[Federal Register Volume 83, Number 146 (Monday, July 30, 2018)]
[Notices]
[Pages 36641-36646]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-16167]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-83695; File No. SR-NYSEArca-2018-50]
Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing
and Immediate Effectiveness of Proposed Rule Change Relating to the
Listing and Trading of Shares of the Columbia Multi-Sector Municipal
Income ETF
July 24, 2018.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that, on July 10, 2018, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I and II below, which Items
have been prepared by the self-regulatory organization. The Commission
is publishing this notice to solicit comments on the proposed rule
change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to list and trade shares of the Columbia
Multi-Sector Municipal Income ETF (the ``Fund'') pursuant to NYSE Arca
Rule 5.2-E(j)(3), Commentary .02. The proposed rule change is available
on the Exchange's website at www.nyse.com, at the principal office of
the Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to list and trade shares (``Shares'') of the
Fund under Commentary .02 to NYSE Arca Rule 5.2-E(j)(3), which governs
the listing and trading of Investment Company Units (``Units'') \4\
based on fixed income securities indexes.\5\ As discussed below, the
Exchange is submitting this proposed rule change because the ``Index''
(as defined below) does not meet all of the ``generic'' listing
requirements of Commentary .02 to Rule 5.2-E(j)(3) applicable to the
listing of Units based on fixed income securities indexes. The Index
meets all such requirements except for those set forth in Commentary
.02(a)(2).\6\
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\4\ An open-end investment company that issues 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.
\5\ The Commission previously has approved proposed rule changes
relating to listing and trading of funds based on municipal bond
indexes. See Securities Exchange Act Release Nos. 67985 (October 4,
2012), 77 FR 61804 (October 11, 2012) (SR-NYSEArca-2012-92) (order
approving proposed rule change to list and trade the iShares 2018
S&P AMT-Free Municipal Series and iShares 2019 S&P AMT-Free
Municipal Series under Rule 5.2(j)(3), Commentary .02); 72523 (July
2, 2014), 79 FR 39016 (July 9, 2014) (SRNYSEArca-2014-37) (order
approving proposed rule change to list and trade iShares 2020 S&P
AMT-Free Municipal Series under Rule 5.2(j)(3), Commentary .02); and
75468 (July 16, 2015), 80 FR 43500 (July 22, 2015) (SE-NYSEArca-
2015-25) (order approving proposed rule change to list and trade the
iShares iBonds Dec 2021 AMT-Free Muni Bond ETF and iShares iBonds
Dec 2022 AMT-Free Muni Bond ETF under Rule 5.2(j)(3), Commentary
.02). See also Securities Exchange Act Release Nos. 78329 (July 14,
2016), 81 FR 47217 (July 20, 2016) (SR-BatsBZX-2016-01) (order
approving the listing and trading of the VanEck Vectors AMT-Free 6-8
Year Municipal Index ETF, VanEck Vectors AMT-Free 8-12 Year
Municipal Index ETF, and VanEck Vectors AMT-Free 12-17 Year
Municipal Index ETF).
\6\ Commentary .02(a)(2) provides that Fixed Income Security
components that in aggregate account for at least 75% of the Fixed
Income Securities portion of the weight of the index or portfolio
each shall have a minimum original principal amount outstanding of
$100 million or more.
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[[Page 36642]]
Description of the Shares and the Fund
The Fund is a series of the Columbia ETF Trust I (the Trust).\7\
Columbia Management Investment Advisers, LLC (the ``Adviser'') will be
the investment advisor for the Fund. BNY Mellon Corporation will serve
as the custodian, administrator, and transfer agent for the Fund. ALPS
Distributors, Inc. will act as the distributor for the Fund's Shares.
