31214 Federal Register / Vol. 83, No. 128 / Tuesday, July 3, 2018 / Notices 

7 15 U.S.C. 78s(b)(3)(A)(iii). 

8 17 CFR 240.19b–4(f)(6). 

9 17 CFR 240.19b–4(f)(6). 

10 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6)(iii) requires the Exchange to give the 

Commission written notice of the Exchange’s intent 

to file the proposed rule change along with a brief 

description and the 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 pre-filing requirement. 

11 17 CFR 240.19b–4(f)(6)(iii). 

12See Securities Exchange Act Release No. 61061 

(November 24, 2009), 74 FR 62857 (December 1, 

2009) (SR–NYSEArca–2009–44). 

13For purposes only of waiving the operative 

delay for this proposal, the Commission has 

considered the proposed rule’s impact on 

efficiency, competition, and capital formation. See 

15 U.S.C. 78c(f). 

14 15 U.S.C. 78s(b)(2)(B). 

15 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

Program, the proposed rule change will 

allow for further analysis of the Penny 

Pilot Program and a determination of 

how the Penny Pilot Program should be 

structured in the future. In doing so, the 

proposed rule change will also serve to 

promote regulatory clarity and 

consistency, thereby reducing burdens 

on the marketplace and facilitating 

investor protection. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were either 

solicited or received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The Exchange has filed the proposed 

rule change pursuant to Section 

19(b)(3)(A)(iii) of the Act 7 and Rule 

19b–4(f)(6) thereunder.8 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, if 

consistent with the protection of 

investors and the public interest, the 

proposed rule change has become 

effective pursuant to Section 19(b)(3)(A) 

of the Act and Rule 19b–4(f)(6)(iii) 

thereunder. 

A proposed rule change filed under 

Rule 19b–4(f)(6) 9 normally does not 

become operative prior to 30 days after 

the date of the filing.10 However, 

pursuant to Rule 19b–4(f)(6)(iii),11 the 

Commission may designate a shorter 

time if such action is consistent with the 

protection of investors and the public 

interest. 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 believes that 

waiving the 30-day operative delay is 

consistent with the protection of 

investors and the public interest 

because doing so will allow the Pilot 

Program to continue without 

interruption in a manner that is 

consistent with the Commission’s prior 

approval of the extension and expansion 

of the Pilot Program and will allow the 

Exchange and the Commission 

additional time to analyze the impact of 

the Pilot Program.12 Accordingly, the 

Commission designates the proposed 

rule change as operative upon filing 

with the Commission.13

At any time within 60 days of the 

filing of such 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. If the 

Commission takes such action, the 

Commission shall institute proceedings 

under Section 19(b)(2)(B) 14 of the Act to 

determine whether the proposed rule 

change should be approved or 

disapproved. 

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 rule-comments@

sec.gov. Please include File Number SR– 

MRX–2018–22 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–MRX–2018–22. 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–MRX–2018–22 and should 

be submitted on or before July 24, 2018. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–14295 Filed 7–2–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83546; File No. SR– 

NYSEArca–2018–40] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing of Proposed 

Rule Change Regarding Investments of 

the REX BKCM ETF 

June 28, 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 June 26, 

2018, NYSE Arca, Inc. (‘‘NYSE Arca’’ or 

the ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III below, which Items have been 

prepared by the Exchange. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 


sradovich on DSK3GMQ082PROD with NOTICES
Federal Register / Vol. 83, No. 128 / Tuesday, July 3, 2018 / Notices 31215 

4A Managed Fund Share is a security that 

represents an interest in an investment company 

registered under the Investment Company Act of 

1940 (15 U.S.C. 80a–1) (‘‘1940 Act’’) organized as 

an open-end investment company or similar entity 

that invests in a portfolio of securities selected by 

its investment adviser consistent with its 

investment objectives and policies. In contrast, an 

open-end investment company that issues 

Investment Company Units, listed and traded on 

the Exchange under NYSE Arca Rule 5.2–E(j)(3), 

seeks to provide investment results that correspond 

generally to the price and yield performance of a 

specific foreign or domestic stock index, fixed 

income securities index or combination thereof. 

5The Trust is registered under the 1940 Act. On 

May 7, 2018, the Trust filed with the Commission 

an amendment to its registration statement on Form 

N–1A under the Securities Act of 1933 (15 U.S.C. 

77a) (‘‘Securities Act’’) and the 1940 Act relating to 

the Fund (File Nos. 333–180871 and 811–22700) 

(the ‘‘Registration Statement’’). The description of 

the operation of the Trust and the Fund herein is 

based, in part, on the Registration Statement. The 

Trust will file an amendment to the Registration 

Statement as necessary to conform to 

representations in this filing. 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. 30445 

(April 2, 2013) (‘‘Exemptive Order’’). Investments 

made by the Fund will comply with the conditions 

set forth in the Exemptive Order. 

6The Commission has previously approved 

listing and trading on the Exchange of other series 

of Managed Fund Shares under Rule 8.600–E. See, 

e.g., Securities Exchange Act Release Nos. 79683 

(December 23, 2016) (SR–NYSEArca–2016–82) 

(order approving a proposed rule change to list and 

trade shares of the JPMorgan Diversified Event 

Driven ETF under NYSE Arca Equities Rule 8.600); 

77904 (May 25, 2016) (SR–NYSEArca–2016–17) 

(order approving a proposed rule change to list and 

trade of shares of the JPMorgan Diversified 

Alternatives ETF under NYSE Arca Equities Rule 

8.600). 

7An investment adviser to an open-end fund is 

required to be registered under the Investment 

Advisers Act of 1940 (the ‘‘Advisers Act’’). As a 

result, the Adviser and Sub-Advisers and their 

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. 

8The term ‘‘normal market conditions’’ is defined 

in NYSE Arca Rule 8.600–E(c)(5). 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes certain 

changes regarding investments of the 

REX BKCM ETF, shares of which are 

currently listed on the Exchange under 

NYSE Arca Rule 8.600–E (‘‘Managed 

Fund Shares’’). The proposed 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 certain 

changes, described below under 

‘‘Application of Generic Listing 

Requirements’’, regarding investments 

of the REX BKCM ETF (‘‘Fund’’), shares 

(‘‘Shares’’) of which are currently listed 

and traded on the Exchange under 

NYSE Arca Rule 8.600–E, which 

governs the listing and trading of 

Managed Fund Shares 4 on the 

Exchange. Shares of the Fund 

commenced trading on the Exchange on 

May 16, 2018 in accordance with the 

generic listing standards in Commentary 

.01 to NYSE Arca Rule 8.600–E. 

The Fund is a series of the Exchange 

Listed Funds Trust (‘‘Trust’’).5 Exchange 

Traded Concepts, LLC (‘‘Adviser’’) is the 

investment adviser to the Fund. BKCM 

LLC (‘‘BKCM’’) and Vident Investment 

Advisory, LLC are the sub-advisers 

(‘‘Sub-Advisers’’) to the Fund. Foreside 

Fund Services, LLC (‘‘Distributor’’) is 

the distributor of the Fund’s Shares. 

BNY Mellon serves as the Fund’s 

transfer agent and custodian. BNY 

Mellon and UMB Fund Services 

(‘‘UMBFS’’) serve as administrators to 

the Fund (‘‘Administrator’’).6

Commentary .06 to Rule 8.600–E 

provides that, if the investment adviser 

to the investment company issuing 

Managed Fund Shares is affiliated with 

a broker-dealer, such investment adviser 

shall erect a ‘‘fire wall’’ between the 

investment adviser and the brokerdealer with respect to access to 

information concerning the composition 

and/or changes to such investment 

company portfolio.7 In addition, 

Commentary .06 further requires that 

personnel who make decisions on the 

open-end fund’s portfolio composition 

must be subject to procedures designed 

to prevent the use and dissemination of 

material nonpublic information 

regarding the open-end fund’s portfolio. 

