Federal Register / Vol. 80, No. 73 / Thursday, April 16, 2015 / Notices 20529 

12 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. 

4The Commission previously has approved 

proposed rule changes relating to listing and trading 

on the Exchange of Units based on municipal bond 

indexes. See Securities Exchange Act Release Nos. 

67985 (October 4, 2012), 77 FR 61804 (October 11, 

2012) (SR–NYSEArca–2012–92) (order approving 

proposed rule change relating to the listing and 

trading of iShares 2018 S&P AMT-Free Municipal 

Series and iShares 2019 S&P AMT-Free Municipal 

Series under NYSE Arca Equities Rule 5.2(j)(3), 

Commentary .02); 67729 (August 24, 2012), 77 FR 

52776 (August 30, 2012) (SR–NYSEArca–2012–92) 

(notice of proposed rule change relating to the 

listing and trading of iShares 2018 S&P AMT-Free 

Municipal Series and iShares 2019 S&P AMT-Free 

Municipal Series under NYSE Arca Equities Rule 

5.2(j)(3), Commentary .02); 71232 (January 3, 2014), 

79 FR 1662 (January 9, 2014) (SR–NYSEArca–2013– 

118) (order approving listing and trading of shares 

of the Market Vectors Short High-Yield Municipal 

Index ETF under NYSE Arca Equities Rule 5.2(j)(3), 

Commentary .02); 72523, (July 2, 2014), 79 FR 

39016 (July 9, 2014) (SR–NYSEArca–2014–37) 

(order approving proposed rule change relating to 

the listing and trading of iShares 2020 S&P AMTFree Municipal Series under NYSE Arca Equities 

Rule 5.2(j)(3), Commentary .02); 72172 (May 15, 

2014), 79 FR 29241 (May 21, 2014) (SR–NYSEArca– 

2014–37) (notice of proposed rule change relating 

to the listing and trading of iShares 2020 S&P AMTFree Municipal Series under NYSE Arca Equities 

Rule 5.2(j)(3), Commentary .02). The Commission 

also has issued a notice of filing and immediate 

effectiveness of a proposed rule change relating to 

listing and trading on the Exchange of shares of the 

iShares Taxable Municipal Bond Fund. See 

Securities Exchange Act Release No. 63176 (October 

25, 2010), 75 FR 66815 (October 29, 2010) (SR– 

NYSEArca–2010–94). The Commission has 

approved for Exchange listing and trading of shares 

of two actively managed funds of the PIMCO ETF 

Trust that principally hold municipal bonds. See 

Securities Exchange Act Release No. 60981 

(November 10, 2009), 74 FR 59594 (November 18, 

2009) (SR–NYSEArca–2009–79) (order approving 

listing and trading of shares of the PIMCO ShortTerm Municipal Bond Strategy Fund and PIMCO 

Intermediate Municipal Bond Strategy Fund). The 

Commission also has approved listing and trading 

on the Exchange of shares of the SPDR® Nuveen 

S&P High Yield Municipal Bond Fund under 

Commentary .02 of NYSE Arca Equities Rule 

5.2(j)(3). See Securities Exchange Act Release No. 

63881 (February 9, 2011), 76 FR 9065 (February 16, 

2011) (SR–NYSEArca–2010–120). 

5On January 6, 2015, the Trust filed a registration 

statement on Form N–1A under the Securities Act 

Continued 

change should be approved or 

disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

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

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

CBOE–2015–036 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Brent J. Fields, Secretary, Securities 

and Exchange Commission, 100 F Street 

NE., Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–CBOE–2015–036. 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 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; 

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–CBOE– 

2015–036 and should be submitted on 

or before May 7, 2015. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.12

Brent J. Fields, 

Secretary. 

[FR Doc. 2015–08703 Filed 4–15–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74701; File No. SR– 

NYSEArca–2015–18] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing of Proposed 

Rule Change Relating to Listing and 

Trading under NYSE Arca Equities 

Rule 5.2(j)(3), Commentary .02 of 

Shares of the Vanguard Tax-Exempt 

Bond Index Fund 

April 10, 2015. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that on April 6, 

2015, NYSE Arca, Inc. (‘‘NYSE Arca’’ or 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III below, which Items have been 

prepared by the Exchange. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to list and 

trade under NYSE Arca Equities Rule 

5.2(j)(3), Commentary .02, the shares of 

the Vanguard Tax-Exempt Bond Index 

Fund. 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 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to list and 

trade shares (‘‘Shares’’) of the Vanguard 

Tax-Exempt Bond Index Fund’s ETF 

share class (‘‘Fund’’) under NYSE Arca 

Equities Rule 5.2(j)(3), Commentary .02, 

which governs the listing and trading of 

Investment Company Units (‘‘Units’’) 

based on fixed income securities 

indexes.4 The Fund is a series of the 

Vanguard Municipal Bond Funds Trust 

(‘‘Trust’’).5 The Vanguard Group, Inc. 


