[Federal Register Volume 84, Number 245 (Friday, December 20, 2019)]
[Notices]
[Pages 70216-70221]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-27459]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87763; File No. SR-NYSEArca-2019-91]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change To Permit the 
Continued Listing and Trading of Shares Under NYSE Arca Rule 8.600-E of 
the Cambria Core Equity ETF, a Series of Cambria ETF Trust

December 16, 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 December 11, 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 and II 
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 to permit the continued listing and trading 
of shares under NYSE Arca Rule 8.600-E of the Cambria Core Equity ETF, 
a series of Cambria ETF Trust, following its reorganization into the 
Core Alternative ETF, a series of Listed Funds Trust, notwithstanding 
that its investments do not meet the requirements of Commentary 
.01(d)(2) to Rule 8.600-E. The proposed rule 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 to permit the continued listing and trading 
of shares (``Shares'') under NYSE Arca Rule 8.600-E (``Managed Fund 
Shares'') \4\ of the Cambria Core Equity ETF, a series of Cambria ETF 
Trust (the ``Cambria Trust''), following its reorganization into the 
Core Alternative ETF (the ``Fund''), which will be a series of the 
Listed Funds Trust (the ``LF Trust'' or ``Trust''). Shares of the 
Cambria Core Equity ETF commenced trading on the Exchange on May 24, 
2017, pursuant to the generic listing criteria in Commentary .01 to 
NYSE Arca Rule 8.600-E.
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    \4\ 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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    The LF Trust has filed a combined prospectus and proxy statement 
(the ``Proxy Statement'') with the Commission on Form N-14 describing a 
reorganization plan (``Reorganization'') \5\ pursuant to which, 
following approval of the Cambria Core Equity ETF's shareholders, all 
or substantially all of the assets and all of the stated liabilities 
included in the financial statements of the Cambria Core Equity ETF 
would be transferred to the Fund. According to the Proxy Statement, the 
investment objective of the Fund will be the same as that of the 
Cambria Core Equity ETF following implementation of the Reorganization. 
Following shareholder approval and closing of the Reorganization, 
investors in the Cambria Core Equity ETF will receive shares of 
beneficial interest of the Fund with an aggregate net asset value equal 
to the aggregate net asset value of the Shares of the Cambria Core 
Equity ETF calculated as of the close of business on the business day 
before the closing of the Reorganization. The closing date of the 
Reorganization and the first day of trading of the Fund under its new 
name is expected to be on or about December 18, 2019.
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    \5\ See registration statement on Form N-14 under the 1933 Act, 
dated September 27, 2019 (File No. 333-233973) (``Proxy 
Statement'').
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    The Shares are offered by the LF Trust, which is registered with 
the Commission as an open-end management investment company consisting 
of multiple investment series.\6\ The Fund is a series of the LF Trust. 
U.S. Bancorp Fund Services, LLC, doing business as U.S. Bank Global 
Fund Services, LLC, will be the administrator (the ``Administrator'') 
for the Trust. U.S. Bank N.A. will serve as the custodian for the 
Fund.\7\ Core Alternative Capital, LLC (the ``Adviser'') will be the 
investment adviser to the Fund.
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    \6\ The Trust is registered under the 1940 Act. On August 23, 
2019, the Trust filed with the Securities and Exchange Commission 
(``SEC'' or ``Commission'') a post-effective 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. 333-215588 and 811-23226) (``Registration Statement''). 
Description of the operation of the Trust and of the Fund and Shares 
herein is based, in part, on the Registration Statement. There are 
no permissible holdings for the Fund that are not described in this 
proposal. The Commission has issued an order granting certain 
exemptive relief to the Cambria Trust under the Investment Company 
Act of 1940 (15 U.S.C. 80a-1) (``1940 Act''). See Investment Company 
Act Release No. 30340 (January 4, 2013)) (File No. 812-13959). The 
LF Trust intends to operate in conformity with such order following 
the implementation of the Reorganization.
    \7\ The Administrator to the Cambria Core Equity ETF was SEI 
Investments Global Funds Services and the custodian to the Cambria 
Core Equity ETF was Brown Brothers Harriman & Co.
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    As discussed below, the Fund does not currently meet the 
requirements of Commentary .01(d)(2) to Rule 8.600-E. The Exchange 
proposes to permit the listing and trading of Shares of the Fund 
notwithstanding that the Fund's investments do not meet requirements of 
Commentary .01(d)(2) to Rule 8.600-E.
    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''

