[Federal Register Volume 81, Number 114 (Tuesday, June 14, 2016)]
[Notices]
[Pages 38759-38769]
[FR Doc No: 2016-13965]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78016; File No. SR-NYSEArca-2015-110]

Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
of Amendment No. 6 to a Proposed Rule Change To Amend NYSE Arca
Equities Rule 8.600 To Adopt Generic Listing Standards for Managed Fund
Shares

June 8, 2016.

I. Introduction

    On November 6, 2015, NYSE Arca, Inc. (``NYSE Arca'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a
proposed rule change to amend NYSE Arca Equities Rule 8.600 by, among
other things, adopting generic listing standards for

Managed Fund Shares. The proposed rule change was published for comment
in the Federal Register on November 27, 2015.\3\ On January 4, 2016,
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.\4\
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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. 76486 (Nov. 20,
2015), 80 FR 74169 (``Notice'').
    \4\ See Securities Exchange Act Release No. 76819, 81 FR 987
(Jan. 8, 2016). The Commission designated February 25, 2016 as the
date by which the Commission shall either approve or disapprove, or
institute proceedings to determine whether to disapprove, the
proposed rule change. See id.
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    On November 23, 2015, the Exchange filed Amendment No. 1 to the
proposed rule change. On February 21, 2016, the Exchange withdrew
Amendment No. 1 to the proposed rule change and filed Amendment No. 2
to the proposed rule change, which replaced the proposed rule change as
originally filed. The proposed rule change, as modified by Amendment
No. 2, was published for comment in the Federal Register on February 1,
2016.\5\ On February 11, 2016, the Exchange filed Amendment No. 3 to
the proposed rule change, which amended and replaced the proposed rule
change as modified by Amendment No. 2 in its entirety.
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    \5\ See Securities Exchange Act Release No. 76974 (Jan. 26,
2016), 81 FR 5149.
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    On February 12, 2016, the Exchange filed Amendment No. 4 to the
proposed rule change, which superseded the proposed rule change as
modified by Amendment No. 3. On February 22, 2016, the Commission
published notice of filing of Amendment No. 4. and instituted
proceedings under Section 19(b)(2)(B) of the Act \6\ to determine
whether to approve or disapprove the proposed rule change, as modified
by Amendment No 4.\7\ In the Order Instituting Proceedings, the
Commission solicited comment on specified matters related to the
proposal.\8\
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    \6\ 15 U.S.C. 78s(b)(2)(B).
    \7\ See Securities Exchange Act Release No. 77203, 81 FR 9900
(Feb. 26, 2016) (``Order Instituting Proceedings''). Specifically,
the Commission instituted proceedings to allow for additional
analysis of the proposed rule change's consistency with Section
6(b)(5) of the Act, which requires, among other things, that the
rules of a national securities exchange be ``designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade,'' and ``to protect investors and the
public interest.'' See id., 81 FR at 9908.
    \8\ See id. at 9909.
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    On May 20, 2016, the Commission designated a longer period for
Commission action on the proposed rule change.\9\ On June 3, 2016, the
Exchange filed Amendment No. 5 to the proposed rule change, which
superseded Amendment No 4 to the proposed rule change. The Commission
has received one comment on the proposed rule change.\10\
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    \9\ See Securities Exchange Act Release No. 77872, 81 FR 33570
(May 26, 2016) (designating July 22, 2016 as the date by which the
Commission must either approve or disapprove the proposed rule
change).
    \10\ See Letter from Rob Ivanoff to the Commission dated Nov.
22, 2015 (commenting that the format of the Exchange's proposed rule
change was unclear and difficult to read, and suggesting a new
format that would be easier to understand). This comment is
available on the Commission's Web site at: http://www.sec.gov/comments/sr-nysearca-2015-110/nysearca2015110-1.htm.
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    Pursuant to Section 19(b)(1) of the Act \11\ and Rule 19b-4
thereunder,\12\ notice is hereby given that, on June 6, 2016, the
Exchange filed Amendment No. 6 to the proposed rule change, which
supersedes the originally filed proposed rule change, as modified by
Amendment No. 5, in its entirety.\13\ The proposed rule change, as
modified by Amendment No. 6, is as described in Items II and III below,
which Items have been prepared by the Exchange. The Commission is
publishing this notice to solicit comments on the proposed rule change,
as modified by Amendment No. 6, from interested persons.
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    \11\ 15 U.S.C. 78s(b)(1).
    \12\ 17 CFR 240.19b-4.
    \13\ The Commission notes that each of the Exhibits 4 to the
Exchange's amendments depict the changes to the proposed rule text.
The amendments, including the Exhibits 4, are available at the
Commission's Web site at: http://www.sec.gov/comments/sr-nysearca-2015-10/nysearca2015110.shtml.
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II. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to amend NYSE Arca Equities Rule 8.600 to
adopt generic listing standards for Managed Fund Shares. 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.

III. 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 V below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.

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

1. Purpose
    The Exchange proposes to amend NYSE Arca Equities Rule 8.600 to
adopt generic listing standards for Managed Fund Shares. Under the
Exchange's current rules, a proposed rule change must be filed with the
Securities and Exchange Commission (``SEC'' or ``Commission'') for the
listing and trading of each new series of Managed Fund Shares. The
Exchange believes that it is appropriate to codify certain rules within
Rule 8.600 that would generally eliminate the need for such proposed
rule changes, which would create greater efficiency and promote uniform
standards in the listing process.\14\
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    \14\ The Exchange has previously filed a proposed rule change to
amend NYSE Arca Equities Rule 8.600 to adopt generic listing
standards for Managed Fund Shares. See Securities Exchange Act
Release No. 74433 (March 4, 2015), 80 FR 12690 (March 10, 2015) (SR-
NYSEArca-2015-02). On June 3, 2015, the Exchange filed Amendment No.
1 to the proposed rule change. See Securities Exchange Act Release
No. 75115 (June 5, 2015), 80 FR 33309 (June 11, 2015). On October
13, 2015, the Exchange withdrew the proposed rule change. See
Securities Exchange Act Release No. 76186 (October 19, 2015), 80 FR
64461 (October 23, 2015). This Amendment No. 6 to SR-NYSEArca-2015-
110 replaces SR-NYSEArca-2015-110 as originally filed and Amendments
No. 2, 3, 4 and 5 thereto, and supersedes such filings in their
entirety. The Exchange has withdrawn Amendment No. 1 to SR-NYSEArca-
2015-110.
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Background
    Rule 8.600 sets forth certain rules related to the listing and
trading of Managed Fund Shares.\15\ Under Rule 8.600(c)(1), the term
``Managed Fund Share'' means a security that:
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    \15\ See Securities Exchange Act Release No. 57619 (April 4,
2008), 73 FR 19544 (April 10, 2008) (SR-NYSEArca-2008-25) (order
approving NYSE Arca Equities Rule 8.600 and listing and trading of
shares of certain issues of Managed Fund Shares) (the ``Approval
Order''). The Approval Order approved the rules permitting the
listing and trading of Managed Fund Shares, trading hours and halts,
listing fees applicable to Managed Fund Shares, and the listing and
trading of several individual series of Managed Fund Shares.
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    (a) Represents an interest in a registered investment company
(``Investment Company'') organized as an open-end management investment
company or similar entity, that invests in a portfolio of securities
selected by the Investment Company's investment adviser (hereafter
``Adviser'') consistent with the Investment Company's investment
objectives and policies;
    (b) is issued in a specified aggregate minimum number in return for
a deposit of a specified portfolio of securities and/or a cash amount
with a