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\7\ The Trust is registered under the Investment Company Act of
1940 (15 U.S.C. 80a) (``1940 Act''). On May 4, 2018, the Trust filed
with the Commission 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. 333-209996 and 811-22736)
(``Registration Statement''). The Trust will file an amendment to
the Registration Statement as necessary to conform to the
representations in this filing. The description of the operation of
the Trust and the Fund herein is based, in part, on the Registration
Statement. In addition, the Commission has issued an order granting
certain exemptive relief to the Trust under the 1940 Act. See
Investment Company Act Release No. 32134, (May 31, 2016) (File No.
812-14552).
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Beta Advantage[reg] Multi-Sector Municipal Bond Index
According to the Registration Statement, the investment objective
of the Fund is to seek investment results that correspond (before fees
and expenses) to the performance of the Beta Advantage[reg] Multi-
Sector Municipal Bond Index (the ``Index''), a multistate index of
fixed income municipal bond securities.\8\
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\8\ The Index is owned and calculated by Bloomberg Index
Services Limited (``Index Provider''), which is not affiliated with
the Fund or the Adviser.
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The Index reflects a rules-based, multi-sector strategic beta
approach to measuring the performance of the U.S. tax-exempt bond
market, including municipal bonds issued by or on behalf of state or
local governmental units whose interest is exempt from regular federal
income tax, through representation of the following five sectors of the
municipal debt market in the Index (percentages noted below are sector
weights within the Index):
core revenue (45% of Index weight); \9\
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\9\ Core revenue includes certain bonds in the Bloomberg
Barclays Municipal Bond: Electric Index, the Bloomberg Barclays
Municipal Bond: Transportation Index, the Bloomberg Barclays
Municipal Bond: Education Index, and the Bloomberg Barclays
Municipal Bond: Leasing Index. The Exchange represents, for
informational purposes, that, as of May 18, 2018, this sector
included 1,476 bonds, and that such bonds had an outstanding par
value of at least $15 million ($10 million for the Bloomberg
Barclays Municipal Bond: Leasing Index), and were issued as part of
a transaction of at least $100 million.
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health care (20% of Index weight);\10\
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\10\ Health care includes certain bonds in the Bloomberg
Barclays Municipal Bond: Hospital Index. The Exchange represents,
for informational purposes, that, as of May 18, 2018, this sector
included 1,380 bonds, and that such bonds had an outstanding par
value of at least $10 million and were issued as part of a
transaction of at least $100 million.
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high quality revenue bonds (15% of Index weight);\11\
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\11\ High quality revenue bonds include certain bonds in the
Bloomberg Barclays Municipal Bond: Housing Index and the Bloomberg
Barclays Municipal Bond: Water & Sewer Index. The Exchange
represents, for informational purposes, that, as of May 18, 2018,
this sector included 701 bonds, and that such bonds included in the
Bloomberg Barclays Municipal Bond: Housing Index had an outstanding
par value of at least $10 million and were issued as part of a
transaction of at least $100 million; and that such bonds included
in the Bloomberg Barclays Municipal Bond: Water & Sewer Index had an
outstanding par value of at least $15 million and were issued as
part of a transaction of at least $100 million.
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general obligation (GO) bonds (10% of Index weight);\12\
and
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\12\ GO bonds include certain bonds in the Bloomberg Barclays
Municipal Bond: GO Index. The Exchange represents, for informational
purposes, that, as of May 18, 2018, this sector included 1,668
bonds, and that such bonds had an outstanding par value of at least
$15 million and were issued as part of a transaction of at least
$100 million.
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high yield debt (10% of Index weight).\13\
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\13\ High yield debt includes certain bonds in the Bloomberg
Barclays Municipal High Yield Bond Index. The Exchange represents,
for informational purposes, that, as of May 18, 2018, this sector
included 388 bonds, and that such bonds had an outstanding par value
of at least $5 million and were issued as part of a transaction of
at least $25 million.
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Each of the sectors in [sic] other than the high yield debt sector
is derived from a sub-set index or indices of the Bloomberg Barclays
Municipal Bond Index (the ``Parent Index''), which serves as each
sector's initial universe of eligible securities for inclusion in the
Index. The Parent Index is a broad-based, market value-weighted index
designed to measure the performance of the U.S. municipal bond market.
