[Federal Register Volume 80, Number 102 (Thursday, May 28, 2015)]
[Notices]
[Pages 30519-30525]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-12829]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-75023; File No. SR-NYSEArca-2014-100]
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting
Approval of Proposed Rule Change, as Modified by Amendment Nos. 1 and 2
Thereto, Relating to the Listing and Trading of Shares of the SPDR SSgA
Global Managed Volatility ETF Under NYSE Arca Equities Rule 8.600
May 21, 2015.
I. Introduction
On September 5, 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 list and trade
shares (``Shares'') of the SPDR SSgA Global Managed Volatility ETF
(``Fund'') under NYSE Arca Equities Rule 8.600, which governs the
listing and trading of Managed Fund Shares. The proposed rule change
was published for comment in the Federal Register on September 24,
2014.\3\ On November 4, 2014, pursuant to Section 19(b)(2) of the
Act,\4\ 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\
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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. 73141 (Sept. 18,
2014), 79 FR 57161 (``Notice'').
\4\ 15 U.S.C. 78s(b)(2).
\5\ See Securities Exchange Act Release No. 73515, 79 FR 66758
(Nov. 10, 2014). The Commission designated a longer period within
which to take action on the proposed rule change and designated
December 23, 2014, as the date by which it should approve,
disapprove, or institute proceedings to determine whether to
disapprove the proposed rule change.
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On December 22, 2014, the Commission instituted proceedings under
Section 19(b)(2)(B) of the Act \6\ to determine whether to approve or
disapprove the proposed rule change.\7\ In the Order Instituting
Proceedings, the
[[Page 30520]]
Commission solicited responses to specified matters related to the
proposal.\8\ The Commission received no comment letters on the proposed
rule change.
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\6\ 15 U.S.C. 78s(b)(2)(B).
\7\ See Securities Exchange Act Release No. 73914, 79 FR 78524
(Dec. 30, 2014) (``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., 79 FR at 78530.
\8\ See id. (soliciting public comment on the statements of the
Exchange contained in the Notice, including statements made in
connection with information sharing procedures with respect to
certain non-U.S. equity security holdings and the Exchange's
arguments regarding the applicability of the definition of
``Actively-Traded Securities'' under Regulation M (``Reg M'')).
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The Exchange subsequently filed Amendment No. 1 to the proposed
rule change on January 20, 2015.\9\ On March 20, 2015, pursuant to
Section 19(b)(2) of the Act,\10\ the Commission designated a longer
period for Commission action on proceedings to determine whether to
disapprove the proposed rule change.\11\ On April 7, 2015, the Exchange
filed Amendment No. 2 to the proposed rule change.\12\ The Commission
published a Notice of Filing of Amendment Nos. 1 and 2 to the proposed
rule change for comment in the Federal Register on April 21, 2014.\13\
The Commission received no comments on the proposal, as modified by
Amendment Nos. 1 and 2 thereto.
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\9\ The text of Amendment No. 1, which amends and replaces the
proposed rule change in its entirety, is available on the Exchange's
Web site, at the principal office of the Exchange, and at the
Commission's Public Reference Room. The text of Amendment No. 1 to
the proposed rule change is also available on the Commission's Web
site. See Letter from Martha Redding, Senior Counsel and Assistant
Secretary, New York Stock Exchange, to Kevin M. O'Neill, Deputy
Secretary, Commission (Jan. 22, 2015), available at http://www.sec.gov/comments/sr-nysearca-2014-100/nysearca2014100-1.pdf.
\10\ 15 U.S.C. 78s(b)(2).
\11\ See Securities Exchange Act Release No. 74559, 80 FR 16047
(Mar. 26, 2015). The Commission designated a longer period within
which to take action on the proposed rule change and designated May
7, 2015 as the date by which it should determine whether to
disapprove the proposed rule change. See also Securities Exchange
Act Release No. 74559A (Apr. 13, 2015) (correcting the date by which
the Commission must take action on proceedings to determine whether
to disapprove the proposed rule change to May 22, 2015).
\12\ See Amendment No. 2, available at http://www.sec.gov/comments/sr-nysearca-2014-100/nysearca2014100-2.pdf.
\13\ See Securities Exchange Act Release No. 74729 (Apr. 15,
2015), 80 FR 22242.
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This order grants approval of the proposed rule change, as modified
by Amendment Nos. 1 and 2 thereto.
II. Description of the Proposal, as Modified by Amendment Nos. 1 and 2
Thereto
NYSE Arca proposes to list and trade Shares of the Fund under NYSE
Arca Equities Rule 8.600, which governs the listing and trading of
Managed Fund Shares on the Exchange. The Shares will be offered by SSgA
Active ETF Trust (``Trust''), which is organized as a Massachusetts
business trust and is registered with the Commission as an open-end
management investment company.\14\ SSgA Funds Management, Inc. will
serve as the investment adviser to the Fund (``Adviser'').\15\ State
Street Global Markets, LLC will be the principal underwriter and
distributor of the Fund's Shares, and State Street Bank and Trust
Company (``Custodian'') will serve as the administrator, custodian, and
transfer agent for the Fund. The Exchange has made the following
representations and statements in describing the Fund and its
investment strategy, including the Fund's portfolio holdings and
investment restrictions.\16\
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\14\ The Trust is registered under the Investment Company Act of
1940 (``1940 Act''). According to the Exchange, on September 20,
2012, 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 under the 1940 Act relating to the Fund
(File Nos. 333-173276 and 811-22542) (``Registration Statement'').