value equal to the next determined net asset value; and
    (c) when aggregated in the same specified minimum number, may be
redeemed at a holder's request, which holder will be paid a specified
portfolio of securities and/or cash with a value equal to the next
determined net asset value.
    Effectively, Managed Fund Shares are securities issued by an
actively-managed open-end Investment Company (i.e., an actively-managed
exchange-traded fund (``ETF'')). Because Managed Fund Shares are
actively-managed, they do not seek to replicate the performance of a
specified passive index of securities. Instead, they generally use an
active investment strategy to seek to meet their investment objectives.
In contrast, an open-end Investment Company that issues Investment
Company Units (``Units''), listed and traded on the Exchange pursuant
to NYSE Arca Equities Rule 5.2(j)(3), seeks to provide investment
results that generally correspond to the price and yield performance of
a specific foreign or domestic stock index, fixed income securities
index or combination thereof. All Managed Fund Shares listed and/or
traded pursuant to Rule 8.600 (including pursuant to unlisted trading
privileges) are subject to the full panoply of Exchange rules and
procedures that currently govern the trading of equity securities on
the Exchange.\16\
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    \16\ See Approval Order, supra note 15, at 19547.
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    In addition, Rule 8.600(d) currently provides for the criteria that
Managed Fund Shares must satisfy for initial and continued listing on
the Exchange, including, for example, that a minimum number of Managed
Fund Shares are required to be outstanding at the time of commencement
of trading on the Exchange. However, the current process for listing
and trading new series of Managed Fund Shares on the Exchange requires
that the Exchange submit a proposed rule change with the Commission. In
this regard, Commentary .01 to Rule 8.600 specifies that the Exchange
will file separate proposals under Section 19(b) of the Act (hereafter,
a ``proposed rule change'') before listing and trading of shares of an
issue of Managed Fund Shares.
Proposed Changes to Rule 8.600
    The Exchange would amend Commentary .01 to Rule 8.600 to specify
that the Exchange may approve Managed Fund Shares for listing and/or
trading (including pursuant to unlisted trading privileges) pursuant to
SEC Rule 19b-4(e) under the Act, which pertains to derivative
securities products (``SEC Rule 19b-4(e)'').\17\ SEC Rule 19b-4(e)(1)
provides that the listing and trading of a new derivative securities
product by a self-regulatory organization (``SRO'') is not deemed a
proposed rule change, pursuant to paragraph (c)(1) of Rule 19b-4,\18\
if the Commission has approved, pursuant to section 19(b) of the Act,
the SRO's trading rules, procedures and listing standards for the
product class that would include the new derivative securities product
and the SRO has a surveillance program for the product class. This is
the current method pursuant to which ``passive'' ETFs are listed under
NYSE Arca Equities Rule 5.2(j)(3).
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    \17\ 17 CFR 240.19b-4(e). As provided under SEC Rule 19b-4(e),
the term ``new derivative securities product'' means any type of
option, warrant, hybrid securities product or any other security,
other than a single equity option or a security futures product,
whose value is based, in whole or in part, upon the performance of,
or interest in, an underlying instrument.
    \18\ 17 CFR 240.19b-4(c)(1). As provided under SEC Rule 19b-
4(c)(1), a stated policy, practice, or interpretation of the SRO
shall be deemed to be a proposed rule change unless it is reasonably
and fairly implied by an existing rule of the SRO.
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    The Exchange would also specify within Commentary .01 to Rule 8.600
that components of Managed Fund Shares listed pursuant to SEC Rule 19b-
4(e) must satisfy on an initial and continued basis certain specific
criteria, which the Exchange would include within Commentary .01, as
described in greater detail below. As proposed, the Exchange would
continue to file separate proposed rule changes before the listing and
trading of Managed Fund Shares with components that do not satisfy the
additional criteria described below or components other than those
specified below. For example, if the components of a Managed Fund Share
exceeded one of the applicable thresholds, the Exchange would file a
separate proposed rule change before listing and trading such Managed
Fund Share. Similarly, if the components of a Managed Fund Share
included a security or asset that is not specified below, the Exchange
would file a separate proposed rule change.
    The Exchange would also add to the criteria of Rule 8.600(c) to
provide that the Web site for each series of Managed Fund Shares shall
disclose certain information regarding the Disclosed Portfolio, to the
extent applicable. The required information includes the following, to
the extent applicable: ticker symbol, CUSIP or other identifier, a
description of the holding, identity of the asset upon which the
derivative is based, the strike price for any options, the quantity of
each security or other asset held as measured by select metrics,
maturity date, coupon rate, effective date, market value and percentage
weight of the holding in the portfolio.\19\
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    \19\ Proposed rule changes for previously-listed series of
Managed Fund Shares have similarly included disclosure requirements
with respect to each portfolio holding, as applicable to the type of
holding. See, e.g. Securities Exchange Act Release No. 72666 (July
3, 2014), 79 FR 44224 (July 30, 2014) (SR-NYSEArca-2013-122) (the
``PIMCO Total Return Use of Derivatives Approval''), at 44227.
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    In addition, the Exchange would amend Rule 8.600(d) to specify that
all Managed Fund Shares must have a stated investment objective, which
must be adhered to under normal market conditions.\20\
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    \20\ The Exchange would also add a new defined term under Rule
8.600(c)(5) to specify that the term ``normal market conditions''
includes, but is not limited to, the absence of trading halts in the
applicable financial markets generally; operational issues (e.g.,
systems failure) causing dissemination of inaccurate market
information; or force majeure type events such as natural or man-
made disaster, act of God, armed conflict, act of terrorism, riot or
labor disruption or any similar intervening circumstance.
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    Finally, the Exchange would also amend the continued listing
requirement in Rule 8.600(d)(2)(A) by changing the requirement that a
Portfolio Indicative Value for Managed Fund Shares be widely
disseminated by one or more major market data vendors at least every 15
seconds during the time when the Managed Fund Shares trade on the
Exchange to a requirement that a Portfolio Indicative Value be widely
disseminated by one or more major market data vendors at least every 15
seconds during the Core Trading Session (as defined in NYSE Arca
Equities Rule 7.34).
Proposed Managed Fund Share Portfolio Standards
    The Exchange is proposing standards that would pertain to Managed
Fund Shares to qualify for listing and trading pursuant to SEC Rule
19b-4(e). These standards would be grouped according to security or
asset type. The Exchange notes that the standards proposed for a
Managed Fund Share portfolio that holds U.S. Component Stocks, Non-U.S.
Component Stocks, Derivative Securities Products and Index-Linked
Securities are based in large part on the existing equity security
standards applicable to Units in Commentary .01 to Rule 5.2(j)(3). The
standards proposed for a Managed Fund Share portfolio that holds fixed
income securities are based in large part on the existing fixed income
security standards applicable to Units in Commentary .02 to Rule
5.2(j)(3). Many of the standards proposed for other types of holdings
in

