC Participant 
are collectively referred to as an ``Authorized Participant.''
    A standard creation transaction fee is imposed to offset the 
transfer and other transaction costs associated with the issuance of 
Creation Units.
Redemption of Creation Units
    Shares may be redeemed only in Creation Units at their NAV next 
determined after receipt of a redemption request in proper form by 
PIMS, only on a Business Day and only through a Participating Party or 
DTC Participant who has executed a Participant Agreement. The Trust 
will not redeem Shares in amounts less than Creation Units. Beneficial 
owners also may sell Shares in the secondary market, but must 
accumulate enough Shares to constitute a Creation Unit in order to have 
such Shares redeemed by the Trust.
    The Transfer Agent, through NSCC, makes available immediately prior 
to the opening of business on the Exchange on each Business Day, the 
identity of the Fund's securities and/or an amount of cash that will be 
applicable (subject to possible amendment or correction) to redemption 
requests received in proper form on that day. The Fund's securities 
received on redemption (``Redemption Instruments'') may not be 
identical to Deposit Instruments that are applicable to creations of 
Creation Units. Unless cash redemptions are permitted or required for 
the Fund, the redemption proceeds for a Creation Unit generally consist 
of Redemption Instruments as announced by the Transfer Agent on the 
Business Day of the request for redemption, plus cash in an amount 
equal to the difference between the NAV of the Shares being redeemed, 
as next determined after a receipt of a request in proper form, and the 
value of the Redemption Instruments, less the fixed transaction fee and 
any variable transaction fees.
    In order to redeem Creation Units of the Fund, an Authorized 
Participant must submit an order to redeem for one or more Creation 
Units. An order to redeem Creation Units of a Fund using the Clearing 
Process generally must be submitted to the Distributor not later than 
4:00 p.m. E.T. on the Business Day of the request for redemption in 
order for such order to be effected based on the NAV of the Fund as 
next determined. An order to redeem Creation Units of the Fund using 
the NSCC Clearing Process made in proper form but received by the Fund 
after 4:00 p.m. E.T. will be deemed received on the next Business Day 
immediately following the day on which such order request is 
transmitted.
Application of Generic Listing Requirements
    The Exchange is submitting this proposed rule change because the 
changes described below would result in the portfolio for the Fund not 
meeting all of the ``generic'' listing requirements of Commentary .01 
to NYSE Arca Rule 8.600-E applicable to the listing of Managed Fund 
Shares. The Fund's portfolio would meet all such requirements except 
for those set forth in Commentary .01(a)(1), Commentary .01(b)(4) and 
Commentary .01(b)(5).\17\ Specifically, the Fund:
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    \17\ Commentary .01(b)(5) to NYSE Arca Rule 8.600-E provides 
that non-agency, non-government sponsored entity and privately 
issued mortgage-related and other asset-backed securities components 
of a portfolio may not account, in the aggregate, for more than 20% 
of the weight of the fixed income portion of the portfolio.
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     Will not comply with the requirement in Commentary 
.01(b)(5) that investments in non-agency, non-government sponsored 
entity and privately issued mortgage-related and other asset-backed 
securities (i.e., Private ABS/MBS) not account, in the aggregate, for 
more than 20% of the weight of the fixed income portion of the 
portfolio. Instead, Private ABS/MBS will, in the aggregate, not exceed 
more than 20% of the total assets of the Fund.
     will not comply with the requirement that securities that 
in aggregate account for at least 90% of the fixed income weight of the 
portfolio meet one of the criteria in Commentary .01(b)(4).\18\ 
Instead, fixed income securities that do not meet any of the criteria 
in Commentary .01(b)(4) will not exceed 10% of the total assets of the 
Fund.
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    \18\ Commentary .01(b)(4) provides that component securities 
that in the aggregate account for at least 90% of the fixed income 
weight of the portfolio must be either: (a) from issuers that are 
required to file reports pursuant to Sections 13 and 15(d) of the 
Act; (b) from issuers that have a worldwide market value of its 
outstanding common equity held by non-affiliates of $700 million or 
more; (c) from issuers that have outstanding securities that are 
notes, bonds debentures, or evidence of indebtedness having a total 
remaining principal amount of at least $1 billion; (d) exempted 
securities as defined in Section 3(a)(12) of the Act; or (e) from 
issuers that are a government of a foreign country or a political 
subdivision of a foreign country.
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     may invest in shares of affiliated short-term bond funds, 
which are equity securities. Therefore, to the extent the Fund invests 
in shares of affiliated short-term bond funds or other non-exchange-
traded open-end management investment company securities, the Fund will 
not comply with the requirements of Commentary .01(a)(1) to NYSE Arca 
Rule 8.600-E (U.S. Component Stocks) with respect to its equity 
securities holdings. Instead, such securities would not be required to 
meet the requirements of Commentary .01(a)(1)(A) through (E) to Rule 
8.600-E.\19\
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    \19\ Commentary .01(a) to Rule 8.600-E specifies the equity 
securities accommodated by the generic criteria in Commentary 
.01(a), namely, U.S. Component Stocks (as described in Rule 5.2-
E(j)(3)) and Non-U.S. Component Stocks (as described in Rule 5.2-
E(j)(3)). Commentary .01(a)(1) to Rule 8.600-E (U.S. Component 
Stocks) provides that the component stocks of the equity portion of 
a portfolio that are U.S. Component Stocks shall meet the following 
criteria initially and on a continuing basis: (A) Component stocks 
(excluding Derivative Securities Products and Index-Linked 
Securities) that in the aggregate account for at least 90% of the 
equity weight of the portfolio (excluding such Derivative Securities 
Products and Index-Linked Securities) each shall have a minimum 
market value of at least $75 million; (B) Component stocks 
(excluding Derivative Securities Products and Index-Linked 
Securities) that in the aggregate account for at least 70% of the 
equity weight of the portfolio (excluding such Derivative Securities 
Products and Index-Linked Securities) each shall have a minimum 
monthly trading volume of 250,000 shares, or minimum notional volume 
traded per month of $25,000,000, averaged over the last six months; 
(C) The most heavily weighted component stock (excluding Derivative 
Securities Products and Index-Linked Securities) shall not exceed 
30% of the equity weight of the portfolio, and, to the extent 
applicable, the five most heavily weighted component stocks 
(excluding Derivative Securities Products and Index-Linked 
Securities) shall not exceed 65% of the equity weight of the 
portfolio; (D) Where the equity portion of the portfolio does not 
include Non-U.S. Component Stocks, the equity portion of the 
portfolio shall include a minimum of 13 component stocks; provided, 
however, that there shall be no minimum number of component stocks 
if (i) one or more series of Derivative Securities Products or 
Index-Linked Securities constitute, at least in part, components 
underlying a series of Managed Fund Shares, or (ii) one or more 
series of Derivative Securities Products or Index-Linked Securities 
account for 100% of the equity weight of the portfolio of a series 
of Managed Fund Shares; and (E) Except as provided herein, equity 
securities in the portfolio shall be U.S. Component Stocks listed on 
a national securities exchange and shall be NMS Stocks as defined in 
Rule 600 of Regulation NMS under the Securities Exchange Act of 
1934.
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     may invest in convertible and non-convertible preferred 
stocks, warrants, and Work Out Securities, which are equity securities. 
To the extent the Fund invests in such securities, the Fund will not 
comply with the requirements of Commentary .01(a)(1) to NYSE Arca Rule 
8.600-E (U.S. Component Stocks) and/or Commentary .01(a)(2) to NYSE 
Arca Rule 8.600-E (Non-U.S. Component Stocks) with respect to its 
equity securities holdings.\20\ Instead, the

