2850 Federal Register / Vol. 83, No. 13 / Friday, January 19, 2018 / Notices 

12 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 81842 

(October 10, 2017), 82 FR 48127. 

4 15 U.S.C. 78s(b)(2). 

5See Securities Exchange Act Release No. 82176, 

82 FR 57497 (December 5, 2017). The Commission 

designated January 14, 2018, as the date by which 

it shall approve or disapprove, or institute 

proceedings to determine whether to disapprove, 

the proposed rule change. 

6 In Amendment No. 6, which amended and 

superseded the proposed rule change as modified 

by Amendment Nos. 1, 2, 3, 4 and 5, the Exchange: 

(1) Changed the name of the Fund; (2) represented 

that the Trust will file an amendment to the 

Registration Statement (as defined herein) as 

necessary to conform to the representations in the 

filing; (3) clarified the definitions of certain return 

factors the Adviser (as defined herein) may utilize 

as part of the Fund’s investment strategy; (4) moved 

cash and cash equivalents from the ‘‘other 

investments’’ category to the ‘‘principal 

investments’’ category; (5) provided that the Fund 

may purchase and sell foreign exchange-traded 

futures on foreign equities and foreign stock 

indexes and foreign exchange-traded options on 

foreign equity futures as part of its principal 

investments; (6) clarified that no more than 10% of 

the equity weight of the Fund’s portfolio will be 

invested in non-exchange-traded American 

Depositary Receipts; (7) provided additional 

information regarding the Fund’s holding of nonexchange-traded contingent value rights, including 

that such holdings would be limited to 0.5% of the 

Fund’s assets by market value and that such 

holdings would not meet the criteria of 

Commentary .01(a)(1)(E) and (a)(2)(E) to NYSE Arca 

Rule 8.600–E, as further described herein; (8) 

provided that the Fund’s investment in sovereign 

obligations and obligations of supranational entities 

each is not expected to exceed 5% of the Fund’s 

assets; (9) provided additional information 

regarding the availability of information for the 

Shares; and (10) made other clarifications, 

corrections, and technical changes. Amendment No. 

6 is not subject to notice and comment because it 

does not materially alter the substance of the 

proposed rule change or raise unique or novel 

regulatory issues. All of the amendments to the 

proposed rule change are available at https://

www.sec.gov/comments/sr-nysearca-2017-87/ 

nysearca201787.htm. 

III. Date of Effectiveness of the 

Proposed Rule Change, Security-Based 

Swap Submission and Advance Notice 

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. 

The proposal shall not take effect 

until all regulatory actions required 

with respect to the proposal are 

completed. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change, security-based swap submission 

or advance notice 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– 

ICEEU–2017–017 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–ICEEU–2017–017. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change, security-based swap submission 

or advance notice that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change, security-based 

swap submission or advance notice 

between the Commission and any 

person, other than those that may be 

withheld from the public in accordance 

with the provisions of 5 U.S.C. 552, will 

be available for website viewing and 

printing in the Commission’s Public 

Reference Section, 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 

filings will also be available for 

inspection and copying at the principal 

office of ICE Clear Europe and on ICE 

Clear Europe’s website at https://

www.theice.com/notices/Notices.shtml?

regulatoryFilings. 

All comments received will be posted 

without change. Persons submitting 

comments are cautioned that we do not 

redact or edit personal identifying 

information from comment submissions. 

You should submit only information 

that you wish to make available 

publicly. All submissions should refer 

to File Number SR–ICEEU–2017–017 

and should be submitted on or before 

February 9, 2018. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.12

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–00854 Filed 1–18–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–82492; File No. SR– 

NYSEArca–2017–87] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Order Granting Approval of 

a Proposed Rule Change, as Modified 

by Amendment No. 6, To List and 

Trade Shares of the JPMorgan Long/ 

Short ETF Under NYSE Arca Rule 

8.600–E 

January 12, 2018. 

I. Introduction 

On September 26, 2017, NYSE Arca, 

Inc. (‘‘Exchange’’ or ‘‘NYSE Arca’’) filed 

with the Securities and Exchange 

Commission (‘‘Commission’’), pursuant 

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

Exchange Act of 1934 (‘‘Act’’) 1 and Rule 

19b–4 thereunder,2 a proposed rule 

change to list and trade shares 

(‘‘Shares’’) of the JPMorgan Long/Short 

ETF (‘‘Fund’’) under NYSE Arca Rule 

8.600–E. The proposed rule change was 

published for comment in the Federal 

Register on October 16, 2017.3 On 

November 17, 2017, the Exchange filed 

Amendment No. 1 to the proposed rule 

change, and on November 27, 2017, the 

Exchange filed Amendment No. 2 to the 

proposed rule change. On November 29, 

2017, pursuant to Section 19(b)(2) of the 

Act,4 the Commission designated a 

longer period within which to approve 

the proposed rule change, disapprove 

the proposed rule change, or institute 

proceedings to determine whether to 

disapprove the proposed rule change.5

On December 4, 2017, the Exchange 

filed Amendment No. 3 to the proposed 

rule change. On December 6, 2017, the 

Exchange filed Amendment No. 4 to the 

proposed rule change. On December 26, 

2017, the Exchange filed Amendment 

No. 5 to the proposed rule change. On 

January 3, 2018, the Exchange filed 

Amendment No. 6 to the proposed rule 

change.6 The Commission has received 

no comments on the proposed rule 

change. This order approves the 

proposed rule change, as modified by 

Amendment No. 6. 