a Managed Fund Share portfolio are based on previous proposed rule
changes for specific series of Managed Fund Shares.\21\
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    \21\ See the PIMCO Total Return Use of Derivatives Approval. See
also, Securities Exchange Act Release Nos. 66321 (February 3, 2012),
77 FR 6850 (February 9, 2012) (SR-NYSEArca-2011-95) (the ``PIMCO
Total Return Approval''); 69244 (March 27, 2013), 78 FR 19766 (April
2, 2013) (SR-NYSEArca-2013-08) (the ``SPDR Blackstone/GSO Senior
Loan Approval''); 68870 (February 8, 2013), 78 FR 11245 (February
15, 2013) (SR-NYSEArca-2012-139) (the ``First Trust Preferred
Securities and Income Approval''); 69591 (May 16, 2013), 78 FR 30372
(May 22, 2013) (SR-NYSEArca-2013-33) (the ``International Bear
Approval''); 61697 (March 12, 2010), 75 FR 13616 (March 22, 2010)
(SR-NYSEArca-2010-04) (the ``WisdomTree Real Return Approval''); and
67054 (May 24, 2012), 77 FR 32161 (May 31, 2012) (SR-NYSEArca-2012-
25) (the ``WisdomTree Brazil Bond Approval''). Certain standards
proposed herein for Managed Fund Shares are also based on previous
proposed rule changes for specific series of Units for which
Commission approval for listing was required due to the Units not
satisfying certain standards of Commentary .01 and .02 to NYSE Arca
Equities Rule 5.2(j)(3). See, e.g., Securities Exchange Act Release
No. 69373 (April 15, 2013), 78 FR 23601 (April 19, 2013) (SR-
NYSEArca-2012-108) (the ``NYSE Arca U.S. Equity Synthetic Reverse
Convertible Index Fund Approval'').
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    Proposed Commentary .01(a) would describe the standards for a
Managed Fund Share portfolio that holds equity securities, which are
defined to be U.S. Component Stocks,\22\ Non-U.S. Component Stocks,\23\
Derivative Securities Products,\24\ and Index-Linked Securities \25\
listed on a national securities exchange. For Derivative Securities
Products and Index-Linked Securities, no more than 25% of the equity
weight of the portfolio could include leveraged and/or inverse
leveraged Derivative Securities Products or Index-Linked Securities. In
addition, proposed Commentary .01(a) would provide that, to the extent
that a portfolio includes convertible securities, the equity security
into which such security is converted would be required to meet the
criteria of Commentary .01(a) after converting.
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    \22\ For the purposes of Commentary .01 and this proposal, the
term ``U.S. Component Stocks'' would have the same meaning as
described in NYSE Arca Equities Rule 5.2(j)(3).
    \23\ For the purposes of Commentary .01 and this proposal, the
term ``Non-U.S. Component Stocks'' would have the same meaning as
described in NYSE Arca Equities Rule 5.2(j)(3).
    \24\ For the purposes of Commentary .01 and this proposal, the
term ``Derivative Securities Products'' would mean Investment
Company Units and securities described in Section 2 of Rule 8.
    \25\ Index-Linked Securities are securities that qualify for
Exchange listing and trading under NYSE Arca Equities Rule
5.2(j)(6). The securities described in Rule 5.2(j)(3), Rule
5.2(j)(6) and Section 2 of Rule 8, as referenced above, would
include securities listed on another national securities exchange
pursuant to substantially equivalent listing rules.
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    As proposed in Commentary .01(a)(1) to Rule 8.600, 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:
    (1) 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 must have a
minimum market value of at least $75 million; \26\
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    \26\ This proposed text is identical to the corresponding text
of Commentary .01(a)(A)(1) to NYSE Arca Equities Rule 5.2(j)(3),
except for the omission of the reference to ``index,'' which is not
applicable, and the addition of the reference to Index-Linked
Securities.
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    (2) 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 must 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; \27\
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    \27\ This proposed text is identical to the corresponding text
of Commentary .01(a)(A)(2) to NYSE Arca Equities Rule 5.2(j)(3),
except for the omission of the reference to ``index,'' which is not
applicable, and the addition of the reference to Index-Linked
Securities.
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    (3) The most heavily weighted component stock (excluding Derivative
Securities Products and Index-Linked Securities) must 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) must not exceed 65% of
the equity weight of the portfolio; \28\
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    \28\ This proposed text is identical to the corresponding text
of Commentary .01(a)(A)(3) to NYSE Arca Equities Rule 5.2(j)(3),
except for the omission of the reference to ``index,'' which is not
applicable, and the addition of the reference to Index-Linked
Securities.
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    (4) 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 (a) 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 (b) 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; \29\
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    \29\ This proposed text is identical to the corresponding text
of Commentary .01(a)(A)(4) to NYSE Arca Equities Rule 5.2(j)(3),
except for the omission of the reference to ``index,'' which is not
applicable, the addition of the reference to Index-Linked
Securities, and the reference to the 100% limit applying to the
``equity portion'' of the portfolio.
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    (5) Except as provided in proposed Commentary .01(a), equity
securities in the portfolio must be U.S. Component Stocks listed on a
national securities exchange and must be NMS Stocks as defined in Rule
600 of Regulation NMS; \30\
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    \30\ 17 CFR 240.600. This proposed text is identical to the
corresponding text of Commentary .01(a)(A)(5) to NYSE Arca Equities
Rule 5.2(j)(3), except for the addition of ``equity'' to make clear
that the standard applies to ``equity securities'', the exclusion of
unsponsored ADRs, and the omission of the reference to ``index,''
which is not applicable.
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    (6) American Depositary Receipts (``ADRs'') may be exchange-traded
or non-exchange-traded. However no more than 10% of the equity weight
of the portfolio shall consist of non-exchange-traded ADRs.\31\
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    \31\ Proposed rule changes for previously-listed series of
Managed Fund Shares have similarly included the ability for such
Managed Fund Share holdings to include not more than 10% of net
assets in unsponsored ADRs (which are not exchange-listed). See,
e.g., Securities Exchange Act Release No. 71067 (December 12,
20113[sic]), 78 FR 76669 (December 18, 2013) (order approving
listing and trading of shares of the SPDR MFS Systematic Core Equity
ETF, SPDR MFS Systematic Growth Equity ETF, and SPDR MFS Systematic
Value Equity ETF under NYSE Arca Equities Rule 8.600).
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    As proposed in Commentary .01(a)(2) to Rule 8.600, the component
stocks of the equity portion of a portfolio that are Non-U.S. Component
Stocks shall meet the following criteria initially and on a continuing
basis:
    (1) Non-U.S. Component Stocks each shall have a minimum market
value of at least $100 million; \32\
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    \32\ The proposed text is identical to the corresponding
representation from the ``SSgA Global Managed Volatility Release'',
as defined in footnote 28, below. The proposed text is also
identical to the corresponding text of Commentary .01(a)(B)(1) to
NYSE Arca Equities Rule 5.2(j)(3), except for the omission of the
reference to ``index,'' which is not applicable, and that each Non-
U.S. Component Stock must have a minimum market value of at least
$100 million instead of the 90% required under Commentary
.01(a)(B)(1) to NYSE Arca Equities Rule 5.2(j)(3).
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    (2) Non-U.S. Component Stocks each shall have a minimum global
monthly trading volume of 250,000 shares, or minimum global notional
volume traded per month of $25,000,000, averaged over the last six
months; \33\
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    \33\ The proposed text is identical to the corresponding
representation from the SSgA Global Managed Volatility Release, as
defined in footnote 28, below. This proposed text also is identical
to the corresponding text of Commentary .01(a)(B)(2) to NYSE Arca
Equities Rule 5.2(j)(3), except for the omission of the reference to
``index,'' which is not applicable.

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    (3) The most heavily weighted Non-U.S. Component Stock shall not
exceed 25% of the equity weight of the portfolio, and, to the extent
applicable, the five most heavily weighted Non-U.S. Component Stocks
shall not exceed 60% of the equity weight of the portfolio; \34\
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    \34\ This proposed text is identical to the corresponding text
of Commentary .01(a)(B)(3) to NYSE Arca Equities Rule 5.2(j)(3),
except for the omission of the reference to ``index'', which is not
applicable.
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    (4) Where the equity portion of the portfolio includes Non-U.S.
Component Stocks, the equity portion of the portfolio shall include a
minimum of 20 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; \35\ and
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    \35\ This proposed text is similar to the corresponding text of
Commentary .01(a)(B)(4) to NYSE Arca Equities Rule 5.2(j)(3), except
for the omission of the reference to ``index,'' which is not
applicable, the addition of the reference to Index-Linked
Securities, the reference to the equity portion of the portfolio
including Non-U.S. Component Stocks, and the reference to the 100%
limitation applying to the ``equity weight'' of the portfolio, which
is included because the proposed standards in Commentary .01 to Rule
8.600 permit the inclusion of non-equity securities, whereas
Commentary .01 to NYSE Arca Equities Rule 5.2(j)(3) applies only to
equity securities.
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    (5) Each Non-U.S. Component Stock shall be listed and traded on an
exchange that has last-sale reporting.\36\
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    \36\ This proposed text is similar to Commentary .01(a)(B)(5) to
NYSE Arca Equities Rule 5.2(j)(3) as it relates to Non-U.S.
Component Stocks.
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    The Exchange notes that it is not proposing to require that any of
the equity portion of the equity portfolio composed of Non-U.S.
Component Stocks be listed on markets that are either a member of the
Intermarket Surveillance Group (``ISG'') or a market with which the
Exchange has a comprehensive surveillance sharing agreement
(``CSSA'').\37\ However, as further detailed below, the regulatory
staff of the Exchange, or the Financial Industry Regulatory Authority,
Inc. (``FINRA''), on behalf of the Exchange, will communicate as needed
regarding trading in Managed Fund Shares with other markets that are
members of the ISG, including U.S. securities exchanges on which the
components are traded. The Exchange notes that the generic listing
standards for Units based on foreign indexes in NYSE Arca Equities Rule
5.2(j)(3) do not include specific ISG or CSSA requirements.\38\ In
addition, the Commission has approved listing and trading on the
Exchange of shares of an issue of Managed Fund Shares under NYSE Arca
Equities Rule 8.600 where non-U.S. equity securities in such issue's
portfolio meet specified criteria and where there is no requirement
that such non-U.S. equity securities are traded in markets that are
members of ISG or with which the Exchange has in place a CSSA.\39\
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    \37\ ISG is comprised of an international group of exchanges,
market centers, and market regulators that perform front-line market
surveillance in their respective jurisdictions. See
www.isgportal.org. A list of ISG members is available at
www.isgportal.org.
    \38\ Under Commentary .01 to NYSE Arca Equities Rule 5.2(j)(3),
Units with components that include Non-U.S. Component Stocks can
hold a portfolio that is entirely composed of Non-U.S. Component
Stocks that are listed on markets that are neither members of ISG,
nor with which the Exchange has in place a CSSA.
    \39\ See Securities Exchange Act Release No. 75023 (May 21,
2015), 80 FR 30519 (May 28, 2015) (SR-NYSEArca-2014-100) (order
approving listing and trading on the Exchange of shares of the SPDR
SSgA Global Managed Volatility ETF under NYSE Arca Equities Rule
8.600) (``SSgA Global Managed Volatility Release'').
---------------------------------------------------------------------------

