[Federal Register Volume 81, Number 104 (Tuesday, May 31, 2016)]
[Notices]
[Pages 34388-34393]
[FR Doc No: 2016-12668]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77891; File No. SR-NYSEArca-2016-70]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Proposed Rule Change Regarding Use of Rule 144A Securities by the
Fidelity Corporate Bond ETF, Fidelity Investment Grade Bond ETF,
Fidelity Limited Term Bond ETF, and Fidelity Total Bond ETF

May 24, 2016.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on May 11, 2016, NYSE Arca, Inc. (the ``Exchange'' or
``NYSE Arca'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C.78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to permit the Fidelity Corporate Bond ETF,
Fidelity Investment Grade Bond ETF, Fidelity Limited Term Bond ETF, and
Fidelity Total Bond ETF (each a ``Fund'' and together the ``Funds'') to
consider securities issued pursuant to Rule 144A under the Securities
Act of 1933 as debt securities eligible for the principal investment of
80% of Fund assets. Shares of the Fidelity Corporate Bond ETF, Fidelity
Limited Term Bond ETF, and Fidelity Total Bond ETF have been approved
by the Exchange for listing and trading on the Exchange under NYSE Arca
Equities Rule 8.600. The proposed rule change is available on the
Exchange's Web site at www.nyse.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.

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

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

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

1. Purpose
    The Commission approved proposed rule changes relating to listing
and trading on the Exchange of shares (``Shares'') of the Funds under
NYSE Arca Equities Rule 8.600,\4\ which governs the listing and trading
of Managed Fund Shares.\5\ The Exchange

