62492 Federal Register / Vol. 79, No. 201 / Friday, October 17, 2014 / Notices 

Commission notes, however, that this information 

may be available in an issuer’s prospectus. 

44AOG Letter. 

45NASAA Letter. 

46See FINRA’s First Response Letter. 

47 Id. 

48See, e.g., FINRA’s First Response Letter 

(discussing the economic impact of requiring 

‘‘independent valuations’’). 

49NASAA Letter. 

50FINRA’s First Response Letter. 

51 15 U.S.C. 78s(b)(2). 

52 17 CFR 200.30–3(a)(12). 

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

2 15 U.S.C. 78s(b)(1). 

3 17 CFR 240.19b–4. 

4A Managed Fund Share is a security that 

represents an interest in an investment company 

registered under the Investment Company Act of 

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

an open-end investment company or similar entity 

that invests in a portfolio of securities selected by 

its investment adviser consistent with its 

investment objectives and policies. In contrast, an 

open-end investment company that issues 

Investment Company Units, listed and traded on 

the Exchange under NYSE Arca Equities Rule 

5.2(j)(3), seeks to provide investment results that 

correspond generally to the price and yield 

performance of a specific foreign or domestic stock 

index, fixed income securities index or combination 

thereof. 

Commission notes that, while one 

commenter on the amended proposal 

suggested market forces should be 

sufficient to drive improvements in the 

unlisted DPP and REIT industry,44 given 

current industry practice with respect to 

disclosure of DPP and REIT values, the 

Commission believes that FINRA’s 

amended proposal is warranted. 

Also, given commenters’ concern 

regarding the complexity of calculating 

over-distributions, the Commission 

supports FINRA’s amended approach of 

requiring enhanced disclosure 

surrounding them. More specifically, 

the Commission believes that, at this 

time, this approach would improve 

investor awareness and understanding 

in a practical manner. 

In addition, one commenter on the 

amended proposal expressed concern 

that members could use the net 

investment methodology’s requirements 

concerning offering and organization 

expenses to manipulate DPP and REIT 

values.45 Under the amended proposal, 

however, if a member has reason to 

believe a calculation of the offering and 

organization expenses using the 

maximum offering percentage is 

unreliable, the member must use the 

minimum offering percentage.46

The same commenter further 

recommended that FINRA require 

disclosure of the identity of the service 

used to obtain a valuation under the 

appraised value methodology and 

clarify that such service must be 

independent.47 Regarding disclosure of 

the valuation service’s identity, the 

Commission notes that this information 

may be available through an issuer’s 

prospectus. Regarding the independence 

of the service, the amended proposal 

requires the use of a ‘‘third-party 

valuation expert,’’ which both the 

Commission and FINRA interpret as 

being an independent entity.48

Finally, the commenter opposed the 

extension of the effective date under the 

amended proposal, stating that investors 

should not have to wait for more 

transparent price reporting.49 FINRA 

extended the effective date, however, to 

provide industry participants sufficient 

time to make adjustments to product 

structures and any necessary 

operational changes, as well as to limit 

the impact of the amended proposal on 

current offerings.50

In sum, the Commission believes that 

the proposal, as amended, represents a 

significant improvement to current 

industry practice concerning the 

disclosure of the value of unlisted DPP 

and REIT securities. As amended, the 

proposal would help ensure that 

investors receive more accurate 

information regarding the nature and 

worth of their holdings of DPP and REIT 

securities. While the Commission 

believes that this outcome would 

improve accuracy and transparency and, 

consequently, investor protection, it 

will continue to monitor the activity in 

this market for potential abuses. 

For the reasons stated above, the 

Commission finds that the proposed 

rule change, as amended, is consistent 

with the Act and the rules and 

regulations thereunder. 

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,51 that the 

proposed rule change (SR–FINRA– 

2014–006), as modified by Amendment 

No. 1, be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.52

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–24681 Filed 10–16–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73342; File No. SR– 

NYSEArca–2014–114] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing of Proposed 

Rule Change To List and Trade Shares 

of the iShares Interest Rate Hedged 0– 

5 Year High Yield Bond ETF, iShares 

Interest Rate Hedged 10+ Year Credit 

Bond ETF, and the iShares Interest 

Rate Hedged Emerging Markets Bond 

ETF Under NYSE Arca Equities Rule 

8.600 

October 10, 2014. 

