[Federal Register Volume 84, Number 107 (Tuesday, June 4, 2019)]
[Notices]
[Pages 25863-25872]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-11556]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85955; File No. SR-NYSEArca-2019-38]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change Regarding Investments of Aware Ultra-Short 
Duration Enhanced Income ETF, a Series of Tidal ETF Trust

May 29, 2019.
    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 May 15, 2019, NYSE Arca, Inc. (``NYSE Arca'' or the 
``Exchange'') 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 
Aware Ultra-Short Duration Enhanced Income ETF (the ``Fund''), a series 
of Tidal 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 commenced trading on 
the Exchange on January 29, 2019 pursuant to the generic listing 
standards under Commentary .01 to NYSE Arca Rule 8.600-E \4\ (``Managed 
Fund Shares'').\5\
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    \4\ The Fund's investments currently comply with the generic 
requirements set forth in Commentary .01 to 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) (``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.

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[[Page 25864]]

    Toroso Investments, LLC (the ``Adviser'') is the investment adviser 
for the Fund. Aware Asset Management, Inc. (the ``Subadviser'') is the 
subadviser to the Fund. U.S. Bank National Association serves as the 
custodian (``Custodian'') for the Fund. Tidal ETF Services LLC serves 
as administrator for the Fund. U.S. Bancorp Fund Services, LLC serves 
as sub-administrator, fund accountant and transfer agent (``Transfer 
Agent'') for the Fund.\6\ Foreside Fund Services, LLC serves as the 
distributor (the ``Distributor'') for the Fund's Shares.
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    \6\ The Trust is registered under the 1940 Act. On December 21, 
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. 333-227298 and 811-23377) 
(``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 the 1940 Act. See 
Investment Company Act Release No. 33433 (March 29, 2019) (File No. 
812-14939).
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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 
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 and are not affiliated 
with a broker-dealer. In the event (a) the Adviser or Subadviser 
becomes registered as a broker-dealer or affiliated with one or more 
broker-dealers, or (b) any new adviser or sub-adviser is a registered 
broker-dealer or is affiliated with a broker-dealer, it will implement 
and maintain a fire wall with respect to its relevant personnel or its 
broker-dealer affiliate regarding access to information concerning the 
composition and/or changes to the portfolio, and will be subject to 
procedures designed to prevent the use and dissemination of material 
non-public information regarding such portfolio.
Aware Ultra-Short Duration Enhanced Income ETF
    According to the Registration Statement, the investment objective 
of the Fund is to seek to maximize current income while maintaining a 
portfolio consistent with the preservation of capital and daily 
liquidity.
    The Fund seeks to achieve its investment objective primarily by 
investing in ``Fixed Income Securities'' (as described below).
    The Fund's may invest in the following fixed income instruments 
(``Fixed Income Securities'') issued by both U.S. and non-U.S. 
government and private sector issuers:
     U.S. government securities;
     Agency and non-agency asset-backed securities (``ABS'') 
and mortgage-backed securities (``MBS'') and collateralized mortgage 
obligations (``CMOs''); \7\
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    \7\ For purposes of this filing, non-agency ABS, non-agency MBS, 
and non-agency CMOs are referred to collectively herein as ``Private 
ABS/MBS.''
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     floating or variable rate securities;
     collateralized bond obligations (``CBOs''), collateralized 
loan obligations (``CLOs'') and other collateralized debt obligations 
(``CDOs'' and, together with CBOs and CLOs, ``CDOs/CBOs/CLOs''); \8\
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    \8\ For purposes of this filing, CDOs, CBOs and CLOs are 
