[Federal Register Volume 85, Number 38 (Wednesday, February 26, 2020)]
[Notices]
[Pages 11146-11157]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-03774]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88255; File No. SR-NYSEArca-2019-60]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Amendment No. 4 and Order Granting Accelerated Approval of a 
Proposed Rule Change, as Modified by Amendment No. 4, To List and Trade 
Shares of the KFA Global Carbon ETF Under NYSE Arca Rule 8.600-E

February 20, 2020.
    On August 14, 2019, NYSE Arca, Inc. (``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 change to list and trade 
shares (``Shares'') of the KFA Global Carbon ETF (``Fund'') under NYSE 
Arca Rule 8.600-E, which governs the listing and trading of Managed 
Fund Shares on the Exchange. The proposed rule change was published for 
comment in the Federal Register on August 29, 2019.\3\ On September 12, 
2019, the Exchange filed Amendment No. 1 to the proposed rule change, 
which replaced and superseded the proposed rule change as originally 
filed.\4\ On October 10, 2019, pursuant to Section 19(b)(2) of the 
Exchange Act,\5\ the Commission designated a longer period within which 
to approve the proposed rule change, disapprove the proposed rule 
change, or institute proceedings to determine whether to disapprove the 
proposed rule change.\6\ On October 22, 2019, the Exchange filed 
Amendment No. 2 to the proposed rule change, which replaced and 
superseded the proposed rule change, as modified by Amendment No. 1.\7\ 
On November 22, 2019, the Commission published notice of Amendment No. 
2 and instituted proceedings under Section 19(b)(2)(B) of the Act \8\ 
to determine whether to approve or disapprove the proposed rule 
change.\9\ On December 16, 2019, the Exchange filed Amendment No. 3 to 
the proposed rule change, which replaced and superseded the proposed 
rule change, as modified by Amendment No. 2.\10\ On December 19, 2019, 
the Exchange filed Amendment No. 4 to the proposed rule change, which 
replaced and superseded the proposed rule change, as modified by 
Amendment No. 3.\11\ The Commission has received no comment letters on 
the proposal. The Commission is publishing this notice to solicit 
comments on Amendment No. 4 from interested persons, and is approving 
the proposed rule change, as modified by Amendment No. 4, on an 
accelerated basis.
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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. 86752 (Aug. 23, 
2019), 84 FR 45557.
    \4\ Amendment No. 1 is available on the Commission's website at: 
https://www.sec.gov/comments/sr-nysearca-2019-60/srnysearca201960-6117868-192147.pdf.
    \5\ 15 U.S.C. 78s(b)(2).
    \6\ See Securities Exchange Act Release No. 87277, 84 FR 55658 
(Oct. 17, 2019). The Commission designated November 27, 2019, as the 
date by which the Commission shall approve or disapprove, or 
institute proceedings to determine whether to disapprove, the 
proposed rule change.
    \7\ Amendment No. 2 is available on the Commission's website at: 
https://www.sec.gov/comments/sr-nysearca-2019-60/srnysearca201960-6324054-194703.pdf.
    \8\ 15 U.S.C. 78s(b)(2)(B).
    \9\ See Securities Exchange Act Release No. 87589, 84 FR 65862 
(Nov. 29, 2019).
    \10\ Amendment No. 3 is available on the Commission's website 
at: https://www.sec.gov/comments/sr-nysearca-2019-60/srnysearca201960-6555837-200935.pdf.
    \11\ Amendment No. 4 is available on the Commission's website 
at: https://www.sec.gov/comments/sr-nysearca-2019-60/srnysearca201960-6567293-201062.pdf.
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I. The Exchange's Description of the Proposed Rule Change, as Modified 
by Amendment No. 4

    The Exchange proposes to list and trade shares of the KFA Global 
Carbon ETF under NYSE Arca Rule 8.600-E (``Managed Fund Shares''). This 
Amendment No. 4 to SR-NYSEArca-2019-60 replaces SR-NYSEArca-2019-60 as 
originally filed and Amendments 1, 2 and 3 thereto and supersedes such 
filings in their entirety. 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.

[[Page 11147]]

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 list and trade shares (``Shares'') of the 
KFA Global Carbon ETF (``Fund'') under NYSE Arca Rule 8.600-E, which 
governs the listing and trading of Managed Fund Shares \12\ on the 
Exchange. The Fund will be an actively managed exchange-traded fund.
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    \12\ 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 Shares will be offered by KraneShares Trust (the ``Trust''), 
which was established as a Delaware statutory trust on February 3, 
2012. The Trust is registered with the Securities and Exchange 
Commission (``SEC'' or ``Commission'') as an open-end management 
investment company.\13\
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    \13\ The Trust is registered under the 1940 Act. On June 11, 
2019, the Trust filed with the Commission 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. 333-180870 and 
811-22698) (``Registration Statement''). 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 upon which the Trust may rely, granting certain exemptive 
relief under the 1940 Act. See Investment Company Act Release No. 
32455 (January 27, 2017) (File No. 812-14675).
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    Krane Funds Advisors, LLC (``Krane'' or ``Adviser'') will serve as 
the investment adviser to the Fund. Climate Finance Partners LLC 
(``Sub-Adviser'') will serve as the non-discretionary investment sub-
adviser to the Fund. SEI Investments Global Funds Services 
(``Administrator'') will serve as administrator for the Fund.
    SEI Investments Distribution Co. (``Distributor''), an affiliate of 
the Administrator, will serve as the Fund's distributor. Brown Brothers 
Harriman & Co. (``BBH'') will serve as custodian and transfer agent for 
the Fund.
    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.\14\ 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. The 
Adviser and Sub-Adviser are not registered as broker-dealers, but the 
Adviser is affiliated with a broker-dealer, and has implemented and 
will maintain a fire wall with respect to its broker-dealer affiliate 
regarding access to information concerning the composition and/or 
changes to the portfolio. The Sub-Adviser is not affiliated with a 
broker-dealer. In the event (a) the Adviser or Sub-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 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.
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    \14\ 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 Sub-Adviser and their 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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KFA Global Carbon ETF
Principal Investments
    According to the Registration Statement, the Fund will seek to 
provide a total return that, before fees and expenses, exceeds that of 
the IHS Markit Global Carbon Index (the ``Index'') over a complete 
market cycle. The Index is designed to track the performance of liquid 
carbon credit futures contracts maturing within the next two calendar 
years.
    More specifically, the Index is designed to track, and the Fund and 
the Fund's Subsidiary (as defined below), under normal market 
conditions,\15\ intend to invest primarily in, liquid carbon credit 
futures contracts issued under the European Union Allowance (EUA), 
California Carbon Allowance (CCA), and Regional Greenhouse Gas 
Initiative (RGGI) regimes, and maturing within the next one to two 
calendar years. EUA futures are currently traded principally on ICE 
Futures Europe, and CCA futures and RGGI futures are currently traded 
principally on ICE Futures US. ICE Futures Europe, ICE Futures US and 
CME are members of the Intermarket Surveillance Group (``ISG''). As the 
global carbon credit market grows, as discussed below, additional 
liquid carbon credit contracts may enter the Index that are not issued 
under the EUA, CCA and RGGI regimes, and the Fund may invest in these 
additional carbon credit contracts. Any additional carbon credit 
futures contracts that enter the Index will have an average monthly 
trading volume for the six month look-back period prior to the annual 
rebalancing date that is a minimum of $10,000,000 as of November 30th 
of a given year, and will be traded on exchanges that are members of 
the ISG or with which the Exchange has in place a comprehensive 
surveillance sharing agreement. These additional liquid carbon credit 
contracts that may enter the Index in the future and the current liquid 
carbon credit contracts in the Index are referred to herein as ``Carbon 
Credit Futures.'' The Fund and the Subsidiary may invest in these 
additional Carbon Credit Futures; however, as noted above, the Fund and 
the Subsidiary, under normal market conditions, will primarily invest 
in carbon credit futures contracts issued under the EUA, CCA and RGGI 
regimes.
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    \15\ The term ``normal market conditions'' is defined in NYSE 
Arca Rule 8.600-E(c)(5).
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    According to the Registration Statement, although the Fund will 
seek to maintain exposure to Carbon Credit Futures that are the same as 
those included in the Index, the Fund and the Subsidiary will be 
actively managed and will not be required to replicate the performance 
of the Index or to invest in the specific instruments in the Index. For 
example, while the Fund may hold the same Carbon Credit Futures that 
are