[[Page 70217]]

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.\8\ In addition, Commentary .06 further 
requires that personnel who make decisions on the investment company's 
portfolio composition must be subject to procedures designed to prevent 
the use and dissemination of material nonpublic information regarding 
the applicable investment company portfolio.
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    \8\ An investment adviser to an open-end fund is required to be 
registered under the Investment Advisers Act of 1940 (the ``Advisers 
Act''). As a result, the Adviser and its related personnel are 
subject to the provisions of Rule 204A-1 under the Advisers Act 
relating to codes of ethics. This Rule requires investment advisers 
to adopt a code of ethics that reflects the fiduciary nature of the 
relationship to clients as well as compliance with other applicable 
securities laws. Accordingly, procedures designed to prevent the 
communication and misuse of non-public information by an investment 
adviser must be consistent with Rule 204A-1 under the Advisers Act. 
In addition, Rule 206(4)-7 under the Advisers Act makes it unlawful 
for an investment adviser to provide investment advice to clients 
unless such investment adviser has (i) adopted and implemented 
written policies and procedures reasonably designed to prevent 
violation, by the investment adviser and its supervised persons, of 
the Advisers Act and the Commission rules adopted thereunder; (ii) 
implemented, at a minimum, an annual review regarding the adequacy 
of the policies and procedures established pursuant to subparagraph 
(i) above and the effectiveness of their implementation; and (iii) 
designated an individual (who is a supervised person) responsible 
for administering the policies and procedures adopted under 
subparagraph (i) above.
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    The Adviser is not a registered broker-dealer and is not affiliated 
with a broker-dealer. In addition, Adviser personnel who make decisions 
regarding a Fund's portfolio are subject to procedures designed to 
prevent the use and dissemination of material nonpublic information 
regarding the Fund's portfolio. In the event that (a) the Adviser 
becomes registered as a broker-dealer or newly affiliated with a 
broker-dealer, or (b) any new adviser or sub-adviser is a registered 
broker-dealer or becomes affiliated with a broker-dealer, it will 
implement and maintain a fire wall with respect to its relevant 
personnel or such broker-dealer affiliate, as applicable, 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.
Principal Investments of the Fund
    According to the Registration Statement, the Fund is an actively 
managed exchange-traded fund (``ETF'') that seeks capital appreciation 
and capital preservation with a low correlation to the broader U.S. 
equity market. To achieve its investment objective, the Fund uses a 
combination of several strategies to produce capital appreciation while 
reducing risk exposure across market conditions.
    Under normal market conditions,\9\ at least 80% of the value of the 
Fund's net assets will be invested in exchange-traded equity securities 
that tend to offer current dividends and/or exchange traded index call 
and put options on the S&P 500 Index (``S&P 500 Index Options''). 
According to the Registration Statement, writing index call options 
reduces the Fund's volatility, provides steady cash flow and is an 
important source of the Fund's return. The Fund's purchase of index put 
options also protects the Fund from a significant market decline that 
may occur over a short period of time.
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    \9\ The term ``normal market conditions'' is defined in NYSE 
Arca Rule 8.600-E(c)(5).
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Non-Principal Investments
    In addition to the principal investments described above, the Fund 
may invest in fixed income securities issued by various U.S. public-
sector or corporate entities and obligations issued or guaranteed by 
the U.S. Government.
    The Fund may also hold cash and/or cash equivalents.\10\
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    \10\ For purposes of this filing, cash equivalents include the 
securities included in Commentary .01(c) to NYSE Arca Rule 8.600-E.
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Application of Generic Listing Requirements
    The Exchange submits this proposal in order to list and trade 