[[Page 62919]]

Exchange proposes that not more than 10% of the Fund's assets in the 
aggregate will be held in convertible and non-convertible preferred 
stocks, warrants and Work Out Securities.
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    \20\ Commentary .01(a)(2) to Rule 8.600-E (Non-U.S. Component 
Stocks) provides that the component stocks of the equity portion of 
a portfolio that are Non-U.S. Component Stocks shall meet the 
following criteria initially and on a continuing basis: (A) Non-U.S. 
Component Stocks each shall have a minimum market value of at least 
$100 million; (B) Non-U.S. Component Stocks each shall have a 
minimum global monthly trading volume of 250,000 shares, or minimum 
global notional volume traded per month of $25,000,000, averaged 
over the last six months; (C) The most heavily weighted Non-U.S. 
Component stock shall not exceed 25% of the equity weight of the 
portfolio, and, to the extent applicable, the five most heavily 
weighted Non-U.S. Component Stocks shall not exceed 60% of the 
equity weight of the portfolio; (D) Where the equity portion of the 
portfolio includes Non-U.S. Component Stocks, the equity portion of 
the portfolio shall include a minimum of 20 component stocks; 
provided, however, that there shall be no minimum number of 
component stocks if (i) one or more series of Derivative Securities 
Products or Index-Linked Securities constitute, at least in part, 
components underlying a series of Managed Fund Shares, or (ii) one 
or more series of Derivative Securities Products or Index-Linked 
Securities account for 100% of the equity weight of the portfolio of 
a series of Managed Fund Shares; and (E) Each Non-U.S. Component 
Stock shall be listed and traded on an exchange that has last-sale 
reporting.
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    Deviations from the generic requirements are necessary for the Fund 
to achieve its investment objective in a manner that is cost-effective 
and that maximizes investors' returns. Further, the proposed 
alternative requirements are narrowly tailored to allow the Fund to 
achieve its investment objective in manner that is consistent with the 
principles of Section 6(b)(5) of the Act. As a result, it is in the 
public interest to approve listing and trading of Shares of the Fund on 
the Exchange pursuant to the requirements set forth herein.
    As noted above, the Fund will not comply with the requirement in 
Commentary .01(b)(5) that investments in non-agency, non-government 
sponsored entity and privately issued mortgage-related and other asset-
backed securities (i.e., Private ABS/MBS) not account, in the 
aggregate, for more than 20% of the weight of the fixed income portion 
of the portfolio. Instead, Private ABS/MBS will, in the aggregate, not 
exceed more than 20% of the total assets of the Fund.
    This alternative requirement is appropriate because the Fund's 
investment in Private ABS/MBS is expected to provide the Fund with 
benefits associated with increased diversification, as Private ABS/MBS 
investments tend to be less correlated to interest rates than many 
other fixed income securities. The Fund's investment in Private ABS/MBS 
will be subject to the Fund's liquidity procedures as adopted by the 
Board, and the Adviser does not expect that investments in Private ABS/
MBS of up to 20% of the total assets of the Fund will have any material 
impact on the liquidity of the Fund's investments. The Exchange notes 
that the Commission has previously approved the listing of actively 
managed ETFs that can invest 20% of their total assets in non-U.S. 
Government, non-agency, non-GSE and other privately issued ABS and MBS 
(i.e., Private ABS/MBS).\21\ Thus, it is appropriate to expand the 
limit on the Fund's investments in Private ABS/MBS set forth in 
Commentary .01(b)(5) of the generic listing standards.
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    \21\ See, e.g., Securities Exchange Act Release Nos. 80946 (June 
15, 2017) 82 FR 28126 (June 20, 2017) (SR-NASDAQ-2017-039) 
(permitting the Guggenheim Limited Duration ETF to invest up to 20% 
of its total assets in privately-issued, non-agency and non-GSE ABS 