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

Securities Exchange Act of 1934 (the 

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

notice is hereby given that, on 

September 29, 2014, NYSE Arca, Inc. 

(the ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed 

with the Securities and Exchange 

Commission (the ‘‘Commission’’) the 

proposed rule change as described in 

Items I and II below, which Items have 

been prepared by the self-regulatory 

organization. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of the Substance 

of the Proposed Rule Change 

The Exchange proposes to list and 

trade the following under NYSE Arca 

Equities Rule 8.600 (‘‘Managed Fund 

Shares’’): iShares Interest Rate Hedged 

0–5 Year High Yield Bond ETF; iShares 

Interest Rate Hedged 10+ Year Credit 

Bond ETF; and the iShares Interest Rate 

Hedged Emerging Markets Bond ETF. 

The text of the proposed rule change is 

available on the Exchange’s Web site at 

www.nyse.com, at the principal office of 

the Exchange, and at the Commission’s 

Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

self-regulatory organization included 

statements concerning the purpose of, 

and basis for, the proposed rule change 

and discussed any comments it received 

on the proposed rule change. The text 

of those statements may be examined at 

the places specified in Item IV below. 

The Exchange has prepared summaries, 

set forth in sections A, B, and C below, 

of the most significant parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to list and 

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

under NYSE Arca Equities Rule 8.600, 

which governs the listing and trading of 

Managed Fund Shares: 4 iShares Interest 

Rate Hedged 0–5 Year High Yield Bond 

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Federal Register / Vol. 79, No. 201 / Friday, October 17, 2014 / Notices 62493 

5The Commission has previously approved 

listing and trading on the Exchange of a number of 

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

Securities Exchange Act Release Nos. 57801 (May 

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

NYSEArca–2008–31) (order approving Exchange 

listing and trading of twelve actively-managed 

funds of the WisdomTree Trust); 72138 (May 9, 

2014), 79 FR 27958 (May 15, 2014) (File No. SR– 

NYSEArca–2014–23) (order approving Exchange 

listing and trading of shares of the iShares Interest 

Rate Hedged Corporate Bond ETF and iShares 

Interest Rate Hedged High Yield Bond ETF). 

6The Trust is registered under the 1940 Act. On 

December 6, 2013, the Trust filed with the 

Commission a registration statement on Form N–1A 

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

under the 1940 Act relating to the iShares Interest 

Rate Hedged 0–5 Year High Yield Bond ETF (‘‘High 

Yield Bond Registration Statement’’); iShares 

Interest Rate Hedged 10+ Year Credit Bond ETF 

(‘‘Credit Bond Registration Statement’’); and the 

iShares Interest Rate Hedged Emerging Markets 

Bond ETF (‘‘Emerging Markets Bond Registration 

Statement’’ and, together with the High Yield Bond 

Registration Statement and the Credit Bond 

Registration Statement, the ‘‘Registration 

Statements’’) (File Nos. 333–179904 and 811– 

22649). The description of the operation of the 

Trust and the Funds herein is based, in part, on the 

Registration Statements. 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. 29571 

(File No. 812–13601) (‘‘Exemptive Order’’). 

7An investment adviser to an open-end fund is 

required to be registered under the Investment 

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

result, the Adviser and its related personnel are 

subject to the provisions of Rule 204A–1 under the 

Advisers Act relating to codes of ethics. This Rule 

requires investment advisers to adopt a code of 

ethics that reflects the fiduciary nature of the 

relationship to clients as well as compliance with 

other applicable securities laws. Accordingly, 

procedures designed to prevent the communication 

and misuse of non-public information by an 

investment adviser must be consistent with Rule 

204A–1 under the Advisers Act. In addition, Rule 

206(4)–7 under the Advisers Act makes it unlawful 

for an investment adviser to provide investment 

advice to clients unless such investment adviser has 

(i) adopted and implemented written policies and 

procedures reasonably designed to prevent 

violation, by the investment adviser and its 

supervised persons, of the Advisers Act and the 

Commission rules adopted thereunder; (ii) 

implemented, at a minimum, an annual review 

regarding the adequacy of the policies and 

procedures established pursuant to subparagraph (i) 

above and the effectiveness of their 

implementation; and (iii) designated an individual 

(who is a supervised person) responsible for 

administering the policies and procedures adopted 

under subparagraph (i) above. 