In addition, the Exchange states that the Trust has obtained from
the Commission certain exemptive relief under the 1940 Act. See
Investment Company Act Release No. 29524 (Dec. 13, 2010) (File No.
812-13487).
\15\ The Exchange represents that the Adviser is not a
registered broker-dealer but is affiliated with a broker-dealer and
has implemented a ``fire wall'' with respect to such broker-dealer
regarding access to information concerning the composition of or
changes to the Fund's portfolio. The Exchange further represents
that, in the event (a) the Adviser or any sub-adviser becomes
registered as a broker-dealer or newly affiliated with a broker-
dealer, or (b) any new adviser or sub-adviser is a registered
broker-dealer or becomes affiliated with a broker-dealer, the
Adviser or any new adviser or sub-adviser, as the case may be, will
implement a fire wall with respect to its relevant personnel or
broker-dealer affiliate, as applicable, regarding access to
information concerning the composition of or changes to the
portfolio, and will be subject to procedures designed to prevent the
use and dissemination of material, non-public information regarding
the portfolio.
\16\ The Commission notes that additional information regarding
the Fund, the Trust, and the Shares, including investment
strategies, risks, creation and redemption procedures, fees,
portfolio holdings disclosure policies, calculation of net asset
value (``NAV''), distributions, and taxes, among other things, can
be found in Amendment No. 1 and the Registration Statement, as
applicable. See Amendment No. 1 and Registration Statement, supra
notes 9 and 14, respectively.
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A. The Exchange's Description of the Fund's Principal Investment
Policies
According to the Exchange, the Fund will seek to provide
competitive, long-term returns while maintaining low, long-term
volatility relative to the broad global market. Under normal
circumstances,\17\ the Fund will invest all of its assets in the SSgA
Global Managed Volatility Portfolio (``Portfolio''), a separate series
of the SSgA Master Trust with an identical investment objective as the
Fund. As a result, the Fund will invest indirectly through the
Portfolio.\18\
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\17\ With respect to the Fund, the term ``under normal
circumstances'' includes, but is not limited to, the absence of
extreme volatility or trading halts in the equity markets or the
financial markets generally; operational issues causing
dissemination of inaccurate market information; or force majeure
type events such as systems failure, natural or man-made disaster,
act of God, armed conflict, act of terrorism, riot or labor
disruption, or any similar intervening circumstance.
\18\ According to the Exchange, the Fund is intended to be
managed in a ``master-feeder'' structure, under which the Fund will
invest substantially all of its assets in the Portfolio (i.e., a
``master fund''), which is a separate 1940 Act-registered mutual
fund that has an identical investment objective. As a result, the
Fund (i.e., the ``feeder fund'') will have an indirect interest in
all of the securities owned by the corresponding Portfolio. Because
of this indirect interest, the Fund's investment returns should be
the same as those of the Portfolio, adjusted for the expenses of the
Fund. The Exchange represents that, in general, the Portfolio, which
will be where investments will be held, will primarily consist of
equity securities and, to a lesser extent, other investments as
described under ``Non-Principal Investment Policies'' below. The
Fund will invest in shares of the Portfolio and will not invest in
investments described under ``Non-Principal Investment Policies,''
but may be exposed to such investments by means of the Fund's
investment in shares of the Portfolio. The Exchange states that in
extraordinary instances, the Fund reserves the right to make direct
investments in equity securities and other investments.
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According to the Exchange, the Adviser will utilize a proprietary
quantitative investment process to select a portfolio of exchange-
listed-and-traded equity securities that the Adviser believes will
exhibit low volatility and provide competitive, long-term returns
relative to the broad global market.\19\ The Portfolio will invest its
assets in both U.S. and foreign investments. The Portfolio will
generally invest at least 80% of its net assets in global equity
securities and at least 30% of its net assets in global equity
securities of issuers economically tied to countries other than the
United States. The Portfolio will generally hold securities of issuers
economically tied to at least three countries, including the United
States.\20\ The Portfolio may purchase
[[Page 30521]]
exchange-listed-and-traded common stocks and preferred securities of
U.S. and foreign corporations (referred to herein as ``non-U.S. equity
securities'').\21\ Under normal circumstances, the Portfolio will
include a minimum of 20 exchange-listed-and-traded equity securities.
