[Federal Register Volume 83, Number 149 (Thursday, August 2, 2018)]
[Notices]
[Pages 37831-37839]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-16536]


=======================================================================
-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83733; File No. SR-NYSEArca-2018-25]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Amendment No. 1 and Order Instituting Proceedings To Determine 
Whether To Approve or Disapprove a Proposed Rule Change as Modified by 
Amendment No. 1 Thereto Regarding the Continued Listing and Trading of 
Shares of the Natixis Loomis Sayles Short Duration Income ETF

July 27, 2018.

I. Introduction

    On April 16, 2018, NYSE Arca, Inc. (``Exchange'' or ``NYSE Arca'') 
filed with the Securities and Exchange Commission (``Commission''), 
pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 1934 
(``Exchange Act'') \2\ and Rule 19b-4 thereunder,\3\ a proposed rule 
change to continue listing and trading shares of the Natixis Loomis 
Sayles Short Duration Income ETF under NYSE Arca Rule 8.600-E, Managed 
Fund Shares.\4\ The proposed rule change was published for comment in 
the Federal Register on May 3, 2018.\5\ On June 5, 2018, the Commission 
extended the time period within which to approve the proposed rule 
change, disapprove the proposed rule change, or institute proceedings 
to determine whether to approve or disapprove the proposed rule change 
to August 1,

[[Page 37832]]

2018.\6\ On June 6, 2018, the Exchange filed Amendment No. 1 to the 
proposed rule change, which replaced and superseded the proposed rule 
change as originally filed. The Commission received no comments on the 
proposed rule change. The Commission is publishing this notice and 
order to solicit comments on the proposed rule change, as modified by 
Amendment No. 1, from interested persons and to institute proceedings 
under Section 19(b)(2)(B) of the Exchange Act to determine whether to 
approve or disapprove the proposed rule change as modified by Amendment 
No. 1.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
    \4\ Currently, the Exchange lists and trades the shares pursuant 
to NYSE Arca Rule 8.600-E. As discussed further below, the Exchange 
submitted this proposed rule change to permit the fund's portfolio 
to deviate from two of the ``generic'' listing requirements 
applicable to Managed Fund Shares.
    \5\ See Securities Exchange Act Release No. 83122 (April 27, 
2018), 83 FR 19578. (``Notice'').
    \6\ See Securities Exchange Act Release No. 83385, 83 FR 27034 
(June 11, 2018).
---------------------------------------------------------------------------

II. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the self-regulatory organization 
included statements concerning the purpose of, and basis for, the 
proposed rule change and discussed any comments it received on the 
proposed rule change. The text of those statements may be examined at 
the places specified in Item IV below. The Exchange has prepared 
summaries, set forth in sections A, B, and C below, of the most 
significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to list and trade shares (``Shares'') of the 
following under NYSE Arca Rule 8.600-E, which governs the listing and 
trading of Managed Fund Shares: \7\ Natixis Loomis Sayles Short 
Duration Income ETF (``Fund''). The Shares are offered by Natixis ETF 
Trust (the ``Trust''), which is registered with the Commission as an 
open-end management investment company.\8\ Natixis Advisors, L.P. (the 
``Adviser'') is the investment adviser for the Fund. Loomis, Sayles & 
Company, L.P. is the Fund's sub-adviser (``Sub-Adviser''). ALPS 
Distributors, Inc. (the ``Distributor'') is the principal underwriter 
and distributor of the Fund's Shares. The Adviser is the Fund's 
administrator. State Street Bank and Trust Company (``State Street'') 
serves as the custodian, and transfer agent (``Transfer Agent'' or 
``Custodian'') for the Fund.\9\
---------------------------------------------------------------------------

    \7\ A 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.
    \8\ Shares of the Fund commenced trading on the Exchange on 
December 28, 2017 pursuant to Commentary .01 to NYSE Arca Rule 
8.600-E.
    \9\ The Trust is registered under the 1940 Act. On December 26, 
2017, the Trust filed with the Commission its registration statement 
on Form N-1A under the Securities Act of 1933 (15 U.S.C. 77a), and 
under the 1940 Act relating to the Fund (File Nos. 333-210156 and 
811-23146) (``Registration Statement''). The description of the 
operation of the Trust and the Fund herein is based, in part, on the 
Registration Statement. In addition, the Commission has issued an 
order granting certain exemptive relief to the Trust under the 1940 
Act. See Investment Company Act Release No. 30654 (August 20, 2013) 
(File No. 812-13942-02) (``Exemptive Order'').
---------------------------------------------------------------------------

