Federal Register / Vol. 80, No. 59 / Friday, March 27, 2015 / Notices 16477 

21For purposes only of waiving the operative 

delay for this proposal, the Commission has 

considered the proposed rule’s impact on 

efficiency, competition, and capital formation. See 

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

22 17 CFR 200.30–3(a)(12). 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4A Managed Fund Share is a security that 

represents an interest in an investment company 

registered under the Investment Company Act of 

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

an open-end investment company or similar entity 

that invests in a portfolio of securities selected by 

its investment adviser consistent with its 

investment objectives and policies. In contrast, an 

open-end investment company that issues 

Investment Company Units, listed and traded on 

the Exchange under NYSE Arca Equities Rule 

5.2(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 has previously approved 

listing and trading on the Exchange of actively 

managed funds under Rule 8.600. See, e.g., 

Securities Exchange Act Release Nos. 57801 (May 

8, 2008), 73 FR 27878 (May 14, 2008) (SR– 

NYSEArca–2008–31) (order approving Exchange 

listing and trading of twelve actively-managed 

funds of the WisdomTree Trust); 66321 (February 

3, 2012), 77 FR 6850 (February 9, 2012) (SR– 

NYSEArca–2011–95) (order approving listing and 

trading of PIMCO Total Return Exchange Traded 

Fund); 66670 (March 28, 2012), 77 FR 20087 (April 

3, 2012) (SR–NYSEArca–2012–09) (order approving 

Continued 

Exchange notes that this functionality is 

already available on other exchanges. 

The Commission believes that waiving 

the 30-day operative delay is consistent 

with the protection of investors and the 

public interest because it will allow the 

Exchange’s Clearing Members to 

monitor and manage potential risks in a 

timely manner. Therefore, the 

Commission hereby waives the 30-day 

operative delay and designates the 

proposed rule change to be operative 

upon filing with the Commission.21

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission may summarily 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is: (1) Necessary or appropriate in 

the public interest; (2) for the protection 

of investors; or (3) otherwise in 

furtherance of the purposes of the Act. 

If the Commission takes such action, the 

Commission shall institute proceedings 

to determine whether the proposed rule 

should be approved or disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposal is 

consistent with the Act. Comments may 

be submitted by any of the following 

methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

BATS–2015–22 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE., 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–BATS–2015–22. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

Internet Web site (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 Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE., 

Washington, DC 20549, on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of such 

filing will also be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change; 

the Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR–BATS– 

2015–22 and should be submitted on or 

before April 17, 2015. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.22

Brent J. Fields, 

Secretary. 

[FR Doc. 2015–06994 Filed 3–26–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74562; File No. SR– 

NYSEArca–2015–15] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing of Proposed 

Rule Change Relating to Listing and 

Trading of Shares of Principal EDGE 

Active Income ETF Under NYSE Arca 

Equities Rule 8.600 

March 23, 2015. 

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 March 

12, 2015, 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 

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 list and 

trade shares of the following under 

NYSE Arca Equities Rule 8.600 

(‘‘Managed Fund Shares’’): Principal 

EDGE Active Income ETF. The text of 

the proposed rule change is available on 

the Exchange’s Web site 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 the following 

under NYSE Arca Equities Rule 8.600, 

which governs the listing and trading of 

Managed Fund Shares 4 on the 

Exchange: 5 Principal EDGE Active 

Income ETF (the ‘‘Fund’’). 

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16478 Federal Register / Vol. 80, No. 59 / Friday, March 27, 2015 / Notices 

listing and trading of PIMCO Global Advantage 

Inflation-Linked Bond Strategy Fund). 

6The Trust is registered under the 1940 Act. On 

February 6, 2015, the Trust filed with the 

Commission a registration statement on Form N–1A 

under the Securities Act of 1933 (15 U.S.C. 77a) 

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

Fund (File Nos. 333–201935 and 811–23029) (the 

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

operation of the Trust and the Fund herein is based, 

in part, on the Registration Statement. In addition, 

the Commission has issued an order granting 

certain exemptive relief to the Adviser (as defined 

herein) under the 1940 Act. See Investment 

Company Act Release No. (30742) [sic] (File No. 

812–14136) (‘‘Exemptive Order’’). The Fund will be 

offered in reliance upon the Exemptive Order 

issued to the Adviser. 

7An investment adviser to an open-end fund is 

required to be registered under the Investment 

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

result, the Adviser and Sub-Advisers and their 

related personnel are subject to the provisions of 

Rule 204A–1 under the Advisers Act relating to 

codes of ethics. This Rule requires investment 

advisers to adopt a code of ethics that reflects the 

fiduciary nature of the relationship to clients as 

well as compliance with other applicable securities 

laws. Accordingly, procedures designed to prevent 

the communication and misuse of non-public 

information by an investment adviser must be 

consistent with Rule 204A–1 under the Advisers 

Act. In addition, Rule 206(4)–7 under the Advisers 

Act makes it unlawful for an investment adviser to 

provide investment advice to clients unless such 

investment adviser has (i) adopted and 

implemented written policies and procedures 

reasonably designed to prevent violation, by the 

investment adviser and its supervised persons, of 

the Advisers Act and the Commission rules adopted 

thereunder; (ii) implemented, at a minimum, an 

annual review regarding the adequacy of the 

policies and procedures established pursuant to 

subparagraph (i) above and the effectiveness of their 

implementation; and (iii) designated an individual 

(who is a supervised person) responsible for 

administering the policies and procedures adopted 

under subparagraph (i) above. 

8For purposes of this filing, ETFs consist of 

Investment Company Units (as described in NYSE 

Arca Equities Rule 5.2(j)(3)), Portfolio Depositary 

Receipts (as described in NYSE Arca Equities Rule 

8.100; Managed Fund Shares (as described in NYSE 

Arca Equities Rule 8.600); and closed-end funds. 

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. 

9With respect to the Fund, the term ‘‘under 

normal market circumstances’’ includes, but is not 

limited to, the absence of extreme volatility or 

trading halts in the equity and fixed income 

markets or the financial markets generally; events 

or circumstances causing a disruption in market 

liquidity or orderly markets; operational issues 

causing dissemination of inaccurate market 

information; or force majeure type events such as 

systems failure, natural or man-made disaster, act 

of God, armed conflict, act of terrorism, riot or labor 

disruption or any similar intervening circumstance. 

10The Fund will limit its investments in noninvestment grade fixed income securities to 75% or 

less of the Fund’s net assets. 

11Agency securities are debt instruments issued 

by U.S. government-sponsored entities and other 

federally related entities such as the Federal 

National Mortgage Association (FNMA), Federal 

Home Loan Bank and the Federal Home Loan Bank 

(FHLB). 

12Asset-backed securities are debt instruments 

secured by a loan, lease or receivables against 

assets. 

13Residential mortgage-backed securities are debt 

instruments secured by a residential mortgage or a 

collection of mortgages. 

14Commercial mortgage-backed securities are 

debt instruments secured by a loan on a commercial 

property. 

15 Inverse floaters are bonds or other types of debt 

instruments whose coupon rate has an inverse 

relationship to a benchmark rate. 

16Covered securities are secured debt 

instruments generally issued by credit institutions 

and backed by a pool of assets, usually mortgages 

or public sector loans. 