The Index is designed to achieve higher yields and stronger risk-
adjusted returns relative to that of the Parent Index. The Index's
allocation to each of the five sectors is fixed and, as such, will not
vary as a result of Index rebalancing or reconstitution. The five
sectors will generate all of the component securities of the Index.
The Exchange represents, for informational purposes, that, as of
May 18, 2018, the Index included 5,613 component fixed income municipal
bond securities from issuers in 49 different states and the District of
Columbia. The most heavily weighted security in the Index represented
approximately 0.37% of the total weight of the Index and the aggregate
weight of the top five most heavily weighted securities in the Index
represented 1.41% of the total weight of the Index. Approximately
19.22% of the weight of the components in the Index had a minimum
original principal outstanding of $100 million or more. In addition,
the total dollar amount outstanding of issues in the Index was
approximately $196,572,849,000 and the average dollar amount
outstanding of issues in the Index was approximately $35,021,000.
The Fund will invest, under normal market conditions,\14\ at least
80% of its assets in securities within the Index or in securities that
the Adviser determines have economic characteristics that are
substantially the same as the economic characteristics of the
securities within the Index. The Fund will accordingly invest at least
80% of its net assets (plus borrowings for investment purposes) in
bonds and other debt instruments issued by or on behalf of state or
local governmental units whose interest is exempt from U.S. federal
income tax.
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\14\ The term ``under normal market conditions'' as used herein
includes, but is not limited to, the absence of adverse market,
economic, political or other conditions, including extreme
volatility or trading halts in the fixed income markets or the
financial markets generally; operational issues (such as systems
failure) causing dissemination of inaccurate market information; or
force majeure type events, natural or man-made disaster, act of God,
armed conflict, act of terrorism, riot or labor disruption or any
similar intervening circumstance.
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Other Investments
While the Fund, under normal market conditions, will invest at
least 80% of the Fund's assets in securities within the Index or in
securities that the Adviser determines have economic characteristics
that are substantially the same as the economic characteristics of the
securities within the Index, the Fund may invest its remaining assets
in cash and cash equivalents such as repurchase agreements and money
market funds.
Requirements for Index Constituents
The Index will contain at least 500 component securities. In
addition, at least 90% of the weight of the Index will be comprised of
securities that have an outstanding par value of at least $10 million
and were issued as part of a transaction of at least $100 million.
Discussion
Based on the characteristics of the Index and the representations
made in the Requirements for Index Constituents section above, the
Exchange believes it is appropriate to allow the listing and trading of
the Shares. The Index and Fund satisfy all of the generic listing
requirements for Units based on a fixed income index, except for the
minimum principal amount outstanding
[[Page 36643]]
requirement of Commentary .02(a)(2) to Rule 5.2-E(j)(3). A fundamental
purpose behind the minimum principal amount outstanding requirement is
to ensure that component securities of an index are sufficiently liquid
such that the potential for index manipulation is reduced. The Exchange
notes that the representations in the Requirements for Index
Constituents for the Index are comparable to those made regarding the
Bloomberg Barclays AMT-Free Intermediate Continuous Municipal Index,
Bloomberg Barclays AMT-Free Long Continuous Municipal Index, Bloomberg
Barclays AMT-Free Short Continuous Municipal Index, Bloomberg Barclays
Municipal Pre-Refunded--Treasury-Escrowed Index, Bloomberg Barclays
Managed Money Municipal Short Term Index, and Bloomberg Barclays
Municipal Managed Money Index (the ``Comparable Indexes''), which
underlie series of Units that were previously approved for listing and
trading by the Commission.\15\ In the Approval Order, the Commission
highlighted the representations that the Comparable Indexes would, on a
continuous basis, contain at least 500 component securities and that at
least 90% of the weight of a Comparable Index would be comprised of
securities that have a minimum par amount of $7 million and were a
constituent of an offering where the original offering amount was at
least $75 million. The Exchange believes that these representations
regarding the Index's diversification and the lack of concentration
among constituent securities provide a strong degree of protection
against index manipulation consistent with other proposed rule changes
relating to listing and trading of shares of funds based on municipal
bond indexes.\16\
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\15\ The Comparable Indexes underlie, respectively, the VanEck
Vectors AMT-Free Intermediate Municipal Index ETF, VanEck Vectors
AMT-Free Long Municipal Index ETF, VanEck Vectors AMT-Free Short
Municipal Index ETF, VanEck Vectors Pre-Refunded Municipal Index
ETF, SPDR Nuveen Bloomberg Barclays Short Term Municipal Bond ETF,
and SPDR Nuveen Bloomberg Barclays Municipal Bond ETF. See
Securities Exchange Act Release No. 82295 (December 12, 2017), 82 FR
60056 (December 18, 2017) (SR-NYSEArca-2017-56) (Notice of Filing of
Amendment No. 3 and Order Granting Accelerated Approval of a
Proposed Rule Change, as Modified by Amendment No. 3, to List and
Trade Shares of Twelve Series of Investment Company Units Pursuant
to NYSE Arca Rule 5.2-E(j)(3)) (the ``Approval Order'').