The Adviser and Sub-Advisers are not 

registered as broker-dealers or affiliated 

with a broker-dealer. In the event (a) the 

Adviser or a Sub-Adviser becomes 

registered as a broker-dealer or newly 

affiliated with one or more brokerdealers, or (b) any new adviser or subadviser is a registered broker-dealer or 

becomes affiliated with a broker-dealer, 

it will implement and maintain a fire 

wall with respect to its relevant 

personnel or its 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. 

REX BKCM ETF 

Principal Investments 

According to the Registration 

Statement, the Fund’s investment 

objective is to seek total return. The 

Fund will seek to achieve its investment 

objective, under normal market 

conditions,8 by obtaining investment 

exposure to an actively managed 

portfolio consisting of equity securities 

of cryptocurrency-related and other 

blockchain technology-related 

companies. 

According to the Registration 

Statement, in implementing the Fund’s 

investment strategy, BKCM will seek to 

identify companies utilizing blockchain 

technologies to generate present or 

future revenue from their core business. 

A company will only be eligible for 

inclusion in the portfolio to the extent 

that BKCM determines the company has 

committed material resources to the 

development of such revenue stream. 

Cryptocurrency-related companies 

mine, trade, or promote the mainstream 

adoption of cryptocurrencies or provide 

trading venues for cryptocurrencies and 

other blockchain applications. Other 

blockchain technology-related 

companies utilize blockchain 

technology in connection with 

disrupting traditional financial 

transaction mechanisms, develop 

enterprise blockchain solutions, or use 


sradovich on DSK3GMQ082PROD with NOTICES
31216 Federal Register / Vol. 83, No. 128 / Tuesday, July 3, 2018 / Notices 

9The Bitcoin Investment Trust is a private, openended trust available to accredited investors that 

derives its value from the price of bitcoin. Shares 

of GBTC are restricted securities that may not be 

resold except in transactions exempt from 

registration under the Securities Act. On March 4, 

2016, GBTC submitted to the Commission an 

amended Form D as a business trust. Shares of 

GBTC have been quoted on OTC Markets Group, 

Inc.’s (‘‘OTC Markets’’) OTCQX Best Marketplace 

under the symbol ‘‘GBTC’’ since March 26, 2015. 

On April 2, 2018, GBTC published an annual report 

for GBTC for the period ended December 31, 2017. 

Both GBTC’s Form D and annual report can be 

found on OTC Market’s website: http://

www.otcmarkets.com/stock/GBTC/filings. 

OTC Markets is a wholly owned subsidiary of 

OTC Link LLC, which is a member of the Financial 

Industry Regulatory Authority (‘‘FINRA’’) and is 

registered with the Commission as an alternative 

trading system (‘‘OTC Link ATS’’). 

10The Fund will not hold listed derivatives based 

on bitcoin or other cryptocurrencies. 11The Fund will not hold OTC derivatives based 

on bitcoin or other cryptocurrencies. 

12The Adviser represents that, to the extent the 

Trust effects the creation or redemption of Shares 

wholly or partially in cash, such transactions will 

be effected in the same manner for all Authorized 

Participants (as defined below). 

blockchain technology to decentralize 

user data and enhance privacy on the 

internet. 

The Fund, through its ‘‘Subsidiary’’, 

(as described below), may invest up to 

15% of its total assets in the following 

over-the-counter (‘‘OTC’’) equity 

securities: shares of the Bitcoin 

Investment Trust (‘‘GBTC’’).9 The 

Subsidiary’s investment in GBTC will 

be reflected in the net asset value of the 

Fund’s Shares based on the closing 

price of GBTC on OTCQX Best 

Marketplace. 

The Fund expects to obtain exposure 

to certain investments, including GBTC, 

by investing up to 25% of its total 

assets, as measured at the end of every 

quarter of the Fund’s taxable year, in a 

wholly-owned and controlled Cayman 

Islands subsidiary (‘‘Subsidiary’’), as 

described below in ‘‘Investment in the 

Subsidiary’’. 

The Fund and the Subsidiary may 

invest in the securities of non-exchangetraded open-end investment companies 

(i.e., mutual funds). 

As discussed below under 

‘‘Application of Generic Listing 

Requirements’’ below, with the 

exception of the Subsidiary’s holdings 

of shares of GBTC and the Fund’s and 

the Subsidiary’s investment in nonexchange-traded open-end investment 

company securities, the Fund’s and the 

Subsidiary’s investment in equity 

securities will satisfy the requirements 

of Commentary .01(a) of NYSE Arca 

Rule 8.600–E. 

The Fund and the Subsidiary may 

hold fixed income securities. Such 

holdings will comply with the criteria 

in Commentary .01(b) of NYSE Arca 

Rule 8.600–E. 

The Fund and the Subsidiary may 

hold cash and cash equivalents. Such 

holdings will comply with the criteria 

in Commentary .01(c) of NYSE Arca 

Rule 8.600–E. 

The Fund and the Subsidiary may 

hold listed derivatives.10 Such holdings 

will comply with the criteria in 

Commentary .01(d) and (f) of NYSE 

Arca Rule 8.600–E. 

The Fund and the Subsidiary may 

hold OTC derivatives.11 Such holdings 

will comply with the criteria in 

Commentary .01(e) and (f) of NYSE Arca 

Rule 8.600–E. 

Investment in the Subsidiary 

According to the Registration 

Statement, the Fund expects to obtain 

additional exposure through investment 

in the Subsidiary. Such investment may 

not exceed 25% of the Fund’s total 

assets, as measured at the end of every 

quarter of the Fund’s taxable year. The 

Subsidiary otherwise is subject to the 

same general investment policies and 

restrictions as the Fund. Except as 

noted, references to the investment 

strategies of the Fund for non-equity 

securities and other financial 

instruments include the investment 

strategies of the Subsidiary. 

The Subsidiary is not registered under 

the 1940 Act. The Board has oversight 

responsibility for the investment 

activities of the Fund, including its 

investments in the Subsidiary, and the 

Fund’s role as the sole shareholder of 

the Subsidiary. Also, in managing the 

Subsidiary’s portfolio, the Adviser 

would be subject to the same investment 

restrictions and operational guidelines 

that apply to the management of the 

Fund. 

Any Subsidiary will be advised by the 

Adviser and will be managed on a dayto-day basis by the Sub-Advisers, and 

will have the same investment objective 

as the Fund. According to the 

Registration Statement, the Fund’s 

investment in the Subsidiary would be 

expected to provide the Fund with an 

effective means of obtaining exposure to 

certain cryptocurrency investments in a 

manner consistent with U.S. federal tax 

law requirements applicable to 

regulated investment companies. 

Creations and Redemptions 

According to the Registration 

Statement, the Fund offers and issues 

Shares at net asset value (‘‘NAV’’) in 

‘‘Creation Unit Aggregations’’ (or 

‘‘Creation Units’’), generally in exchange 

for the ‘‘Deposit Securities’’ and the 

‘‘Cash Component’’ (each as defined 

below). Shares are redeemable only in 

Creation Unit Aggregations and, 

generally, in exchange for the Deposit 

Securities and Cash Component. 

The Trust reserves the right to offer an 

‘‘all cash’’ option for creations and 

redemptions of Creation Units for the 

Fund.12

The Trust issues and sells Shares of 

the Fund only in Creation Units on a 

continuous basis through the 

Distributor, at their NAV next 

determined after receipt, on any 

business day, of an order received in 

proper form. 