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20530 Federal Register / Vol. 80, No. 73 / Thursday, April 16, 2015 / Notices 

of 1933 (15 U.S.C. 77a) (‘‘1933 Act’’) and the 

Investment Company Act of 1940 (‘‘1940 Act’’) (15 

U.S.C. 80a–1) (File Nos. 2–57689 and 811–02687) 

(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 Trust under 

the 1940 Act. See Investment Company Act Release 

No. 27773 (April 2, 2007) (File No. 812–13336) 

(‘‘Exemptive Order’’). 

6The term ‘‘under normal circumstances’’ 

includes, but is not limited to, the absence of 

extreme volatility or trading halts in the fixed 

income markets or the financial markets generally; 

operational issues causing dissemination of 

inaccurate market information; or force majeure 

type events such as systems failure, natural or manmade disaster, act of God, armed conflict, act of 

terrorism, riot or labor disruption or any similar 

intervening circumstance. 

7S&P Dow Jones Indices (‘‘S&P’’) is the ‘‘Index 

Provider’’ with respect to the Index. The Index 

Provider is not a broker-dealer or affiliated with a 

broker-dealer and has implemented procedures 

designed to prevent the use and dissemination of 

material, non-public information regarding the 

Index. 

8For purposes of this filing, ETFs include 

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); and Managed Fund Shares (as described in 

NYSE Arca Equities Rule 8.600). The ETFs all will 

be listed and traded in the U.S. on national 

securities exchanges. While the Fund may invest in 

inverse ETFs, the Fund will not invest in leveraged 

or inverse leveraged ETFs (e.g., 2X or 3X). 

9According to the Registration Statement, a 

hybrid instrument is an interest in an issuer that 

combines the characteristics of an equity security, 

a debt security, a commodity, and/or a derivative. 

Examples of hybrid instruments include exchangetraded or OTC convertible securities, contingent 

convertible securities; trust-preferred securities, and 

commodity-linked bonds. 

will be the investment adviser to the 

Fund (‘‘Adviser’’). 

State Street Bank and Trust Company 

will serve as custodian for the Fund. 

Vanguard Marketing Corporation will be 

the distributor (‘‘Distributor’’) for the 

Fund’s Shares. 

Principal Investments 

According to the Registration 

Statement, the Fund will seek to track 

the performance of a benchmark index 

that measures the investment-grade 

segment of the U.S. municipal bond 

market. The Fund will invest by 

sampling its benchmark index, meaning 

that it holds a range of securities that, 

in the aggregate, approximates the full 

index in terms of key risk factors and 

other characteristics. All of the Fund’s 

investments will be selected through the 

sampling process, and, under normal 

circumstances 6, at least 80% of the 

Fund’s assets will be invested in 

securities held in its benchmark index. 

Under normal circumstances, at least 

80% of the Fund’s income will be 

exempt from federal income taxes. 

The Fund has proposed to use the 

Standard & Poor’s National AMT-Free 

Municipal Bond Index (‘‘Index’’) as its 

benchmark index.7 The Index includes 

municipal bonds from issuers that are 

primarily state or local governments or 

agencies whose interest is exempt from 

U.S. federal income taxes and the 

federal alternative minimum tax (AMT). 

To be eligible for inclusion in the Index, 

each bond must have a rating of at least 

investment-grade, as determined by a 

nationally recognized statistical rating 

organization (e.g., at least BBB- by Fitch 

Ratings, Inc.); be denominated in U.S. 

dollars; and have a minimum par 

amount of $25 million. In addition, to 

be included in the Index, each bond 

must have a minimum term to maturity 

and/or pre-refunded or call date greater 

than or equal to one calendar month. 

The following bond types are 

specifically excluded from the Index: 

bonds subject to the AMT; commercial 

paper; derivative securities (inverse 

floaters, forwards, swaps); housing 

bonds; insured conduit bonds where the 

obligor is a for-profit institution; noninsured conduit bonds; non-rated 

bonds; notes; taxable municipals; 

tobacco bonds; and variable rate debt. 