    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 broker-dealer with 
respect to access to information concerning the composition and/or 
changes to such investment company portfolio. 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.\10\ Commentary .06 to Rule 
8.600-E is similar to Commentary .03(a)(i) and (iii) to NYSE Arca Rule 
5.2-E(j)(3); however, Commentary .06 in connection with the 
establishment of a ``fire wall'' between the investment adviser and the 
broker-dealer reflects the applicable open-end fund's portfolio, not an 
underlying benchmark index, as is the case with index-based funds. The 
Adviser and Sub-Adviser are not registered as broker-dealers but each 
is affiliated with a broker-dealer and has implemented and will 
maintain a ``fire wall'' with respect to such broker-dealer regarding 
access to information concerning the composition and/or changes to the 
Fund's portfolio. In the event (a) the Adviser or Sub-Adviser becomes 
registered as a broker-dealer or newly affiliated with a broker-dealer, 
or (b) any new adviser or sub-adviser is a registered broker-dealer or 
becomes affiliated with a broker-dealer, it will implement and maintain 
a fire wall with respect to its relevant personnel or 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.
---------------------------------------------------------------------------

    \10\ An 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-Adviser 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.
---------------------------------------------------------------------------

Natixis Loomis Sayles Short Duration Income ETF
Principal Investments
    According to the Registration Statement, the Fund's investment 
objective is current income consistent with preservation of capital. 
Under normal market conditions,\11\ the Fund will invest at least 80% 
of its net assets in ``Fixed-Income Securities'' (as described below).
---------------------------------------------------------------------------

    \11\ The term ``normal market conditions'' is defined in NYSE 
Arca Rule 8.600-E(c)(5).
---------------------------------------------------------------------------

    The Fixed Income Securities in which the Fund may invest are the 
following:
    <bullet> U.S. Government Securities, including U.S. Treasury Bills, 
U.S. Treasury Notes and Bonds, U.S. Treasury Floating Rate Notes, 
Treasury Inflation-Protected Securities (``TIPS''), and obligations of 
U.S. agencies or instrumentalities (e.g., ``Ginnie Maes'', ``Fannie 
Maes'' and ``Freddie Macs'');
    <bullet> agency and non-agency asset-backed securities (``ABS'');
    <bullet> U.S. dollar-denominated foreign securities, including 
emerging market securities;
    <bullet> Adjustable-Rate Mortgage Securities (``ARMs'');
    <bullet> junior and senior loans;
    <bullet> bank loans, loan participations and assignments;
    <bullet> agency and non-agency mortgage-backed securities 
(``MBS'');

[[Page 37833]]

    <bullet> collateralized mortgage obligations (``CMOs'');
    <bullet> zero coupon and pay-in-kind securities;
    <bullet> corporate bonds;
    <bullet> Non-US government securities, supranational entities 
obligations issued by foreign governments, or international agencies 
and instrumentalities;
    <bullet> inflation-linked and inflation-indexed securities;
    <bullet> money market instruments; \12\
---------------------------------------------------------------------------

    \12\ Money market instruments are short-term instruments 
referenced in Commentary .01 (c) to NYSE Arca Rule 8.600-E.
---------------------------------------------------------------------------

    <bullet> mortgage-related securities (such as Government National 
Mortgage Association or Federal National Mortgage Association 
certificates);
    <bullet> mortgage dollar rolls;
    <bullet> variable and floating rate securities;
    <bullet> Rule 144A securities;
    <bullet> taxable municipal securities;
    <bullet> step-coupon securities; and
    <bullet> stripped securities.
    The Fund may hold any portion of its assets in cash (U.S. dollars, 
foreign currencies or multinational currency units) and/or cash 
equivalents.\13\
---------------------------------------------------------------------------

    \13\ For purposes of this filing, cash equivalents shall mean 
the short-term instruments enumerated in Commentary .01(c) to NYSE 
Arca Rule 8.600-E.
---------------------------------------------------------------------------

Other Investments
    While the Fund, under normal market conditions, will invest at 
least 80% of its net assets in the securities and financial instruments 
described above, the Fund may invest its remaining assets in the 
securities and financial instruments referenced below.
    The Fund may enter into short sales of Fixed Income Securities.
    The Fund may invest in exchange-traded funds (``ETFs'') \14\ and 
exchange-traded notes (``ETNs''). \15\
---------------------------------------------------------------------------

    \14\ For purposes of this filing, the term ``ETFs'' includes 
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). All ETFs will be listed and traded in the U.S. on a 
national securities exchange. While the Fund may invest in inverse 
ETFs, the Fund will not invest in leveraged (e.g., 2X, -2X, 3X or -
3X) ETFs.
    \15\ ETNs are Index-Linked Securities as described in NYSE Arca 
Rule 5.2-E(j)(6).
---------------------------------------------------------------------------