and MBS); 76412 (November 10, 2015), 80 FR 71880 (November 17, 2015) 
(SR-NYSEArca-2015-111) (permitting the RiverFront Strategic Income 
Fund to invest up to 20% of its assets in privately-issued, non-
agency and non-GSE ABS and MBS); 74814 (April 27, 2015), 80 FR 24986 
(May 1, 2015) (SR-NYSEArca-2014-017) (permitting the Guggenheim 
Enhanced Short Duration ETF to invest up to 20% of its assets in 
privately-issued, non-agency and non-GSE ABS and MBS); 74109 
(January 21, 2015), 80 FR 4327 (January 27, 2015) (SR-NYSEArca-2014-
134) (permitting the IQ Wilshire Alternative Strategies ETF to 
invest up to 20% of its total assets in MSB and other ABS, without 
any limit on the type of such MBS and ABS).
---------------------------------------------------------------------------

    The Fund will not comply with the requirement that securities that 
in aggregate account for at least 90% of the fixed income weight of the 
portfolio meet one of the criteria in Commentary .01(b)(4).19 Instead, 
fixed income securities that do ot meet any of the criteria in 
Commentary .01(b)(4) will not exceed 10% of the total assets of the 
Fund. The Exchange notes that the Commission has previously approved 
the listing of Managed Fund Shares with similar investment objectives 
and strategies without imposing requirements that a certain percentage 
of such funds' securities meet one of the criteria set forth in 
Commentary .01(b)(4).\22\ Thus, it is appropriate to expand the limit 
on investments in fixed income securities that do not satisfy the 
criteria in Commentary .01(b)(4) of the generic listing standards, as 
described above.
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    \22\ See, e.g., Securities Exchange Act Release Nos. 67894 
(September 20, 2012) 77 FR 59227 (September 26, 2012) (SR-BATS-2012-
033) (order approving the listing and trading of shares of the 
iShares Short Maturity Bond Fund); 70342 (September 6, 2013), 78 FR 
56256 (September 12, 2013) (SR-NYSEArca-2013-71) (order approving 
the listing and trading of shares of the SPDR SSgA Ultra Short Term 
Bond ETF, SPDR SSgA Conservative Ultra Short Term Bond ETF and SPDR 
SSgA Aggressive Ultra Short Term Bond ETF).
---------------------------------------------------------------------------

    The Fund may invest in shares of the Affiliated Short Term Bond 
Fund, which are equity securities. Therefore, to the extent the Fund 
invests in shares of the Affiliated Short Term Bond Fund or other non-
exchange-traded open-end management investment company securities, the 
Fund will not comply with the requirements of Commentary .01(a)(1) to 
NYSE Arca Rule 8.600-E (U.S. Component Stocks) with respect to its 
equity securities holdings. However, it is appropriate and in the 
public interest to approve listing and trading of Shares of the Fund 
notwithstanding that the Fund's holdings in such securities would not 
meet the requirements of Commentary .01(a)(1)(A) through (E) to Rule 
8.600-E.\23\ Investments in shares of the Affiliated Short Term Bond 
Fund will not exceed 25% of the total assets of the Fund. Investments 
in other non-exchange-traded open-end management investment company 
securities will not exceed 10% of the total assets of the Fund. The 
Fund's investment in shares of the Affiliated Short Term Bond Fund will 
be utilized in order to obtain income on short-term cash balances while 
awaiting attractive investment opportunities, to provide liquidity in 
preparation for anticipated redemptions or for defensive purposes, 
which will allow the Fund to obtain the benefits of a more diversified 
portfolio available in the Affiliated Short Term Bond Fund than might 
otherwise be available through direct investments in Money Market 
Funds.\24\ Moreover, such investments, which may include mutual funds 
that invest, for example, principally in fixed income securities, would 
be utilized to help the Fund meet its investment objective and to 
equitize cash in the short term. The Fund will invest in such 
securities only to the extent that those investments would be 
consistent with the requirements of Section 12(d)(1) of the 1940 Act 
and the rules thereunder.\25\ Because such