8The term ‘‘under normal circumstances’’ 

includes, but is not limited to, the absence of 

extreme volatility or trading halts in the equity 

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. 

9Futures will be exchange traded, and swaps will 

be centrally cleared. All derivatives will be 

collateralized. 

10See note 27, infra. 

ETF; iShares Interest Rate Hedged 10+ 

Year Credit Bond ETF; and the iShares 

Interest Rate Hedged Emerging Markets 

Bond ETF (each, a ‘‘Fund’’ and 

collectively, the ‘‘Funds’’). The Shares 

of the Funds will be offered by iShares 

U.S. ETF Trust (the ‘‘Trust’’).5 The Trust 

is registered with the Commission as an 

open-end management investment 

company.6 BlackRock Fund Advisors 

(‘‘BFA’’) will serve as the investment 

adviser to the Funds (the ‘‘Adviser’’). 

BFA is an indirect wholly-owned 

subsidiary of BlackRock, Inc. BlackRock 

Investments, LLC (the ‘‘Distributor’’) 

will be the principal underwriter and 

distributor of the Funds’ Shares. State 

Street Bank and Trust Company (the 

‘‘Administrator’’, ‘‘Custodian’’ or 

‘‘Transfer Agent’’) will serve as 

administrator, custodian and transfer 

agent for the Funds. 

Commentary .06 to Rule 8.600 

provides that, if the investment adviser 

to the investment company issuing 

Managed Fund Shares is affiliated with 

a broker-dealer, such investment adviser 

shall erect a ‘‘fire wall’’ between the 

investment adviser and the brokerdealer with respect to access to 

information concerning the composition 

and/or changes to such investment 

company portfolio. Commentary .06 

further requires that personnel who 

make decisions on the open-end fund’s 

portfolio composition must be subject to 

procedures designed to prevent the use 

and dissemination of material 

nonpublic information regarding the 

open-end fund’s portfolio.7 Commentary 

.06 to Rule 8.600 is similar to 

Commentary .03(a)(i) and (iii) to NYSE 

Arca Equities Rule 5.2(j)(3); however, 

Commentary .06 in connection with the 

establishment of a ‘‘fire wall’’ between 

the investment adviser and the brokerdealer reflects the applicable open-end 

fund’s portfolio, not an underlying 

benchmark index, as is the case with 

index-based funds. The Adviser is not 

registered as a broker-dealer but is 

affiliated with multiple broker-dealers 

and has implemented a ‘‘fire wall’’ with 

respect to such broker-dealers regarding 

access to information concerning the 

composition and/or changes to a Fund’s 

portfolio. In the event (a) the Adviser or 

any sub-adviser registers as a brokerdealer or becomes newly affiliated with 

a broker-dealer, or (b) any new adviser 

or sub-adviser is a registered brokerdealer, or becomes affiliated with a 

broker-dealer, it will implement a fire 

wall with respect to its relevant 

personnel or its broker-dealer affiliate 

regarding access to information 

concerning the composition and/or 

changes to a portfolio, and will be 

subject to procedures designed to 

prevent the use and dissemination of 

material non-public information 

regarding such portfolio. 

iShares Interest Rate Hedged 0–5 Year 

High Yield Bond ETF 

According to the High Yield Bond 

Registration Statement, the Fund will 

seek to mitigate the interest rate risk of 

a portfolio composed of U.S. dollardenominated, high yield corporate 

bonds with remaining maturities of less 

than five years. The Fund will seek to 

achieve its investment objective by 

investing, under normal circumstances,8

at least 80% of its net assets in U.S. 