Each bond in the Index must be a 

constituent of a deal where the deal’s 

original offering amount was at least 

$100 million. Index constituents 

normally undergo a review and 

rebalancing once a month. At each 

monthly rebalancing, no one issuer can 

represent more than 25% of the weight 

of the Index; and individual issuers that 

represent at least 5% of the weight of 

the Index cannot account for more than 

50% of the weight of the Index in the 

aggregate. 

Non-Principal Investments 

While under normal circumstances, at 

least 80% of the Fund’s assets will be 

invested in securities held in its 

benchmark index, as described above, 

the Fund may invest up to 20% of its 

assets in other securities and financial 

instruments, as described below. 

According to the Registration 

Statement, up to 20% of the Fund’s 

assets may be used to purchase 

nonpublic, investment-grade securities, 

generally referred to as 144A securities, 

as well as smaller public issues or 

medium-term notes not included in its 

benchmark index because of the small 

size of the issue. The vast majority of 

these securities will have characteristics 

and risks similar to those in the 

benchmark index. Subject to the same 

20% limit, the Fund may also purchase 

other investments that are outside of its 

benchmark index or may hold bonds 

that, when acquired, were included in 

the benchmark index but subsequently 

were removed. 

The Fund may invest in U.S. Treasury 

futures contracts, exchange-traded and 

over-the-counter (‘‘OTC’’) options on 

such futures contracts, exchange-traded 

and OTC fixed income options, 

centrally cleared and non-centrally 

cleared interest rate swaps, centrally 

cleared and non-centrally cleared total 

return swaps, and centrally cleared and 

non-centrally cleared credit default 

swaps. 

The Fund may invest in noninvestment-grade securities, also 

referred to as ‘‘high-yield securities’’ or 

‘‘junk bonds’’, which are debt securities 

that are rated lower than the four 

highest rating categories by a nationally 

recognized statistical rating organization 

(e.g., lower than Baa3/P–2 by Moody’s 

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

below BBB–/A–2 by Standard & Poor’s) 

or, if unrated, are determined to be of 

comparable quality by the Adviser. 

The Fund may invest in variable and 

floating rate securities, which are debt 

securities that provide for periodic 

adjustments in the interest rate paid on 

the security. Variable rate securities 

provide for a specified periodic 

adjustment in the interest rate, while 

floating rate securities have interest 

rates that change whenever there is a 

change in a designated benchmark rate 

or the issuer’s credit quality. 

The Fund may purchase shares of 

exchange-traded funds (‘‘ETFs’’) 8, 

including ETF shares issued by other 

Vanguard funds. 

The Fund may invest in hybrid 

instruments.9

In addition to the municipal securities 

referenced in the ‘‘Principal 

Investments’’ section above, the Fund 

may invest in other municipal 

securities, which are debt obligations 

issued by states, municipalities, U.S. 

jurisdictions or territories, and other 

political subdivisions and by agencies, 

authorities, and instrumentalities of 

states and multistate agencies or 

authorities (collectively, 

municipalities). Municipal securities 

also include a variety of structures 

geared toward accommodating 

municipal-issuer short-term cash flow 

requirements. These structures include, 

but are not limited to, general market 

notes, commercial paper, put bonds, 

and variable-rate demand obligations 

(‘‘VRDOs’’). 

The Fund may invest in Build 

America Bonds. 

The Fund may purchase certain 

variable-rate demand-preferred 

securities (‘‘VRDPs’’) issued by closedend municipal bond funds, which, in 

turn, invest primarily in portfolios of 

tax-exempt municipal bonds. The Fund 


tkelley on DSK3SPTVN1PROD with NOTICES
Federal Register / Vol. 80, No. 73 / Thursday, April 16, 2015 / Notices 20531 

10Several factors considered in monitoring 

illiquidity determinations include the valuation of 

a security; the availability of qualified institutional 

buyers, brokers, and dealers that trade in the 

security; and the availability of information about 

the security’s issuer. 

11The 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 1933 Act). 

12The diversification standard is set forth in 

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

13 26 U.S.C. 851. 

14Commentary .02(a)(2) to NYSE Arca Equities 

Rule 5.2(j)(3) provides that components that in the 

aggregate account for at least 75% of the weight of 

the index or portfolio each shall have a minimum 

original principal amount outstanding of $100 

million or more. 