[[Page 62920]]

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

    \23\ See note 19, supra.
    \24\ For purposes of this section of the filing, non-exchange-
traded securities of other registered investment companies do not 
include money market funds, which are cash equivalents under 
Commentary .01(c) to Rule 8.600-E and for which there is no 
limitation in the percentage of the portfolio invested in such 
securities. In addition, the Commission has issued orders granting 
exemptive relief under the 1940 Act that apply to the Trust. See 
Investment Company Act Release No. 24179 (December 1, 1999) (File 
No. 812-11354) with respect to investments by a fund in money market 
or ultra-short bond funds for cash management purposes) and 
Investment Company Act Release No. 30200 (September 11, 2012) (File 
No. 812-13993) with respect to investments by a fund in other 
registered investment companies.
    \25\ The Commission has previously approved proposed rule 
changes under Section 19(b) of the Act for series of Managed Fund 
Shares that may invest in non-exchange traded investment company 
securities to the extent permitted by Section 12(d)(1) of the 1940 
Act and the rules thereunder. See, e.g., Securities Exchange Act 
Release No. 78414 (July 26, 2016), 81 FR 50576 (August 1, 2016) (SR-
NYSEArca-2016-79) (order approving listing and trading of shares of 
the Virtus Japan Alpha ETF under NYSE Arca Rule 8.600-E).
---------------------------------------------------------------------------

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

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

    The Exchange notes that the Commission has previously approved the 
listing of Managed Fund Shares with similar investment objectives and 
strategies where such funds were permitted to invest in the shares of 
other registered investment companies that are not ETFs or money market 
funds.\27\ Thus, it is appropriate to permit the Fund to invest up to 
25% of its total assets in shares the Affiliated Short Term Bond Fund 
and 10% of its total assets in other non-exchange-traded open-end 
management investment company securities.
---------------------------------------------------------------------------

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

    To the extent the Fund invests in convertible and non-convertible 
preferred stocks, warrants and Work Out Securities, the Fund will not 
comply with the requirements of Commentary .01(a)(1) to NYSE Arca Rule 
8.600-E (U.S. Component Stocks) and/or Commentary .01(a)(2) to NYSE 
Arca Rule 8.600-E (Non-U.S. Component Stocks) with respect to its 
equity securities holdings. The Exchange believes this is appropriate 
in that the Adviser represents that the Fund will not actively invest 
in such securities but may, at times, receive a distribution of such 
securities in connection with the Fund's holdings in certain Principal 
Investment Instruments. Therefore, the Fund's holdings in such 
securities would not be utilized to further the Fund's investment 
objective and generally would not be acquired as the result of the 
Fund's voluntary investment decisions. In addition, the Exchange 
proposes that not more than 10% of the Fund's assets in the aggregate 
will be held in convertible and non-convertible preferred stocks, 
warrants and Work Out Securities.
    The Exchange accordingly believes that it is appropriate and in the 
public interest to approve listing and trading of Shares of the Fund on 
the Exchange notwithstanding that the Fund would not meet the 
requirements of Commentary .01(a)(1), (a)(2), (b)(4) and (b)(5) to Rule 
8.600-E. The Exchange notes that, other than Commentary .01(a)(1), 
(a)(2), (b)(4) and (b)(5) to Rule 8.600-E, the Fund's portfolio will 
meet all other requirements of Rule 8.600-E.

Availability of Information

    The Fund's website (www.pgiminvestments.com) will include the 
prospectus for the Fund that may be downloaded. The Fund's website will 
include additional quantitative information updated on a daily basis 
including, for the Fund, (1) daily trading volume, the prior Business 
Day's reported closing price, NAV and midpoint of the bid/ask spread at 
the time of calculation of such NAV (the ``Bid/Ask Price''),\28\ and a 
calculation of the premium and discount of the Bid/Ask Price against 
the NAV, and (2) data in chart format displaying the frequency 
distribution of discounts and premiums of the daily Bid/Ask Price 
against the NAV, within appropriate ranges, for each of the four 
previous calendar quarters. On each Business Day, before commencement 
of trading in Shares in the Core Trading Session on the Exchange, the 
Fund discloses on its