excluded from the term Private ABS/MBS. CLOs are securities issued 
by a trust or other special purpose entity that are collateralized 
by a pool of loans by U.S. banks and participations in loans by U.S. 
banks that are unsecured or secured by collateral other than real 
estate. CBOs are securities issued by a trust or other special 
purpose entity that are backed by a diversified pool of fixed income 
securities issued by U.S. or foreign governmental entities or fixed 
income securities issued by U.S. or corporate issuers. CDOs/CBOs/
CLOs are distinguishable from ABS because they are collateralized by 
bank loans or by corporate or government fixed income securities and 
not by consumer and other loans made by non-bank lenders, including 
student loans. As discussed below, for purposes of this proposed 
rule change, CDOs/CBOs/CLOs will not be subject to the 20% limit set 
forth in Commentary .01(b)(5) to Rule 8.600-E.
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     corporate debt securities;
     municipal securities;
     floating or variable rate securities;
     inflation-indexed bonds;
     inflation-indexed securities issued by the U.S. Treasury, 
commonly known as ``TIPS'';
     commercial paper (in addition to commercial paper that are 
cash equivalents); \9\
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    \9\ See note 10, infra.
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     convertible securities; and
     structured notes.
    The Fund may hold cash and cash equivalents.\10\
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    \10\ For purposes of this filing, cash equivalents are the 
short-term instruments enumerated in Commentary .01(c) to Rule 
8.600-E.
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    The Fund may enter into dollar rolls and short sales of Fixed 
Income Securities. The Fund may also purchase securities and other 
instruments under when-issued, delayed delivery, to be announced or 
forward commitment transactions.
    The Fund may invest in private placements and Rule 144A securities.
    The Fund may hold the following U.S. and non-U.S. equity 
securities: Common stocks, preferred stocks, rights, warrants, 
exchange-traded notes (``ETNs''),\11\ exchange-traded funds 
(``ETFs''),\12\ and securities of other investment companies, subject 
to applicable limitations under Section 12(d)(1) of the 1940 Act.
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    \11\ ETNs are securities as described in NYSE Arca Rule 5.2-
E(j)(6) (Equity Index-Linked Securities, Commodity-Linked 
Securities, Currency-Linked Securities, Fixed Income Index-Linked 
Securities, Futures-Linked Securities and Multifactor Index-Linked 
Securities).
    \12\ For purposes of this filing, the term ``ETFs'' are 
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). All ETFs will be listed and traded in the U.S. on a 
national securities exchange. While the Fund may invest in inverse 
ETFs, the Fund will not invest in leveraged (e.g., 2X, -2X, 3X or -
3X) ETFs.
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    The Fund may hold the following U.S. and non-U.S. exchange-listed 
and over-the-counter (``OTC'') derivative instruments: OTC foreign 
currency forwards; U.S. and non-U.S. exchange-listed futures and 
options on stocks, Fixed Income Securities, interest rates, credit, 
currencies, commodities or related indices; and OTC options on stocks, 
Fixed Income Securities, interest rates, credit, currencies, 
commodities or related indices.\13\
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    \13\ Derivative instruments may be used for ``hedging,'' which 
means that they may be used when the Sub-Adviser seeks to protect 
the Fund's investments from a decline in value resulting from 
changes to interest rates, market prices, currency fluctuations, or 
other market factors. Derivative instruments may also be used for 
other purposes, including to seek to increase liquidity, provide 
efficient portfolio management, broaden investment opportunities 
(including taking short or negative positions), implement a tax or 
cash management strategy, gain exposure to a particular security or 
segment of the market, modify the effective duration of the Fund's 
portfolio investments and/or enhance total return.