Shares of the Fund and to allow the Fund to hold listed derivatives, in 
particular call and put options on the S&P 500 Index, in a manner that 
does not comply with Commentary .01(d)(2) to Rule 8.600-E.\11\ 
Otherwise, the Fund will comply with all other listing requirements of 
the Generic Listing Standards \12\ for Managed Fund Shares on an 
initial and continued listing basis.\13\
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    \11\ Commentary .01(d)(2) to Rule 8.600-E provides that ``the 
aggregate gross notional value of listed derivatives based on any 
five or fewer underlying reference assets shall not exceed 65% of 
the weight of the portfolio (including gross notional exposures), 
and the aggregate gross notional value of listed derivatives based 
on any single underlying reference asset shall not exceed 30% of the 
weight of the portfolio (including gross notional exposures).'' The 
Fund does not meet the generic listing standards because its fails 
to meet the requirement of Commentary .01(d)(2) that prevents the 
aggregate gross notional value of listed derivatives based on any 
single underlying reference asset from exceeding 30% of the weight 
of the portfolio (including gross notional exposures) and the 
requirement that the aggregate gross notional value of listed 
derivatives based on any five or fewer underlying reference assets 
shall not exceed 65% of the weight of the portfolio (including gross 
notional exposures).
    \12\ For purposes of this proposal, the term ``Generic Listing 
Standards'' means the generic listing rules for Managed Fund Shares 
under Commentary .01 to Rule 8.600-E.
    \13\ The Exchange notes that this proposed rule change is 
similar to previous rule changes involving Managed Fund Shares with 
similar exposures to listed derivatives based on a single underlying 
reference asset. See Securities Exchange Act Release No. 87556 
(November 18, 2019), 84 FR 64589 (November 22, 2019) (SR-NYSEArca-
2019-82); Securities Exchange Act Release No. 86773 (August 27, 
2019), 84 FR 46051 (September 3, 2019) (SR-CboeBZX-2019-077); 
Securities Exchange Act Release No. 83146 (May 1, 2018), 83 FR 20103 
(May 7, 2018) (SR-CboeBZX-2018-029) (permitted up to 50% of the 
weight of its portfolio including gross notional exposure in S&P 500 
Index options); Securities Exchange Act Release No. 80529 (April 26, 
2017), 82 FR 20506 (May 2, 2017) (SR-BatsBZX-2017-14). See also 
Securities Exchange Act Release Nos. 82906 (March 20, 2018), 83 FR 
12992 (March 26, 2018) (SR-CboeBZX-2017-012) (order approving the 
listing and trading of the LHA Market State Tactical U.S. Equity 
ETF); 83679 (July 20, 2018), 83 FR 35505 (July 26, 2018) (SR-
BatsBZX-2017-72) (Notice of Filing of Amendment No. 4 and Order 
Granting Accelerated Approval of a Proposed Rule Change, as Modified 
by Amendment No. 4 Thereto, to List and Trade Shares of the 
Innovator S&P 500 Buffer ETF Series, Innovator S&P 500 Power Buffer 
ETF Series, and Innovator S&P 500 Ultra Buffer ETF Series Under Rule 
14.11(i)).
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    The market for S&P 500 Index Options is highly liquid.\14\ In 
September 2019, approximately 1.35 million options contracts on the S&P 
500 Index were traded per day, which is more than $430 billion in 
notional volume traded on a daily basis. The Exchange believes that the 
liquidity in the S&P 500 Index Options markets mitigates the concerns 
that Commentary .01(d)(2) to Rule 8.600-E is intended to address and 
that such liquidity would prevent the Shares from being susceptible to 
manipulation.
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    \14\ S&P 500 Index options are traded on the Cboe Exchange, Inc. 
(``Cboe Options''). The Exchange, Cboe Options and all other 
national securities exchanges are members of the Intermarket 
Surveillance Group (``ISG'').
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    In addition, the Exchange believes that sufficient protections are 
in place to protect against market manipulation of the Shares and S&P 
500 Index Options for several reasons: (i) The diversity, liquidity, 
and market cap of the securities underlying the S&P 500 Index; (ii) the 
significant liquidity in the market for S&P 500 Index Options; and 
(iii) surveillance by the Exchange, options exchanges \15\ and the 
Financial Industry Regulatory Authority (``FINRA'') designed to detect 
violations of the federal securities laws and self-