The Adviser expects to favor securities with low exposure to market
risk factors and low security-specific risk. The Adviser will consider
market risk factors to include, among others, a security's size,
momentum, value, liquidity, leverage, and growth. While the Adviser
will attempt to manage the Fund's volatility exposure to stabilize
performance, there can be no guarantee that the Fund will reach its
target volatility. Additionally, the Adviser will implement risk
constraints at the security, industry, size exposure, and sector
levels. Through this quantitative process of security selection and
portfolio diversification, the Adviser expects that the Portfolio will
be subject to a low level of absolute risk (as defined by standard
deviation of returns) and thus should exhibit low volatility over the
long term.
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\19\ Volatility is a statistical measurement of the magnitude of
up and down fluctuations in the value of a financial instrument or
index over time. Volatility may result in rapid and dramatic price
swings.
\20\ Investments in common stock of foreign corporations may
also be in the form of American Depositary Receipts (``ADRs''),
Global Depositary Receipts (``GDRs''), and European Depositary
Receipts (``EDRs'') (collectively ``Depositary Receipts'').
Depositary Receipts are receipts, typically issued by a bank or
trust company, that evidence ownership of underlying securities
issued by a foreign corporation. For ADRs, the depository is
typically a U.S. financial institution, and the underlying
securities are issued by a foreign issuer. For other Depositary
Receipts, the depository may be a foreign or a U.S. entity, and the
underlying securities may have a foreign or a U.S. issuer.
Depositary Receipts will not necessarily be denominated in the same
currency as their underlying securities. Generally, ADRs, in
registered form, are designed for use in the U.S. securities market,
and EDRs, in bearer form, are designated for use in European
securities markets. GDRs are tradable both in the United States and
in Europe and are designed for use throughout the world. The
Portfolio may invest in unsponsored Depositary Receipts. The issuers
of unsponsored Depositary Receipts are not obligated to disclose
material information in the United States, and, therefore, there may
be less information available regarding such issuers, and there may
not be a correlation between such information and the market value
of the Depositary Receipts. Unsponsored Depositary Receipts will not
exceed 10% of the Fund's net assets.
\21\ For purposes of this filing, the term ``non-U.S. equity
securities'' includes the following: Common stocks and preferred
securities of foreign corporations; non-U.S. exchange-traded real
estate investment trusts (``REITs''), as referenced below; and
Depositary Receipts (excluding Depositary Receipts that are
registered under the Act).
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The Adviser will manage the investments of the Portfolio. Under the
master-feeder arrangement, and pursuant to the investment advisory
agreement between the Adviser and the Trust, investment advisory fees
charged at the Portfolio level will be deducted from the advisory fees
charged at the Fund level. This arrangement avoids a ``layering'' of
fees, i.e., the Fund's total annual operating expenses would be no
higher as a result of investing in a master-feeder arrangement than
they would be if the Fund pursued its investment objectives directly.
In addition, the Fund may discontinue investing through the master-
feeder arrangement and pursue its investment objectives directly if the
Fund's Board of Trustees (``Board'') determines that doing so would be
in the best interests of shareholders.
Under normal circumstances, the non-U.S. equity securities in the
Fund's portfolio will meet the following criteria at time of purchase:
(1) Non-U.S. equity securities each shall have a minimum market value
of at least $100 million; (2) non-U.S. equity securities 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; (3) the most heavily weighted non-
U.S. equity security shall not exceed 25% of the weight of the Fund's
entire portfolio, and, to the extent applicable, the five most heavily
weighted non-U.S. equity securities shall not exceed 60% of the weight
of the Fund's entire portfolio; and (4) each non-U.S. equity security
shall be listed and traded on an exchange that has last-sale
reporting.\22\
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\22\ These criteria are similar to certain ``generic'' listing
criteria in NYSE Arca Equities Rule 5.2(j)(3), Commentary .01(a)(B),
which relate to criteria applicable to an index or portfolio of U.S.
and non-U.S. stocks underlying a series of Investment Company Units
to be listed and traded on the Exchange pursuant to Rule 19b-4(e)
under the Act.
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The Portfolio and Fund do not intend to concentrate their
investments in any particular industry. The Portfolio and Fund will
look to the Global Industry Classification Standard (``GICS'') Level 3
(Industries) in making industry determinations.\23\
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\23\ GICS classifications can be found on the Standard & Poor's
Web site at http://www.us.spindices.com/search/?query=gics+map.
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The Portfolio may invest in exchange-traded preferred securities.
Preferred securities pay fixed or adjustable rate dividends to
investors and have ``preference'' over common stock in the payment of
dividends and the liquidation of a company's assets.
B. The Exchange's Description of the Fund's Non-Principal Investment
Policies
In certain situations or market conditions, in order to take
temporary defensive positions, the Fund may (either directly or through
the Portfolio) temporarily depart from its normal investment policies
and strategies, provided that the alternative is consistent with the
Fund's investment objective and is in the best interest of the Fund.
For example, the Fund may hold a higher than normal proportion of its
assets in cash in times of extreme market stress. According to the
Exchange, in addition to the principal investments described above, the
Portfolio may invest its remaining net assets in other investments, as
described below. The investment practices of the Portfolio are the same
in all material respects as those of the Fund.