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[[Page 25865]]

    The Fund will not invest in securities or other financial 
instruments that have not been described in this proposed rule change.
Investment Restrictions
    Private ABS/MBS will, in the aggregate, not exceed more than 20% of 
the total assets of the Fund.
    The Fund may invest up to 10% of its total assets in CDOs/CBOs/
CLOs.\14\
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    \14\ As noted above, CDOs/CBOs/CLOs would be excluded from the 
20% limit on Private ABS/MBS.
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    Investments in non-exchange-traded open-end management investment 
company securities will not exceed 20% of the total assets of the Fund.
Creation and Redemption of Shares
    According to the Registration Statement, the Trust issues and 
redeems Shares only in Creation Units of 25,000 Shares on a continuous 
basis at their NAV per Share next determined after receipt of an order, 
on any ``Business Day'', in proper form pursuant to the terms of the 
Authorized Participant Agreement (``Participant Agreement''). The NAV 
of Shares is calculated each Business Day as of the scheduled close of 
regular trading on the NYSE, generally 4:00 p.m., Eastern Time. A 
``Business Day'' is any day on which the NYSE is open for business. The 
size of a Creation Unit is subject to change.
    The consideration for purchase of a Creation Unit of the Fund 
generally consists of the in-kind deposit of a designated portfolio of 
securities (the ``Deposit Securities'') per each Creation Unit, 
constituting a substantial replication of the securities included in 
the Fund's portfolio and the Cash Component (defined below), computed 
as described below. Notwithstanding the foregoing, the Trust reserves 
the right to permit or require the substitution of a ``cash in lieu'' 
amount (``Deposit Cash'') to be added to the Cash Component to replace 
any Deposit Security.
    Together, the Deposit Securities or Deposit Cash, as applicable, 
and the Cash Component constitute the ``Fund Deposit,'' which 
represents the minimum initial and subsequent investment amount for a 
Creation Unit of the Fund. The ``Cash Component'' is an amount equal to 
the difference between the NAV of Shares (per Creation Unit) and the 
value of the Deposit Securities or Deposit Cash, as applicable.
    The Fund, through the National Securities Clearing Corporation 
(``NSCC''), makes available on each Business Day, prior to the opening 
of business on the Exchange (currently 9:30 a.m., Eastern Time), the 
list of the names and the required number of shares of each Deposit 
Security or the required amount of Deposit Cash, as applicable, to be 
included in the current Fund Deposit (based on information at the end 
of the previous Business Day) for the Fund.
    The Trust reserves the right to permit or require the substitution 
of Deposit Cash to replace any Deposit Security, which shall be added 
to the Cash Component.
    To be eligible to place orders with the Transfer Agent to purchase 
a Creation Unit of the Fund, an entity must be (i) a ``Participating 
Party'', i.e., a broker-dealer or other participant in the clearing 
process through the Continuous Net Settlement System of the NSCC (the 
``Clearing Process''), a clearing agency that is registered with the 
Commission; or (ii) a Depository Trust Company (``DTC'') Participant. 
In addition, each Participating Party or DTC Participant (each, an 
``Authorized Participant'') must execute a Participant Agreement.
    The order cut-off time for the Fund for orders to purchase Creation 
Units is expected to be 2:00 p.m. Eastern Time, which time may be 
modified by the Fund from time-to-time by amendment to the Participant 
Agreement and/or applicable order form.
    Shares may be redeemed only in Creation Units at their NAV next 
determined after receipt of a redemption request in proper form by the 
Fund through the Transfer Agent and only on a Business Day.
    With respect to the Fund, the Custodian, through the NSCC, makes 
available prior to the opening of business on the Exchange (currently 
9:30 a.m., Eastern Time) on each Business Day, the list of the names 
and share quantities of the Fund's portfolio securities that will be 
applicable (subject to possible amendment or correction) to redemption 
requests received in proper form on that day (``Fund Securities''). 
Fund Securities received on redemption may not be identical to Deposit 
Securities.
    Redemption proceeds for a Creation Unit are paid either in-kind or 
in cash, or combination thereof, as determined by the Trust. With 
respect to in-kind redemptions of the Fund, redemption proceeds for a 
Creation Unit will consist of Fund Securities--as announced by the 
Custodian on the Business Day of the request for redemption received in 
proper form plus cash in an amount equal to the difference between the 
NAV of Shares being redeemed, as next determined after a receipt of a 
request in proper form, and the value of the Fund Securities (the 
``Cash Redemption Amount''), less a fixed redemption transaction fee, 
as applicable. In the event that the Fund Securities have a value 
greater than the NAV of Shares, a compensating cash payment equal to 
the differential is required to be made by or through an Authorized 
Participant by the redeeming shareholder. Notwithstanding the 
foregoing, at the Trust's discretion, an Authorized Participant may 
receive the corresponding cash value of the securities in lieu of the 
in-kind securities value representing one or more Fund Securities.\15\
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    \15\ The Adviser represents that, to the extent the Trust 
effects the creation or redemption of Shares wholly or partially in 
cash, such transactions will be effected in the same manner for all 
Authorized Participants.
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    Orders to redeem Creation Units must be submitted in proper form to 
the Transfer Agent prior to 4:00 p.m. Eastern Time.
Use of Derivatives by the Fund
    Investments in derivative instruments will be made in accordance 
with the Fund's investment objectives and policies.
    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 Fund'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.