[[Page 70218]]

regulatory organization (``SRO'') rules. The Exchange has in place a 
surveillance program for transactions in ETFs to ensure the 
availability of information necessary to detect and deter potential 
manipulations and other trading abuses, thereby making the Shares less 
readily susceptible to manipulation. Further, the Exchange believes 
that because the S&P 500 Index Options in the Fund's portfolio will be 
acquired in extremely liquid and highly regulated markets,\16\ the 
Shares are less readily susceptible to manipulation.
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    \15\ The Exchange and all nine U.S. options exchanges are 
members of the Options Regulatory Surveillance Authority, which was 
established in 2006 to provide efficiencies in looking for insider 
trading and serves as a central organization to facilitate 
cooperation in insider trading investigations for the U.S. options 
exchanges.
    \16\ All exchange-listed securities that the Fund may hold will 
trade on a market that is a member of the ISG and the Fund will not 
hold any non-exchange-listed equities or options. For a list of the 
current members of ISG, see www.isgportal.org. See also notes 14 and 
15, supra.
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    As noted above, S&P 500 Index Options are among the most liquid 
options in the world and derive their value from the actively traded 
S&P 500 Index components. The contracts are cash-settled with no 
delivery of stocks or ETFs, and trade in competitive auction markets 
with price and quote transparency. The Exchange believes the highly 
regulated options markets and the broad base and scope of the S&P 500 
Index make securities that derive their value from that index less 
susceptible to market manipulation in view of market capitalization and 
liquidity of the S&P 500 Index components, price and quote 
transparency, and arbitrage opportunities.
    The Exchange believes that the liquidity of the markets for 
securities in the S&P 500 Index and S&P 500 Index Options is 
sufficiently great to deter fraudulent or manipulative acts associated 
with the Fund's Share price. Coupled with the extensive surveillance 
programs of the Exchange and other SROs described herein, the Exchange 
does not believe that trading in the Shares would present manipulation 
concerns.
Availability of Information
    The Fund's website (https://www.corealtfunds.com) will include the 
Fund's prospectus that may be downloaded. The Fund's website will 
include ticker and exchange information, along with additional 
quantitative information updated on a daily basis, including, for the 
Fund: (1) The prior business day's net asset value (``NAV'') per Share 
and the market closing price or mid-point of the bid/ask spread at the 
time of calculation of such NAV per Share (the ``Bid/Ask Price''),\17\ 
and a calculation of the premium or discount of the market closing 
price or Bid/Ask Price against such NAV per Share; and (2) a table 
showing the number of days of such premium or discount for the most 
recently completed calendar year, and the most recently completed 
calendar quarters since that year (or the life of Fund, if shorter). On 
each business day, before commencement of trading in Shares in the Core 
Trading Session \18\ on the Exchange, the Fund will disclose on its 
website the Disclosed Portfolio as defined in NYSE Arca Rule 8.600-
E(c)(2) (the ``Disclosed Portfolio'') that forms the basis for the 
Fund's calculation of NAV at the end of the business day.
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    \17\ 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.
    \18\ The Core Trading Session begins for each security at 9:30 
a.m. Eastern time and ends at the conclusion of Core Trading Hours 
or the Core Closing Auction, whichever comes later. See NYSE Arca 
Rule 7.34-E. ``Core Trading Hours'' is defined as the hours of 9:30 
a.m. Eastern time through 4:00 p.m. (Eastern Time) or such other 
hours as may be determined by the Exchange from time to time. See 
Rule 1.1(j).
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    On a daily basis, the Fund will disclose 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.
    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-CEN. 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, Form N-PORT and Form N-CEN may be viewed 
on-screen or downloaded from the Commission's website at www.sec.gov.
    Quotation and last sale information for the Shares and other U.S. 
exchange traded equities will be available via the Consolidated Tape 
Association (``CTA'') high-speed line. In addition, the Portfolio 
Indicative Value as defined in NYSE Arca Rule 8.600-E(c)(3) (the 
``PIV'')), will be widely disseminated by one or more major market data 
vendors at least every 15 seconds during the Core Trading Session.
    The intra-day, closing and settlement prices of S&P 500 Index 
Options will be readily available from the Options Price Reporting 
Authority (``OPRA''), Cboe Options' website, automated quotation 
systems, published or other public sources, or online information 
services such as Bloomberg or Reuters. Additionally, FINRA's Trade 
Reporting and Compliance Engine (``TRACE'') will be a source of price 
information for certain fixed income securities to the extent 
transactions in such securities are reported to TRACE. 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.
    Price information regarding U.S. government securities 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.
    Quotation and last sale information for equity securities of non-
U.S. companies will be available from the exchanges on which they trade 
and from major market data vendors, as applicable.
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.\19\ 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. Trading in the Fund's Shares also 
will be subject to Rule 8.600-E(d)(2)(D) (``Trading Halts'').
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    \19\ See NYSE Arca Rule 7.12-E.
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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 a.m. to 8 p.m., E.T. in accordance 
with NYSE Arca Rule 7.34-E (Early, Core, and Late Trading Sessions). 
The Exchange has appropriate rules to facilitate transactions in the 
Shares during all trading sessions. As provided in NYSE Arca Rule 7.6-
E, 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(d)(2) 
(with respect to listed derivatives) as described above, the Shares of 
the Fund will conform to the initial and continued listing criteria 
under NYSE