\16\ See note 5, supra. See also, the Approval Order.
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In addition, the Exchange represents that: (1) Except for
Commentary .02(a)(2) to Rule 5.2-E(j)(3), the Index currently satisfies
all of the generic listing standards under Commentary .02 to Rule 5.2-
E(j)(3); (2) the continued listing standards under Commentary .02 to
Rule 5.2-E(j)(3), as applicable to Units based on fixed income
securities, will apply to the Shares of the Fund; and (3) the issuer of
the Fund is required to comply with Rule 10A-3 \17\ under the Act for
the initial and continued listing of the Shares. In addition, the
Exchange represents that the Fund will comply with all other
requirements applicable to Units, including, but not limited to,
requirements relating to the dissemination of key information such as
the value of the Index and the Intraday Indicative Value (``IIV''),\18\
rules governing the trading of equity securities, trading hours,
trading halts, surveillance, information barriers and the Information
Bulletin, as set forth in the Exchange rules applicable to Units and
prior Commission orders approving the generic listing rules applicable
to the listing and trading of Units.
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\17\ 17 CFR 240.10A-3.
\18\ The IIV will be widely disseminated by one or more major
market data vendors at least every 15 seconds during the Exchange's
Core Trading Session (normally, 9:30 a.m. to 4:00 p.m., E.T.
Currently, it is the Exchange's understanding that several major
market data vendors display and/or make widely available IIV taken
from CTA or other data feeds.
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The current value of the Index will be widely disseminated by one
or more major market data vendors at least once per day, as required by
Commentary .02(b)(ii) to Rule 5.2-E(j)(3). The portfolio of securities
held by the Fund will be disclosed daily on the Fund's website.
Further, the Fund's website will contain the Fund's prospectus and
additional data relating to net asset value (``NAV'') and other
applicable quantitative information. The issuer has represented that
the NAV will be calculated daily and will be made available to all
market participants at the same time. The Index Provider is not a
broker-dealer but is affiliated with a broker-dealer. The Index
Provider will implement and will maintain a ``fire wall'' around the
personnel who have access to information concerning changes and
adjustments to the Index. In addition, any advisory committee,
supervisory board or similar entity that advises the Index Provider or
that makes decisions on the Index, methodology and related matters,
will implement and maintain, or be subject to, procedures designed to
prevent the use and dissemination of material non-public information
regarding the Index. The Adviser is not registered as a broker-dealer
but is affiliated with one or more broker-dealers, and has implemented
and will maintain a fire wall with respect to its broker-dealer
affiliates regarding access to information concerning the composition
and/or changes to the portfolio. In the event (a) the 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, it will implement and maintain
a fire wall with respect to relevant personnel and any broker-dealer
affiliate regarding access to information concerning the composition
and/or changes to the portfolio, and will be subject to procedures
designed to prevent the use and dissemination of material non-public
information regarding such portfolio.