[[Page 25866]]

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)(1), 
Commentary .01(b)(4) and Commentary .01(b)(5).\16\
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    \16\ 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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    Specifically, the Fund:
     Will not comply with the requirement in Commentary 
.01(b)(1) that components that in the aggregate account for at least 
75% of the fixed income weight of the portfolio each have a minimum 
original principal amount outstanding of $100 million or more. Instead, 
the Exchange proposes that components, excluding Private ABS/MBS and 
CDOs/CBOs/CLOs that, in the aggregate, account for at least 50% of the 
fixed income weight of the portfolio each shall have a minimum original 
principal amount outstanding of $50 million or more. Private ABS/MBS 
and CDOs/CBOs/CLOs would not be subject to a requirement for a minimum 
original principal amount outstanding.
     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. CDOs/CBOs/CLOs will not 
be subject to the 20% limit set forth in Commentary .01(b)(5); however, 
the Fund's investments in CDOs/CBOs/CLOs will be limited to10% of the 
Fund's total assets.
     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) in respect 
of its investments in Private ABS/MBS.\17\ Instead, the Exchange 
proposes that all Fixed Income Securities, excluding Private ABS/MBS, 
will meet the criteria in Commentary .01(b)(4). Private ABS/MBS will be 
limited to 20% of the Fund's total assets and will not be required to 
comply with the criteria in Commentary .01(b)(4)(a) through (e) to NYSE 
Arca Rule 8.600-E.
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    \17\ 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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     will not comply with the requirements of Commentary 
.01(a)(1)(A) through (E) to NYSE Arca Rule 8.600-E in connection with 
the Fund's investments in non-exchange traded investment company 
securities.
    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)(1) that components that in the aggregate account for 
at least 75% of the fixed income weight of the portfolio each have a 
minimum original principal amount outstanding of $100 million or more. 
Instead, the Exchange proposes that components, excluding Private ABS/
MBS and CDOs/CBOs/CLOs, that in the aggregate account for at least 50% 
of the fixed income weight of the portfolio each shall have a minimum 
original principal amount outstanding of $50 million or more. Private 
ABS/MBS and CDOs/CBOs/CLOs would not be subject to a requirement for a 
minimum original principal amount outstanding. At least 50% of the 
fixed income weight of the Fund's portfolio, excluding Private ABS/MBS 
and CDOs/CBOs/CLOs, would continue to be subject to a substantial 
minimum (i.e., $50 million) original principal amount outstanding. By 
excluding Private ABS/MBS and CDOs/CBOs/CLOs from this requirement, the 
Fund will be able to better diversify its holdings in such securities, 
and would be able to invest in a larger variety of Private ABS/MBS and 
CDOs/CBOs/CLOs that have characteristics consistent with the Fund's 
investment objective to maximize current income while maintaining a 
portfolio consistent with the preservation of capital and daily 
liquidity. These characteristics may include, for example, Private ABS/
MBS and CDOs/CBOs/CLOs with investment grade credit rating or liquidity 
comparable to fixed income securities with a much greater amount 
outstanding.
    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 
Fund's 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.\18\ 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).\19\ Thus, it is appropriate to