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7For more information regarding the Fund and 

the Shares, see Amendment No. 6, supra note 6. 

8The Trust is registered under the Investment 

Company Act of 1940 (‘‘1940 Act’’). On July 18, 

2017, the Trust filed with the Commission an 

amendment to its registration statement on Form N– 

1A under the Securities Act of 1933 and the 1940 

Act relating to the Fund (File Nos. 333–191837 and 

811–22903) (‘‘Registration Statement’’). The 

Exchange represents that the Trust will file an 

amendment to the Registration Statement as 

necessary to conform to representations in the 

Exchange’s filing. 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. 31990 (February 9, 2016) 

(‘‘Exemptive Order’’). The Exchange represents that 

investments made by the Fund will comply with 

the conditions set forth in the Exemptive Order. 

9The Adviser is a wholly-owned subsidiary of 

JPMorgan Asset Management Holdings Inc., which 

is an indirect, wholly-owned subsidiary of 

JPMorgan Chase & Co., a bank holding company. 

The Adviser is not registered as a broker-dealer, but 

is affiliated with a broker-dealer and has 

implemented and will maintain a fire wall with 

respect to such broker-dealer affiliate regarding 

access to information concerning the composition 

of and/or changes to the Fund’s portfolio. In the 

event (a) the Adviser becomes registered as a 

broker-dealer or newly affiliated with one or more 

broker-dealers, or (b) any new adviser or subadviser is a registered broker-dealer or becomes 

affiliated with a broker-dealer, it will implement 

and maintain a fire wall with respect to its relevant 

personnel or its broker-dealer affiliate regarding 

access to information concerning the composition 

of and/or changes to the portfolio, and will be 

subject to procedures designed to prevent the use 

and dissemination of material non-public 

information regarding such portfolio. 

10The term ‘‘normal market conditions’’ is 

defined in NYSE Arca Rule 8.600–E(c)(5). 

11Each return factor represents a potential source 

of investment return that results from, among other 

things, assuming a particular risk or taking 

advantage of a behavioral bias. The exposure to 

individual return factors may vary based on the 

market opportunity of the individual return factors. 

For example, the return factors that the Adviser 

may utilize include, but are not limited to: Value 

(seek to purchase ‘‘cheap’’ stocks based on the 

ratios of their price to certain company 

characteristics and sell short stocks that are 

relatively more expensive based on the same 

considerations); Momentum (seek to capture the 

tendency that a security’s recent performance may 

continue in the near future); Size (seek to purchase 

small cap stocks and sell short large cap stocks); 

Quality (seek to buy high quality stocks and sell 

short lower ranked stocks). 

12Under normal market conditions, the Adviser 

currently expects that a significant portion of the 

Fund’s exposure will be attained through the use 

of derivatives in addition to its exposure through 

direct investment. Derivatives will primarily be 

used as an efficient means of implementing a 

particular strategy in order to gain exposure to a 

desired return factor. Derivatives may also be used 

to increase gain, to effectively gain targeted 

exposure from cash positions, to hedge various 

investments, and/or for risk management. 

13 Depositary Receipts include American 

Depositary Receipts (‘‘ADRs’’), Global Depositary 

Receipts, and European Depositary Receipts. No 

more than 10% of the equity weight of the Fund’s 

portfolio will be invested in non-exchange traded 

ADRs. 

14Bank obligations include bankers’ acceptances, 

certificates of deposit, and time deposits. 

II. The Exchange’s Description of the 

Proposed Rule Change, as Modified by 

Amendment No. 6 7

The Exchange proposes to list and 

trade Shares of the Fund under NYSE 

Arca Rule 8.600–E, which governs the 

listing and trading of Managed Fund 

Shares on the Exchange. The Fund is a 

series of J.P. Morgan Exchange-Traded 

Fund Trust (‘‘Trust’’), a Delaware 

statutory trust.8 J.P. Morgan Investment 

Management Inc. (‘‘Adviser’’) will be 

the investment adviser to the Fund and 

will also provide administrative services 

for and oversee the other service 

providers for the Fund.9 JPMorgan 

Distribution Services, Inc. will be the 

distributor of the Fund’s Shares. 

According to the Exchange, the Fund 

will seek to provide long-term total 

return. Under normal market 

conditions,10 the Fund will employ the 

‘‘Equity Long/Short’’ strategy to access 

certain return factors.11 The strategy 

will involve simultaneously investing in 

equities (investing long) that the 

Adviser believes are attractive based on 

relevant return factors and selling 

equities (selling short) that the Adviser 

believes are unattractive based on 

relevant return factors. The Fund will 

generally invest its assets globally to 

gain exposure, either directly or through 

the use of derivatives, to equity 

securities (across market capitalizations) 

in developed markets.12

A. Principal Investments 

According to the Exchange, under 

normal market conditions, at least 80% 

of the Fund’s assets will be invested in 

the securities and financial instruments 

described below. 