    Proposed Commentary .01(b) would describe the standards for a
Managed Fund Share portfolio that holds fixed income securities, which
are debt securities \40\ that are notes, bonds, debentures or evidence
of indebtedness that include, but are not limited to, U.S. Department
of Treasury securities (``Treasury Securities''), government-sponsored
entity securities (``GSE Securities''), municipal securities, trust
preferred securities, supranational debt and debt of a foreign country
or a subdivision thereof, investment grade and high yield corporate
debt, bank loans, mortgage and asset backed securities, and commercial
paper. In addition, to the extent that a portfolio includes convertible
securities, the fixed income security into which such security is
converted would be required to meet the criteria of Commentary .01(b)
after converting.
---------------------------------------------------------------------------

    \40\ Debt securities include a variety of fixed income
obligations, including, but not limited to, corporate debt
securities, government securities, municipal securities, convertible
securities, and mortgage-backed securities. Debt securities include
investment-grade securities, non-investment-grade securities, and
unrated securities. Debt securities also include variable and
floating rate securities.
---------------------------------------------------------------------------

    The components of the fixed income portion of a portfolio must meet
the following criteria initially and on a continuing basis:
    (1) Components that in the aggregate account for at least 75% of
the fixed income weight of the portfolio each shall have a minimum
original principal amount outstanding of $100 million or more; \41\
---------------------------------------------------------------------------

    \41\ This text of proposed Commentary .01(b)(1) to Rule 8.600 is
based on the corresponding text of Commentary .02(a)(2) to Rule
5.2(j)(3) .
---------------------------------------------------------------------------

    (2) No component fixed-income security (excluding Treasury
Securities and GSE Securities) could represent more than 30% of the
fixed income weight of the portfolio, and the five most heavily
weighted component fixed income securities in the portfolio (excluding
Treasury Securities and GSE Securities) must not in the aggregate
account for more than 65% of the fixed income weight of the portfolio;
\42\
---------------------------------------------------------------------------

    \42\ This proposed text is identical to the corresponding text
of Commentary .02(a)(4) to Rule 5.2(j)(3), except for the omission
of the reference to ``index,'' which is not applicable.
---------------------------------------------------------------------------

    (3) An underlying portfolio (excluding exempted securities) that
includes fixed income securities must include a minimum of 13 non-
affiliated issuers; provided, however, that there shall be no minimum
number of non-affiliated issuers required for fixed income securities
if at least 70% of the weight of the portfolio consists of equity
securities as described in proposed Commentary .01(a).\43\
---------------------------------------------------------------------------

    \43\ This proposed text is similar to the corresponding text of
Commentary .02(a)(5) to Rule 5.2(j)(3), except for the omission of
the reference to ``index,'' which is not applicable, the exclusion
of the text ``consisting entirely of exempted securities'' and the
provision that there shall be no minimum number of non-affiliated
issuers required for fixed income securities if at least 70% of the
weight of the portfolio consists of equity securities as described
in proposed Commentary .01(a).
---------------------------------------------------------------------------

    (4) Component securities that in aggregate account for at least 90%
of the fixed income weight of the portfolio must be either (a) from
issuers that are required to file reports pursuant to Sections 13 and
15(d) of the Act; (b) from issuers that have a worldwide market value
of its outstanding common equity held by non-affiliates of $700 million
or more; (c) from issuers that have outstanding securities that are
notes, bonds debentures, or evidence of indebtedness having a total
remaining principal amount of at least $1 billion; \44\ (d) exempted
securities as defined in Section 3(a)(12) of the Act; or (e) from
issuers that are a government of a foreign country or a political
subdivision of a foreign country; and
---------------------------------------------------------------------------

    \44\ With respect to subparagraphs (b) and (c) above, the
special purpose vehicle (``SPV'') that issues the fixed income
security (e.g., an asset-backed or mortgage-backed security) would
itself be required to satisfy the $700 million and $1 billion
criteria, respectively, and not the entity that controls, owns or is
affiliated with the SPV.
---------------------------------------------------------------------------

    (5) Non-agency, non-GSE and privately-issued mortgage-related and
other asset-backed securities components of a portfolio shall not
account, in the aggregate, for more than

20% of the weight of the fixed income portion of the portfolio.\45\
---------------------------------------------------------------------------

    \45\ Proposed rule changes for previously-listed series of
Managed Fund Shares have similarly included the ability for such
Managed Fund Share holdings to include up to 20% of net assets in
non-agency, non-GSE and privately-issued mortgage-related and other
asset-backed securities. See, e.g., Securities Exchange Act Release
No. 75566 (July 30, 2015), 80 FR 46612 (August 5, 2015) (SR-
NYSEArca-2015-42) (order approving listing and trading of shares of
Newfleet Multi-Sector Unconstrained Bond ETF under NYSE Arca
Equities Rule 8.600).
---------------------------------------------------------------------------

    Proposed Commentary .01(c) would describe the standards for a
Managed Fund Share portfolio that holds cash and cash equivalents.\46\
Specifically, the portfolio may hold short-term instruments with
maturities of less than 3 months. There would be no limitation to the
percentage of the portfolio invested in such holdings. Short-term
instruments would include the following: \47\
---------------------------------------------------------------------------

    \46\ Proposed rule changes for previously-listed series of
Managed Fund Shares have similarly included the ability for such
Managed Fund Share holdings to include cash and cash equivalents.
See, e.g., SPDR Blackstone/GSO Senior Loan Approval, supra note 21,
at 19768-69 and First Trust Preferred Securities and Income
Approval, supra note 21, at 76150.
    \47\ Proposed rule changes for previously-listed series of
Managed Fund Shares have similarly specified short-term instruments
with respect to their inclusion in Managed Fund Share holdings. See,
e.g., First Trust Preferred Securities and Income Approval, supra
note 21, at 76150-51.
---------------------------------------------------------------------------

    (1) U.S. Government securities, including bills, notes and bonds
differing as to maturity and rates of interest, which are either issued
or guaranteed by the U.S. Treasury or by U.S. Government agencies or
instrumentalities;
    (2) certificates of deposit issued against funds deposited in a
bank or savings and loan association;
    (3) bankers' acceptances, which are short-term credit instruments
used to finance commercial transactions;
    (4) repurchase agreements and reverse repurchase agreements;
    (5) bank time deposits, which are monies kept on deposit with banks
or savings and loan associations for a stated period of time at a fixed
rate of interest;
    (6) commercial paper, which are short-term unsecured promissory
notes; and
    (7) money market funds.
    Proposed Commentary .01(d) would describe the standards for a
Managed Fund Share portfolio that holds listed derivatives, including
futures, options and swaps on commodities, currencies and financial
instruments (e.g., stocks, fixed income, interest rates, and
volatility) or a basket or index of any of the foregoing.\48\ There
would be no limitation to the percentage of the portfolio invested in
such holdings, subject to the following requirements:
---------------------------------------------------------------------------

    \48\ Proposed rule changes for previously-listed series of
Managed Fund Shares have similarly included the ability for such
Managed Fund Share holdings to include listed derivatives. See,
e.g., WisdomTree Real Return Approval, supra note 21, at 13617 and
WisdomTree Brazil Bond Approval, supra note 21, at 32163.
---------------------------------------------------------------------------

    (1) 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.); and
    (2) 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).
    Proposed Commentary .01(e) would describe the standards for a
Managed Fund Share portfolio that holds over the counter (``OTC'')
derivatives, including forwards, options and swaps on commodities,
currencies and financial instruments (e.g., stocks, fixed income,
interest rates, and volatility) or a basket or index of any of the
foregoing.\49\ Proposed Commentary .01(e) would provide that, on both
an initial and continuing basis, no more than 20% of the assets in the
portfolio may be invested in OTC derivatives. For purposes of
calculating this limitation, a portfolio's investment in OTC
derivatives will be calculated as the aggregate gross notional value of
the OTC derivatives.
---------------------------------------------------------------------------

    \49\ A proposed rule change for series of Units previously
listed and traded on the Exchange pursuant to Rule 5.2(j)(3)
similarly included the ability for such Units' holdings to include
OTC derivatives, specifically OTC down-and-in put options, which are
not NMS Stocks as defined in Rule 600 of Regulation NMS and
therefore do not satisfy the requirements of Commentary .01(a)(A) to
Rule 5.2(j)(3). See, e.g., NYSE Arca U.S. Equity Synthetic Reverse
Convertible Index Fund Approval, supra note 21, at 23602.
---------------------------------------------------------------------------