The Exchange's existing rules require that the issuer of the Fund
notify the Exchange of any material change to the methodology used to
determine the composition of the Index and, therefore, if the
methodology of the Index was changed in a manner that would materially
alter its existing composition, the Exchange would have advance notice
and would evaluate the modifications to determine whether the Index
remained sufficiently broad-based and well diversified.
Availability of Information
On each business day, the Fund will disclose on its website
(www.columbiathreadneedleetf.com) the portfolio that will form the
basis for the Fund's calculation of NAV at the end of the business day.
On a daily basis, the Fund will disclose for each portfolio
security or other financial instrument of the Fund the following
information on the Funds' website: Ticker symbol (if applicable), name
of security and financial instrument, a common identifier such as CUSIP
or ISIN (if applicable), number of shares (if applicable), and dollar
value of securities and financial instruments held in the portfolio,
and percentage weighting of the security and financial instrument in
the portfolio. The website information will be publicly available at no
charge. The current value of the Index will be widely disseminated by
one or more major market data vendors at least once per day, as
required by NYSE Arca Rule 5.2-E(j)(3), Commentary .02 (b)(ii).
The IIV for Shares of the Fund will be disseminated by one or more
major market data vendors, updated at least every 15 seconds during the
Exchange's Core Trading Session, as required by NYSE Arca Rule 5.2-
E(j)(3), Commentary .02 (c). The current value of the Index would be
widely disseminated by one or more major
[[Page 36644]]
market data vendors at least once per day, as required by NYSE Arca
Rule 5.-(j)(3), Commentary .02 (b)(ii). In addition, the portfolio of
securities held by the Fund will be disclosed daily on the Fund's
website.
Investors can also obtain the Trust's Statement of Additional
Information (``SAI''), the Fund's Shareholder Reports, and its Form N-
CSR and Form N-SAR, filed twice a year. The Trust's SAI and Shareholder
Reports are available free upon request from the Trust, and those
documents and the Form N-CSR and Form N-SAR may be viewed on-screen or
downloaded from the Commission's website at www.sec.gov. 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.
Quotation and last sale information for the Shares of the Fund will
be available via the Consolidated Tape Association (``CTA'') high speed
line. Quotation information for investment company securities may be
obtained through nationally recognized pricing services through
subscription agreements or from brokers and dealers who make markets in
such securities. Price information regarding municipal bonds is
available from third party pricing services and major market data
vendors. Trade price and other information relating to municipal bonds
is available through the Municipal Securities Rulemaking Board's
Electronic Municipal Market Access (``EMMA'') system.
Surveillance
The Exchange represents that trading in the Shares of the Fund will
be subject to the existing trading surveillances, administered by the
Financial Industry Regulatory Authority (``FINRA'') on behalf of the
Exchange, or by regulatory staff of the Exchange, which are designed to
detect violations of Exchange rules and applicable federal securities
laws. The Exchange represents that these procedures are adequate to
properly monitor Exchange trading of the Shares of the Fund in all
trading sessions and to deter and detect violations of Exchange rules
and federal securities laws applicable to trading on the Exchange.\19\
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\19\ FINRA conducts cross-market surveillances on behalf of the
Exchange pursuant to a regulatory services agreement. The Exchange
is responsible for FINRA's performance under this regulatory
services agreement.
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The surveillances referred to above generally focus on detecting
securities trading outside their normal patterns, which could be
indicative of manipulative or other violative activity. When such
situations are detected, surveillance analysis follows and
investigations are opened, where appropriate, to review the behavior of
all relevant parties for all relevant trading violations.
The Exchange or FINRA, on behalf of the Exchange, or both, will
communicate as needed regarding trading in the Shares with other
markets and other entities that are members of the Intermarket
Surveillance Group (``ISG''), and the Exchange or FINRA, on behalf of
the Exchange, or both, may obtain trading information regarding trading
in the Shares from such markets and other entities. In addition, the
Exchange may obtain information regarding trading in 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.
