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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

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) (the ‘‘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 Commission approved the generic listing 

standards in Commentary .01 to NYSE Arca Rule 

8.600–E in Securities Exchange Act Release No. 

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

(SR–NYSEArca–2015–110) (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) (‘‘Approval 

Order’’). 

6For purposes of Commentary .01(a) to Rule 

8.600–E, equity securities include the following: 

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). 

7NYSE Arca Rule 5.2–E(j)(3) provides that the 

term ‘‘Non-US Component Stock’’ shall mean an 

equity security that is not registered under Sections 

12(b) or 12(g) of the Securities Exchange Act of 

1934 and that is issued by an entity that (a) is not 

organized, domiciled or incorporated in the United 

States, and (b) is an operating company (including 

Real Estate Investment Trusts (REITS) and income 

trusts, but excluding investment trusts, unit trusts, 

mutual funds, and derivatives). 

8See Securities Exchange Act Release No. 55621 

(April 12, 2007), 72 FR 19571 (April 18, 2007) (SR– 

NYSEArca–2006–86) (Notice of Filing of Proposed 

Rule Change and Amendments No. 1, 2, 3, and 4 

Thereto and Order Granting Accelerated Approval 

of the Proposed Rule Change as Modified by 

Amendments No. 2 and 4 Thereto Adopting Generic 

Listing Standards for Exchange-Traded Funds 

Based on International or Global Indexes or Indexes 

Described in Exchange Rules Previously Approved 

by the Commission as Underlying Benchmarks for 

Derivative Securities). See also Securities Exchange 

Act Release Nos. 54739 (November 9, 2006), 71 FR 

61811 [sic] (October 19 [sic], 2006) (SR–Amex– 

2006–78) (Order Granting Accelerated Approval to 

Proposed Rule Change and Amendment No. 1 

Thereto and Notice of Filing and Order Granting 

Accelerated Approval to Amendment No. 2 Thereto 

Relating to Generic Listing Standards for Series of 

Portfolio Depositary Receipts and Index Fund 

Shares Based on International or Global Indexes); 

55113 (January 17, 2007), 72 FR 3179 (January 24, 

2007) (SR–NYSE–2006–101) (Notice of Filing and 

Order Granting Accelerated Approval of a Proposed 

Rule Change as Modified by Amendments No. 1 

and 2 Thereto Adopting Generic Listing Standards 

for Exchange-Traded Funds Based on International 

or Global Indexes or Indexes Previously Approved 

by the Commission as Underlying Benchmarks for 

Derivative Securities). 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83759; File No. SR– 

NYSEArca–2018–54] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing of Proposed 

Rule Change To Amend Commentary 

.01 to NYSE Arca Rule 8.600–E 

Relating to Certain Generic Listing 

Standards for Managed Fund Shares 

August 1, 2018. 

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

Securities Exchange Act of 1934 

(‘‘Act’’) 2 and Rule 19b–4 thereunder,3

notice is hereby given that, on July 18, 

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

‘‘NYSE Arca’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the self-regulatory organization. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

Commentary .01 to NYSE Arca Rule 

8.600–E relating to certain generic 

listing standards for 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 

Commentary .01 to NYSE Arca Rule 

8.600–E sets forth generic listing 

standards for listing and trading of 

Managed Fund Shares on the 

Exchange.4 The Exchange proposes to 

amend certain provisions in 

Commentary .01, as described below.5

Proposed Amendments to Commentary 

.01(a) to Rule 8.600–E 

Commentary .01(a) to NYSE Arca 

Rule 8.600–E sets forth generic 

standards applicable to equity securities 

included in the portfolio of a series of 

Managed Fund Shares.6 Commentary 

.01(a)(2) (‘‘Non-U.S. Component 

Stocks’’) sets forth criteria to be met 

initially and on a continuing basis by 

component stocks of the equity portion 

of a portfolio that are Non-U.S. 

Component Stocks.7

Commentary .01(a)(2)(A) provides 

that Non-U.S. Component Stocks each 

shall have a minimum market value of 

at least $100 million. Commentary 

.01(a)(2)(B) provides that Non-U.S. 

Component Stocks each shall have a 

minimum global monthly trading 

volume of 250,000 shares, or minimum 

global notional volume traded per 

month of $25,000,000, averaged over the 

last six months. 