    The Fund may invest in bilateral credit default swaps, bilateral 
interest rate swaps and bilateral standardized commodity and equity 
index total return swaps. The Fund may invest in the following swaps: 
Interest rate, credit default, credit default swaps index (``CDX''), 
commodity, equity-linked, fixed income, credit default, credit-linked 
and currency exchange swaps or an index or indexes of the foregoing. 
The Fund may invest in swaptions.
    The Fund may invest in the following options: U.S. exchange-traded 
and over-the-counter (``OTC'') options on Fixed Income Securities, 
domestic and foreign equity and fixed income indices, CDX, U.S. 
Treasury futures contracts, interest rates and currencies.
    The Fund may invest in futures on Fixed Income Securities, domestic 
and foreign equity and fixed income indices, interest rates and CDX.
    The Fund may invest in publicly or privately issued interests in 
investment pools whose underlying assets are credit default, credit-
linked, interest rate, currency exchange, equity-linked or other types 
of swap contracts and related underlying securities or securities loan 
agreements.
    The Fund may invest in non-exchange-traded open-end investment 
company securities.
    With respect to any of the Fund's investments identified above, the 
Fund may purchase securities on a forward commitment or when-issued or 
delayed delivery basis.
Use of Derivatives by the Fund
    Investments in derivative instruments will be consistent with the 
Fund's investment objective and policies. The Fund will typically use 
derivative instruments as a substitute for taking a position in the 
underlying asset where advantageous and/or as part of a strategy 
designed to reduce exposure to other risks, such as interest rate risk. 
The Fund may also use derivative instruments to enhance returns, manage 
portfolio duration, or manage the risk of securities price 
fluctuations. To limit the potential risk associated with such 
transactions, the Fund segregates or ``earmarks'' assets determined to 
be liquid by the Adviser in accordance with procedures established by 
the Trust's Board of Trustees (the ``Board'') to cover its obligations 
under derivative instruments. In addition, the Fund has included 
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 use of derivatives, may give rise to 
leverage, causing the Fund to be more volatile than if it had not been 
leveraged. Because the markets for certain securities, or the 
securities 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.
Creation and Redemption of Shares
    According to the Registration Statement, the Fund issues and sells 
Shares of the Fund only in Creation Units of 100,000 Shares on a 
continuous basis through the Distributor at the net asset value 
(``NAV'') next determined after receipt of an order in proper form on 
any business day. The size of a Creation Unit is subject to change.
    The consideration for purchase of Creation Units generally consists 
of ``Deposit Securities'' and the ``Cash Component'', which generally 
correspond pro rata, to the extent practicable, to the Fund securities, 
or, as permitted by the Fund, the ``Cash Deposit.'' Together, the 
Deposit Securities and the Cash Component or, alternatively, the Cash 
Deposit, constitute the ``Fund Deposit,'' which represents the minimum 
initial and subsequent investment amount for a Creation Unit of the 
Fund.
    The Transfer Agent and Custodian, through the National Securities 
Clearing Corporation (``NSCC''), makes available on each business day, 
prior to the opening of the Core Trading Session on NYSE Arca 
(currently 9:30 a.m., Eastern Time (``E.T.'')), the identity and the 
required number of each Deposit Security and the amount of the Cash 
Component to be included in the current Fund Deposit (based on 
information at the end of the previous business day).
    The Fund may also permit the substitution of an amount of cash (a 
``cash-in-lieu'' amount) to replace any Deposit Security of the Fund 
that is a non-deliverable instrument. The amount of cash contributed 
will be equivalent to the price of the instrument listed as a Deposit 
Security. The Fund reserves the right to permit the substitution of a 
``cash in-lieu'' amount to be added to replace any Deposit Security 
under specified circumstances.
Procedures for Creating Creation Units
    To be eligible to place orders with the Distributor and to create a 
Creation Unit of the Fund, an entity must be: (i) A ``Participating 
Party'' (i.e., a broker-dealer or other participant in the clearing 
process through the Continuous Net Settlement System of the NSCC; or 
(ii) a participant of the Depository Trust Company (``DTC'') (``DTC 
Participant'') and must have executed an Authorized Participant 
agreement with the Distributor, and accepted by the Transfer Agent, 
with respect to creations and redemptions of Creation Units. A 
Participating Party or DTC Participant who has executed an ``Authorized 
Participant Agreement'' is referred to as an ``Authorized 
Participant.''
    To initiate a creation order for a Creation Unit, an Authorized 
Participant must submit an irrevocable order to purchase Shares in 
proper form to the Transfer Agent no later than 2:00