17Sinking fund securities are bonds or other types 

of debt instruments that are subject to periodic 

payments by the issuer to a trustee. The trustee uses 

the payments to retire part of the bond issuance by 

purchasing the bonds in the open market. 

18Equipment trust certificates are debt 

instruments secured by equipment or other physical 

assets, with the title of the equipment or other 

physical assets held in trust for the holders of the 

debt instruments. 

19Sovereign bonds are debt instruments issued by 

national governments. 

20Convertible bonds are debt instruments that 

can be converted into common stock of the issuing 

company. Convertible bonds may trade over-thecounter (‘‘OTC’’) or on an exchange. 

21Pay-in-kind securities are debt instruments that 

pay investors in the form of additional securities 

rather than cash. 

The Fund is a series of the Principal 

Exchange-Traded Funds (‘‘Trust’’), a 

statutory trust organized under the laws 

of the State of Delaware and registered 

with the Commission as an open-end 

management investment company.6 The 

investment manager for the Fund will 

be Principal Management Corporation 

(the ‘‘Adviser’’ or ‘‘PMC’’). Principal 

Global Investors, LLC and Edge Asset 

Management, LLC will each serve as a 

sub-adviser and portfolio manager. 

Principal Global Investors, LLC and 

Edge Asset Management, LLC are each 

referred to as a ‘‘Sub-Adviser’’ and 

collectively as the ‘‘Sub-Advisers’’. 

Commentary .06 to Rule 8.600 provides 

that, if the investment adviser to the 

investment company issuing Managed 

Fund Shares is affiliated with a brokerdealer, such investment adviser shall 

erect a ‘‘fire wall’’ between the 

investment adviser and the brokerdealer with respect to access to 

information concerning the composition 

and/or changes to such investment 

company portfolio.7 In addition, 

Commentary .06 further requires that 

personnel who make decisions on the 

open-end fund’s portfolio composition 

must be subject to procedures designed 

to prevent the use and dissemination of 

material nonpublic information 

regarding the open-end fund’s portfolio. 

The Adviser and Sub-Advisers are not 

registered as broker-dealers but are 

affiliated with three broker-dealers and 

have implemented and will maintain a 

fire wall with respect to each such 

broker-dealer affiliate regarding access 

to information concerning the 

composition and/or changes to the 

portfolios. In the event (a) the Adviser 

or Sub-Advisers become registered 

broker-dealers or newly affiliated with 

one or more broker-dealers, or (b) any 

new adviser or sub-adviser is a 

registered broker-dealer or becomes 

affiliated with a broker-dealer, it will 

implement 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 portfolios, and will be 

subject to procedures designed to 

prevent the use and dissemination of 

material non-public information 

regarding such portfolios. 

Principal EDGE Active Income ETF 

Principal Investments 

According to the Registration 

Statement, the Fund will seek to 

provide current income. 

The Fund will invest in a manner 

designed to provide shareholders with 

regular cash flow from their investment 

in the Fund. With regard to each 

investment category, the Fund will carry 

out its investment strategy by investing 

in the securities listed in each 

investment category below and/or 

through the purchase of shares issued 

by U.S. exchange-traded funds 

(‘‘ETFs’’) 8 or other investment 

companies, including shares in unit 

investment trusts and open-end 

investment companies, that invest a 

majority of their assets in the securities 

listed in the Principal Investment 

categories below. The Fund under 

normal market circumstances 9 will 

invest a majority of its net assets in the 

following financial instruments listed in 

(1) and (2), below: 

1. Investment Grade and NonInvestment Grade U.S. and Non-U.S. 

Fixed Income Securities 

Under normal market circumstances, 

at least 20% but no more than 90% of 

the Fund’s net assets will be invested in 

investment grade and non-investment 

grade fixed income securities 10 which 

will consist of the following: U.S. 

Treasuries; agency securities; 11 assetbacked securities; 12 residential 

mortgage-backed securities; 13

commercial mortgage-backed 

securities; 14 zero-coupon securities; 

variable and floating rate instruments 

including inverse floaters; 15 covered 

securities; 16 sinking fund securities; 17

equipment trust certificates; 18 sovereign 

bonds; 19 convertible bonds; 20 pay-inkind securities; 21 step-coupon 

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Federal Register / Vol. 80, No. 59 / Friday, March 27, 2015 / Notices 16479 

22Step coupon securities are debt instruments 

that pay interest at predetermined rates which 

increase or decrease over time. 

23Stripped Securities are securities composed of 

the separate income of principal components of a 

debt security. For example, stripped mortgage 

securities are created when the interest and 

principal components of a mortgage security are 

separated and sold as individual securities. 

24Under normal market circumstances, the Fund 

will generally seek to invest in corporate bond 

issuances that have at least $100,000,000 par 

amount outstanding in developed countries and at 

least $200,000,000 par amount outstanding in 

emerging market countries. 

25 In determining whether a security is of 

‘‘comparable quality’’, the Sub-Advisers will 

consider, for example, whether the issuer of the 

security has issued other rated securities; whether 

the obligations under the security are guaranteed by 

another entity and the rating of such guarantor (if 

any); whether and (if applicable) how the security 

is collateralized; other forms of credit enhancement 

(if any); the security’s maturity date; liquidity 

features (if any); relevant cash flow(s); valuation 

features; other structural analysis; macroeconomic 

analysis and sector or industry analysis. 

26ADRs are receipts issued by an American bank 

or trust company evidencing ownership of 

underlying securities issued by a foreign issuer, and 

are designed for use in U.S. Securities markets. 

EDRs are receipts issued by European banks 

evidencing ownership of underlying securities 

traded outside of the bank’s home country. GDRs 

are receipts issued by foreign banks evidencing 

ownership of underlying securities traded outside 

of the bank’s home country. Depositary Receipts 

may be issued by sponsored or unsponsored 

programs. In sponsored programs, an issuer has 

made arrangements to have its securities traded in 

the form of Depositary Receipts. In unsponsored 

programs, the issuer may not be directly involved 

in the creation of the program. Although regulatory 

requirements with respect to sponsored and 

unsponsored programs are generally similar, in 

some cases it may be easier to obtain financial 

information from an issuer that has participated in 

the creation of a sponsored program. Accordingly, 

there may be less information available regarding 

issuers of securities of underlying unsponsored 

programs, and there may not be a correlation 

between the availability of such information and 

the market value of the Depositary Receipts. The 

Fund may invest in sponsored or unsponsored 

ADRs; however, not more than 10% of the net 

assets of the Fund will be invested in nonexchange-listed ADRs. Not more than 10% of the 

net assets of the Fund in the aggregate invested in 

exchange-traded equity securities shall consist of 

equity securities whose principal market is not a 

member of the Intermarket Surveillance Group 

(‘‘ISG’’) or party to a comprehensive surveillance 

sharing agreement (‘‘CSSA’’) with the Exchange. 

See note 47, infra. 

27The Fund may make short sales of securities: 

(i) To offset potential declines in long positions in 

similar securities, (ii) to increase the flexibility of 

the Fund; (iii) for investment return; and (iv) as part 

of a risk arbitrage strategy. 