proposes to amend the representation in the Prior Corporate Bond Notice
and Prior Total Bond Notice to provide each Fund may include Rule 144A
securities within a Fund's principal investments in debt securities
(i.e., debt securities in which at least 80% of a Fund's assets are
invested).
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    \4\ See Securities Exchange Act Release Nos. 72068 (May 1,
2014), 79 FR 25923 (May 6, 2014) (SR-NYSEArca-2014-47) (notice of
filing of proposed rule change relating to listing and trading of
Shares of Fidelity Corporate Bond ETF Managed Shares under NYSE Arca
Equities Rule 8.600) (``Prior Corporate Bond Notice''); 72439 (June
20, 2014), 79 FR 36361 (June 26, 2014) (SR-NYSEArca-2014-47) (order
approving proposed rule change relating to listing and trading of
Shares of Fidelity Corporate Bond ETF Managed Shares under NYSE Arca
Equities Rule 8.600) (``Prior Corporate Bond Order'' and, together
with the Prior Corporate Bond Notice, the ``Prior Corporate Bond
Releases''); 72064 (May 1, 2014), 79 FR 25908 (May 6, 2014) (SR-
NYSEArca-2014-46) (notice of filing of proposed rule change relating
to listing and trading of Shares of Fidelity Investment Grade Bond
ETF; Fidelity Limited Term Bond ETF; and Fidelity Total Bond ETF
under NYSE Arca Equities Rule 8.600) (``Prior Total Bond Notice);
72748 (August 4, 2014), 79 FR 46484 (August 8, 2014) (SR-NYSEArca-
2014-46) (order approving proposed rule change relating to listing
and trading of Shares of the Fidelity Investment Grade Bond ETF,
Fidelity Limited Term Bond ETF, and Fidelity Total Bond ETF under
NYSE Arca Equities Rule 8.600) (``Prior Total Bond ETF Order'' and,
together with the Prior Total Bond Notice, the ``Prior Total Bond
Releases'').
    \5\ A Managed Fund Share is a security that represents an
interest in an investment company registered under the Investment
Company Act of 1940 (15 U.S.C. 80a-1) (``1940 Act'') organized as an
open-end investment company or similar entity that invests in a
portfolio of securities selected by its investment adviser
consistent with its investment objectives and policies.
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I. Description of the Funds
    Fidelity Investments Money Management, Inc. (``FIMM''), an
affiliate of Fidelity Management & Research Company (``FMR''), is the
manager (``Manager'') of each Fund. FMR Co., Inc. (``FMRC'') serves as
a sub-adviser for the Fidelity Total Bond ETF. FMRC has day-to-day
responsibility for choosing certain types of investments of foreign and
domestic issuers for Fidelity Total Bond ETF. Other investment
advisers, which also are affiliates of FMR, serve as sub-advisers to
the Funds and assist FIMM with foreign investments, including Fidelity
Management & Research (U.K.) Inc. (``FMR U.K.''), Fidelity Management &
Research (Hong Kong) Limited (``FMR H.K.''), and Fidelity Management &
Research (Japan) Inc. (``FMR Japan'') (each a ``Sub-Adviser'' and
together with FMRC, ``Sub-Advisers''). Fidelity Distributors
Corporation (``FDC'') is the distributor for the Funds' Shares.
    The Funds are funds of Fidelity Merrimack Street Trust (``Trust''),
a Massachusetts business trust.\6\
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    \6\ The Trust is registered under the 1940 Act. On December 29,
2015, the Trust filed with the Commission an amendment to its
registration statement on Form N-1A under the Securities Act of 1933
(15 U.S.C. 77a) (``Securities Act'') and the 1940 Act relating to
the Funds (File Nos. 333-186372 and 811-22796) (``Registration
Statement''). The description of the operation of the Trust and the
Funds herein is based, in part, on the Registration Statement. In
addition, the Commission has issued an order granting certain
exemptive relief to the Trust under the 1940 Act. See Investment
Company Act Release No. 30513 (May 10, 2013) (``Exemptive Order'')
(File No. 812-14104).
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    Shares of the Fidelity Corporate Bond ETF, Fidelity Limited Term
Bond ETF, and Fidelity Total Bond ETF have been approved by the
Exchange for listing and trading on the Exchange under NYSE Arca
Equities Rule 8.600 and are currently trading on the Exchange.
A. Fidelity Corporate Bond ETF
    As described in the Prior Corporate Bond Notice, the Fidelity
Corporate Bond ETF seeks a high level of current income. The Manager
normally invests at least 80% of Fidelity Corporate Bond ETF assets in
investment-grade corporate bonds and other corporate debt
securities.\7\ Corporate debt securities are bonds and other debt
securities issued by corporations and other business structures, as
described in the Prior Corporate Bond Notice.
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    \7\ According to the Registration Statement, investment-grade
debt securities include all types of debt instruments, including
corporate debt securities, that are of medium and high-quality. An
investment-grade rating means the security or issuer is rated
investment-grade by a credit rating agency registered as a
nationally recognized statistical rating organization (``NRSRO'')
with the Commission (for example, Moody's Investors Service, Inc.),
or is unrated but considered to be of equivalent quality by the
Fidelity Corporate Bond ETF's Manager or Sub-Advisers.
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    The Fidelity Corporate Bond ETF may hold uninvested cash or may
invest it in cash equivalents such as money market securities, or
shares of short-term bond exchanged-traded funds registered under the
1940 Act (``ETFs'') or mutual funds or money market funds, including
Fidelity central funds (special types of investment vehicles created by
Fidelity for use by the Fidelity funds and other advisory clients). The
Manager uses the Barclays[supreg] U.S. Credit Bond Index as a guide in
structuring the Fund and selecting its investments. FIMM manages the
Fund to have similar overall interest rate risk to the Barclays[supreg]
U.S. Credit Bond Index.
    As stated in the Prior Corporate Bond Releases, in buying and
selling securities for the Fund, the Manager analyzes the credit
quality of the issuer, security-specific features, current valuation
relative to alternatives in the market, short-term trading
opportunities resulting from market inefficiencies, and potential
future valuation. In managing the Fund's exposure to various risks,
including interest rate risk, the Manager considers, among other
things, the market's overall risk characteristics, the market's current
pricing of those risks, information on the Fund's competitive universe
and internal views of potential future market conditions.
    While the Manager normally invests at least 80% of assets of the
Fund in investment grade corporate bonds and other corporate debt
securities, as described above, the Manager may invest up to 20% of the
Fund's assets in other securities and financial instruments, as
described in the Prior Corporate Bond Notice.
    According to the Registration Statement, the Fund may invest in
restricted securities, which are subject to legal restrictions on their
sale. Restricted securities generally can be sold in privately
negotiated transactions, pursuant to an exemption from registration
under the Securities Act, or in a registered public offering.
B. Fidelity Investment Grade Bond ETF, Fidelity Limited Term Bond ETF
and Fidelity Total Bond ETF
    As described in the Prior Total Bond Notice, the Fidelity
Investment Grade Bond ETF (which has not yet commenced operation) will
seek a high level of current income. The Manager normally will invest
at least 80% of the Fund's assets in investment-grade debt securities
(those of medium and high quality). The debt securities in which the
Fund may invest are corporate debt securities; U.S. Government
securities; repurchase agreements and reverse repurchase agreements;
money market securities; mortgage and other asset-backed securities;
senior loans; loan participations and loan assignments and other
evidences of indebtedness, including letters of credit, revolving
credit facilities and other standby financing commitments; stripped
securities; municipal securities; sovereign debt obligations; and
obligations of international agencies or supranational entities
(collectively, ``Debt Securities'').
    As described in the Prior Total Bond Notice, the Fidelity
Investment Grade Bond ETF may hold uninvested cash or may invest it in
cash equivalents such as repurchase agreements, shares of short term
bond ETFs, mutual funds or money market funds, including Fidelity
central funds (special types of investment vehicles created by Fidelity
for use by the Fidelity funds and other advisory clients). The Manager
will use the Barclays U.S. Aggregate Bond Index (the ``Aggregate
Index'') as a guide in structuring the Fund and selecting its
investments, and will manage the Fund to have similar overall interest
rate risk to the Aggregate Index.
    As described in the Prior Total Bond Notice, the Manager will
consider other factors when selecting the Fidelity Investment Grade
Bond ETF's investments, including the credit quality of the issuer,
security-specific features, current valuation relative to alternatives
in the market, short-term trading opportunities resulting from market
inefficiencies, and potential future valuation. In managing the
Fidelity Investment Grade Bond ETF's exposure to various risks,
including interest rate risk, the Manager will consider, among other
things, the market's overall risk characteristics, the market's current
pricing of those risks, information on the Fidelity Investment Grade
Bond ETF's competitive universe and internal views of potential future
market conditions.
    As described in the Prior Total Bond Notice, the Fidelity Limited
Term Bond