The Exchange proposes to amend 

Commentary .01(a)(2)(A) to provide that 

Non-U.S. Component Stocks that in the 

aggregate account for at least 90% of the 

weight of the Non-U.S. Component 

Stocks of the equity portion of a 

portfolio each shall have a minimum 

market value of at least $100 million. In 

addition, the Exchange proposes to 

amend Commentary .01(a)(2)(B) to 

provide that Non-U.S. Component 

Stocks that in the aggregate account for 

at least 70% of the weight of the NonU.S. Component Stocks of the equity 

portion of a portfolio each shall have a 

minimum global monthly trading 

volume of 250,000 shares, or minimum 

global notional volume traded per 

month of $25,000,000, averaged over the 

last six months. 

The proposed amendments are 

comparable to the current numerical 

requirements in Commentary 

.01(a)(B)(1) and Commentary .01(a)(B)(2) 

to NYSE Arca Rule 5.2–E(j)(3) 

applicable to component stocks in an 

index or portfolio underlying 

Investment Company Units. The 

Exchange notes that, in originally 

approving the generic listing criteria in 

Commentary .01(a)(B) to NYSE Arca 

Rule 5.2–E(j)(3) applicable to indexes 

that include only non-U.S. Component 

Stocks or both U.S. and Non-U.S. 

Component Stocks in an index or 

portfolio underlying a series of 

Investment Company Units, the 

Commission stated that ‘‘[t]hese 

requirements are designed, among other 

things, to require that components of an 

index or portfolio underlying an ETF are 

adequately capitalized and sufficiently 

liquid, and that no one stock dominates 

the index.’’ 8

Like the requirements applicable to an 

index or portfolio underlying 


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9Commentary .01(a)(2)(C) provides that the most 

heavily weighted Non-U.S. Component stock shall 

not exceed 25% of the equity weight of the 

portfolio, and, to the extent applicable, the five 

most heavily weighted Non-U.S. Component Stocks 

shall not exceed 60% of the equity weight of the 

portfolio. 

Commentary .01(a)(2)(D) provides that, where the 

equity portion of the portfolio includes Non-U.S. 

Component Stocks, the equity portion of the 

portfolio shall include a minimum of 20 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. 

10Commentary .01(b) provides that fixed income 

securities are debt securities that are notes, bonds, 

debentures or evidence of indebtedness that 

include, but are not limited to, U.S. Department of 

Treasury securities (‘‘Treasury Securities’’), 

government-sponsored entity securities (‘‘GSE 

Securities’’), municipal securities, trust preferred 

securities, supranational debt and debt of a foreign 

country or a subdivision thereof, investment grade 

and high yield corporate debt, bank loans, mortgage 

and asset backed securities, and commercial paper. 

11See, e.g., Securities Exchange Act Release Nos. 

80946 (June 15, 2017) 82 FR 28126 (June 20, 2017) 

(SR–NASDAQ–2017–039) (permitting the 

Guggenheim Limited Duration ETF to invest up to 

20% of its total assets in privately-issued, nonagency and non-GSE ABS and MBS); 76412 

(November 10, 2015), 80 FR 71880 (November 17, 

2015) (SR–NYSEArca–2015–111) (permitting the 

RiverFront Strategic Income Fund to invest up to 

20% of its assets in privately-issued, non-agency 

and non-GSE ABS and MBS); 74814 (April 27, 

2015), 80 FR 24986 (May 1, 2015) (SR–NYSEArca– 

2014–017 [sic]) (permitting the Guggenheim 

Enhanced Short Duration ETF to invest up to 20% 

of its assets in privately-issued, non-agency and 

non-GSE ABS and MBS); 74109 (January 21, 2015), 

80 FR 4327 (January 27, 2015) (SR–NYSEArca– 

2014–134) (permitting the IQ Wilshire Alternative 

Strategies ETF to invest up to 20% of its total assets 

in MSB [sic] and other ABS, without any limit on 

the type of such MBS and ABS). 

12See 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). 

13For purposes of Commentary .01(a)(3), nonexchange-traded open-end management investment 

company securities 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. 

14The 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 Rule 8.600–E). 

