[Federal Register Volume 80, Number 26 (Monday, February 9, 2015)]
[Notices]
[Pages 7050-7052]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-02512]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-74199; File No. SR-NYSEArca-2014-107]
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Instituting
Proceedings To Determine Whether To Approve or Disapprove Proposed Rule
Change, as Modified by Amendment No. 1 Thereto, To Reflect Changes to
the Means of Achieving the Investment Objective Applicable to the
Guggenheim Enhanced Short Duration ETF
February 3, 2015.
On October 21, 2014, NYSE Arca, Inc. (``Exchange'') filed with the
Securities and Exchange Commission (``Commission''), pursuant to
Section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\
and Rule 19b-4 thereunder,\2\ a proposed rule change to reflect certain
changes to the description of the Guggenheim Enhanced Short Duration
ETF (``Fund''), a series of Claymore Exchange-Traded Fund Trust
(``Trust''). On October 29, 2014, the Exchange filed Amendment No. 1 to
the proposed rule change. The proposed rule change was published for
comment in the Federal Register on November 7, 2014.\3\ The Commission
received one comment on the proposal.\4\ On December 10, 2014, 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.\5\ This Order institutes 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. 1 thereto.
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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. 73512 (Nov. 3,
2014), 79 FR 66442 (``Notice'').
\4\ All comments on the proposed rule change, including
Amendment No. 1, are available on the Commission's Web site at:
http://www.sec.gov/comments/sr-nysearca-2014-107/nysearca2014107.shtml.
\5\ See Securities Exchange Act Release No. 73810, 79 FR 74783
(Dec. 16, 2014). The Commission determined that it was appropriate
to designate a longer period within which to take action on the
proposed rule change so that it has sufficient time to consider the
proposed rule change. Accordingly, the Commission designated
February 5, 2015 as the date by which it should approve, disapprove,
or institute proceedings to determine whether to disapprove the
proposed rule change.
\6\ 15 U.S.C. 78s(b)(2)(B).
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I. Description of the Proposal
The Exchange proposes to reflect a change, as described below, to
the
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description of the measures that Guggenheim Funds Investment Advisors,
LLC (``Adviser'') may use to implement the Fund's investment objective,
which is to seek maximum current income, consistent with preservation
of capital and daily liquidity.\7\ The shares of the Fund (``Shares'')
are currently listed and traded on the Exchange under NYSE Arca
Equities Rule 8.600,\8\ which governs the listing and trading of
Managed Fund Shares. The Shares are offered by the Trust, a statutory
trust organized under the laws of the State of Delaware and registered
with the Commission as an open-end management investment company.\9\
The Exchange represents that the Fund and the Shares are currently in
compliance with the listing standards and other rules of the Exchange
and the requirements set forth in the Prior Release.
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\7\ According to the Prior Release (defined below), the Fund
uses a low duration strategy to seek to outperform the 1-3 month
Treasury Bill Index, in addition to providing returns in excess of
those available in U.S. Treasury bills, government repurchase
agreements, and money market funds, while providing preservation of
capital and daily liquidity. The Prior Release states that the Fund
would hold under normal circumstances a diversified portfolio of
fixed income instruments of varying maturities, but that have an
average duration of less than 1 year.
\8\ See Securities Exchange Act Release No. 64550 (May 26,
2011), 76 FR 32005 (June 2, 2011) (SR-NYSEArca-2011-11) (order
approving listing and trading on the Exchange of the Guggenheim
Enhanced Core Bond ETF and Guggenheim Enhanced Ultra-Short Bond ETF)
(``Prior Order''). See also Securities Exchange Act Release No.
64224 (Apr. 7, 2011), 76 FR 20401 (Apr. 12, 2011) (SR-NYSEArca-2011-
11) (``Prior Notice,'' and together with the Prior Order,
collectively ``Prior Release'').
\9\ The Trust is registered under the Investment Company Act of
1940 (``1940 Act''). On September 27, 2013, the Trust filed with the
Commission an amendment to its registration statement on Form N-1A
under the Securities Act of 1933 (``Securities Act'') and the 1940
Act relating to the Fund (File Nos. 333-134551 and 811-21906)
(``Registration Statement''). In addition, according to the
Exchange, the Trust has obtained certain exemptive relief under
the1940 Act. See Investment Company Act Release No. 29271, May 18,
2010 (File No. 812-13534).