[[Page 25867]]

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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    \18\ Rule 22e-4(b) under the 1940 Act requires, among other 
things, that a fund ``adopt and implement a written liquidity risk 
management program that is reasonably designed to assess and manage 
its liquidity risk.'' The rule is ``designed to promote effective 
liquidity risk management throughout the open-end investment company 
industry, thereby reducing the risk that funds will be unable to 
meet their redemption obligations and mitigating dilution of the 
interests of fund shareholders.'' See Release Nos. 33-10233; IC-
32315; File No. S7-16-15 (October 13, 2016).
    \19\ 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). See also Securities 
Exchange Act Release No. 83319 (May 24, 2018), 83 FR 25097 (May 31, 
2018) (SR-NYSEArca-2018-15) (Order Approving a Proposed Rule Change, 
as Modified by Amendment No. 1 Thereto, to Continue Listing and 
Trading Shares of the PGIM Ultra Short Bond ETF under NYSE Arca Rule 
8.600-E).
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    As noted above, 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).\20\ The Exchange proposes that the Private ABS/MBS, will not 
be required to comply with the criteria in Commentary .01(b)(4)(a) 
through (e) to NYSE Arca Rule 8.600-E. In this regard, the Exchange 
proposes to provide that the Fund will not invest more than 20% of the 
Fund's total assets in Private ABS/MBS. CDOs/CBOs/CLOs, however, will 
be subject to the criteria in Commentary .01(b)(4)(a) through (e) \21\ 
and the Fund will not invest more than 10% of the Fund's total assets 
in CDOs/CBOs/CLOs.\22\ The Exchange believes that this 10% limitation 
will help the Fund maintain portfolio diversification and will reduce 
manipulation risk. In addition, the Adviser does not expect that 
investments in CDOs/CBOs/CLOs of up to 10% of the total assets of the 
Fund will have any material impact on the liquidity of the Fund's 
investments.\23\
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    \20\ 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. In the First Prior Order, the 
Commission approved an exception from Commentary .01(b)(4) to 
provide that fixed income securities that do not meet any of the 
criteria in Commentary .01(b)(4) will not exceed 10% of the total 
assets of the Fund.
    \21\ As noted above, CDOs/CBOs/CLOs would be excluded from the 
20% limit on Private ABS/MBS.
    \22\ For purposes of this filing, CDOs/CBOs/CLOs are not deemed 
to be ABS for purposes of the restriction on the Fund's holdings of 
Private ABS/MBS. See note 8, supra.
    \23\ The Exchange notes that the Commission has approved a 
proposed rule change permitting an issue of Managed Fund Shares to 
hold up to 30% of the weight of the fixed income securities portion 
of the fund's portfolio to consist of non-agency, non-GSE and 
privately-issued mortgage-related and other asset-backed securities. 
See Securities Exchange Act Release No. 84826 (December 14, 2018), 
83 FR 65386 (December 20, 2018) (SR-NYSEArca-2018-25) (Order 
Approving a Proposed Rule Change, as Modified by Amendment No. 2, 
Regarding the Continued Listing and Trading of Shares of the Natixis 
Loomis Sayles Short Duration Income ETF).
---------------------------------------------------------------------------