15The Commission initially approved the 

Exchange’s proposed rule change to exclude 

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

Company Units and securities described in Section 

Investment Company Units noted above, 

the proposed amendments to 

Commentary .01(a)(2)(A) and (B) would 

subject a substantial portion of a fund’s 

holdings in Non-U.S. Component Stocks 

to specified minimum liquidity and 

market value requirements. Such 

holdings also will continue to be subject 

to the weighting and diversification 

requirements of Commentary 

.01(a)(2)(C) and (D), which prevent any 

stock or small group of stocks from 

dominating a fund’s portfolio.9 The 

proposed amendments to Commentary 

.01(a)(2) to Rule 8.600–E would provide 

additional flexibility to series of 

Managed Fund Shares investing in NonU.S. Component Stocks while 

continuing to apply substantial 

minimum criteria relating to liquidity, 

market capitalization and 

diversification. 

Proposed Amendment to Commentary 

.01(b)(5) to Rule 8.600–E 

Commentary .01(b) to NYSE Arca 

Rule 8.600–E sets forth generic 

standards applicable to fixed income 

securities included in the portfolio of a 

series of Managed Fund Shares.10

Commentary .01(b)(5) provides that 

non-agency, non- GSE and privatelyissued mortgage-related and other assetbacked securities (‘‘ABS’’) 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. The Exchange proposes to 

amend Commentary .01(b)(5) by 

deleting the words ‘‘fixed income 

portion’’ to provide that such 20% 

limitation would apply to the entire 

portfolio rather than to only the fixed 

income portion of the portfolio. Thus, 

Commentary .01(b)(5) would provide 

that non-agency, non-GSE and privatelyissued mortgage-related and other ABS 

components of a portfolio shall not 

account, in the aggregate, for more than 

20% of the weight of the portfolio. 

This Exchange believes this 

amendment is appropriate because a 

fund’s investment in non-agency, nonGSE and privately-issued mortgagerelated and other ABS may provide a 

fund with benefits associated with 

increased diversification, as such 

investments may be less correlated to 

interest rates than many other fixed 

income securities. In addition, a fund’s 

investment in non-agency, non-GSE and 

privately-issued mortgage-related and 

other ABS will be subject to a fund’s 

liquidity procedures as adopted by a 

fund’s board of directors. The Exchange 

notes that the Commission has 

previously approved the listing of 

actively managed exchange-traded 

funds that can invest 20% of their total 

assets in non-U.S. Government, nonagency, non-GSE and other privately 

issued asset-backed and mortgagebacked securities (‘‘MBS’’).11 In 

addition, the Commission has 

previously approved listing and trading 

of shares of an issue of Managed Fund 

Shares where such fund’s investments 

in non-U.S. Government, non-agency, 

non-GSE and other privately issued ABS 

will, in the aggregate, not exceed more 

than 20% of the total assets of the fund, 

rather than the weight of the fixed 

income portion of the fund’s portfolio.12

Therefore, the Exchange believes it is 

appropriate to apply the 20% limitation 

to a fund’s investment in non-agency, 

non-GSE and privately-issued mortgagerelated and other asset-backed securities 

components of a portfolio in 

Commentary .01(b)(5) to a fund’s total 

assets. 

Proposed Amendment to Commentary 

.01(a)(3) to Rule 8.600–E 

The Exchange further proposes to add 

new Commentary .01(a)(3) to NYSE 

Arca Rule 8.600–E to provide that the 

portfolio of a series of Managed Fund 

Shares may include non-exchangetraded open-end management 

investment company securities, which 

securities shall be excluded from the 

equity portion of the portfolio for 

purposes of meeting the criteria in 

Commentary .01(a)(1). 

A fund’s investment in such 

securities, which are registered under 

the 1940 Act, may be utilized, for 

example, to obtain income on short-term 

cash balances while awaiting attractive 

investment opportunities, to provide 

liquidity in preparation for anticipated 

redemptions or for defensive 

purposes.13 Such investments may 

include mutual funds that invest 

principally in securities and financial 

instruments that help the Fund meet its 

investment objective and/or to equitize 

cash in the short term.14 Because such 

securities must satisfy applicable 1940 

Act diversification requirements, and 

have a net asset value based on the 

value of securities and financial 

instruments the investment company 

holds, 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 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)).15 In its 


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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 Rule 8.600–E 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. 

16See note 12, supra. 

17 15 U.S.C. 78f(b). 

18 15 U.S.C. 78f(b)(5). 19See note 8, supra. 