FINRA also can access data obtained from the Municipal Securities
Rulemaking Board relating to municipal bond trading activity for
surveillance purposes in connection with trading in the Shares.
2. Statutory Basis
The Exchange believes that the proposal is consistent with Section
6(b) of the Act \20\ in general and Section 6(b)(5) of the Act \21\ in
particular in that it is designed to prevent fraudulent and
manipulative acts and practices, to promote just and equitable
principles of trade, to foster cooperation and coordination with
persons engaged in facilitating transactions in securities, 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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\20\ 15 U.S.C. 78f.
\21\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that the proposed rule change is designed to
prevent fraudulent and manipulative acts and practices in that the
Shares of the Fund will be listed and traded on the Exchange pursuant
to the initial and continued listing criteria in NYSE Arca Rule 5.2-
E(j)(3), except for the requirement in Commentary .02(a)(2) that the
component fixed income securities, in the aggregate, account for at
least 75% of the weight of the index each shall have a minimum
principal amount outstanding of $100 million or more. The Exchange
represents that 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 federal
securities laws applicable to trading on the Exchange.\22\ The Exchange
represents that these procedures are adequate to properly monitor
Exchange trading of the Shares in all trading sessions and to deter and
detect violations of Exchange rules and federal securities laws
applicable to trading on the Exchange. The Exchange or FINRA, on behalf
of the Exchange, or both, will communicate as needed regarding trading
in the Shares with other markets that are members of the ISG. In
addition, the Exchange will communicate as needed regarding trading in
the Shares with other markets that are members of the ISG or with which
the Exchange has in place a comprehensive surveillance sharing
agreement. FINRA also can access data obtained from the Municipal
Securities Rulemaking Board relating to municipal bond trading activity
for surveillance purposes in connection with trading in the Shares of
the Fund.
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\22\ FINRA conducts cross-market surveillances on behalf of the
Exchange pursuant to a regulatory services agreement. The Exchange
is responsible for FINRA's performance under this regulatory
services agreement.
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As discussed above, the Exchange believes that the Index is
sufficiently broad-based to deter potential manipulation. For
informational purposes, as of May 18, 2018, the Index included 5,613
components, the total dollar amount outstanding of issues in the Index
was approximately $196,572,849,000, and the average dollar amount
outstanding of issues in the Index was approximately $35,021,000.
Whereas the Exchange's generic listing rules require that an index
contain securities from a minimum of 13 non-affiliated issuers,\23\ the
Index, as of May 18, 2018, included securities issued by municipal
entities in 49 different states and the District of Columbia. Further,
whereas the generic listing rules permit a single component security to
represent up to 30% of the weight of an index and the top five
component securities to, in aggregate, represent up to 65% of the
weight of an index,\24\ as of May 18, 2018,the most heavily weighted
security in the Index represented approximately 0.37% of the total
weight of the Index and the
[[Page 36645]]
aggregate weight of the top five most heavily weighted securities in
the Index represented 1.41% of the total weight of the Index. The
Exchange notes that the representations in ``Requirements for Index
Constituents'' above for the Index are comparable to those made
regarding the Comparable Indexes, which underlie series of Units that
were previously approved for listing and trading by the Commission.\25\
The Exchange believes that this significant diversification and the
lack of concentration among constituent securities in the Index
provides a strong degree of protection against index manipulation that
is consistent with other proposed rule changes that have been approved
for listing and trading by the Commission.\26\
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\23\ See Commentary .02(a)(5) to NYSE Arca Rule 5.2-E(j)(3).
\24\ See Commentary .02(a)(4) to NYSE Arca Rule 5.2-E(j)(3).
\25\ See the Approval Order.
\26\ See note 5, supra. See also, the Approval Order.