[[Page 11148]]

included in the Index, the Fund also may hold liquid carbon credit 
futures issued under the carbon credit regimes included in the Index 
but which are not currently included in the Index solely because they 
have different maturity dates (``Non-Index Futures'') (collectively, 
Carbon Credit Futures and Non-Index Futures are ``Carbon Futures''), or 
hold different weightings of Carbon Credit Futures than the Index.
    As of the last annual rebalancing date, November 30, 2019, the 
weighting of Carbon Credit Futures in the Index was, and the weighting 
of Carbon Credit Futures in the Fund (including the Subsidiary (as 
defined below)) would have been, as follows:

 European Union Allowance (EUA)--65%
 California Carbon Allowance (CCA)--25%
 Regional Greenhouse Gas Initiative (RGGI)--10%

    Although, as described in more detail below, the Carbon Credit 
Futures in the Index are physically settled futures contracts, the 
Adviser does not anticipate that the Fund will hold Carbon Futures 
until expiry or take or make delivery of any physical commodities. 
Instead, the Adviser expects to roll each Carbon Future contract in the 
Fund's (or Subsidiary's (as defined below)) portfolio approximately two 
weeks prior to expiry. Thus, the Adviser expects to sell near to expiry 
Carbon Futures and reinvest the proceeds in new Carbon Futures to 
achieve the Fund's investment objective.
Other Investments
    While the Fund, under normal market conditions, will invest 
primarily in Carbon Futures referenced above, the Fund may hold other 
securities and financial instruments, as described below.
    Other than investing in Carbon Futures, the Fund, in seeking to 
achieve its investment objective, may invest up to 10% of its net 
assets in futures contracts that are not Carbon Futures, including 
interest rate futures and currency futures, and options on either 
Carbon Futures or other types of futures, including interest rate 
futures and currency futures.
    The Fund may hold cash and cash equivalents.\16\
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    \16\ 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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    The Fund will seek to exceed the performance of the Index through 
the active management of a portfolio of debt instruments (other than 
cash equivalents). Such debt instruments in which the Fund intends to 
invest are government securities and corporate or other non-government 
fixed-income securities with maturities of up to 12 months.
    The fixed income securities in which the Fund invests will comply 
with the generic listing requirements of Commentary .01(b) to Rule 
8.600-E.
    The Fund may invest in exchange-traded funds (``ETFs'') \17\ and 
exchange-traded notes (``ETNs'').\18\
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    \17\ 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 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.
    \18\ 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). While the Fund may invest in inverse ETNs, the Fund 
will not invest in leveraged (e.g., 2X, -2X, 3X or -3X) ETNs.
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    The Fund may hold investment company securities (including ETFs), 
consistent with the requirements of Section 12(d)(1) of the 1940 Act.
    The Fund may invest up to 25% of its assets in a wholly-owned 
subsidiary (the ``Subsidiary''). The Fund will utilize the Subsidiary 
for purposes of investing in the Carbon Futures and other futures 
contracts and options on futures contracts. The Subsidiary is a 
corporation operating under Cayman Islands law that is wholly-owned and 
controlled by the Fund. The Subsidiary is advised by the Adviser and 
sub-advised by the Sub-Adviser. The Subsidiary has the same investment 
objective as the Fund and will follow the same investment policies and 
restrictions as the Fund. Accordingly, the Subsidiary will only invest 
in the same instruments as the Fund may invest in, as discussed herein, 
including Carbon Futures, other futures contracts and options on 
futures contracts, and cash and cash equivalents as margin or 
collateral with respect to its Carbon Futures and other futures 
contracts and options on futures contracts investments.
    The Fund will conduct foreign currency exchange transactions to the 
extent necessary to purchase Carbon Futures and convert proceeds of 
sales of Carbon Futures into U.S. Dollars. The Fund will conduct such 
foreign currency transactions either on a spot (i.e., cash) basis at 
the spot rate prevailing in the foreign currency exchange market, or 
through forwards and U.S. exchange-traded futures on foreign 
currencies.
    The Exchange submits this proposal in order to allow the Fund to 
hold listed derivatives, in particular Carbon Futures, in a manner that 
does not comply with Commentary .01(d)(2) to Rule 8.600-E, as described 
below. While the Fund may invest up to 10% of its net assets in futures 
contracts that are not Carbon Futures and options on either Carbon 
Futures or other types of futures, these investments will comply with 
Commentary .01(d)(2) to Rule 8.600-E. Otherwise, the Fund will comply 
with all other listing requirements of Commentary .01 to NYSE Arca Rule 
8.600-E on an initial and continued listing basis.
Description of the Index
    According to the Registration Statement, the Index utilizes a 
rules-based methodology and is designed to track a portfolio of liquid, 
accessible carbon credit futures contracts with ``physical delivery'' 
of emission allowances issued under ``cap and trade'' regimes.\19\
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    \19\ According to the Registration Statement, in a typical ``cap 
and trade'' regime, a limit (or ``cap'') is set by a regulator, such 
as a government entity or supranational organization, on the total 
amount of specific greenhouse gases (``GHG''), such as 
CO2, that can be emitted by regulated entities, such as 
manufacturers or energy producers. The regulator then may issue or 
sell individual ``emission allowances'' to regulated entities. These 
emission allowances are issued by the regulator to regulated 
entities, which may then buy or sell (``trade'') the emission 
allowances on the open market. The regulator may gradually reduce 
the market cap on emission allowances, thereby increasing the value 
of such allowances and forcing regulated entities to reduce their 
GHG emissions. A cap on emission allowances available to the market 
supports the value of those allowances and is intended to 
incentivize regulated entities to reduce their GHG emissions, 
because they are permitted to sell unneeded emission allowances for 
profit. Commodity futures contracts linked to the value of emission 
allowances are known as carbon credit futures.
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    The Index is provided by Markit Indices GmbH (the ``Index 
Provider''), a wholly-owned subsidiary of IHS Markit Ltd. The Index 
Provider is not affiliated with the Fund or Krane.\20\ The Index 
Provider determines the components and the relative weightings of the 
components in the Index. The Index Provider may consult with the IHS 
Markit Global Carbon Index Advisory Committee to review potential 
changes to the Index rules and methodology. Any decision as to the 
eligibility or ineligibility of a Carbon Credit Future will be 
published and the Index rules