The consideration for purchase of a 

Creation Unit of the Fund generally 

consists of an in-kind deposit of a 

designated portfolio of securities—the 

‘‘Deposit Securities’’—per each Creation 

Unit constituting a substantial 

replication, or a representation, of the 

securities included in the Fund’s 

portfolio and an amount of cash—the 

Cash Component. The Cash Component 

is an amount equal to the difference 

between the net asset value of the 

Shares (per Creation Unit) and the 

market value of the Deposit Securities. 

Together, the Deposit Securities and the 

Cash Component constitute the ‘‘Fund 

Deposit,’’ which represents the 

minimum initial and subsequent 

investment amount for a Creation Unit 

of the Fund. 

The Administrator, through the 

National Securities Clearing Corporation 

(‘‘NSCC’’), makes available on each 

business day, immediately prior to the 

opening of business on the Exchange 

(currently 9:30 a.m., Eastern Time), the 

list of the names and the required 

number of shares of each Deposit 

Security to be included in the current 

Fund Deposit (based on information at 

the end of the previous business day) for 

the Fund. Such Fund Deposit is 

applicable, subject to any adjustments, 

in order to effect creations of Creation 

Units of the Fund until such time as the 

next-announced composition of the 

Deposit Securities is made available. 

The identity and number of shares of 

the Deposit Securities required for the 

Fund Deposit for the Fund changes as 

rebalancing adjustments and corporate 

action events are reflected from time to 

time by the Sub-Advisers with a view to 

the Fund’s investment objective. In 

addition, the Trust reserves the right to 

permit or require the substitution of an 

amount of cash—i.e., a ‘‘cash in lieu’’ 

amount—to be added to the Cash 

Component to replace any Deposit 

Security which may not be available in 

sufficient quantity for delivery or which 

may not be eligible for transfer through 

the ‘‘Clearing Process’’ (discussed 


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13As described in the Registration Statement, an 

EFCRP is a technique permitted by the rules of 

certain futures exchanges that, as utilized by the 

Fund in a Sub-Adviser’s discretion, would allow 

such Fund or its Subsidiary to take a position in 

a futures contract from an Authorized Participant, 

or give futures contracts to an Authorized 

Participant, in the case of a redemption, rather than 

to enter the futures exchange markets to obtain such 

a position. An EFCRP by itself will not change 

either party’s net risk position materially. Because 

the futures position that the Fund would otherwise 

need to take in order to meet its investment 

objective can be obtained without unnecessarily 

impacting the financial or futures markets or their 

pricing, EFCRPs can generally be viewed as 

transactions beneficial to the Fund. A block trade 

is a technique that permits certain funds to obtain 

a futures position without going through the market 

auction system and can generally be viewed as a 

transaction beneficial to the Fund. 14See note 11, supra. 

below), or which may not be eligible for 

trading by an ‘‘Authorized Participant’’ 

(as defined below) or the investor for 

which it is acting. The Trust also 

reserves the right to offer an ‘‘all cash’’ 

option for creations of Creation Units for 

the Fund. 

In addition to the list of names and 

numbers of securities constituting the 

current Deposit Securities of the Fund 

Deposit, the Administrator, through the 

NSCC, also makes available on each 

business day, the estimated Cash 

Component, effective through and 

including the previous business day, per 

outstanding Creation Unit of the Fund. 

To be eligible to place orders with the 

Distributor to create a Creation Unit of 

the Fund, an entity must be (i) a 

‘‘Participating Party,’’ i.e., a brokerdealer or other participant in the 

clearing process through the Continuous 

Net Settlement System of the NSCC (the 

‘‘Clearing Process’’), a clearing agency 

that is registered with the Commission; 

or (ii) a Depository Trust Company 

(‘‘DTC’’) Participant, and, in each case, 

must have executed an agreement with 

the Trust, the Distributor and the 

Administrator with respect to creations 

and redemptions of Creation Units 

(‘‘Participant Agreement’’). A 

Participating Party and DTC Participant 

are collectively referred to as an 

‘‘Authorized Participant.’’ 

All orders to create Creation Units 

must be placed for one or more Creation 

Unit size aggregations of at least 50,000 

Shares. The size of a Creation Unit is 

subject to change. All orders to create 

Creation Units, whether through the 

Clearing Process (through a 

Participating Party) or outside the 

Clearing Process (through a DTC 

Participant), must be placed in the 

manner and by the time set forth in the 

Participant Agreement and/or 

applicable order form. The date on 

which an order to create Creation Units 

(or an order to redeem Creation Units as 

discussed below) is placed is referred to 

as the ‘‘Transmittal Date.’’ 

If permitted by a Sub-Adviser in its 

sole discretion with respect to the Fund, 

an Authorized Participant may also 

agree to enter into or arrange for an 

exchange of a futures contract for 

related position (‘‘EFCRP’’) or block 

trade with the relevant Fund or its 

Subsidiary whereby the Authorized 

Participant would also transfer to such 

Fund a number and type of exchangetraded futures contracts at or near the 

closing settlement price for such 

contracts on the purchase order date. 

Similarly, a Sub-Adviser in its sole 

discretion may agree with an 

Authorized Participant to use an EFCRP 

or block trade to effect an order to 

redeem Creation Units.13

Redemption 

Shares may be redeemed only in 

Creation Units at their NAV next 

determined after receipt of a redemption 

request in proper form by the Fund 

through the Administrator and only on 

a business day. The Trust will not 

redeem Shares in amounts less than 

Creation Units. Shareholders must 

accumulate enough Shares in the 

secondary market to constitute a 

Creation Unit in order to have such 

shares redeemed by the Trust. 

With respect to the Fund, the 

Administrator, through the NSCC, will 

make available immediately prior to the 

opening of business on the Exchange 

(currently 9:30 a.m., Eastern Time) on 

each business day, the ‘‘Fund 

Securities’’ that will be applicable 

(subject to possible amendment or 

correction) to redemption requests 

received in proper form on that day. 

Fund Securities received on redemption 

may not be identical to Deposit 

Securities which are applicable to 

creations of Creation Units. 

Unless cash redemptions are available 

or specified for the Fund, the 

redemption proceeds for a Creation Unit 

generally consist of Fund Securities—as 

announced by the Administrator on the 

business day of the request for 

redemption received in proper form— 

plus cash in an amount equal to the 

difference between the NAV of the 

Shares being redeemed, as next 

determined after receipt of a request in 

proper form, and the value of the Fund 

Securities (the ‘‘Cash Redemption 

Amount’’), less a redemption 

transaction fee. In the event that the 

Fund Securities have a value greater 

than the NAV of the Shares, a 

compensating cash payment equal to the 

differential is required to be made by or 

through an Authorized Participant by 

the redeeming shareholder. 

If it is not possible to effect deliveries 

of the Fund Securities, the Trust may in 

its discretion exercise its option to 

redeem such Shares in cash, and the 

redeeming Beneficial Owner will be 

required to receive its redemption 

proceeds in cash. In addition, an 

investor may request a redemption in 

cash which the Fund may, in its sole 

discretion, permit. In either case, the 

investor will receive a cash payment 

equal to the NAV of its Shares based on 

the NAV of Shares of the Fund next 

determined after the redemption request 

is received in proper form (minus a 

redemption transaction fee and 

additional charge for requested cash 

redemptions specified above, to offset 

the Trust’s brokerage and other 

transaction costs associated with the 

disposition of Fund Securities). The 

Fund may also, in its sole discretion, 

upon request of a shareholder, provide 

such redeemer a portfolio of securities 

which differs from the exact 

composition of the Fund Securities but 

does not differ in NAV. 

