[Federal Register Volume 84, Number 173 (Friday, September 6, 2019)]
[Notices]
[Pages 47024-47028]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-19217]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86841; File No. SR-NYSEArca-2019-38]


Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a 
Proposed Rule Change, as Modified by Amendments No. 1 and No. 2, To 
Amend the Listing Rule Applicable to Shares of the Aware Ultra-Short 
Duration Enhanced Income ETF

August 30, 2019.

I. Introduction

    On May 15, 2019, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposed rule

[[Page 47025]]

change to change the listing rule applicable to shares (``Shares'') of 
the Aware Ultra-Short Duration Enhanced In[square]come ETF (``Fund''), 
a series of the Tidal ETF Trust (``Trust''). The proposed rule change 
was published for comment in the Federal Register on June 4, 2019.\3\ 
On July 8, 2019, the Exchange filed Amendment No. 1 to the proposed 
rule change, which amended and superseded the Notice in its 
entirety.\4\ On July 10, 2019, the Exchange filed Amendment No. 2 to 
the proposed rule change, which amended the proposed rule change as 
modified by Amendment No. 1.\5\ On July 19, 2019, pursuant to Section 
19(b)(2) of the Act,\6\ the Commission extended the time period within 
which to approve the proposed rule change, disapprove the proposed rule 
change, or institute proceedings to determine whether to approve or 
disapprove the proposed rule change.\7\ The Commission has received no 
comments on the proposed rule change. This order approves the proposed 
rule change, as modified by Amendments No. 1 and No. 2.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 85955 (May 29, 
2019), 84 FR 25863 (``Notice'').
    \4\ In Amendment No. 1, the Exchange: (1) Provided clarification 
regarding certain of the Fund's permitted investments; (2) changed 
certain citations supporting its proposals; (3) expanded upon an 
argument in support of one of its proposals and deleted an argument 
that had been offered in support of another proposal; (4) expanded 
certain representations regarding the Exchange's ability to obtain 
trading information regarding certain of the Fund's permitted 
investments; and (5) made other technical changes. Because Amendment 
No. 1 does not materially alter the substance of the proposed rule 
change or raise unique or novel regulatory issues, Amendment No. 1 
is not subject to notice and comment. The amendments to the proposed 
rule change are available at https://www.sec.gov/comments/sr-nysearca-2019-38/srnysearca201938.htm.
    \5\ In Amendment No. 2, the Exchange: (1) Modified the list of 
the Fund's permitted investments; and (2) made a technical change. 
Because Amendment No. 2 does not materially alter the substance of 
the proposed rule change or raise unique or novel regulatory issues, 
Amendment No. 2 is not subject to notice and comment.
    \6\ 15 U.S.C. 78s(b)(2).
    \7\ See Securities Exchange Act Release No. 86414, 84 FR 35892 
(July 25, 2019) (designating September 2, 2019, as the date by which 
the Commission shall approve, disapprove, or institute proceedings 
to determine whether to approve or disapprove the proposed rule 
change).
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II. Description of the Proposed Rule Change, as Modified by Amendments 
No. 1 and No. 2 8
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    \8\ For a complete description of the Exchange's proposal, see 
Notice, Amendments No. 1 and No. 2, supra notes 3, 4, and 5 
respectively.
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    The Exchange states that the Shares commenced trading on the 
Exchange on January 29, 2019, pursuant to the generic listing standards 
in Commentary .01 to NYSE Arca Rule 8.600-E, which govern Managed Fund 
Shares,\9\ and that the Fund's investments comply with those 
requirements.\10\ According to the Registration Statement,\11\ 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.
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    \9\ 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.
    \10\ See Amendment No. 1, supra note 4, at 4 n.3.
    \11\ On December 21, 2018, the Trust, which is registered under 
the 1940 Act, 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), and under the 1940 Act relating to the Fund (File 
Nos. 333-227298 and 811-23377) (``Registration Statement''). The 
Exchange represents that the Trust will file an amendment to the 
Registration Statement as necessary to conform to the 
representations in the proposed rule change. See id., n.5.
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    The Exchange filed the proposed rule change to modify the listing 
rule applicable to the Shares. The Exchange proposes certain deviations 
from the generic requirements, which it states are necessary for the 
Fund to achieve its investment objective in a manner that is cost-
effective and that maximizes investors' returns.\12\
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    \12\ See id. at 11.
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A. The Fund's Permitted Investments

