[Federal Register Volume 78, Number 79 (Wednesday, April 24, 2013)]
[Notices]
[Pages 24276-24280]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-09626]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69397; File No. SR-NYSEArca-2013-18]
Self-Regulatory Organizations; NYSE Arca, Inc.; Order Granting
Approval of Proposed Rule Change, as Modified by Amendment No. 1
Thereto, To List and Trade Fourteen Series of the iShares Trust Under
NYSE Arca Equities Rule 8.600
April 18, 2013.
I. Introduction
On February 14, 2013, NYSE Arca, Inc. (``Exchange'' or ``NYSE
Arca'') 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 fourteen
series of the iShares Trust (``Trust''). The proposed rule change was
published for comment in the Federal Register on March 6, 2013.\3\ The
Commission received no comments on the proposal. On April 2, 2013, the
Exchange filed Amendment No. 1 to the proposed rule change.\4\ This
order grants approval of 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. 69008 (February 28,
2013), 78 FR 14600 (``Notice'').
\4\ In Amendment No. 1, the Exchange clarified that the variable
rate demand notes that may be purchased by the Funds (as defined
herein) would be backed by a letter of credit from a highly rated
bank or financial institution that meets certain credit standards
and that the Funds would purchase such variable rate demand notes
with hard one or seven-day put options. In addition, the Exchange
clarified that the net asset value (``NAV'') for the iShares New
Zealand Dollar Cash Rate Fund would be determined on each business
day as of the value date roll-over in New Zealand, which would
ordinarily be 7:00 a.m., New Zealand time (which would be 1:00 p.m.,
2:00 p.m., or 3:00 p.m. Eastern Time or ``E.T.'' the prior day,
depending on daylight savings time). The Exchange further clarified
that fair value determinations would be made in accordance with the
requirements of the Investment Company Act of 1940 (``1940 Act'').
Finally, the Exchange made a number of technical changes to the
proposed rule change. Because the changes made by the Exchange in
Amendment No. 1 do not materially alter the substance of the
proposed rule change and do not raise any novel or unique regulatory
issues, Amendment No. 1 is not subject to notice and comment.
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II. Description of the Proposed Rule Change
The Exchange proposes to list and trade the Shares of the iShares
Australian Dollar Cash Rate Fund; iShares British Pound Cash Rate Fund;
iShares Canadian Dollar Cash Rate
[[Page 24277]]
Fund; iShares Chinese Offshore Renminbi Cash Rate Fund; iShares Euro
Cash Rate Fund; iShares Japanese Yen Cash Rate Fund; iShares Mexican
Peso Cash Rate Fund; iShares New Zealand Dollar Cash Rate Fund; iShares
Norwegian Krone Cash Rate Fund; iShares Singapore Dollar Cash Rate
Fund; iShares Swedish Krona Cash Rate Fund; iShares Swiss Franc Cash
Rate Fund; iShares Thai Offshore Baht Cash Rate Fund; and iShares
Turkish Lira Cash Rate Fund (each, a ``Fund'' and, collectively, the
``Funds'') 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 iShares Trust, a statutory trust organized under the
laws of Delaware and registered with the Securities and Exchange
Commission as an open-end management investment company.\5\
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\5\ The Trust is registered under the 1940 Act. On August 9,
2012, the Trust filed with the Commission a post-effective amendment
to Form N-1A under the Securities Act of 1933 and the 1940 Act
relating to the Funds (File Nos. 333-92935 and 811-09729)
(``Registration Statement''). The Commission has issued an order
granting certain exemptive relief to the Trust under the 1940 Act.
See Investment Company Act Release No. 29571 (January 24, 2011)
(File No. 812-13601).
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The investment adviser to the Funds will be BlackRock Fund Advisors
(``Investment Adviser''), an indirect wholly-owned subsidiary of
BlackRock, Inc. BlackRock Investments, LLC, an affiliate of the
Investment Adviser, will serve as the distributor for the Funds. State
Street Bank and Trust Company will serve as the administrator,
custodian, and transfer agent for each Fund. According to the Exchange,
the Investment Adviser is affiliated with multiple broker-dealers and
has implemented a ``fire wall'' with respect to such broker-dealers
regarding access to information concerning the composition and/or
changes to the Funds' portfolio.\6\
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\6\ See NYSE Arca Equities Rule 8.600, Commentary .06. In the
event (a) the Investment Adviser or any sub-adviser becomes newly
affiliated with a broker-dealer, or (b) any new manager, adviser, or
sub-adviser becomes affiliated with a broker-dealer, it will
implement a fire wall with respect to such broker-dealer 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.