An Authorized Participant or an 

investor for which it is acting subject to 

a legal restriction with respect to a 

particular stock included in the Fund 

Securities applicable to the redemption 

of a Creation Unit may be paid an 

equivalent amount of cash. The Trust 

also reserves the right to offer an ‘‘all 

cash’’ option for redemptions of 

Creation Units for the Fund.14

Intraday Indicative Value 

Information regarding the intraday 

value of Shares of the Fund, also known 

as the ‘‘intraday indicative value’’ 

(‘‘IIV’’), will be disseminated every 15 

seconds during the Exchange’s Core 

Trading Session by market data vendors 

or other information providers. The IIV 

will generally be determined by using 

both current market quotations and/or 

price quotations obtained from brokerdealers that may trade in the portfolio 

securities and other financial 

instruments held by the Fund. 

Other Restrictions 

The Fund’s investments, including 

derivatives, will be consistent with the 

Fund’s investment objective and will 

not be used to enhance leverage 

(although certain derivatives and other 

investments may result in leverage). 

That is, the Fund’s investments will not 

be used to seek performance that is the 

multiple or inverse multiple (e.g., 2X or 

–3X) of the Fund’s primary broad-based 


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31218 Federal Register / Vol. 83, No. 128 / Tuesday, July 3, 2018 / Notices 

15The Fund’s broad-based securities benchmark 

index will be identified in a future amendment to 

the Registration Statement following the Fund’s 

first full calendar year of performance. 

16To mitigate leveraging risk, the Adviser will 

segregate or ‘‘earmark’’ liquid assets or otherwise 

cover the transactions that may give rise to such 

risk. 

17Commentary .01(a) to Rule 8.600–E specifies 

the equity securities accommodated by the generic 

criteria in Commentary .01(a), namely, U.S. 

Component Stocks (as described in Rule 5.2– 

E(j)(3)); Non-U.S. Component Stocks (as described 

in Rule 5.2–E(j)(3)); Derivative Securities Products 

(i.e., Investment Company Units and securities 

described in Section 2 of Rule 8–E); and IndexLinked Securities that qualify for Exchange listing 

and trading under Rule 5.2–E(j)(6). Commentary 

.01(a)(1) to Rule 8.600–E (U.S. Component Stocks) 

provides that the component stocks of the equity 

portion of a portfolio that are U.S. Component 

Stocks shall meet the following criteria initially and 

on a continuing basis: 

(A) Component stocks (excluding Derivative 

Securities Products and Index-Linked Securities) 

that in the aggregate account for at least 90% of the 

equity weight of the portfolio (excluding such 

Derivative Securities Products and Index-Linked 

Securities) each shall have a minimum market 

value of at least $75 million; 

(B) Component stocks (excluding Derivative 

Securities Products and Index-Linked Securities) 

that in the aggregate account for at least 70% of the 

securities benchmark index (as defined 

in Form N–1A).15

The Fund’s Use of Derivatives 

To the extent the Fund or the 

Subsidiary invests in derivative 

instruments, such investments will be 

made consistent with the Fund’s 

investment objective and policies. In 

addition, the Fund will include 

appropriate risk disclosure in its 

offering documents, including 

leveraging risk. Leveraging risk is the 

risk that certain transactions of the 

Fund, including the Fund’s or the 

Subsidiary’s use of derivatives, may give 

rise to leverage, causing the Fund to be 

more volatile than if it had not been 

leveraged.16 Because the markets for 

certain assets, or the assets themselves, 

may be unavailable or cost prohibitive 

as compared to derivative instruments, 

suitable derivative transactions may be 

an efficient alternative for the Fund to 

obtain the desired asset exposure. 

Derivatives Valuation Methodology for 

Purposes of Determining Intra-Day 

Indicative Value 

On each business day, before 

commencement of trading in Fund 

Shares on NYSE Arca, the Fund will 

disclose on its website the identities and 

quantities of the portfolio instruments 

and other assets held by the Fund 

including assets directly held by the 

Subsidiary, that will form the basis for 

the Fund’s calculation of NAV at the 

end of the business day. 

In order to provide additional 

information regarding the intra-day 

value of Shares of the Fund, one or more 

major market data vendors will 

disseminate an updated IIV for the 

Fund. A third party market data 

provider will calculate the IIV for the 

Fund. The third party market data 

provider may use market quotes if 

available or may fair value securities 

against proxies (such as swap or yield 

curves). 

Disclosed Portfolio 

The Fund’s disclosure of derivative 

positions in the applicable Disclosed 

Portfolio will include information that 

market participants can use to value 

these positions intraday. On a daily 

basis, the Fund will disclose the 

information regarding the Disclosed 

Portfolio required under NYSE Arca 

Rule 8.600–E(c)(2) to the extent 

applicable. The Fund’s website 

information will be publicly available at 

no charge. 

Impact on Arbitrage Mechanism 

The Adviser believes there will be 

minimal impact to the arbitrage 

mechanism as a result of any use by the 

Fund or the Subsidiary of derivatives. 

Market makers and participants should 

be able to value derivatives as long as 

the positions are disclosed with relevant 

information. The Adviser believes that 

the price at which Shares trade will 

continue to be disciplined by arbitrage 

opportunities created by the ability to 

purchase or redeem creation Shares at 

their NAV, which should ensure that 

Shares will not trade at a material 

discount or premium in relation to their 

NAV. 

The Adviser does not believe there 

will be any significant impacts to the 

settlement or operational aspects of the 

Fund’s arbitrage mechanism due to the 

use of derivatives. 

Application of Generic Listing 

Requirements 

The Exchange is submitting this 

proposed rule change because the 

portfolio for the Fund will not meet all 

of the ‘‘generic’’ listing requirements of 

Commentary .01 to NYSE Arca Rule 

8.600–E applicable to the listing of 

Managed Fund Shares. The Fund’s 

portfolio would meet all such 

requirements except for those set forth 

in Commentary .01(a)(1) to NYSE Arca 

Rule 8.600–E. 

As noted above, the Fund, through its 

Subsidiary, may invest up to 15% of its 

total assets in OTC equity securities 

issued by GBTC, a trust that has as its 

investment objective for the net asset 

value per share to reflect the 

performance of the market price of 

bitcoin, less GBTC’s expenses. The 

Exchange believes that it is appropriate 

and in the public interest to approve 

listing and trading of Shares of the Fund 

on the Exchange notwithstanding that 

the Fund would not meet the 

requirements of Commentary 

.01(a)(1)(E) to Rule 8.600–E with respect 

to the Fund’s investments, through the 

Subsidiary, in such OTC securities. 

While the Fund’s investments in GBTC 

would not meet the requirements of 

Commentary .01(a)(1)(E) to Rule 8.600– 

E, such investments satisfy several other 

important criteria. For example, shares 

of GBTC have a minimum monthly 

trading volume of 250,000 shares, or a 

minimum notional volume traded per 

month of $25 million, averaged over the 

last six months, and a market value in 

excess of the required $75 million. 

Shares of GBTC have been quoted on 

OTC Market’s OTCQX Best Marketplace 

under the symbol ‘‘GBTC’’ since March 

26, 2015. The Exchange represents, for 

informational purposes, that, as of May 

7, 2018, approximately 187,572,000 

shares of GBTC were outstanding, with 

a market capitalization of 

$2,807,952,840 based on the last traded 

price. Moreover, average trading volume 

for the 6 months ended May 7, 2018 was 

7,107,650 shares per day, and total 

trading volume for 2017 was 

1,576,551,613 shares. 

As noted above, GBTC has 

demonstrated significant liquidity. The 

liquid market in the shares of GBTC also 

alleviates many of the valuation 

concerns raised by the Staff. The 

substantial and sustained trading 

volume in shares of GBTC, as well as 

the fact that such investment will be 

limited to 15% of the Fund’s assets, 

would help to limit any adverse effect 

on the Fund’s arbitrage mechanism. 

As noted above, on February 27, 2018, 

GBTC submitted to the Commission an 

amended Form D as a business trust. On 

April 2, 2018, GBTC published an 

annual report for the period ended 

December 31, 2017. This report can be 

found on OTC Market’s website. 