    The Fund would seek to achieve its investment objective primarily 
by investing in ``Fixed Income Securities,'' which are: U.S. government 
securities; agency and non-agency asset-backed securities (``ABS'') and 
mortgage-backed securities (``MBS'') and collateralized mortgage 
obligations (``CMOs''); \13\ 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''); \14\ 
corporate debt securities; municipal securities; inflation-indexed 
bonds; inflation-indexed securities issued by the U.S. Treasury; 
commercial paper (in addition to commercial paper that are cash 
equivalents); \15\ convertible securities; and structured notes. In 
addition, the Fund could: (1) Hold cash and cash equivalents; \16\ (2) 
enter into dollar rolls and short sales of Fixed Income Securities; (3) 
purchase securities and other instruments under when-issued, delayed 
delivery, to be announced or forward commitment transactions; (4) 
invest in private placements and Rule 144A securities; (5) hold U.S. 
and non-U.S. exchange-traded common stocks, preferred stocks, rights, 
warrants, exchange-traded notes (``ETNs''),\17\ exchange-traded funds 
(``ETFs''); \18\ and (6) hold securities of other investment 
companies,\19\ subject to applicable limitations under Section 12(d)(1) 
of the 1940 Act. Further, the Fund could 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 indices on the foregoing 
securities and financial instruments; and OTC options on stocks, Fixed 
Income Securities, interest rates, credit, currencies, commodities,

[[Page 47026]]

or indices on the foregoing securities and financial instruments.\20\
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    \13\ For purposes of this filing, non-agency ABS, non-agency 
MBS, and non-agency CMOs are referred to collectively herein as 
``Private ABS/MBS.'' In the aggregate, Private ABS/MBS would not 
exceed more than 20% of the total assets of the Fund.
    \14\ For purposes of this filing, CDOs/CBOs/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. According to the 
Exchange, CDOs/CBOs/CLOs are distinguishable from Private ABS/MBS 
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. 
Collectively, CDOs, CBOs, and CLOs would not exceed more than 10% of 
the total assets of the Fund.
    \15\ See infra note 16.
    \16\ For purposes of this filing, cash equivalents are the 
short-term instruments enumerated in Commentary .01(c) to Rule 
8.600-E.
    \17\ 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).
    \18\ For purposes of this filing, ``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 would be listed and traded in the U.S. on a national 
securities exchange. According to the Exchange, while the Fund might 
invest in inverse ETFs, the Fund would not invest in leveraged 
(e.g., 2X, -2X, 3X or -3X) ETFs.
    \19\ Investments in non-exchange-traded open-end management 
investment company securities would not exceed 20% of the total 
assets of the Fund.
    \20\ See Amendment No. 2, supra note 5.
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B. Alternative Listing and Trading Criteria for the Shares