    Proposed Commentary .01(f) would provide that, to the extent that
listed or OTC derivatives are used to gain exposure to individual
equities and/or fixed income securities, or to indexes of equities and/
or fixed income securities, the aggregate gross notional value of such
exposures shall meet the criteria set forth in Commentary .01(a) and
.01(b) to Rule 8.600 (including gross notional exposures),
respectively. The Exchange notes that, for purposes of this proposal, a
portfolio's investment in OTC derivatives will be calculated as the
aggregate gross notional value of the OTC derivatives.
    The following examples illustrate how certain of the proposed
generic criteria of Rule 8.600 would be applied:
    1. An actively managed ETF holds non-agency MBS that represent 15%
of the weight of the fixed income portion of the portfolio. The fixed
income portion of the portfolio meets all the requirements of
Commentary .01(b). The ETF also holds an OTC swap on a non-agency MBS
Index that represents 10% of the fixed income weight of the portfolio
calculated on a notional value basis. Separately, the OTC swap and
fixed income portion of the portfolio would meet the requirements of
the Rule 8.600, Commentary .01. However, when the 15% weight in non-
agency MBS and the 10% weight in the non-agency MBS Index OTC swap are
combined, as required by proposed Commentary .01(f) to Rule 8.600, the
25% total weight would exceed the 20% limit for non-agency GSE and
privately-issued mortgage-related securities in Commentary .01(b)(5).
The portfolio, therefore, would not meet the proposed generic criteria
of Rule 8.600.
    2. An actively managed ETF holds a portfolio of non-U.S. equity
securities, S&P 500 Index and gold futures. S&P 500 Index futures and
the gold futures held by the fund are listed on an ISG member exchange.
The equity portion of the portfolio consists of developed and emerging
markets equity securities with a current aggregate market value of $15
million and all components meet the requirements under Commentary
.01(a)(2). The gold futures contract trading unit size is 100 troy
ounces and an ounce of gold is currently worth $1200. The fund holds
500 gold futures contracts with a notional value of $60 million (500 *
100 * $1200). One S&P 500 contract represents 250 units of the S&P 500
Index and the S&P 500 Index is trading at $2,000. The portfolio holds
50 contracts, so the notional value of the S&P 500 Index futures
position is $25 million (50 * 250 * $2000). The S&P 500 Index futures
meet the requirement under Commentary .01(f), that is, the S&P 500
Index meets the criteria in Commentary .01(a). The weights of the
components are as follows: Equity securities represent 15% of the
portfolio, gold futures represent 60% of

the portfolio and S&P 500 Index futures represent 25% of the portfolio.
The gold futures represent 60% of the portfolio and exceeds the 30%
concentration limitation on any single underlying reference asset as
outlined in proposed Commentary .01(d)(2). The portfolio, therefore,
would not meet the proposed generic criteria of Rule 8.600.
    3. An actively managed ETF holds a portfolio of equity securities
and call option contracts on company XYZ. The equity portion of [sic]
portfolio meets the requirements under Commentary .01(a). Company XYZ
represents 20% of the weight of the equity portion of the portfolio.
The equity portion of the fund has a market value of $100 million and
the market value of the fund's holdings in company XYZ has a market
value of $20 million. The fund also holds 10,000 call option contracts
on company XYZ which has a current market price of $50 a share and,
therefore, a notional value of $50 million (50 * 100 * 10,000) (that
is, the $50 market price per share times the multiplier of 100 times
10,000 contracts). The option contracts are traded on an ISG member
exchange. The total exposure to company XYZ is therefore $70 million
and represents 46.7% ($70 million/$150 million=46.7%) of the portfolio.
This fund would not meet the requirements of Rule 8.600 because the
exposure to XYZ at 46.7% exceeds the 30% concentration limitation of
proposed Commentary .01(d)(2).
    The Exchange believes that the proposed standards would continue to
ensure transparency surrounding the listing process for Managed Fund
Shares. Additionally, the Exchange believes that the proposed portfolio
standards for listing and trading Managed Fund Shares, many of which
track existing Exchange rules relating to Units, are reasonably
designed to promote a fair and orderly market for such Managed Fund
Shares.\50\ These proposed standards would also work in conjunction
with the existing initial and continued listing criteria related to
surveillance procedures and trading guidelines.
---------------------------------------------------------------------------

    \50\ See Approval Order, supra note 15 at 19548.
---------------------------------------------------------------------------

    In support of this proposal, the Exchange represents that: \51\
---------------------------------------------------------------------------

    \51\ The Exchange made similar representations in the Approval
Order. See id. at 19549.
---------------------------------------------------------------------------

    (1) The Managed Fund Shares will continue to conform to the initial
and continued listing criteria under Rule 8.600;
    (2) the Exchange's surveillance procedures are adequate to continue
to properly monitor the trading of the Managed Fund Shares in all
trading sessions and to deter and detect violations of Exchange rules.
Specifically, the Exchange intends to utilize its existing surveillance
procedures applicable to derivative products, which will include
Managed Fund Shares, to monitor trading in the Managed Fund Shares;
    (3) prior to the commencement of trading of a particular series of
Managed Fund Shares, the Exchange will inform its Equity Trading Permit
(``ETP'') Holders in a Bulletin of the special characteristics and
risks associated with trading the Managed Fund Shares, including
procedures for purchases and redemptions of Managed Fund Shares,
suitability requirements under NYSE Arca Equities Rule 9.2(a), the
risks involved in trading the Managed Fund Shares during the Opening
and Late Trading Sessions when an updated Portfolio Indicative Value
will not be calculated or publicly disseminated, information regarding
the Portfolio Indicative Value and the Disclosed Portfolio, prospectus
delivery requirements, and other trading information. In addition, the
Bulletin will disclose that the Managed Fund Shares are subject to
various fees and expenses, as described in the applicable registration
statement, and will discuss any exemptive, no-action, and interpretive
relief granted by the Commission from any rules under the Act. Finally,
the Bulletin will disclose that the net asset value for the Managed
Fund Shares will be calculated after 4 p.m. ET each trading day; and
    (4) the issuer of a series of Managed Fund Shares will be required
to comply with Rule 10A-3 under the Act for the initial and continued
listing of Managed Fund Shares, as provided under NYSE Arca Equities
Rule 5.3.
    The Exchange notes that the proposed change is not otherwise
intended to address any other issues and that the Exchange is not aware
of any problems that ETP Holders or issuers would have in complying
with the proposed change.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\52\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\53\ in particular, because it
is 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.
---------------------------------------------------------------------------

    \52\ 15 U.S.C. 78f(b).
    \53\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    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 because it would facilitate the listing and trading of
additional Managed Fund Shares, which would enhance competition among
market participants, to the benefit of investors and the marketplace.
Specifically, after more than six years under the current process,
whereby the Exchange is required to file a proposed rule change with
the Commission for the listing and trading of each new series of
Managed Fund Shares, the Exchange believes that it is appropriate to
codify certain rules within Rule 8.600 that would generally eliminate
the need for separate proposed rule changes. The Exchange believes that
this would facilitate the listing and trading of additional types of
Managed Fund Shares that have investment portfolios that are similar to
investment portfolios for Units, which have been approved for listing
and trading, thereby creating greater efficiencies in the listing
process for the Exchange and the Commission. In this regard, the
Exchange notes that the standards proposed for Managed Fund Share
portfolios that include U.S. Component Stocks, Non-U.S. Component
Stocks, Derivative Securities Products, and Index-Linked Securities are
based in large part on the existing equity security standards
applicable to Units in Commentary .01 to NYSE Arca Equities Rule
5.2(j)(3) and that the standards proposed for Managed Fund Share
portfolios that include fixed income securities are based in large part
on the existing fixed income standards applicable to Units in
Commentary .02 to NYSE Arca Equities Rule 5.2(j)(3). Additionally, many
of the standards proposed for other types of holdings of series of
Managed Fund Shares are based on previous proposed rule changes for
specific series of Managed Fund Shares.\54\
---------------------------------------------------------------------------

    \54\ See supra, note 21.
---------------------------------------------------------------------------

    With respect to the proposed addition to the criteria of Rule
8.600(c) to provide that the Web site for each series of Managed Fund
Shares shall disclose certain information regarding the Disclosed
Portfolio, to the extent applicable, the Exchange notes that proposed
rule changes approved by the Commission for previously-listed series of
Managed Fund Shares have similarly included disclosure requirements
with respect to each portfolio holding, as

applicable to the type of holding.\55\ With respect to the proposed
definition of the term ``normal market conditions'' in proposed Rule
8.600(c)(5), such definition is similar to the definition of normal
market conditions approved by the Commission for other issues of
Managed Fund Shares.\56\ In addition, proposed Rule 8.600(d)(1)(C),
would specify that a series of Managed Fund Shares would be required to
adhere to its stated investment objective during normal market
conditions.
---------------------------------------------------------------------------

    \55\ See supra, note 19.
    \56\ See, e.g., Securities Exchange Act Release No. 74338
(February 20, 2015), 80 FR 10556 (February 26, 2015) (SR-NYSEArca-
2014-143) (order approving listing and trading of shares of the SPDR
Doubletree Total Return Tactical ETF under NYSE Arca Equities Rule
8.600).
---------------------------------------------------------------------------

