[Federal Register Volume 83, Number 169 (Thursday, August 30, 2018)]
[Notices]
[Pages 44312-44320]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-18781]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83936; File No. SR-NYSEArca-2018-60]


Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing 
of Proposed Rule Change To List and Trade Shares of the First Trust 
Long Duration Opportunities ETF Under NYSE Arca Rule 8.600-E

August 24, 2018.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on August 17, 2018, NYSE Arca, Inc. (the ``Exchange'' or 
``NYSE Arca'') filed with the Securities and Exchange Commission (the 
``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

[[Page 44313]]

comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to list and trade shares of the First Trust 
Long Duration Opportunities ETF under NYSE Arca Rule 8.600-E (``Managed 
Fund Shares''). The proposed change is available on the Exchange's 
website at www.nyse.com, at the principal office of the Exchange, and 
at the Commission's Public Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to list and trade shares (``Shares'') of 
First Trust Long Duration Opportunities ETF (the ``Fund'') which under 
NYSE Arca Rule 8.600-E, which governs the listing and trading of 
Managed Fund Shares on the Exchange.\4\
---------------------------------------------------------------------------

    \4\ 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.
---------------------------------------------------------------------------

    The Shares are offered by First Trust Exchange-Traded Fund IV (the 
``Trust''), which is registered with the Commission as an open-end 
management investment company.\5\ The Fund is a series of the Trust.
---------------------------------------------------------------------------

    \5\ The Trust is registered under the 1940 Act. On June 12, 
2018, the Trust filed with the Commission its registration statement 
on Form N-1A under the Securities Act of 1933 (15 U.S.C. 77a), and 
under the 1940 Act relating to the Fund (File Nos. 333-174332 and 
811-22559) (``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 upon which the Trust may rely, granting certain exemptive 
relief under the 1940 Act. See Investment Company Act Release No. 
30029 (April 10, 2012) (File No. 812-13795).
---------------------------------------------------------------------------

    First Trust Advisors L.P. is the investment adviser (``First 
Trust'' or ``Adviser'') to the Fund. First Trust Portfolios L.P. is the 
distributor (``Distributor'') for the Fund's Shares. The Bank of New 
York Mellon acts as the administrator, custodian and transfer agent 
(``Custodian'' or ``Transfer Agent'') for the Fund.
    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 
and maintain 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.\6\ In 
addition, Commentary .06 further requires that personnel who make 
decisions on the open-end fund's portfolio composition must be subject 
to procedures designed to prevent the use and dissemination of material 
nonpublic information regarding the open-end fund's portfolio. The 
Adviser is not registered as a broker-dealer. The Adviser is affiliated 
with First Trust Portfolios L.P., a broker-dealer, and has implemented 
and will maintain a fire wall with respect to its broker-dealer 
affiliate regarding access to information concerning the composition 
and/or changes to the portfolio. In the event (a) the Adviser becomes 
registered as a broker-dealer or newly affiliated with a broker-dealer, 
or (b) any new adviser or sub-adviser is a registered broker-dealer or 
becomes affiliated with a broker-dealer, it will implement and maintain 
a fire wall with respect to its relevant personnel or its broker-dealer 
affiliate regarding access to information concerning the composition 
and/or changes to the portfolio, and will be subject to procedures 
designed to prevent the use and dissemination of material non-public 
information regarding such portfolio.
---------------------------------------------------------------------------

    \6\ 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 its related personnel are 
subject to the provisions of Rule 204A-1 under the Advisers Act 
relating to codes of ethics. This Rule requires investment advisers 
to adopt a code of ethics that reflects the fiduciary nature of the 
relationship to clients as well as compliance with other applicable 
securities laws. Accordingly, procedures designed to prevent the 
communication and misuse of non-public information by an investment 
adviser must be consistent with Rule 204A-1 under the Advisers Act. 
In addition, Rule 206(4)-7 under the Advisers Act makes it unlawful 
for an investment adviser to provide investment advice to clients 
unless such investment adviser has (i) adopted and implemented 
written policies and procedures reasonably designed to prevent 
violation, by the investment adviser and its supervised persons, of 
the Advisers Act and the Commission rules adopted thereunder; (ii) 
implemented, at a minimum, an annual review regarding the adequacy 
of the policies and procedures established pursuant to subparagraph 
(i) above and the effectiveness of their implementation; and (iii) 
designated an individual (who is a supervised person) responsible 
for administering the policies and procedures adopted under 
subparagraph (i) above.
---------------------------------------------------------------------------