The Portfolio may invest in U.S. Government obligations \24\ and
U.S.-registered, dollar-denominated bonds of foreign corporations,
governments, agencies, and supra-national entities. The Portfolio also
may invest in restricted securities.\25\
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\24\ U.S. Government obligations are a type of bond. U.S.
Government obligations include securities issued or guaranteed as to
principal and interest by the U.S. Government or its agencies or
instrumentalities. One type of U.S. Government obligation, U.S.
Treasury obligations, are backed by the full faith and credit of the
U.S. Treasury and differ only in their interest rates, maturities,
and times of issuance. U.S. Treasury bills have initial maturities
of one-year or less; U.S. Treasury notes have initial maturities of
one to ten years; and U.S. Treasury bonds generally have initial
maturities of greater than ten years. Other U.S. Government
obligations are issued or guaranteed by agencies or
instrumentalities of the U.S. Government including, but not limited
to, the Federal National Mortgage Association, the Government
National Mortgage Association (``Ginnie Mae''), the Small Business
Administration, the Federal Farm Credit Administration, the Federal
Home Loan Mortgage Corporation, the Federal Home Loan Banks, Banks
for Cooperatives (including the Central Bank for Cooperatives), the
Federal Land Banks, the Federal Intermediate Credit Banks, the
Tennessee Valley Authority, the Export-Import Bank of the United
States, the Commodity Credit Corporation, the Federal Financing
Bank, the National Credit Union Administration, and the Federal
Agricultural Mortgage Corporation. Some obligations issued or
guaranteed by U.S. Government agencies or instrumentalities,
including, for example, Ginnie Mae pass-through certificates, are
supported by the full faith and credit of the U.S. Treasury.
\25\ Restricted securities are securities that are not
registered under the Securities Act, but which can be offered and
sold to ``qualified institutional buyers'' under Rule 144A under the
Securities Act. The Board has delegated to the Adviser the
responsibility for determining the liquidity of Rule 144A restricted
securities that the Portfolio may invest in. In reaching liquidity
decisions, the Adviser may consider the following factors: the
frequency of trades and quotes for the security; the number of
dealers wishing to purchase or sell the security and the number of
other potential purchasers; dealer undertakings to make a market in
the security; and the nature of the security and the nature of the
marketplace in which it trades (e.g., the time needed to dispose of
the security, the method of soliciting offers, and the mechanics of
transfer).
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The Portfolio may conduct foreign currency transactions on a spot
(i.e., cash) or forward basis (i.e., by entering into forward contracts
to purchase or sell foreign currencies).
The Portfolio may invest in exchange-traded products (``ETPs''),
including exchange-traded funds (``ETFs'') registered under the 1940
Act, exchange-traded commodity trusts, and exchange-traded notes.\26\
The Portfolio
[[Page 30522]]
also may invest in the securities of other investment companies,
including money market funds and exchange-traded closed-end funds,
subject to applicable limitations under Section 12(d)(1) of the 1940
Act.\27\ The Portfolio may invest up to 25% of its total assets in one
or more ETPs that are qualified publicly traded partnerships
(``QPTPs'') \28\ and whose principal activities are the buying and
selling of commodities or options, futures, or forwards with respect to
commodities. The Portfolio may invest in exchange-traded shares of
REITs.
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\26\ For purposes of this filing, ETPs include Investment
Company Units (as described in NYSE Arca Equities Rule 5.2(j)(3));
Index-Linked Securities (as described in NYSE Arca Equities Rule
5.2(j)(6)); Portfolio Depositary Receipts (as described in NYSE Arca
Equities Rule 8.100); Trust Issued Receipts (as described in NYSE
Arca Equities Rule 8.200); Commodity-Based Trust Shares (as
described in NYSE Arca Equities Rule 8.201); Currency Trust Shares
(as described in NYSE Arca Equities Rule 8.202); Commodity Index
Trust Shares (as described in NYSE Arca Equities Rule 8.203); and
Managed Fund Shares (as described in NYSE Arca Equities Rule 8.600).
The Portfolio may invest in ETFs managed by the Adviser. The Adviser
may receive management or other fees from the ETPs in which the
Portfolio or Fund may invest, as well as a management fee for
managing the Fund. The ETPs all will be listed and traded in the
U.S. on national securities exchanges.
\27\ The Fund will invest substantially all of its assets in the
Portfolio. The Exchange states that, pursuant to Section 12(d)(1) of
the 1940 Act, a fund may invest in the securities of another
investment company (the ``acquired company'') provided that the
fund, immediately after such purchase or acquisition, does not own
in the aggregate: (i) More than 3% of the total outstanding voting
stock of the acquired company; (ii) securities issued by the
acquired company having an aggregate value in excess of 5% of the
value of the total assets of the fund; (iii) securities issued by
the acquired company and all other investment companies (other than
Treasury stock of the fund) having an aggregate value in excess of
10% of the value of the total assets of the fund; or (iv) in the
case of investment in a closed-end fund, more than 10% of the total
outstanding voting stock of the acquired company. The Fund may also
invest in the securities of other investment companies if such
securities are the only investment securities held by the Fund, such
as through a master-feeder arrangement. The Fund currently will
pursue its investment objective through such an arrangement. To the
extent allowed by law, regulation, the Fund's investment
restrictions, and the Trust's exemptive relief, the Fund may invest
its assets in securities of investment companies that are money
market funds, including those advised by the Adviser or otherwise
affiliated with the Adviser, in excess of the limits discussed
above.