[[Page 11149]]

will be updated accordingly. Additional information about the Index is 
available on the Index Provider's website, www.ihsmarkit.com.
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    \20\ The Index Provider is not a broker-dealer or affiliated 
with a broker-dealer and has implemented and will maintain 
procedures designed to prevent the use and dissemination of 
material, nonpublic information regarding the Index.
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    As of July 31, 2019, eligible components of the Index include 
emission allowances issued under the European Union Emissions Trading 
System (EUA),\21\ California Carbon Allowance (CCA) \22\ and Regional 
Greenhouse Gas Initiative (RGGI) \23\ ``cap and trade'' regimes. As the 
global carbon credit market grows, additional liquid carbon credit 
futures contracts may enter the Index that are not issued under the 
EUA, CCA and RGGI regimes. Any additional carbon credit futures 
contracts that enter the Index will have an average monthly trading 
volume for the six month look-back period prior to the annual 
rebalancing date that is a minimum of $10,000,000 as of November 30th 
of a given year, and will be traded on exchanges that are members of 
the ISG or with which the Exchange has in place a comprehensive 
surveillance sharing agreement. The Fund and the Subsidiary may invest 
in these additional Carbon Credit Futures. However, the Fund and the 
Subsidiary, under normal market conditions, will invest primarily in 
carbon credit futures issued under the EUA, CCA, and RGGI regimes.
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    \21\ The EUA allowance is based on the ICE Futures ECX CFI 
Carbon Financial Instrument Futures Contract (``ECX CFI Futures''). 
ECX CFI Futures are standardized contracts developed by the European 
Climate Exchange (``ECX''). They are standardized contractual 
instruments for futures on deliverable carbon equivalent emissions 
allowances issued under the European Union Emissions Trading Scheme 
(``EU ETS''), which are listed and admitted to trading on ICE 
Futures Europe and the European Energy Exchange (EEX).
    \22\ CCA-CBL California Carbon Allowance Futures Contracts 
(``California Contracts'') are listed and traded on ICE Futures U.S 
and CME Globex (operated by CME Group, Inc. (``CME'')). The 
California Contracts allow for trading of physically delivered 
greenhouse gas emissions allowances. Each California Contract is an 
allowance issued by the California Air Resources Board (or a linked 
program) to emit one metric ton of CO2 equivalent under 
California Assembly Bill 32 ``California Global Warming Solutions 
Act of 2006'' and its associated regulations, rules and amendments 
(collectively the ``California Cap and Trade Program'').
    \23\ RGGI-Regional Greenhouse Gas Initiative Futures are traded 
on ICE Futures U.S. They are monthly physically delivered contracts 
on RGGI CO2 allowances.
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    The Fund's holdings in listed derivatives, including Carbon 
Futures, will comply with the requirements of Commentary .01(d)(1) to 
Rule 8.600-E.\24\
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    \24\ Commentary .01(d)(1) to Rule 8.600-E provides that, with 
respect to a fund's holdings in listed derivatives, in the 
aggregate, at least 90% of the weight of such 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 via the ISG from other 
members or affiliates of the ISG or for which the principal market 
is a market with which the Exchange has a comprehensive surveillance 
sharing agreement. (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).
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    The Adviser represents that, as of November 30, 2019, the initial 
universe and weighting of Carbon Credit Futures in the Index was as 
follows:
Regional Component--Europe, Middle East and Africa
 European Union Allowance (EUA)--65%
Regional Component--Americas
 California Carbon Allowance (CCA)--25%
 Regional Greenhouse Gas Initiative (RGGI)--10%