2008 Approval Order approving 

amendments to Commentary .01(a) to 

Rule 5.2(j)(3) to 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 mutual fund shares certain of 

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 

requirements 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 are tailored to exchange-traded 

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

and not to mutual fund shares, which 

do not trade in the secondary market 

and for which no such volume 

information is reported. In addition, 

Commentary .01(a)(1)(A) relating to 

minimum market value of portfolio 

component stocks, Commentary 

.01(a)(1)(C) relating to weighting of 

portfolio component stocks, and 

Commentary .01(a)(1)(D) relating to 

minimum number of portfolio 

components are not appropriately 

applied to open-end management 

investment company securities; openend investment companies hold 

multiple individual securities as 

disclosed publicly in accordance with 

the 1940 Act. 

The Exchange notes that the 

Commission has previously approved 

listing and trading of an issue of 

Managed Fund Shares that may invest 

in equity securities that are nonexchange-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.16

The Exchange, therefore, believes it is 

appropriate to exclude non-exchangetraded open-end management 

investment company securities from the 

equity portion of the portfolio for 

purposes of meeting the criteria in 

Commentary .01(a)(1). 

The Exchange believes the proposed 

amendments would provide issuers of 

Managed Fund Shares with additional 

investment choices for fund portfolios 

for issues permitted to list and trade on 

the Exchange pursuant to the Rule 19b– 

4(e), which would enhance competition 

among market participants, to the 

benefit of investors and the marketplace. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

Section 6(b) of the Act,17 in general, and 

furthers the objectives of Sections [sic] 

6(b)(5) of the Act,18 in particular, 

because it is designed to prevent 

fraudulent and manipulative acts and 

practices, to promote just and equitable 

principles of trade, to foster cooperation 

and coordination with persons engaged 

in regulating, clearing, settling, 

processing information with respect to, 

and facilitating transactions in 

securities, to remove impediments to, 

and perfect the mechanisms of, a free 

and open market and a national market 

system and, in general, to protect 

investors and the public interest and 

because it is not designed to permit 

unfair discrimination between 

customers, issuers, brokers, or dealers 

The Exchange has in place 

surveillance procedures that are 

adequate to properly monitor trading in 

series of Managed Fund Shares in all 

trading sessions and to deter and detect 

violations of Exchange rules and 

applicable federal securities laws. The 

Exchange notes that the Exchange or 

Financial Industry Regulatory Authority 

(‘‘FINRA’’), on behalf of the Exchange, 

or both, would communicate as needed 

regarding trading in Managed Fund 

Shares with other markets and other 

entities that are members of the 

Intermarket Surveillance Group, and the 

Exchange or FINRA, on behalf of the 

Exchange, or both, could obtain trading 

information regarding trading in 

Managed Fund Shares from such 

markets and other entities. In addition, 

the Exchange could obtain information 

regarding trading in Managed Fund 

Shares from markets and other entities 

that are members of ISG or with which 

the Exchange has in place a 

comprehensive surveillance sharing 

agreement. 

With respect to the proposed 

amendment to Commentary .01(a)(2), 

the proposed amendments are 

comparable to the current numerical 

requirements in Commentary 

.01(a)(B)(1) and Commentary .01(a)(B)(2) 

to NYSE Arca Rule 5.2–E(j)(3) 

applicable to component stocks in an 

index or portfolio underlying 

Investment Company Units. The 

Exchange notes that, in originally 

approving the generic listing criteria in 

Commentary .01(a)(B) to NYSE Arca 

Rule 5.2–E(j)(3) applicable to indexes 

that include only non-U.S. Component 

Stocks or both U.S. and Non-U.S. 

Component Stocks in an index or 

portfolio underlying a series of 

Investment Company Units, the 

Commission stated that ‘‘[t]hese 

requirements are designed, among other 

things, to require that components of an 

index or portfolio underlying an ETF are 

adequately capitalized and sufficiently 

liquid, and that no one stock dominates 

the index.’’ 19

Like the requirements applicable to an 

index or portfolio underlying 

Investment Company Units noted above, 

the proposed amendments to 

Commentary .01(a)(2)(A) and (B) would 

subject a substantial portion of a fund’s 

holdings in Non-U.S. Component Stocks 

to specified minimum liquidity and 

market value requirements. Such 

holdings also will continue to be subject 

to the weighting and diversification 

requirements of Commentary 

.01(a)(2)(C) and (D), which prevent any 

stock or small group of stocks from 

dominating a fund’s portfolio. The 

proposed amendments to Commentary 

.01(a)(2) to Rule 8.600–E would provide 

additional flexibility to series of 

Managed Fund Shares investing in NonU.S. Component Stocks while 

continuing to apply substantial 

minimum criteria relating to liquidity, 

market capitalization and 

diversification. 