15Commentary .02(a)(4) to NYSE Arca Equities 

Rule 5.2(j)(3) provides that no component fixedincome security (excluding Treasury Securities and 

GSE Securities, as defined therein) shall represent 

more than 30% of the weight of the index or 

portfolio, and the five most heavily weighted 

component fixed-income securities in the index or 

portfolio shall not in the aggregate account for more 

than 65% of the weight of the index or portfolio. 

may invest in securities issued by 

single-state or national closed-end 

municipal bond funds. VRDPs are 

issued by closed-end funds to leverage 

returns for common shareholders. 

The Fund may participate in tender 

option bond programs, which are a type 

of municipal bond derivative structure, 

which is taxed as a partnership for 

federal income tax purposes. These 

programs provide for tax-exempt 

income at a variable rate. In such 

programs, high-quality longer-term 

municipal bonds are held inside a trust 

and varying economic interests in the 

bonds are created and sold to investors. 

Investment Restrictions 

The Fund may invest in other 

investment companies to the extent 

permitted by applicable law or 

Commission exemption and consistent 

with Section 12(d)(1) of the 1940 Act. 

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, in accordance with 

Commission guidance.10 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 

securities. Illiquid securities 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.11

The Fund is classified as diversified 

within the meaning of the 1940 Act.12

The Fund intends to maintain the 

required level of diversification and 

otherwise conduct its operations so as to 

qualify as a ‘‘regulated investment 

company’’ for purposes of the Internal 

Revenue Code of 1986.13

The Exchange is submitting this 

proposed rule change because the Index 

for the Fund does not meet all of the 

‘‘generic’’ listing requirements of 

Commentary .02(a) to NYSE Arca 

Equities Rule 5.2(j)(3) applicable to the 

listing of Units based on fixed income 

securities indexes. The Index meets all 

such requirements except for those set 

forth in Commentary .02(a)(2).14

Specifically, as of February 7, 2015, 

33.69% of the weight of the Index 

components have a minimum original 

principal amount outstanding of $100 

million or more. 

As of February 7, 2015, 98.72% of the 

weight of the Index components was 

composed of individual maturities that 

were part of an entire municipal bond 

offering with a minimum original 

principal amount outstanding of $100 

million or more for all maturities of the 

offering. In addition, the total dollar 

amount outstanding of issues in the 

Index was approximately $2.424 billion 

and the average dollar amount 

outstanding of issues in the Index was 

approximately $60 million. Further, the 

most heavily weighted component 

represents 0.27% of the weight of the 

Index and the five most heavily 

weighted components represent 0.96% 

of the weight of the Index.15 In addition, 

the average daily notional trading 

volume for Index components for the 

period from January 2, 2014 to 

December 31, 2014 was $1,272,356,609 

and the sum of the notional trading 

volumes for the same period was 

$318,089,152,147. 

Therefore, the Exchange believes that, 

notwithstanding that the Index does not 

satisfy the criterion in NYSE Arca 

Equities Rule 5.2(j)(3), Commentary .02 

(a)(2), the Index is sufficiently broadbased to deter potential manipulation, 

given that it is composed of 

approximately 10,015 issues and 969 

unique issuers. In addition, the Index 

securities are sufficiently liquid to deter 

potential manipulation in that a 

substantial portion (98.72%) of the 

Index weight is composed of maturities 

that are part of an entire municipal bond 

offering with a minimum original 

principal amount outstanding of $100 

million or more, and in view of the 

substantial total dollar amount 

outstanding and the average dollar 

amount outstanding of Index issues, as 

referenced above. 

Purchase and Issuance of Shares in 

Creation Units 

The Fund will issue and sell Shares 

only in ‘‘Creation Units’’ through the 

Distributor, without a sales load, at its 

net asset value (‘‘NAV’’) next 

determined after receipt of an order in 

proper form on any business day. 

The consideration for purchase of a 

Creation Unit from the Fund generally 

will consist of the in-kind deposit of a 

designated portfolio of securities 

(Deposit Securities) and an amount of 

cash (‘‘Cash Component’’) consisting of 

a purchase balancing amount and a 

transaction fee (both described in the 

following paragraphs). Together, the 

Deposit Securities and the Cash 

Component constitute the ‘‘Fund 

Deposit’’. 