    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).\24\ In addition, the Commission has approved proposed rule 
changes permitting investments by an issue of Managed Fund Shares to 
exclude non-U.S. Government, non-agency, non-GSE and other privately-
issued ABS and MBS (as described in such proposed rule changes) from 
the provisions of rules comparable to Commentary .01(b)(4).\25\
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    \24\ See, e.g., Exchange Act Release Nos. 67894 (September 20, 
2012), 77 FR 59227 (September 26, 2012) (SR-BATS-2012-033) (order 
approving the listing and trading of shares of the iShares Short 
Maturity Bond Fund); 70342 (September 6, 2013), 78 FR 56256 
(September 12, 2013) (SR-NYSEArca-2013-71) (order approving the 
listing and trading of shares of the SPDR SSgA Ultra Short Term Bond 
ETF, SPDR SSgA Conservative Ultra Short Term Bond ETF and SPDR SSgA 
Aggressive Ultra Short Term Bond ETF).
    \25\ See Securities Exchange Act Release No. 84047 (September 6, 
2018), 83 FR 46200 (September 12, 2018) (SR-NASDAQ-2017-128) (Notice 
of Filing of Amendment No. 3 and Order Granting Accelerated Approval 
of a Proposed Rule Change, as Modified by Amendment No. 3, to List 
and Trade Shares of the Western Asset Total Return ETF); See also, 
Securities Exchange Act Release Nos. 84047 (September 6, 2018), 83 
FR 46200 (September 12, 2018) (SR-NASDAQ-2017-128) (Notice of Filing 
of Amendment No. 3 and Order Granting Accelerated Approval of a 
Proposed Rule Change, as Modified by Amendment No. 3, to List and 
Trade Shares of the Western Asset Total Return ETF); 85022 (January 
31, 2019), 25 FR 2265 (February 6, 2019) (SR-NASDAQ-2018-080) 
(Notice of Filing of Amendment No. 3 and Order Granting Accelerated 
Approval of a Proposed Rule Change, as Modified by Amendment Nos. 1, 
2 and 3, To List and Trade Shares of the BrandywineGLOBAL-Global 
Total Return ETF).
---------------------------------------------------------------------------

    In addition, the Fund's investment in Private ABS/MBS and CDOs/
CBOs/CLOs will be subject to the Fund's liquidity risk management 
program as approved by the Fund's Board.\26\ The liquidity procedures 
generally include public disclosure by the Fund of its liquidity and 
redemption practices. The Fund's holdings in Private ABS/MBS and CDOs/
CBOs/CLOs would be encompassed within the Fund's liquidity risk 
management program.
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    \26\ Rule 22e-4(b) under the 1940 Act requires, among other 
things, that a fund ``adopt and implement a written liquidity risk 
management program that is reasonably designed to assess and manage 
its liquidity risk.'' The rule is ``designed to promote effective 
liquidity risk management throughout the open-end investment company 
industry, thereby reducing the risk that funds will be unable to 
meet their redemption obligations and mitigating dilution of the 
interests of fund shareholders.'' See Release Nos. 33-10233; IC-
32315; File No. S7-16-15 (October 13, 2016).
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    The Fund may invest in shares of investment company securities 
(other than ETFs), which are equity securities. Therefore, to the 
extent the Fund invests in shares of other non-exchange-traded open-end 
management investment company securities, the Fund will not comply with 
the requirements of Commentary .01(a)(1)(A) through (E) to NYSE Arca 
Rule 8.600-E (U.S. Component Stocks) with respect to its equity 
securities holdings.\27\
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    \27\ 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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[[Page 25868]]

    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. Investments in 
other non-exchange-traded open-end management investment company 
securities will not exceed 20% of the total assets of the Fund. 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.\28\ 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).
---------------------------------------------------------------------------

    \28\ 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)).\29\ 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.
---------------------------------------------------------------------------

    \29\ 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.\30\ Thus, it is appropriate to permit the Fund to invest up to 
20% of its total assets in other non-exchange-traded open-end 
management investment company securities.
---------------------------------------------------------------------------

    \30\ 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''); 83319 
(May 24, 2018), 83 FR 25097 (May 31, 2018) (SR-NYSEArca-2018-15), 
(Order Approving a Proposed Rule Change, as Modified by Amendment 
No. 1 Thereto, to Continue Listing and Trading Shares of the PGIM 
Ultra Short Bond ETF under NYSE Arca Rule 8.600-E).
---------------------------------------------------------------------------

