[Federal Register Volume 84, Number 173 (Friday, September 6, 2019)]
[Notices]
[Pages 47024-47028]
[FR Doc No: 2019-19217]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

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

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

August 30, 2019.

I. Introduction

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

change to change the listing rule applicable to shares (``Shares'') of
the Aware Ultra-Short Duration Enhanced In[square]come ETF (``Fund''),
a series of the Tidal ETF Trust (``Trust''). The proposed rule change
was published for comment in the Federal Register on June 4, 2019.\3\
On July 8, 2019, the Exchange filed Amendment No. 1 to the proposed
rule change, which amended and superseded the Notice in its
entirety.\4\ On July 10, 2019, the Exchange filed Amendment No. 2 to
the proposed rule change, which amended the proposed rule change as
modified by Amendment No. 1.\5\ On July 19, 2019, pursuant to Section
19(b)(2) of the Act,\6\ the Commission extended the time period within
which to approve the proposed rule change, disapprove the proposed rule
change, or institute proceedings to determine whether to approve or
disapprove the proposed rule change.\7\ The Commission has received no
comments on the proposed rule change. This order approves the proposed
rule change, as modified by Amendments No. 1 and No. 2.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 85955 (May 29,
2019), 84 FR 25863 (``Notice'').
    \4\ In Amendment No. 1, the Exchange: (1) Provided clarification
regarding certain of the Fund's permitted investments; (2) changed
certain citations supporting its proposals; (3) expanded upon an
argument in support of one of its proposals and deleted an argument
that had been offered in support of another proposal; (4) expanded
certain representations regarding the Exchange's ability to obtain
trading information regarding certain of the Fund's permitted
investments; and (5) made other technical changes. Because Amendment
No. 1 does not materially alter the substance of the proposed rule
change or raise unique or novel regulatory issues, Amendment No. 1
is not subject to notice and comment. The amendments to the proposed
rule change are available at https://www.sec.gov/comments/sr-nysearca-2019-38/srnysearca201938.htm.
    \5\ In Amendment No. 2, the Exchange: (1) Modified the list of
the Fund's permitted investments; and (2) made a technical change.
Because Amendment No. 2 does not materially alter the substance of
the proposed rule change or raise unique or novel regulatory issues,
Amendment No. 2 is not subject to notice and comment.
    \6\ 15 U.S.C. 78s(b)(2).
    \7\ See Securities Exchange Act Release No. 86414, 84 FR 35892
(July 25, 2019) (designating September 2, 2019, as the date by which
the Commission shall approve, disapprove, or institute proceedings
to determine whether to approve or disapprove the proposed rule
change).
---------------------------------------------------------------------------

II. Description of the Proposed Rule Change, as Modified by Amendments
No. 1 and No. 2 8
---------------------------------------------------------------------------

    \8\ For a complete description of the Exchange's proposal, see
Notice, Amendments No. 1 and No. 2, supra notes 3, 4, and 5
respectively.
---------------------------------------------------------------------------

    The Exchange states that the Shares commenced trading on the
Exchange on January 29, 2019, pursuant to the generic listing standards
in Commentary .01 to NYSE Arca Rule 8.600-E, which govern Managed Fund
Shares,\9\ and that the Fund's investments comply with those
requirements.\10\ According to the Registration Statement,\11\ the
investment objective of the Fund is to seek to maximize current income
while maintaining a portfolio consistent with the preservation of
capital and daily liquidity.
---------------------------------------------------------------------------

    \9\ A Managed Fund Share is a security that represents an
interest in an investment company registered under the Investment
Company Act of 1940 (15 U.S.C. 80a-1) (``1940 Act'') organized as an
open-end investment company or similar entity that invests in a
portfolio of securities selected by its investment adviser
consistent with its investment objectives and policies. In contrast,
an open-end investment company that issues Investment Company Units,
listed and traded on the Exchange under NYSE Arca Rule 5.2-E(j)(3),
seeks to provide investment results that correspond generally to the
price and yield performance of a specific foreign or domestic stock
index, fixed income securities index or combination thereof.
    \10\ See Amendment No. 1, supra note 4, at 4 n.3.
    \11\ On December 21, 2018, the Trust, which is registered under
the 1940 Act, filed with the Commission an amendment to its
registration statement on Form N-1A under the Securities Act of 1933
(15 U.S.C. 77a), and under the 1940 Act relating to the Fund (File
Nos. 333-227298 and 811-23377) (``Registration Statement''). The
Exchange represents that the Trust will file an amendment to the
Registration Statement as necessary to conform to the
representations in the proposed rule change. See id., n.5.
---------------------------------------------------------------------------