First Trust Long Duration Opportunities ETF
Principal Investments
    According to the Registration Statement, the investment objective 
of the Fund is to generate current income with a focus on preservation 
of capital. Under normal market conditions,\7\ the Fund will invest at 
least 80% of its net assets in a portfolio of ``Fixed Income 
Securities'' (described below), which may be represented by derivatives 
relating to such securities. The term Fixed Income Securities means:
---------------------------------------------------------------------------

    \7\ The term ``normal market conditions'' is defined in NYSE 
Arca Rule 8.600-E(c)(5). On a temporary basis, including for 
defensive purposes, during the initial invest-up period (i.e., the 
six-week period following the commencement of trading of Shares on 
the Exchange) and during periods of high cash inflows or outflows 
(i.e., rolling periods of seven calendar days during which inflows 
or outflows of cash, in the aggregate, exceed 10% of the Fund's net 
assets as of the opening of business on the first day of such 
periods), the Fund may depart from its principal investment 
strategies; for example, it may hold a higher than normal proportion 
of its assets in cash. The Fund may adopt a defensive strategy when 
the Adviser believes securities in which the Fund normally invests 
have elevated risks due to political or economic factors and in 
other extraordinary circumstances.
---------------------------------------------------------------------------

    <bullet> Debt securities issued or guaranteed by the U.S. 
Government, its agencies or government-sponsored entities (``GSE'' or 
``U.S. Government Entities''), other than ``Agency Mortgage-Related 
Investments'' as referenced below; \8\
---------------------------------------------------------------------------

    \8\ Government-sponsored entities include, for example, the 
Government National Mortgage Association, the Federal National 
Mortgage Association, and the Federal Home Loan Mortgage 
Corporation.
---------------------------------------------------------------------------

    <bullet> mortgage-related debt securities and other mortgage-
related instruments issued or guaranteed by the U.S. Government and 
U.S. Government Entities (collectively, ``Agency Mortgage-Related 
Investments''); and
    <bullet> debentures related to securities issued or guaranteed by 
the U.S. Government and U.S. Government Entities.
    The Fund may invest in the following derivative instruments: 
options, futures contracts and swap agreements.

[[Page 44314]]

According to the Registration Statement, the use of these derivative 
transactions may allow the Fund to obtain net long or short exposures 
to selected interest rates or durations. The Fund may also utilize 
derivatives to enhance return, to hedge some of the risks of its 
investments in securities, as a substitute for a position in the 
underlying asset, to reduce transaction costs, to maintain full market 
exposure (which means to adjust the characteristics of its investments 
to more closely approximate those of the markets in which it invests), 
to manage cash flows or to preserve capital
    The Fund may invest in exchange-traded funds (``ETFs'') that invest 
in Fixed Income Securities.\9\ Such ETFs will count towards the Fund's 
80% investment requirement described above.
---------------------------------------------------------------------------

    \9\ 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.
---------------------------------------------------------------------------

    The Fund may enter into mortgage dollar rolls.
    The Fund may invest in to-be-announced transactions (``TBA'').
    Cash earmarked or otherwise held as collateral for settling 
mortgage dollar rolls, TBA transactions, and other delayed-delivery 
transactions will count towards the Fund's 80% investment requirement 
described above.
    The Fund may enter into short sales of any securities in which the 
Fund may invest.
Other Investments
    While, under normal market conditions, the Fund will invest at 
least 80% of the Fund's net assets in the securities and financial 
instruments described above under ``Principal Investments'', the Fund 
may invest up to 20% of its net assets in the securities and financial 
instruments described below.
    The Fund may invest in cash and cash equivalents.\10\ In addition, 
the Fund may hold the following short-term instruments with maturities 
of three months or more: Certificates of deposit; bankers' acceptances; 
repurchase agreements and reverse repurchase agreements; bank time 
deposits; and commercial paper.
---------------------------------------------------------------------------

    \10\ For purposes of this filing, cash equivalents are the 
short-term instruments enumerated in Commentary .01(c) to Rule 
8.600-E.
---------------------------------------------------------------------------

    The Fund may invest up to 20% of its net assets in other fixed 
income securities, including asset-backed securities (``ABS'') and 
mortgage-related debt securities and other mortgage-related instruments 
not issued or guaranteed by the U.S. Government or U.S. Government 
Entities (``Non-Agency Mortgage-Related Investments'').\11\
---------------------------------------------------------------------------