dollar-denominated high yield corporate 

bonds with remaining maturities of less 

than five years, in one or more 

investment companies (exchange-traded 

and non-exchange-traded) that 

principally invest in high yield bonds, 

in U.S. Treasury securities (or cash 

equivalents), and by taking short 

positions in U.S. Treasury futures, other 

interest rate futures contracts, and 

interest rate swaps.9

According to the High Yield Bond 

Registration Statement, the Fund 

intends to initially invest a substantial 

portion of its assets in one underlying 

fund, the iShares 0–5 Year High Yield 

Corporate Bond ETF (the ‘‘Underlying 

High Yield Corporate Bond Fund’’). The 

Fund will attempt to mitigate the 

interest rate risk primarily through the 

use of U.S. Treasury futures contracts 

and interest rate swaps. The Fund may 

also take short positions in other 

interest rate futures contracts, including 

but not limited to, Eurodollar and 

Federal Funds futures. The Fund will 

invest only in futures contracts that are 

traded on an exchange that is a member 

of the Intermarket Surveillance Group 

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

in place a comprehensive surveillance 

sharing agreement.10

BFA will utilize a model-based 

proprietary investment process to 

assemble an investment portfolio 

comprised of (i) long positions in the 

Underlying High Yield Corporate Bond 

Fund, (ii) long positions in U.S. dollardenominated high yield corporate 

bonds, (iii) long positions in U.S. 

Treasury securities and (iv) short 

positions in U.S. Treasury futures, other 

interest rate futures contracts, and 

interest rate swaps. The short positions 

are expected to have, in the aggregate, 

approximately equivalent duration to 

the underlying securities in the 

Underlying High Yield Corporate Bond 

Fund and to the high yield corporate 

bonds. By taking these short positions, 

BFA will seek to mitigate the potential 

impact of rising interest rates on the 

performance of the Underlying High 

Yield Corporate Bond Fund and the 

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62494 Federal Register / Vol. 79, No. 201 / Friday, October 17, 2014 / Notices 

11See note 9, supra. 12See note 9, supra. 

13Circumstances under which a Fund may 

temporarily depart from its normal investment 

process include, but are not limited to, extreme 

volatility or trading halts in the equity 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 man-made disaster, act 

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

disruption or any similar intervening circumstance. 

high yield corporate bonds (conversely 

also limiting the potential positive 

impact of falling interest rates). The 

short positions will not be intended to 

mitigate other factors influencing the 

price of high yield bonds, such as credit 

risk, which may have a greater impact 

than rising or falling interest rates. 

Relative to a long-only investment in the 

same high yield bonds, the Fund’s 

investment strategy is designed to 

outperform in a rising interest rate 

environment and underperform in a 

falling interest rate environment. 

iShares Interest Rate Hedged 10+ Year 

Credit Bond ETF 

According to the Credit Bond 

Registration Statement, the Fund will 

seek to mitigate the interest rate risk of 

a portfolio composed of investmentgrade U.S. corporate bonds and U.S. 

dollar-denominated bonds, including 

those of non-U.S. corporations and 

governments, with remaining maturities 

greater than ten years. The Fund will 

seek to achieve its investment objective 

by investing, under normal 

circumstances, at least 80% of its net 

assets in investment-grade U.S. 

corporate bonds and U.S. dollardenominated bonds, including those of 

non-U.S. corporations and governments, 

with remaining maturities greater than 

ten years, in one or more investment 

companies (exchange-traded and nonexchange-traded) that principally invest 

in investment-grade bonds, in U.S. 

Treasury securities (or cash 

equivalents), and by taking short 

positions in U.S. Treasury futures, other 

interest rate futures contracts, and 

interest rate swaps.11

According to the Credit Bond 

Registration Statement, the Fund 

intends to initially invest a substantial 

portion of its assets in one underlying 

fund, the iShares 10+ Year Credit Bond 

ETF (the ‘‘Underlying Credit Bond 

Fund’’). The Fund will attempt to 

mitigate the interest rate risk primarily 

through the use of U.S. Treasury futures 

contracts and interest rate swaps. The 

Fund may also invest in other interest 

rate futures contracts, including but not 

limited to, Eurodollar and Federal 

Funds futures. The Fund will invest 

only in futures contracts that are traded 

on an exchange that is a member of the 

ISG or with which the Exchange has in 

place a comprehensive surveillance 

sharing agreement. 