28The Fund has claimed an exclusion from the 

definition of a ‘‘commodity pool operator’’ under 

the Commodity Exchange Act (‘‘CEA’’) (7 U.S.C. 1) 

and is not subject to registration or regulation as a 

commodity pool operator under the CEA. The CFTC 

recently amended Rule 4.5 (‘‘Exclusion for certain 

otherwise regulated persons from the definition of 

the term ‘‘commodity pool operator’’). Rule 4.5 

provides that a mutual fund does not meet the 

definition of ‘‘commodity pool operator’’ if its use 

of futures contracts, options on futures contracts 

and swaps is sufficiently limited that the fund can 

fall within one of two exclusions set out in Rule 4.5. 

The Fund intends to limit its use of futures 

contracts, options on futures contracts and swaps to 

the degree necessary to fall within one of the two 

exclusions. If the Fund is unable to do so, it may 

incur expenses that are necessary to comply with 

the CEA and rules the CFTC has adopted under it. 

securities; 22 stripped securities; 23

inflation-indexed bonds; inflation 

protected debt securities; bank loans; 

municipal bonds; and corporate bonds 

issued by U.S., supranational and nonU.S. issuers (including issuers located 

in emerging markets) and denominated 

in U.S. dollars.24 ‘‘Investment grade’’ 

securities are rated BBB- or higher by 

S&P or Baa3 or higher by Moody’s 

Investors Service, Inc. (‘‘Moody’s’’) or, if 

unrated, of comparable quality in the 

opinion of the Sub-Advisers.25 ‘‘Noninvestment grade’’ securities are rated 

Ba1 or lower by Moody’s and BB+ or 

lower by Standard & Poor’s Rating 

Services (‘‘S&P’’). If the security has 

been rated by only one of those 

agencies, that rating will determine 

whether the security is below 

investment grade. If the security has not 

been rated by either of those agencies, 

the Sub-Advisers will determine 

whether the security is of a quality 

comparable to those rated below 

investment grade. 

2. Equity Securities Including U.S. and 

Non-U.S. Issues 

Under normal market circumstances, 

at least 20% but no more than 90% of 

the Fund’s net assets will be invested in 

a diversified portfolio of equity 

securities issued by companies located 

in the U.S. and/or foreign countries, 

including emerging markets, which 

trade on a U.S. or foreign exchange. The 

Fund may carry out its investment in 

foreign securities by purchasing 

American Depositary Receipts 

(‘‘ADRs’’), European Depositary 

Receipts (‘‘EDRs’’) and Global 

Depositary Receipts (‘‘GDRs’’, together 

with EDRs and ADRs, ‘‘Depositary 

Receipts’’).26 The equity securities will 

be common stocks and preferred stocks 

as well as master limited partnerships 

(‘‘MLPs’’) and real estate investment 

trusts (‘‘REITs’’). 

The Fund may engage in short sales.27

Non-Principal Investments 

While the Fund, under normal market 

circumstances, will invest a majority of 

its assets in the securities and financial 

instruments described above, the Fund 

may invest in other securities and 

financial instruments, as described 

below. With regard to each nonprincipal investment category, the Fund 

may carry out its investment strategy by 

investing in the securities listed in each 

investment category below and/or 

through the purchase of shares issued 

by ETFs or other investment companies 

that invest a majority of their assets in 

the securities listed in the investment 

categories below. 

The Fund may invest in the following 

money market instruments: Commercial 

paper issued by U.S. and foreign 

corporations; bank obligations; 

certificates of deposit; time deposits and 

bankers’ acceptances of U.S. commercial 

banks and overseas branches of U.S. 

commercial banks and foreign banks; 

and short-term corporate debt, all of 

which have, at the time of purchase, 397 

days or less remaining to maturity 

issued by U.S. and foreign issuers. 

A portion of the Fund’s assets may be 

invested in cross currency positions of 

the currencies of developed and 

emerging markets through spot foreign 

exchange currency contracts, forward 

foreign exchange currency contracts, 

and foreign exchange currency options 

that trade on U.S. exchanges. 

The Fund may invest in the following 

derivative instruments: Futures 

contracts (consisting of futures contracts 

based on equity or fixed income 

securities and/or equity or fixed income 

indices, commodities, interest rates and 

currencies); swap agreements on any of 

the following asset classes: Equity, fixed 

income, currency and interest rates 

(such swaps may be based on the price 

return or total return of the referenced 

asset); credit default swaps (consisting 

of credit default swaps in which the 

referenced asset is a single fixed income 

security or a group of fixed income 

securities); options (consisting of long 

and short positions in call options and 

put options on indices based on 

equities, fixed income securities, 

interest rates, currencies or 

commodities, individual securities or 

currencies, swaptions and options on 

futures contracts); and forward contracts 

(consisting of forward contracts based 

on equity or fixed income securities 

and/or equity or fixed income indices, 

currencies, interest rates, swap forwards 

and non-deliverable forwards). 

Futures contracts and options on 

futures contracts in which the Fund 

may invest will be traded on U.S. 

exchanges regulated by the Commodity 

Futures Trading Commission 

(‘‘CFTC’’),28 all of which will be 

members of the ISG or exchanges with 

which the Exchange has in place a 

CSSA. All other options contracts will 

be listed on a U.S. national securities 

exchange or a non-U.S. securities 

exchange that is a member of ISG or a 

party to a CSSA with the Exchange. 

The Fund may use repurchase 

agreements, reverse repurchase 

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16480 Federal Register / Vol. 80, No. 59 / Friday, March 27, 2015 / Notices 

29The Commission has stated that long-standing 

Commission guidelines have required open-end 

funds to hold no more than 15% of their net assets 

in illiquid securities and other illiquid assets. See 

Investment Company Act Release No. 28193 (March 

11, 2008), 73 FR 14618 (March 18, 2008), footnote 

34. See also, Investment Company Act Release No. 

5847 (October 21, 1969), 35 FR 19989 (December 

31, 1970) (Statement Regarding ‘‘Restricted 

Securities’’); Investment Company Act Release No. 

18612 (March 12, 1992), 57 FR 9828 (March 20, 

1992) (Revisions of Guidelines to Form N–1A). A 

fund’s portfolio security is illiquid if it cannot be 

disposed of in the ordinary course of business 

within seven days at approximately the value 

ascribed to it by the fund. See Investment Company 

Act Release No. 14983 (March 12, 1986), 51 FR 

9773 (March 21, 1986) (adopting amendments to 

Rule 2a–7 under the 1940 Act); Investment 

Company Act Release No. 17452 (April 23, 1990), 

55 FR 17933 (April 30, 1990) (adopting Rule 144A 

under the Securities Act). 

30The diversification standard is set forth in 

section 5(b)(1) of the 1940 Act. 

31 26 U.S.C. 851 et seq. 

32The Commission has defined concentration as 

investing more than 25% of an investment 

company’s total assets in an industry or group of 

industries, with certain exceptions such as with 

respect to investments in obligations issued or 

guaranteed by the U.S. Government or its agencies 

and instrumentalities, or tax-exempt obligations of 

state or municipal governments and their political 

subdivisions. See, e.g., Investment Company Act 

Release No. 9011 (October 30, 1975), 40 FR 54241 

(November 21, 1975). 