    \11\ For purposes of this filing, Agency Mortgage-Related 
Investments and Non-Agency Mortgage-Related Investments consist of: 
(1) Residential mortgage-backed securities (``RMBS''); (2) 
commercial mortgage-backed securities (``CMBS''); (3) stripped 
mortgage-backed securities (``SMBS''), which are mortgage-backed 
securities where mortgage payments are divided up between paying the 
loan's principal and paying the loan's interest; and (4) 
collateralized mortgage obligations (``CMOs'') and real estate 
mortgage investment conduits (``REMICs'') where they are divided 
into multiple classes with each class being entitled to a different 
share of the principal and/or interest payments received from the 
pool of underlying assets.
---------------------------------------------------------------------------

    The Fund may invest in non-exchange-traded investment company 
securities (i.e., mutual funds).
    The Fund will not invest in securities or other financial 
instruments that have not been described in this proposed rule change.
Other Restrictions
    The Fund's investments, including derivatives, will be consistent 
with the Fund's investment objective and will not be used to enhance 
leverage (although certain derivatives and other investments may result 
in leverage). That is, the Fund's investments will not be used to seek 
performance that is the multiple or inverse multiple (e.g., 2X or -3X) 
of the Fund's primary broad-based securities benchmark index (as 
defined in Form N-1A).\12\
---------------------------------------------------------------------------

    \12\ The Fund's broad-based securities benchmark index will be 
identified in a future amendment to the Registration Statement 
following the Fund's first full calendar year of performance.
---------------------------------------------------------------------------

Use of Derivatives by the Fund
    The Fund may invest in the types of derivatives described in the 
``Other Investments'' section above for the purposes described in that 
section. Investments in derivative instruments will be made in 
accordance with the Fund's investment objective and policies.
    To limit the potential risk associated with such transactions, the 
Fund will enter into offsetting transactions or segregate or 
``earmark'' assets determined to be liquid by the Adviser in accordance 
with procedures established by the Trust's Board of Trustees (the 
``Board''). 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.
Impact on Arbitrage Mechanism
    The Adviser believes there will be minimal, if any, impact to the 
arbitrage mechanism as a result of the Fund's use of derivatives. The 
Adviser understands that 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 net asset value (``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 will be any significant impacts 
to the settlement or operational aspects of the Fund's arbitrage 
mechanism due to the use of derivatives.
Creation and Redemption of Shares
    The Fund will issue and redeem Shares on a continuous basis at NAV 
\13\ only in large blocks of Shares (``Creation Units'') in 
transactions with authorized participants, generally including broker-
dealers and large institutional investors (``Authorized 
Participants''). Creation Units generally will consist of 50,000 
Shares. The size of a Creation Unit is subject to change. As described 
in the Registration Statement, the Fund will issue and redeem Creation 
Units in exchange for an in-kind portfolio of instruments and/or cash 
in lieu of such instruments (the ``Creation Basket'').\14\ In addition, 
if there is a difference between the NAV attributable to a Creation 
Unit and the market value of the Creation Basket exchanged for the 
Creation Unit, the party conveying instruments (which may include cash-
in-lieu amounts) with the lower value will pay to the other an amount 
in cash equal to the difference (referred to as the ``Cash 
Component'').
---------------------------------------------------------------------------

    \13\ The NAV of the Fund's Shares generally will be calculated 
once daily Monday through Friday as of the close of regular trading 
on the New York Stock Exchange (``NYSE''), generally 4:00 p.m., 
Eastern Time (``E.T.''). NAV per Share will be calculated by 
dividing the Fund's net assets by the number of Fund Shares 
outstanding.
    \14\ It is expected that the Fund will typically issue and 
redeem Creation Units on a cash basis; however, at times, the Fund 
may issue and redeem Creation Units on an in-kind (or partially in-
kind) (or partially cash) basis.
---------------------------------------------------------------------------

    Creations and redemptions must be made by or through an Authorized 
Participant that has executed an agreement that has been agreed to by 
the Distributor and the Transfer Agent with