The purchase balancing amount is an 

amount equal to the difference between 

the NAV of a Creation Unit and the 

market value of the Deposit Securities 

(Deposit Amount). It ensures that the 

NAV of a Fund Deposit (not including 

the transaction fee) is identical to the 

NAV of the Creation Unit it is used to 

purchase. If the purchase balancing 

amount is a positive number (i.e., the 

NAV per Creation Unit exceeds the 

market value of the Deposit Securities), 

then that amount will be paid by the 

purchaser to the Fund in cash. If the 

purchase balancing amount is a negative 

number (i.e., the NAV per Creation Unit 

is less than the market value of the 

Deposit Securities), then that amount 

will be paid by the Fund to the 

purchaser in cash (except as offset by 

the transaction fee). 

Vanguard, through the National 

Securities Clearing Corporation 

(‘‘NSCC’’), will make available after the 

close of each business day a list of the 

names and the number of shares of each 

Deposit Security to be included in the 

next business day’s Fund Deposit for the 

Fund (subject to possible amendment or 

correction). The Fund reserves the right 


tkelley on DSK3SPTVN1PROD with NOTICES
20532 Federal Register / Vol. 80, No. 73 / Thursday, April 16, 2015 / Notices 

16 17 CFR 240.10A–3. 

17The IIV will be widely disseminated by one or 

more major market data vendors at least every 15 

seconds during the Exchange’s Core Trading 

Session of 9:30 a.m. to 4:00 p.m., Eastern time. 

Currently, it is the Exchange’s understanding that 

several major market data vendors display and/or 

make widely available IIVs taken from the 

Consolidated Tape Association (‘‘CTA’’) or other 

data feeds. 

18See, e.g., Securities Exchange Act Release Nos. 

55783 (May 17, 2007), 72 FR 29194 (May 24, 2007) 

(SR–NYSEArca–2007–36) (order approving NYSE 

Arca generic listing standards for Units based on a 

fixed income index); 44551 (July 12, 2001), 66 FR 

37716 (July 19, 2001) (SR–PCX–2001–14) (order 

approving generic listing standards for Units and 

Portfolio Depositary Receipts); 41983 (October 6, 

1999), 64 FR 56008 (October 15, 1999) (SR–PCX– 

98–29) (order approving rules for listing and trading 

of Units). 

19 15 U.S.C. 78f(b)(5). 

to accept a nonconforming Fund 

Deposit. 

The identity and number of shares of 

the Deposit Securities required for a 

Fund Deposit may change from one day 

to another to reflect rebalancing 

adjustments, corporate actions, and 

interest payments on underlying bonds 

or to respond to adjustments to the 

weighting or composition of the 

component securities of the Index. 

In addition, the Fund reserves the 

right to permit or require the 

substitution of an amount of cash— 

referred to as ‘‘cash-in-lieu’’—to be 

added to the Cash Component to replace 

any Deposit Security. This might occur, 

for example, if a Deposit Security is not 

available in sufficient quantity for 

delivery, is not eligible for transfer 

through the applicable clearance and 

settlement system, or is not eligible for 

trading by an ‘‘Authorized Participant’’ 

or the investor for which an Authorized 

Participant is acting. 

To initiate a purchase order for a 

Creation Unit, an Authorized 

Participant must submit an order in 

proper form to the Distributor and such 

order must be received by the 

Distributor prior to the closing time of 

regular trading of the New York Stock 

Exchange (‘‘NYSE’’) (Closing Time) 

(ordinarily 4 p.m. Eastern time) to 

receive that day’s NAV. Authorized 

Participants must transmit orders using 

a transmission method acceptable to the 

Distributor pursuant to procedures set 

forth in the ‘‘Participant Agreement’’. 

Redemption of Shares in Creation Units 

Redemption orders must be placed by 

an Authorized Participant. Shares may 

be redeemed only in Creation Units. 

Unless cash redemptions are available 

or specified for the Fund, an investor 

tendering a Creation Unit generally will 

receive redemption proceeds consisting 

of (1) a basket of ‘‘Redemption 

Securities’’; plus (2) a redemption 

balancing amount in cash equal to the 

difference between (x) the NAV of the 

Creation Unit being redeemed, as next 

determined after receipt of a request in 

proper form, and (y) the value of the 

Redemption Securities; less (3) a 

transaction fee. If the Redemption 

Securities have a value greater than the 

NAV of a Creation Unit, the redeeming 

investor will pay the redemption 

balancing amount in cash to the Fund 

rather than receive such amount from 

the Fund. 