    The Exchange filed the proposed rule change to modify the listing
rule applicable to the Shares. The Exchange proposes certain deviations
from the generic requirements, which it states are necessary for the
Fund to achieve its investment objective in a manner that is cost-
effective and that maximizes investors' returns.\12\
---------------------------------------------------------------------------

    \12\ See id. at 11.
---------------------------------------------------------------------------

A. The Fund's Permitted Investments

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

or indices on the foregoing securities and financial instruments.\20\
---------------------------------------------------------------------------

    \13\ For purposes of this filing, non-agency ABS, non-agency
MBS, and non-agency CMOs are referred to collectively herein as
``Private ABS/MBS.'' In the aggregate, Private ABS/MBS would not
exceed more than 20% of the total assets of the Fund.
    \14\ For purposes of this filing, CDOs/CBOs/CLOs are excluded
from the term Private ABS/MBS. CLOs are securities issued by a trust
or other special purpose entity that are collateralized by a pool of
loans by U.S. banks and participations in loans by U.S. banks that
are unsecured or secured by collateral other than real estate. CBOs
are securities issued by a trust or other special purpose entity
that are backed by a diversified pool of fixed income securities
issued by U.S. or foreign governmental entities or fixed income
securities issued by U.S. or corporate issuers. According to the
Exchange, CDOs/CBOs/CLOs are distinguishable from Private ABS/MBS
because they are collateralized by bank loans or by corporate or
government fixed income securities and not by consumer and other
loans made by non-bank lenders, including student loans.
Collectively, CDOs, CBOs, and CLOs would not exceed more than 10% of
the total assets of the Fund.
    \15\ See infra note 16.
    \16\ For purposes of this filing, cash equivalents are the
short-term instruments enumerated in Commentary .01(c) to Rule
8.600-E.
    \17\ ETNs are securities as described in NYSE Arca Rule 5.2-
E(j)(6) (Equity Index-Linked Securities, Commodity-Linked
Securities, Currency-Linked Securities, Fixed Income Index-Linked
Securities, Futures-Linked Securities and Multifactor Index-Linked
Securities).
    \18\ For purposes of this filing, ``ETFs'' are Investment
Company Units (as described in NYSE Arca Rule 5.2-E(j)(3));
Portfolio Depositary Receipts (as described in NYSE Arca Rule 8.100-
E); and Managed Fund Shares (as described in NYSE Arca Rule 8.600-
E). All ETFs would be listed and traded in the U.S. on a national
securities exchange. According to the Exchange, while the Fund might
invest in inverse ETFs, the Fund would not invest in leveraged
(e.g., 2X, -2X, 3X or -3X) ETFs.
    \19\ Investments in non-exchange-traded open-end management
investment company securities would not exceed 20% of the total
assets of the Fund.
    \20\ See Amendment No. 2, supra note 5.
---------------------------------------------------------------------------

B. Alternative Listing and Trading Criteria for the Shares

    The Exchange represents that the Fund's portfolio satisfy all the
generic listing requirements of Rule 8.600-E, except as discussed
below.
    The Fund proposes to invest in shares of non-exchange listed open-
end management investment company securities. Such investments would
not comply with the requirements of Commentary .01(a)(1)(A) through (E)
to NYSE Arca Rule 8.600-E (U.S. Component Stocks) \21\ because,
according to the Exchange, it would be difficult or impossible to apply
certain of the generic quantitative criteria (e.g., market
capitalization, trading volume, or portfolio criteria) applicable to
U.S. Component Stocks to mutual fund shares.\22\ The Fund's portfolio
holdings in such investment company securities would be limited to 20%
of the total assets of the Fund.\23\
---------------------------------------------------------------------------