[[Page 70219]]

Arca Rule 8.600-E. Consistent with Commentary .06 of NYSE Arca Rule 
8.600-E, the Adviser will implement and maintain, or be subject to, 
procedures designed to prevent the use and dissemination of material 
non-public information regarding the actual components of the Fund's 
portfolio. The Exchange represents that, for initial and continued 
listing, the Fund will be in compliance with Rule 10A-3 \20\ under the 
Act, as provided by NYSE Arca Rule 5.3-E. 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.
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    \20\ 17 CFR 240.10A-3.
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Surveillance
    The Exchange believes that its surveillance procedures are adequate 
to properly monitor the trading of the Shares on the Exchange during 
all trading sessions and to deter and detect violations of Exchange 
rules and the applicable federal securities laws. The Exchange 
represents that trading in the Shares will be subject to the existing 
trading surveillances, administered by FINRA on behalf of the Exchange, 
or by regulatory staff of the Exchange, which are designed to detect 
violations of Exchange rules and applicable federal securities laws. 
The Exchange represents that these procedures are adequate to properly 
monitor Exchange trading of the Shares in all trading sessions and to 
deter and detect violations of Exchange rules and federal securities 
laws applicable to trading on the Exchange.\21\
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    \21\ FINRA conducts cross-market surveillances on behalf of the 
Exchange pursuant to a regulatory services agreement. The Exchange 
is responsible for FINRA's performance under this regulatory 
services agreement.
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    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, exchange traded 
equity securities, and S&P 500 Index Options 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 such securities from such markets and other 
entities. The Exchange may obtain information regarding trading in such 
securities from markets and other entities that are members of ISG or 
with which the Exchange has in place a comprehensive surveillance 
sharing agreement. In addition, 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 or reference assets, (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 
of the Fund on the Exchange.
    The issuer must notify the Exchange of any failure by the Fund to 
comply with the continued listing requirements, and, pursuant to its 
obligations under Section 19(g)(1) of the Act, the Exchange will 
monitor for compliance with the continued listing requirements. If the 
Fund is not in compliance with the applicable listing requirements, the 
Exchange will commence delisting procedures under NYSE Arca Rule 5.5-
E(m).
Information Bulletin
    Prior to the commencement of trading, the Exchange will inform its 
Equity Trading Permit Holders \22\ in an Information Bulletin 
(``Bulletin'') of the special characteristics and risks associated with 
trading the Shares. Specifically, the Bulletin will discuss the 
following: (1) The procedures for purchases and redemptions of Shares 
in creation unit aggregations (and that Shares are not individually 
redeemable); (2) NYSE Arca Rule 9.2-E(a), which imposes a duty of due 
diligence on its Equity Trading Permit Holders to learn the essential 
facts relating to every customer prior to trading the Shares; (3) the 
risks involved in trading the Shares during the Early and Late Trading 
Sessions when an updated PIV will not be calculated or publicly 
disseminated; (4) how information regarding the PIV and the Disclosed 
Portfolio is disseminated; (5) the requirement that Equity Trading 
Permit Holders deliver a prospectus to investors purchasing newly 
issued Shares prior to or concurrently with the confirmation of a 
transaction; and (6) trading information.
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    \22\ An ``ETP Holder'' means a sole proprietorship, partnership, 
corporation, limited liability company or other organization in good 
standing that is a registered broker-dealer and has been issued an 
Equity Trading Permit (``ETP'') by the Exchange. See Rules 1.1(n) 
and (o).
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    In addition, the Bulletin will reference that the Fund is subject 
to various fees and expenses described in the Registration Statement. 
The Bulletin will discuss any exemptive, no-action, and interpretive 
relief granted by the Commission from any rules under the Act. The 
Bulletin will also disclose that the NAV for the Shares will be 
calculated after 4:00 p.m., Eastern time each trading day.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \23\ 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.
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    \23\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices, to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities, 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 in that the Shares will meet 
each of the initial and continued listing criteria in Commentary .01 to 
NYSE Arca Rule 8.600-E, with the exception of Commentary .01(d)(2) to 
NYSE Arca Rule 8.600-E, which requires that the aggregate gross 
notional value of listed derivatives based on any five or fewer 
underlying reference assets shall not exceed 65% of the weight of the 
portfolio (including gross notional exposures), and the aggregate gross 
notional value of listed derivatives based on any single underlying 
reference asset shall not exceed 30% of the weight of the portfolio 
(including gross notional exposures).\24\ Commentary .01(d)(2) to