ETF seeks to provide a high rate of income. The Manager normally
invests at least 80% of the Fidelity Limited Term Bond ETF's assets in
investment-grade Debt Securities (those of medium and high quality).
The Fidelity Limited Term Bond ETF may hold uninvested cash or may
invest it in cash equivalents such as repurchase agreements, shares of
short term bond ETFs, mutual funds or money market funds, including
Fidelity central funds (special types of investment vehicles created by
Fidelity for use by the Fidelity funds and other advisory clients). The
Manager uses the Fidelity Limited Term Composite Index (the ``Composite
Index'') as a guide in structuring the Fund and selecting its
investments. The Manager manages the Fidelity Limited Term Bond ETF to
have similar overall interest rate risk to the Composite Index.
    The Manager considers other factors when selecting the Fidelity
Limited Term Bond ETF's investments, including the credit quality of
the issuer, security-specific features, current valuation relative to
alternatives in the market, short-term trading opportunities resulting
from market inefficiencies, and potential future valuation. In managing
the Fidelity Limited Term Bond ETF's exposure to various risks,
including interest rate risk, the Manager considers, among other
things, the market's overall risk characteristics, the market's current
pricing of those risks, information on the Fund's competitive universe
and internal views of potential future market conditions.
    As described in the Prior Total Bond Notice, the Fidelity Total
Bond ETF seeks a high level of current income. The Manager normally
invests at least 80% of the Fidelity Total Bond ETF's assets in Debt
Securities. The Manager allocates the Fidelity Total Bond ETF's assets
across investment-grade, high yield, and emerging market Debt
Securities. The Manager may invest up to 20% of the Fund's assets in
lower-quality Debt Securities. The Fidelity Total Bond ETF may hold
uninvested cash or may invest it in cash equivalents such as repurchase
agreements, shares of short term bond ETFs mutual funds or money market
funds, including Fidelity central funds (special types of investment
vehicles created by Fidelity for use by the Fidelity funds and other
advisory clients).
    The Manager uses the Barclays U.S. Universal Bond Index (the
``Universal Index'') as a guide in structuring and selecting the
investments of the Fidelity Total Bond ETF and selecting its
investments, and in allocating the Fidelity Total Bond ETF's assets
across the investment-grade, high yield, and emerging market asset
classes. The Manager manages the Fidelity Total Bond ETF to have
similar overall interest rate risk to the Universal Index. The Manager
considers other factors when selecting the Fund's investments,
including the credit quality of the issuer, security-specific features,
current valuation relative to alternatives in the market, short-term
trading opportunities resulting from market inefficiencies, and
potential future valuation. In managing the Fund's exposure to various
risks, including interest rate risk, the Manager considers, among other
things, the market's overall risk characteristics, the market's current
pricing of those risks, information on the Fund's competitive universe
and internal views of potential future market conditions.
    As described in the Prior Total Bond Notice, the Manager may invest
the Fidelity Total Bond ETF's assets in Debt Securities of foreign
issuers in addition to securities of domestic issuers.
    While, as described above, the Manager normally invests at least
80% of assets of Fidelity Limited Term Bond ETF in investment-grade
Debt Securities (and will normally invest at least 80% of assets of the
Fidelity Investment Grade Bond ETF in investment-grade Debt
Securities), and the Manager normally invests at least 80% of assets of
the Fidelity Total Bond ETF in Debt Securities, the Manager may invest
up to 20% of a Fund's assets in other securities and financial
instruments (``Other Investments'', as described in the Prior Total
Bond Notice).
    As described in the Prior Corporate Bond Notice and Prior Total
Bond Notice, as part of a Fund's Other Investments, (i.e., up to 20% of
a Fund's assets), each Fund may invest in restricted securities, which
are subject to legal restrictions on their sale.\8\
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    \8\ Restricted securities are subject to legal restrictions on
their sale. Restricted securities generally can be sold in privately
negotiated transactions, pursuant to an exemption from registration
under the Securities Act, or in a registered public offering. Rule
144A securities are securities which, while privately placed, are
eligible for purchase and resale pursuant to Rule 144A. Rule 144A
permits certain qualified institutional buyers, such as a Fund, to
trade in privately placed securities even though such securities are
not registered under the Securities Act.
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II. Proposed Change
    The Exchange proposes that each Fund may include Rule 144A
securities within a Fund's principal investments in debt securities
(i.e., debt securities in which at least 80% of a Fund's assets are
invested). As discussed below, the Exchange believes it is appropriate
for Rule 144A securities to be included as principal investments of a
Fund in view of (1) the high level of liquidity in the market for such
securities compared to other debt securities asset classes, and (2) the
high level of transparency in the market for Rule 144A securities,
particularly in light of reporting of transaction data in such
securities through the Trade Reporting and Compliance Engine
(``TRACE'') operated by the Financial Industry Regulatory Authority
(``FINRA'').
    FMR has represented to the Exchange that Rule 144A securities
account for approximately 20% of daily trading volume in U.S. corporate
bonds. Dealers trade and report transactions in Rule 144A securities in
the same manner as registered corporate bonds. While the average number
of daily trades and U.S. dollar volume in registered corporate bonds is
much higher than in Rule 144A securities, the average lot size is
higher for Rule 144A securities.\9\ Specifically, the average lot size
for 144A securities for the period January 1, 2015 through August 31,
2015 was approximately $2.2 million, compared to an average lot size
for the same period of approximately $500,000 for registered corporate
bonds.
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    \9\ Source: MarketAxess Trace Data. For example, for the period
January 1, 2015 through August 31, 2015, for registered bonds and
Rule 144A securities with $1 billion to $1.999 billion the average
daily dollar volume outstanding was approximately $6.8 billion and
$1.7 billion, respectively, and the average lot size was $666,647
and $2,398,292, respectively.
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    In addition, in 2013, the Commission approved FINRA rules relating
to dissemination of information regarding transactions in Rule 144A
securities in TRACE.\10\ In approving FINRA's