33According to PMC, when a bond defaults and 

the issuer enters into bankruptcy, a market often 

continues to exist for the bond (normally at a steep 

discount to its face value). Buyers typically value 

the defaulted bond based on expected restructuring 

outcomes or liquidation distributions. Market 

quotations provided by broker-dealers or pricing 

services reflect these market indicators. 

agreements, and mortgage dollar rolls 

for temporary or emergency purposes or 

to earn additional income on portfolio 

securities, such as Treasury bills or 

notes. In a reverse repurchase 

agreement, the Fund sells a portfolio 

security to another party, such as a bank 

or broker-dealer, in return for cash and 

agrees to repurchase the instrument at a 

particular price and time. While a 

reverse repurchase agreement is 

outstanding, the Fund will maintain 

cash or appropriate liquid assets to 

cover its obligation under the 

agreement. The Fund will enter into 

reverse repurchase agreements only 

with parties that the Sub-Advisers 

deems creditworthy. 

The Fund may invest in restricted 

securities (Rule 144A securities), which 

are subject to legal restrictions on their 

sale. Restricted securities generally can 

be sold in privately negotiated 

transactions, pursuant to an exemption 

from registration under the Securities 

Act, or in a registered public offering. 

Other Restrictions 

The Fund will limit its investment in 

non-government sponsored residential 

mortgage-backed securities, commercial 

mortgage-backed securities and assetbacked securities (including equipment 

trust certificates) as well as bank loans 

and illiquid restricted securities, in the 

aggregate, to 20% or less of the Fund’s 

net assets. 

The Fund may hold up to an aggregate 

amount of 15% of its net assets in 

illiquid assets (calculated at the time of 

investment), including Rule 144A 

securities deemed illiquid by the 

Adviser, consistent with Commission 

guidance. The Fund will monitor its 

portfolio liquidity on an ongoing basis 

to determine whether, in light of current 

circumstances, an adequate level of 

liquidity is being maintained, and will 

consider taking appropriate steps in 

order to maintain adequate liquidity if, 

through a change in values, net assets, 

or other circumstances, more than 15% 

of the Fund’s net assets are held in 

illiquid assets. Illiquid assets include 

securities subject to contractual or other 

restrictions on resale and other 

instruments that lack readily available 

markets as determined in accordance 

with Commission staff guidance.29

The Fund will be classified as a 

‘‘diversified’’ investment company 

under the 1940 Act.30

The Fund intends to qualify for and 

to elect treatment as a separate regulated 

investment company (‘‘RIC’’) under 

subchapter M of the Internal Revenue 

Code.31 Furthermore, the Fund may not 

concentrate investments in a particular 

industry or group of industries, as 

concentration is defined under the 1940 

Act, the rules or regulations thereunder 

or any exemption therefrom, as such 

statute, rules or regulations may be 

amended or interpreted from time to 

time.32

The Fund’s investments will be 

consistent with its investment objective 

and will not be used to enhance 

leverage. 

Net Asset Value 

According to the Registration 

Statement, the Fund’s net asset value 

per Share (‘‘NAV’’) will be the value of 

a single Share. The NAV of Shares of the 

Fund will be computed by adding the 

value of the Fund’s investments, cash, 

and other assets, subtracting its 

liabilities, and dividing the result by the 

number of Shares outstanding. 

According to the Registration 

Statement, the Fund’s Board of Trustees 

has delegated day-to-day valuation 

oversight responsibilities to PMC. PMC 

has established a Valuation Committee 

(‘‘Valuation Committee’’) to fulfill these 

oversight responsibilities. 

Generally, the Fund will value its 

portfolio securities and assets as 

follows: 

In computing the Fund’s NAV, the 

Fund’s fixed income securities 

(including defaulted debt,33 and 

restricted securities) (collectively, 

‘‘OTC-Traded Securities’’) will be 

valued based on price quotations 

obtained from a third-party pricing 

service or from a broker-dealer who 

makes markets in such securities. Any 

such third-party pricing service may use 

a variety of methodologies to value 

some or all such securities to determine 

the market price. For example, the 

prices of securities with characteristics 

similar to those held by the Fund may 

be used to assist with the pricing 

process. In addition, the pricing service 

may use proprietary pricing models. 

The Fund’s OTC-Traded Securities will 

generally be valued at bid prices. 

Debt securities with remaining 

maturities of sixty days or less for which 

market quotations and information 

furnished by a third party pricing 

service are not readily available will be 

valued at amortized cost, which 

approximates current value. 

Exchange traded equity securities, 

including ETFs, certain Depositary 

Receipts, exchange-traded REITs, 

exchange-traded preferred stock, and 

exchange-traded convertible bonds, will 

be valued at market value, which will 

generally be determined using the last 

reported official closing or last trading 

price on the exchange or market on 

which the security is primarily traded at 

the time of valuation or, if no sale has 

occurred, at the last quoted bid price on 

the primary market or exchange on 

which they are traded. Unsponsored 

ADRs will be valued at the last reported 

sale price from the OTC Bulletin Board 

or OTC Link LLC on the valuation date. 

Investment company securities (other 

than ETFs) will be valued at NAV. 

Exchange-traded futures contracts 

will be valued at the settlement or 

closing price determined by the 

applicable exchange. 

Exchange-traded option contracts, 

including options on futures, will be 

valued at their most recent sale price. If 

no such sales are reported, these 

contracts will be valued at their most 

recent bid price. 

Except as discussed below, nonexchange-traded derivatives, including 

swaps and swaptions, will normally be 

valued on the basis of quotes obtained 

from a third party broker-dealer who 

makes markets in such securities or on 

the basis of quotes obtained from an 

independent third-party pricing service. 

The Fund’s OTC-traded derivative 

instruments will generally be valued at 

bid prices. Certain OTC-traded 

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Federal Register / Vol. 80, No. 59 / Friday, March 27, 2015 / Notices 16481 

34The portfolio used for this purpose will be the 

same portfolio used to calculate the Fund’s NAV for 

that business day. 

35A tradeable round lot for a security will be the 

standard unit of trading in that particular type of 

security in its primary market. 

36A TBA Transaction is a method of trading 

mortgage-backed securities. In a TBA Transaction, 

the buyer and seller agree upon general trade 

parameters such as agency, settlement date, par 

amount and price. The actual pools delivered 

generally are determined two days prior to the 

settlement date. 

37This includes instruments that can be 

transferred in kind only with the consent of the 

counterparty to the extent the Fund does not intend 

to seek such consents. 

38Because these instruments will be excluded 

from the Creation Basket, their value will be 

reflected in the determination of the Balancing 

Amount (defined below). 

39 In determining whether the Fund will sell or 

redeem Creation Units entirely on a cash or in-kind 

basis (whether for a given day or a given order), the 

key consideration will be the benefit that would 

accrue to the Fund and its investors. Purchases of 

Creation Units either on an all cash basis or in-kind 

are expected to be neutral to the Fund from a tax 

perspective. In contrast, cash redemptions typically 

require selling portfolio positions, which may result 

in adverse tax consequences for the remaining Fund 

shareholders that would not occur with an in-kind 

redemption. As a result, tax considerations may 

warrant in-kind redemptions. 