    The Adviser further represents that the Index allocated each of the 
EUA and CCA allowances to two Carbon Credit Futures with different 
expiration dates. Accordingly, according to the Adviser, the Fund's 
allocations to EUA and CCA Carbon Credit Futures, on a continuous 
basis, would similarly be to at least four different contracts (e.g., 
two different contracts each with two different expiry dates).
    The Commodities Futures Trading Commission (the ``CFTC'') has 
adopted certain requirements that subject registered investment 
companies and their advisers to regulation by the CFTC if a registered 
investment company invests more than a prescribed level of its net 
assets in CFTC-regulated futures, options and swaps, or if a registered 
investment company markets itself as providing investment exposure to 
such instruments. Due to the Fund's intended use of CFTC-regulated 
futures above the prescribed levels, it will be a ``commodity pool'' 
under the Commodity Exchange Act.
    The Index is calculated on each full Securities Industry and 
Financial Markets Association (SIFMA) recommended U.S. trading day and 
the last calendar day of November. To convert the value of foreign 
carbon credit futures contracts to U.S. dollars, the Index utilizes 
foreign exchange spot rates from WM Reuters, using foreign exchange 
rates as of 4:00 p.m. London time for any day the Index is calculated. 
The Index was launched on July 25, 2019 with a base date of July 31, 
2014 and a base value of 100. As of the most recent rebalancing date of 
November 30, 2018, the Index included five futures contracts with 
market capitalizations ranging from a minimum of $506 million for the 
RGGI program to a maximum of $29.463 billion for the EUA program. The 
average market capitalization of the futures of these programs was 
$10.916 billion. The largest Regional Components in the Index were 
Europe and the Americas (EUA (65%), CCA (25%) and RGGI (10%)).\25\
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    \25\ Sources: Intercontinental Exchange (https://data.theice.com) and IHS Markit OPIS (https://indices.ihsmarkit.com/Carbonindex).
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Other Restrictions
    The Fund's and the Subsidiary's investments, including derivatives, 
will be consistent with the Fund's investment objective and will not be 
used to seek performance that is the multiple or inverse multiple 
(e.g., 2X or -3X) of the Index.
Use of Derivatives by the Fund
    Investments in derivative instruments will be made in accordance 
with the Fund's investment objective and policies.
    To limit the potential risk associated with such transactions, the 
Fund will enter into offsetting transactions or segregate or 
``earmark'' assets determined to be liquid by the Adviser in accordance 
with procedures established by the Trust's Board of Trustees (the 
``Board''). In addition, the Fund has included appropriate risk 
disclosure in its offering documents, including leveraging risk. 
Leveraging risk is the risk that certain transactions of the Fund, 
including the Fund's use of derivatives, may give rise to leverage, 
causing the Fund to be more volatile than if it had not been leveraged.
Impact on Arbitrage Mechanism
    The Adviser believes there will be minimal, if any, impact to the 
arbitrage mechanism as a result of the Fund's use of derivatives. The 
Adviser understands that market makers and participants should be able 
to value derivatives as long as the positions are disclosed with 
relevant information. The Adviser believes 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 net asset value (``NAV''), which should ensure that 
Shares of the Fund will not trade at a material discount or premium in 
relation to their NAV.
    The Adviser does not believe there will be any significant impacts 
to the settlement or operational aspects of the Fund's arbitrage 
mechanism due to the use of derivatives.

[[Page 11150]]

Creation and Redemption of Shares
    According to the Registration Statement, the Trust will issue and 
redeem Shares of the Fund only in ``Creation Units'' on a continuous 
basis through the Distributor at the NAV next determined after receipt, 
on any Business Day (as defined below), of an order in proper form. A 
``Business Day'', as used herein, is any day on which the New York 
Stock Exchange (``NYSE'') is open for business. A Creation Unit is 
50,000 Shares. The size of a Creation Unit is subject to change. 
Creation Units may be purchased and redeemed only by or through a 
Depository Trust Company (``DTC'') Participant that has entered into an 
Authorized Participant Agreement with the Distributor (an ``Authorized 
Participant'').
Purchases of Creation Units
    The consideration for the purchase of Creation Units of the Fund 
will consist of an in-kind deposit of a designated portfolio of 
securities (or cash for all or any portion of such securities 
(``Deposit Cash'') (collectively, the ``Deposit Securities'')) and the 
Cash Component, which is an amount equal to the difference between the 
aggregate NAV of a Creation Unit and the Deposit Securities. Together, 
the Deposit Securities and the Cash Component constitute the ``Fund 
Deposit.''
    The Custodian or the Administrator makes available through the 
National Securities Clearing Corporation (``NSCC'') on each Business 
Day, prior to the opening of the Exchange's Core Trading Session 
(normally 9:30 a.m., Eastern time (``E.T.''), the list of names and the 
required number of shares of each Deposit Security and Deposit Cash, as 
applicable, and the estimated amount of the Cash Component to be 
included in the current Fund Deposit. Such Fund Deposit is applicable, 
subject to any adjustments as described below, in order to effect 
purchases of Creation Units of the Fund until such time as the next-
announced Fund Deposit is made available.
    The Trust reserves the right to permit or require the substitution 
of an amount of cash to replace any Deposit Security under specified 
circumstances.
    Cash purchases of Creation Units will be effected in essentially 
the same manner as in-kind purchases. The Authorized Participant will 
pay the cash equivalent of the Deposit Securities as Deposit Cash plus 
or minus the same Cash Component.
Placement of Purchase Orders
    To initiate an order for a Creation Unit, an Authorized Participant 
must submit to the Distributor an irrevocable order in proper form to 
purchase Shares of the Fund on a Business Day generally before the time 
as of which that day's NAV is calculated. For a purchase order to be 
processed based on the NAV calculated on a particular Business Day, the 
purchase order must be received in proper form and accepted by the 
Trust prior to the time as of which the NAV is calculated (``Cutoff 
Time'').
Redemptions of Creation Units
    The consideration paid by the Fund for the redemption of Creation 
Units consists of an in-kind basket of a designated portfolio of 
securities (or cash for all or any portion of such securities 
(``Redemption Cash'')) (collectively, the ``Fund Securities'') and the 
Cash Component, which is an amount equal to the difference between the 
aggregate NAV of a Creation Unit and the Fund Securities. Together, the 
Fund Securities and the Cash Component constitute the ``Fund 
Redemption.''
    The Custodian or the Administrator will make available through NSCC 
on each Business Day, prior to the opening of the Exchange's Core 
Trading Session, the list of names and the number of shares of each 
Fund Security and Redemption Cash, as applicable, and the estimated 
amount of the Cash Component to be included in the current Fund 
Redemption. Such Fund Redemption will be applicable, subject to any 
adjustments as described below, for redemptions of Creation Units of 
the Fund until such time as the next-announced Fund Redemption is made 
available. The delivery of Fund Shares will be settled through the DTC 
system.
    The identity and number of shares of the Fund Securities change 
pursuant to, among other matters, changes in the composition of the 
Fund's portfolio and as rebalancing adjustments and corporate action 
events are reflected from time to time. The composition of the Fund 
Securities may not be the same as the Deposit Securities.
    The Trust reserves the right to permit or require the substitution 
of an amount of cash to replace any Redemption Security under 
circumstances specified in the Registration Statement.
    Cash redemptions of Creation Units will be effected in essentially 
the same manner as in-kind redemptions. The Authorized Participant will 
receive the cash equivalent of the Fund Securities as Redemption Cash 
plus or minus the same Cash Component.\26\
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    \26\ 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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Placement of Redemption Orders
    To initiate a redemption order for a Creation Unit, an Authorized 
Participant must submit to the Distributor an irrevocable order in 
proper form to redeem Shares of the Fund on a Business Day generally 
before the time as of which that day's NAV is calculated. For a 
redemption order to be processed based on the NAV calculated on a 
particular Business Day, the order must be received in proper form and 
accepted by the Trust prior to the time as of which the NAV is 
calculated (``Cutoff Time''). A redemption request, if accepted by the 
Trust, will be processed based on the NAV as of the next Cutoff Time.
Application of Generic Listing Requirements
    The Exchange is submitting this proposed rule change because the 
portfolio for the Fund will not meet all of the ``generic'' listing 
requirements of Commentary .01 to NYSE Arca Rule 8.600-E applicable to 
the listing of Managed Fund Shares. Specifically, the Fund's portfolio 
will meet all such requirements except for those set forth in 
Commentary .01(a)(1) with respect to the Fund's investments in non-
exchange-traded investment company securities and Commentary .01(d)(2) 
with respect to the Fund's and the Subsidiary's Investments in Carbon 
Futures.\27\
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    \27\ Commentary .01(d)(2) to Rule 8.600-E provides that, with 
respect to a fund's portfolio, 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).
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    In order to achieve its investment objective, under normal market 
conditions, the aggregate gross notional value of Carbon Futures may, 
in certain circumstances, approach 100% of the Fund (including gross 
notional values). As noted above, Commentary .01(d)(2) to Rule 8.600-E 
prohibits the Fund from holding listed derivatives based on any five or 
fewer underlying reference assets in excess of 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 Exchange is proposing to 
allow the Fund to hold up to 100% of the weight of its portfolio