proposed rule change to amend its rules regarding dissemination of Rule
144A transactions, the Commission stated:
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    \10\ See Securities Exchange Act Release Nos. 70009 (July 19,
2013), 78 FR 44997 (July 25, 2103) (SR-FINRA-2013-029) (notice of
filing of a proposed rule change relating to the dissemination of
transactions in TRACE-Eligible securities effected pursuant to Rule
144A); 70345 (September 6, 2013), 78 FR 56251 (September 12, 2013)
(SR-FINRA-2013-029) (order approving proposed rule change relating
to the dissemination of transactions in TRACE-Eligible securities
effected pursuant to Rule 144A). In the proposed rule change, FINRA
proposed to amend FINRA Rule 6750 to provide for the dissemination
of Rule 144A transactions, provided the asset type (e.g., corporate
bonds) currently is subject to dissemination under FINRA Rule 6750;
to amend the dissemination protocols to extend the dissemination
caps currently applicable to the non-Rule 144A transactions in such
asset type (e.g., non-Rule 144A corporate bond transactions) to Rule
144A transactions in such securities; to amend FINRA Rule 7730 to
establish a data set for real-time Rule 144A transaction data and a
second data set for historic Rule 144A transaction data, to amend
the definition of ``Historic TRACE Data'' to reference the three
data sets currently included therein and the proposed fourth data
set; and to make other clarifying and technical amendments. FINRA
Rule 6730(a) requires any transaction in a TRACE-Eligible security
to be reported to TRACE as soon as practicable but no later than
within 15 minutes of the transaction, subject to specified
exceptions. FINRA Rule 6730(c) requires the trade report to contain
information on size, price, time of execution, amount of commission,
the date of settlement and other information.

    Real-time dissemination of last-sale information could aid
dealers in deriving better quotations, because they would know the
prices at which other market participants had recently transacted in
the same or similar instruments. This information could aid all
market participants in evaluating current quotations, because they
could inquire why dealer quotations might differ from the prices of
recently executed transactions. Furthermore, post-trade transparency
affords market participants a means of testing whether dealer
quotations before the last sale were close to the price at which the
last sale was executed. In this manner, post-trade transparency can
promote price competition between dealers and more efficient price
discovery and ultimately lower transaction costs in the market for
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Rule 144A securities.