[[Page 44315]]

respect to creations and redemptions of Creation Units. All standard 
orders to create Creation Units must be received by the Transfer Agent 
no later than the closing time of the regular trading session on the 
NYSE (ordinarily 4:00 p.m., E.T.) (the ``Closing Time'') in each case 
on the date such order is placed in order for the creation of Creation 
Units to be effected based on the NAV of Shares as next determined on 
such date after receipt of the order in proper form. Shares may be 
redeemed only in Creation Units at their NAV next determined after 
receipt not later than the Closing Time of a redemption request in 
proper form by the Fund through the Transfer Agent and only on a 
business day. The Custodian, through the National Securities Clearing 
Corporation (``NSCC''), will make available on each business day, prior 
to the opening of business of the Exchange, the list of the names and 
quantities of the instruments comprising the Creation Basket, as well 
as the estimated Cash Component (if any), for that day. The published 
Creation Basket will apply until a new Creation Basket is announced on 
the following business day prior to commencement of trading in the 
Shares.
Application of Generic Listing Requirements
    The Exchange is submitting this proposed rule change because the 
portfolio for the Fund will not meet all of the ``generic'' listing 
requirements of Commentary .01 to NYSE Arca Rule 8.600-E applicable to 
the listing of Managed Fund Shares. The Fund's portfolio will meet all 
such requirements except for those set forth in Commentary 
.01(a)(1),\15\ (b)(1), and (b)(5), as described below.
---------------------------------------------------------------------------

    \15\ Commentary .01(a)(1) to NYSE Arca Rule 8.600-E 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; and (F) American Depositary Receipts 
(``ADRs'') in a portfolio may be exchange-traded or non- exchange-
traded. However, no more than 10% of the equity weight of a 
portfolio shall consist of non-exchange-traded ADRs.
---------------------------------------------------------------------------

    The Fund will not comply with the requirements set forth in 
Commentary (b)(1) and (b)(5) to NYSE Arca Rule 8.600-E with respect to 
the Fund's investments in Fixed Income Securities.
    The Fund will not comply with the requirement in Commentary 
.01(b)(1) to Rule 8.600-E that components that in the aggregate account 
for at least 75% of the fixed income weight of the portfolio each shall 
have a minimum original principal amount outstanding of $100 million or 
more.\16\ Instead, the Exchange proposes that, except for periods of 
high cash inflows or outflows,\17\ components that in the aggregate 
account for at least 30% of the fixed income weight of the portfolio 
each shall have a minimum original principal amount outstanding of $50 
million or more.
---------------------------------------------------------------------------

    \16\ Commentary .01(b)(1) to Rule 8.600-E provides that 
components that in the aggregate account for at least 75% of the 
fixed income weight of the portfolio each shall have a minimum 
original principal amount outstanding of $100 million or more.
    \17\ See note 7, supra.
---------------------------------------------------------------------------

    As noted above in ``Principal Investments'', under normal market 
conditions, the Fund's principal holdings will include Agency Mortgage-
Related Investments (as defined above), securities issued or guaranteed 
by the U.S. Government and U.S. Government Entities other than Agency 
Mortgage-Related Investments, and debentures related to securities 
issued or guaranteed by the U.S. Government and U.S. Government 
Entities. The Adviser represents that the Agency Mortgage-Related 
Investments market is extremely large and liquid; \18\ however, 
individual bond sizes in Agency Mortgage-Related Investments tend to be 
slightly smaller on average than standard corporate obligation deal 
issuances. For example, as of March 31, 2018 there were approximately 
$3.06 trillion in Fannie Mae outstanding; however, that amount is 
comprised of tens of thousands of individual pools with a range of 
individual pool specific issue sizes. While an individual tranche may 
be less than $100 million, it may have been issued as part of a deal in 
excess of $100 million. The Adviser represents that, except for periods 
of high cash inflows or outflows, at least 30% (based on dollar amount 
invested) of the fixed income weight of the securities in which the 
Fund invests would have a minimum original principal amount outstanding 
of $50 million or more. The Adviser represents that these criteria are 
appropriate, based on the size and liquidity of the market in which 
agency mortgage securities generally trade and the anticipated 
availability of Agency Mortgage-Related Investments that would satisfy 
the Fund's investment parameters.
---------------------------------------------------------------------------

    \18\ The approximate average daily trading volume in agency 
mortgage-backed securities (``MBS'') from 2003-2017 was $249 
billion. The average daily trading volume in agency MBS for June 
2018 was approximately $223.2 billion. As of March 31, 2018, 
approximately $6.99 trillion in agency MBS was outstanding. (Source: 
Securities Industry and Financial Markets Association (SIFMA)).
---------------------------------------------------------------------------