    \21\ Commentary .01(a) to Rule 8.600-E specifies the equity
securities accommodated by the generic criteria in Commentary
.01(a). Commentary .01(a)(1) to Rule 8.600-E provides that the
component stocks of the equity portion of a portfolio that are U.S.
Component Stocks must meet the following criteria initially and on a
continuing basis:
    (A) Component stocks (excluding Derivative Securities Products
and Index-Linked Securities) that in the aggregate account for at
least 90% of the equity weight of the portfolio (excluding such
Derivative Securities Products and Index-Linked Securities) each
shall have a minimum market value of at least $75 million;
    (B) Component stocks (excluding Derivative Securities Products
and Index-Linked Securities) that in the aggregate account for at
least 70% of the equity weight of the portfolio (excluding such
Derivative Securities Products and Index-Linked Securities) each
shall have a minimum monthly trading volume of 250,000 shares, or
minimum notional volume traded per month of $25,000,000, averaged
over the last six months;
    (C) The most heavily weighted component stock (excluding
Derivative Securities Products and Index-Linked Securities) shall
not exceed 30% of the equity weight of the portfolio, and, to the
extent applicable, the five most heavily weighted component stocks
(excluding Derivative Securities Products and Index-Linked
Securities) shall not exceed 65% of the equity weight of the
portfolio;
    (D) Where the equity portion of the portfolio does not include
Non-U.S. Component Stocks, the equity portion of the portfolio shall
include a minimum of 13 component stocks; provided, however, that
there shall be no minimum number of component stocks if (i) one or
more series of Derivative Securities Products or Index-Linked
Securities constitute, at least in part, components underlying a
series of Managed Fund Shares, or (ii) one or more series of
Derivative Securities Products or Index-Linked Securities account
for 100% of the equity weight of the portfolio of a series of
Managed Fund Shares; and
    (E) Except as provided herein, equity securities in the
portfolio shall be U.S. Component Stocks listed on a national
securities exchange and shall be NMS Stocks as defined in Rule 600
of Regulation NMS under the Securities Exchange Act of 1934.
    \22\ See Amendment No. 1, supra note 4, at 16.
    \23\ See id., at 7.
---------------------------------------------------------------------------

    The Exchange proposes that, instead of complying with the
requirement of Commentary .01(b)(1) to NYSE Arca Rule 8.600-E,\24\ the
Fund's Fixed Income Securities--other than Private ABS/MBS and CDOs/
CBOs/CLOs--that in the aggregate account for at least 50% of the fixed
income weight of the portfolio each would have a minimum original
principal amount outstanding of $50 million or more. As proposed,
Private ABS/MBS, CDOs/CBOs/CLOs held by the Fund would not be subject
to any minimum original principal amount outstanding requirement.
---------------------------------------------------------------------------

    \24\ Commentary .01(b)(1) requires that fixed income securities
portfolio components that in the aggregate account for at least 75%
of the fixed income weight of the portfolio each have a minimum
original principal amount outstanding of $100 million or more.
---------------------------------------------------------------------------

    The Exchange proposes that the Fund's investments in Private ABS/
MBS not be required to comply with Commentary .01(b)(4) to NYSE Arca
Rule 8.600-E.\25\ According to the Exchange, all other Fixed Income
Securities, including the Fund's CDOs/CBOs/CLOs, would be subject to
the criteria in Commentary .01(b)(4).
---------------------------------------------------------------------------

    \25\ Commentary .01(b)(4) provides that component securities
that in the aggregate account for at least 90% of the fixed income
weight of the portfolio must be either: (a) From issuers that are
required to file reports pursuant to Sections 13 and 15(d) of the
Act; (b) from issuers that have a worldwide market value of its
outstanding common equity held by non-affiliates of $700 million or
more; (c) from issuers that have outstanding securities that are
notes, bonds debentures, or evidence of indebtedness having a total
remaining principal amount of at least $1 billion; (d) exempted
securities as defined in Section 3(a)(12) of the Act; or (e) from
issuers that are a government of a foreign country or a political
subdivision of a foreign country. Unlike the Fund's Private ABS/MBS,
the Fund's CDOs, CBOs, and CLOs would be subject to the criteria in
Commentary .01(b)(4).
---------------------------------------------------------------------------