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Summary of the Funds
Each Fund generally will seek to provide its shareholders a daily
return that reflects: (i) The increase or decrease in the exchange rate
of the foreign currency identified in its name (``FX Base Currency'')
against the United States dollar; and (ii) the yield of the FX Base
Currency, minus the Fund's fees and expenses. ``Yield'' refers to the
yield an investor would expect to receive if they invested in an
overnight or similar cash or cash equivalent investment denominated in
the FX Base Currency. Each Fund also will seek to preserve liquidity,
and maintain stability of principal and preserve capital, as measured
in the FX Base Currency.
According to the Registration Statement, each Fund will be an
actively managed exchange-traded fund that will seek to achieve its
investment objective by investing, under normal circumstances,\7\
substantially all of its assets in short-term securities denominated in
United States dollars and a matching notional amount of spot foreign
exchange contracts (generally required to be settled within two
business days) to purchase the FX Base Currency (against delivery of
the United States dollar). Under normal circumstances, there will be a
1:1 ratio between the fixed income securities and spot contracts. The
strategy of combining investments in short-term fixed income securities
and spot foreign exchange contracts is designed to provide financial
exposure substantially similar to a purchase of the FX Base Currency,
reflecting: (i) The increase or decrease in the exchange rate of the FX
Base Currency against the United States dollar; and (ii) the yield of
the FX Base Currency, minus the Fund's fees and expenses.
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\7\ The term ``under normal circumstances'' 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 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.
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According to the Registration Statement, each Fund will invest in
United States dollar denominated short-term debt securities of varying
maturities and spot foreign exchange contracts in order to seek to
replicate the daily return of the FX Base Currency. The short-term debt
securities held by the each Fund generally will consist of high quality
debt obligations and may include, but are not limited to, obligations
issued by the U.S. government and its agencies and instrumentalities,
U.S. municipal variable rate demand notes,\8\ U.S. corporate and
commercial debt instruments,\9\ and bank notes and similar demand
deposits. Each Fund's assets also may be invested in short-term debt
instruments and bank notes and similar demand deposits denominated in
the FX Base Currency from time to time when the Investment Adviser
believes these debt securities may help the Fund achieve its investment
objective. All short-term debt securities acquired by each Fund will be
rated investment grade by at least one nationally recognized
statistical rating organization (``NRSRO'') or, if unrated, deemed by
the Investment Adviser to be of equivalent quality.\10\ Each Fund may
also invest its assets in money market funds (including funds that are
managed by the Investment Adviser or one of its affiliates), cash, and
cash equivalents. All money market securities acquired by each Fund
will be rated investment grade. The Funds do not intend to invest in
any unrated money market securities. However, a Fund may do so, to a
limited extent, such as where a rated money market security becomes
unrated, if such money market security is determined by the Investment
Adviser to be of comparable quality.
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\8\ According to the Exchange, variable rate demand obligations
(also referred to as variable rate demand notes) are tax-exempt
obligations that contain a floating or variable interest rate
adjustment formula and a right of demand on the part of the holder
thereof to receive payment of the unpaid principal balance plus
accrued interest upon a short notice period not to exceed seven
days.
\9\ Each Fund will invest only in corporate bonds that the
Investment Adviser deems to be sufficiently liquid at time of
investment. Generally a non-U.S. corporate bond must have $200
million (or an equivalent value if denominated in a currency other
than United States dollars) or more par amount outstanding and
significant par value traded to be considered as an eligible
investment, and a U.S. corporate bond must have $100 million (or an
equivalent value if denominated in a currency other than United
States dollars) or more par amount outstanding and significant par
value traded to be considered as an eligible investment.
\10\ According to the Investment Adviser, the Investment Adviser
may determine that unrated securities are of ``equivalent quality''
based on such credit quality factors that it deems appropriate,
which may include, among other things, performing an analysis
similar, to the extent possible, to that performed by an NRSRO when
rating similar securities and issuers. In making such a
determination, the Investment Adviser may consider internal analyses
and risk ratings, third party research and analysis, and other
sources of information, as deemed appropriate by the Investment
Adviser.
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According to the Registration Statement, each Fund generally will
maintain a weighted average portfolio maturity of between 1 and 30 days
and generally will be limited to investments with remaining maturities
of 60 days or less. The Funds will not purchase any security with a
remaining maturity of more than 397 calendar days.