The Fund may invest in U.S. and 

foreign exchange-listed common stocks 

of U.S. and foreign corporations, U.S. 

and foreign exchange-listed preferred 

stocks of U.S. and foreign corporations, 

U.S. and foreign exchange-listed 

warrants of U.S. and foreign 

corporations, U.S. and foreign exchangelisted rights of U.S. and foreign 

corporations, and U.S. and foreign 

exchange-listed master limited 

partnerships (‘‘MLPs’’). 

The Fund may purchase and sell U.S. 

exchange-traded futures on U.S. and 

foreign equities, U.S. exchange-traded 

options on U.S. and foreign equity 

futures, and U.S. exchange-traded 

futures on U.S. and foreign stock 

indexes, foreign exchange-traded futures 

on foreign equities and foreign stock 

indexes, and foreign exchange-traded 

options on foreign equity futures. 

The Fund may invest in over-thecounter (‘‘OTC’’) and U.S. exchangetraded call and put options on equity 

securities and equity securities indexes. 

The Fund may invest in OTC total 

return swaps on U.S. and foreign 

equities and U.S. and foreign equity 

indices. 

The Fund may invest in forward 

currency transactions. Such investments 

consist of non-deliverable forwards, 

foreign forward currency contracts, 

caps, and floors. 

The Fund may invest in exchangelisted real estate investment trusts 

(‘‘REITs’’) that will be traded on U.S. 

national securities exchanges and on 

non-U.S. exchanges. 

The Fund may invest in U.S. and 

foreign exchange-listed and OTC 

Depositary Receipts.13

The Fund may invest in OTC-traded 

convertible securities (bonds or 

preferred stock that can convert to 

common stock). 

The Fund may invest in cash and cash 

equivalents, which are investments in 

money market funds (including funds 

for which the Adviser and/or its 

affiliates may serve as investment 

adviser or administrator), bank 

obligations,14 and commercial paper. 

B. Other Investments 

While the Fund, under normal market 

conditions, will invest at least 80% of 

its assets in the securities and financial 

instruments described above, the Fund 

may invest its remaining assets in other 

assets and financial instruments, as 

described below. 

The Fund may invest in U.S. 

Government obligations, which may 

include direct obligations of the U.S. 

Treasury, including Treasury bills, 

notes, and bonds, all of which are 

backed as to principal and interest 

payments by the full faith and credit of 

the United States, and separately traded 

principal and interest component parts 

of such obligations that are transferable 

through the Federal book-entry system 

known as Separate Trading of 

Registered Interest and Principal of 

Securities and Coupons Under Book 

Entry Safekeeping. 

The Fund may invest in U.S. and 

foreign corporate debt. 

The Fund may invest in sovereign 

obligations, which are investments in 

debt obligations issued or guaranteed by 

a foreign sovereign government or its 

agencies, authorities, or political 

subdivisions. The Fund may also invest 

in obligations of supranational entities, 

including securities designated or 

supported by governmental entities to 

promote economic reconstruction or 

development of international banking 

institutions and related government 

agencies. 

The Fund may invest in spot currency 

transactions. 


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15The Exchange states that, for the purposes of 

the filing, CVRs are rights provided to shareholders 

of a company in connection with a corporate 

restructuring or acquisition. These rights relate to 

additional benefits to shareholders if a certain event 

occurs. CVRs frequently have an expiration date 

relating to the times that contingent events must 

occur. CVRs related to a company’s stock are 

generally related to the price performance of such 

stock. 

16The Fund’s broad-based securities benchmark 

index will be identified in a future amendment to 

the Registration Statement following the Fund’s 

first full calendar year of performance. 

17Commentary .01(a)(1)(F) to NYSE Arca Rule 

8.600–E provides that ADRs in a portfolio may be 

exchange-traded or non-exchange-traded, but no 

more than 10% of the equity weight of a portfolio 

may consist of non-exchange-traded ADRs. 

18See Securities Exchange Act Release No. 77904 

(May 25, 2016), 81 FR 35101 (June 1, 2016) (SR– 

NYSEArca–2016–17) (order approving listing and 

trading of shares of the JPMorgan Diversified 

Alternative ETF under NYSE Arca Equities Rule 

8.600). 

19 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

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

20 15 U.S.C. 78f(b)(5). 

The Fund may hold non-exchangetraded contingent value rights 

(‘‘CVRs’’).15

The Fund may invest in Rule 144A 

securities and Regulation S securities. 

C. Investment Restrictions 

The Fund’s investments, including 

derivatives, will be consistent with the 

Fund’s investment objective and will 

not be used to enhance leverage 

(although certain derivatives and other 

investments may result in leverage). 

That is, while the Fund will be 

permitted to borrow as permitted under 

the 1940 Act, the Fund’s investments 

will not be used to seek performance 

that is the multiple or inverse multiple 

(e.g., 2Xs and 3Xs) of the Fund’s 

primary broad-based securities 

benchmark index (as defined in Form 

N–1A).16

D. Application of Generic Listing 

Requirements 

According to the Exchange, the 

Fund’s portfolio will not meet all of the 

generic listing requirements of 

Commentary .01 to NYSE Arca Rule 

8.600–E. Specifically, the Fund will 

meet all the requirements of NYSE Arca 

Rule 8.600–E except for those set forth 

in Commentary .01(a)(1)(E) and 

Commentary .01(a)(2)(E) relating to nonexchange-traded CVRs, Commentary 

.01(e), and Commentary .01(b)(3). 