    Additionally, the Exchange proposes that the Fund's investments not
be required to comply with Commentary .01(b)(5) t NYSE Arca Rule 8.600-
E.\26\ As mentioned above, the Fund would instead invest up to 20% of
its total assets in Private ABS/MBS and up to 10% of its total assets
in CDOs/CBOs/CLOs.
---------------------------------------------------------------------------

    \26\ Commentary .01(b)(5) requires that investments in non-
agency, non-government sponsored entity and privately issued
mortgage-related and other asset-backed securities not account, in
the aggregate, for more than 20% of the weight of the portfolio.
---------------------------------------------------------------------------

III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule
change, as modified by Amendments No. 1 and No. 2, is consistent with
the Act and the rules and regulations thereunder applicable to a
national securities exchange.\27\ In particular, the Commission finds
that the proposed rule change, as modified by Amendments No. 1 and No.
2, is consistent with Section 6(b)(5) of the Act,\28\ which requires,
among other things, that the rules of a national securities exchange be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to remove impediments
to and perfect the mechanism of a free and open market and a national
market system, and, in general, to protect investors and the public
interest.
---------------------------------------------------------------------------

    \27\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
    \28\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    According to the Exchange, the Shares would continue to satisfy the
initial and continued listing criteria for Managed Fund Shares pursuant
to NYSE Arca Rule 8.600-E, except for the requirements of Commentary
.01(a)(1), (b)(1), (b)(4), and (b)(5).
    As discussed above, the Fund will not meet the requirement in
Commentary .01(b)(1) of NYSE Arca Rule 8.600-E that components that in
the aggregate account for at least 75% of the fixed income weight of
the portfolio shall each have a minimum original principal amount
outstanding of $100 million or more. Instead, the Exchange proposes
that components that, in the aggregate, account for at least 50% of the
fixed income weight of the portfolio each shall have a minimum original
principal amount outstanding of $50 million or more. Private ABS/MBS
and CDOs/CBOs/CLOs would be excluded from this requirement and would
not be subject to a requirement for a minimum original principal amount
outstanding. The Exchange represents that at least 50% of the fixed
income weight of the Fund's portfolio would still be required to have a
substantial minimum original principal amount outstanding.\29\ The
Exchange asserts that not subjecting Private ABS/MBS and CDOs/CBOs/CLOs
to a standard for minimum original principal amount outstanding would
allow the Fund to invest in a larger variety of Private ABS/MBS and
CDOs/CBOs/CLOs, which would help the Fund meet its investment
objectives and diversify its holdings in such securities.\30\
---------------------------------------------------------------------------

    \29\ See Amendment No. 1, supra note 4, at 11.
    \30\ See id. at 11-12.
---------------------------------------------------------------------------

    Also as discussed above, the Fund, with respect to its investments
in Private ABS/MBS, will not comply with the generic listing
requirement that

securities comprising at least 90% of the fixed income weight of the
Fund's portfolio meet one of the criteria in Commentary .01(b)(4) to
NYSE Arca Rule 8.600-E.\31\ The Exchange represents that, Fixed Income
Securities, including CDOs/CBOs/CLOs, held by the Fund other than
Private ABS/MBS, will continue to meet this requirement. The Exchange
also represents that it will not invest more than 20% of the Fund's
total assets in Private ABS/MBS. CDOs/CBOs/CLOs, which will meet the
requirements of Commentary .01(b)(4), will be limited to 10% of the
portfolio. The Exchange believes that this limitation will help the
Fund maintain portfolio diversification and reduce manipulation
risk.\32\ The Commission notes that it has previously approved the
listing of Managed Fund Shares that exclude Private ABS/MBS from the
provisions of rules comparable to Commentary .01(b)(4) to NYSE Arca
Rule 8.600-E.\33\
---------------------------------------------------------------------------