Vanguard, through the NSCC, will 

make available after the close of each 

business day a list of the names and the 

number of shares of each Redemption 

Security to be included in the next 

business day’s redemption basket for the 

Fund (subject to possible amendment or 

correction). The basket of Redemption 

Securities provided to an investor 

redeeming a Creation Unit may not be 

identical to the basket of Deposit 

Securities required of an investor 

purchasing a Creation Unit. If the Fund 

and a redeeming investor mutually 

agree, the Fund may provide the 

investor with a basket of Redemption 

Securities that differs from the 

composition of the redemption basket 

published through the NSCC. 

The Fund reserves the right to deliver 

cash in lieu of any Redemption Security 

for the same reason it might accept cash 

in lieu of a Deposit Security, or if the 

Fund could not lawfully deliver the 

security or could not do so without first 

registering such security under federal 

or state law. 

If an Authorized Participant, or a 

redeeming investor acting through an 

Authorized Participant, is subject to a 

legal restriction with respect to a 

particular security included in the 

basket of Redemption Securities, such 

investor may be paid an equivalent 

amount of cash in lieu of the security. 

The right of redemption may be 

suspended or the date of payment 

postponed with respect to the Fund (1) 

for any period during which the NYSE 

or the Exchange is closed (other than 

customary weekend and holiday 

closings), (2) for any period during 

which trading on the NYSE or the 

Exchange is suspended or restricted, (3) 

for any period during which an 

emergency exists as a result of which 

disposal of the Fund’s portfolio 

securities or determination of its NAV is 

not reasonably practical, or (4) in such 

other circumstances as the Commission 

permits. 

A creation and redemption 

transaction fee will be imposed to offset 

transfer and other transaction costs that 

may be incurred by the Fund. 

The Exchange represents that: (1) 

Except for Commentary .02(a)(2) to 

NYSE Arca Equities Rule 5.2(j)(3), the 

Shares of the Fund currently satisfy all 

of the generic listing standards under 

NYSE Arca Equities Rule 5.2(j)(3); (2) 

the continued listing standards under 

NYSE Arca Equities Rules 5.2(j)(3) and 

5.5(g)(2) applicable to Units shall apply 

to the Shares; and (3) the Trust is 

required to comply with Rule 10A–3 

under the Act 16 for the initial and 

continued listing of the Shares. In 

addition, the Exchange represents that 

the Shares will comply with all other 

requirements applicable to Units 

including, but not limited to, 

requirements relating to the 

dissemination of key information such 

as the value of the Index and the 

applicable Intraday Indicative Value 

(‘‘IIV’’),17 rules governing the trading of 

equity securities, trading hours, trading 

halts, surveillance, and the Information 

Bulletin to Equity Trading Permit 

Holders (‘‘ETP Holders’’), as set forth in 

Exchange rules applicable to Units and 

prior Commission orders approving the 

generic listing rules applicable to the 

listing and trading of Units.18

The current value of the Index will be 

widely disseminated by one or more 

major market data vendors at least once 

per day, as required by NYSE Arca 

Equities Rule 5.2(j)(3), Commentary .02 

(b)(ii). The IIV for Shares of the Fund 

will be disseminated by one or more 

major market data vendors, updated at 

least every 15 seconds during the 

Exchange’s Core Trading Session, as 

required by NYSE Arca Equities Rule 

5.2(j)(3), Commentary .02(c). 

The Index value, calculated and 

disseminated at least once daily, as well 

as the components of the Index and 

their percentage weighting, will be 

available from major market data 

vendors. In addition, as disclosed in the 

Registration Statement, the portfolio of 

securities held by the Fund will be 

disclosed monthly on the Fund’s Web 

site at www.vanguard.com. 

2. Statutory Basis 

The basis under the Act for this 

proposed rule change is the requirement 

under Section 6(b)(5)19 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 


tkelley on DSK3SPTVN1PROD with NOTICES
Federal Register / Vol. 80, No. 73 / Thursday, April 16, 2015 / Notices 20533 

20FINRA surveils trading on the Exchange 

pursuant to a regulatory services agreement. The 

Exchange is responsible for FINRA’s performance 

under this regulatory services agreement. 