\28\ A QPTP is an entity that is treated as a partnership for
federal income tax purposes, subject to certain requirements. If
such an ETP fails to qualify as a QPTP, the income generated from
the Portfolio's investment in the ETP may not comply with certain
income tests necessary for the Portfolio to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code.
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The Portfolio may invest in repurchase agreements with commercial
banks, brokers, or dealers to generate income from its excess cash
balances and to invest securities lending cash collateral.\29\ The
Portfolio may also enter into reverse repurchase agreements.\30\
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\29\ A repurchase agreement is an agreement under which a fund
acquires a financial instrument (e.g., a security issued by the U.S.
government or an agency thereof, a banker's acceptance, or a
certificate of deposit) from a seller, subject to resale to the
seller at an agreed upon price and date (normally, the next business
day). A repurchase agreement may be considered a loan collateralized
by securities. The resale price reflects an agreed upon interest
rate effective for the period the instrument is held by a fund and
is unrelated to the interest rate on the underlying instrument.
\30\ Reverse repurchase agreements involve the sale of
securities with an agreement to repurchase the securities at an
agreed-upon price, date, and interest payment, and have the
characteristics of borrowing.
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In addition to repurchase agreements, the Portfolio may invest in
short-term instruments, including money market instruments (including
money market funds advised by the Adviser), cash, and cash equivalents,
on an ongoing basis to provide liquidity or for other reasons.\31\
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\31\ Money market instruments are generally short-term
investments that may include but are not limited to: (i) Shares of
money market funds; (ii) obligations issued or guaranteed by the
U.S. government, its agencies, or its instrumentalities (including
government-sponsored enterprises); (iii) negotiable certificates of
deposit, bankers' acceptances, fixed time deposits, and other
obligations of U.S. and foreign banks (including foreign branches)
and similar institutions; (iv) commercial paper rated at the date of
purchase ``Prime-1'' by Moody's or ``A-1'' by Standard & Poor's, or
if unrated, of comparable quality as determined by the Adviser; (v)
non-convertible corporate debt securities (e.g., bonds and
debentures) with remaining maturities at the date of purchase of not
more than 397 days and that satisfy the rating requirements set
forth in Rule 2a-7 under the 1940 Act; (vi) short-term U.S. dollar-
denominated obligations of foreign banks (including U.S. branches)
that, in the opinion of the Adviser, are of comparable quality to
obligations of U.S. banks which may be purchased by the Portfolio;
and (vii) variable rate demand notes.
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C. The Exchange's Description of the Fund's Investment Restrictions
According to the Exchange, the Fund may hold up to an aggregate
amount of 15% of its net assets in illiquid assets (calculated at the
time of investment), including Rule 144A securities deemed illiquid by
the Adviser. The Fund will monitor its portfolio liquidity on an
ongoing basis to determine whether, in light of current circumstances,
an adequate level of liquidity is being maintained, and will consider
taking appropriate steps in order to maintain adequate liquidity if,
through a change in values, net assets, or other circumstances, more
than 15% of the Fund's net assets are held in illiquid assets. Illiquid
assets include securities subject to contractual or other restrictions
on resale and other instruments that lack readily available markets as
determined in accordance with Commission staff guidance.
The Exchange represents that the Portfolio and the Fund will be
classified as a ``non-diversified'' investment company under the 1940
Act. A non-diversified classification means that the Portfolio or Fund
is not limited by the 1940 Act with regard to the percentage of its
assets that may be invested in the securities of a single issuer. This
means that the Portfolio or Fund may invest a greater portion of its
assets in the securities of a single issuer than a diversified fund.
Although the Portfolio and Fund will be non-diversified for purposes of
the 1940 Act, the Portfolio and Fund intend to maintain the required
level of diversification and otherwise conduct its operations so as to
qualify as a ``regulated investment company'' for purposes of the
Internal Revenue Code of 1986.
The Exchange represents that neither the Fund nor the Portfolio
will invest in options, futures contracts, or swap agreements. The
Exchange further represents that the Fund's and Portfolio's investments
will be consistent with the Fund's investment objective and will not be
used to enhance leverage.
III. Discussion and Commission Findings
After careful review, the Commission finds that the Exchange's
proposal to list and trade the Shares is consistent with the Exchange
Act and the rules and regulations thereunder applicable to a national
securities exchange.\32\ In particular, the Commission finds that the
proposed rule change, as modified by Amendment Nos. 1 and 2 thereto, is
consistent with Section 6(b)(5) of the Exchange Act,\33\ which
requires, among other things, that the Exchange's rules be designed 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.
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\32\ 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).
\33\ 15 U.S.C. 78f(b)(5).