    The Exchange represents that the Fund's portfolio satisfy all the 
generic listing requirements of Rule 8.600-E, except as discussed 
below.
    The Fund proposes to invest in shares of non-exchange listed open-
end management investment company securities. Such investments would 
not comply with the requirements of Commentary .01(a)(1)(A) through (E) 
to NYSE Arca Rule 8.600-E (U.S. Component Stocks) \21\ because, 
according to the Exchange, it would be difficult or impossible to apply 
certain of the generic quantitative criteria (e.g., market 
capitalization, trading volume, or portfolio criteria) applicable to 
U.S. Component Stocks to mutual fund shares.\22\ The Fund's portfolio 
holdings in such investment company securities would be limited to 20% 
of the total assets of the Fund.\23\
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    \21\ Commentary .01(a) to Rule 8.600-E specifies the equity 
securities accommodated by the generic criteria in Commentary 
.01(a). Commentary .01(a)(1) to Rule 8.600-E provides that the 
component stocks of the equity portion of a portfolio that are U.S. 
Component Stocks must 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.
    \22\ See Amendment No. 1, supra note 4, at 16.
    \23\ See id., at 7.
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    The Exchange proposes that, instead of complying with the 
requirement of Commentary .01(b)(1) to NYSE Arca Rule 8.600-E,\24\ the 
Fund's Fixed Income Securities--other than 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 would have a minimum original 
principal amount outstanding of $50 million or more. As proposed, 
Private ABS/MBS, CDOs/CBOs/CLOs held by the Fund would not be subject 
to any minimum original principal amount outstanding requirement.
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    \24\ Commentary .01(b)(1) requires that fixed income securities 
portfolio 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.
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    The Exchange proposes that the Fund's investments in Private ABS/
MBS not be required to comply with Commentary .01(b)(4) to NYSE Arca 
Rule 8.600-E.\25\ According to the Exchange, all other Fixed Income 
Securities, including the Fund's CDOs/CBOs/CLOs, would be subject to 
the criteria in Commentary .01(b)(4).
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    \25\ 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. Unlike the Fund's Private ABS/MBS, 
the Fund's CDOs, CBOs, and CLOs would be subject to the criteria in 
Commentary .01(b)(4).
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    Additionally, the Exchange proposes that the Fund's investments not 
be required to comply with Commentary .01(b)(5) t NYSE Arca Rule 8.600-
E.\26\ As mentioned above, the Fund would instead invest up to 20% of 
its total assets in Private ABS/MBS and up to 10% of its total assets 
in CDOs/CBOs/CLOs.
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    \26\ Commentary .01(b)(5) requires that investments in non-
agency, non-government sponsored entity and privately issued 
mortgage-related and other asset-backed securities not account, in 
the aggregate, for more than 20% of the weight of the portfolio.
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule 
change, as modified by Amendments No. 1 and No. 2, is consistent with 
the Act and the rules and regulations thereunder applicable to a 
national securities exchange.\27\ In particular, the Commission finds 
that the proposed rule change, as modified by Amendments No. 1 and No. 
2, is consistent with Section 6(b)(5) of the Act,\28\ which requires, 
among other things, that the rules of a national securities exchange be 
designed to prevent fraudulent and manipulative acts and practices, to 
promote just and equitable principles of trade, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general, to protect investors and the public 
interest.
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    \27\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \28\ 15 U.S.C. 78f(b)(5).
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    According to the Exchange, the Shares would continue to satisfy the 
initial and continued listing criteria for Managed Fund Shares pursuant 
to NYSE Arca Rule 8.600-E, except for the requirements of Commentary 
.01(a)(1), (b)(1), (b)(4), and (b)(5).
    As discussed above, the Fund will not meet the requirement in 
Commentary .01(b)(1) of NYSE Arca Rule 8.600-E that components that in 
the aggregate account for at least 75% of the fixed income weight of 
the portfolio shall each have a minimum original principal amount 
outstanding of $100 million or more. Instead, the Exchange proposes 
that components 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 be excluded from this requirement and would 
not be subject to a requirement for a minimum original principal amount 
outstanding. The Exchange represents that at least 50% of the fixed 
income weight of the Fund's portfolio would still be required to have a 
substantial minimum original principal amount outstanding.\29\ The 
Exchange asserts that not subjecting Private ABS/MBS and CDOs/CBOs/CLOs 
to a standard for minimum original principal amount outstanding would 
allow the Fund to invest in a larger variety of Private ABS/MBS and 
CDOs/CBOs/CLOs, which would help the Fund meet its investment 
objectives and diversify its holdings in such securities.\30\
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    \29\ See Amendment No. 1, supra note 4, at 11.
    \30\ See id. at 11-12.
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    Also as discussed above, the Fund, with respect to its investments 
in Private ABS/MBS, will not comply with the generic listing 
requirement that