    As noted above, the Fund will not comply with the requirement in 
Commentary .01(b)(5) that investments in non-agency, non-government 
sponsored entity and privately issued mortgage-related and other asset-
backed securities (i.e., Non-Agency Mortgage-Related Investments) not 
account, in the aggregate, for more than 20% of the weight of the fixed 
income portion of the portfolio.\19\ Instead, Non-Agency Mortgage-
Related Investments will, in the aggregate, not exceed more than 20% of 
the total assets of the Fund.
---------------------------------------------------------------------------

    \19\ Commentary .01(b)(5) to NYSE Arca Rule 8.600-E provides 
that non-agency, non-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.
---------------------------------------------------------------------------

    This alternative requirement is appropriate because the Fund's 
investment in Non-Agency Mortgage-Related Investments is expected to 
provide the Fund with benefits associated with increased 
diversification, as Non-Agency Mortgage-Related Investments tend to be 
less correlated to interest rates than many other fixed income 
securities. The Adviser represents that the Fund's investment in Non-
Agency Mortgage-Related Investments will be subject to the Fund's 
liquidity procedures as adopted by the Board, and the Adviser does not 
expect that investments in Non-Agency Mortgage-Related Investments of 
up to 20% of the total assets of the Fund will have any material impact 
on the liquidity of the Fund's investments. The Exchange

[[Page 44316]]

notes that the Commission has previously approved the listing of 
actively managed ETFs that can invest 20% of their total assets in non-
U.S. Government, non-agency, non-GSE and other privately issued ABS and 
MBS.\20\ Thus, it is appropriate to allow an exception to the Fund's 
investments in Non-Agency Mortgage-Related Investments set forth in 
Commentary .01(b)(5) of the generic listing standards.
---------------------------------------------------------------------------

    \20\ See, 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, non-agency 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) (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 MBS and other ABS, without 
any limit on the type of such MBS and ABS); 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).
---------------------------------------------------------------------------

    As noted above, the Fund may invest in equity securities that are 
non-exchange-traded open-end investment company securities (i.e., 
mutual funds). The Exchange believes that it is appropriate and in the 
public interest to approve listing and trading of Shares of the Fund on 
the Exchange notwithstanding that the Fund would not meet the 
requirements of Commentary .01(a)(1)(A) through (E) to Rule 8.600-E 
with respect to the Fund's investments in non-exchange-traded open-end 
investment company securities.\21\ Investments in non-exchange-traded 
open-end investment company securities will not be principal 
investments of the Fund.\22\ 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.
---------------------------------------------------------------------------

    \21\ 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).
    \22\ 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.
---------------------------------------------------------------------------

    With respect to investments by the Fund in non-exchange-traded 
investment company securities, because such securities have a net asset 
value based on the value of securities and financial assets the 
investment company holds, the Exchange believes it is both unnecessary 
and inappropriate to apply to such investment company securities the 
criteria in Commentary .01(a)(1).
    The Exchange notes that Commentary .01(A) 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).\23\ 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.
---------------------------------------------------------------------------

    \23\ 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 
listing and trading of an issue of Managed Fund Shares that may invest 
in equity securities that are non-exchange-traded 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.\24\ 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.
---------------------------------------------------------------------------

    \24\ 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), (b)(1), 
and (b)(5) to Rule 8.600-E, as described above, the Fund's portfolio 
will meet all other requirements of Rule 8.600-E.
Availability of Information
    The Fund's website (www.ftportfolios.com) will include the 
prospectus for the Fund that may be downloaded. The Fund's website will 
include additional quantitative information updated on a daily basis 
including, for the Fund, (1) daily trading volume, the prior business 
day's reported closing price, NAV and midpoint of the bid/ask spread at 
the time of calculation of such NAV (the ``Bid/Ask Price''),\25\ and a 
calculation of

[[Page 44317]]

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 will disclose 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.\26\
---------------------------------------------------------------------------