    The Adviser and Subadviser represent that the proposed exceptions 
from the requirements of Commentary .01 to Rule 8.600-E described above 
are consistent with the Fund's investment objective, and will further 
assist the Adviser and Subadviser to achieve such investment objective. 
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.
    The Exchange accordingly believes that it is appropriate and in the 
public interest to approve listing and trading of Shares of the Fund on 
the Exchange notwithstanding that the Fund would not meet the 
requirements of Commentary .01(a)(1), (b)(1), (b)(4) and (b)(5) to Rule 
8.600-E. The Exchange notes that, other than Commentary .01(a)(1), 
(b)(1), (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.awareetf.com) will include the prospectus 
for the Fund that may be

[[Page 25869]]

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''),\31\ 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 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.\32\
---------------------------------------------------------------------------

    \31\ 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.
    \32\ 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 securities and 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. 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-
traded common stocks, preferred stocks, rights, warrants, ETNs and 
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.\33\ Money market 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. 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.
---------------------------------------------------------------------------

    \33\ 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.
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

[[Page 25870]]

continued listing criteria under NYSE Arca Rule 8.600-E. The Exchange 
represents that for initial and/or continued listing, the Fund will be 
in compliance with Rule 10A-3 under the Act, as provided by NYSE Arca 
Rule 5.3-E. A minimum of 100,000 Shares will be outstanding at the 
commencement of trading on the Exchange. The Exchange has obtained a 
representation from the issuer of the Shares that the NAV per Share 
will be calculated daily and that the NAV and the Disclosed Portfolio 
will be made available to all market participants at the same time.
Surveillance
    The Exchange represents that trading in the Shares will be subject 
to the existing trading surveillances administered by the Exchange, as 
well as cross-market surveillances administered by FINRA on behalf of 
the Exchange, which are designed to detect violations of Exchange rules 
and applicable federal securities laws. The Exchange represents that 
these procedures are adequate to properly monitor Exchange trading of 
the Shares in all trading sessions and to deter and detect violations 
of Exchange rules and federal securities laws applicable to trading on 
the Exchange.
    The surveillances referred to above generally focus on detecting 
securities trading outside their normal patterns, which could be 
indicative of manipulative or other violative activity. When such 
situations are detected, surveillance analysis follows and 
investigations are opened, where appropriate, to review the behavior of 
all relevant parties for all relevant trading violations.
    The Exchange or FINRA, on behalf of the Exchange, or both, will 
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.
    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 or affiliated with a broker-
dealer. 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 discussed above, the Fund will not comply with the requirement 
in

[[Page 25871]]

Commentary .01(b)(1) that components that in the aggregate account for 
at least 75% of the fixed income weight of the portfolio each have a 
minimum original principal amount outstanding of $100 million or more. 
Instead, the Exchange proposes that components, excluding Private ABS/
MBS and CDOs/CBOs/CLOs, that in the aggregate account for at least 50% 
of the fixed income weight of the portfolio each shall have a minimum 
original principal amount outstanding of $50 million or more. Private 
ABS/MBS and CDOs/CBOs/CLOs would not be subject to a requirement for a 
minimum original principal amount outstanding. The Exchange believes 
this alternative is appropriate because at least 50% of the fixed 
income weight of the Fund's portfolio, excluding Private ABS/MBS and 
CDOs/CBOs/CLOs, would continue to be subject to a substantial minimum 
(i.e., $50 million) original principal amount outstanding. In addition, 
by excluding Private ABS/MBS and CDOs/CBOs/CLOs from this requirement, 
the Fund will be able to better diversify its holdings in such 
securities, and would be able to invest in a larger variety of Private 
ABS/MBS and CDOs/CBOs/CLOs that have characteristics consistent with 
the Fund's investment objective to maximize current income while 
maintaining a portfolio consistent with the preservation of capital and 
daily liquidity. These characteristics may include, for example, 
Private ABS/MBS and CDOs/CBOs/CLOs with investment grade credit rating 
or liquidity comparable to fixed income securities with a much greater 
amount outstanding.
    As noted above, the Fund may invest in shares of non-exchange-
traded investment company securities, which are equity securities. 
Therefore, to the extent the Fund invests in shares of non-exchange-
traded open-end management investment company securities, the Fund will 
not comply with the requirements of Commentary .01(a)(1)(A) through (E) 
to NYSE Arca Rule 8.600-E (U.S. Component Stocks) with respect to its 
equity securities holdings.\34\ The Exchange believes 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. Investments in non-exchange-traded open-end management 
investment company securities will not exceed 20% of the total assets 
of the Fund. 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).
---------------------------------------------------------------------------