[[Page 11151]]

(as measured by gross notional exposures) in Carbon Futures.
    As discussed below, although the Fund will concentrate its holdings 
in listed derivatives that are based on a smaller number of reference 
assets than allowed under Commentary .01(d)(2), the Exchange believes 
that sufficient protections are in place to protect against market 
manipulation of the Shares and Carbon Futures and otherwise satisfy the 
purposes of Rule 8.600-E. The Exchange believes that Carbon Futures are 
not subject to the concentration risk that the rule is intended to 
address because of the liquidity of such futures.\28\ The Exchange 
notes that the exchange markets for Carbon Futures are highly liquid, 
and therefore believes that trading in such futures is not readily 
susceptible to manipulation. In addition, at least 90% of the weight of 
listed derivatives utilized by the Fund would be traded on exchanges 
that are members of the ISG or with which the Exchange has in place a 
comprehensive surveillance sharing agreement, and Carbon Futures are 
currently traded on ISG markets.\29\
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    \28\ The Adviser represents that these are currently the largest 
and most liquid futures markets on carbon offset credits: (1) Carbon 
credit futures on EUA: 1,269,401,000 contracts with open interest at 
a price of $23.21 as of November 30, 2018 translating to a $29.463 
billion market capitalization. In addition, the average annual 
trading volume as of that date was $98.856 billion (with 
approximately $89 billion consisting of carbon credit futures with 
December expirations); (2) carbon credit futures on CCA: 178,800,000 
contracts with open interest at a price of $15.55 as of November 30, 
2018 translates to a $2.780 billion market capitalization. In 
addition, the average annual trading volume as of that date was 
$2.39 billion (with approximately $1.25 billion consisting of carbon 
credit futures with December expirations); and (3) carbon credit 
futures on RGGIs: 94,000,000 contracts with open interest at a price 
of $5.38 as of November 30, 2018 translates to a $506 million market 
capitalization. In addition, the average annual trading volume as of 
that date was $250 million (with approximately $182.9 million 
consisting of carbon credit futures with December expirations). 
Source: (https://www.theice.com/microsite/usenvironmentalmonthlymarketreport).
    \29\ The Exchange notes that the Commission has approved 
proposed rule changes by a national securities exchange to list and 
trade series of Managed Fund Shares that may hold listed derivatives 
on underlying reference assets that may not comply with provisions 
similar to those in Commentary .01(d)(2) to Rule 8.600-E. See, e.g., 
Securities Exchange Act Release Nos. 80529 (April 26, 2017), 82 FR 
20506 (May 2, 2017) (SR-BatsBZX-2017-14) (Order Granting Approval of 
a Proposed Rule Change to List and Trade Shares of the Amplify 
YieldShares Oil Hedged MLP Fund under BZX Rule 14.11(i)); 82906 
(March 20, 2018), 83 FR 12992 (March 26, 2018) (SR-CboeBZX-2017-012) 
(Order Approving a Proposed Rule Change, as Modified by Amendment 
No. 2, to List and Trade Shares of the LHA Market State[supreg] 
Tactical U.S. Equity ETF under Rule 14.11(i)); 83014 (April 9, 
2018), 83 FR 16150 (April 13, 2018) (SR-CboeBZX-2017-023) (Notice of 
Filing of Amendment No. 2 and Order Granting Accelerated Approval of 
a Proposed Rule Change, as Modified by Amendment No. 2, to List and 
Trade Shares of the iShares Gold Strategy ETF Under Exchange Rule 
14.11(i)); 83146 (May 1, 2018), 83 FR 20103 (May 7, 2018) (SR-
CboeBZX-2018-029) (Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change to Allow the Horizons Cadence Hedged US 
Dividend Yield ETF, a Series of the Horizons ETF Trust I, to Hold 
Listed Options Contracts in a Manner that Does Not Comply with Rule 
14.11(i), Managed Fund Shares). See also, Securities Exchange Act 
Release No. 85701 (April 22, 2019), 84 FR 17902 (April 26, 2019) 
(SR-CboeBZX-2019-016) (Notice of Filing of Amendment No. 1 and Order 
Granting Accelerated Approval of a Proposed Rule Change, as Modified 
by Amendment No. 1, to Allow the JPMorgan Core Plus Bond ETF of the 
J.P. Morgan Exchange-Traded Fund Trust to Hold Certain Instruments 
in a Manner that May Not Comply with Rule 14.11(i), Managed Fund 
Shares).
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    The Exchange notes that the Commission has previously approved 
listing and trading on the Exchange under NYSE Arca Rule 8.204-E 
(Commodity Futures Trust Shares) of a trust with the investment 
objective of providing investment results that correspond generally to 
the performance of a basket of exchange-traded futures contracts for 
carbon equivalent emissions allowances issued under the European Union 
Emissions Trading Scheme (``EU ETS'').\30\
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    \30\ See Securities Exchange Act Release No. 57838, (May 20, 
2008), 73 FR 30649 (May 28, 2008) (SR-NYSEArca-2008-09) (Order 
Granting Approval of Proposed Rule Change, as Modified by Amendment 
Nos. 1 and 2 Thereto, Relating to the Listing and Trading of Shares 
of the AirShares EU Carbon Allowances Fund) (``AirShares Order''). 
The EU ETS is a ``cap and trade'' emissions trading program 
instituted by the European Union, in furtherance of the joint 
commitment of its member states under the Kyoto Protocol to achieve 
certain reductions in their emissions of greenhouse gases. The net 
assets of the AirShares EU Carbon Allowances Fund were to consist of 
long positions in ICE Futures ECX Carbon Financial Instrument 
Futures Contracts consisting of standardized contractual instruments 
for futures on deliverable EUAs issued under the EU ETS and 
developed by the European Climate Exchange. The Adviser represents 
that the European Union Emissions Trading System (EUA) referenced 
above is the same as the EU ETS referenced in the AirShares Order.
---------------------------------------------------------------------------