    With respect to the proposed amendment to the continued listing
requirement in Rule 8.600(d)(2)(A) to require dissemination of a
Portfolio Indicative Value at least every 15 seconds during the Core
Trading Session (as defined in NYSE Arca Equities Rule 7.34), such
requirement conforms to the requirement applicable to the dissemination
of the Intraday Indicative Value for Units in Commentary .01(c) and
Commentary .02 (c) to NYSE Arca Equities Rule 5.2(j)(3). In addition,
such dissemination is consistent with representations made in proposed
rule changes for issues of Managed Fund Shares previously approved by
the Commission.\57\
---------------------------------------------------------------------------

    \57\ See, e.g., Approval Order, supra note 15; International
Bear Approval, supra note 21.
---------------------------------------------------------------------------

    With respect to the proposed requirement in Commentary .01(a) that
no more than 25% of the equity weight of the portfolio shall consist of
leveraged and/or inverse leveraged Derivative Securities Products or
Index-Linked Securities, such requirement would assure that only a
relatively small proportion of a fund's investments could consist of
such leveraged and/or inverse securities. In addition, such limitation
would apply to both U.S. Component Stocks and Non-U.S. Component Stocks
comprising the equity portion of a portfolio. With respect to the
proposed provision in Commentary .01(a) that, to the extent a portfolio
includes a convertible security, the equity security into which such
security is converted must meet the criteria in Commentary .01(a) after
converting, such requirement would assure that the equity securities
into which a convertible security could be converted meet the liquidity
and other criteria in Commentary .01 applicable to such equity
securities. With respect to the proposed exclusion of Derivatives
Securities Products and Index-Linked Securities from the requirements
of proposed Commentary .01(a) of Rule 8.600, the Exchange believes it
is appropriate to exclude Index-Linked Securities as well as Derivative
Securities Products from certain component stock eligibility criteria
for Managed Fund Shares in so far as Derivative Securities Products and
Index-Linked Securities are themselves subject to specific quantitative
listing and continued listing requirements of a national securities
exchange on which such securities are listed. Derivative Securities
Products and Index-Linked Securities that are components of a fund's
portfolio would have been listed and traded on a national securities
exchange pursuant to a proposed rule change approved by the Commission
pursuant to Section 19(b)(2) of the Act \58\ or submitted by a national
securities exchange pursuant to Section 19(b)(3)(A) of the Act \59\ or
would have been listed by a national securities exchange pursuant to
the requirements of Rule 19b-4(e) under the Act.\60\ The Exchange also
notes that Derivative Securities Products and Index-Linked Securities
are derivatively priced, and, therefore, the Exchange believes that it
would not be necessary to apply the proposed generic quantitative
criteria (e.g., market capitalization, trading volume, or portfolio
component weighting) applicable to equity securities other than
Derivative Securities Products or Index-Linked Securities (e.g., common
stocks) to such products.\61\
---------------------------------------------------------------------------

    \58\ 15 U.S.C. 78s(b)(2).
    \59\ 15 U.S.C. 78s(b)(3)(A).
    \60\ 17 CFR 240.19b-4(e).
    \61\ See Securities Exchange Act Release Nos. 57561 (March 26,
2008), 73 FR 17390 (April 1, 2008) (SR-NYSEArca-2008-29) (notice of
filing of proposed rule change to amend eligibility criteria for
components of an index underlying Investment Company Units); 57751
(May 1, 2008), 73 FR 25818 (May 7, 2008) (SR-NYSEArca-2008-29)
(order approving proposed rule change to amend eligibility criteria
for components of an index underlying Investment Company Units).
---------------------------------------------------------------------------

    With respect to the proposed criteria applicable to U.S. Component
Stocks, the Exchange notes that such criteria are similar to those in
Commentary .01 to NYSE Arca Equities Rule 5.2(j)(3) relating to
criteria applicable to an index or portfolio of U.S. Component Stocks.
In addition, Non-U.S. Component Stocks also will be required to meet
criteria similar to certain generic listing standards in Commentary .01
to NYSE Arca Equities Rule 5.2(j)(3) relating to criteria applicable to
an index or portfolio of U.S. Component Stocks and Non-U.S. Component
Stocks underlying a series of Units to be listed and traded on the
Exchange pursuant to Rule 19b-4(e) under the Act.
    With respect to the proposed requirement in Commentary .01(a)(1)(F)
that ADRs in a portfolio may be exchange-traded or non-exchange-traded
and that no more than 10% of the equity weight of the portfolio shall
consist of non-exchange-traded ADRs, the Exchange notes that such
requirement will ensure that unsponsored ADRs, which are traded OTC and
which generally have less market transparency than sponsored ADRs, as
well as any sponsored ADRs traded OTC, could account for only a small
percentage of the equity weight of a portfolio. Further, the
requirement is consistent with representations made in proposed rule
changes for issues of Managed Fund Shares previously approved by the
Commission.\62\
---------------------------------------------------------------------------

    \62\ See note 31, supra.
---------------------------------------------------------------------------

    With respect to the proposed provision in Commentary .01(b) that,
to the extent a portfolio includes convertible securities, the fixed
income security into which such security is converted must meet the
criteria in paragraph (b) of Commentary .01 after converting, such
requirement would assure that the fixed income securities into which a
convertible security could be converted meet the liquidity and other
criteria in Commentary .01(b) applicable to fixed income securities.
    As proposed, pursuant to Commentary .01(b)(3) to Rule 8.600, an
underlying portfolio (excluding exempted securities) that includes
fixed income securities must include a minimum of 13 non-affiliated
issuers, but there would be no minimum number of non-affiliated issuers
required for fixed income securities if at least 70% of the weight of
the portfolio consists of equity securities, as described in Commentary
.01(a). The Exchange notes that, when evaluated in conjunction with
proposed Commentary .01(b)(2), the proposed rule is consistent with
Commentary .02(a)(4) and (5) of NYSE Arca Equities Rule 5.2(j)(3) in
that it provides for a maximum weighting of a fixed income security in
the fixed income portion of the portfolio of a fund that is comparable
to the existing rules applicable to Investment Company Units based on
fixed income indexes.
    With respect to the proposed requirement in Commentary .01(b)(5)
that non-agency, non-GSE and privately-issued mortgage-related and
other asset-backed securities components of a portfolio shall not
account, in the aggregate, for more than 20% of the weight of the fixed
income portion of the portfolio, the Exchange notes that

such requirement is consistent with representations made in proposed
rule changes for issues of Managed Fund Shares previously approved by
the Commission.\63\
---------------------------------------------------------------------------

    \63\ See note 45, supra.
---------------------------------------------------------------------------

    With respect to the proposed amendment to Commentary .01(c)
relating to cash and cash equivalents, while there is no limitation on
the amount of cash and cash equivalents that can make up the portfolio,
such instruments are short-term, highly liquid, and of high credit
quality, making them less susceptible than other asset classes both to
price manipulation and volatility. Further, the requirement is
consistent with representations made in proposed rule changes for
issues of Managed Fund Shares previously approved by the
Commission.\64\
---------------------------------------------------------------------------

    \64\ See note 46, supra.
---------------------------------------------------------------------------

    With respect to proposed Commentary .01(d)(1) to Rule 8.600
relating to listed derivatives, the Exchange believes that it is
appropriate that there be no limit to the percentage of a portfolio
invested in such holdings, provided that, in the aggregate, at least
90% of the weight of such holdings invested in futures, exchange-traded
options, and listed swaps would consist of futures, options, and swaps
for which the Exchange may obtain information via ISG from other
members or affiliates or for which the principal market is a market
with which the Exchange has a CSSA. Such a requirement would facilitate
information sharing among market participants trading shares of a
series of Managed Fund Shares as well as futures and options that such
series may hold. In addition, listed swaps would be centrally cleared,
reducing counterparty risk and thereby furthering investor
protection.\65\ With respect to proposed Commentary .01(d)(2) to Rule
8.600, requiring percentage caps on the aggregate gross notional value
of listed derivatives based on any five or fewer underlying reference
assets or based on any single underlying reference asset, the Exchange
believes such requirements will help ensure that listed derivatives
utilized by a fund are adequately diversified and not unduly
concentrated.
---------------------------------------------------------------------------

    \65\ The Commission has noted that ``[c]entral clearing
mitigates counterparty risk among dealers and other institutions by
shifting that risk from individual counterparties to [central
counterparties (``CCPs'')], thereby protecting CCPs from each
other's potential failures.'' See Securities Exchange Act Release
No. 67286 (June 28, 2012) (File No. S7-44-10) (Process for
Submissions for Review of Security-Based Swaps for Mandatory
Clearing and Notice Filing Requirements for Clearing Agencies).
---------------------------------------------------------------------------