    Transactions executed by FINRA members became subject to
dissemination through FINRA's TRACE on June 30, 2014, thus providing a
level of transparency to the Rule 144A market comparable to that of
registered bonds.\11\
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    \11\ In its June 30, 2014 press release ``FINRA Brings 144A
Corporate Debt Transactions Into the Light'', FINRA stated: 144A
transactions--resales of restricted corporate debt securities to
large institutions called qualified institutional buyers (QIBs)--
account for a significant portion of the volume in corporate debt
securities. In the first quarter of 2014, 144A transactions
comprised nearly 13 percent of the average daily volume in
investment-grade corporate debt, and nearly 30 percent of the
average daily volume in high-yield corporate debt. 144A transactions
comprised nearly 20 percent of the average daily volume in the
corporate debt market as a whole. Through the Trade Reporting and
Compliance Engine (TRACE), FINRA will disseminate 144A transactions
subject to the same dissemination caps that are currently in effect
for non-144A transactions. The same dissemination cap for
investment-grade corporate bonds ($5 million) applies to both 144A
and non-144A corporate bond transactions, and the $1 million
dissemination cap for high-yield corporate bonds similarly applies
to both 144A and non-144A transactions. 144A transactions are also
subject to the same 15-minute reporting requirement as non-144A
corporate debt transactions. See also, FINRA Regulatory Notice 13-35
October 2013.
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    The Exchange notes that, while the proposed rule change would
categorize Rule 144A securities within a Fund's principal investments
in debt securities, any investments in Rule 144A securities, of course,
would be required to comply with restrictions under the 1940 Act and
rules thereunder relating to investment in illiquid assets.\12\ As
stated in the Prior Corporate Bond Notice and Prior Total Bond Notice,
each Fund may hold up to an aggregate amount of 15% of its net assets
in illiquid assets (calculated at the time of investment), including
Rule 144A securities deemed illiquid by the Manager or Sub-Advisers.
Each Fund monitors its portfolio liquidity on an ongoing basis to
determine whether, in light of current circumstances, an adequate level
of liquidity is being maintained, and will consider taking appropriate
steps in order to maintain adequate liquidity if, through a change in
values, net assets, or other circumstances, more than 15% of a Fund's
net assets are held in illiquid assets. Illiquid assets include assets
subject to contractual or other restrictions on resale and other
instruments that lack readily available markets as determined in
accordance with Commission staff guidance.\13\
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    \12\ The Commission has stated that long-standing Commission
guidelines have required open-end funds to hold no more than 15% of
their net assets in illiquid securities and other illiquid assets.
See Investment Company Act Release No. 28193 (March 11, 2008), 73 FR
14618 (March 18, 2008), footnote 34. See also, Investment Company
Act Release No. 5847 (October 21, 1969), 35 FR 19989 (December 31,
1970) (``Statement Regarding ``Restricted Securities''); Investment
Company Act Release No. 18612 (March 12, 1992), 57 FR 9828 (March
20, 1992) (Revisions of Guidelines to Form N-1A). A fund's portfolio
security is illiquid if it cannot be disposed of in the ordinary
course of business within seven days at approximately the value
ascribed to it by the fund. See Investment Company Act Release No.
14983 (March 12, 1986), 51 FR 9773 (March 21, 1986) (adopting
amendments to Rule 2a-7 under the 1940 Act); Investment Company Act
Release No. 17452 (April 23, 1990), 55 FR 17933 (April 30, 1990)
(adopting Rule 144A under the Securities Act.
    \13\ In its recent rulemaking proposal relating to open-end fund
liquidity risk management programs, the Commission noted that
``[s]ecurities offered pursuant to rule 144A under the Securities
Act may be considered liquid depending on certain factors''. The
Commission, citing to the ``Statement Regarding `Restricted
Securities''' (see note 11, above), noted: ``The Commission stated
[in the ``Statement Regarding `Restricted Securities'''] that
`determination of the liquidity of Rule 144A securities in the
portfolio of an investment company issuing redeemable securities is
a question of fact for the board of directors to determine, based
upon the trading markets for the specific security' and noted that
the board should consider the unregistered nature of a rule 144A
security as one of the factors it evaluates in determining its
liquidity.'' See Release Nos. 33-9922; IC-31835; File Nos. S7-16-15;
S7-08-15 (September 22, 2015); note 94.
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    Moreover, as stated in the Prior Corporate Bond Notice and Prior
Total Bond Notice, each Fund does not currently intend to purchase any
asset if, as a result, more than 10% of its net assets would be
invested in assets that are deemed to be illiquid because they are
subject to legal or contractual restrictions on resale or because they
cannot be sold or disposed of in the ordinary course of business at
approximately the prices at which they are valued. For purposes of a
Fund's illiquid assets limitation discussed above, if through a change
in values, net assets, or other circumstances, a Fund were in a
position where more than 10% of its net assets were invested in
illiquid assets, it would consider appropriate steps to protect
liquidity.
    The Prior Corporate Bond Notice and Prior Total Bond Notice stated
that various factors may be considered in determining the liquidity of
a Fund's investments, including: (1) The frequency of trades and quotes
for the asset; (2) the number of dealers wishing to purchase or sell
the asset and the number of other potential purchasers; (3) dealer
undertakings to make a market in the asset; and (4) the nature of the
asset and the nature of the marketplace in which it trades (including
any demand, put or tender features, the mechanics and other
requirements for transfer, any letters of credit or other credit
enhancement features, any ratings, the number of holders, the method of
soliciting offers, the time required to dispose of the security, and
the ability to assign or offset the rights and obligations of the
asset).
    The Exchange believes that the size of the Rule 144A market
(approximately 20% of daily trading volume in U.S. corporate bonds),
the active participation of multiple dealers utilizing trading
protocols that are similar to those in the corporate bond market, and
the transparency of the 144A market resulting from reporting of Rule
144A transactions in TRACE will deter manipulation in trading the
Shares.
    Except for the change described above, all other representations
made in the Prior Corporate Bond Releases and the Prior Total Bond
Releases remain unchanged.\14\ The Funds will continue to comply with
all initial and continued listing requirements under NYSE Arca Equities
Rule 8.600.
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    \14\ See note 4, supra. All terms referenced but not defined
herein are defined in the Prior Corporate Bond Notice and Prior
Total Bond Notice.
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    The Exchange represents that the trading in the Shares will be
subject to the existing trading surveillances, administered by the
Exchange or FINRA, on behalf of the Exchange, which are designed to
detect violations of Exchange rules and applicable federal securities
laws.\15\ The Exchange represents that these procedures are adequate to
properly monitor Exchange trading of the Shares in all trading sessions
and to deter and detect violations of Exchange rules and federal