    \31\ See supra note 25.
    \32\ See Amendment No. 1, supra note 4, at 13.
    \33\ See Securities Exchange Act Release Nos. 84047 (September
6, 2018), 83 FR 46200 (September 12, 2018) (SR-NASDAQ-2017-128);
85022 (January 31, 2019), 84 FR 2265 (February 6, 2019) (SR-NASDAQ-
2018-080).
---------------------------------------------------------------------------

    The Commission notes that CDOs/CBOs/CLOs will not be included in
the definition of Private ABS/MBS and, as a result, will not be subject
to the restriction on aggregate holdings of Private ABS/MBS set forth
in Commentary .01(b)(5) to NYSE Arca Rule 8.600-E, which limits
investments in Private ABS/MBS to 20% of the weight of the portfolio.
Instead, the Fund may invest up to 20% of the Fund in Private ABS/MBS
and up to 10% of the fund's total assets in CDOs/CBOs/CLOs such that,
in the aggregate, they may account for up to 30% of the weight of the
Fund's portfolio. The Commission notes that it has previously approved
similar limitations for Private ABS/MBS and CDOs/CBOs/CLOs.\34\
---------------------------------------------------------------------------

    \34\ See id.
---------------------------------------------------------------------------

    Finally, the Fund will not comply with the requirements of
Commentary .01(a)(1)(A) through (E) to NYSE Arca Rule 8.600-E \35\ in
connection with the Fund's investments in non-exchange traded open-end
investment company securities. The Exchange represents that investments
in other non-exchange-traded open-end management investment company
securities will not exceed 20% of the total assets of the Fund. The
Exchange asserts that the criteria of Commentary .01(a)(1) does not
need to apply to such securities because the securities must satisfy
applicable 1940 Act diversification requirements, and the net asset
value of the securities is based on the value of securities and
financial assets the investment company holds.\36\ The Commission notes
that it has previously approved a similar proposal to invest in non-
exchange-traded open-end management investment company securities.\37\
---------------------------------------------------------------------------

    \35\ See supra note 21.
    \36\ See Amendment No. 1, supra note 4, at 23-24.
    \37\ See, e.g., Securities Exchange Act Release No. 78414 (July
26, 2016), 81 FR 50576 (August 1, 2016) (SR-NYSEArca-2016-79) (order
approving listing and trading of shares of the Virtus Japan Alpha
ETF under NYSE Arca Rule 8.600-E).
---------------------------------------------------------------------------

    Other than as described above, the Fund's portfolio will continue
to meet all the requirements of NYSE Arca Rule 8.600-E. The Commission
believes that the proposed initial and continued listing requirements
are designed to mitigate the potential for manipulation of the Shares,
do not raise any novel issues, and are consistent with listing
requirements of other Managed Fund Shares.\38\
---------------------------------------------------------------------------

    \38\ See supra notes 33, 34, and 37.
---------------------------------------------------------------------------

    The Commission finds that the proposal is consistent with Section
11A(a)(1)(C)(iii) of the Act,\39\ which sets forth Congress' finding
that it is in the public interest and appropriate for the protection of
investors and the maintenance of fair and orderly markets to assure the
availability to brokers, dealers, and investors of information with
respect to quotations for, and transactions in, securities. According
to the Exchange, quotation and last-sale information for the Shares
will be available via the Consolidated Tape Association high-speed
line. Further, the Portfolio Indicative Value, as defined in NYSE Arca
Rule 8.600-E(c)(3), will be widely disseminated by one or more major
market data vendors at least every 15 seconds during the Core Trading
Session (defined in NYSE Arca Rule 7.34-E(a)(2)). Information regarding
market price and trading volume of the Shares will be continually
available on a real-time basis throughout the day on brokers' computer
screens and other electronic services. Information regarding the
previous day's closing price and trading volume information for the
Shares will be published daily in the financial section of newspapers.
In addition, the Fund's website will include a form of prospectus for
the Fund and additional data relating to the net asset value (``NAV'')
and other applicable quantitative information.
---------------------------------------------------------------------------