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20See note 11 [sic], supra. 21 15 U.S.C. 78f(b)(8). 

With respect to the proposed 

amendment to Commentary .01(b)(5), 

the Exchange believes this amendment 

is appropriate because a fund’s 

investment in non-agency, non-GSE and 

privately-issued mortgage-related and 

other ABS may provide a fund with 

benefits associated with increased 

diversification, as such investments may 

be less correlated to interest rates than 

many other fixed income securities. In 

addition, a fund’s investment in nonagency, non-GSE and privately-issued 

mortgage-related and other ABS will be 

subject to a fund’s liquidity procedures 

as adopted by a fund’s board of 

directors. 

The Exchange notes that the 

Commission has previously approved 

the listing of actively managed 

exchange-traded funds that can invest 

20% of their total assets in non-U.S. 

Government, non-agency, non-GSE and 

other privately issued asset-backed and 

MBS. In addition, the Commission has 

previously approved listing and trading 

of shares of an issue of Managed Fund 

Shares where such fund’s investments 

in non-U.S. Government, non-agency, 

non-GSE and other privately issued ABS 

will, in the aggregate, not exceed more 

than 20% of the total assets of the fund, 

rather than the weight of the fixed 

income portion of the fund’s portfolio.20

Therefore, the Exchange believes it is 

appropriate to apply the 20% limitation 

to a fund’s investment in non-agency, 

non-GSE and privately-issued mortgagerelated and other asset-backed securities 

components of a portfolio in 

Commentary .01(b)(5) to a fund’s total 

assets. 

The Exchange further proposes to add 

new Commentary .01(a)(3) to NYSE 

Arca Rule 8.600–E to provide that the 

equity portion of a portfolio may 

include non-exchange-traded open-end 

management investment company 

securities, which securities shall be 

excluded from the equity portion of the 

portfolio for purposes of meeting the 

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

fund’s investment in such securities 

may be utilized, for example, to obtain 

income on short-term cash balances 

while awaiting attractive investment 

opportunities, to provide liquidity in 

preparation for anticipated redemptions 

or for defensive purposes. Such 

investments may include mutual funds 

that invest principally in securities and 

financial instruments that help the Fund 

meet its investment objective and/or to 

equitize cash in the short term. Because 

such securities must satisfy applicable 

1940 Act diversification requirements, 

and have a net asset value based on the 

value of securities and financial 

instruments the investment company 

holds, it is both unnecessary and 

inappropriate to apply to such 

investment company securities the 

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

same reasons, such investment company 

securities are appropriately excluded 

from the equity portion of the portfolio 

for purposes of meeting the criteria in 

Commentary .01(a)(1). 

The Exchange notes that Commentary 

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

E exclude 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)). In its 

2008 Approval Order approving 

amendments to Commentary .01(a) to 

Rule 5.2(j)(3) to 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 mutual fund shares certain of 

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 

requirements 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 are tailored to exchange-traded 

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

and not to mutual fund shares, which 

do not trade in the secondary market 

and for which no such volume 

information is reported. In addition, 

Commentary .01(a)(1)(A) relating to 

minimum market value of portfolio 

component stocks, Commentary 

.01(a)(1)(C) relating to weighting of 

portfolio component stocks, and 

Commentary .01(a)(1)(D) relating to 

minimum number of portfolio 

components are not appropriately 

applied to open-end management 

investment company securities; openend investment companies hold 

multiple individual securities as 

disclosed publicly in accordance with 

the 1940 Act. 

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 additional types of Managed Fund 

Shares that will enhance competition 

among market participants, to the 

benefit of investors and the marketplace. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

In accordance with Section 6(b)(8) of 

the Act,21 the Exchange believes that the 

proposed rule change would not impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. The 

proposed rule change would permit 

Exchange listing and trading under Rule 

19b–4(e) of additional types of Managed 

Fund Shares, which would 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 within such longer period 

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 


daltland on DSKBBV9HB2PROD with NOTICES
Federal Register / Vol. 83, No. 152 / Tuesday, August 7, 2018 / Notices 38757 

22 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)(6)(iii). 