40Where the Fund permits an in-kind purchaser 

or redeemer to deposit or receive cash in lieu of one 

or more Deposit or Redemption Instruments, the 

purchaser or redeemer may be assessed a higher 

Transaction Fee to offset the transaction cost to the 

Fund of buying or selling those particular Deposit 

or Redemption Instruments. 

derivative instruments, such as interest 

rate swaps and credit default swaps, 

will be valued at the mean price. 

Prices described above will be 

obtained from pricing services that have 

been approved by the Fund’s Board of 

Trustees. A number of independent 

third party pricing services are available 

and the Fund may use more than one of 

these services. The Fund may also 

discontinue the use of any pricing 

service at any time. PMC will engage in 

oversight activities with respect to the 

Fund’s pricing services, which includes, 

among other things, testing the prices 

provided by pricing services prior to 

calculation of the Fund’s NAV, 

conducting periodic due diligence 

meetings, and periodically reviewing 

the methodologies and inputs used by 

these services. 

Foreign securities and instruments 

will be valued in their local currency 

following the methodologies described 

above. Typically, foreign securities, 

instruments and currencies will be 

translated to U.S. dollars, based on 

foreign currency exchange rate 

quotations supplied by a pricing service 

as of the close of the New York Stock 

Exchange (‘‘NYSE’’), which will use a 

proprietary model to determine the 

exchange rate. 

Forward foreign currency exchange 

contracts will be valued at an 

interpolated rate based on days to 

maturity between the closest preceding 

and subsequent settlement period. Such 

interpolated rates are derived from 

foreign currency exchange rate 

quotations reported by an independent 

third-party pricing service. 

Other portfolio securities and assets 

for which market quotations, official 

closing prices, or information furnished 

by a pricing service are not readily 

available or, in the opinion of the 

Valuation Committee, are deemed 

unreliable will be fair valued in good 

faith by the Valuation Committee in 

accordance with applicable fair value 

pricing policies. For example, if, in the 

opinion of the Valuation Committee, a 

security’s value has been materially 

affected by events occurring before the 

Fund’s pricing time but after the close 

of the exchange or market on which the 

security is principally traded, that 

security will be fair valued in good faith 

by the Valuation Committee in 

accordance with applicable fair value 

pricing policies. 

In fair valuing a security, the 

Valuation Committee may consider 

factors including price movements in 

futures contracts and ADRs, market and 

trading trends, the bid/ask quotes of 

brokers, and off-exchange institutional 

trading. 

Creation and Redemption of Shares 

According to the Registration 

Statement, the Fund will issue and 

redeem Shares on a continuous basis at 

NAV per Share in aggregations of a 

specified number of Shares called 

‘‘Creation Units.’’ Creation Units 

generally will be issued in exchange for 

portfolio securities and/or cash. Shares 

are not individually redeemable, but are 

redeemable only in Creation Unit 

aggregations, and in exchange for 

portfolio securities and/or cash. A 

Creation Unit of the Fund will consist 

of a block of 50,000 Shares. The size of 

a Creation Unit is subject to change. 

Shareholders who are not ‘‘Authorized 

Participants’’ (as defined below) will not 

be able to purchase or redeem Shares 

directly with or from the Fund. 

All orders to purchase Creation Units 

must be placed with a Distributor by or 

through a party (the ‘‘Authorized 

Participant’’) that has entered into a 

participant agreement with the 

Distributor (‘‘Participant Agreement’’) 

with respect to the creation and 

redemption of Creation Units. An 

Authorized Participant is either: (a) A 

broker or dealer registered under the Act 

or other participant in the Continuous 

Net Settlement System of the National 

Securities Clearing Corporation 

(‘‘NSCC’’), a clearing agency registered 

with the Commission and affiliated with 

the Depository Trust Company (‘‘DTC’’); 

or (b) a participant in the DTC (such 

participant, a ‘‘DTC Participant’’). 

Shares of the Fund will be purchased 

and redeemed in Creation Units and 

generally on an ‘‘in- kind’’ basis. Except 

where the purchase or redemption will 

include cash under the limited 

circumstances specified below, 

purchasers will be required to purchase 

Creation Units by making an in-kind 

deposit of specified instruments 

(‘‘Deposit Instruments’’), and 

shareholders redeeming their Shares 

will receive an in-kind transfer of 

specified instruments (‘‘Redemption 

Instruments’’). On any given business 

day, the names and quantities of the 

instruments that constitute the Deposit 

Instruments and the names and 

quantities of the instruments that 

constitute the Redemption Instruments 

will be identical, and these instruments 

may be referred to, in the case of either 

a purchase or a redemption, as the 

‘‘Creation Basket’’. In addition, the 

Creation Basket will correspond pro rata 

to the positions in the Fund’s portfolio 

(including cash positions),34 except: (a) 

In the case of bonds, for minor 

differences when it is impossible to 

break up bonds beyond certain 

minimum sizes needed for transfer and 

settlement; (b) for minor differences 

when rounding is necessary to eliminate 

fractional shares or lots that are not 

tradeable round lots; 35 or (c) To-BeAnnounced (‘‘TBA’’) transactions,36

short positions and other positions that 

cannot be transferred in kind 37 will be 

excluded from the Creation Basket.38 If 

there is a difference between the NAV 

attributable to a Creation Unit and the 

aggregate market value of the Creation 

Basket exchanged for the Creation Unit, 

the party conveying instruments with 

the lower value will pay to the other an 

amount in cash equal to that difference 

(the ‘‘Balancing Amount’’). 

Purchases and redemptions of 

Creation Units may be made in whole or 

in part on a cash basis, rather than in 

kind, solely under specified 

circumstances.39 The Adviser represents 

that, to the extent the Trust effects the 

creation and redemption of Shares in 

cash, such transactions will be effected 

in the same manner for all Authorized 

Participants. 

An investor purchasing or redeeming 

a Creation Unit from the Fund may be 

charged a Transaction Fee to protect 

existing shareholders of the Fund from 

the dilutive costs associated with the 

purchase and redemption of Creation 

Units.40

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16482 Federal Register / Vol. 80, No. 59 / Friday, March 27, 2015 / Notices 

41The 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 each 

Fund and its service providers. 

42Under accounting procedures to be followed by 

the Fund, trades made on the prior business day 

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

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

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. 

43Currently, it is the Exchange’s understanding 

that several major market data vendors display and/ 

or make widely available PIVs taken from the CTA 

or other data feeds. 

44See NYSE Arca Equities Rule 7.12. 

The Fund will make available, prior 

to the opening of trading on the NYSE 

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

through the NSCC the names and 

quantities of the instruments comprising 

the Creation Basket, as well as the 

estimated Balancing Amount (if any), 

for that day. The published Creation 

Basket will apply with respect to 

purchases or redemptions until a new 

Creation Basket is announced on the 

following business day, and there will 

be no intra-day changes to the Creation 

Basket, except to correct errors in the 

published Creation Basket. 