    With respect to proposed Commentary .01(e) to Rule 8.600 relating
to OTC derivatives, the Exchange believes that the limitation to 20% of
a fund's assets would assure that the preponderance of fund investments
would not be in derivatives that are not listed and centrally cleared.
The Exchange believes that such a limitation is sufficient to mitigate
the risks associated with price manipulation because a 20% cap on OTC
derivatives will ensure that any series of Managed Fund Shares will be
sufficiently broad-based in scope to minimize potential manipulation
associated with OTC derivatives and because the remaining 80% of the
portfolio will consist of instruments subject to numerous restrictions
designed to prevent manipulation, including equity securities (which,
as proposed, would be subject to market cap, trading volume, and
diversity requirements, among others), fixed income securities (which,
as proposed, would be subject to principal amount outstanding,
diversity, and issuer requirements, among others), cash and cash
equivalents (which, as proposed, would be limited to short-term, highly
liquid, and high credit quality instruments), and/or listed derivatives
(which would be subject to the limitations in proposed Commentary
.01(d)).
    The Exchange notes that a fund's investments in derivative
instruments would be subject to limits on leverage imposed by the 1940
Act. Section 18(f) of the 1940 Act and related Commission guidance
limit the amount of leverage an investment company can obtain. A fund's
investments would be consistent with its investment objective and would
not be used to enhance leverage. To limit the potential risk associated
with a fund's use of derivatives, a fund will segregate or ``earmark''
assets determined to be liquid by a fund in accordance with the 1940
Act (or, as permitted by applicable regulation, enter into certain
offsetting positions) to cover its obligations under derivative
instruments.
    With respect to proposed Commentary .01(f) to Rule 8.600 relating
to a fund's use of listed or OTC derivatives to gain exposure to
individual equities and/or fixed income securities, or to indexes of
equities and/or indexes of fixed income securities, the Exchange notes
that the aggregate gross notional value of such exposure would be
required to meet the numerical and other criteria set forth in proposed
Commentary .01(a) and .01(b) to Rule 8.600 (including gross notional
exposures), respectively.
    Quotation and other market information relating to listed futures
and options is available from the exchanges listing such instruments as
well as from market data vendors. With respect to centrally-cleared
swaps \66\ and non-centrally-cleared swaps regulated by the CFTC,\67\
the Dodd-Frank Act mandates that swap information be reported to swap
data repositories (``SDRs'').\68\ SDRs provide a central facility for
swap data reporting and recordkeeping and are required to comply with
data standards set by the CFTC, including real-time public reporting of
swap transaction data to a derivatives clearing organization or
SEF.\69\ SDRs require real-time reporting of all OTC and centrally
cleared derivatives, including public reporting of the swap price and
size. The parties responsible for reporting swaps information are CFTC-
registered swap dealers (``RSDs''), major swap participants, and swap
execution facilities (``SEFs''). If swap counterparties do not fall
into the above categories, then one of the parties to the swap must
report the trade to the SDR. Cleared swaps regulated by the CFTC must
be executed on a Designated Contract Market (``DCM'') or SEF. Such
cleared swaps have the same reporting requirements as futures,
including end-of-day price, volume, and open interest. CFTC swaps
reporting requirements require public dissemination of, among other
items, product ID (if available); asset class; underlying reference
asset, reference issuer, or reference index; termination date; date and
time of execution; price, including currency; notional amounts,
including currency; whether direct or indirect counterparties include
an RSD; whether cleared or un-cleared; and platform ID of where the
contract was executed (if applicable).
---------------------------------------------------------------------------

    \66\ There are currently five categories of swaps eligible for
central clearing: Interest rate swaps; credit default swaps; foreign
exchange swaps; equity swaps; and commodity swaps. The following
entities provide central clearing for OTC derivatives: ICE Clear
Credit (US); ICE Clear (EU); CME Group; LCH.Clearnet; and Eurex.
    \67\ Pursuant to the Dodd-Frank Act, OTC and centrally-cleared
swaps are regulated by the CFTC with the exception of security-based
swaps, which are regulated by the Commission.
    \68\ The following entities are provisionally registered with
the CFTC as SDRs: BSDR LLC., Chicago Mercantile Exchange, Inc., DTCC
Data Repository, and ICE Trade Vault.
    \69\ Approximately eighteen entities are currently registered
with the CFTC as SEFs.
---------------------------------------------------------------------------

    With respect to security-based swaps regulated by the Commission,
the Commission has adopted Regulation SBSR under the Act implementing
requirements for regulatory reporting and public dissemination of
security-based swap transactions set forth in Title VII of the Dodd-
Frank Act. Regulation SBSR provides for the reporting of security-based
swap

information to registered security-based swap data repositories
(``Registered SDRs'') or the Commission, and the public dissemination
of security-based swap transaction, volume, and pricing information by
Registered SDRs.\70\
---------------------------------------------------------------------------

    \70\ See Securities Exchange Act Release No. 74244 (February 11,
2015), 80 FR 14564 (March 19, 2015) (Regulation SBSR--Reporting and
Dissemination of Security-Based Swap Information).
---------------------------------------------------------------------------

    Price information relating to forwards and OTC options will be
available from major market data vendors.
    A fund's investments will not be used to seek performance that is
the multiple or inverse multiple (i.e., 2Xs and 3Xs) of a fund's broad-
based securities market index (as defined in Form N-1A).\71\ In
addition, the Exchange notes that, under proposed Commentary .01(a) to
Rule 8.600, for Derivative Securities Products and Index-Linked
Securities, no more than 25% of the equity weight of a fund's portfolio
could include leveraged and/or inverse leveraged Derivative Securities
Products or Index-Linked Securities.
---------------------------------------------------------------------------

    \71\ See, e.g., Securities Exchange Act Release No. 74842 (April
29, 2015), 86 FR 25723 (May 5, 2015) (SR-NYSEArca-2014-89) (order
approving listing and trading of shares of eight PIMCO exchange-
traded funds).
---------------------------------------------------------------------------

    The proposed rule change is also designed to protect investors and
the public interest because Managed Fund Shares listed and traded
pursuant to Rule 8.600, including pursuant to the proposed new
portfolio standards, would continue to be subject to the full panoply
of Exchange rules and procedures that currently govern the trading of
equity securities on the Exchange.\72\
---------------------------------------------------------------------------

    \72\ See Approval Order, supra note 15, at 19547.
---------------------------------------------------------------------------

    The proposed rule change is also designed to protect investors and
the public interest as well as to promote just and equitable principles
of trade in that any Non-U.S. Component Stocks will each meet the
following criteria initially and on a continuing basis: (1) Have a
minimum market value of at least $100 million; (2) have a minimum
global monthly trading volume of 250,000 shares, or minimum global
notional volume traded per month of $25,000,000, averaged over the last
six months; (3) most heavily weighted Non-U.S. Component Stock shall
not exceed 25% of the equity weight of the portfolio, and, to the
extent applicable, the five most heavily weighted Non-U.S. Component
Stocks shall not exceed 60% of the equity weight of the portfolio; and
(4) each Non-U.S. Component Stock shall be listed and traded on an
exchange that has last-sale reporting. The Exchange believes that such
quantitative criteria are sufficient to mitigate any concerns that may
arise on the basis of a series of Managed Fund Shares potentially
holding 100% of its assets in Non-U.S. Component Stocks that are
neither listed on members of ISG nor exchanges with which the Exchange
has in place a CSSA because, as stated above, such criteria are either
the same or more stringent than the portfolio requirements for Units
that hold Non-U.S. Component Stocks and there are no such requirements
related to such securities being listed on an exchange that is a member
of ISG or with which the Exchange has in place a CSSA. Further, the
Exchange has not encountered and is not aware of any instances of
manipulation or other negative impact in any series of Units that has
occurred by virtue of the Units holding such Non-U.S. Component Stocks.
As such, the Exchange believes that there should be no difference in
the portfolio requirements for Managed Fund Shares and Units as it
relates to holding Non-U.S. Component Stocks that are not listed on an
exchange that is a member of ISG or with which the Exchange has in
place a CSSA.
    The Exchange believes that the proposed rule change is designed to
prevent fraudulent and manipulative acts and practices because the
Managed Fund Shares will be listed and traded on the Exchange pursuant
to the initial and continued listing criteria in Rule 8.600. The
Exchange has in place surveillance procedures that are adequate to
properly monitor trading in the Managed Fund Shares in all trading
sessions and to deter and detect violations of Exchange rules and
applicable federal securities laws. FINRA, on behalf of the Exchange,
or the regulatory staff of the Exchange, will communicate as needed
regarding trading in Managed Fund Shares with other markets that are
members of the ISG, including all U.S. securities exchanges and futures
exchanges on which the components are traded. In addition, the Exchange
may obtain information regarding trading in Managed Fund Shares from
other markets that are members of the ISG, including all U.S.
securities exchanges and futures exchanges on which the components are
traded, or with which the Exchange has in place a CSSA.
    The Exchange also believes that the proposed rule change would
fulfill the intended objective of Rule 19b-4(e) under the Act by
allowing Managed Fund Shares that satisfy the proposed listing
standards to be listed and traded without separate Commission approval.
However, as proposed, the Exchange would continue to file separate
proposed rule changes before the listing and trading of Managed Fund
Shares that do not satisfy the additional criteria described above.
    For these reasons, the Exchange believes that the proposal is
consistent with the Act.