21See note 14, supra. 22See note 15, supra. 

be listed and traded on the Exchange 

pursuant to the initial and continued 

listing criteria in NYSE Arca Equities 

Rule 5.2(j)(3). The Exchange represents 

that trading in the Shares 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.20 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 

with other markets that are members of 

the Intermarket Surveillance Group 

(‘‘ISG’’) or with which the Exchange has 

in place a comprehensive surveillance 

sharing agreement. FINRA also can 

access data obtained from the Municipal 

Securities Rulemaking Board relating to 

municipal bond trading activity for 

surveillance purposes in connection 

with trading in the Shares. The Index 

Provider is not a broker-dealer or 

affiliated with a broker-dealer and has 

implemented procedures designed to 

prevent the use and dissemination of 

material, non-public information 

regarding the Index. As of February 7, 

2015, there were approximately 10,015 

issues in the Index. The Index meets all 

such requirements except for those set 

forth in Commentary .02(a)(2).21

Specifically, as of February 7, 2015, 

33.69% of the weight of the Index 

components have a minimum original 

principal amount outstanding of $100 

million or more. 

As of February 7, 2015, 98.72% of the 

weight of the Index components was 

composed of individual maturities that 

were part of an entire municipal bond 

offering with a minimum original 

principal amount outstanding of $100 

million or more for all maturities of the 

offering. In addition, the total dollar 

amount outstanding of issues in the 

Index was approximately $2.424 billion 

and the average dollar amount 

outstanding of issues in the Index was 

approximately $60 million. Further, the 

most heavily weighted component 

represents 0.27% of the weight of the 

Index and the five most heavily 

weighted components represent 0.96% 

of the weight of the Index.22 Therefore, 

the Exchange believes that, 

notwithstanding that the Index does not 

satisfy the criterion in NYSE Arca 

Equities Rule 5.2(j)(3), Commentary .02 

(a)(2), the Index is sufficiently broadbased to deter potential manipulation, 

given that it is composed of 

approximately 10,015 issues and 969 

unique issuers. The Index securities are 

sufficiently liquid to deter potential 

manipulation in that a substantial 

portion (98.72%) of the Index weight is 

composed of maturities that are part of 

an entire municipal bond offering with 

a minimum original principal amount 

outstanding of $100 million or more, 

and in view of the substantial total 

dollar amount outstanding and the 

average dollar amount outstanding of 

Index issues, as referenced above. In 

addition, the average daily notional 

trading volume for Index components 

for the period from January 2, 2014 to 

December 31, 2014 was $1,272,356,609 

and the sum of the notional trading 

volumes for the same period was 

$318,089,152,147. 

The Index value, calculated and 

disseminated at least once daily, as well 

as the components of the Index and 

their respective percentage weightings, 

will be available from major market data 

vendors. In addition, as disclosed in the 

Registration Statement, the portfolio of 

securities held by the Fund will be 

disclosed on the Fund’s Web site. The 

IIV for Shares of the Fund will be 

disseminated by one or more major 

market data vendors, updated at least 

every 15 seconds during the Exchange’s 

Core Trading Session. The Adviser 

represents that, within a single 

municipal bond issuer, separate issues 

by the same issuer are also likely to 

trade similarly to one another. In 

addition, the Adviser represents that 

individual CUSIPs within the Index that 

share characteristics with other CUSIPs 

have a high yield to maturity 

correlation, and frequently have a 

correlation of one or close to one. 

The proposed rule change is designed 

to promote just and equitable principles 

of trade and to protect investors and the 

public interest. In addition, a large 

amount of information is publicly 

available regarding the Fund and the 

Shares, thereby promoting market 

transparency. As disclosed in the 

Registration Statement, the Fund’s 

portfolio holdings will be periodically 

disclosed on the Fund’s Web site. 

Moreover, the IIV will be widely 

disseminated by one or more major 

market data vendors at least every 15 

seconds during the Exchange’s Core 

Trading Session. The current value of 

the Index will be disseminated by one 

or more major market data vendors at 

least once per day. Information 

regarding market price and trading 

volume of the Shares will be continually 

available on a real-time basis throughout 

the day on brokers’ computer screens 

and other electronic services, and 

quotation and last sale information will 

be available via the CTA high-speed 

line. The Web site for the Fund will 

include 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. If the Exchange 

becomes aware that the NAV is not 

being disseminated to all market 

participants at the same time, it will halt 

trading in the Shares until such time as 

the NAV is available to all market 

participants. With respect to trading 

halts, the Exchange may consider all 

relevant factors in exercising its 

discretion to halt or suspend trading in 

the Shares of the Fund. Trading also 

may be halted because of market 

conditions or for reasons that, in the 

view of the Exchange, make trading in 

the Shares inadvisable. If the IIV or the 

Index values are not being disseminated 

as required, the Corporation may halt 

trading during the day in which the 

interruption to the dissemination of the 

applicable IIV or Index value occurs. If 

the interruption to the dissemination of 

the applicable IIV or Index value 

persists past the trading day in which it 

occurred, the Corporation will halt 

trading. 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 7.34, which sets forth 

circumstances under which Shares of 

the Fund may be halted. In addition, 

investors will have ready access to 

information regarding the IIV, and 


tkelley on DSK3SPTVN1PROD with NOTICES
20534 Federal Register / Vol. 80, No. 73 / Thursday, April 16, 2015 / Notices 