Commentary .01(a)(1)(E) to NYSE 

Arca Rule 8.600–E requires that, on both 

an initial and continuing basis, the 

component stocks of the equity portion 

of a portfolio that are U.S. Component 

Stocks (as described in NYSE Arca Rule 

5.2–E(j)(3)) be listed on a national 

securities exchange and be NMS Stocks 

as defined in Rule 600 of Regulation 

NMS under the Act.17 Commentary 

.01(a)(2)(E) to NYSE Arca Rule 8.600–E 

requires that, on both an initial and 

continuing basis, the component stocks 

of the equity portion of a portfolio that 

are Non-U.S. Component Stocks (as 

described in NYSE Arca Rule 5.2– 

E(j)(3)) be listed and traded on an 

exchange that has last-sale reporting. 

The Exchange states that the nonexchange-traded CVRs that the Fund 

may hold would not be listed on a 

national securities exchange or an 

exchange with last sale reporting, and 

therefore would not meet the criteria of 

Commentary .01(a)(1)(E) and 

Commentary .01(a)(2)(E). The Exchange 

states that the Adviser represents that 

the Fund may at times hold a de 

minimis amount of the Fund’s assets 

(less than 0.5% by market value) in nonexchange-traded CVRs. The Exchange 

also states that the Adviser represents 

that the Fund will not actively invest in 

non-exchange-traded CVRs but may, at 

times, receive a distribution of such 

securities in connection with the Fund’s 

holdings in other securities. According 

to the Exchange, therefore, the Fund’s 

holdings in non-exchange-traded CVRs, 

if any, would not be utilized to further 

the Fund’s investment objective and 

would not be acquired as the result of 

the Fund’s voluntary investment 

decisions. 

Commentary .01(e) to NYSE Arca 

Rule 8.600–E requires that, on both an 

initial and continuing basis, no more 

than 20% of the assets in the Fund’s 

portfolio may be invested in OTC 

derivatives (calculated as the aggregate 

gross notional value of the OTC 

derivatives). The Exchange states that 

the aggregate gross notional value of the 

Fund’s investments in OTC derivatives 

may exceed this limit. The Exchange 

states that the Adviser intends to engage 

in strategies that utilize OTC foreign 

currency forward transactions, OTC 

total return swaps, and OTC options. 

According to the Exchange, because 

foreign currency forward transactions 

and total return swaps will be traded 

OTC, it would not be possible to 

implement these strategies efficiently 

using listed derivatives. In addition, use 

of OTC options on equity securities and 

equity securities indexes may be an 

important means to reduce risk in the 

Fund’s equity investments, or, 

depending on market conditions, to 

enhance returns of such investments. 

The Exchange states that if the Fund 

were limited to investing up to 20% of 

assets in OTC derivatives, the Fund 

would have to exclude or underweight 

these strategies and would be less 

diversified, concentrating risk in the 

other strategies it will utilize. In 

addition, the Exchange states that the 

Adviser represents that the Fund will 

follow an investment strategy utilized 

within the JP Morgan Diversified 

Alternative ETF, shares of which have 

previously been approved by the 

Commission for Exchange listing and 

trading.18

Commentary .01(b)(3) to NYSE Arca 

Rule 8.600–E provides that a portfolio 

(excluding exempted securities) that 

includes fixed income securities shall 

include a minimum of 13 non-affiliated 

issuers, provided, however, that there 

shall be no minimum number of nonaffiliated issuers required for fixed 

income securities if at least 70% of the 

weight of the portfolio consists of equity 

securities as described in Commentary 

.01(a) to NYSE Arca Rule 8.600–E. The 

Exchange states that the Fund’s 

investment in fixed income securities 

will not meet this requirement. 

However, the Exchange represents that 

the Fund’s investment in corporate debt 

will not exceed 5% of the Fund’s assets, 

the Fund’s investment in OTC-traded 

convertible securities also will not 

exceed 5% of the Fund’s assets, and the 

Fund’s investment in sovereign 

obligations and obligations of 

supranational entities each is not 

expected to exceed 5% of the Fund’s 

assets. The Exchange also states the 

Adviser’s belief that it is appropriate to 

permit a small investment in corporate 

debt, OTC-traded convertible securities, 

sovereign obligations, and obligations of 

supranational entities in order to permit 

the Fund to diversify its investments to 

enhance investor returns. According to 

the Exchange, because such investments 

would be limited and are not expected 

to exceed 20% of the Fund’s assets in 

the aggregate, it would be difficult for 

the Fund to diversify such investments 

in order to comply with the requirement 

that fixed income securities include at 

least 13 non-affiliated issuers. 

III. Discussion and Commission’s 

Findings 

After careful review, the Commission 

finds that the proposed rule change, as 

modified by Amendment No. 6, is 

consistent with the Act and the rules 

and regulations thereunder applicable to 

a national securities exchange.19 In 

particular, the Commission finds that 

the proposed rule change, as modified 

by Amendment No. 6, is consistent with 

Section 6(b)(5) of the Act,20 which 

requires, among other things, that the 

Exchange’s rules be designed to prevent 

fraudulent and manipulative acts and 


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21The Exchange states that the Fund’s 

investments in derivative instruments will be made 

in accordance with the 1940 Act and consistent 

with the Fund’s investment objective and policies. 