As noted above, the Fund and the 

Subsidiary may invest in equity 

securities that are non-exchange-traded 

securities of other open-end investment 

company securities (i.e., mutual funds). 

The Exchange believes that it is 

appropriate and in the public interest to 

approve listing and trading of Shares of 

the Fund on the Exchange 

notwithstanding that the Fund would 

not meet the requirements of 

Commentary .01(a)(1)(A) through (E) to 

Rule 8.600–E with respect to the Fund’s 

and the Subsidiary’s investments in 

such securities.17 Investments in such 


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Federal Register / Vol. 83, No. 128 / Tuesday, July 3, 2018 / Notices 31219 

equity weight of the portfolio (excluding such 

Derivative Securities Products and Index-Linked 

Securities) each shall have a minimum monthly 

trading volume of 250,000 shares, or minimum 

notional volume traded per month of $25,000,000, 

averaged over the last six months; 

(C) The most heavily weighted component stock 

(excluding Derivative Securities Products and 

Index-Linked Securities) shall not exceed 30% of 

the equity weight of the portfolio, and, to the extent 

applicable, the five most heavily weighted 

component stocks (excluding Derivative Securities 

Products and Index-Linked Securities) shall not 

exceed 65% of the equity weight of the portfolio; 

(D) Where the equity portion of the portfolio does 

not include Non-U.S. Component Stocks, the equity 

portion of the portfolio shall include a minimum of 

13 component stocks; provided, however, that there 

shall be no minimum number of component stocks 

if (i) one or more series of Derivative Securities 

Products or Index-Linked Securities constitute, at 

least in part, components underlying a series of 

Managed Fund Shares, or (ii) one or more series of 

Derivative Securities Products or Index-Linked 

Securities account for 100% of the equity weight of 

the portfolio of a series of Managed Fund Shares; 

(E) Except as provided herein, equity securities in 

the portfolio shall be U.S. Component Stocks listed 

on a national securities exchange and shall be NMS 

Stocks as defined in Rule 600 of Regulation NMS 

under the Securities Exchange Act of 1934; and 

(F) American Depositary Receipts (‘‘ADRs’’) in a 

portfolio may be exchange-traded or nonexchangetraded. However, no more than 10% of the equity 

weight of a portfolio shall consist of non-exchangetraded ADRs. 

18For purposes of this section of the filing, nonexchange-traded securities of other registered 

investment companies do not include money 

market funds, which are cash equivalents under 

Commentary .01(c) to Rule 8.600–E and for which 

there is no limitation in the percentage of the 

portfolio invested in such securities. 

19The Commission has previously approved 

proposed rule changes under Section 19(b) of the 

Act for series of Managed Fund Shares that may 

invest in non-exchange traded investment company 

securities. See, e.g., Securities Exchange Act 

Release No. 78414 (July 26, 2016), 81 FR 50576 

(August 1, 2016) (SR–NYSEArca–2016–79) (order 

approving listing and trading of shares of the Virtus 

Japan Alpha ETF under NYSE Arca Equities Rule 

8.600). 

20The Commission initially approved the 

Exchange’s proposed rule change to exclude 

‘‘Derivative Securities Products’’ (i.e., Investment 

Company Units and securities described in Section 

2 of Rule 8) and ‘‘Index-Linked Securities (as 

described in Rule 5.2–E(j)(6)) from Commentary 

.01(a)(A) (1) through (4) to Rule 5.2–E(j)(3) in 

Securities Exchange Act Release No. 57751 (May 1, 

2008), 73 FR 25818 (May 7, 2008) (SR–NYSEArca– 

2008–29) (Order Granting Approval of a Proposed 

Rule Change, as Modified by Amendment No. 1 

Thereto, to Amend the Eligibility Criteria for 

Components of an Index Underlying Investment 

Company Units) (‘‘2008 Approval Order’’). See also, 

Securities Exchange Act Release No. 57561 (March 

26, 2008), 73 FR 17390 (April 1, 2008) (Notice of 

Filing of Proposed Rule Change and Amendment 

No. 1 Thereto to Amend the Eligibility Criteria for 

Components of an Index Underlying Investment 

Company Units). The Commission subsequently 

approved generic criteria applicable to listing and 

trading of Managed Fund Shares, including 

exclusions for Derivative Securities Products and 

Index-Linked Securities in Commentary .01(a)(1)(A) 

through (D), in Securities Exchange Act Release No. 

78397 (July 22, 2016), 81 FR 49320 (July 27, 2016) 

(Order Granting Approval of Proposed Rule Change, 

as Modified by Amendment No. 7 Thereto, 

Amending NYSE Arca Equities Rule 8.600 To 

Adopt Generic Listing Standards for Managed Fund 

Shares). See also, Amendment No. 7 to SR– 

NYSEArca–2015–110, available at https://

www.sec.gov/comments/sr-nysearca-2015-110/ 

nysearca2015110-9.pdf. 

21See Securities Exchange Act Release No. 83319 

(May 24, 2018) (SR–NYSEArca–2018–15) (Order 

Approving a Proposed Rule Change, as Modified by 

Amendment No. 1 Thereto, to Continue Listing and 

Trading Shares of the PGIM Ultra Short Bond ETF 

Under NYSE Arca Rule 8.600–E). 

22The Bid/Ask Price of the Fund’s Shares will be 

determined using the mid-point of the highest bid 

and the lowest offer on the Exchange as of the time 

of calculation of the Fund’s NAV. The records 

relating to Bid/Ask Prices will be retained by the 

Fund and its service providers. 

23Under accounting procedures to be followed by 

the Fund, trades made on the prior business day 

(‘‘T’’) will be booked and reflected in NAV on the 

current business day (‘‘T+1’’). Accordingly, the 

Continued 

equity securities will not be principal 

investments of the Fund.18 Such 

investments, which may include mutual 

funds that invest, for example, 

principally in fixed income securities, 

would be utilized to help the Fund meet 

its investment objective and to equitize 

cash in the short term.19 Because such 

securities have a net asset value based 

on the value of securities and financial 

assets the investment company holds, 

the Exchange believes it is both 

unnecessary and inappropriate to apply 

to such investment company securities 

the criteria in Commentary .01(a)(1). 

The Exchange notes that Commentary 

.01(a)(1)(A) through (D) to Rule 8.600– 

E exclude application of those 

provisions to certain ‘‘Derivative 

Securities Products’’ that are exchangetraded investment company securities, 

including Investment Company Units 

(as described in NYSE Arca Rule 5.2– 

E(j)(3)), Portfolio Depositary Receipts (as 

described in NYSE Arca Rule 8.100–E) 

and Managed Fund Shares (as described 

in NYSE Arca Rule 8.600–E).20 In its 

2008 Approval Order approving 

amendments to Commentary .01(a) to 

Rule 5.2(j)(3) that exclude Derivative 

Securities Products from certain 

provisions of Commentary .01(a) (which 

exclusions are similar to those in 

Commentary .01(a)(1) to Rule 8.600–E), 

the Commission stated that ‘‘based on 

the trading characteristics of Derivative 

Securities Products, it may be difficult 

for component Derivative Securities 

Products to satisfy certain quantitative 

index criteria, such as the minimum 

market value and trading volume 

limitations.’’ The Exchange notes that it 

would be difficult or impossible to 

apply to non-exchange-traded 

investment company securities the 

generic quantitative criteria (e.g., market 

capitalization, trading volume, or 

portfolio criteria) in Commentary 

.01(a)(1)(A) through (D) applicable to 

U.S. Component Stocks. For example, 

the requirement for U.S. Component 

Stocks in Commentary .01(a)(1)(B) that 

there be minimum monthly trading 

volume of 250,000 shares, or minimum 

notional volume traded per month of 

$25,000,000, averaged over the last six 

months is tailored to exchange-traded 

securities (e.g., U.S. Component Stocks) 

and not to mutual fund shares, which 

do not trade in the secondary market. 