[[Page 62921]]

website the Disclosed Portfolio as defined in NYSE Arca Rule 8.600-
E(c)(2) that forms the basis for the Fund's calculation of NAV at the 
end of the Business Day.\29\
---------------------------------------------------------------------------

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

    On a daily basis, the Fund discloses the information required under 
NYSE Arca Rule 8.600-E(c)(2) to the extent applicable. The website 
information will be publicly available at no charge.
    In addition, a basket composition file, which includes the security 
names and share quantities, if applicable, required to be delivered in 
exchange for the Fund's Shares, together with estimates and actual cash 
components, will be publicly disseminated daily prior to the opening of 
the Exchange via the NSCC. The basket represents one Creation Unit of 
the Fund. Authorized Participants may refer to the basket composition 
file for information regarding Principal Investment Instruments, and 
any other instrument that may comprise the Fund's basket on a given 
day.
    Investors can also obtain the Trust's Statement of Additional 
Information (``SAI''), the Fund's Shareholder Reports, and the Fund's 
Forms N-CSR and Forms N-SAR, filed twice a year. The Fund's SAI and 
Shareholder Reports will be available free upon request from the Trust, 
and those documents and the Form N-CSR, Form N-PX and Form N-SAR may be 
viewed on-screen or downloaded from the Commission's website at 
www.sec.gov.
    Intra-day and closing price information regarding exchange-traded 
options will be available from the exchange on which such instruments 
are traded. Intra-day and closing price information regarding the 
Principal Investment Instruments also will be available from major 
market data vendors. Price information relating to OTC options and 
swaps will be available from major market data vendors. Intra-day price 
information for exchange-traded derivative instruments will be 
available from the applicable exchange and from major market data 
vendors. For exchange-listed securities (including ETFs), intraday 
price quotations will generally be available from broker-dealers and 
trading platforms (as applicable). Intraday and other price information 
for the fixed income securities in which the Fund invests will be 
available through subscription services, such as Bloomberg, Markit and 
Thomson Reuters, which can be accessed by Authorized Participants and 
other market participants. Additionally, the Trade Reporting and 
Compliance Engine (``TRACE'') of the Financial Industry Regulatory 
Authority (``FINRA'') will be a source of price information for 
corporate bonds, privately-issued securities, MBS and ABS, to the 
extent transactions in such securities are reported to TRACE.\30\ Money 
market funds and affiliated short-term bond funds are typically priced 
once each Business Day and their prices will be available through the 
applicable fund's website or from major market data vendors. Electronic 
Municipal Market Access (``EMMA'') will be a source of price 
information for municipal bonds. Price information regarding U.S. 
government securities, repurchase agreements, reverse repurchase 
agreements and cash equivalents generally may be obtained from brokers 
and dealers who make markets in such securities or through nationally 
recognized pricing services through subscription agreements.
---------------------------------------------------------------------------

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

    Information regarding market price and trading volume of the Shares 
will be continually available on a real-time basis throughout the day 
on brokers' computer screens and other electronic services. Information 
regarding the previous day's closing price and trading volume 
information for the Shares will be published daily in the financial 
section of newspapers.
    Quotation and last sale information for the Shares will be 
available via the Consolidated Tape Association (``CTA'') high-speed 
line. Exchange-traded options quotation and last sale information for 
options cleared via the Options Clearing Corporation are available via 
the Options Price Reporting Authority. In addition, the Portfolio 
Indicative Value (``PIV''), as defined in NYSE Arca Rule 8.600-E(c)(3), 
will be widely disseminated by one or more major market data vendors at 
least every 15 seconds during the Core Trading Session.
    Price information for instruments that would otherwise qualify as 
Principal Investment Instruments but for being denominated in non-U.S. 
currency is available from major market data vendors.
Trading Halts
    With respect to trading halts, the Exchange may consider all 
relevant factors in exercising its discretion to halt or suspend 
trading in the Shares of the Fund. Trading in Shares of the Fund will 
be halted if the circuit breaker parameters in NYSE Arca Rule 7.12-E 
have been reached. Trading also may be halted because of market 
conditions or for reasons that, in the view of the Exchange, make 
trading in the Shares inadvisable. These may include: (1) The extent to 
which trading is not occurring in the securities and/or the financial 
instruments comprising the Disclosed Portfolio of the Fund; or (2) 
whether other unusual conditions or circumstances detrimental to the 
maintenance of a fair and orderly market are present. Trading in the 
Shares will be subject to NYSE Arca Rule 8.600-E(d)(2)(D), which sets 
forth circumstances under which Shares of the Fund may be halted.
Trading Rules
    The Exchange deems the Shares to be equity securities, thus 
rendering trading in the Shares subject to the Exchange's existing 
rules governing the trading of equity securities. Shares will trade on 
the NYSE Arca Marketplace from 4:00 a.m. to 8:00 p.m. E.T. in 
accordance with NYSE Arca Rule 7.34-E (Trading Sessions). The Exchange 
has appropriate rules to facilitate transactions in the Shares during 
all trading sessions. As provided in NYSE Arca Rule 7.6-E, the minimum 
price variation (``MPV'') for quoting and entry of orders in equity 
securities traded on the NYSE Arca Marketplace is $0.01, with the 
exception of securities that are priced less than $1.00 for which the 
MPV for order entry is $0.0001.
    With the exception of the requirements of Commentary .01(a)(1), 
Commentary .01(b)(4) and Commentary .01(b)(5) as described above under 
``Application of Generic Listing Requirements,'' the Shares of the Fund 
will conform to the initial and continued listing criteria under NYSE 
Arca Rule 8.600-E. The Exchange represents that for initial and/or 
continued listing, the Fund will be in compliance with Rule 10A-3 under 
the Act, as provided by NYSE Arca Rule 5.3-E. A minimum of 100,000 
Shares will be outstanding at the commencement of trading on the 
Exchange. The Exchange has obtained a representation from the issuer of 
the Shares that the NAV per Share will be calculated daily and that the 
NAV and