To limit the potential risk associated with such 

transactions, the Fund will segregate or ‘‘earmark’’ 

assets determined to be liquid by the Adviser in 

accordance with procedures established by the 

Trust’s Board of Trustees and in accordance with 

the 1940 Act (or, as permitted by applicable 

regulation, enter into certain offsetting positions) to 

cover its obligations under derivative instruments. 

The Exchange states that these procedures have 

been adopted consistent with Section 18 of the 1940 

Act and related Commission guidance. In addition, 

the Fund will include appropriate risk disclosure in 

its offering documents, including leveraging risk. 

22The Exchange states that the Adviser represents 

that it is not possible to implement its strategies 

efficiently using listed derivatives because the 

foreign currency forward transactions and total 

return swaps in which the Fund may invest will be 

traded OTC. The Exchange also states that use of 

OTC options on equity securities and equity 

securities indexes may be an important means to 

reduce risk in the Fund’s equity investments. 

23As noted above, the Adviser represents that the 

Fund will follow an investment strategy utilized by 

the JP Morgan Diversified Alternative ETF, shares 

of which were previously approved for Exchange 

listing and trading by the Commission. See supra 

note 18 and accompanying text. 

24NYSE Arca Rule 8.600–E(c)(2) requires that the 

website for each series of Managed Fund Shares 

disclose the following information regarding the 

Disclosed Portfolio, to the extent applicable: (A) 

Ticker symbol; (B) CUSIP or other identifier; (C) 

description of the holding; (D) with respect to 

holdings in derivatives, the identity of the security, 

commodity, index or other asset upon which the 

derivative is based; (E) the strike price for any 

options; (F) the quantity of each security or other 

asset held as measured by (i) par value, (ii) notional 

value, (iii) number of shares, (iv) number of 

contracts, and (v) number of units; (G) maturity 

date; (H) coupon rate; (I) effective date; (J) market 

value; and (K) percentage weighting of the holding 

in the portfolio. 

25 15 U.S.C. 78k–1(a)(1)(C)(iii). 

26Currently, 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. 

practices, to promote just and equitable 

principles of trade, to remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system, and, in 

general, to protect investors and the 

public interest. 

As noted above, the Fund’s 

investment in non-exchange-traded 

CVRs would not comply with either 

Commentary .01(a)(1)(E) to NYSE Arca 

Rule 8.600–E, which requires the U.S. 

Component Stocks in the portfolio to be 

listed on a national securities exchange 

and to be NMS Stocks, or Commentary 

.01(a)(2)(E) to NYSE Arca Rule 8.600–E, 

which requires the Non-U.S. 

Component Stocks in the portfolio to be 

listed and traded on an exchange with 

last sale reporting. As proposed, the 

Fund may at times hold a de minimis 

amount of the Fund’s assets (less than 

0.5% by market value) in non-exchangetraded CVRs. Also, the Fund will not 

actively invest in non-exchange-traded 

CVRs but may, at times, receive a 

distribution of such securities in 

connection with the Fund’s holdings in 

other securities. 

In addition, as noted above, the 

aggregate gross notional value of the 

Fund’s investments in OTC derivatives 

may exceed the 20% limit in 

Commentary .01(e) to NYSE Arca Rule 

8.600–E.21 The Exchange states that the 

20% limit could result in the Fund 

being unable to fully pursue its 

investment objective while attempting 

to sufficiently mitigate investment risks. 

According to the Exchange, if the Fund 

were limited to investing up to 20% of 

its assets in OTC derivatives, the Fund 

would have to exclude or underweight 

the strategies utilizing OTC derivatives 

and the Fund would be less diversified, 

concentrating risk in the other strategies 

it plans to utilize.22 In addition, the 

Exchange states that the inability of the 

Fund to adequately hedge its holdings 

would effectively limit the Fund’s 

ability to invest in certain instruments, 

or could expose the Fund to additional 

investment risk. The Exchange also 

states that suitable derivative 

transactions may be an efficient 

alternative for the Fund to obtain the 

desired asset exposure because the 

markets for certain assets, or the assets 

themselves, may be unavailable or cost 

prohibitive as compared to derivative 

instruments. Furthermore, the Exchange 

states that OTC derivatives may be 

tailored more specifically than the 

available listed derivatives to the assets 

held by the Fund.23 As proposed, on a 

daily basis, the Fund will disclose on its 

website the information regarding the 

Disclosed Portfolio required under 

NYSE Arca Rule 8.600–E(c)(2) to the 

extent applicable.24 The website 

information will be publicly available at 

no charge. The Exchange represents that 

the Fund’s disclosure of derivative 

positions in the Disclosed Portfolio will 

include information that market 

participants can use to value the 

derivative positions intraday. 