Moreover, application of such criteria 

would not serve the purpose applicable 

with respect to U.S. Component Stocks, 

namely, to establish minimum liquidity 

and diversification criteria for U.S. 

Component Stocks held by series of 

Managed Fund Shares. 

In addition, the Commission has 

previously approved listing and trading 

of an issue of Managed Fund Shares that 

may invest in equity securities that are 

non-exchange-traded securities of other 

open-end investment company 

securities notwithstanding that the fund 

would not meet the requirements of 

Commentary .01(a)(1)(A) through (E) to 

Rule 8.600–E with respect to such 

fund’s investments in such securities.21

Thus, the Exchange believes that it is 

appropriate to permit the Fund and the 

Subsidiary to invest in non-exchangetraded open-end management 

investment company securities, as 

described above. 

The Exchange notes that, other than 

Commentary .01(a)(1) to Rule 8.600–E, 

the Fund will meet all other 

requirements of Rule 8.600–E. 

Availability of Information 

The Fund’s website 

(www.rexshares.com), which is publicly 

available, includes a form of the 

prospectus for the Fund that may be 

downloaded. The Fund’s website will 

include additional quantitative 

information updated on a daily basis, 

including, for the Fund, (1) daily trading 

volume, the prior business day’s 

reported closing price, NAV and midpoint of the bid/ask spread at the time 

of calculation of such NAV (the ‘‘Bid/ 

Ask Price’’),22 and a calculation of the 

premium and discount of the Bid/Ask 

Price against the NAV, and (2) data in 

chart format displaying the frequency 

distribution of discounts and premiums 

of the daily Bid/Ask Price against the 

NAV, within appropriate ranges, for 

each of the four previous calendar 

quarters. On each business day, before 

commencement of trading in Shares in 

the Core Trading Session on the 

Exchange, the Adviser will disclose on 

the Fund’s website the Disclosed 

Portfolio for the Fund as defined in 

NYSE Arca Rule 8.600–E(c)(2) that will 

form the basis for the Fund’s calculation 

of NAV at the end of the business day.23


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31220 Federal Register / Vol. 83, No. 128 / Tuesday, July 3, 2018 / Notices 

Fund will be able to disclose at the beginning of the 

business day the portfolio that will form the basis 

for the NAV calculation at the end of the business 

day. 

24Currently, it is the Exchange’s understanding 

that several major market data vendors display and/ 

or make widely available IIVs taken from the CTA 

or other data feeds. 

25See NYSE Arca Rule 7.12–E. 

26 17 CFR 240.10A–3. 

27FINRA 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. 

28For 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. 

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. 

Quotation and last sale information 

for the Shares and U.S. exchange-traded 

equity securities will be available via 

the CTA high speed line. Quotation and 

last sale information for futures, 

exchange-traded options and non-U.S. 

exchange-traded equity securities will 

be available from the exchange on 

which they are listed. Information 

regarding market price and trading 

volume for 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. 

Price information for fixed income 

securities, cash equivalents, nonexchange-traded investment company 

securities (other than money market 

funds), shares of GBTC, listed 

derivatives and OTC derivatives may be 

obtained from brokers and dealers who 

make markets in such securities or 

through nationally recognized pricing 

services through subscription 

agreements. Price information for 

money market funds and other nonexchange-traded investment company 

securities also will be available from the 

applicable investment company’s 

website and from market data vendors. 

In addition, the IIV, as defined in 

NYSE Arca Rule 8.600–E(c)(3), will be 

widely disseminated by one or more 

major market data vendors at least every 

15 seconds during the Core Trading 

Session.24 The dissemination of the IIV, 

together with the Disclosed Portfolio, 

will allow investors to determine the 

approximate value of the underlying 

portfolio of the Fund on a daily basis 

and will provide a close estimate of that 

value throughout the trading day. 

Trading Halts 

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.25 Trading in Shares of the 

Fund will be halted if the circuit breaker 

parameters in NYSE Arca Rule 7.12–E 

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 of 

the Fund inadvisable. 

Trading in the Shares will be subject 

to NYSE Arca Rule 8.600–E(d)(2)(D), 

which sets forth circumstances under 

which Shares of the Fund may be 

halted. 

Trading Rules 

The Exchange deems the Shares to be 

equity securities, thus rendering trading 

in the Shares subject to the Exchange’s 

existing rules governing the trading of 

equity securities. Shares will trade on 

the NYSE Arca Marketplace from 4:00 

a.m. to 8:00 p.m. E.T. in accordance 

with NYSE Arca Rule 7.34–E (Early, 

Core, and Late Trading Sessions). The 

Exchange has appropriate rules to 

facilitate transactions in the Shares 

during all trading sessions. As provided 

in NYSE Arca Rule 7.6–E, the minimum 

price variation (‘‘MPV’’) for quoting and 

entry of orders in equity securities 

traded on the NYSE Arca Marketplace is 

$0.01, with the exception of securities 

that are priced less than $1.00 for which 

the MPV for order entry is $0.0001. 

The Shares of the Fund will conform 

to the initial and continued listing 

criteria under NYSE Arca Rule 8.600–E. 

The Exchange represents that, for initial 

and continued listing, the Fund will be 

in compliance with Rule 10A–3 26 under 

the Act, as provided by NYSE Arca Rule 

5.3–E. A minimum of 100,000 Shares of 

the Fund will be outstanding at the 

commencement of trading on the 

Exchange. The Exchange will obtain a 

representation from the issuer of the 

Shares of the Fund that the NAV and 

the Disclosed Portfolio will be made 

available to all market participants at 

the same time. 

Surveillance 

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 

applicable federal securities laws.27 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 

applicable federal securities laws. 

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, certain exchangetraded equity securities, certain futures 

and certain options 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 such securities and financial 

instruments from such markets and 

other entities. In addition, the Exchange 

may obtain information regarding 

trading in such securities and financial 

instruments from markets and other 

entities that are members of ISG or with 

which the Exchange has in place a 

comprehensive surveillance sharing 

agreement.28

In addition, the Exchange also has a 

general policy prohibiting the 

distribution of material, non-public 

information by its employees. 

All statements and representations 

made in this filing regarding (a) the 

description of the portfolio or reference 

assets, (b) limitations on portfolio 

holdings or reference assets, or (c) the 

applicability of Exchange listing rules 

specified in this rule filing shall 

constitute continued listing 

requirements for listing the Shares on 

the Exchange. 

The issuer has represented to the 

Exchange that it will advise the 

Exchange of any failure by the Fund to 

comply with the continued listing 

requirements, and, pursuant to its 

obligations under Section 19(g)(1) of the 


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Federal Register / Vol. 83, No. 128 / Tuesday, July 3, 2018 / Notices 31221 

29 15 U.S.C. 78f(b)(5). 

Act, the Exchange will monitor for 

compliance with the continued listing 

requirements. If the Fund is not in 

compliance with the applicable listing 

requirements, the Exchange will 

commence delisting procedures under 

NYSE Arca Rule 5.5–E(m). 

Information Bulletin 

Prior to the commencement of 

trading, the Exchange will inform its 

Equity Trading Permit (‘‘ETP’’) Holders 

in an Information Bulletin (‘‘Bulletin’’) 

of the special characteristics and risks 

associated with trading the Shares of the 

Fund. Specifically, the Bulletin will 

discuss the following: (1) The 

procedures for purchases and 

redemptions of Shares in Creation Units 

(and that Shares are not individually 

redeemable); (2) NYSE Arca Rule 9.2– 

E(a), which imposes a duty of due 

diligence on its ETP Holders to learn the 

essential facts relating to every customer 

prior to trading the Shares; (3) the risks 

involved in trading the Shares during 

the Early and Late Trading Sessions 

when an updated IIV will not be 

calculated or publicly disseminated; (4) 

how information regarding the IIV and 

the Disclosed Portfolio is disseminated; 

(5) the requirement that ETP Holders 

deliver a prospectus to investors 

purchasing newly issued Shares prior to 

or concurrently with the confirmation of 

a transaction; and (6) trading 

information. 