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Specifically, the proposal seeks to reflect a change to the Fund's
limitation on investments in certain asset-backed securities
(``ABS'').\10\ According to the Prior Release, the Fund may invest up
to 10% of its assets in mortgage-backed securities (``MBS'') or in
other ABS.\11\ This 10% limitation does not apply to securities issued
or guaranteed by federal agencies or U.S. government sponsored
instrumentalities, such as the Government National Mortgage
Administration (``GNMA''), the Federal Housing Administration
(``FHA''), the Federal National Mortgage Association (``FNMA''), and
the Federal Home Loan Mortgage Corporation (``FHLMC''). Under the
proposal, the Fund would be permitted to invest up to 50% of its assets
in ABS that are not mortgage-related.\12\ This 50% limitation would not
apply to securities issued or guaranteed by federal agencies or U.S.
government sponsored instrumentalities, such as GNMA, FHA, FNMA, and
FHLMC. The Fund would continue to be subject to a 10% limit on
investments in MBS that are not issued or guaranteed by federal
agencies or U.S. government sponsored instrumentalities. In addition,
the Fund's holdings in MBS and ABS would be subject to the respective
limitations on the Fund's investments in illiquid assets (as described
below) and high yield securities.\13\
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\10\ Under the proposal, the Exchange seeks to reflect certain
other conforming or clarifying changes to the description of the
measures that the Adviser will utilize to implement the Fund's
investment objective. These other proposed changes can be found in
more detail in the Notice. See supra note 3.
\11\ As stated in the Prior Release, the Fund may invest in MBS
or other ABS issued or guaranteed by private issuers. The MBS in
which the Fund may invest may also include residential MBS,
collateralized mortgage obligations, and commercial MBS. In
addition, the ABS in which the Fund may invest include
collateralized debt obligations.
\12\ Specifically, the Exchange notes that such ABS are bonds
backed by pools of loans or other receivables and are securitized by
a wide variety of assets that are generally broken into three
categories: Consumer, commercial, and corporate. The consumer
category includes credit card, auto loan, student loan, and
timeshare loan ABS. The commercial category includes trade
receivables, equipment leases, oil receivables, film receivables,
rental cars, aircraft securitizations, ship and container
securitizations, whole business securitizations, and diversified
payment right securitizations. Corporate ABS include cash flow
collateralized loan obligations, collateralized by both middle
market and broadly syndicated bank loans. ABS are issued through
special purpose vehicles that are bankruptcy remote from the issuer
of the collateral. The credit quality of an ABS tranche depends on
the performance of the underlying assets and the structure. To
protect ABS investors from the possibility that some borrowers could
miss payments or even default on their loans, ABS include various
forms of credit enhancement.
\13\ According to the Prior Release, the Fund may invest no more
than 10% of its net assets in high yield securities, which are debt
securities that are rated below investment grade by nationally
recognized statistical rating organizations, or are unrated
securities that the Adviser believes are of comparable quality.
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The Exchange states that this change to the Fund's investment
limitations would allow the Adviser to better achieve the Fund's
investment objective to seek maximum current income, consistent with
preservation of capital and daily liquidity. In addition, according to
the Exchange, the Fund's increased investment in ABS that are not
mortgage-related would continue to adhere to the Fund's investment
strategy of investing in short duration fixed income securities.\14\
The Exchange asserts that, due to the quality of ABS in which the Fund
will invest, the Adviser does not expect that the Fund's additional
investments in ABS that are not mortgage-related will expose the Fund
to additional liquidity risk.
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\14\ The Fund will target floating rate, shorter maturity,
shorter spread duration and other amortizing securities. These
securities' maturity and spread duration are consistent with the
Fund's investment objective.
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The Exchange states that there is no change to the Fund's
investment objective and represents that the Fund will continue to
comply with all initial and continued listing requirements under NYSE
Arca Equities Rule 8.600. In addition, the Exchange represents that,
other than the proposed change described above and in the Notice, all
other facts presented and representations made in the Prior Release
remain unchanged.