    \39\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
---------------------------------------------------------------------------

    Exchange-traded options quotation and last-sale information for
options cleared via the Options Clearing Corporation are available via
the Options Price Reporting Authority. Intra-day and closing price
information regarding exchange-traded options will be available from
the exchange on which such instruments are traded. Price information
relating to OTC options and swaps will be available from major market
data vendors. Intra-day price information for exchange-traded
derivative instruments will be available from the applicable exchange
and from major market data vendors. For exchange-traded common stocks,
preferred stocks, rights, warrants, ETNs and ETFs, intraday price
quotations will generally be available from broker-dealers and trading
platforms (as applicable). Intraday and other price information for the
Fixed Income Securities in which the Fund invests will be available
through subscription services, which can be accessed by authorized
participants and other market participants. Additionally, the Trade
Reporting and Compliance Engine (``TRACE'') of the Financial Industry
Regulatory Authority (``FINRA'') will be a source of price information
for corporate bonds, privately-issued securities, MBS and ABS, to the
extent transactions in such securities are reported to TRACE.\40\
Shares of money market funds are typically priced once each business
day and their prices will be available through the applicable fund's
website or from major market data vendors. Price information regarding
U.S. government securities, repurchase agreements, reverse repurchase
agreements and cash equivalents generally may be obtained from brokers
and dealers who make markets in such securities or through nationally
recognized pricing services through subscription agreements.
---------------------------------------------------------------------------

    \40\ Broker-dealers that are FINRA member firms have an
obligation to report transactions in specified debt securities to
TRACE to the extent required under applicable FINRA rules.
Generally, such debt securities will have at issuance a maturity
that exceeds one calendar year. For fixed income securities that are
not reported to TRACE, (i) intraday price quotations will generally
be available from broker-dealers and trading platforms (as
applicable) and (ii) price information will be available from feeds
from market data vendors, published or other public sources, or
online information services, as described above.
---------------------------------------------------------------------------

    The Commission also believes that the proposal is reasonably
designed to promote fair disclosure of information that may be
necessary to price the Shares appropriately and to prevent trading when
a reasonable degree of transparency cannot be assured. The Exchange
states that it has obtained a representation from the issuer of the
Shares that the NAV per Share will be calculated daily and that the NAV
and the Disclosed Portfolio (as defined in

NYSE Rule 8.600-E(c)(2)) will be made available to all market
participants at the same time.\41\ In addition, the Exchange states
that on a daily basis, the Fund discloses on its website the Disclosed
Portfolio of the Fund that forms the basis for the Fund's NAV
calculation.\42\ Trading in the Shares also will be subject to NYSE
Arca Rule 8.600-E(d)(2)(D), which sets forth circumstances under which
Shares of a fund may be halted. Further, trading in the Shares may be
halted if the circuit breaker parameters in NYSE Arca Rule 7.12-E have
been reached, because of market conditions, or for reasons that, in the
view of the Exchange, make trading in the Shares inadvisable.\43\
---------------------------------------------------------------------------

    \41\ See Amendment No. 1, supra note 4, at 20.
    \42\ See id. at 18.
    \43\ These may include: (1) The extent to which trading is not
occurring in the securities and/or the financial instruments
comprising the Disclosed Portfolio of the Fund; or (2) whether other
unusual conditions or circumstances detrimental to the maintenance
of a fair and orderly market are present. See id.
---------------------------------------------------------------------------

    The Exchange states that it has a general policy prohibiting the
distribution of material, non-public information by its employees.\44\
Additionally, the Commission notes that the Reporting Authority that
provides the Disclosed Portfolio must implement and maintain, or be
subject to, procedures designed to prevent the use and dissemination of
material, non-public information regarding the actual components of the
portfolio.\45\
---------------------------------------------------------------------------

    \44\ See id. at 20.
    \45\ See NYSE Arca Rule 8.600(d)(2)(B)(ii). The term ``Reporting
Authority'' is defined in NYSE Arca Rule 8.600(c)(4).
---------------------------------------------------------------------------