    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.\31\
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    \31\ 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; (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; and (F) American Depositary Receipts (``ADRs'') in a portfolio 
may be exchange-traded or nonexchange-traded. However, no more than 
10% of the equity weight of a portfolio shall consist of non-
exchange-traded ADRs.
---------------------------------------------------------------------------

    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.\32\

[[Page 11152]]

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).
---------------------------------------------------------------------------

    \32\ 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. 86362 (July 12, 2019), 84 FR 34457 (July 18, 2019) (SR-
NYSEArca-2019-36 (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 JPMorgan Income 
Builder Blend 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)).\33\ 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)(1) (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.
---------------------------------------------------------------------------

    \33\ 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.
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    Other than Commentary .01(a)(1) and (d)(2) to Rule 8.600-E, as 
described above, the Fund's portfolio will meet all other requirements 
of Rule 8.600-E.
Availability of Information
    The Fund's website (www.kraneshares.com) will include the 
prospectus for the Fund that may be downloaded. The Fund's website will 
include additional quantitative information updated on a daily basis 
including, for the Fund, (1) daily trading volume, the prior business 
day's reported closing price, NAV and midpoint of the bid/ask spread at 
the time of calculation of such NAV (the ``Bid/Ask Price''),\34\ 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 will disclose 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.\35\
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    \34\ 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.
    \35\ 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 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.
    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 financial instruments 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 N-CEN and Forms N-PORT, 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-PX, Form N-CEN and Form 
N-PORT (formerly Forms N-Q and N-SAR) may be viewed on-screen or 
downloaded from the Commission's website at www.sec.gov.
    Intra-day and the closing settlement price information regarding 
carbon credit futures and other U.S. exchange-traded futures will be 
available from the exchange on which such instruments are traded and 
from major market data vendors. Spot currency prices and price 
information regarding currency forwards, debt instruments (other than 
cash equivalents) and cash equivalents also will be available from 
major market data vendors. Additionally, the Trade Reporting and 
Compliance Engine (``TRACE'') of the Financial Industry Regulatory 
Authority (``FINRA'') will be a source of price information for certain 
fixed income securities to the extent transactions in such securities 
are

[[Page 11153]]

reported to TRACE.\36\ Price information regarding U.S. government 
securities and other 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. 
The Index price is available via Bloomberg and Reuters. The Index 
methodology and constituent list is available via IHS Markit's website 
(https://indices.ihsmarkit.com).
---------------------------------------------------------------------------

    \36\ 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.
---------------------------------------------------------------------------

    Quote and last-sale information for Carbon Futures, futures that 
are not Carbon Futures and options on futures are widely disseminated 
through major market data vendors and from the exchange on which they 
trade. ICE Futures US, ICE Futures Europe and CME also provide delayed 
futures information on current and past trading sessions and market 
news on their respective websites.
    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. Price information regarding non-exchange-traded 
investment company securities is available from major market data 
vendors.
    Quotation and last sale information for the Shares, ETFs and ETNs 
will be available via the Consolidated Tape Association (``CTA'') high-
speed line. 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.\37\ 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'').
---------------------------------------------------------------------------

    \37\ See NYSE Arca Rule 7.12-E.
---------------------------------------------------------------------------

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 (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(a)(1) with 
respect to the Fund's investments in non-exchange-traded investment 
company securities and Commentary .01(d)(2) (with respect to listed 
derivatives) to Rule 8.600-E as described above in ``Application of 
Generic Listing Requirements,'' the Shares of the Fund will conform to 
the initial and continued listing criteria under NYSE Arca Rule 8.600-
E. Consistent with NYSE Arca Rule 8.600-E(d)(2)(B)(ii), 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 \38\ 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 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. The 
Fund's investments will be consistent with its investment goal and will 
not be used to provide multiple returns of a benchmark or to produce 
leveraged returns.
---------------------------------------------------------------------------

    \38\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------

Surveillance
    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.\39\
---------------------------------------------------------------------------

    \39\ FINRA conducts cross-market surveillances on behalf of the 
Exchange pursuant to a regulatory services agreement. The Exchange 
is responsible for FINRA's performance under this regulatory 
services agreement.
---------------------------------------------------------------------------

    The surveillances referred to above generally focus on detecting 
securities trading outside their normal patterns, which could be 
indicative of manipulative or other violative activity. When such 
situations are detected, surveillance analysis follows and 
investigations are opened, where appropriate, to review the behavior of 
all relevant parties for all relevant trading violations.
    The Exchange or FINRA, on behalf of the Exchange, or both, will 
communicate as needed regarding trading in the Shares, ETFs, ETNs, 
certain futures and options on 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 such securities and financial instruments from 
such markets and other entities.\40\ In addition, the Exchange may 
obtain information regarding trading in such securities and financial 
instruments from markets and other entities that are members of ISG or 
with which the Exchange has in place a comprehensive surveillance 
sharing agreement. In addition, FINRA, on behalf of the Exchange, is 
able to access, as needed, trade information for certain fixed income 
securities held by the Fund reported to FINRA's TRACE.
---------------------------------------------------------------------------

    \40\ For a list of the current members of ISG, see 
www.isgportal.org. The Exchange notes that certain Index components 
and holdings of the Fund may not be listed or traded on ISG 
exchanges.
---------------------------------------------------------------------------

    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

[[Page 11154]]

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 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.
    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., E.T. each trading day.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \41\ 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.
---------------------------------------------------------------------------

    \41\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares will be listed and traded on the Exchange pursuant to the 
initial and continued listing criteria in NYSE Arca Rule 8.600-E 
notwithstanding that the Fund will not comply with the requirement in 
Commentary .01 (a)(1) and Commentary .01(d)(2) to Rule 8.600-E, as 
described herein.
    The Exchange believes that sufficient protections are in place to 
protect against market manipulation of the Shares and Carbon Futures 
due to, among other matters (a) the liquidity and market capitalization 
of Carbon Futures, including EUA futures, CCA futures and RGGI 
futures,\42\ and (b) surveillance by the Exchange and FINRA of the 
Shares and futures designed to detect violations of the federal 
securities laws and self-regulatory organization rules. The current 
Carbon Futures--i.e., EUA futures, CCA futures, RGGI futures-- trade in 
competitive auction markets with price, quote transparency and 
arbitrage opportunities. Any additional carbon credit futures contracts 
that enter the Index will have an average monthly trading volume for 
the six month look-back period prior to the annual rebalancing date 
that is a minimum of $10,000,000 as of November 30th of a given year, 
and will be traded on exchanges that are members of the ISG or with 
which the Exchange has in place a comprehensive surveillance sharing 
agreement. Further, the Exchange believes that because the assets in 
the Fund's portfolio will be acquired in extremely liquid and highly 
regulated markets, the Shares are less readily susceptible to 
manipulation. EUA futures, CCA futures and RGGI futures are traded on 
ISG markets.
---------------------------------------------------------------------------