II. Proceedings To Determine Whether To Approve or Disapprove SR-
NYSEArca-2014-107 and Grounds for Disapproval Under Consideration
The Commission is instituting proceedings pursuant to Section
19(b)(2)(B) of the Act \15\ to determine whether the proposed rule
change should be approved or disapproved. Institution of such
proceedings is appropriate at this time in view of the legal and policy
issues raised by the proposed rule change. Institution of proceedings
does not indicate that the Commission has reached any conclusions with
respect to any of the issues involved. Rather, as described below, the
Commission seeks and encourages interested persons to provide comments
on the proposed rule change.
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\15\ 15 U.S.C. 78s(b)(2)(B).
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Pursuant to Section 19(b)(2)(B) of the Act,\16\ the Commission is
providing notice of the grounds for disapproval under consideration.
The Commission is instituting 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.'' \17\
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\16\ Id.
\17\ 15 U.S.C. 78f(b)(5).
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III. Procedure: Request for Written Comments
The Commission requests that interested persons provide written
[[Page 7052]]
submissions of their views, data, and arguments with respect to the
proposal summarized above and information described in the Notice,\18\
as well as any other concerns they may have with the proposal. In
particular, the Commission invites the written views of interested
persons concerning whether the proposal is consistent with Section
6(b)(5) or any other provision of the Act, or the rules and regulations
thereunder. Although there do not appear to be any issues relevant to
approval or disapproval that would be facilitated by an oral
presentation of views, data, and arguments, the Commission will
consider, pursuant to Rule 19b-4, any request for an opportunity to
make an oral presentation.\19\
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\18\ See supra note 3.
\19\ Section 19(b)(2) of the Act, as amended by the Securities
Act Amendments of 1975, Public Law 94-29 (June 4, 1975), grants the
Commission flexibility to determine what type of proceeding--either
oral or notice and opportunity for written comments--is appropriate
for consideration of a particular proposal by a self-regulatory
organization. See Securities Act Amendments of 1975, Senate Comm. on
Banking, Housing & Urban Affairs, S. Rep. No. 75, 94th Cong., 1st
Sess. 30 (1975).
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Interested persons are invited to submit written data, views, and
arguments regarding whether the proposal should be approved or
disapproved by March 2, 2015. Any person who wishes to file a rebuttal
to any other person's submission must file that rebuttal by March 16,
2015.
The Commission asks that commenters address the sufficiency and
merit of the Exchange's and commenter's statements in support of the
proposal, in addition to any other comments they may wish to submit
about the proposed rule change. In particular, the Commission seeks
comment on the following:
1. Does the Notice contain sufficient information about the Fund's
proposed investments in ABS for commenters to evaluate the liquidity
and transparency of the underlying markets for those ABS?
2. What are commenters' views on the liquidity of the Fund's
proposed holdings in ABS? What are commenters' views on pricing
transparency in the market for these ABS? Does the pricing transparency
vary for investors, market makers, and other market participants? If
so, how and why?
3. The Exchange states that, because the preponderance of the
Fund's investments in ABS will be in investment-grade instruments,
``the Adviser does not expect that the proposed additional investments
in ABS that are not mortgage-related will expose the Fund to additional
liquidity risk.'' Do commenters agree? Why or why not?
4. Do commenters believe that the proposal to increase the Fund's
holdings in ABS would have any effect on the arbitrage mechanism with
respect to the Fund? If so, what effect and why? If not, why not? Do
commenters believe that the proposed change in the Fund's investments
would have any effect on market pricing of the Fund relative to its net
asset value? Why or why not?
5. What are commenters' views on whether the Fund's proposal to
increase its ABS holdings would affect the ability of market makers to
make markets in the Shares of the Fund?
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 protected]. Please include
File Number SR-NYSEArca-2014-107 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Numbers SR-NYSEArca-2014-107. 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 these filings also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NYSEArca-2014-107 and should
be submitted on or before March 2, 2015. Rebuttal comments should be
submitted by March 16, 2015.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(57).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015-02512 Filed 2-6-15; 8:45 am]
BILLING CODE 8011-01-P