    The Exchange deems the Shares to be equity securities, thus
rendering trading in the Shares subject to the Exchange's existing
rules governing the trading of equity securities.\46\ In support of its
proposal, the Exchange has made the following representations:
---------------------------------------------------------------------------

    \46\ See Amendment No. 1, supra note 4, at 20.
---------------------------------------------------------------------------

    (1) A minimum of 100,000 Shares will be outstanding at the
commencement of trading on the Exchange.\47\
---------------------------------------------------------------------------

    \47\ See id.
---------------------------------------------------------------------------

    (2) Trading in the Shares will be subject to the existing trading
surveillances administered by the Exchange, as well as cross-market
surveillances administered by FINRA on behalf of the Exchange, which
are designed to detect violations of Exchange rules and applicable
federal securities laws.\48\
---------------------------------------------------------------------------

    \48\ See id.
---------------------------------------------------------------------------

    (3) The Exchange or FINRA, on behalf of the Exchange, or both, (1)
will communicate as needed regarding trading in the Shares, ETFs,
certain exchange-traded options and certain futures with other markets
and other entities that are members of the Intermarket Surveillance
Group (``ISG''); and (2) may obtain trading information regarding
trading in the Shares, ETFs, certain exchange-traded options and
certain futures from such markets and other entities.\49\ The Exchange
is able to access from FINRA, as needed, trade information for certain
Fixed Income Securities held by the Fund reported to TRACE. FINRA also
can access data obtained from the Municipal Securities Rulemaking Board
relating to certain municipal bond trading activity for surveillance
purposes in connection with trading in the Shares.\50\
---------------------------------------------------------------------------

    \49\ In addition, the Exchange may obtain information regarding
trading in the Shares, ETFs, certain exchange-traded options and
certain futures from such markets and other entities that are
members of the ISG, or with which the Exchange has in place a
comprehensive surveillance sharing agreement. See Amendment No. 2,
supra note 5.
    \50\ See id. at 22.
---------------------------------------------------------------------------

    (4) The Exchange has appropriate rules to facilitate transactions
in the Shares during all trading sessions.\51\
---------------------------------------------------------------------------

    \51\ See id. at 20.
---------------------------------------------------------------------------

    (5) The Fund will be in compliance with Rule 10A-3 under the
Act,\52\ as provided by NYSE Arca Rule 5.3-E for initial and continued
listing of shares.\53\
---------------------------------------------------------------------------

    \52\ 17 CFR 240.10A-3.
    \53\ See Amendment No. 1, supra note 4, at 20.
---------------------------------------------------------------------------

    (6) All statements and representations made in the proposed rule
change regarding the description of the portfolio, limitations on
portfolio holdings or reference assets, or the applicability of
Exchange listing rules specified in this rule filing shall constitute
continued listing requirements for listing the Shares on the Exchange.
In addition, the issuer has represented to the Exchange that it will
advise the Exchange of any failure by the Fund to comply with the
continued listing requirements, and, pursuant to its obligations under
Section 19(g)(1) of the Act, the Exchange will monitor for compliance
with the continued listing requirements. If the Fund is not in
compliance with the applicable listing requirements, the Exchange will
commence delisting procedures under NYSE Arca Rule 5.5(m)-E.\54\
---------------------------------------------------------------------------

    \54\ See id. at 21.
---------------------------------------------------------------------------

    This approval order is based on all of the Exchange's
representations, including those set forth above and in Amendments No.
1 and No. 2.
    For the foregoing reasons, the Commission finds that the proposed
rule change, as modified by Amendments No. 1 and No. 2, is consistent
with Section 6(b)(5) of the Act \55\ the rules and regulations
thereunder applicable to a national securities exchange.
---------------------------------------------------------------------------

    \55\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

IV. Conclusion

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

    \56\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\57\
---------------------------------------------------------------------------

    \57\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-19217 Filed 9-5-19; 8:45 am]
 BILLING CODE 8011-01-P