[[Page 62922]]

the Disclosed Portfolio will be made available to all market 
participants at the same time.
Surveillance
    The Exchange represents that trading in the Shares will be subject 
to the existing trading surveillances administered by the Exchange, as 
well as cross-market surveillances administered by FINRA on behalf of 
the Exchange, which are designed to detect violations of Exchange rules 
and applicable federal securities laws. The Exchange represents that 
these procedures are adequate to properly monitor Exchange trading of 
the Shares in all trading sessions and to deter and detect violations 
of Exchange rules and federal securities laws applicable to trading on 
the Exchange.
    The surveillances referred to above generally focus on detecting 
securities trading outside their normal patterns, which could be 
indicative of manipulative or other violative activity. When such 
situations are detected, surveillance analysis follows and 
investigations are opened, where appropriate, to review the behavior of 
all relevant parties for all relevant trading violations.
    The Exchange or FINRA, on behalf of the Exchange, or both, will 
communicate as needed regarding trading in the Shares, ETFs, certain 
exchange-traded options and certain futures 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, 
ETFs, certain exchange-traded options and certain futures from such 
markets and other entities. In addition, the Exchange may obtain 
information regarding trading in the Shares, ETFs, certain exchange-
traded options and certain futures from markets and other entities that 
are members of ISG or with which the Exchange has in place a 
comprehensive surveillance sharing agreement (``CSSA''). The Exchange 
is able to access from FINRA, as needed, trade information for certain 
fixed income securities held by the Fund reported to TRACE. FINRA also 
can access data obtained from the Municipal Securities Rulemaking Board 
(``MSRB'') relating to certain municipal bond trading activity for 
surveillance purposes in connection with trading in the Shares.
    In addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
    All statements and representations made in this filing regarding 
(a) the description of the portfolio, (b) limitations on portfolio 
holdings or reference assets, or (c) the applicability of Exchange 
listing rules specified in this rule filing shall constitute continued 
listing requirements for listing the Shares on the Exchange.
    The issuer has represented to the Exchange that it will advise the 
Exchange of any failure by the Fund to comply with the continued 
listing requirements, and, pursuant to its obligations under Section 
19(g)(1) of the Act, the Exchange will monitor for compliance with the 
continued listing requirements. If the Fund is not in compliance with 
the applicable listing requirements, the Exchange will commence 
delisting procedures under NYSE Arca Rule 5.5(m)-E.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) of the Act that an exchange have 
rules that are designed to prevent fraudulent and manipulative acts and 
practices, to promote just and equitable principles of trade, to remove 
impediments to, and perfect the mechanism of a free and open market 
and, in general, to protect investors and the public interest.
    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares will be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria in NYSE Arca Rule 8.600-E. The 
Exchange has in place surveillance procedures that are adequate to 
properly monitor trading in the Shares in all trading sessions and to 
deter and detect violations of Exchange rules and federal securities 
laws applicable to trading on the Exchange. The Adviser and Subadviser 
are not registered as broker-dealers, but the Adviser and Subadviser 
are affiliated with a broker-dealer and have implemented and will 
maintain a ``fire wall'' with respect to such broker-dealer regarding 
access to information concerning the composition and/or changes to the 
Fund's portfolio. The Exchange or FINRA, on behalf of the Exchange, or 
both, will communicate as needed regarding trading in the Shares, 
certain exchange-traded options and certain futures with other markets 
and other entities that are members of the ISG, and the Exchange or 
FINRA, on behalf of the Exchange, or both, may obtain trading 
information regarding trading in the Shares, certain exchange-traded 
options and certain futures from such markets and other entities. In 
addition, the Exchange may obtain information regarding trading in the 
Shares, certain exchange-traded options and certain futures with other 
markets and other entities that are members of the ISG, or with which 
the Exchange has in place a comprehensive surveillance sharing 
agreement. The Exchange is able to access from FINRA, as needed, trade 
information for certain fixed income securities held by the Fund 
reported to FINRA's TRACE. FINRA also can access data obtained from the 
MSRB relating to certain municipal bond trading activity for 
surveillance purposes in connection with trading in the Shares.
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest in 
that the Exchange will obtain a representation from the issuer of the 
Shares that the NAV per Share will be calculated daily and that the NAV 
and the Disclosed Portfolio will be made available to all market 
participants at the same time. In addition, a large amount of 
information is publicly available regarding the Fund and the Shares, 
thereby promoting market transparency. The website for the Fund 
includes a form of the prospectus for the Fund and additional data 
relating to NAV and other applicable quantitative information. Trading 
in Shares of the Fund will be halted if the circuit breaker parameters 
in NYSE Arca Rule 7.12-E have been reached or because of market 
conditions or for reasons that, in the view of the Exchange, make 
trading in the Shares inadvisable, and trading in the Shares will be 
subject to NYSE Arca Rule 8.600-E(d)(2)(D), which sets forth 
circumstances under which trading in the Shares of the Fund may be 
halted. In addition, as noted above, investors have ready access to 
information regarding the Fund's holdings, the PIV, the Disclosed 
Portfolio, and quotation and last sale information for the Shares. In 
the aggregate, at least 90% of the weight of the Fund's holdings 
invested in futures, exchange-traded options, and listed swaps shall, 
on both an initial and continuing basis, consist of futures, options, 
and swaps for which the Exchange may obtain information from other 
members or affiliates of the ISG or for which the principal market is a 
market with which the Exchange has a CSSA. For purposes of calculating 
this limitation, a portfolio's investment in listed derivatives will be 
calculated as the aggregate gross notional value of the listed 
derivatives.
    As described above, deviations from the generic requirements of 
Commentary .01(a) are necessary for the