[[Page 37834]]

p.m., E.T. on any business day for creation of Creation Units to be 
effected based on the NAV of Shares of the Fund on the following 
business day.
Redemption of Creation Units
    Shares may be redeemed only in Creation Units at their NAV next 
determined after receipt of a redemption request in proper form on a 
business day and only through a Participating Party or DTC Participant 
who has executed an Authorized Participant Agreement.
    With respect to the Fund, State Street, through the NSCC, makes 
available immediately prior to the opening of the Core Trading Session 
on the NYSE Arca on each business day, the identity of the Fund's 
securities and/or an amount of cash that will be applicable to 
redemption requests received in proper form on that day. The Fund's 
securities received on redemption generally correspond pro rata, to the 
positions in the Fund's portfolio. The Fund's securities received on 
redemption (``Fund Securities'') will generally be identical to Deposit 
Securities that are applicable to creations of Creation Units.
    Subject to the terms of the applicable Authorized Participant 
Agreement and any creation and redemption procedures adopted by the 
Fund and provided to all Authorized Participants, to initiate a 
redemption order for a Creation Unit, an Authorized Participant must 
submit an irrevocable order to redeem Shares in proper form to the 
Transfer Agent no later than 2:00 p.m., E.T. on any business day for 
redemption of Creation Units to be effected based on the NAV of shares 
of the Fund on that business day.
    Unless cash only redemptions are available or specified for the 
Fund, the redemption proceeds for a Creation Unit generally consists of 
Fund Securities--as announced on the business day of the request for a 
redemption order 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 a receipt of a request in proper form, and the value 
of the Fund Securities, less the redemption transaction fee and 
variable fees.\16\ The Fund may substitute a ``cash-in-lieu'' amount to 
replace any Fund Security in certain limited circumstances. The amount 
of cash paid out in such cases will be equivalent to the value of the 
instrument listed as the Fund Security. In the event that the Fund 
Securities have a value greater than the NAV of the Shares, a 
compensating cash payment equal to the difference will be included in 
the Cash Component required to be delivered by an Authorized 
Participant.
---------------------------------------------------------------------------

    \16\ The Adviser represents that, to the extent the Trust 
effects the redemption of Shares in cash, such transactions will be 
effected in the same manner for all Authorized Participants.
---------------------------------------------------------------------------

Derivatives Valuation Methodology for Purposes of Determining Portfolio 
Indicative Value
    On each business day, before commencement of trading in Fund Shares 
on NYSE Arca, the Fund discloses on its website the identities and 
quantities of the portfolio instruments and other assets held by the 
Fund that form the basis for the Fund's calculation of NAV at the end 
of the business day. The NAV of the Shares of the Fund is determined 
once each day the New York Stock Exchange (the ``NYSE'') is open, as of 
the close of its regular trading session (normally 4:00 p.m., E.T.) 
(``NYSE Close'').
    In order to provide additional information regarding the intra-day 
value of Shares of the Fund, one or more major market data vendors 
disseminates every 15 seconds an updated Intraday Indicative Value 
(``IIV'') for the Fund as calculated by an information provider or 
market data vendor. A third party market data provider calculates the 
IIV for the Fund.
    With respect to specific derivatives:
    <bullet> Foreign currency derivatives may be valued intraday using 
market quotes, or another proxy as determined to be appropriate by the 
third party market data provider.
    <bullet> Futures may be valued intraday using the relevant futures 
exchange data, or another proxy as determined to be appropriate by the 
third party market data provider.
    <bullet> Swaps may be valued using intraday data from market 
vendors, or based on underlying asset price, or another proxy as 
determined to be appropriate by the third party market data provider.
    <bullet> Exchange listed options may be valued intraday using the 
relevant exchange data, or another proxy as determined to be 
appropriate by the third party market data provider.
    <bullet> OTC options and swaptions may be valued intraday through 
option valuation models (e.g., Black-Scholes) or using exchange-traded 
options as a proxy, or another proxy as determined to be appropriate by 
the third party market data provider.
Disclosed Portfolio
    The Fund's disclosure of derivative positions in the applicable 
Disclosed Portfolio includes information that market participants can 
use to value these positions intraday. On a daily basis, the Fund 
discloses the information regarding the Disclosed Portfolio required 
under NYSE Arca Rule 8.600-E (c)(2) to the extent applicable.
Impact on Arbitrage Mechanism
    The Adviser believes there will be minimal, if any, impact to the 
arbitrage mechanism as a result of the use 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 of the Fund trade will continue 
to be disciplined by arbitrage opportunities created by the ability to 
purchase or redeem Shares of the Fund at their NAV, which should ensure 
that Shares of the Fund will not trade at a material discount or 
premium in relation to their NAV.
    The Adviser does not believe there is any significant impact to the 
settlement or operational aspects of the Fund's arbitrage mechanism due 
to the use of derivatives. Because derivatives generally are not 
eligible for in-kind transfer, they will be substituted with a ``cash 
in lieu'' amount when the Fund processes purchases or redemptions of 
block-size ``Creation Units'' (as described above) in-kind.
Application of Generic Listing Requirements
    The Exchange is submitting this proposed rule change because the 
portfolio for the Fund would 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(b)(5) 
and Commentary .01(a)(1).
    The Fund will not comply with the requirement of Commentary 
.01(b)(5) to NYSE Arca Rule 8.600-E that non-agency, non-government-
sponsored entity (``GSE'') and privately-issued mortgage-related and 
other asset-backed securities components of a portfolio shall not 
account, in the aggregate, for more than 20% of the weight of the fixed 
income portion of the portfolio.\17\ Instead, up to 30% of the weight 
of the