Availability of Information 

The Funds’ [sic] Web site 

(www.principalfunds.com), which will 

be publicly available prior to the public 

offering of Shares, will include a form 

of the prospectus for the Fund that may 

be downloaded. The Fund’s Web site 

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’’),41 and a calculation of the 

premium and discount of the Bid/Ask 

Price against the NAV, and (2) data in 

chart format displaying the frequency 

distribution of discounts and premiums 

of the daily Bid/Ask Price against the 

NAV, within appropriate ranges, for 

each of the four previous calendar 

quarters. On each business day, before 

commencement of trading in Shares in 

the Core Trading Session on the 

Exchange, the Adviser will disclose on 

the Fund’s Web site the Disclosed 

Portfolio for the Fund as defined in 

NYSE Arca Equities Rule 8.600(c)(2) 

that will form the basis for the Fund’s 

calculation of NAV at the end of the 

business day.42

The Fund’s portfolio holdings will be 

disclosed on its Web site daily after the 

close of trading on the Exchange and 

prior to the opening of trading on the 

Exchange the following day. 

The Fund’s disclosure of derivative 

positions in the Disclosed Portfolio will 

include information that market 

participants can use to value these 

positions intraday. On a daily basis, the 

Fund will disclose on the Fund’s Web 

site the following information regarding 

each portfolio holding, as applicable to 

the type of holding: Ticker symbol, 

CUSIP number or other identifier, if 

any; a description of the holding 

(including the type of holding, such as 

the type of swap); the identity of the 

security, commodity, index or other 

asset or instrument underlying the 

holding, if any; for options, the option 

strike price; quantity held (as measured 

by, for example, par value, notional 

value or number of shares, contracts or 

units); maturity date, if any; coupon 

rate, if any; effective date, if any; market 

value of the holding; and the percentage 

weighting of the holding in the Fund’s 

portfolio. The Web site information will 

be publicly available at no charge. 

Investors can also obtain the Trust’s 

Statement of Additional Information 

(‘‘SAI’’), the Fund’s Shareholder 

Reports, and its Form N–CSR and Form 

N–SAR, filed twice a year. The Trust’s 

SAI and Shareholder Reports are 

available free upon request from the 

Trust, and those documents and the 

Form N–CSR and Form N–SAR may be 

viewed on-screen or downloaded from 

the Commission’s Web site at 

www.sec.gov. 

Quotation and last sale information 

for the portfolio holdings of the Fund 

that are U.S. exchange listed, including 

ETFs and U.S. exchange-traded ADRs 

and exchange-traded REITs, exchangetraded preferred stock, and exchangetraded convertible securities, and 

exchange-traded MLPs will be available 

via the Consolidated Tape Association 

(‘‘CTA’’) high speed line. Quotation and 

last sale information for such U.S. 

exchange-listed securities, as well as 

futures will be available from the 

exchange on which they are listed. 

Quotation and last sale information for 

exchange-listed options cleared via the 

Options Clearing Corporation will be 

available via the Options Price 

Reporting Authority. 

Quotation information for OTCTraded Securities, OTC-traded 

derivative instruments (including 

swaps, swaptions, forwards and 

currency-related derivatives), 

investment company securities 

(excluding ETFs), Rule 144A securities, 

U.S. Treasuries, agency securities, assetbacked securities, residential mortgagebacked securities, commercial mortgagebacked securities, zero-coupon 

securities, variable and floating rate 

instruments including inverse floaters, 

covered securities, sinking fund 

securities, equipment trust certificates, 

sovereign bonds, convertible bonds, 

pay-in-kind securities, step-coupon 

securities, stripped securities, inflationindexed bonds, inflation protected debt 

securities, bank loans, municipal bonds, 

corporate bonds, and money market 

instruments may be obtained from 

brokers and dealers who make markets 

in such securities or through nationally 

recognized pricing services through 

subscription agreements. The U.S. 

dollar value of foreign securities, 

instruments and currencies can be 

derived by using foreign currency 

exchange rate quotations obtained from 

nationally recognized pricing services. 

In addition, the Portfolio Indicative 

Value (‘‘PIV’’), as defined in NYSE Arca 

Equities Rule 8.600(c)(3), will be widely 

disseminated by one or more major 

market data vendors at least every 15 

seconds during the Core Trading 

Session.43 The dissemination of the PIV, 

together with the Disclosed Portfolio, 

will allow investors to determine the 

approximate value of the underlying 

portfolio of the Fund on a daily basis 

and will provide a close estimate of that 

value throughout the trading day. 

Trading Halts 

With respect to trading halts, the 

Exchange may consider all relevant 

factors in exercising its discretion to 

halt or suspend trading in the Shares of 

the Fund.44 Trading in Shares of the 

Fund will be halted if the circuit breaker 

parameters in NYSE Arca Equities Rule 

7.12 have been reached. Trading also 

may be halted because of market 

conditions or for reasons that, in the 

view of the Exchange, make trading in 

the Shares of the Fund inadvisable. 

These may include: (1) The extent to 

which trading is not occurring in the 

securities and/or the financial 

instruments comprising the Disclosed 

Portfolio of the Fund; or (2) whether 

other unusual conditions or 

circumstances detrimental to the 

maintenance of a fair and orderly 

market are present. Trading in the 

Shares will be subject to NYSE Arca 

Equities Rule 8.600(d)(2)(D), which sets 

forth circumstances under which Shares 

of the Fund may be halted. 

Trading Rules 

The Exchange deems the Shares to be 

equity securities, thus rendering trading 

in the Shares subject to the Exchange’s 

existing rules governing the trading of 

equity securities. Shares will trade on 

the NYSE Arca Marketplace from 4:00 

a.m. to 8:00 p.m. Eastern Time in 

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Federal Register / Vol. 80, No. 59 / Friday, March 27, 2015 / Notices 16483 

45 17 CFR 240 10A–3. 

46FINRA surveils trading on the Exchange 

pursuant to a regulatory services agreement. The 

Exchange is responsible for FINRA’s performance 

under this regulatory services agreement. 

47For a list of the current members of ISG, see 

www.isgportal.org. The Exchange notes that not all 

components of the Disclosed Portfolio for the Fund 

may trade on markets that are members of ISG or 

with which the Exchange has in place a 

comprehensive surveillance sharing agreement. 48 15 U.S.C. 78f(b)(5). 

accordance with NYSE Arca Equities 

Rule 7.34 (Opening, 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 Equities Rule 7.6, Commentary .03, 

the minimum price variation (‘‘MPV’’) 

for quoting and entry of orders in equity 

securities traded on the NYSE Arca 

Marketplace is $0.01, with the exception 

of securities that are priced less than 

$1.00 for which the MPV for order entry 

is $0.0001. 

The Shares of the Fund will conform 

to the initial and continued listing 

criteria under NYSE Arca Equities Rule 

8.600. The Exchange represents that, for 

initial and/or continued listing, the 

Fund will be in compliance with Rule 

10A–3 45 under the Act, as provided by 

NYSE Arca Equities Rule 5.3. A 

minimum of 100,000 Shares of the Fund 

will be outstanding at the 

commencement of trading on the 

Exchange. The Exchange will obtain a 

representation from the issuer of the 

Shares of the Fund that the NAV and 

the Disclosed Portfolio will be made 

available to all market participants at 

the same time. 