[[Page 62923]]

Fund to achieve its investment objective in a manner that is cost-
effective and that maximizes investors' returns. Further, the proposed 
alternative requirements are narrowly tailored to allow the Fund to 
achieve its investment objective in manner that is consistent with the 
principles of Section 6(b)(5) of the Act. As a result, it is in the 
public interest to approve listing and trading of Shares of the Fund on 
the Exchange pursuant to the requirements set forth herein.
    As discussed above, the Fund will not comply with the requirement 
in Commentary .01(b)(5) that investments in non-agency, non-government 
sponsored entity and privately issued mortgage-related and other asset-
backed securities (i.e., Private ABS/MBS) not account, in the 
aggregate, for more than 20% of the weight of the fixed income portion 
of the portfolio. Instead, Private ABS/MBS will, in the aggregate, not 
exceed more than 20% of the total assets of the Fund.
    This alternative requirement is appropriate because the Fund's 
investment in Private ABS/MBS is expected to provide the Fund with 
benefits associated with increased diversification, as Private ABS/MBS 
investments tend to be less correlated to interest rates than many 
other fixed income securities. The Fund's investment in Private ABS/MBS 
will be subject to the Fund's liquidity procedures as adopted by the 
Board, and the Adviser does not expect that investments in Private ABS/
MBS of up to 20% of the total assets of the Fund will have any material 
impact on the liquidity of the Fund's investments. The Exchange notes 
that the Commission has previously approved the listing of actively 
managed ETFs that can invest 20% of their total assets in non-U.S. 
Government, non-agency, non-GSE and other privately issued ABS and MBS 
(i.e., Private ABS/MBS).\31\ Thus, it is appropriate to expand the 
limit on the Fund's investments in Private ABS/MBS set forth in 
Commentary .01(b)(5) of the generic listing standards.
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    \31\See note 21, supra.
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    The Fund will not comply with the requirement that securities that 
in aggregate account for at least 90% of the fixed income weight of the 
portfolio meet one of the criteria in Commentary .01(b)(4). Instead, 
fixed income securities that do not meet any of the criteria in 
Commentary .01(b)(4) will not exceed 10% of the total assets of the 
Fund. The Exchange notes that the Commission has previously approved 
the listing of Managed Fund Shares with similar investment objectives 
and strategies without imposing requirements that a certain percentage 
of such funds' securities meet one of the criteria set forth in 
Commentary .01(b)(4). Thus, it is appropriate to expand the limit on 
investments in fixed income securities that do not satisfy the criteria 
in Commentary .01(b)(4) of the generic listing standards, as described 
above.
    The Fund may invest in shares of affiliated short-term bond funds, 
which are equity securities. Therefore, to the extent the Fund invests 
in shares of affiliated short-term bond funds or other non-exchange-
traded open-end management investment company securities, the Fund will 
not comply with the requirements of Commentary .01(a)(1) to NYSE Arca 
Rule 8.600-E (U.S. Component Stocks) with respect to its equity 
securities holdings. It is appropriate and in the public interest to 
approve listing and trading of Shares of the Fund notwithstanding that 
the Fund's holdings in such securities would not meet the requirements 
of Commentary .01(a)(1)(A) through (E) to Rule 8.600-E. The Fund's 
investment in the Affiliated Short Term Bond Fund will not exceed 25% 
of the total assets of the Fund. Investments in other non-exchange-
traded open-end management investment company securities will not 
exceed 10% of the total assets of the Fund. The Fund's investment in 
shares of affiliated short-term bond funds will be utilized in order to 
obtain income on short-term cash balances while awaiting attractive 
investment opportunities, to provide liquidity in preparation for 
anticipated redemptions or for defensive purposes, which will allow the 
Fund to obtain the benefits of a more diversified portfolio available 
in the shares of affiliated short-term bond funds than might otherwise 
be available through direct investments in Money Market Funds. 
Moreover, such investments, which may include mutual funds that invest, 
for example, principally in fixed income securities, would be utilized 
to help the Fund meet its investment objective and to equitize cash in 
the short term. The Fund will invest in such securities only to the 
extent that those investments would be consistent with the requirements 
of Section 12(d)(1) of the 1940 Act and the rules thereunder. Because 