securities laws applicable to trading on the Exchange. The Exchange or
FINRA, on behalf of the Exchange, communicate as needed regarding
trading in the Shares and exchange-listed equity securities (including
ADRs) with other markets and other entities that are members of the
ISG, and FINRA, on behalf of the Exchange, may obtain trading
information regarding trading in the Shares and exchange-listed equity
securities (including ADRs) from such markets and other entities. The
Exchange may obtain information regarding trading in the Shares and
exchange-listed equity securities (including ADRs) from markets and
other entities that are members of ISG or with which the Exchange has
in place a comprehensive surveillance sharing agreement.\16\ In
addition, as stated in the Prior Corporate Bond Releases and the Prior
Total Bond Releases, investors have ready access to information
regarding the Funds' holdings, the Portfolio Indicative Value, the
Disclosed Portfolio, and quotation and last sale information for the
Shares
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    \15\ 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.
    \16\ For a list of the current members of ISG, see
www.isgportal.org. The Exchange notes that not all of the components
of the portfolio for a Fund may trade on exchanges that are members
of the ISG or with which the Exchange has in place a comprehensive
surveillance sharing agreement.
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2. Statutory Basis
    The basis under the Act for this proposed rule change is the
requirement under Section 6(b)(5)\17\ that an exchange have rules that
are designed to prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of trade, to remove
impediments to, and perfect the mechanism of a free and open market
and, in general, to protect investors and the public interest.
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    \17\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the proposed rule change is designed to
prevent fraudulent and manipulative acts and practices in that the
Shares will be listed and traded on the Exchange pursuant to the
initial and continued listing criteria in NYSE Arca Equities Rule
8.600. The Exchange believes it is appropriate for Rule 144A securities
to be included as principal investments of a Fund in view of (1) the
high level of liquidity in the market for such securities compared to
other debt securities asset classes, and (2) the high level of
transparency in the market for Rule 144A securities, particularly in
light of reporting of transaction data in such securities through
TRACE. The Exchange has in place surveillance procedures that are
adequate to properly monitor trading in the Shares in all trading
sessions and to deter and detect violations of Exchange rules and
federal securities laws applicable to trading on the Exchange. FINRA,
on behalf of the Exchange, is able to access, as needed, trade
information for certain fixed income securities held by the Funds
reported to TRACE. The Manager and the Sub-Advisers are not broker-
dealers but are affiliated with one or more broker-dealers and have
each implemented a fire wall with respect to such broker-dealers
regarding access to information concerning the composition and/or
changes to the portfolios, and will be subject to procedures designed
to prevent the use and dissemination of material non-public information
regarding the portfolios. Each Fund may hold up to an aggregate amount
of 15% of its net assets in illiquid assets (calculated at the time of
investment), including Rule 144A securities deemed illiquid by the
Manager or Sub-Advisers.
    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 has in place surveillance procedures that are
adequate to properly monitor trading in the Shares in all trading
sessions and to deter and detect violations of Exchange rules and
federal securities laws applicable to trading on the Exchange. FINRA,
on behalf of the Exchange, is able to access, as needed, trade
information for certain fixed income securities held by the Funds
reported to TRACE. The Exchange will obtain a representation from the
issuer of the Shares that the NAV per Share will be calculated daily
and that the NAV and the Disclosed Portfolio will be made available to
all market participants at the same time. In addition, a large amount
of information is publicly available regarding the Funds and the
Shares, thereby promoting market transparency. Transaction information
relating to Rule 144A securities will be available via TRACE. Moreover,
the Portfolio Indicative Value with respect to Shares of each Fund will
be widely disseminated by one or more major market data vendors at
least every 15 seconds during the Exchange's Core Trading Session. On
each business day, before commencement of trading in Shares in the Core
Trading Session on the Exchange, each Fund will disclose on the Trust's
Web site the Disclosed Portfolio that will form the basis for a Fund's
calculation of NAV at the end of the business day. The Trust's Web site
will include a form of the prospectus for the Funds and additional data
relating to NAV and other applicable quantitative information. Trading
in Shares of a Fund will be halted if the circuit breaker parameters in
NYSE Arca Equities Rule 7.12 have been reached or because of market
conditions or for reasons that, in the view of the Exchange, make
trading in the Shares inadvisable, and trading in the Shares will be
subject to NYSE Arca Equities Rule 8.600(d)(2)(D), which sets forth
circumstances under which Shares of a Fund may be halted. In addition,
as noted above, investors will have ready access to information
regarding each Fund's holdings, the Portfolio Indicative Value, 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. The Exchange believes that the size of the Rule 144A
market (approximately 20% of daily trading volume in U.S. corporate
bonds), the active participation of multiple dealers utilizing trading
protocols that are similar to those in the corporate bond market, and
the transparency of the Rule 144A market resulting from reporting of
Rule 144A transactions in TRACE will deter manipulation in trading the
Shares. Any investments in Rule 144A securities would be required to
comply with restrictions under the 1940 Act and rules thereunder
relating to investment in illiquid assets. Each Fund does not currently
intend to purchase any asset if, as a result, more than 10% of its net
assets would be invested in assets that are deemed to be illiquid
because they are subject to legal or contractual restrictions on resale
or because they cannot be sold or disposed of in the ordinary course of
business at approximately the prices at which they are valued. Various
factors may be considered in determining the liquidity of a Fund's
investments, including: (1) The frequency of trades and quotes for the
asset; (2) the number of dealers wishing to purchase or sell the asset
and the number of other potential purchasers; (3) dealer undertakings
to make a market in the asset; and (4) the nature of the asset and the
nature of the marketplace in which it trades (including any demand, put
or tender features, the mechanics and other requirements for transfer,
any letters of credit or other credit enhancement features, any
ratings, the number of holders, the method of soliciting offers, the
time required to dispose of the security, and the ability to assign or
offset the rights and obligations of the asset). 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 each Fund's holdings, the
Portfolio Indicative Value, 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 believes the
proposed rule change is designed to allow the Funds to invest in a
broader range of debt securities thereby helping the Funds to achieve
their respective investment objective.

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

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

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

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

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to<EMAIL_ADDRESS>Please include
File Number SR-NYSEArca-2016-70 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-2016-70. 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 Web site (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 Web site 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; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSEArca-2016-70, and should
be submitted on or before June 21, 2016.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
Robert W. Errett,
Deputy Secretary.
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    \18\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2016-12668 Filed 5-27-16; 8:45 am]
 BILLING CODE 8011-01-P


[Federal Register Volume 87, Number 140 (Friday, July 22, 2022)]
[Proposed Rules]
[Pages 43755-43757]
[FR Doc No: 2022-15618]

=======================================================================
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DEPARTMENT OF TRANSPORTATION

Federal Aviation Administration

14 CFR Part 71

[Docket No. FAA-2022-0901; Airspace Docket No. 21-ANE-5]
RIN 2120-AA66

Proposed Amendment and Revocation of VOR Federal Airways;
Northeast United States

AGENCY: Federal Aviation Administration (FAA), DOT.

ACTION: Notice of proposed rulemaking (NPRM).

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SUMMARY: This action proposes to amend VHF Omnidirectional Range (VOR)
Federal airways V-1, V-16, and V-290, and remove airways V-93 and V-
229. This action is necessary to support the FAA's VOR Minimum
Operational Network (MON) program.

DATES: Comments must be received on or before September 6, 2022.