    \25\ 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.
    \26\ 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 will disclose 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, will be 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 
Form N-CSR, 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 Forms N-CSR and N-PX may be viewed on-screen or downloaded from 
the Commission's website at www.sec.gov.
    Intra-day and closing price information regarding futures and 
exchange-traded options will be available from the exchange on which 
such instruments are traded. Intra-day and closing price information 
regarding fixed income securities will be available from major market 
data vendors. Price information relating to OTC options and swaps 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. For exchange-listed securities, intraday price quotations will 
generally be available from broker-dealers and trading platforms (as 
applicable). Intraday and other price information for the fixed income 
securities in which the Fund will invest will be available through 
subscription services, such as Bloomberg, Markit and Thomson Reuters, 
which can be accessed by Authorized Participants and other market 
participants. Additionally, the Trade Reporting and Compliance Engine 
(``TRACE'') of the Financial Industry Regulatory Authority (``FINRA'') 
will be a source of price information for certain Fixed Income 
Securities, including Agency Mortgage-Related Investments and Non-
Agency Mortgage-Related Investments, to the extent transactions in such 
securities are reported to TRACE.\27\ Non-exchange-traded open-end 
investment company securities are typically priced once each business 
day and their prices will be available through the applicable fund's 
website or from major market data vendors. Price information regarding 
U.S. government securities, GSEs, debentures, cash equivalents and 
other short-term instruments generally may be obtained from brokers and 
dealers who make markets in such securities or through nationally 
recognized pricing services through subscription agreements.
---------------------------------------------------------------------------

    \27\ Broker-dealers that are FINRA member firms have an 
obligation to report transactions in specified debt securities to 
TRACE to the extent required under applicable FINRA rules. 
Generally, such debt securities will have at issuance a maturity 
that exceeds one calendar year. For fixed income securities that are 
not reported to TRACE, (i) intraday price quotations will generally 
be available from broker-dealers and trading platforms (as 
applicable) and (ii) price information will be available from feeds 
from market data vendors, published or other public sources, or 
online information services, as described above.
---------------------------------------------------------------------------

    Information regarding market price and trading volume of the Shares 
and ETFs 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 and ETFs 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'') are 
available via the Options Price Reporting Authority (``OPRA''). In 
addition, the Portfolio Indicative Value (``PIV''), 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.
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.\28\ 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. Trading in the Fund's Shares also 
will be subject to Rule 8.600-E(d)(2)(D) (``Trading Halts'').
---------------------------------------------------------------------------

    \28\ See NYSE Arca Rule 7.12-E.
---------------------------------------------------------------------------

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 a.m. to 8 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.
    With the exception of the requirements of Commentary .01(a)(1), 
(b)(5), and (e) to Rule 8.600-E as described above in ``Application of 
Generic Listing Requirements,'' the Shares of the Fund will conform to 
the initial and continued listing criteria under NYSE Arca Rule 8.600-
E. Consistent with NYSE Arca Rule 8.600-E(d)(2)(B)(ii), the Adviser 
will implement and maintain, or be subject to, procedures designed to 
prevent the use and dissemination of material non-public information 
regarding the actual components of the Fund's portfolio. The Exchange 
represents that, for initial and continued listing, the Fund will be in 
compliance with Rule 10A-3 \29\ under the Act, as provided by NYSE Arca 
Rule 5.3-E. The Exchange will obtain a representation from the issuer 
of the

[[Page 44318]]

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. The Fund's investments will be 
consistent with its investment goal and will not be used to provide 
multiple returns of a benchmark or to produce leveraged returns.
---------------------------------------------------------------------------

    \29\ 17 CFR 240.10A-3.
---------------------------------------------------------------------------

Surveillance
    The Exchange represents that trading in the Shares will be subject 
to the existing trading surveillances, administered by FINRA on behalf 
of the Exchange, or by regulatory staff of the Exchange, which are 
designed to detect violations of Exchange rules and applicable federal 
securities laws. The Exchange represents that these procedures are 
adequate to properly monitor Exchange trading of the Shares in all 
trading sessions and to deter and detect violations of Exchange rules 
and federal securities laws applicable to trading on the Exchange.\30\
---------------------------------------------------------------------------

    \30\ FINRA conducts cross-market surveillances on behalf of the 
Exchange pursuant to a regulatory services agreement. The Exchange 
is responsible for FINRA's performance under this regulatory 
services agreement.
---------------------------------------------------------------------------

    The surveillances referred to above generally focus on detecting 
securities trading outside their normal patterns, which could be 
indicative of manipulative or other violative activity. When such 
situations are detected, surveillance analysis follows and 
investigations are opened, where appropriate, to review the behavior of 
all relevant parties for all relevant trading violations.
    The Exchange or FINRA, on behalf of the Exchange, or both, will 
communicate as needed regarding trading in the Shares, certain 
exchange-traded options and certain exchange-traded futures, and ETFs 
with other markets and other entities that are members of the 
Intermarket Surveillance Group (``ISG''), and the Exchange or FINRA, on 
behalf of the Exchange, or both, may obtain trading information 
regarding trading in such securities and financial instruments from 
such markets and other entities.\31\ In addition, the Exchange may 
obtain information regarding trading in such securities and financial 
instruments from markets and other entities that are members of ISG or 
with which the Exchange has in place a CSSA. In addition, FINRA, on 
behalf of the Exchange, is able to access, as needed, trade information 
for certain fixed income securities held by the Fund reported to 
FINRA's TRACE.
---------------------------------------------------------------------------