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The Commission also finds that the proposal to list and trade the
Shares on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of
the Exchange Act,\34\ which sets forth the finding of Congress 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. Quotation and
last-sale information for the Shares will be available via the
Consolidated Tape Association (``CTA'') high-speed line. In addition,
the Indicative Optimized
[[Page 30523]]
Portfolio Value (``IOPV''),\35\ which is the Portfolio Indicative Value
as defined in NYSE Arca Equities Rule 8.600(c)(3), will be widely
disseminated at least every 15 seconds during the Exchange's Core
Trading Session by one or more major market data vendors.\36\ On each
business day, before commencement of trading in Shares in the Core
Trading Session on the Exchange, the Fund will disclose on its Web site
the Disclosed Portfolio that will form the basis for the Fund's
calculation of NAV at the end of the business day.\37\ In addition, a
basket composition file, which includes the security names and share
quantities required to be delivered in exchange for the Fund's Shares,
together with estimates and actual cash components, will be publicly
disseminated daily prior to the opening of the New York Stock Exchange
(``NYSE'') via the National Securities Clearing Corporation. The basket
represents one Creation Unit of the Fund.
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\34\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
\35\ The IOPV calculation will be an estimate of the value of
the Fund's NAV per Share using market data converted into U.S.
dollars at the current currency rates. The IOPV price will be based
on quotes and closing prices from the securities' local market and
may not reflect events that occur subsequent to the local market's
close. Premiums and discounts between the IOPV and the market price
of the Shares may occur. The IOPV should not be viewed as a ``real-
time'' update of the NAV per Share of the Fund, which will be
calculated only once a day.
\36\ According to the Exchange, several major market data
vendors display and make widely available IOPVs taken from CTA or
other data feeds.
\37\ On a daily basis, the Fund will disclose for each portfolio
security or other financial instrument of the Fund and of the
Portfolio the following information on the Fund's Web site: ticker
symbol (if applicable); name of security and financial instrument;
number of shares and dollar value of financial instruments held in
the portfolio; and percentage weighting of the security and
financial instrument in the portfolio. The Web site information will
be publicly available at no charge.
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The NAV of the Portfolio will be calculated by the Custodian and
determined at the close of the regular trading session on the NYSE
(ordinarily 4:00 p.m. Eastern time) on each day that the NYSE is open,
provided that fixed-income assets (and, accordingly, the Portfolio's
NAV) may be valued as of the announced closing time for trading in
fixed-income instruments on any day that the Securities Industry and
Financial Markets Association (or applicable exchange or market on
which the Portfolio's investments are traded) announces an early
closing time.\38\ Information regarding market price and trading volume
of the Shares will be continuously 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. The Exchange represents that, with
respect to U.S. exchange-listed equity securities, the intra-day,
closing and settlement prices of common stocks and exchange-traded
equity securities (including shares of preferred securities, ETPs,
closed-end funds, QPTPs, REITs, and U.S. exchange-listed Depositary
Receipts) will be readily available from the national securities
exchanges trading such securities, automated quotation systems,
published or other public sources, or on-line information services such
as Bloomberg or Reuters. With respect to non-U.S. exchange-listed
equity securities, intra-day, closing, and settlement prices of common
stocks and other equity securities (including shares of preferred
securities and non-U.S. Depositary Receipts) will be available from the
foreign exchanges on which such securities trade as well as from major
market-data vendors. Pricing information regarding each asset class in
which the Fund or Portfolio will invest, including Rule 144A
securities, repurchase agreements, reverse repurchase agreements, and
securities of investment companies (other than ETFs registered under
the 1940 Act), will generally be available through nationally
recognized data service providers through subscription arrangements.
Quotation information from brokers and dealers or pricing services will
be available for fixed income securities, including U.S. Government
obligations; U.S. registered, dollar-denominated bonds of foreign
corporations, governments, agencies, and supra-national entities;
short-term instruments; unsponsored Depositary Receipts; and spot and
forward currency transactions held by the Fund and Portfolio.
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\38\ The NAV per Share for the Fund will be computed by dividing
the value of the net assets of the Portfolio (i.e., the value of its
total assets less total liabilities) by the total number of Shares
outstanding, rounded to the nearest cent. According to the Exchange,
common stocks and exchange-traded equity securities (including
shares of preferred securities, ETPs, closed-end funds, QPTPs,
REITs, and Depositary Receipts (other than unsponsored Depositary
Receipts traded in the OTC market) traded on a national securities
exchange generally will be valued at the last reported sale price or
the official closing price on that exchange where the stock is
primarily traded on the day that the valuation is made. Foreign
exchange-traded equities and listed ADRs will be valued at the last
sale or official closing price on the relevant exchange on the
valuation date. If, however, neither the last sale price nor the
official closing price is available, each of these securities will
be valued at either the last reported sale price or official closing
price as of the close of regular trading of the principal market on
which the security is listed. According to the Exchange, securities
of investment companies (other than ETFs registered under the 1940
Act), including affiliated funds, money market funds, and closed-end
funds, will be valued at NAV. Unsponsored Depositary Receipts, which
are traded in the OTC market, will be valued at the last reported
sale price from the OTC Bulletin Board or OTC Link LLC on the
valuation date. Rule 144A securities, repurchase agreements, and
reverse repurchase agreements will generally be valued at bid prices
received from independent pricing services as of the announced
closing time for trading in such instruments. Spot currency
transactions will generally be valued at bid prices received from
independent pricing service converted into U.S. dollars at current
market rates on the date of valuation. Foreign currency forwards
normally will be valued on the basis of quotes obtained from broker-
dealers or third party pricing services. According to the Exchange,
fixed income securities, including U.S. Government obligations; U.S.