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The proposed rule change is designed to promote just and equitable
principles of trade and to protect investors and the public interest in
that a large amount of information will be publicly available regarding
the Fund and the Shares, thereby promoting market transparency. The
Fund's portfolio holdings will be disclosed on the Fund's website daily
after the close of trading on the Exchange and prior to the opening of
trading on the Exchange the following day. Moreover, the IIV will be
widely disseminated by one or more major market data vendors at least
every 15 seconds during the Exchange's Core Trading Session. The
current value of the Index will be disseminated by one or more major
market data vendors at least once per day. 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, and quotation and last sale information will
be available via the CTA high-speed line. The website for the Fund will
include the prospectus for the Fund and additional data relating to NAV
and other applicable quantitative information. Moreover, prior to the
commencement of trading, the Exchange will inform its ETP Holders in an
Information Bulletin of the special characteristics and risks
associated with trading the Shares.
If the Exchange becomes aware that the NAV is not being
disseminated to all market participants at the same time, it will halt
trading in the Shares until such time as the NAV is available to all
market participants. With respect to trading halts, the Exchange may
consider all relevant factors in exercising its discretion to halt or
suspend trading in the Shares of the Fund. 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. If the IIV or the
Index values are not being disseminated as required, the Exchange may
halt trading during the day in which the interruption to the
dissemination of the IIV or Index value occurs. If the interruption to
the dissemination of the IIV or Index value persists past the trading
day in which it occurred, the Exchange will halt trading. Trading in
Shares of the Fund will be halted if the circuit breaker parameters in
NYSE Arca Rule 7.12-E have been reached or because of market conditions
or for reasons that, in the view of the Exchange, make trading in the
Shares inadvisable, and trading in the Shares will be subject to NYSE
Arca Rule 7.34-E, which sets forth circumstances under which Shares of
the Fund may be halted. In addition, investors will have ready access
to information regarding the IIV, and quotation and last sale
information for the Shares.
The proposed rule change is designed to perfect the mechanism of a
free and open market and, in general, to protect investors and the
public interest in that it will facilitate the listing and trading of
an additional type of exchange-traded fund that holds municipal bonds
and that will enhance competition among market participants, to the
benefit of investors and the marketplace. As noted above, the Exchange
has in place surveillance procedures relating to trading in the Shares
and may obtain information via ISG from other exchanges that are
members of ISG or with which the Exchange has entered into a
comprehensive surveillance sharing agreement. In addition, investors
will have ready access to information regarding the IIV and quotation
and last sale information for the Shares.
For the above reasons, the Exchange believes that the proposed rule
change is consistent with the requirements of Section 6(b)(5) of the
Act.\27\
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\27\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purpose of the Act. The Exchange notes that the
proposed rule change will facilitate the listing and trading of an
additional type of Units based on a municipal bond index that will
enhance competition among market participants, to the benefit of
investors and the marketplace.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the proposed rule change does not: (i) Significantly affect
the protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, it has become effective pursuant to
Section 19(b)(3)(A) of the Act \28\ and Rule 19b-4(f)(6)
thereunder.\29\
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\28\ 15 U.S.C. 78s(b)(3)(A).
\29\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change, along
with a brief description and text of the proposed rule change, at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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The Exchange has asked the Commission to waive the 30-day operative
delay so that the proposal may become operative immediately upon
filing. The Commission notes that the Exchange's proposal is similar to
proposals the Commission has previously approved.\30\ Accordingly, the
Commission believes that the proposal raises no new or novel regulatory
issues and waiver of the 30-day operative delay is consistent with the
protection of investors and the public interest. The Commission
therefore waives the 30-day operative delay and designates the proposed
rule change to be operative upon filing.\31\
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\30\ See, e.g., the Approval Order.
\31\ For purposes only of waiving the 30-day operative delay,
the Commission has also considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act.
[[Page 36646]]
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NYSEArca-2018-50 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSEArca-2018-50. 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 website (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 website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549 on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NYSEArca-2018-50 and should be submitted
on or before August 20, 2018.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\32\
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\32\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-16167 Filed 7-27-18; 8:45 am]
BILLING CODE 8011-01-P