    \31\ For a list of the current members of ISG, see 
www.isgportal.org. The Exchange notes that not all components of the 
Disclosed Portfolio may trade on markets that are members of ISG or 
with which the Exchange has in place a comprehensive surveillance 
sharing agreement (``CSSA'').
---------------------------------------------------------------------------

    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 asset, (b) 
limitations on portfolio holdings or reference assets, or (c) the 
applicability of Exchange listing rules specified in this rule filing 
shall constitute continued listing requirements for listing the Shares 
of the Fund on the Exchange.
    The issuer must notify 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
    The Exchange will inform its Equity Trading Permit Holders in an 
Information Bulletin (``Bulletin'') of the special characteristics and 
risks associated with trading the Shares. Specifically, the Bulletin 
will discuss the following: (1) The procedures for purchases and 
redemptions of Shares in Creation Unit aggregations (and that Shares 
are not individually redeemable); (2) NYSE Arca Rule 9.2-E(a), which 
imposes a duty of due diligence on its Equity Trading Permit Holders to 
learn the essential facts relating to every customer prior to trading 
the Shares; (3) the risks involved in trading the Shares during the 
Early and Late Trading Sessions when an updated PIV will not be 
calculated or publicly disseminated; (4) how information regarding the 
PIV and the Disclosed Portfolio is disseminated; (5) the requirement 
that Equity Trading Permit Holders deliver a prospectus to investors 
purchasing newly issued Shares prior to or concurrently with the 
confirmation of a transaction; and (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 will be 
calculated after 4:00 p.m., E.T. each trading day.
2. Statutory Basis
    The basis under the Act for this proposed rule change is the 
requirement under Section 6(b)(5) \32\ 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.
---------------------------------------------------------------------------

    \32\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is designed to 
prevent fraudulent and manipulative acts and practices in that the 
Shares are 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 applicable federal securities 
laws. The Exchange or FINRA, on behalf of the Exchange, or both, will 
communicate as needed regarding trading in the Shares, certain 
exchange-traded options and certain exchange-traded futures, and ETFs 
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 such securities and financial 
instruments from such markets and other entities. The Exchange may 
obtain information regarding trading in such securities and financial 
instruments from markets and other entities that are members of ISG or 
with which the Exchange has in place a CSSA. In addition, FINRA, on 
behalf of the Exchange, is able to access, as needed, trade information 
for certain fixed income securities held by the Fund reported to TRACE. 
The Adviser is not registered as a broker-dealer. The Adviser is 
affiliated with First Trust Portfolios L.P., a broker-dealer and has 
implemented and will maintain a fire wall with respect to its broker-
dealer affiliate regarding access to information concerning the 
composition and/or changes to the portfolio.
    The Exchange notes that, other than Commentary .01(a)(1), (b)(5), 
and (e) to Rule 8.600-E, as described above, the Fund's portfolio will 
meet all other requirements of Rule 8.600-E.
    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 44319]]