registered, dollar-denominated bonds of foreign corporations,
governments, agencies; and supra-national entities; and short-term
instruments will generally be valued at bid prices received from
independent pricing services as of the announced closing time for
trading in fixed-income instruments in the respective market or
exchange. In determining the value of a fixed income investment,
pricing services determine valuations for normal institutional-size
trading units of such securities using valuation models or matrix
pricing, which incorporates yield and/or price with respect to bonds
that are considered comparable in characteristics such as rating,
interest rate, and maturity date and quotations from securities
dealers to determine current value. Any assets or liabilities
denominated in currencies other than the U.S. dollar will be
converted into U.S. dollars at the current market rates on the date
of valuation as quoted by one or more sources. In the event that
current market valuations are not readily available or such
valuations do not reflect current market value, the SSgA Master
Trust's procedures require the Pricing and Investment Committee to
determine a security's fair value if a market price is not readily
available, in accordance with the 1940 Act.
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The Commission further believes that the proposal to list and trade
the Shares 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 will obtain a representation from the issuer of
the Shares that the NAV per Share will be calculated daily and that the
NAV and the Disclosed Portfolio will be made available to all market
participants at the same time.
Trading in Shares of the Fund will be halted if the circuit-breaker
parameters in NYSE Arca Equities Rule 7.12 have been reached. Trading
also may be halted because of market conditions or for reasons that, in
the view of the Exchange, make trading in the Shares inadvisable.\39\
Trading in the Shares will be subject to NYSE Arca Equities Rule
8.600(d)(2)(D), which sets forth
[[Page 30524]]
circumstances under which Shares of the Fund may be halted.
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\39\ These may include: (1) The extent to which trading is not
occurring in the securities or the financial instruments
constituting 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.
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The Exchange represents that it has a general policy prohibiting
the distribution of material, non-public information by its employees.
The Exchange represents that the Adviser is not a registered
broker-dealer but is affiliated with a broker-dealer and has
implemented a ``fire wall'' with respect to that broker-dealer
regarding access to information concerning the composition or changes
to the Fund's portfolio.\40\ Prior to the commencement of trading, the
Exchange will inform its Equity Trading Permit Holders in an
Information Bulletin (``Bulletin'') of the special characteristics and
risks associated with trading the Shares. The Exchange represents that
trading in the Shares will be subject to the existing trading
surveillances, administered by the Financial Industry Regulatory
Authority (``FINRA'') on behalf of the Exchange, which are designed to
detect violations of Exchange rules and applicable federal securities
laws.\41\
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\40\ See supra note 15. The Exchange represents that an
investment adviser to an open-end fund is required to be registered
under the Investment Advisers Act of 1940 (``Advisers Act''). As a
result, the Adviser and its related personnel are subject to the
provisions of Rule 204A-1 under the Advisers Act relating to codes
of ethics. This Rule requires investment advisers to adopt a code of
ethics that reflects the fiduciary nature of the relationship to
clients as well as compliance with other applicable securities laws.
Accordingly, procedures designed to prevent the communication and
misuse of non-public information by an investment adviser must be
consistent with Rule 204A-1 under the Advisers Act. In addition,
Rule 206(4)-7 under the Advisers Act makes it unlawful for an
investment adviser to provide investment advice to clients unless
such investment adviser has (i) adopted and implemented written
policies and procedures reasonably designed to prevent violation, by
the investment adviser and its supervised persons, of the Advisers
Act and the Commission rules adopted thereunder; (ii) implemented,
at a minimum, an annual review regarding the adequacy of the
policies and procedures established pursuant to subparagraph (i)
above and the effectiveness of their implementation; and (iii)
designated an individual (who is a supervised person) responsible
for administering the policies and procedures adopted under
subparagraph (i) above.
\41\ The Exchange states that FINRA surveils trading on the
Exchange pursuant to a regulatory services agreement. The Exchange
is responsible for FINRA's performance under this regulatory
services agreement.
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The Exchange represents that it 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.
In support of this proposal, the Exchange has also made the following
representations:
(1) The Shares will conform to the initial and continued listing
criteria under NYSE Arca Equities Rule 8.600.
(2) The Exchange has appropriate rules to facilitate transactions
in the Shares during all trading sessions.
(3) Trading in the Shares will be subject to the existing trading
surveillances, administered by FINRA on behalf of the Exchange, which
are designed to detect violations of Exchange rules and applicable
federal securities laws, and these procedures are adequate to properly
monitor Exchange trading of the Shares in all trading sessions and to
deter and detect violations of Exchange rules and federal securities
laws applicable to trading on the Exchange.