    \42\ See note 28, supra.
---------------------------------------------------------------------------

    The Exchange believes that these factors, coupled with the highly 
regulated EUA, CCA and RGGI markets, are sufficiently great to deter 
fraudulent [sic] and market manipulation. The Exchange also believes 
that such liquidity is sufficient to support the creation and 
redemption mechanism.
    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 applicable federal 
securities laws. The Exchange or FINRA, on behalf of the Exchange, or 
both, will communicate as needed regarding trading in the Shares, ETFs, 
ETNs, certain futures and options on 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 such securities and financial instruments from 
such markets and other entities. In addition, the Exchange may obtain 
information regarding trading in such securities and financial 
instruments from markets and other entities that are members of ISG or 
with which the Exchange has in place a comprehensive surveillance 
sharing agreement. In addition, FINRA, on behalf of the Exchange, is 
able to access, as needed, trade information for certain fixed income 
securities held by the Fund reported to FINRA's TRACE.
    The Adviser and Sub-Adviser are not registered as broker-dealers, 
but the Adviser is affiliated with a broker-dealer, and has implemented 
and will maintain a fire wall with respect to its broker-dealer 
affiliate regarding access to information concerning the composition 
and/or changes to the portfolio. The Sub-Adviser is not affiliated with 
a broker-dealer.
    The Exchange notes that the Commission has previously approved 
listing and trading on the Exchange under NYSE Arca Rule 8.204-E 
(Commodity Futures Trust Shares) of a trust with the investment 
objective of providing investment results that correspond generally to 
the performance of carbon credit futures on EUAs.\43\ Other than cash 
and cash equivalents, the AirShares Trust sought investment exposure 
exclusively to carbon credit futures on EUAs. Thus, the Commission has 
already considered and approved for listing a product with the same 
types of assets in which the Fund will invest.
---------------------------------------------------------------------------

    \43\ See note 30, supra.
---------------------------------------------------------------------------

    The Exchange notes that the Commission has approved proposed rule 
changes by a national securities exchange to list and trade series of 
Managed Fund Shares that may hold listed derivatives on underlying 
reference assets that may not comply with provisions similar to those 
in Commentary .01(d)(2) to Rule 8.600-E.\44\ In addition, the Exchange 
believes that the listing and trading of Shares of the Fund would 
further an interest in the U.S. maintaining a competitive position in 
the global securities markets, which requires that U.S. participants 
respond to new developments and encourage the development of new 
products. Innovative financial vehicles such as the Fund will provide 
investors

[[Page 11155]]

greater access to U.S. markets. By providing a wide range of investors 
with a U.S. exchange-traded security that primarily invests in Carbon 
Futures, the Exchange believes that the listing of the Fund will 
benefit both investors and the markets.
---------------------------------------------------------------------------

    \44\ See note 29, supra.
---------------------------------------------------------------------------

    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.\45\ 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). 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.\46\
---------------------------------------------------------------------------

    \45\ See note 31, supra.
    \46\ See note 32, supra.
---------------------------------------------------------------------------

    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 will be publicly available regarding the Fund and the 
Shares, thereby promoting market transparency. Intra-day and the 
closing settlement price information regarding carbon credit futures 
and other U.S. exchange-traded futures will be available from the 
exchange on which such instruments are traded and from major market 
data vendors. Spot currency prices and price information regarding 
currency forwards, debt instruments (other than cash equivalents) and 
cash equivalents also will be available from major market data vendors. 
Additionally, FINRA's TRACE will be a source of price information for 
certain fixed income securities to the extent transactions in such 
securities are reported to TRACE. Price information regarding U.S. 
government securities and other 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. The Index price is available via Bloomberg and Reuters. The 
Index methodology and constituent list is available via IHS Markit's 
website.
    Quote and last-sale information for Carbon Futures, futures that 
are not Carbon Futures and options on futures are widely disseminated 
through major market data vendors and from the exchange on which they 
trade. ICE Futures US, ICE Futures Europe and CME also provide delayed 
futures information on current and past trading sessions and market 
news on their respective websites.
    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. Price information regarding non-exchange-traded 
investment company securities is available from major market data 
vendors.
    Quotation and last sale information for the Shares, ETFs and ETNs 
will be available via the CTA. In addition, the 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.
    Prior to the commencement of trading, the Exchange will inform its 
Equity Trading Permit Holders in an Information Bulletin of the special 
characteristics and risks associated with trading the Shares. 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. 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. In 
addition, as noted above, investors will have ready access to 
information regarding the Fund's holdings, NAV, the PIV, the Disclosed 
Portfolio, and quotation and last sale information for the Shares.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
an actively-managed exchange-traded product that, through permitted use 
of an increased level of listed derivatives above that currently 
permitted by the generic listing requirements of Commentary .01(d)(2) 
to NYSE Arca Rule 8.600-E, and through investment in non-exchange-
traded investment company securities (notwithstanding the requirements 
of Commentary .01(a)(1) to NYSE Arca Rule 8.600-E), will enhance 
competition among market participants, to the benefit of investors and 
the marketplace. As noted above, the Exchange has in place surveillance 
procedures relating to trading in the Shares and may obtain information 
via ISG from other exchanges that are members of ISG or with which the 
Exchange has entered into a comprehensive surveillance sharing 
agreement. In addition, as noted above, investors have ready access to 
information regarding the Fund's holdings, the PIV, the Disclosed 
Portfolio, and quotation and last sale information for the Shares.