ADDRESSES: Send comments on this proposal to the U.S. Department of
Transportation, Docket Operations, 1200 New Jersey Avenue SE, West
Building Ground Floor, Room W12-140, Washington, DC 20590; telephone:
(800) 647-5527 or<PHONE_NUMBER>. You must identify FAA Docket No. FAA-
2022-0901; Airspace Docket No. 21-ANE-5 at the beginning of your
comments. You may also submit comments through the internet at https://www.regulations.gov.
    FAA Order JO 7400.11F, Airspace Designations and Reporting Points,
and subsequent amendments can be viewed online at https://www.faa.gov/air_traffic/publications/. For further information, you can contact the
Rules and Regulations Group, Federal Aviation Administration, 800
Independence Avenue SW, Washington, DC 20591; telephone: (202) 267-
8783.

FOR FURTHER INFORMATION CONTACT: Paul Gallant, Rules and Regulations
Group, Office of Policy, Federal Aviation Administration, 800
Independence Avenue SW, Washington, DC 20591; telephone: (202) 267-
8783.

SUPPLEMENTARY INFORMATION:

Authority for This Rulemaking

    The FAA's authority to issue rules regarding aviation safety is
found in Title 49 of the United States Code. Subtitle I, Section 106
describes the authority of the FAA Administrator. Subtitle VII,
Aviation Programs, describes in more detail the scope of the agency's
authority. This rulemaking is promulgated under the authority described
in Subtitle VII, Part A, Subpart I, Section 40103. Under that section,
the FAA is charged with prescribing regulations to assign the use of
the airspace necessary to ensure the safety of aircraft and the
efficient use of airspace. This regulation is within the scope of that
authority as it would modify the VOR Federal airway route structure in
the eastern United States to maintain the efficient flow of air
traffic.

Comments Invited

    Interested parties are invited to participate in this proposed
rulemaking by submitting such written data, views, or arguments as they
may desire. Comments that provide the factual basis supporting the
views and suggestions presented are particularly helpful in developing
reasoned regulatory decisions on the proposal. Comments are
specifically invited on the overall regulatory, aeronautical, economic,
environmental, and energy-related aspects of the proposal.
    Communications should identify both docket numbers (FAA Docket No.
FAA-2022-0901; Airspace Docket No. 21-ANE-5) and be submitted in
triplicate to the Docket Management Facility (see ADDRESSES section for
address and phone number). You may also submit comments through the
internet at https://www.regulations.gov.
    Commenters wishing the FAA to acknowledge receipt of their comments
on this action must submit with those comments a self-addressed,
stamped postcard on which the following statement is made: ``Comments
to FAA Docket No. FAA-2022-0901; Airspace Docket No. 21-ANE-5.'' The
postcard will be date/time stamped and returned to the commenter.
    All communications received on or before the specified comment
closing

date will be considered before taking action on the proposed rule. The
proposal contained in this action may be changed in light of comments
received. A report summarizing each substantive public contact with FAA
personnel concerned with this rulemaking will be filed in the docket.

Availability of NPRM's

    An electronic copy of this document may be downloaded through the
internet at https://www.regulations.gov. Recently published rulemaking
documents can also be accessed through the FAA's web page at https://www.faa.gov/air_traffic/publications/airspace_amendments/.
    You may review the public docket containing the proposal, any
comments received and any final disposition in person in the Dockets
Office (see ADDRESSES section for address and phone number) between
9:00 a.m. and 5:00 p.m., Monday through Friday, except Federal
holidays. An informal docket may also be examined during normal
business hours at the office of the Eastern Service Center, Federal
Aviation Administration, Room 210, 1701 Columbia Ave., College Park, GA
30337.

Availability and Summary of Documents for Incorporation by Reference

    This document proposes to amend FAA Order JO 7400.11F, Airspace
Designations and Reporting Points, dated August 10, 2021, and effective
September 15, 2021. FAA Order JO 7400.11F is publicly available as
listed in the ADDRESSES section of this proposed rule. FAA Order JO
7400.11F lists Class A, B, C, D, and E airspace areas, air traffic
service routes, and reporting points.