5The Exchange has filed to make the pilot 

program permanent. See Cboe–BYX–2018–014 

(pending publication). 

6See Securities Exchange Act Release No. 68303 

(November 27, 2012), 77 FR 71652 (December 3, 

2012) (‘‘RPI Approval Order’’) (SR–BYX–2012–019). 

7A ‘‘User’’ is defined in BYX Rule 1.5(cc) as any 

member or sponsored participant of the Exchange 

who is authorized to obtain access to the System. 

8A ‘‘Retail Order’’ is defined in Rule 11.24(a)(2) 

as an agency order that originates from a natural 

person and is submitted to the Exchange by a RMO, 

provided that no change is made to the terms of the 

order with respect to price or side of market and 

the order does not originate from a trading 

algorithm or any computerized methodology. See 

Rule 11.24(a)(2). 

9The term Protected Quotation is defined in BYX 

Rule 1.5(t) and has the same meaning as is set forth 

in Regulation NMS Rule 600(b)(58). The terms 

Protected NBB and Protected NBO are defined in 

BYX Rule 1.5(s). The Protected NBB is the bestpriced protected bid and the Protected NBO is the 

best-priced protected offer. Generally, the Protected 

NBB and Protected NBO and the national best bid 

(‘‘NBB’’) and national best offer (‘‘NBO’’, together 

with the NBB, the ‘‘NBBO’’) will be the same. 

However, a market center is not required to route 

to the NBB or NBO if that market center is subject 

to an exception under Regulation NMS Rule 

611(b)(1) or if such NBB or NBO is otherwise not 

available for an automatic execution. In such case, 

the Protected NBB or Protected NBO would be the 

best-priced protected bid or offer to which a market 

center must route interest pursuant to Regulation 

NMS Rule 611. 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

NYSEArca–2018–54 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–NYSEArca–2018–54. 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–2018–54 and 

should be submitted on or before 

August 28, 2018. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.22

Robert W. Errett, 

Deputy Secretary. 

[FR Doc. 2018–16803 Filed 8–6–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83758; File No. SR– 

CboeBYX–2018–015] 

Self-Regulatory Organizations; Cboe 

BYX Exchange, Inc.; Notice of Filing 

and Immediate Effectiveness of a 

Proposed Rule Change To Extend the 

Pilot Period for the Exchange’s Retail 

Price Improvement Program 

August 1, 2018. 

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

Securities Exchange Act of 1934 (the 

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

notice is hereby given that on July 30, 

2018, Cboe BYX Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘BYX’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the Exchange. The Exchange has 

designated this proposal as a ‘‘noncontroversial’’ proposed rule change 

pursuant to Section 19(b)(3)(A) of the 

Act 3 and Rule 19b–4(f)(6)(iii) 

thereunder,4 which renders it effective 

upon filing with the Commission. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange filed a proposal to 

extend the pilot period for the 

Exchange’s Retail Price Improvement 

Program, which is currently scheduled 

to expire on July 31, 2018, until the 

earlier of approval of the filing to make 

the Program permanent or December 31, 

2018. 

The text of the proposed rule change 

is available at the Exchange’s website at 

www.markets.cboe.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 

Exchange 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 

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 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of the proposed rule 

change is to extend the pilot period for 

the Exchange’s Retail Price 

Improvement Program (the ‘‘Program’’), 

which is set to expire on July 31, 2018, 

until the earlier of approval of the filing 

to make the Program permanent or 

December 31, 2018.5

Background 

In November 2012, the Commission 

approved the Program on a pilot basis.6

The Program is designed to attract retail 

order flow to the Exchange, and allows 

such order flow to receive potential 

price improvement. The Program is 

currently limited to trades occurring at 

prices equal to or greater than $1.00 per 

share. Under the Program, all Exchange 

Users 7 are permitted to provide 

potential price improvement for Retail 

Orders 8 in the form of non-displayed 

interest that is better than the national 

best bid that is a Protected Quotation 

(‘‘Protected NBB’’) or the national best 

offer that is a Protected Quotation 

(‘‘Protected NBO’’, and together with the 

Protected NBB, the ‘‘Protected NBBO’’).9


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