Finally, as noted above, the Fund’s 

investment in fixed income securities 

will not meet the requirement for 13 

non-affiliated issuers in Commentary 

.01(b)(3) to NYSE Arca Rule 8.600–E. As 

proposed, the Fund’s investment in 

corporate debt will not exceed 5% of the 

Fund’s assets, the Fund’s investment in 

OTC-traded convertible securities will 

not exceed 5% of the Fund’s assets, and 

the Fund’s investment in sovereign 

obligations and obligations of 

supranational entities each is not 

expected to exceed 5% of the Fund’s 

assets. According to the Exchange, 

because these investments would be 

limited and are not expected to exceed 

20% of the Fund’s assets in the 

aggregate, it would be difficult for the 

Fund to diversify such investments in 

order to comply this requirement. The 

Exchange also states the Adviser’s belief 

that it is appropriate to permit a small 

investment in corporate debt, OTCtraded convertible securities, sovereign 

obligations, and obligations of 

supranational entities in order to permit 

the Fund to diversify its investments to 

enhance investor returns. 

The Commission notes that, other 

than Commentary .01(a)(1)(E) and 

Commentary .01(a)(2)(E) relating to nonexchange-traded CVRs, Commentary 

.01(e), and Commentary .01(b)(3), the 

Fund will meet all the requirements of 

NYSE Arca Rule 8.600–E. 

The Commission also finds that the 

proposal is consistent with Section 

11A(a)(1)(C)(iii) of the Act,25 which sets 

forth Congress’s finding that it is in the 

public interest and appropriate for the 

protection of investors and the 

maintenance of fair and orderly markets 

to assure the availability to brokers, 

dealers, and investors of information 

with respect to quotations for, and 

transactions in, securities. Quotation 

and last-sale information for the Shares 

will be available via the CTA high-speed 

line. The Portfolio Indicative Value 

(‘‘PIV’’) for the Fund, as defined in 

NYSE Arca Rule 8.600–E(c)(3), will be 

widely disseminated by one or more 

major market data vendors at least every 

15 seconds during the Exchange’s Core 

Trading Session.26 Information 

regarding market price and trading 

volume for the Shares will be 

continually available on a real-time 

basis throughout the day on brokers’ 

computer screens and other electronic 

services. Information regarding the 

previous day’s closing price and trading 

volume information for the Shares will 

be published daily in the financial 

section of newspapers. 

Quotation and last sale information 

for portfolio holdings of the Fund that 

are U.S. exchange-listed, including 

common stocks, warrants, rights, MLPs, 

preferred stocks, REITs, and Depositary 

Receipts will be available via the CTA 

high speed line. Quotation and last sale 

information for such U.S. exchangelisted securities, as well as U.S. and 

foreign exchange-traded futures and 

options on futures, will be available 

from the exchanges 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. 


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2854 Federal Register / Vol. 83, No. 13 / Friday, January 19, 2018 / Notices 

27The Exchange also represents that an 

investment adviser to an open-end fund is required 

to be registered under the Investment Advisers Act 

of 1940. 

28See NYSE Arca Rule 8.600–E(d)(2)(B)(ii). 

29The Exchange states that FINRA conducts 

cross-market surveillances on behalf of the 

Exchange pursuant to a regulatory services 

agreement, and that the Exchange is responsible for 

FINRA’s performance under this regulatory services 

agreement. 

30See 17 CFR 240.10A–3. 

31The Commission notes that certain proposals 

for the listing and trading of exchange-traded 

products include a representation that the exchange 

will ‘‘surveil’’ for compliance with the continued 

listing requirements. See, e.g., Securities Exchange 

Act Release No. 77499 (April 1, 2016), 81 FR 20428, 

20432 (April 7, 2016) (SR–BATS–2016–04). In the 

context of this representation, it is the 

Commission’s view that ‘‘monitor’’ and ‘‘surveil’’ 

both mean ongoing oversight of compliance with 

the continued listing requirements. Therefore, the 

Quotation and last sale information for 

foreign exchange-listed equity securities 

will be available from the exchanges on 

which they trade and from major market 

data vendors, as applicable. Price 

information for preferred stocks and 

non-exchange-traded CVRs will be 

available from one or more major market 

data vendors or from broker-dealers. 

Quotation information for OTC options, 

cash equivalents, swaps, obligations of 

supranational agencies, money market 

funds, U.S. Government obligations, 

U.S. Government agency obligations, 

sovereign obligations, repurchase and 

reverse repurchase agreements, and U.S. 

and foreign corporate debt 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. Forwards 

and spot currency price information 

will be available from major market data 

vendors. Price information for OTC 

Depositary Receipts, convertible 

securities, 144A securities and 

Regulation S securities is available from 

major market data vendors. In addition, 

the Fund’s website, which will be 

publicly available prior to the public 

offering of the Shares, will include a 

form of the prospectus for the Fund and 

additional data relating to NAV and 

other applicable quantitative 

information. 

The Commission also believes that the 

proposal is reasonably designed to 

promote fair disclosure of information 

that may be necessary to price the 

Shares appropriately and to prevent 

trading when a reasonable degree of 

transparency cannot be assured. The 

Exchange will obtain a representation 

from the issuer of the Shares that the 

NAV per Share will be calculated daily 

and that the NAV and the Disclosed 

Portfolio will be made available to all 

market participants at the same time. 

Trading in the Shares will be halted if 

the circuit-breaker parameters in NYSE 

Arca Rule 7.12–E have been reached. 

Trading also may be halted because of 

market conditions or for reasons that, in 

the view of the Exchange, make trading 

in the Shares inadvisable. Moreover, 

trading in the Shares will be subject to 

NYSE Arca Rule 8.600–E(d)(2)(D), 

which sets forth circumstances under 

which Shares may be halted. 