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 will be publicly available regarding the Fund and the 
Shares, thereby promoting market transparency. Quotation and last sale 
information for the Shares and ETFs will be available via the CTA high-
speed line, and from the national securities exchanges on which they 
are listed. The Exchange will inform its Equity Trading Permit Holders 
in an Information Bulletin of the special characteristics and risks 
associated with trading the Shares. 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. 
Trading in the Shares will be subject to NYSE Arca Rule 8.600-
E(d)(2)(D), which sets forth circumstances under which Shares of the 
Fund may be halted. In addition, as noted above, investors will have 
ready access to information regarding the Fund's holdings, NAV, the 
PIV, the Disclosed Portfolio, and quotation and last sale information 
for the Shares.
    The proposed rule change is designed to perfect the mechanism of a 
free and open market and, in general, to protect investors and the 
public interest in that it will facilitate the listing and trading of 
an additional type of actively-managed exchange-traded product that 
principally will hold fixed income securities and that will enhance 
competition among market participants, to the benefit of investors and 
the marketplace. As noted above, the Exchange has in place surveillance 
procedures relating to trading in the Shares and may obtain information 
via ISG from other exchanges that are members of ISG or with which the 
Exchange has entered into a CSSA. In addition, as noted above, 
investors will have ready access to information regarding the Fund's 
holdings, NAV, Disclosed Portfolio, and quotation and last sale 
information for the Shares.
    Deviations from the generic requirements, as described above, 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 a 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.
    As noted above, the Fund will not comply with the requirement in 
Commentary .01(b)(1) to Rule 8.600-E that components that in the 
aggregate account for at least 75% of the fixed income weight of the 
portfolio each shall have a minimum original principal amount 
outstanding of $100 million or more. Instead, the Exchange proposes 
that components that in the aggregate account for at least 30% of the 
fixed income weight of the portfolio each shall have a minimum original 
principal amount outstanding of $50 million or more. The Adviser 
represents that the Agency Mortgage-Related Investments market is 
extremely large and liquid; \33\ however, individual bond sizes in 
Agency Mortgage-Related Investments tend to be slightly smaller on 
average than standard corporate obligation deal issuances. The Adviser 
represents that, except for periods of high cash inflows or outflows, 
at least 30% (based on dollar amount invested) of the fixed income 
weight of the securities in which the Fund invests would have a minimum 
original principal amount outstanding of $50 million or more. The 
Adviser represents that these criteria are appropriate, based on the 
size and liquidity of the market in which agency mortgage securities 
generally trade and the anticipated availability of Agency Mortgage-
Related Investments that would satisfy the Fund's investment 
parameters.
---------------------------------------------------------------------------

    \33\ See note 18, supra.
---------------------------------------------------------------------------

    As noted above, the Fund will not comply with the requirement in 
Commentary .01(b)(5) that investments in non-agency, non-government 
sponsored entity and privately issued mortgage-related and other asset-
backed securities (i.e., Non-Agency Mortgage-Related Investments and 
ABS) not account, in the aggregate, for more than 20% of the weight of 
the fixed income portion of the portfolio. Instead, Non-Agency 
Mortgage-Related Investments will, in the aggregate, not exceed more 
than 20% of the total assets of the Fund.
    This alternative requirement is appropriate because the Fund's 
investment in Non-Agency Mortgage-Related Investments is expected to 
provide the Fund with benefits associated with increased 
diversification, as Non-Agency Mortgage-Related Investments tend to be 
less correlated to interest rates than many other fixed income 
securities. The Adviser represents that the Fund's investment in Non-
Agency Mortgage-Related Investments will be subject to the Fund's 
liquidity procedures as adopted by the Board, and the Adviser does not 
expect that investments in Non-Agency Mortgage-Related Investments of 
up to 20% of the total assets of the Fund will have any material impact 
on the liquidity of the Fund's investments. The Exchange notes that the 
Commission has previously approved the listing of actively managed ETFs 
that can invest 20% of their total assets in non-U.S. Government, non-
agency, non-GSE and other privately issued ABS and MBS.\34\ Thus, it is 
appropriate to expand the limit on the Fund's investments in Non-Agency 
Mortgage-Related Investments set forth in Commentary .01(b)(5) of the 
generic listing standards.
---------------------------------------------------------------------------

    \34\ See note 20, supra.
---------------------------------------------------------------------------

    As noted above, the Fund's portfolio will 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. The Exchange believes that it is appropriate and in 
the public interest to approve listing and trading of Shares of the 
Fund on the Exchange notwithstanding that the Fund would not meet the 
requirements of Commentary .01(a)(1)(A) through (E) to Rule 8.600-E 
with respect to the Fund's investments in non-exchange-traded open-end 
investment company securities. Investments in non-exchange-traded open-
end investment company 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.
    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 
shares of an additional type of actively-managed exchange-traded 
product 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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purpose of the Act. The Exchange notes that the 
proposed rule change will facilitate the listing and trading of an 
additional type of actively-managed exchange-traded product that 
principally will hold fixed income

[[Page 44320]]

securities and that will enhance competition among market participants, 
to the benefit of investors and the marketplace.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were solicited or received with respect to the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or 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

    <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#d3a1a6bfb6feb0bcbebeb6bda7a093a0b6b0fdb4bca5"><span class="__cf_email__" data-cfemail="5725223b327a34383a3a323923241724323479303821">[email protected]</span></a>. Please include 
File Number SR-NYSEArca-2018-60 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-2018-60. 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-2018-60, and should be 
submitted on or before October 1, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\35\
---------------------------------------------------------------------------

    \35\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-18781 Filed 8-29-18; 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>