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

    In accordance with Section 6(b)(8) of the Act,\73\ 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 purposes of the Act. Instead, the Exchange believes that the
proposed rule change would facilitate the listing and trading of
additional types of Managed Fund Shares and result in a significantly
more efficient process surrounding the listing and trading of Managed
Fund Shares, which will enhance competition among market participants,
to the benefit of investors and the marketplace. The Exchange believes
that this would reduce the time frame for bringing Managed Fund Shares
to market, thereby reducing the burdens on issuers and other market
participants and promoting competition. In turn, the Exchange believes
that the proposed change would make the process for listing Managed
Fund Shares more competitive by applying uniform listing standards with
respect to Managed Fund Shares.
---------------------------------------------------------------------------

    \73\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

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.

IV. Date of Effectiveness of the Proposed Rule Change, as Modified by
Amendment No. 6, and Timing for Commission Action

    Section 19(b)(2) of the Act \74\ provides that, after initiating
disapproval proceedings, the Commission shall issue an order approving
or disapproving the proposed rule change not later than 180 days after
the date of publication of notice of the filing of the proposed rule
change. The Commission may, however, extend the period for issuing an
order approving or disapproving the proposed rule change by not more
than 60 days if the Commission determines that a longer period is
appropriate and publishes the reasons for such determination. On May
20, 2016, the Commission published notice of its determination that it
was appropriate to

designate a longer period within which to issue an order approving or
disapproving the proposed rule change so that it would have sufficient
time to consider the proposed rule change and, pursuant to Section
19(b)(2) of the Act,\75\ designated July 22, 2016, as the date by which
the Commission shall either approve or disapprove the proposed rule
change.\76\
---------------------------------------------------------------------------

    \74\ 15 U.S.C. 78s(b)(2).
    \75\ 15 U.S.C. 78s(b)(2).
    \76\ See supra note 9 and accompanying text.
---------------------------------------------------------------------------

V. Solicitation of Comments

    Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether Amendment No. 6
to 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-2015-110 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.

All submissions should refer to File Number SR-NYSEArca-2015-110. 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 such filing will also 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-2015-110 and should
be submitted on or before June 29, 2016.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\77\
---------------------------------------------------------------------------

    \77\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-13965 Filed 6-13-16; 8:45 am]
 BILLING CODE 8011-01-P


			  UNITED STATES OF AMERICA

		        DEPARTMENT OF TRANSPORTATION

			  OFFICE OF THE SECRETARY

			          WASHINGTON, D.C.

			Issued by the Department of Transportation on February 20, 2004

NOTICE OF ACTION TAKEN -- DOCKET OST-98-3509

________________________________________________________________________
________________________________________________________

This serves as notice to the public of the action described below, taken
by the Department official indicated (no additional confirming order
will be issued in this matter).

Applicant: Nova Airlines AB						Date Filed:  December 11, 2003

Relief requested:  Renew exemption from 49 U.S.C. § 41301 to conduct
charter foreign air transportation of persons, property and mail between
Sweden, Denmark and Norway and the United States; and other charters
pursuant to 14 CFR 212 of the Department’s regulations.

If renewal, date and citation of last action: December 13, 2001, in this
docket

Applicant representative:  Malcolm L. Benge<PHONE_NUMBER>		DOT analyst:
Shelita Smith<PHONE_NUMBER>

Responsive pleadings:  None

	DISPOSITION

Action: Approved									Action date: February 20, 2004

Effective dates of authority granted:  February 20, 2004 – February
20, 2006

Basis for approval (bilateral agreement/reciprocity):  Air Transport
Services Agreements between the United States and Sweden, Denmark and
Norway

Except to the extent exempted/waived, this authority is subject to the
terms, conditions, and limitations indicated:

  X    Standard exemption conditions (attached)              Foreign air
carrier permit conditions (Order   -  -  )

Special conditions/Partial grant/Denial basis/Remarks:

Action taken by:   Paul L. Gretch, Director

		      Office of International Aviation

________________________________________________________________________
____________________________________________________________

We found that the applicant was qualified to perform its proposed
operations.

Under authority assigned by the Department in its regulations, 14 CFR
Part 385, we found that  (1) our action was consistent with Department
policy; (2) grant of the authority was consistent with the public
interest; and (3) grant of the authority would not constitute a major
regulatory action under the Energy Policy and Conservation Act of 1975.
To the extent not granted/deferred/dismissed, we denied all requests in
the referenced Docket.  We may amend, modify, or revoke the authority
granted in this Notice at any time without hearing at our discretion.

Persons entitled to petition the Department for review of the action set
forth in this Notice under the Department’s regulations, 14 CFR
§385.30, may file their petitions within seven (7) days after the date
of issuance of this Notice.  This action was effective when taken, and
the filing of a petition for review will not alter such effectiveness.

An electronic version of this document is available on the World Wide
Web at:

http://dms.dot.gov//reports/reports_aviation.asp

Foreign Carrier Exemption Conditions

In the conduct of the operations authorized, the foreign carrier
applicant(s) shall:

(1)  Not conduct any operations unless it holds a currently effective
authorization from its homeland for such operations, and it has filed a
copy of such authorization with the Department;

(2)  Comply with all applicable requirements of the Federal Aviation
Administration, including, but not limited to, 14 CFR Parts 129, 91, and
36, and with all applicable U.S. Government requirements concerning
security.  To assure compliance with all applicable U.S. Government
requirements concerning security, the holder shall, before commencing
any new service (including charter flights) from a foreign airport that
would be the holder’s last point of departure for the United States,
contact its Principal Security Inspector (PSI) to advise the PSI of its
plans and to find out whether the Transportation Security Administration
has determined that security is adequate to allow such airport(s) to be
served;

(3)  Comply with the requirements for minimum insurance coverage
contained in 14 CFR Part 205, and, prior to the commencement of any
operations under this authority, file evidence of such coverage, in the
form of a completed OST Form 6411, with the Federal Aviation
Administration’s Program Management Branch (AFS-260), Flight Standards
Service (any changes to, or termination of, insurance also shall be
filed with that office);

(4)  Not operate aircraft under this authority unless it complies with
operational safety requirements at least equivalent to Annex 6 of the
Chicago Convention;

(5)  Conform to the airworthiness and airman competency requirements of
its Government for international air services;

(6)  Except as specifically exempted or otherwise provided for in a
Department Order, comply with the requirements of 14 CFR Part 203,
concerning waiver of Warsaw Convention liability limits and defenses;

(7)  Agree that operations under this authority constitute a waiver of
sovereign immunity, for the purposes of 28 U.S.C. 1605(a), but only with
respect to those actions or proceedings instituted against it in any
court or other tribunal in the United States that are: (a)  based on its
operations in international air transportation that, according to the
contract of carriage, include a point in the United States as a point of
origin, point of destination, or agreed stopping place, or for which the
contract of carriage was purchased in the United States; or (b)  based
on a claim under any international agreement or treaty cognizable in any
court or other tribunal of the United States.  In this condition, the
term "international air transportation" means "international
transportation" as defined by the Warsaw Convention, except that all
States shall be considered to be High Contracting Parties for the
purpose of this definition;

(8)  Except as specifically authorized by the Department, originate or
terminate all flights to/from the United States in its homeland;

(9)  Comply with the requirements of 14 CFR Part 217, concerning the
reporting of scheduled, nonscheduled, and charter data;

(10) If charter operations are authorized, except as otherwise provided
in the applicable aviation agreement, comply with the Department's rules
governing charters (including 14 CFR Parts 212 and 380); and

(11) Comply with such other reasonable terms, conditions, and
limitations required by the public interest as may be prescribed by the
Department, with all applicable orders or regulations of other U.S.
agencies and courts, and with all applicable laws of the United States.

This authority shall not be effective during any period when the holder
is not in compliance with the conditions imposed above.  Moreover, this
authority cannot be sold or otherwise transferred without explicit
Department approval under Title 49 of the U.S. Code.

08/2003