BFA will utilize a model-based 

proprietary investment process to 

assemble an investment portfolio 

comprised of (i) long positions in the 

Underlying Credit Bond Fund, (ii) long 

positions in U.S. dollar-denominated 

investment-grade corporate bonds, (iii) 

long positions in U.S. Treasury 

securities, and (iv) short positions in 

U.S. Treasury futures, other interest rate 

futures contracts, and interest rate 

swaps. The short positions are expected 

to have, in the aggregate, approximately 

equivalent duration to the underlying 

securities in the Underlying Credit Bond 

Fund and to the investment-grade 

corporate bonds. By taking these short 

positions, BFA will seek to mitigate the 

potential impact of rising interest rates 

on the performance of the Underlying 

Credit Bond Fund and the investmentgrade corporate bonds (conversely also 

limiting the potential positive impact of 

falling interest rates). The short 

positions are not intended to mitigate 

other factors influencing the price of 

investment-grade bonds, such as credit 

risk, which may have a greater impact 

than rising or falling interest rates. 

Relative to a long-only investment in the 

same investment-grade bonds, the 

Fund’s investment strategy is designed 

to outperform in a rising interest rate 

environment and underperform in a 

falling interest rate environment. 

Shares Interest Rate Hedged Emerging 

Markets Bond ETF 

According to the Emerging Markets 

Bond Registration Statement, the Fund 

will seek to mitigate the interest rate 

risk of a portfolio composed of U.S. 

dollar-denominated, emerging market 

bonds. The Fund will seek to achieve its 

investment objective by investing, under 

normal circumstances, at least 80% of 

its net assets in U.S. dollar-denominated 

emerging market bonds, in one or more 

investment companies (exchange-traded 

and non-exchange-traded) that 

principally invest in emerging market 

bonds, in U.S. Treasury securities (or 

cash equivalents), and by taking short 

positions in U.S. Treasury futures, other 

interest rate futures contracts, and 

interest rate swaps.12

According to the Emerging Markets 

Bond Registration Statement, the Fund 

intends to initially invest a substantial 

portion of its assets in one underlying 

fund, the iShares J.P. Morgan USD 

Emerging Markets Bond ETF (the 

‘‘Underlying Emerging Markets Bond 

Fund’’). The Fund will attempt to 

mitigate the interest rate risk primarily 

through the use of U.S. Treasury futures 

contracts and interest rate swaps. The 

Fund may also take short positions in 

other interest rate futures contracts, 

including but not limited to, Eurodollar 

and Federal Funds futures. The Fund 

will invest only in futures contracts that 

are traded on an exchange that is a 

member of the ISG or with which the 

Exchange has in place a comprehensive 

surveillance sharing agreement. The 

Underlying Emerging Markets Bond 

Fund may invest in non-U.S. securities, 

emerging markets securities and debt 

instruments. 

BFA will utilize a model-based 

proprietary investment process to 

assemble an investment portfolio 

comprised of (i) long positions in the 

Underlying Emerging Markets Bond 

Fund, (ii) long positions in U.S. dollardenominated emerging market bonds, 

(iii) long positions in U.S. Treasury 

securities, and (iv) short positions in 

U.S. Treasury futures, other interest rate 

futures contracts, and interest rate 

swaps. The short positions are expected 

to have, in the aggregate, approximately 

equivalent duration to the underlying 

securities in the Underlying Emerging 

Markets Bond Fund and to the emerging 

market bonds. By taking these short 

positions, BFA will seek to mitigate the 

potential impact of rising interest rates 

on the performance of the Underlying 

Emerging Markets Bond Fund and the 

emerging market bonds (conversely also 

limiting the potential positive impact of 

falling interest rates). The short 

positions are not intended to mitigate 

other factors influencing the price of 

emerging market bonds, such as credit 

risk, which may have a greater impact 

than rising or falling interest rates. 