Surveillance 

The Exchange represents that trading 

in the Shares of the Fund will be subject 

to the existing trading surveillances, 

administered by the Financial Industry 

Regulatory Authority (‘‘FINRA’’) on 

behalf of the Exchange, which are 

designed to detect violations of 

Exchange rules and applicable federal 

securities laws.46 The Exchange 

represents that these procedures are 

adequate to properly monitor Exchange 

trading of the Shares in all trading 

sessions and to deter and detect 

violations of Exchange rules and federal 

securities laws applicable to trading on 

the Exchange. 

The surveillances referred to above 

generally focus on detecting securities 

trading outside their normal patterns, 

which could be indicative of 

manipulative or other violative activity. 

When such situations are detected, 

surveillance analysis follows and 

investigations are opened, where 

appropriate, to review the behavior of 

all relevant parties for all relevant 

trading violations. 

FINRA, on behalf of the Exchange, 

will communicate as needed regarding 

trading in the Shares, ETFs, other 

exchange-traded equity securities 

(including exchange-listed Depositary 

Receipts), options, futures, and options 

on futures with other markets and other 

entities that are members of the ISG, and 

FINRA, on behalf of the Exchange, may 

obtain trading information regarding 

trading in such financial instruments, as 

applicable, from such markets and other 

entities. In addition, the Exchange may 

obtain information regarding trading in 

such financial instruments, as 

applicable, from markets and other 

entities that are members of ISG or with 

which the Exchange has in place a 

comprehensive surveillance sharing 

agreement.47 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 Trade Reporting 

and Compliance Engine (‘‘TRACE’’). 

Not more than 10% of the net assets 

of the Fund in the aggregate invested in 

exchange-traded equity securities shall 

consist of equity securities whose 

principal market is not a member of the 

ISG or party to a CSSA with the 

Exchange. 

In addition, the Exchange also has a 

general policy prohibiting the 

distribution of material, non-public 

information by its employees. 

Information Bulletin 

Prior to the commencement of 

trading, the Exchange will inform its 

Equity Trading Permit (‘‘ETP’’) Holders 

in an Information Bulletin (‘‘Bulletin’’) 

of the special characteristics and risks 

associated with trading the Shares of the 

Fund. Specifically, the Bulletin will 

discuss the following: (1) The 

procedures for purchases and 

redemptions of Shares in Creation Units 

(and that Shares are not individually 

redeemable); (2) NYSE Arca Equities 

Rule 9.2(a), which imposes a duty of 

due diligence on its ETP Holders to 

learn the essential facts relating to every 

customer prior to trading the Shares; (3) 

the risks involved in trading the Shares 

during the Opening 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 

ETP Holders deliver a prospectus to 

investors purchasing newly issued 

Shares prior to or concurrently with the 

confirmation of a transaction; and (6) 

trading information. 

In addition, the Bulletin will 

reference that the Fund is subject to 

various fees and expenses described in 

the Registration Statement. The Bulletin 

will discuss any exemptive, no-action, 

and interpretive relief granted by the 

Commission from any rules under the 

Act. The Bulletin will also disclose that 

the NAV for the Shares of the Fund will 

be calculated after 4:00 p.m. Eastern 

Time each trading day. 

2. Statutory Basis 

The basis under the Act for this 

proposed rule change is the requirement 

under section 6(b)(5) 48 that an exchange 

have rules that are designed to prevent 

fraudulent and manipulative acts and 

practices, to promote just and equitable 

principles of trade, to remove 

impediments to, and perfect the 

mechanism of a free and open market 

and, in general, to protect investors and 

the public interest. 

The Exchange believes that the 

proposed rule change is designed to 

prevent fraudulent and manipulative 

acts and practices in that the Shares will 

be listed and traded on the Exchange 

pursuant to the initial and continued 

listing criteria in NYSE Arca Equities 

Rule 8.600. The Adviser and SubAdvisers are not registered as brokerdealers but are affiliated with three 

broker-dealers and have implemented 

and will maintain a fire wall with 

respect to each such broker-dealer 

affiliate regarding access to information 

concerning the composition and/or 

changes to the portfolios. The Exchange 

has in place surveillance procedures 

that are adequate to properly monitor 

trading in the Shares of the Fund in all 

trading sessions and to deter and detect 

violations of Exchange rules and federal 

securities laws applicable to trading on 

the Exchange. FINRA, on behalf of the 

Exchange, will communicate as needed 

regarding trading in the Shares, ETFs, 

other exchange-traded equity securities 

(including exchange-listed Depositary 

Receipts), options, futures, and options 

on futures with other markets and other 

entities that are members of the ISG, and 

FINRA, on behalf of the Exchange, may 

obtain trading information regarding 

trading in such financial instruments, as 

applicable, from such markets and other 

entities. In addition, the Exchange may 

obtain information regarding trading in 

such financial instruments, as 

applicable, from markets and other 

entities that are members of ISG or with 

which the Exchange has in place a 

comprehensive surveillance sharing 

agreement. FINRA, on behalf of the 

Exchange, is able to access, as needed, 

mstockstill on DSK4VPTVN1PROD with NOTICES

16484 Federal Register / Vol. 80, No. 59 / Friday, March 27, 2015 / Notices 

trade information for certain fixed 

income securities held by the Fund 

reported to FINRA’s TRACE. Not more 

than 10% of the net assets of the Fund 

in the aggregate invested in exchangetraded equity securities shall consist of 

equity securities whose principal 

market is not a member of the ISG or 

party to a CSSA with the 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’s investments will be 

consistent with its investment objective 

and will not be used to enhance 

leverage. The Fund will limit its 

investment in non-government 

sponsored residential mortgage-backed 

securities, commercial mortgage-backed 

securities and asset-backed securities, in 

the aggregate, to 20% or less of the 

Fund’s net assets. The PIV, as defined 

in NYSE Arca Equities Rule 8.600(c)(3), 

will be widely disseminated by one or 

more major market data vendors at least 

every 15 seconds during the Core 

Trading Session. The Fund may hold up 

to an aggregate amount of 15% of its net 

assets in illiquid assets (calculated at 

the time of investment), including Rule 

144A securities deemed illiquid by the 

Adviser, consistent with Commission 

guidance. 

The Shares of the Fund will conform 

to the initial and continued listing 

criteria under NYSE Arca Equities Rule 

8.600. The Exchange represents that, for 

initial and/or continued listing, the 

Fund will be in compliance with Rule 

10A–3 under the Act, as provided by 

NYSE Arca Equities Rule 5.3. A 

minimum of 100,000 Shares of the Fund 

will be outstanding at the 

commencement of trading on the 

Exchange. The Exchange will obtain a 

representation from the issuer of the 

Shares of the Fund that the NAV per 

Share will be calculated daily and that 

the NAV and the Disclosed Portfolio 

will be made available to all market 

participants at the same time. In 

addition, a large amount of information 

is publicly available regarding the Fund 

and the respective Shares, thereby 

promoting market transparency. The 

Fund’s portfolio holdings will be 

disclosed on its Web site daily after the 

close of trading on the Exchange and 

prior to the opening of trading on the 

Exchange the following day. On a daily 

basis, the Fund will disclose on its Web 

site the following information regarding 

each portfolio holding, as applicable to 

the type of holding: Ticker symbol, 

CUSIP number or other identifier, if 

any; a description of the holding 

(including the type of holding); the 

identity of the security, commodity, 

index or other asset or instrument 

underlying the holding, if any; quantity 

held (as measured by, for example, par 

value, notional value or number of 

shares, contracts or units); maturity 

date, if any; coupon rate, if any; 

effective date, if any; market value of the 

holding; and the percentage weighting 

of the holding in the Fund’s portfolio. 