such securities must satisfy applicable 1940 Act diversification 
requirements, and have a net asset value based on the value of 
securities and financial assets the investment company holds, it is 
both unnecessary and inappropriate to apply to such investment company 
securities the criteria in Commentary .01(a)(1).
    The Exchange notes that it would be difficult or impossible to 
apply to mutual fund shares certain of the generic quantitative 
criteria (e.g., market capitalization, trading volume, or portfolio 
criteria) in Commentary .01 (A) through (D) applicable to U.S. 
Component Stocks. For example, the requirements for U.S. Component 
Stocks in Commentary .01(a)(1)(B) that there be minimum monthly trading 
volume of 250,000 shares, or minimum notional volume traded per month 
of $25,000,000, averaged over the last six months are tailored to 
exchange-traded securities (i.e., U.S. Component Stocks) and not to 
mutual fund shares, which do not trade in the secondary market and for 
which no such volume information is reported. In addition, Commentary 
.01(a)(1)(A) relating to minimum market value of portfolio component 
stocks, Commentary .01(a)(1)(C) relating to weighting of portfolio 
component stocks, and Commentary .01(a)(1)(D) relating to minimum 
number of portfolio components are not appropriately applied to open-
end management investment company securities; open-end investment 
companies hold multiple individual securities as disclosed publicly in 
accordance with the 1940 Act, and application of Commentary 
.01(a)(1)(A) through (D) would not serve the purposes served with 
respect to U.S. Component Stocks, namely, to establish minimum 
liquidity and diversification criteria for U.S. Component Stocks held 
by series of Managed Fund Shares.
    To the extent the Fund invests in convertible and non-convertible 
preferred stocks, warrants and Work Out Securities, the Fund will not 
comply with the requirements of Commentary .01(a)(1) to NYSE Arca Rule 
8.600-E (U.S. Component Stocks) and/or Commentary .01(a)(2) to NYSE 
Arca Rule 8.600-E (Non-U.S. Component Stocks) with respect to its 
equity securities holdings. The Exchange believes this is appropriate 
in that the Adviser represents that the Fund will not actively invest 
in such securities but may, at times, receive a distribution of such 
securities in connection with the Fund's holdings in certain Principal 
Investment Instruments. Therefore, the Fund's holdings in such 
securities would not be utilized to further the Fund's investment 
objective and generally would not be acquired as the result of the 
Fund's voluntary investment decisions. In addition, the Exchange 
proposes that not more than 10% of the Fund's assets in the aggregate 
will be held in convertible and

[[Page 62924]]

non-convertible preferred stocks, warrants and Work Out Securities.
    The Exchange accordingly believes that it is appropriate and in the 
public interest to approve listing and trading of Shares of the Fund on 
the Exchange notwithstanding that the Fund would not meet the 
requirements of Commentary .01(a)(1), (a)(2), (b)(4) and (b)(5) to Rule 
8.600-E. The Exchange notes that, other than Commentary .01(a)(1), 
(a)(2), (b)(4) and (b)(5) to Rule 8.600-E, the Fund's portfolio will 
meet all other requirements of Rule 8.600-E.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
an additional type of actively managed ETF that will enhance 
competition among market participants, to the benefit of investors and 
the marketplace. As noted above, the Exchange has in place surveillance 
procedures relating to trading in the Shares and may obtain information 
via ISG from other exchanges that are members of ISG or with which the 
Exchange has entered into a CSSA. In addition, as noted above, 
investors have ready access to information regarding the Fund's 
holdings, the PIV, the Disclosed Portfolio, and quotation and last sale 
information for the Shares.

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

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

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

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

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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (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-2018-82 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-2018-82. 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 filng 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-2018-82, and should be 
submitted on or before December 27, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority. \32\
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    \32\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-26514 Filed 12-4-18; 8:45 am]
 BILLING CODE 8011-01-P