[[Page 37835]]

Fixed Income Securities portion of the Fund's portfolio may consist of 
non-agency, non-GSE and privately-issued mortgage-related and other 
asset-backed securities. The Adviser represents that permitting limited 
investments in non-agency, non-GSE and privately-issued mortgage-
related and other asset-backed securities, as described above, would be 
in the best interest of the Fund's shareholders because such 
investments have the potential to reduce the overall risk profile of 
the Fund's portfolio through diversification. In the Adviser's view, 
such investments would reduce the Fund's risk with respect to non-
agency, non-GSE and privately-issued mortgage-related and other asset-
backed securities by diversifying the Fund's exposure among borrowers 
of such debt issues. The Adviser represents that the Fund will only 
purchase U.S. dollar denominated non-agency ABS and MBS that are 
settled through DTC. In addition, by allowing the Fund to allocate up 
to 30% of the weight of its Fixed Income Securities investments in such 
issues would afford the Fund greater flexibility to invest in the most 
liquid available Fixed Income Securities issues, in that such issues 
are expected to be as liquid, or more liquid, than other possible Fund 
investments.
---------------------------------------------------------------------------

    \17\ Commentary .01(b)(5) to NYSE Arca Rule 8.600-E provides 
that the components of the fixed income portion of a portfolio shall 
meet the following criteria initially and on a continuing basis: 
non-agency, non-government-sponsored entity (``GSE'') and privately-
issued mortgage-related and other asset-backed securities components 
of a portfolio shall not account, in the aggregate, for more than 
20% of the weight of the fixed income portion of the portfolio.
---------------------------------------------------------------------------

    As noted above, the Fund may invest in equity securities that are 
non-exchange-traded securities of other open-end investment company 
securities (e.g., 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 investments in such 
securities.\18\ Investments in such equity securities will not be 
principal investments of the Fund.\19\ 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.\20\ 
Because such securities must 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).
---------------------------------------------------------------------------

    \18\ Commentary .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 Index-
Linked 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 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.
    \19\ For purposes of this section of the filing, non-exchange-
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.
    \20\ The 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 to the extent permitted by Section 12(d)(1) of the 1940 
Act and the rules thereunder. 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).
---------------------------------------------------------------------------

    The Exchange notes that Commentary .01(A) through (D) to Rule 
8.600-E exclude application of those provisions to certain ``Derivative 
Securities Products'' that are exchange-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).\21\ 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) 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 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.
---------------------------------------------------------------------------

    \21\ The 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.
---------------------------------------------------------------------------

    The Exchange notes that the Commission has previously approved

[[Page 37836]]

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.\22\ 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.
---------------------------------------------------------------------------

    \22\ See 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).
---------------------------------------------------------------------------

    The Exchange notes that, other than Commentary .01(a)(1)(A) through 
(E) and Commentary.01(b)(5) to Rule 8.600-E, the Fund's portfolio will 
meet all other requirements of Rule 8.600-E.
Availability of Information
    The Fund's website (www.im.natixis.com/us/active-short-duration-income-etf) includes a form of the prospectus for the Fund that may be 
downloaded. The Fund's website includes 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''),\23\ 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 Fund discloses on its website the Disclosed Portfolio 
as defined in NYSE Arca Rule 8.600-E (c)(2) that forms the basis for 
the Fund's calculation of NAV at the end of the business day.\24\
---------------------------------------------------------------------------