    \34\ See note 27, supra.
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    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 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 
Fund's 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.\35\ 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).\36\ 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.
---------------------------------------------------------------------------

    \35\ See note 18, supra.
    \36\ See note 19, supra.
---------------------------------------------------------------------------

    As noted above, 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).\37\ The Exchange proposes that the Private ABS/MBS, will not 
be required to comply with the criteria in Commentary .01(b)(4)(a) 
through (e) to NYSE Arca Rule 8.600-E. In this regard, the Exchange 
proposes to provide that the Fund will not invest more than 20% of the 
Fund's total assets in Private ABS/MBS. CDOs/CBOs/CLOs, however, will 
be subject to the criteria in Commentary .01(b)(4)(a) through (e) \38\ 
and the Fund will not invest more than 10% of the Fund's total assets 
in CDOs/CBOs/CLOs.\39\ The Exchange believes that this 10% limitation 
will help the Fund maintain portfolio diversification and will reduce 
manipulation risk. In addition, the Adviser does not expect that 
investments in CDOs/CBOs/CLOs of up to 10% of the total assets of the 
Fund will have any material impact on the liquidity of the Fund's 
investments.
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    \37\ See note 17, supra.
    \38\ As noted above, CDOs/CBOs/CLOs would be excluded from the 
20% limit on Private ABS/MBS.
    \39\ For purposes of this filing, CDOs/CBOs/CLOs are not deemed 
to be ABS for purposes of the restriction on the Fund's holdings of 
Private ABS/MBS. See note 8, supra.
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    In addition, the Fund's investment in Private ABS/MBS and CDOs/
CBOs/CLOs will be subject to the Fund's liquidity risk management 
program as approved by the Fund's Board.\40\ The liquidity procedures 
generally include public disclosure by the Fund of its liquidity and 
redemption practices. The Fund's holdings in Private ABS/MBS and CDOs/
CBOs/CLOs would be encompassed within the Fund's liquidity risk 
management program.
---------------------------------------------------------------------------

    \40\ See note 18, supra.
---------------------------------------------------------------------------

    The Adviser and Subadviser represent that the proposed exceptions 
from the requirements of Commentary .01 to Rule 8.600-E described above 
are consistent with the Fund's investment objective, and will further 
assist the Adviser and Subadviser to achieve such investment objective. 
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.
    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

[[Page 25872]]

not meet the requirements of Commentary .01(a)(1), (b)(1), (b)(4) and 
(b)(5) to Rule 8.600-E. The Exchange notes that, other than Commentary 
.01(a)(1), (b)(1), (b)(4) and (b)(5) to Rule 8.600-E, the Fund's 
portfolio will meet all other requirements of Rule 8.600-E.

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 
Shares of the Fund, 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 rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2019-38 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-2019-38. 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-2019-38 and should be submitted 
on or before June 25, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\41\
Vanessa A. Countryman,
Acting Secretary.
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    \41\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2019-11556 Filed 6-3-19; 8:45 am]
 BILLING CODE 8011-01-P