According to the Registration Statement, generally, each spot
foreign exchange contract entered into by each Fund will require such
Fund to
[[Page 24278]]
purchase from a foreign exchange dealer selected by the Investment
Adviser, at a specified purchase price expressed in United States
dollars, a specified amount of the FX Base Currency. Each Fund will
enter into spot foreign exchange contracts only in the FX Base Currency
and mainly for the purpose of taking long positions in the FX Base
Currency. Because the spot foreign exchange contracts entered into by
each Fund will be spot transactions and typically settle within two
business days, in order to maintain exposure to the FX Base Currency,
each Fund will continuously enter into new spot foreign exchange
contracts by entering into two simultaneous trades.\11\ The Funds will
not enter into forward foreign exchange contracts. Each Fund is
classified as ``non-diversified.'' \12\
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\11\ According to the Exchange, a Fund will maintain exposure to
its FX Base Currency by entering into two simultaneous trades that
result in the same open net long position of the FX Base Currency
with the settlement date extended by one business day. The first
trade will be an offsetting transaction to the original position
(which is the long foreign exchange contract that such Fund has
entered into on the previous day) for the same notional amount and
same settlement date. This offsetting transaction may cause a Fund
to realize a gain or loss on the transaction. The second trade will
be for the same notional amount as the original position with the
settlement date extended by one business day. Where there is an
interest rate differential in the overnight ``risk free'' rate
between the FX Base Currency and the United States dollar, there
will be a difference in price between the two trades of the
simultaneous transaction. This difference represents the difference
in benchmark overnight interest rates between the two currencies in
the position (i.e., one day of ``carry'' or ``cost of carry'').
\12\ According to the Exchange, each Fund will be ``non-
diversified'' under the 1940 Act and may invest more of its assets
in fewer issuers than ``diversified'' funds. The diversification
standard is set forth in Section 5(b)(1) of the 1940 Act (15 U.S.C.
80a-5(b)(1)).
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Other Investments
In addition to the principal investments described above, each Fund
will invest in other short-term instruments, including other money
market instruments, on an ongoing basis to provide liquidity or for
other reasons. While each Fund may invest in money market instruments
as part of its principal investment strategies, the Investment Adviser
expects that, under normal circumstances, each Fund also intends to
invest in money market securities in a manner consistent with its
investment objective in order to help manage cash flows in and out of
the Fund, such as in connection with payment of dividends or expenses,
and to satisfy margin requirements, or to provide collateral.\13\ All
money market securities acquired by the Funds will be rated investment
grade. The Funds do not intend to invest in any unrated money market
securities. However, a Fund may do so, to a limited extent, such as
where a rated money market security becomes unrated, if such money
market security is determined by the Investment Adviser to be of
comparable quality.
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\13\ For the Funds' purposes, money market securities include:
short-term, high-quality obligations issued or guaranteed by the
U.S. Treasury or the agencies or instrumentalities of the U.S.
government; short-term, high-quality securities issued or guaranteed
by non-U.S. governments, agencies, and instrumentalities; non-
convertible corporate debt securities with remaining maturities of
not more than 397 days that satisfy ratings requirements under Rule
2a-7 of the 1940 Act; repurchase agreements backed by U.S.
government securities; money market mutual funds; commercial paper;
U.S. municipal variable rate demand notes; and deposits and other
obligations of U.S. and non-U.S. banks and financial institutions.
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Each Fund may hold up to 15% of its net assets in securities that
are illiquid (calculated at the time of investment), including Rule
144A Securities. The aggregate value of all of a Fund's illiquid
securities and Rule 144A Securities shall not exceed 15% of a Fund's
total assets. Each 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 a Fund's net assets are held in illiquid securities.
A Fund may not concentrate its investments (i.e., invest 25% or
more of its total assets in the securities of a particular industry or
industry group), provided that this restriction does not limit a
Fund's: (i) Investments in its FX Base Currency; (ii) investments in
securities of other investment companies; (iii) investments in
securities issued or guaranteed by the U.S. government, its agencies,
or instrumentalities, certificates of deposit, and bankers'
acceptances; (iv) investments in repurchase agreements collateralized
by U.S. government securities; or (v) investments in U.S. municipal
securities.
Each Fund intends to qualify as a regulated investment company
under Subchapter M of Subtitle A, Chapter 1, of the Internal Revenue
Code. The Funds will not invest in any non-U.S registered equity
securities and will not invest in options contracts, futures contracts,
or swap agreements. Each Fund's investments will be consistent with the
Fund's investment objective and will not be used to enhance leverage.