    \23\ The 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.
    \24\ Under accounting procedures 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 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.
---------------------------------------------------------------------------

    On a daily basis, the Fund discloses the information required under 
NYSE Arca Rule 8.600-E (c)(2) to the extent applicable. The website 
information will be publicly available at no charge.
    In addition, a basket composition file, which includes the security 
names and share quantities, if applicable, required to be delivered in 
exchange for the Fund's Shares, together with estimates and actual cash 
components, is publicly disseminated daily prior to the opening of the 
Exchange via the NSCC. The basket represents one Creation Unit of the 
Fund. Authorized Participants may refer to the basket composition file 
for information regarding Fixed Income Securities, and any other 
instrument that may comprise the Fund's basket on a given day.
    Investors can also obtain the Trust's Statement of Additional 
Information (``SAI''), the Fund's Shareholder Reports, and the Fund's 
Forms N-CSR and Forms N-SAR, filed twice a year. The Fund's SAI and 
Shareholder Reports will be available free upon request from the Trust, 
and those documents and the Form N-CSR, Form N-PX and Form N-SAR may be 
viewed on-screen or downloaded from the Commission's website at 
www.sec.gov. Intra-day and closing price information regarding 
exchange-traded options (including options on futures) and futures will 
be available from the exchange on which such instruments are traded. 
Intra-day and closing price information regarding Fixed Income 
Securities also will be available from major market data vendors. Price 
information relating to Rule 144A securities, interests in investment 
pools, OTC options, swaps and swaptions will be available from major 
market data vendors. Intra-day price information for exchange-traded 
derivative instruments will be available from the applicable exchange 
and from major market data vendors. Price information regarding non-
exchange-traded investment company securities will be available from 
the applicable investment company. Information regarding market price 
and trading volume of the Shares will be continually available on a 
real-time basis throughout the day on brokers' computer screens and 
other electronic services. Information regarding the previous day's 
closing price and trading volume information for the Shares will be 
published daily in the financial section of newspapers. Quotation and 
last sale information for the Shares, ETFs and ETNs will be available 
via the Consolidated Tape Association (``CTA'') high-speed line. 
Exchange-traded options quotation and last sale information for options 
cleared via the Options Clearing Corporation (``OCC'') is available via 
the Options Price Reporting Authority. 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. The dissemination of the IIV, together with the 
Disclosed Portfolio, may allow investors to determine an approximate 
value of the underlying portfolio of the Fund on a daily basis and to 
provide an 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. 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 inadvisable. These may include: (1) The extent to 
which trading is not occurring in the securities and/or the financial 
instruments comprising the Disclosed Portfolio of the Fund; or (2) 
whether other unusual conditions or circumstances detrimental to the 
maintenance of a fair and orderly market are present. 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 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. The

[[Page 37837]]

Exchange has obtained 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.
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 the Financial 
Industry Regulatory Authority (``FINRA'') on behalf of the Exchange, 
which are designed to detect violations of Exchange rules and 
applicable federal securities laws. The Exchange represents that these 
procedures are adequate to properly monitor Exchange trading of the 
Shares in all trading sessions and to deter and detect violations of 
Exchange rules and federal securities laws applicable to trading on the 
Exchange.
    The 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, ETFs, ETNs, 
certain exchange-traded options and certain futures 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 in the Shares, ETFs, ETNs, certain 
exchange-traded options and certain futures from such markets and other 
entities. In addition, the Exchange may obtain information regarding 
trading in the Shares, ETFs, ETNs, certain exchange-traded options and 
certain futures from markets and other entities that are members of ISG 
or with which the Exchange has in place a comprehensive surveillance 
sharing agreement (``CSSA''). The Exchange is able to access from 
FINRA, as needed, trade information for certain Fixed Income Securities 
held by the Fund reported to FINRA's Trade Reporting and Compliance 
Engine (``TRACE''). FINRA also can access data obtained from the 
Municipal Securities Rulemaking Board (``MSRB'') relating to certain 
municipal bond trading activity for surveillance purposes in connection 
with trading in the Shares.
    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 rules and surveillance procedures 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 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 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 is 
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) 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 
Exchange has in place surveillance procedures that are adequate to 
properly monitor trading in the Shares in all trading sessions and to 
deter and detect violations of Exchange rules and federal securities 
laws applicable to trading on the Exchange. The Adviser is not 
registered as a broker-dealer but the Adviser is affiliated with a 
broker-dealer and has implemented and will maintain a ``fire wall'' 
with respect to such broker-dealer regarding access to information 
concerning the composition and/or changes to the Fund's portfolio. The 
Exchange or FINRA, on behalf of the Exchange, or both, will communicate 
as needed regarding trading in the Shares, ETFs, ETNs, certain 
exchange-traded options and certain futures 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 in the Shares, ETFs, ETNs, certain exchange-traded 
options and certain futures from such markets and other entities. In 
addition, the Exchange may obtain information regarding trading in the 
Shares, ETFs, ETNs, certain exchange-traded options and certain futures 
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 able to access from FINRA, as needed, trade 
information for certain fixed income securities held by the Fund 
reported to FINRA's TRACE. FINRA also can access data obtained from the 
MSRB relating to certain municipal bond trading activity for 
surveillance purposes in connection with trading in the Shares.
    The proposed rule change is designed to promote just and equitable 
principles of trade and to protect investors and the public interest in 
that the Exchange will obtain a representation from the issuer