The Web site information will be 

publicly available at no charge. 

Investors can also obtain the Trust’s 

Statement of Additional Information 

(‘‘SAI’’), the Fund’s Shareholder 

Reports, and its Form N–CSR and Form 

N–SAR, filed twice a year. The Trust’s 

SAI and Shareholder Reports are 

available free upon request from the 

Trust, and those documents and the 

Form N–CSR and Form N–SAR may be 

viewed on-screen or downloaded from 

the Commission’s Web site at 

www.sec.gov. Quotation and last sale 

information for the portfolio holdings of 

the Fund that are U.S. exchange listed, 

including ETFs and U.S. exchangetraded ADRs and exchange-traded 

REITs, exchange-traded preferred stock, 

exchange-traded convertible securities, 

and exchange-traded MLPs will be 

available via the CTA high speed line. 

Quotation and last sale information for 

such U.S. exchange-listed securities, as 

well as futures will be available from 

the exchange on which they are listed. 

Quotation and last sale information for 

exchange-listed options cleared via the 

Options Clearing Corporation will be 

available via the Options Price 

Reporting Authority. 

The Web site for the Fund will 

include a form of the prospectus for the 

Fund and additional data relating to 

NAV and other applicable quantitative 

information. Moreover, prior to the 

commencement of trading, the Exchange 

will inform its ETP Holders in an 

Information Bulletin of the special 

characteristics and risks associated with 

trading the Shares of the Funds [sic]. 

Trading in Shares of the Fund will be 

halted if the circuit breaker parameters 

in NYSE Arca Equities Rule 7.12 have 

been reached or because of market 

conditions or for reasons that, in the 

view of the Exchange, make trading in 

the Shares inadvisable, and trading in 

the Shares will be subject to NYSE Arca 

Equities Rule 8.600(d)(2)(D), which sets 

forth circumstances under which Shares 

of the Fund may be halted. In addition, 

as noted above, investors will have 

ready access to information regarding 

the Fund’s holdings, the PIV, the 

Disclosed Portfolio, and quotation and 

last sale information for the Shares. The 

Fund’s investments will be consistent 

with the Fund’s investment objective 

and will not be used to enhance 

leverage. 

The proposed rule change is designed 

to perfect the mechanism of a free and 

open market and, in general, to protect 

investors and the public interest in that 

it will facilitate the listing and trading 

of an additional type of activelymanaged exchange-traded product that 

will enhance competition among market 

participants, to the benefit of investors 

and the marketplace. As noted above, 

the Exchange has in place surveillance 

procedures relating to trading in the 

Shares of the Fund and may obtain 

information via ISG from other 

exchanges that are members of ISG or 

with which the Exchange has entered 

into a comprehensive surveillance 

sharing agreement. In addition, as noted 

above, investors will have ready access 

to information regarding each Fund’s 

holdings, the PIV, the Disclosed 

Portfolio for the Fund, and quotation 

and last sale information for the Shares 

of the Fund. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purpose of the Act. The Exchange 

notes that the proposed rule change will 

facilitate the listing and trading of an 

additional type of actively-managed 

exchange-traded product that holds 

fixed income and equity 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. 

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Federal Register / Vol. 80, No. 59 / Friday, March 27, 2015 / Notices 16485 

49 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)(ii). 

4 17 CFR 240.19b–4(f)(2). 

5The SEC recently approved MSRB rule 

amendments, effective April 27, 2015, that establish 

professional qualification standards for municipal 

advisors. The amendments to MSRB Rule G–3 

establish two professional qualification 

classifications for municipal advisors—municipal 

advisor representative and municipal advisor 

principal. See Exchange Act Release No. 74384 

(Feb. 26, 2015), 80 FR 11706 (Mar. 4, 2015), File 

No. SR–MSRB–2014–08 (Nov. 18, 2014). 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

NYSEArca–2015–15 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–2015–15. 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 Web site (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 Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE., 

Washington, DC 20549, on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of such 

filing will also be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change; 

the Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR– 

NYSEArca–2015–15 and should be 

submitted on or before April 17, 2015. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.49

Brent J. Fields, 

Secretary. 

[FR Doc. 2015–06991 Filed 3–26–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74561; File No. SR–MSRB– 

2015–01] 

Self-Regulatory Organizations; 

Municipal Securities Rulemaking 

Board; Notice of Filing and Immediate 

Effectiveness of a Proposed Rule 

Change Consisting of Amendments to 

MSRB Rule A–16, on Examination Fees 

March 23, 2015. 

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 March 17, 

2015, the Municipal Securities 

Rulemaking Board (the ‘‘MSRB’’ or 

‘‘Board’’) filed with the Securities and 

Exchange Commission (the ‘‘SEC’’ or 

‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III below, which Items have been 

prepared by the MSRB. 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 MSRB filed with the Commission 

a proposed rule change consisting of 

amendments to MSRB Rule A–16, on 

examination fees (‘‘proposed rule 

change’’). The MSRB designated the 

proposed rule change as ‘‘establishing or 

changing a due, fee or other charge’’ 

under Section 19(b)(3)(A)(ii) of the Act 3

and Rule 19b–4(f)(2) 4 thereunder, 

which renders the proposal effective 

upon filing with the Commission. The 

implementation date of the proposed 

rule change is April 1, 2015. 

The text of the proposed rule change 

is available on the MSRB’s Web site at 

http://www.msrb.org/Rules-andInterpretations/SEC-Filings/2015- 

Filings.aspx, at the MSRB’s principal 

office, 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 

MSRB 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 MSRB has 

prepared summaries, set forth in 

Sections A, B, and C below, of the most 

significant aspects 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 establish a test 

development fee for the MSRB’s new 

municipal advisor representative 

qualification examination (‘‘Series 50 

examination’’) and to better align the 

MSRB’s existing test development fees 

(which have not been adjusted since 

2009) with the costs of developing, 

implementing and maintaining the tests 

(hereinafter, the ‘‘program costs’’). 

Under the proposed rule change, the 

MSRB will institute a test development 

fee of $150 for the Series 50 

examination and change the test 

development fee for each of the three 

existing MSRB-owned examinations 

from $60 to $150. The development fee 

of $150 will, on April 1, 2015, be 

assessed on brokers, dealers and 

municipal securities dealers (‘‘dealers’’) 

and municipal advisors based on the 

number of their associated persons that 

take an MSRB-owned professional 

qualification examination. 

Any person associated with a dealer 

who is engaged in or supervises 

municipal securities activities and any 

person associated with a municipal 

advisor who is engaged in or supervises 

municipal advisory activities must be 

qualified in accordance with MSRB 

Rule G–3.5 As a prerequisite to 

qualification, each individual must pass 

the applicable examination to 

demonstrate a basic competence in the 

subject matter related to the professional 

qualification classification. The 

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