Additional information regarding the individual Funds (including
additional details regarding the underlying FX Base Currencies and
descriptions of the relevant FX Base Currency spot markets), investment
strategies, risks, creation and redemption procedures, fees, portfolio
holdings and disclosure policies, dissemination of key values,
including NAV, and distributions, among other information, are included
in the Notice and Registration Statement, as applicable.\14\
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\14\ See Notice and Registration Statement, supra notes 3 and 5,
respectively.
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III. Discussion and Commission's Findings
After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of Section 6 of the Act \15\
and the rules and regulations thereunder applicable to a national
securities exchange.\16\ In particular, the Commission finds that the
proposal is consistent with Section 6(b)(5) of the Act,\17\ 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. The Commission notes that the Shares of each Fund will be
listed and traded on the Exchange pursuant to the initial and continued
listing criteria in NYSE Arca Equities Rule 8.600.
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\15\ 15 U.S.C. 78f.
\16\ 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).
\17\ 17 U.S.C. 78f(b)(5).
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The Commission finds that the proposal to list and trade the Shares
on the Exchange is consistent with Section 11A(a)(1)(C)(iii) of the
Act,\18\ which sets forth Congress' finding that it is in the public
interest and appropriate for the protection of investors and the
maintenance of fair and orderly markets to assure the availability to
brokers, dealers, and investors of information with respect to
quotations for, and transactions in, securities. 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 for the Shares will be available via the Consolidated Tape
Association (``CTA'') high-speed line. In addition, intra-day, closing,
and settlement prices or other
[[Page 24279]]
values of the debt securities, fixed income instruments, and other
investments held by the Funds are also generally 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. Foreign currency
exchange rates are generally readily available from on-line information
services such as Bloomberg or Reuters. Each Fund's Portfolio Indicative
Value (``PIV''), as defined in NYSE Arca Equities Rule 8.600(c)(3),
will be widely disseminated by one or more major market data vendors at
least every 15 seconds during the Exchange's Core Trading Session.\19\
On each business day, before commencement of trading in Shares in the
Core Trading Session on the Exchange, the Funds will disclose on their
Web site the Disclosed Portfolio, as defined in NYSE Arca Equities Rule
8.600(c)(2), that will form the basis for each Fund's calculation of
NAV at the end of the business day.\20\ The NAV for each Fund normally
will be determined once daily Monday through Friday, generally as of
the regularly scheduled close of business of the New York Stock
Exchange (``NYSE'') (normally 4:00 p.m. E.T.), on each day that the
NYSE is open for trading. The Web site for the Funds will include a
form of the prospectus for the Fund and additional data relating to NAV
and other applicable quantitative information. In addition, a basket
composition file, which will include the security names and share
quantities, if applicable, required to be delivered in exchange for a
Fund's Shares, together with estimates and actual cash components, will
be publicly disseminated daily prior to the opening of the NYSE via the
National Securities Clearing Corporation.
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\18\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
\19\ According to the Exchange, several major market data
vendors display and/or make widely available PIVs published on the
CTA or other data feeds. The PIV will be based on the current value
of the securities, spot foreign exchange contracts, and/or cash
required to be deposited in exchange for Fund Shares. The Exchange
notes that the PIV will not necessarily reflect the precise
composition of the current portfolio of securities held by a Fund at
a particular point in time or the best possible valuation of the
current portfolio. Therefore, the PIV should not be viewed as a
``real-time'' update of each Fund's NAV, which is computed only once
a day. The PIV will be generally determined by using both current
market quotations and/or price quotations obtained from broker-
dealers that may trade in the portfolio securities and other
instruments held by the Funds.
\20\ On a daily basis, the Funds will disclose for each
portfolio security and other financial instruments the following
information: ticker symbol (if applicable); name of securities and
financial instruments; number of shares or dollar value of
securities and financial instruments held in the portfolio; and
percentage weighting of the securities and financial instruments in
the portfolio.