In addition, the Bulletin will 

reference that the Fund is subject to 

various fees and expenses described in 

the Registration Statement. The Bulletin 

will discuss any exemptive, no-action, 

and interpretive relief granted by the 

Commission from any rules under the 

Act. The Bulletin will also disclose that 

the NAV for the Shares of the Fund will 

be calculated after 4:00 p.m. E.T. each 

trading day. 

2. Statutory Basis 

The basis under the Act for this 

proposed rule change is the requirement 

under Section 6(b)(5) 29 that an 

exchange have rules that are designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, to remove 

impediments to, and perfect the 

mechanism of a free and open market 

and, in general, to protect investors and 

the public interest. 

The Exchange believes that the 

proposed rule change is designed to 

prevent fraudulent and manipulative 

acts and practices in that the Shares will 

be listed and traded on the Exchange 

pursuant to the initial and continued 

listing criteria in NYSE Arca Rule 

8.600–E. The Adviser and Sub-Advisers 

are not registered as broker-dealers or 

affiliated with a broker-dealer. 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 applicable federal 

securities laws. 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 

applicable federal securities laws. The 

Exchange or FINRA, on behalf of the 

Exchange, or both, will communicate as 

needed regarding trading in the Shares, 

certain exchange-traded equity 

securities, certain futures and certain 

options with other markets and other 

entities that are members of the ISG, and 

the Exchange or FINRA, on behalf of the 

Exchange, or both, may obtain trading 

information regarding trading such 

securities and financial instruments 

from such markets and other entities. In 

addition, the Exchange may obtain 

information regarding trading in such 

securities and financial instruments 

from markets and other entities that are 

members of ISG or with which the 

Exchange has in place a comprehensive 

surveillance sharing agreement. The 

Exchange is also able to obtain 

information regarding trading in the 

Shares, the commodity underlying 

futures or options on futures through 

ETP Holders, in connection with such 

ETP Holders’ proprietary or customer 

trades which they effect through ETP 

Holders on any relevant market. The 

IIV, as defined in NYSE Arca Rule 

8.600–E(c)(3), will be widely 

disseminated by one or more major 

market data vendors at least every 15 

seconds during the Core Trading 

Session. 

The Shares of the Fund will conform 

to the initial and continued listing 

criteria under NYSE Arca Rule 8.600–E. 

The Exchange represents that, for initial 

and continued listing, the Fund will be 

in compliance with Rule 10A–3 under 

the Act, as provided by NYSE Arca Rule 

5.3–E. A minimum of 100,000 Shares of 

the Fund will be outstanding at the 

commencement of trading on the 

Exchange. The Exchange will obtain a 

representation from the issuer of the 

Shares of the Fund 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. In 

addition, a large amount of information 

is publicly available regarding the Fund 

and the Shares, thereby promoting 

market transparency. The Fund’s 

portfolio holdings will be disclosed on 

its website daily after the close of 

trading on the Exchange and prior to the 

opening of trading on the Exchange the 

following day. On a daily basis, the 

Fund will disclose the information 

regarding the Disclosed Portfolio 

required under NYSE Arca Rule 8.600– 

E(c)(2) to the extent applicable. The 

Fund’s website information will be 

publicly available at no charge. With 

respect to the Fund’s holdings of shares 

of GBTC, on March 4, 2016, GBTC 

submitted to the Commission an 

amended Form D as a business trust. 

Shares of GBTC have been quoted on 

OTC Market’s OTCQX Best Marketplace 

under the symbol ‘‘GBTC’’ since March 

26, 2015. On April 2, 2018, GBTC 

published an annual report for the 

period ended December 31, 2017. Such 

reports are available on OTC Market’s 

website. 

Investors can also obtain the Trust’s 

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. 

The Exchange believes that it is 

appropriate and in the public interest to 

approve listing and trading of Shares of 

the Fund on the Exchange 

notwithstanding that the Fund would 

not meet the requirements of 

Commentary .01(a)(1)(A) through (E) to 

Rule 8.600–E with respect to the Fund’s 

investments in non-exchange-traded 

open-end investment company 

securities. Investments in such equity 

securities will not be principal 

investments of the Fund. Such 

investments, which may include mutual 

funds that invest, for example, 

principally in fixed income securities, 

would be utilized to help the Fund meet 

its investment objective and to equitize 

cash in the short term. Because such 

securities have a net asset value based 

on the value of securities and financial 

assets the investment company holds, 

the Exchange believes it is both 

unnecessary and inappropriate to apply 

to such investment company securities 

the criteria in Commentary .01(a)(1). 

The Exchange notes that Commentary 

.01(a)(1)(A) through (D) to Rule 8.600– 

E exclude application of those 

provisions to certain ‘‘Derivative 

Securities Products’’ that are exchangeVerDate Sep<11>2014 17:07 Jul 02, 2018 Jkt 244001 PO 00000 Frm 00105 Fmt 4703 Sfmt 4703 E:\FR\FM\03JYN1.SGM 03JYN1

sradovich on DSK3GMQ082PROD with NOTICES
31222 Federal Register / Vol. 83, No. 128 / Tuesday, July 3, 2018 / Notices 

30See note 21, supra. 

traded investment company securities, 

including Investment Company Units 

(as described in NYSE Arca Rule 5.2– 

E(j)(3)), Portfolio Depositary Receipts (as 

described in NYSE Arca Rule 8.100–E) 

and Managed Fund Shares (as described 

in NYSE Arca Rule 8.600–E). In its 2008 

Approval Order approving amendments 

to Commentary .01(a) to Rule 5.2(j)(3) 

that exclude Derivative Securities 

Products from certain provisions of 

Commentary .01(a) (which exclusions 

are similar to those in Commentary 

.01(a)(1) to Rule 8.600–E), the 

Commission stated that ‘‘based on the 

trading characteristics of Derivative 

Securities Products, it may be difficult 

for component Derivative Securities 

Products to satisfy certain quantitative 

index criteria, such as the minimum 

market value and trading volume 

limitations.’’ The Exchange notes that it 

would be difficult or impossible to 

apply to non-exchange-traded 

investment company securities the 

generic quantitative criteria (e.g., market 

capitalization, trading volume, or 

portfolio criteria) in Commentary 

.01(a)(1) (A) through (D) applicable to 

U.S. Component Stocks. Moreover, 

application of such criteria would not 

serve the purpose served with respect to 

U.S. Component Stocks, namely, to 

establish minimum liquidity and 

diversification criteria for U.S. 

Component Stocks held by series of 

Managed Fund Shares. 

In addition, the Commission has 

previously approved listing and trading 

of an issue of Managed Fund Shares that 

may invest in equity securities that are 

non-exchange-traded securities of other 

open-end investment company 

securities notwithstanding that the fund 

would not meet the requirements of 

Commentary .01(a)(1)(A) through (E) to 

Rule 8.600–E with respect to such 

fund’s investments in such securities.30

Thus, the Exchange believes that it is 

appropriate to permit the Fund to invest 

in non-exchange-traded open-end 

management investment company 

securities, as described above. 