[[Page 47027]]

securities comprising at least 90% of the fixed income weight of the 
Fund's portfolio meet one of the criteria in Commentary .01(b)(4) to 
NYSE Arca Rule 8.600-E.\31\ The Exchange represents that, Fixed Income 
Securities, including CDOs/CBOs/CLOs, held by the Fund other than 
Private ABS/MBS, will continue to meet this requirement. The Exchange 
also represents that it will not invest more than 20% of the Fund's 
total assets in Private ABS/MBS. CDOs/CBOs/CLOs, which will meet the 
requirements of Commentary .01(b)(4), will be limited to 10% of the 
portfolio. The Exchange believes that this limitation will help the 
Fund maintain portfolio diversification and reduce manipulation 
risk.\32\ The Commission notes that it has previously approved the 
listing of Managed Fund Shares that exclude Private ABS/MBS from the 
provisions of rules comparable to Commentary .01(b)(4) to NYSE Arca 
Rule 8.600-E.\33\
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    \31\ See supra note 25.
    \32\ See Amendment No. 1, supra note 4, at 13.
    \33\ See Securities Exchange Act Release Nos. 84047 (September 
6, 2018), 83 FR 46200 (September 12, 2018) (SR-NASDAQ-2017-128); 
85022 (January 31, 2019), 84 FR 2265 (February 6, 2019) (SR-NASDAQ-
2018-080).
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    The Commission notes that CDOs/CBOs/CLOs will not be included in 
the definition of Private ABS/MBS and, as a result, will not be subject 
to the restriction on aggregate holdings of Private ABS/MBS set forth 
in Commentary .01(b)(5) to NYSE Arca Rule 8.600-E, which limits 
investments in Private ABS/MBS to 20% of the weight of the portfolio. 
Instead, the Fund may invest up to 20% of the Fund in Private ABS/MBS 
and up to 10% of the fund's total assets in CDOs/CBOs/CLOs such that, 
in the aggregate, they may account for up to 30% of the weight of the 
Fund's portfolio. The Commission notes that it has previously approved 
similar limitations for Private ABS/MBS and CDOs/CBOs/CLOs.\34\
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    \34\ See id.
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    Finally, the Fund will not comply with the requirements of 
Commentary .01(a)(1)(A) through (E) to NYSE Arca Rule 8.600-E \35\ in 
connection with the Fund's investments in non-exchange traded open-end 
investment company securities. The Exchange represents that investments 
in other non-exchange-traded open-end management investment company 
securities will not exceed 20% of the total assets of the Fund. The 
Exchange asserts that the criteria of Commentary .01(a)(1) does not 
need to apply to such securities because the securities must satisfy 
applicable 1940 Act diversification requirements, and the net asset 
value of the securities is based on the value of securities and 
financial assets the investment company holds.\36\ The Commission notes 
that it has previously approved a similar proposal to invest in non-
exchange-traded open-end management investment company securities.\37\
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    \35\ See supra note 21.
    \36\ See Amendment No. 1, supra note 4, at 23-24.
    \37\ 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).
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    Other than as described above, the Fund's portfolio will continue 
to meet all the requirements of NYSE Arca Rule 8.600-E. The Commission 
believes that the proposed initial and continued listing requirements 
are designed to mitigate the potential for manipulation of the Shares, 
do not raise any novel issues, and are consistent with listing 
requirements of other Managed Fund Shares.\38\
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    \38\ See supra notes 33, 34, and 37.
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    The Commission finds that the proposal is consistent with Section 
11A(a)(1)(C)(iii) of the Act,\39\ which sets forth Congress' finding 
that it is in the public interest and appropriate for the protection of 
investors and the maintenance of fair and orderly markets to assure the 
availability to brokers, dealers, and investors of information with 
respect to quotations for, and transactions in, securities. According 
to the Exchange, quotation and last-sale information for the Shares 
will be available via the Consolidated Tape Association high-speed 
line. Further, the Portfolio Indicative Value, as defined in NYSE Arca 
Rule 8.600-E(c)(3), will be widely disseminated by one or more major 
market data vendors at least every 15 seconds during the Core Trading 
Session (defined in NYSE Arca Rule 7.34-E(a)(2)). 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. 
In addition, the Fund's website will include a form of prospectus for 
the Fund and additional data relating to the net asset value (``NAV'') 
and other applicable quantitative information.
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    \39\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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    Exchange-traded options quotation and last-sale information for 
options cleared via the Options Clearing Corporation are available via 
the Options Price Reporting Authority. 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, 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.\40\ 
Shares of 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.
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    \40\ 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.
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    The Commission also believes that the proposal is reasonably 
designed to promote fair disclosure of information that may be 
necessary to price the Shares appropriately and to prevent trading when 
a reasonable degree of transparency cannot be assured. The Exchange 
states that it 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 (as defined in