23 17 CFR 200.30–3(a)(12). 

1 12 U.S.C. 5465(e)(1). 

2 17 CFR 240.19b–4(n)(1)(i). 

3 In Amendment No. 1, OCC amended the 

advance notice to include the Monthly Clearing 

Fund Sizing Procedure and the Financial Resource 

Monitoring and Call Procedure as exhibits to the 

filing, both defined hereinafter, as Exhibit 5A and 

Exhibit 5B, respectively. OCC has requested 

confidential treatment for Exhibit 5A, Exhibit 5B, 

and Exhibit 5C, referred to hereinafter, pursuant to 

Exchange Act Rule 24b–2. 

4Securities Exchange Act Release No. 74091 

(January 20, 2015), 80 FR 4001 (January 26, 2015) 

(File No. SR–OCC–2014–811). OCC also filed the 

proposal contained in the advance notice, and 

Amendment No. 1 thereto, as a proposed rule 

change, and subsequent amendment no. 1 thereto, 

under section 19(b)(1) of the Exchange Act and Rule 

19b–4 thereunder. See Securities Exchange Act 

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 exchange-traded 

product that invests principally in 

municipal 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 

comprehensive surveillance sharing 

agreement. In addition, investors will 

have ready access to information 

regarding the IIV and quotation and last 

sale information for the Shares. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purpose of the Act. The Exchange 

notes that the proposed rule change will 

facilitate the listing and trading of an 

additional type of exchange-traded 

product that invests principally in 

municipal 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 up to 90 days (i) as the 

Commission may designate if it finds 

such longer period to be appropriate 

and publishes its reasons for so finding 

or (ii) as to which the self-regulatory 

organization consents, the Commission 

will: 

(A) By order approve or disapprove 

the proposed rule change, or 

(B) institute proceedings to determine 

whether the proposed rule change 

should be disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

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

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

NYSEArca–2015–18 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–2015–18. 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 also will be available for 

inspection and copying at the principal 

offices of the Exchange and on its 

Internet Web site at www.nyse.com. 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–2015–18, and 

should be submitted on or before May 

7, 2015. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.23

Brent J. Fields, 

Secretary. 

[FR Doc. 2015–08695 Filed 4–15–15; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–74713; File No. SR–OCC– 

2014–811] 

Self-Regulatory Organizations; The 

Options Clearing Corporation; Notice 

of Filing of Amendment No. 2 to an 

Advance Notice Concerning the 

Monthly Resizing of the Clearing Fund 

and the Addition of Financial 

Resources 

April 10, 2015. 

Pursuant to section 806(e)(1) of title 

VIII of the Dodd-Frank Wall Street 

Reform and Consumer Protection Act, 

entitled the Payment, Clearing, and 

Settlement Supervision Act of 2010 1

(‘‘Payment, Clearing and Settlement 

Supervision Act’’) and Rule 19b– 

4(n)(1)(i) under the Securities Exchange 

Act of 1934 (‘‘Exchange Act’’),2 notice is 

hereby given that on March 4, 2015, The 

Options Clearing Corporation (‘‘OCC’’) 

filed with the Securities and Exchange 

Commission (‘‘Commission’’) 

Amendment no. 2 to the advance notice 

(‘‘Amendment No. 2’’) as described in 

Items I, II and III below, which Items 

have been prepared by OCC. On 

December 1, 2014, OCC originally filed 

the advance notice with the 

Commission. On December 16, 2014, 

OCC filed Amendment No.1 to the 

advance notice (‘‘Amendment No. 1’’), 

which amended and replaced, in its 

entirety, the advance notice as originally 

filed on December 1, 2014.3

Amendment No. 1 to the advance notice 

was published for comment in the 

Federal Register on January 26, 2015.4


tkelley on DSK3SPTVN1PROD with NOTICES