(4) FINRA, on behalf of the Exchange, will communicate as needed
regarding trading in the Shares, ETPs, and certain exchange-traded
securities underlying the Shares with other markets and other entities
that are members of the Intermarket Surveillance Group (``ISG''), and
FINRA, on behalf of the Exchange, may obtain trading information
regarding trading in the Shares, ETPs and certain exchange-traded
securities underlying the Shares from such markets and other entities.
In addition, the Exchange may obtain information regarding trading in
the Shares, ETPs, and certain exchange-traded securities underlying the
Shares from markets and other entities that are members of ISG or with
which the Exchange has in place a comprehensive surveillance sharing
agreement.\42\ The Exchange states that FINRA, on behalf of the
Exchange, is able to access, as needed, trade information for certain
fixed income securities held by the Fund reported to FINRA's Trade
Reporting and Compliance Engine.
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\42\ For a list of the current members of ISG, see
www.isgportal.org. The Exchange notes that not all components of the
Disclosed Portfolio for the Fund may trade on markets that are
members of ISG or with which the Exchange has in place a
comprehensive surveillance sharing agreement.
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(5) Prior to the commencement of trading, the Exchange will inform
its Equity Trading Permit Holders in a Bulletin of the special
characteristics and risks associated with trading the Shares.
Specifically, the Bulletin will discuss the following: (i) The
procedures for purchases and redemptions of Shares in Creation Unit
aggregations (and that Shares are not individually redeemable); (ii)
NYSE Arca Equities Rule 9.2(a), which imposes a duty of due diligence
on its Equity Trading Permit Holders to learn the essential facts
relating to every customer prior to trading the Shares; (iii) the risks
involved in trading the Shares during the Opening and Late Trading
Sessions when an updated Portfolio Indicative Value will not be
calculated or publicly disseminated; (iv) how information regarding the
Portfolio Indicative Value and the Disclosed Portfolio is disseminated;
(v) the requirement that Equity Trading Permit Holders deliver a
prospectus to investors purchasing newly issued Shares prior to or
concurrently with the confirmation of a transaction; and (vi) trading
information.
(6) For initial and continued listing, the Fund will be in
compliance with Rule 10A-3 under the Act,\43\ as provided by NYSE Arca
Equities Rule 5.3.
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\43\ 17 CFR 240.10A-3.
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(7) The Fund may hold up to an aggregate amount of 15% of its net
assets in illiquid assets (calculated at the time of investment),
including Rule 144A restricted securities deemed illiquid by the
Adviser.
(8) Neither the Fund nor the Portfolio will invest in options,
futures contracts, or swap agreements.
(9) The Fund's and Portfolio's investments will be consistent with
its investment objective and will not be used to enhance leverage.
(10) Under normal circumstances, the non-U.S. equity securities in
the Fund's portfolio will meet the following criteria at time of
purchase: (a) Non-U.S. equity securities each shall have a minimum
market value of at least $100 million; (b) non-U.S. equity securities
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; (c) the most heavily
weighted non-U.S. equity security shall not exceed 25% of the weight of
the Fund's entire portfolio, and, to the extent applicable, the five
most heavily weighted non-U.S. equity securities shall not exceed 60%
of the weight of the Fund's entire portfolio; and (d) each non-U.S.
equity security shall be listed and traded on an exchange that has
last-sale reporting. In addition, under normal circumstances, the
Portfolio will include a minimum of 20 exchange-listed and traded
equity securities.
(11) The Portfolio and Fund do not intend to concentrate their
investments in any particular industry. The Portfolio and Fund will
look to the GICS Level 3 (Industries) standard in making industry
determinations.
(12) Not more than 10% of the net assets of the Fund will be
invested in unsponsored ADRs.
(13) A minimum of 100,000 Shares for the Fund will be outstanding
at the commencement of trading on the Exchange.
[[Page 30525]]
This approval order is based on all of the Exchange's
representations, including those set forth above and in the Notice,
Amendment Nos. 1 and 2 to the proposed rule change, and the Exchange's
description of the Fund. The Commission notes that the Fund and the
Shares must comply with the requirements of NYSE Arca Equities Rule
8.600 to be initially and continuously listed and traded on the
Exchange.
For the foregoing reasons, the Commission finds that the proposed
rule change, as modified by Amendment Nos. 1 and 2 thereto, is
consistent with Section 6(b)(5) of the Act \44\ and the rules and
regulations thereunder applicable to a national securities exchange.
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\44\ 15 U.S.C. 78f(b)(5).
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IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Exchange Act,\45\ that the proposed rule change (SR-NYSEArca-2014-100),
as modified by Amendment Nos. 1 and 2 thereto, be, and it hereby is,
approved.
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\45\ 15 U.S.C. 78s(b)(2).
\46\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\46\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-12829 Filed 5-27-15; 8:45 am]
BILLING CODE 8011-01-P