[[Page 70220]]

NYSE Arca Rule 8.600-E is intended to ensure that a fund is not subject 
to manipulation by virtue of significant exposure to a manipulable 
underlying reference asset by establishing concentration limits among 
the underlying reference assets for listed derivatives held by a 
particular fund. The Exchange notes that this proposed rule change is 
similar to previous rule changes involving Managed Fund Shares with 
similar exposures to a single underlying reference asset.\25\
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    \24\ As noted above, the Exchange is submitting this proposal 
because the Fund would not meet the requirements of Commentary 
.01(d)(2) to Rule 8.600-E which prevents the aggregate gross 
notional value of listed derivatives based on any single underlying 
reference asset from exceeding 30% of the weight of the portfolio 
(including gross notional exposures) and the aggregate gross 
notional value of listed derivatives based on any five or fewer 
underlying reference assets from exceeding 65% of the weight of the 
portfolio (including gross notional exposures).
    \25\ See note 13, supra.
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    The market for S&P 500 Index Options is highly liquid. In September 
2019, approximately 1.35 million options contracts on the S&P 500 Index 
were traded per day, which is more than $430 billion in notional volume 
traded on a daily basis. The Exchange believes that the liquidity in 
the S&P 500 Index Options markets mitigates the concerns that 
Commentary .01(d)(2) to Rule 8.600-E is intended to address and that 
such liquidity would prevent the Shares from being susceptible to 
manipulation.
    In addition, the Exchange believes that sufficient protections are 
in place to protect against market manipulation of the Shares and S&P 
500 Index Options for several reasons: (i) The diversity, liquidity, 
and market cap of the securities underlying the S&P 500 Index; (ii) the 
significant liquidity in the market for S&P 500 Index Options; and 
(iii) surveillance by the Exchange, options exchanges and FINRA 
designed to detect violations of the federal securities laws and SRO 
rules. The Exchange has in place a surveillance program for 
transactions in ETFs to ensure the availability of information 
necessary to detect and deter potential manipulations and other trading 
abuses, thereby making the Shares less readily susceptible to 
manipulation. Further, the Exchange believes that because the S&P 500 
Index Options in the Fund's portfolio will be acquired in extremely 
liquid and highly regulated markets, the Shares are less readily 
susceptible to manipulation.
    The Exchange believes that its surveillance procedures are adequate 
to properly monitor the trading of the Shares on the Exchange during 
all trading sessions and to deter and detect violations of Exchange 
rules and the applicable federal securities laws. The Exchange or 
FINRA, on behalf of the Exchange, or both, will communicate as needed 
regarding trading in the Shares, exchange-traded options and equities 
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 such securities and financial 
instruments from such markets and other entities. The Exchange may 
obtain information regarding trading in such securities and financial 
instruments from markets and other entities that are members of ISG. In 
addition, the Exchange also has a general policy prohibiting the 
distribution of material, non-public information by its employees.
    As noted above, S&P 500 Index Options are highly liquid and derive 
their value from the actively traded S&P 500 Index components. The 
Exchange believes the highly regulated options markets and the broad 
base and scope of the S&P 500 Index make securities that derive their 
value from the S&P 500 Index less susceptible to market manipulation in 
view of market capitalization and liquidity of the components of the 
S&P 500 Index, price and quote transparency, and arbitrage 
opportunities.
    The Exchange believes that the liquidity of the markets for 
securities in the S&P 500 Index, S&P 500 Index Options, and other 
related derivatives is sufficiently great to deter fraudulent or 
manipulative acts associated with the Fund's Shares price. The Exchange 
also believes that such liquidity is sufficient to support the creation 
and redemption mechanism. Coupled with the extensive surveillance 
programs of the SROs described above, the Exchange does not believe 
that trading in the Fund's Shares would present manipulation concerns.
    The Exchange represents that, except as described above, the Fund 
will meet and be subject to all other requirements of the Generic 
Listing Standards and other applicable continued listing requirements 
for Managed Fund Shares under Rule 8.600-E, including those 
requirements regarding the Disclosed Portfolio, PIV, suspension of 
trading or removal, trading halts, disclosure, and firewalls. The Trust 
is required to comply with Rule 10A-3 under the Act for the initial and 
continued listing of the Shares of the Fund.
    For the above reasons, the Exchange believes that the proposed rule 
change is consistent with the requirements of Section 6(b)(5) of the 
Act.