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

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

[[Page 11156]]

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. Discussion and Commission's Findings

    After careful review, the Commission finds that the proposed rule 
change, as modified by Amendment No. 4, is consistent with the Act and 
the rules and regulations thereunder applicable to a national 
securities exchange.\47\ In particular, the Commission finds that the 
proposed rule change, as modified by Amendment No. 4, is consistent 
with Section 6(b)(5) of the Act,\48\ which requires, among other 
things, that the Exchange's rules 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.
---------------------------------------------------------------------------

    \47\ 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).
    \48\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    According to the Exchange, other than Commentary .01(a)(1) with 
respect to the Fund's investments in non-exchange-traded investment 
company securities and Commentary .01(d)(2) with respect to the Fund's 
and the Subsidiary's investments in Carbon Futures, as described above, 
the Fund's portfolio will meet all other requirements of NYSE Arca Rule 
8.600-E, and the Shares of the Fund will conform to the initial and 
continued listing criteria under NYSE Arca Rule 8.600-E.
    With respect to the Fund's investments in shares of non-exchange-
traded open-end management investment company securities, which will 
not comply with Commentary .01(a)(1) to NYSE Arca Rule 8.600-E,\49\ the 
Commission notes that: (1) Such securities must satisfy applicable 1940 
Act diversification requirements; and (2) the value of such securities 
is based on the value of securities and financial assets held by those 
investment companies.\50\ In addition, the Exchange states that 
investments in non-exchange-traded open-end management investment 
company securities will not exceed 20% of the total assets of the 
Fund.\51\ The Commission therefore believes that the Fund's investments 
in non-exchange-traded open-end management investment company 
securities would not make the Shares susceptible to fraudulent or 
manipulative acts and practices.\52\
---------------------------------------------------------------------------

    \49\ See supra note 31.
    \50\ See supra Section II.A.2.
    \51\ See id.
    \52\ The Commission notes it has approved other exchange-traded 
funds that can hold non-exchange-traded open-end management 
investment company securities in a manner that does not comply with 
Commentary .01(a)(1) to Rule 8.600-E. See, e.g., Securities Exchange 
Act Release No. 86362 (July 12, 2019), 84 FR 34457 (July 18, 2019) 
(SR-NYSEArca-2019-36).
---------------------------------------------------------------------------

    With respect to the Fund's investments in Carbon Futures, which may 
be up to 100% of the weight of the portfolio (as measured by gross 
notional exposure), and will not comply with Commentary .01(d)(2) to 
NYSE Arca Rule 8.600-E,\53\ the Commission notes that the Exchange has 
represented that the markets for Carbon Futures are sufficiently liquid 
and highly regulated.\54\ In addition, the Exchange represents that at 
least 90% of the weight of listed derivatives utilized by the Fund will 
be traded on exchanges that are members of the ISG or with which the 
Exchange has in place a comprehensive surveillance sharing agreement, 
and that all Carbon Futures are currently traded on ISG markets. The 
Exchange also represents 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. Moreover, the 
Exchange, represents that the Exchange or FINRA, on behalf of the 
Exchange, or both, will communicate as needed, and may obtain 
information regarding, trading in the Shares, ETFs, ETNs, certain 
futures and options on futures with other markets and other entities 
that are members of the ISG, and that the Exchange may obtain 
information regarding trading in such securities and financial 
instruments from markets and other entities with which the Exchange has 
in place a comprehensive surveillance sharing agreement. For the 
foregoing reasons, the Commission believes that the Fund's investments 
in Carbon Futures would not make the Shares susceptible to fraudulent 
or manipulative acts and practices.
---------------------------------------------------------------------------

    \53\ See supra note 27.
    \54\ The Exchange states that the carbon credit futures issued 
under the carbon credit regimes currently included in the Index 
(i.e., carbon credit futures on EUA, CCA, and RGGI) trade on ISG 
markets and are currently the largest and most liquid futures 
markets on carbon offset credits. See supra note 28. In addition, 
the Exchange represents that any additional carbon credit futures 
contracts that enter the Index will have an average monthly trading 
volume for the six month look-back period prior to the annual 
rebalancing date that is a minimum of $10,000,000 as of November 
30th of a given year, and will be traded on exchanges that are 
members of the ISG or with which the Exchange has in place a 
comprehensive surveillance sharing agreement.
---------------------------------------------------------------------------

    The Exchange represents that all statements and representations 
made in the 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 
the filing shall constitute continued listing requirements for listing 
the Shares of the Fund 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 \55\ 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).
---------------------------------------------------------------------------

    \55\ The Commission notes that certain proposals for the listing 
and trading of exchange-traded products include a representation 
that the exchange will ``surveil'' for compliance with the continued 
listing requirements. See, e.g., Securities Exchange Act Release No. 
77499 (April 1, 2016), 81 FR 20428, 20432 (April 7, 2016) (SR-BATS-
2016-04). In the context of this representation, it is the 
Commission's view that ``monitor'' and ``surveil'' both mean ongoing 
oversight of compliance with the continued listing requirements. 
Therefore, the Commission does not view ``monitor'' as a more or 
less stringent obligation than ``surveil'' with respect to the 
continued listing requirements.
---------------------------------------------------------------------------

    This approval order is based on all of the Exchange's 
representations, including those set forth above and in Amendment No. 
4. For the foregoing reasons, the Commission finds that the proposed 
rule change, as modified by Amendment No. 4, is consistent with Section 
6(b)(5) of the Act \56\ and the rules and regulations thereunder 
applicable to a national securities exchange.
---------------------------------------------------------------------------

    \56\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

IV. Solicitation of Comments on Amendment No. 4 to the Proposed Rule 
Change

    Interested persons are invited to submit written views, data, and 
arguments concerning whether Amendment No. 4 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

[[Page 11157]]

     Send an email to rule-comments@sec.gov. Please include 
File Number SR-NYSEArca-2019-60 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-2019-60. 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-2019-60 and should be submitted 
on or before March 18, 2020.

V. Accelerated Approval of the Proposed Rule Change, as Modified by 
Amendment No. 4

    The Commission finds good cause to approve the proposed rule 
change, as modified by Amendment No. 4, prior to the thirtieth day 
after the date of publication of notice of the filing of Amendment No. 
4 in the Federal Register. The Commission notes that Amendment No. 4 
clarified the investments of the Fund and the application of NYSE Arca 
Rule 8.600-E, Commentary .01 to the Fund's investments. Amendment No. 4 
also provided other clarifications and additional information related 
to the proposed rule change. The changes and additional information in 
Amendment No. 4 assist the Commission in evaluating the Exchange's 
proposal and in determining that it is consistent with the Act. 
Accordingly, the Commission finds good cause, pursuant to Section 
19(b)(2) of the Act,\57\ to approve the proposed rule change, as 
modified by Amendment No. 4, on an accelerated basis.
---------------------------------------------------------------------------

    \57\ 15 U.S.C. 78s(b)(2).
---------------------------------------------------------------------------

VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\58\ that the proposed rule change (SR-NYSEArca-2019-60), as 
modified by Amendment No. 4, be, and it hereby is, approved on an 
accelerated basis.
---------------------------------------------------------------------------

    \58\ Id.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\59\
---------------------------------------------------------------------------

    \59\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2020-03774 Filed 2-25-20; 8:45 am]
BILLING CODE 8011-01-P