[[Page 37838]]

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. In addition, a large amount of 
information is publicly available regarding the Fund and the Shares, 
thereby promoting market transparency. The website for the Fund 
includes a form of the prospectus for the Fund and additional data 
relating to NAV and other applicable quantitative information. 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 8.600-E (d)(2)(D), which sets forth circumstances 
under which trading in the Shares of the Fund may be halted. In 
addition, as noted above, investors have ready access to information 
regarding the Fund's holdings, the IIV, the Disclosed Portfolio, and 
quotation and last sale information for the Shares. In the aggregate, 
at least 90% of the weight of the Fund's holdings invested in futures, 
exchange-traded options, and listed swaps shall, on both an initial and 
continuing basis, consist of futures, options, and swaps for which the 
Exchange may obtain information from other members or affiliates of the 
ISG or for which the principal market is a market with which the 
Exchange has a CSSA.
    As described above, deviations from the generic requirements of 
Commentary .01(a) are necessary for the Fund to achieve its investment 
objective in a manner that is cost-effective and that maximizes 
investors' returns. Further, the proposed alternative requirements are 
narrowly tailored to allow the Fund to achieve its investment objective 
in manner that is consistent with the principles of Section 6(b)(5) of 
the Act. As a result, it is in the public interest to approve listing 
and trading of Shares of the Fund on the Exchange pursuant to the 
requirements set forth herein.
    The Adviser represents that permitting limited investments in non-
agency, non-GSE and privately-issued mortgage-related and other asset-
backed securities, as described above, would be in the best interest of 
the Fund's shareholders because such investments have the potential to 
reduce the overall risk profile of the Fund's portfolio. In the 
Adviser's view, such investments would reduce the Fund's risk with 
respect to non-agency, non-GSE and privately-issued mortgage-related 
and other asset-backed securities by diversifying the Fund's exposure 
among borrowers of such debt issues. In addition, by allowing the Fund 
to allocate up to 30% of the weight of its Fixed Income Securities 
investments in such issues would afford the Fund greater flexibility to 
invest in the most liquid available Fixed Income Securities issues, in 
that such issues are expected to be as liquid, or more liquid, than 
other possible Fund investments.
    The Exchange also 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 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) 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 
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. Other than Commentary 
.01(a)(1)(A) through (E) and Commentary.01(b)(5) to Rule 8.600-E, the 
Fund's portfolio will meet all other requirements of Rule 8.600-E.
    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 actively managed ETF that will enhance 
competition among market participants, to the benefit of investors and 
the marketplace. As noted above, the Exchange has in place surveillance 
procedures relating to trading in the Shares and may obtain information 
via ISG from other exchanges that are members of ISG or with which the 
Exchange has entered into a CSSA. In addition, as noted above, 
investors have ready access to information regarding the Fund's 
holdings, the IIV, the Disclosed Portfolio, and quotation and last sale 
information for the Shares.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purpose of the Act. The Exchange notes that the 
proposed rule change will facilitate the listing and trading of an 
issue of Managed Fund Shares that, through permitted use of an 
increased level of non-agency ABS and MBS above that currently 
permitted by the generic listing requirements of Commentary .01 to NYSE 
Arca Rule 8.600-E, 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. Proceedings to Determine Whether to Approve or Disapprove SR-
NYSEArca-2018-25 and Grounds for Disapproval Under Consideration

    The Commission is instituting proceedings pursuant to Section 
19(b)(2)(B) of the Exchange Act \25\ to determine whether the proposed 
rule change, as modified by Amendment No. 1, should be approved or 
disapproved. Institution of such proceedings is appropriate at this 
time in view of the legal and policy issues raised by the proposed rule 
change. Institution of proceedings does not indicate that the 
Commission has reached any conclusions with respect to any of the 
issues involved. Rather, as described