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 permit the listing and trading of an 
additional type of Managed Fund Shares 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

    Because the foregoing proposed rule change does not: (i) 
Significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \26\ and Rule 19b-
4(f)(6) thereunder.\27\
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    \26\ 15 U.S.C. 78s(b)(3)(A).
    \27\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change, along 
with a brief description and text of the proposed rule change, at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \28\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6)(iii) \29\ permits the 
Commission to designate a shorter time if such action is consistent 
with the protection of investors and the public interest. The Exchange 
has requested that the Commission waive the 30-day operative delay so 
that the proposal may become operative upon filing. The Exchange states 
that waiver of the operative delay would permit the Fund to immediately 
employ its index options strategy, which the Exchange believes will 
allow the Fund to adapt to changing market environments and shifts in 
the underlying holdings of the Fund. The Exchange states that the 
proposal is generally consistent with previous rule changes involving 
Managed Fund Shares with similar exposures to listed derivatives based 
on a single underlying reference asset.\30\ In addition, the Exchange 
represents that the closing date of the Reorganization and the first 
day of trading of the Fund under its new name is expected to be on or 
about December 18, 2019. The Commission believes that the proposal 
raises no new or novel regulatory issues

[[Page 70221]]

and waiver of the 30-day operative delay is consistent with the 
protection of investors and the public interest. Accordingly, the 
Commission designates the proposed rule change to be operative upon 
filing.\31\
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    \28\ 17 CFR 240.19b-4(f)(6).
    \29\ 17 CFR 240.19b-4(f)(6)(iii).
    \30\ See supra note 13.
    \31\ For purposes only of waiving the 30-day operative delay, 
the Commission also has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission will institute proceedings to 
determine whether the proposed rule change should be approved or 
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-2019-91 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-2019-91. 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-2019-91 and should be submitted 
on or before January 10, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\32\
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    \32\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2019-27459 Filed 12-19-19; 8:45 am]
 BILLING CODE 8011-01-P