The Exchange states that it has a 

general policy prohibiting the 

distribution of material, non-public 

information by its employees. The 

Exchange states that the Adviser is not 

registered as a broker-dealer but is 

affiliated with a broker-dealer and has 

implemented and will maintain a fire 

wall with respect to that broker-dealer 

affiliate regarding access to information 

concerning the composition of and/or 

changes to the Fund’s portfolio.27

Further, the Commission notes that the 

Reporting Authority that provides the 

Disclosed Portfolio must implement and 

maintain, or be subject to, procedures 

designed to prevent the use and 

dissemination of material, non-public 

information regarding the actual 

components of the portfolio.28

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. In support of this 

proposal, the Exchange represents that: 

(1) Other than Commentary .01(a)(1)(E) and 

Commentary .01(a)(2)(E) with respect to 

investments in non-exchange-traded CVRs, 

Commentary .01(e), and Commentary 

.01(b)(3), the Fund will meet all other 

requirements of NYSE Arca Rule 8.600–E. 

(2) A minimum of 100,000 Shares of the 

Fund will be outstanding at the 

commencement of trading on the Exchange. 

(3) Trading in the Shares will be subject to 

the existing trading surveillances 

administered by the Exchange, as well as 

cross-market surveillances administered by 

the Financial Industry Regulatory Authority 

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

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 applicable 

federal securities laws.29

(4) The Exchange or FINRA, on behalf of 

the Exchange, or both, will communicate as 

needed regarding trading in the Shares, 

certain exchange-listed equity securities, 

certain futures, and certain exchange-traded 

options with other markets and other entities 

that are members of the Intermarket 

Surveillance Group (‘‘ISG’’), and the 

Exchange or FINRA, on behalf of the 

Exchange, or both, may obtain trading 

information regarding trading such securities 

and financial instruments from such markets 

and other entities. In addition, the Exchange 

may obtain information regarding trading in 

such securities and financial instruments 

from markets and other entities that are 

members of ISG or with which the Exchange 

has in place a comprehensive surveillance 

sharing agreement. 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. 

(5) Prior to the commencement of trading, 

the Exchange will inform its Equity Trading 

Permit Holders in an Information Bulletin of 

the special characteristics and risks 

associated with trading the Shares. 

Specifically, the Information Bulletin will 

discuss: (a) The procedures for purchases and 

redemptions of Shares in creation units (and 

that Shares are not individually redeemable); 

(b) NYSE Arca Rule 9.2–E(a), which imposes 

a duty of due diligence on its Equity Trading 

Permit Holders to learn the essential facts 

relating to every customer prior to trading the 

Shares; (c) the risks involved in trading the 

Shares during the Early and Late Trading 

Sessions when an updated PIV will not be 

calculated or publicly disseminated; (d) how 

information regarding the PIV and the 

Disclosed Portfolio is disseminated; (e) the 

requirement that Equity Trading Permit 

Holders deliver a prospectus to investors 

purchasing newly issued Shares prior to or 

concurrently with the confirmation of a 

transaction; and (f) trading information. 

(6) The Exchange has appropriate rules to 

facilitate transactions in the Shares during all 

trading sessions. 

(7) For initial and continued listing, the 

Fund will be in compliance with Rule 10A– 

3 under the Act.30

(8) The Fund’s investments, including 

derivatives, will be consistent with the 

Fund’s investment objective and will not be 

used to enhance leverage. That is, while the 

Fund will be permitted to borrow as 

permitted under the 1940 Act, the Fund’s 

investments will not be used to seek 

performance that is the multiple or inverse 

multiple (e.g., 2Xs and 3Xs) of the Fund’s 

primary broad-based securities benchmark 

index (as defined in Form N–1A). 

The Exchange represents that all 

statements and representations made in 

the filing regarding: (1) The description 

of the portfolio holdings or reference 

assets; (2) limitations on portfolio 

holdings or reference assets; or (3) the 

applicability of Exchange listing rules 

specified in the rule filing constitute 

continued listing requirements for 

listing the Shares on the Exchange. In 

addition, the issuer has represented to 

the Exchange that it will advise the 

Exchange of any failure by the Fund to 

comply with the continued listing 

requirements and, pursuant to its 

obligations under Section 19(g)(1) of the 

Act, the Exchange will monitor 31 for 


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Federal Register / Vol. 83, No. 13 / Friday, January 19, 2018 / Notices 2855 

Commission does not view ‘‘monitor’’ as a more or 

less stringent obligation than ‘‘surveil’’ with respect 

to the continued listing requirements. 

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

33 15 U.S.C. 78k–1(a)(1)(C)(iii). 

34 15 U.S.C. 78s(b)(2). 

35 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3As discussed in further detail herein, ICE Clear 

Europe is required to establish a recovery plan 

under relevant provisions of the UK Financial 

Services and Markets Act 2000 (Recognition 

Requirements for Investment Exchanges and 

Clearing Houses) Regulations 2001 (SI/2001/1995) 

and Commission Rule 17Ad–22(e)(3)(ii), 17 CFR 

240.17Ad–22(e)(3)(ii). 