The Proposal

    The FAA is proposing an amendment to 14 CFR part 71 to amend VOR
Federal airways V-1, V-16, and V-290, and remove airways V-93 and V-
229. This action is necessary to support the FAA's VOR Minimum
Operational Network (MON) program. The proposed route changes are
described below.
    V-1: V-1 extends from Craig, FL, to Boston, MA. The FAA proposes to
remove the airway segments from Cofield, NC, to Boston, MA. As a
result, V-1 would extend from Craig, FL, to Kinston, NC. The wording
``The portions within R-5002A, R-5002C and R-5002D are excluded during
their times of use. The airspace within R-4006 is excluded.'' would be
removed from the route description because the amended route would no
longer pass by those areas. United States Area Navigation (RNAV) route
T-303 will be published as an overlay of V-1.
    V-16: V-16 consists of two parts: From Los Angeles, CA, to Holly
Springs, MS; and From Shelbyville, TN, to Boston, MA. The FAA proposes
to amend the second part of the route by removing the segments from the
intersection of the Richmond, VA, 039[deg] and the Patuxent, MD,
228[deg] radials, to Boston, MA. As amended, the second part of V-16
would extend from Shelbyville, TN, to Richmond, VA. The first part of
the route, from Los Angeles, CA, to Holly Springs, MS, would remain
unchanged as currently charted. The wording ``The airspace within
Restricted Areas R-5002A, R-5002C, and R-5002D is excluded. The
airspace within Restricted Areas R-4005 and R-4006 is excluded.'' would
be removed from the route description because the amended route would
no longer pass by those areas. RNAV route T-224 would be extended as an
overlay of V-16.
    V-93: V-93 consists of two parts: From Patuxent River, MD, to the
intersection of the Wilkes-Barre, PA 037[deg] and the Sparta, NJ
300[deg] radials; and From the intersection of the Sparta 018[deg] and
the Kingston, NY 270[deg] radials, to Chester, MA. The FAA proposes to
remove V-93 in its entirety. RNAV route T-295 currently overlays part
of V-93, and T-324 is being extended as a partial overlay and
replacement for V-93.
    V-229: V-229 extends from Patuxent, MD, to Hartford, CT. The FAA
proposes to remove V-229 in its entirety. RNAV route T-315 is being
extended as an overlay of V-229.
    V-290: V-290 consists of two parts: From Rainelle, WV, to Flat
Rock, VA; and From Tar River, NC, to the intersection of the Tar River
109[deg] and the New Bern, NC 042[deg] radials. The FAA proposes to
remove the segments from Rainelle, WV, to Flat Rock, VA, due to the
planned decommissioning of the Rainelle, WV, (RNL) VOR. As amended, V-
290 would extend from Tar River, NC, to the intersection of the Tar
River 109[deg] radial and New Bern, NC 042[deg] radial. RNAV route T-
360 is being extended as a partial overlay and replacement for V-290.
    Domestic VOR Federal airways are published in paragraph 6010(a) of
FAA Order JO 7400.11F, dated August 10, 2021, and effective September
15, 2021, which is incorporated by reference in 14 CFR 71.1. The VOR
Federal airways listed in this document would be subsequently published
and removed from FAA Order JO 7400.11.
    FAA Order JO 7400.11, Airspace Designations and Reporting Points,
is published yearly and effective on September 15.

Regulatory Notices and Analyses

    The FAA has determined that this proposed regulation only involves
an established body of technical regulations for which frequent and
routine amendments are necessary to keep them operationally current.
It, therefore: (1) is not a ``significant regulatory action'' under
Executive Order 12866; (2) is not a ``significant rule'' under
Department of Transportation (DOT) Regulatory Policies and Procedures
(44 FR 11034; February 26, 1979); and (3) does not warrant preparation
of a regulatory evaluation as the anticipated impact is so minimal.
Since this is a routine matter that will only affect air traffic
procedures and air navigation, it is certified that this proposed rule,
when promulgated, will not have a significant economic impact on a
substantial number of small entities under the criteria of the
Regulatory Flexibility Act.

Environmental Review

    This proposal will be subject to an environmental analysis in
accordance with FAA Order 1050.1F, ``Environmental Impacts: Policies
and Procedures'' prior to any FAA final regulatory action.

List of Subjects in 14 CFR Part 71

    Airspace, Incorporation by reference, Navigation (air).

The Proposed Amendment

    In consideration of the foregoing, the Federal Aviation
Administration proposes to amend 14 CFR part 71 as follows:

PART 71--DESIGNATION OF CLASS A, B, C, D, AND E AIRSPACE AREAS; AIR
TRAFFIC SERVICE ROUTES; AND REPORTING POINTS

0
1. The authority citation for 14 CFR part 71 continues to read as
follows:

    Authority:  49 U.S.C. 106(f), 106(g); 40103, 40113, 40120; E.O.
10854, 24 FR 9565, 3 CFR, 1959-1963 Comp., p. 389.

Sec.  71.1  [Amended]

0
2. The incorporation by reference in 14 CFR 71.1 of FAA Order JO
7400.11F, Airspace Designations and Reporting Points, dated August 10,
2021, and effective September 15, 2021, is amended as follows:

Paragraph 6010(a) Domestic VOR Federal Airways.

* * * * *

V-1 [Amended]

    From Craig, FL, via INT Craig 020[deg] and Charleston, SC,
214[deg] radials; Charleston; Grand Strand, SC; INT Grand Strand
031[deg] and Kinston, NC, 214[deg] radials; to Kinston. Excluding
the airspace below 2,700 feet MSL outside the United States between
STARY INT and Charleston, SC.
* * * * *

V-16 [Amended]

    From Los Angeles, CA; Paradise, CA; Palm Springs, CA; Blythe,
CA; Buckeye, AZ; Phoenix, AZ; INT Phoenix 155[deg] and Stanfield,
AZ, 105[deg] radials; Tucson, AZ; San Simon, AZ; INT San Simon
119[deg] and Columbus, NM, 277[deg] radials; Columbus; El Paso, TX;
Salt Flat, TX; Wink, TX; INT Wink 066[deg] and Big Spring, TX,
260[deg] radials; Big Spring; Abilene, TX; Bowie, TX; Bonham, TX;
Paris, TX; Texarkana, AR; Pine Bluff, AR; Marvell, AR; to Holly
Springs, MS. From Shelbyville, TN; Hinch Mountain, TN; Volunteer,
TN; Holston Mountain, TN; Pulaski, VA; Roanoke, VA; Lynchburg, VA;
Flat Rock, VA; to Richmond, VA. The airspace within Mexico and the
airspace below 2,000 feet MSL outside the United States is excluded.
* * * * *

V-93 [Removed]

* * * * *

V-229 [Removed]

* * * * *

V-290 [Amended]

    From Tar River, NC; to INT Tar River 109[deg] radial and New
Bern, NC, 042[deg] radial.
* * * * *

    Issued in Washington, DC, on July 18, 2022.
Scott M. Rosenbloom,
Manager, Airspace Rules and Regulations.
[FR Doc. 2022-15618 Filed 7-21-22; 8:45 am]
BILLING CODE 4910-13-P