[[Page 47028]]

NYSE Rule 8.600-E(c)(2)) will be made available to all market 
participants at the same time.\41\ In addition, the Exchange states 
that on a daily basis, the Fund discloses on its website the Disclosed 
Portfolio of the Fund that forms the basis for the Fund's NAV 
calculation.\42\ Trading in the Shares also will be subject to NYSE 
Arca Rule 8.600-E(d)(2)(D), which sets forth circumstances under which 
Shares of a fund may be halted. Further, trading in the Shares may be 
halted if the circuit breaker parameters in NYSE Arca Rule 7.12-E have 
been reached, because of market conditions, or for reasons that, in the 
view of the Exchange, make trading in the Shares inadvisable.\43\
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    \41\ See Amendment No. 1, supra note 4, at 20.
    \42\ See id. at 18.
    \43\ 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. See id.
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    The Exchange states that it has a general policy prohibiting the 
distribution of material, non-public information by its employees.\44\ 
Additionally, the Commission notes that the Reporting Authority that 
provides the Disclosed Portfolio must implement and maintain, or be 
subject to, procedures designed to prevent the use and dissemination of 
material, non-public information regarding the actual components of the 
portfolio.\45\
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    \44\ See id. at 20.
    \45\ See NYSE Arca Rule 8.600(d)(2)(B)(ii). The term ``Reporting 
Authority'' is defined in NYSE Arca Rule 8.600(c)(4).
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    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.\46\ In support of its 
proposal, the Exchange has made the following representations:
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    \46\ See Amendment No. 1, supra note 4, at 20.
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    (1) A minimum of 100,000 Shares will be outstanding at the 
commencement of trading on the Exchange.\47\
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    \47\ See id.
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    (2) 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.\48\
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    \48\ See id.
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    (3) The Exchange or FINRA, on behalf of the Exchange, or both, (1) 
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 (2) may obtain trading information regarding 
trading in the Shares, ETFs, certain exchange-traded options and 
certain futures from such markets and other entities.\49\ 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 
relating to certain municipal bond trading activity for surveillance 
purposes in connection with trading in the Shares.\50\
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    \49\ In addition, the Exchange may obtain information regarding 
trading in the Shares, ETFs, certain exchange-traded options and 
certain futures from such markets and other entities that are 
members of the ISG, or with which the Exchange has in place a 
comprehensive surveillance sharing agreement. See Amendment No. 2, 
supra note 5.
    \50\ See id. at 22.
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    (4) The Exchange has appropriate rules to facilitate transactions 
in the Shares during all trading sessions.\51\
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    \51\ See id. at 20.
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    (5) The Fund will be in compliance with Rule 10A-3 under the 
Act,\52\ as provided by NYSE Arca Rule 5.3-E for initial and continued 
listing of shares.\53\
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    \52\ 17 CFR 240.10A-3.
    \53\ See Amendment No. 1, supra note 4, at 20.
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    (6) All statements and representations made in the proposed rule 
change regarding the description of the portfolio, limitations on 
portfolio holdings or reference assets, or the applicability of 
Exchange listing rules specified in this rule filing shall constitute 
continued listing requirements for listing the Shares on the Exchange. 
In addition, 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.\54\
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    \54\ See id. at 21.
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    This approval order is based on all of the Exchange's 
representations, including those set forth above and in Amendments No. 
1 and No. 2.
    For the foregoing reasons, the Commission finds that the proposed 
rule change, as modified by Amendments No. 1 and No. 2, is consistent 
with Section 6(b)(5) of the Act \55\ the rules and regulations 
thereunder applicable to a national securities exchange.
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    \55\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\56\ that the proposed rule change (SR-NYSEArca-2019-38), as 
modified by Amendments No. 1 and No. 2, be, and hereby is, approved.
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    \56\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\57\
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    \57\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-19217 Filed 9-5-19; 8:45 am]
 BILLING CODE 8011-01-P