Relative to a long-only investment in the 

same emerging market bonds, the 

Fund’s investment strategy is designed 

to outperform in a rising interest rate 

environment and underperform in a 

falling interest rate environment. 

Other Investments 

While each Fund, under normal 

circumstances, will invest at least 80% 

of its net assets in its investments as 

described above, a Fund may directly 

invest in certain other investments, as 

described below. The Funds may 

temporarily depart from its normal 

investment process,13 provided that the 

alternative, in the opinion of BFA, is 

consistent with a Fund’s investment 

objective and is in the best interest of a 

Fund. However, BFA will not seek to 

actively time market movements. 

A Fund may hold up to an aggregate 

amount of 15% of its net assets in 

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Federal Register / Vol. 79, No. 201 / Friday, October 17, 2014 / Notices 62495 

14 In reaching liquidity decisions, the Adviser 

may consider factors including: The frequency of 

trades and quotes for the security; the number of 

dealers wishing to purchase or sell the security and 

the number of other potential purchasers; dealer 

undertakings to make a market in the security; the 

nature of the security and the nature of the 

marketplace in which it trades (e.g., the time 

needed to dispose of the security, the method of 

soliciting offers and the mechanics of transfer); any 

legal or contractual restrictions on the ability to 

transfer the security or asset; significant 

developments involving the issuer or counterparty 

specifically (e.g., default, bankruptcy, etc.) or the 

securities markets generally; and settlement 

practices, registration procedures, limitations on 

currency conversion or repatriation, and transfer 

limitations (for foreign securities or other assets). 

15The Commission has stated that long-standing 

Commission guidelines have required open-end 

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

in illiquid securities and other illiquid assets. See 

Investment Company Act Release No. 28193 (March 

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

34. See also, Investment Company Act Release No. 

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

31, 1970) (Statement Regarding ‘‘Restricted 

Securities’’); Investment Company Act Release No. 

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

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

fund’s portfolio security is illiquid if it cannot be 

disposed of in the ordinary course of business 

within seven days at approximately the value 

ascribed to it by the fund. See Investment Company 

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

9773 (March 21, 1986) (adopting amendments to 

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

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

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

under the Securities Act of 1933). 

16Each of the Underlying High Yield Corporate 

Bond Fund, Underlying Credit Bond Fund, and 

Underlying Emerging Markets Bond Fund, are 

referred to herein as an ‘‘Underlying Fund,’’ or, 

collectively, the ‘‘Underlying Funds’’. 

17The diversification standard is set forth in 

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

18See Form N–1A, Item 9. The Commission has 

taken the position that a fund is concentrated if it 

invests more than 25% of the value of its total 

assets in any one industry. See, e.g., Investment 

Company Act Release No. 9011 (October 30, 1975), 

40 FR 54241 (November 21, 1975). 

19 26 U.S.C. 851 et seq. 

20 17 CFR 240.10A–3. 

illiquid assets (calculated at the time of 

investment), including Rule 144A 

securities deemed illiquid by the 

Adviser, consistent with Commission 

guidance.14 Each 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 a Fund’s net assets are held in 

illiquid assets. Illiquid assets include 

assets subject to contractual or other 

restrictions on resale and other 

instruments that lack readily available 

markets as determined in accordance 

with Commission staff guidance.15

Each Fund may invest in repurchase 

and reverse repurchase agreements. A 

repurchase agreement is an instrument 

under which the purchaser (i.e., a Fund 

or an ‘‘Underlying Fund’’ 16) acquires 

the security and the seller agrees, at the 

time of the sale, to repurchase the 

security at a mutually agreed upon time 

and price, thereby determining the yield 

during the purchaser’s holding period. 

Reverse repurchase agreements involve 

the sale of securities with an agreement 

to repurchase the securities at an 

agreed-upon price, date and interest 

payment and have the characteristics of 

borrowing. 