The Plan is also designed to be consistent with 

the Committee on Payments and Market 

Infrastructures (‘‘CPMI’’)—International 

Organization of Securities Commissions (‘‘IOSCO’’) 

Principles for Financial Market Infrastructures 

(‘‘PFMIs’’), including supplemental guidance from 

CPMI–IOSCO which includes its report on 

‘‘Recovery of financial market infrastructures’’ 

published in October 2014 and revised July 2017 

(the ‘‘Recovery Guidance’’). 

4Capitalized terms used but not defined herein 

have the meanings specified in the Rules. 

compliance with the continued listing 

requirements. If the Fund is not in 

compliance with the applicable listing 

requirements, the Exchange will 

commence delisting procedures under 

NYSE Arca Rule 5.5–E(m). 

This approval order is based on all of 

the Exchange’s statements and 

representations, including those set 

forth above and in Amendment No. 6. 

For the foregoing reasons, the 

Commission finds that the proposed 

rule change, as modified by Amendment 

No. 6, is consistent with Section 6(b)(5) 

of the Act 32 and Section 

11A(a)(1)(C)(iii) of the Act 33 and the 

rules and regulations thereunder 

applicable to a national securities 

exchange. 

IV. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,34 that the 

proposed rule change (SR–NYSEArca– 

2017–87), as modified by Amendment 

No. 6, be, and it hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.35

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–00849 Filed 1–18–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–82496; File No. SR–ICEEU– 

2017–016] 

Self-Regulatory Organizations; ICE 

Clear Europe Limited; Notice of 

Proposed Rule Change, SecurityBased Swap Submission or Advance 

Notice Relating to the ICE Clear 

Europe Recovery Plan 

January 12, 2018. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that on December 

29, 2017, ICE Clear Europe Limited 

(‘‘ICE Clear Europe’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’) the proposed rule 

changes described in Items I, II and III 

below, which Items have been prepared 

by ICE Clear Europe. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Clearing Agency’s Statement of the 

Terms of Substance of the Proposed 

Rule Change, Security-Based Swap 

Submission, or Advance Notice 

Consistent with its obligations under 

applicable laws and regulations,3 ICEU 

has adopted a Recovery Plan identifying 

certain critical clearing services it 

provides and addressing its tools, 

mechanisms and options for addressing 

scenarios that threaten its ability to 

continue to provide such services. 

II. Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change, Security-Based 

Swap Submission or Advance Notice 

In its filing with the Commission, ICE 

Clear Europe 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. ICE 

Clear Europe has prepared summaries, 

set forth in sections (A), (B), and (C) 

below, of the most significant aspects of 

such statements. 

(A) Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change, Security-Based 

Swap Submission or Advance Notice 

(a) Purpose 

Consistent with its obligations under 

applicable laws and regulations, ICE 

Clear Europe has adopted a Recovery 

Plan. The Recovery Plan is based on, 

and is intended to be consistent with, 

ICEU’s Clearing Rules (the ‘‘Rules’’) 4

and Procedures, as well as its existing 

risk management frameworks, policies 

and procedures. 

Overview of the Recovery Plan 

The Recovery Plan identifies the 

critical services that ICEU provides, and 

the business functions that support 

those services. In ICEU’s view, its 

clearing services (for both the F&O and 

CDS product categories), and its related 

treasury and banking services, represent 

its critical services. The Recovery Plan 

outlines a number of firm-specific and 

market-wide stress scenarios that, in 

ICEU’s determination, may result in 

significant losses or liquidity shortfall, 

suspension or failure of its critical 

services and related functions and 

systems, and damage to other market 

infrastructure, with resulting 

uncertainty in the markets for which 

ICEU clears. These include both losses 

from Clearing Member default and nondefault loss scenarios. The Recovery 

Plan further evaluates different impact 

categories and severity levels of these 

stress scenarios. The Recovery Plan then 

addresses the tools, mechanisms and 

options (‘‘Recovery Options’’) upon 

which ICEU may draw (based on its 

existing Rules, Procedures and policies 

and frameworks) in order to address a 

stress scenario and continue to provide 

its critical services, and the actions to 

implement those options (including 

appropriate escalation and early 

warning procedures). The Recovery Plan 

also addresses communication with 

regulators and other relevant 

stakeholders and related governance 

issues. The Recovery Plan further 

considers the implications of certain 

situations that may be beyond its 

control, such as interdependencies with 

other institutions. 

The Recovery Plan also addresses the 

roles and responsibility of ICEU Board, 

management and other personnel, 

including with respect to development, 

review and approval, testing and 

maintenance and liaison with relevant 

regulatory authorities. The Recovery 

Plan also includes a description of 

ICEU, its organizational structure, its 

applicable regulatory regime and the 

standards and guidelines that have 

informed the Recovery Plan. The 

Recovery Plan is based on the Rules and 

Procedures of the clearing house as they 

are in effect, and does not itself change 

the rights and obligations of the clearing 

house or its Clearing Members 

thereunder. 

Critical Services and Functions 

As noted above, ICEU has determined 

that both its F&O and CDS product 

category clearing services, as well as its 

related treasury and banking services, 

are critical services. The Recovery Plan 

sets out the methodology used by the 

clearing house in assessing the 

criticality of services for this purpose. 

ICEU has also identified the front-end 

business functions and support areas 


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