[[Page 37839]]

below, the Commission seeks and encourages interested persons to 
provide comments on the proposed rule change.
---------------------------------------------------------------------------

    \25\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

    Pursuant to Section 19(b)(2)(B) of the Exchange Act,\26\ the 
Commission is providing notice of the grounds for disapproval under 
consideration. The Commission is instituting proceedings to allow for 
additional analysis of the proposal's consistency with Section 6(b)(5) 
of the Exchange Act, which requires, among other things, that the rules 
of a national securities exchange be designed to prevent fraudulent and 
manipulative acts and practices, to promote just and equitable 
principles of trade, and to protect investors and the public 
interest.\27\ In light of the portfolio's potential exposure to the 
permitted investments identified above (including junior loans, ABS, 
MBS, and interests in investment pools in particular), the Commission 
seeks commenters' views on the sufficiency of the information provided 
in the proposed rule change to support a determination that the listing 
and trading of the Shares would be consistent with Section 6(b)(5) of 
the Exchange Act as modified by Amendment No. 1. The Commission notes 
that the Exchange proposes to exempt equity interests in investment 
pools from all of the requirements of Commentary .01(a)(1) to NYSE Arca 
Rule 8.600-E.In light of the portfolio's potential exposure to the 
permitted investments identified above, the Commission seeks 
commenters' views on the sufficiency of the information provided in the 
proposed rule change to support a determination that the listing and 
trading of the Shares would be consistent with Section 6(b)(5) of the 
Exchange Act as modified by Amendment No. 1.
---------------------------------------------------------------------------

    \26\ Id.
    \27\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

IV. Procedure: Request for Written Comments

    Interested persons are invited to submit written views, data, and 
arguments concerning the foregoing, including whether the proposed rule 
change as modified by Amendment No. 1 is consistent with Section 
6(b)(5) or any other provision of the Exchange Act, or the rules and 
regulations thereunder. Although there do not appear to be any issues 
relevant to approval or disapproval that would be facilitated by an 
oral presentation of views, data, and arguments, the Commission will 
consider, pursuant to Rule 19b-4 under the Exchange Act,\28\ any 
request for an opportunity to make an oral presentation.\29\
---------------------------------------------------------------------------

    \28\ 17 CFR 240.19b-4.
    \29\ Section 19(b)(2) of the Exchange Act, as amended by the 
Securities Acts Amendments of 1975, Pub. L. 94-29 (June 4, 1975), 
grants the Commission flexibility to determine what type of 
proceeding--either oral or notice and opportunity for written 
comments--is appropriate for consideration of a particular proposal 
by a self-regulatory organization. See Securities Acts Amendments of 
1975, Senate Comm. on Banking, Housing & Urban Affairs, S. Rep. No. 
75, 94th Cong., 1st Sess. 30 (1975).
---------------------------------------------------------------------------

    Interested persons are invited to submit written data, views, and 
arguments regarding whether the proposal should be approved or 
disapproved by August 23, 2018. Any person who wishes to file a 
rebuttal to any other person's submission must file that rebuttal by 
September 6, 2018.
    Comments may be submitted by any of the following methods:

Electronic Comments

    <bullet> Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#d9abacb5bcf4bab6b4b4bcb7adaa99aabcbaf7beb6af"><span class="__cf_email__" data-cfemail="e795928b82ca84888a8a82899394a7948284c9808891">[email protected]</span></a>. Please include 
File Number SR-NYSEArca-2018-25 on the subject line.

Paper Comments

    <bullet> Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

    All submissions should refer to File Number SR-NYSEArca-2018-25. 
This file number should be included on the subject line if email is 
used. To help the Commission process and review your comments more 
efficiently, please use only one method. The Commission will post all 
comments on the Commission's internet website (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, 
all written statements with respect to the proposed rule change that 
are filed with the Commission, and all written communications relating 
to the proposed rule change between the Commission and any person, 
other than those that may be withheld from the public in accordance 
with the provisions of 5 U.S.C. 552, will be available for website 
viewing and printing in the Commission's Public Reference Room, 100 F 
Street NE, Washington, DC 20549 on official business days between the 
hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be 
available for inspection and copying at the principal office of the 
Exchange. All comments received will be posted without change. Persons 
submitting comments are cautioned that we do not redact or edit 
personal identifying information from comment submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-NYSEArca-2018-25 and should 
be submitted on or before August 23, 2018. Rebuttal comments should be 
submitted by September 6, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\30\
---------------------------------------------------------------------------

    \30\ 17 CFR 200.30-3(a)(57).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2018-16536 Filed 8-1-18; 8:45 am]
 BILLING CODE 8011-01-P


</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>