As noted above, the Fund’s 

investments in derivative instruments 

will be consistent with the Fund’s 

investment objective and policies. In 

addition, the Fund will include 

appropriate risk disclosure in its 

offering documents, including 

leveraging risk. To mitigate leveraging 

risk, the Adviser will segregate or 

‘‘earmark’’ liquid assets or otherwise 

cover the transactions that may give rise 

to such risk. Because the markets for 

certain assets, or the assets themselves, 

may be unavailable or cost prohibitive 

as compared to derivative instruments, 

suitable derivative transactions may be 

an efficient alternative for the Fund to 

obtain the desired asset exposure. In 

addition, OTC derivatives may be 

tailored more specifically to the assets 

held by the Fund than available listed 

derivatives. 

The Exchange notes that, other than 

Commentary .01(a)(1) to Rule 8.600–E, 

the Fund will meet all other 

requirements of Rule 8.600–E. 

The website for the Fund will include 

a form of 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 of the Fund. 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 

8.600–E(d)(2)(D), which sets forth 

circumstances under which Shares of 

the Fund may be halted. In addition, as 

noted above, investors will have ready 

access to information regarding the 

Fund’s holdings, the IIV, the Disclosed 

Portfolio, and quotation and last sale 

information for the Shares. The Fund’s 

investments, including derivatives, will 

be consistent with the Fund’s 

investment objective and will not be 

used to enhance leverage (although 

certain derivatives and other 

investments may result in leverage). 

That is, the Fund’s investments will not 

be used to seek performance that is the 

multiple or inverse multiple (e.g., 2X or 

–3X) of the Fund’s primary broad-based 

securities benchmark index (as defined 

in Form N–1A). 

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 activelymanaged exchange-traded product that 

holds fixed income securities, equity 

securities and derivatives 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 of the Fund 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, as noted 

above, investors will have ready access 

to information regarding the Fund’s 

holdings, the IIV, the Disclosed Portfolio 

for the Fund, and quotation and last sale 

information for the Shares of the Fund. 

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 

another type of actively-managed 

exchange-traded product 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 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or up to 90 days (i) as the 

Commission may designate if it finds 

such longer period to be appropriate 

and publishes its reasons for so finding 

or (ii) as to which the self-regulatory 

organization consents, the Commission 

will: 

(A) By order approve or disapprove 

the proposed rule change, or 

(B) institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

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 rule-comments@

sec.gov. Please include File Number SR– 

NYSEArc–2018–40 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. 


sradovich on DSK3GMQ082PROD with NOTICES
Federal Register / Vol. 83, No. 128 / Tuesday, July 3, 2018 / Notices 31223 

31 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3 15 U.S.C. 78s(b)(3)(A). 

4 17 CFR 240.19b–4(f)(2) and (f)(4). 

5Capitalized terms not defined herein are defined 

in the Rules, By-Laws and Organization Certificate 

of DTC (the ‘‘Rules’’), available at www.dtcc.com/ 

∼/media/Files/Downloads/legal/rules/dtc_rules.pdf. 6Available at http://www.dtcc.com/∼/media/ 

Files/Downloads/legal/fee-guides/ 

dtcfeeguide.pdf?la=en. 

7See Rule 2, Section 1, supra note 5. 

8See Rule 2, Section 3, supra note 5. 

9See Policy Statement, supra note 5 at 133–134. 

10The Required Documentation relates to the 

DTC services the Applicant seeks to utilize and 

includes, but is not limited to, the applicable form 

of agreement with DTC providing, among other 

matters, that the Applicant will abide by the Rules 

and agreeing to New York governing law. There is 

a standard form Participant’s Agreement to be 

signed by a Participant Applicant, and a standard 

form Pledgee’s Agreement to be signed by a Pledgee 

Applicant. Certain certifications and other 

documentation, including but not limited to 

opinions of counsel, authorizing resolutions and 

appointment of authorized signers, may be required 

of a Participant Applicant depending on the nature 

and level of DTC services the Participant Applicant 

seeks to use. Participant Applicants are also 

required to provide certain financial and regulatory 

reports and other information, as applicable, to 

allow DTC to evaluate the Applicant’s financial 

condition, operational capability and character. See 

Rule 2, supra note 5, and the Policy Statement, 

supra note 9. 

All submissions should refer to File 

Number SR–NYSEArca–2018–40. 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 such 

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–2018–40, and 

should be submitted on or before July 

24, 2018. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.31

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–14300 Filed 7–2–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83544; File No. SR–DTC– 

2018–002] 

Self-Regulatory Organizations; The 

Depository Trust Company; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Amend the 

Rules and Fee Schedule Relating to 

Participant and Pledgee Applications 

June 28, 2018. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that on June 21, 

2018, The Depository Trust Company 

(‘‘DTC’’) filed with the Securities and 

Exchange Commission (‘‘Commission’’) 

the proposed rule change as described 

in Items I, II and III below, which Items 

have been prepared by the clearing 

agency. DTC filed the proposed rule 

change pursuant to Section 19(b)(3)(A) 

of the Act 3 and Rules 19b–4(f)(2) and 

(f)(4) thereunder.4 The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Clearing Agency’s Statement of the 

Terms of Substance of the Proposed 

Rule Change 

The proposed rule change of DTC 5

consists of proposed modifications to (i) 

the DTC Fee Schedule (‘‘Fee 

Schedule’’) 6 to add two new application 

fees that would be charged, respectively, 

to legal entities that formally submit an 

application (‘‘Application’’) to become 

either a Participant 7 (each, a 

‘‘Participant Applicant’’) or a Pledgee 8

(each, a ‘‘Pledgee Applicant’’) of DTC 

(Participant Applicants and Pledgee 

Applicants, referred to collectively as 

‘‘Applicants’’), and (ii) DTC’s Policy 

Statements on the Admission of 

Participants (jointly referred to as the 

‘‘Policy Statement’’) with respect to the 

provision that requires a non-U.S. entity 

that applies to become a Participant 

(‘‘Non-U.S. Participant Applicant’’) to 

provide to DTC a legal opinion 

(‘‘Foreign Legal Opinion’’) of its counsel 

in its jurisdiction of organization 

(‘‘Jurisdiction of Organization’’).9 With 

respect to (i) above, the Fee Schedule 

would be amended to charge (A) each 

Participant Applicant a fee of $5,000 in 

connection with its Application to 

become a Participant (‘‘Participant 

Application Fee’’), and (B) each Pledgee 

Applicant a fee of $2,500 in connection 

with its Application to become a 

Pledgee (‘‘Pledgee Application Fee’’) 

(Participant Application Fee and 

Pledgee Application Fee, collectively 

referred to as ‘‘Application Fees’’). With 

respect to (ii) above, the Policy 

Statement would be amended to (A) 

remove the provision that requires each 

Non-U.S. Participant Applicant to 

obtain a Foreign Legal Opinion from its 

counsel and (B) provide that DTC would 

obtain a Foreign Legal Opinion from its 

outside counsel (‘‘DTC Counsel’’) in the 

Jurisdiction of Organization of a new 

Non-U.S. Participant Applicant, which 

opinion DTC would use in conjunction 

with its review of the Application of 

that and each subsequent new Non-U.S. 

Participant Applicant domiciled in that 

Jurisdiction of Organization, as 

described below. Each Non-U.S. 

Participant Applicant would be charged 

a fee (‘‘Foreign Legal Opinion Fee’’) 

with respect to the applicable Foreign 

Legal Opinion obtained by DTC, as 

described below. The proposed rule 

change would also amend the Policy 

Statement to impose a time limit (‘‘Time 

Limit’’) of six months for an Applicant 

to complete its Application with 

required documentation (‘‘Required 

Documentation’’),10 before its 

Application would expire, as described 

below. The proposed rule change would 

also make other changes of a technical 

nature to the Rules text, as described 

below. 

II. Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

In its filing with the Commission, the 

clearing agency 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 these 

statements may be examined at the 

places specified in Item IV below. The 

clearing agency has prepared 

summaries, set forth in sections A, B, 

and C below, of the most significant 

aspects of such statements. 


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