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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 or because of market conditions or for reasons
that, in the view of the Exchange, make trading in the Shares
inadvisable,\21\ and trading in the Shares will be subject to NYSE Arca
Equities Rule 8.600(d)(2)(D), which sets forth additional circumstances
under which Shares of the Fund may be halted. The Exchange states that
it has a general policy prohibiting the distribution of material, non-
public information by its employees. Consistent with NYSE Arca Equities
Rule 8.600(d)(2)(B)(ii), the Reporting Authority must implement and
maintain, or be subject to, procedures designed to prevent the use and
dissemination of material, non-public information regarding the actual
components of the Funds' portfolios. The Investment Adviser has
implemented a ``fire wall'' with respect to its affiliated broker-
dealers regarding access to information concerning the composition and/
or changes to each Fund's portfolio.\22\ The Commission also notes that
the Financial Industry Regulatory Authority (``FINRA''), on behalf of
the Exchange,\23\ will communicate as needed regarding trading in the
Shares with other markets that are members of the Intermarket
Surveillance Group (``ISG'') or with which the Exchange has in place a
comprehensive surveillance sharing agreement. Moreover, prior to the
commencement of trading, the Exchange will inform its Equity Trading
Permit Holders in an Information Bulletin of the special
characteristics and risks associated with trading the Shares.
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\21\ These reasons may include: (1) The extent to which trading
is not occurring in the securities and/or the financial instruments
composing the Disclosed Portfolio of a Fund; or (2) whether other
unusual conditions or circumstances detrimental to the maintenance
of a fair and orderly market are present.
\22\ See note 6, supra and accompanying text. The Commission
notes 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 Investment 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
\23\ The Exchange states that, while 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 the Shares are deemed 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 made representations,
including:
(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) The Exchange represents that 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 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 applicable federal securities laws.
(4) Prior to the commencement of trading, the Exchange will inform
its Equity Trading Permit Holders in an Information Bulletin of the
special characteristics and risks associated with trading the Shares.
Specifically, the Information Bulletin will discuss the following: (a)
The procedures for purchases and redemptions of Shares in aggregations
equal to or greater than the relevant Fund's Minimum Subscription Size
(and that Shares are not individually redeemable); (b) NYSE
[[Page 24280]]
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; (c) the risks involved in
trading the Shares during the Opening and Late Trading Sessions when an
updated PIV will not be calculated or publicly disseminated; (d) how
information regarding the PIV is disseminated; (e) 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 (f) trading information.
(5) For initial and/or continued listing, the Fund will be in
compliance with Rule 10A-3 under the Act,\24\ as provided by NYSE Arca
Equities Rule 5.3.
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\24\ See 17 CFR 240.10A-3.
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(6) The Funds will not invest in any non-U.S registered equity
securities. The Funds will not invest in options contracts, futures
contracts, or swap agreements. Each Fund may hold up to 15% of its net
assets in securities that are illiquid (calculated at the time of
investment), including Rule 144A Securities. The aggregate value of all
of a Fund's illiquid securities and Rule 144A Securities shall not
exceed 15% of a Fund's total assets.
(7) All short-term debt and money market securities acquired by the
Funds will be rated investment grade by at least one NRSRO or, if
unrated, deemed by the Investment Adviser to be of equivalent quality.
The Fund will invest only in corporate bonds that the Investment
Adviser deems to be sufficiently liquid at time of investment.
Generally a non-U.S. corporate bond must have $200 million (or an
equivalent value if denominated in a currency other than United States
dollars) or more par amount outstanding and significant par value
traded to be considered as an eligible investment, and a U.S. corporate
bond must have $100 million (or an equivalent value if denominated in a
currency other than United States dollars) or more par amount
outstanding and significant par value traded to be considered as an
eligible investment. In addition, variable rate demand notes purchased
by the Funds will be backed by a letter of credit provided by a highly
rated bank or financial institution that meets credit standards deemed
appropriate by the Investment Adviser. According to the Exchange, the
Funds will purchase variable rate demand notes with hard one or seven-
day put options, which will increase the liquidity profile within the
Funds that hold them, since they can be converted to cash within one or
seven days.
(8) Each Fund's investments will be consistent with such Fund's
investment objective and will not be used to enhance leverage.
(9) A minimum of 100,000 Shares of each Fund will be outstanding at
the commencement of trading on the Exchange.
This approval order is based on all of the Exchange's
representations, including those set forth above and in the Notice, and
the Exchange's description of the Funds.
For the foregoing reasons, the Commission finds that the proposed
rule change, as modified by Amendment No. 1 thereto, is consistent with
Section 6(b)(5) of the Act \25\ and the rules and regulations
thereunder applicable to a national securities exchange.
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\25\ 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
Act,\26\ that the proposed rule change (SR-NYSEArca-2013-18), as
modified by Amendment No. 1 thereto, be, and it hereby is, approved.
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\26\ 15 U.S.C. 78s(b)(2).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\27\
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\27\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-09626 Filed 4-23-13; 8:45 am]
BILLING CODE 8011-01-P