Each Fund may invest in money 

market instruments on an ongoing basis 

to provide liquidity or for other reasons. 

Money market instruments are generally 

short-term investments that may include 

but are not limited to: (i) Shares of 

money market funds (including those 

advised by BFA or otherwise affiliated 

with BFA); (ii) obligations issued or 

guaranteed by the U.S. government, its 

agencies or instrumentalities (including 

government-sponsored enterprises); (iii) 

negotiable certificates of deposit 

(‘‘CDs’’), bankers’ acceptances, fixedtime deposits and other obligations of 

U.S. and non-U.S. banks (including nonU.S. branches) and similar institutions; 

(iv) commercial paper rated, at the date 

of purchase, ‘‘Prime-1’’ by Moody’s®

Investors Service, Inc., ‘‘F–1’’ by Fitch 

Inc., or ‘‘A–1’’ by Standard & Poor’s®

(‘‘S&P®’’), or if unrated, of comparable 

quality as determined by BFA; (v) nonconvertible corporate debt securities 

(e.g., bonds and debentures) with 

remaining maturities at the date of 

purchase of not more than 397 days and 

that satisfy the rating requirements set 

forth in Rule 2a–7 under the 1940 Act; 

and (vi) short-term U.S. dollardenominated obligations of non-U.S. 

banks (including U.S. branches) that, in 

the opinion of BFA, are of comparable 

quality to obligations of U.S. banks 

which may be purchased by a Fund. 

Any of these instruments may be 

purchased on a current or forwardsettled basis. Time deposits are nonnegotiable deposits maintained in 

banking institutions for specified 

periods of time at stated interest rates. 

A Fund may invest in options that are 

traded on a U.S. or non-U.S. exchange 

and that reference U.S. Treasury 

securities. To the extent that a Fund 

invests in options, not more than 10% 

of such investment would be in options 

whose principal trading market is not a 

member of ISG or is a market with 

which the Exchange does not have a 

comprehensive surveillance sharing 

agreement. 

A Fund or the Underlying Funds may 

invest in debt securities of non-U.S. 

issuers and may invest in privatelyissued debt securities. 

Each Fund will be classified as a 

‘‘diversified’’ investment company 

under the 1940 Act.17

Each Fund will not purchase the 

securities of issuers conducting their 

principal business activity in the same 

industry if, immediately after the 

purchase and as a result thereof, the 

value of a Fund’s investments in that 

industry would equal or exceed 25% of 

the current value of a Fund’s total 

assets, provided that this restriction 

does not limit a Fund’s: (i) Investments 

in securities of other investment 

companies; (ii) investments in securities 

issued or guaranteed by the U.S. 

government, its agencies or 

instrumentalities; (iii) investments in 

securities of state, territory, possession 

or municipal governments and their 

authorities, agencies, instrumentalities 

or political subdivisions; or (iv) 

investments in repurchase agreements 

collateralized by any such obligations.18

Each Fund intends to qualify for and 

to elect treatment as a separate regulated 

investment company (‘‘RIC’’) under 

Subchapter M of the Internal Revenue 

Code.19

Each Fund’s investments will be 

consistent with its investment objective. 

The Shares 

The Shares will conform to the initial 

and continued listing criteria under 

NYSE Arca Equities Rule 8.600. The 

Exchange represents that, for initial 

and/or continued listing, the Funds will 

be in compliance with Rule 10A–3 20

under the Act, as provided by NYSE 

Arca Equities Rule 5.3. A minimum of 

100,000 Shares for each Fund will be 

outstanding at the commencement of 

trading on the Exchange. The Exchange 

will obtain a representation from the 

issuer of the Shares that the net asset 

value (‘‘NAV’’) per Share of each Fund 

will be calculated daily and that the 

NAV and the Disclosed Portfolio as 

defined in NYSE Arca Equities Rule 

8.600(c)(2) will be made available to all 

market participants at the same time. 

Creation and Redemption of Shares 

According to the Registration 

Statements, each Fund will issue and 

redeem Shares on a continuous basis at 

NAV only in large specified numbers of 

Shares called a ‘‘Creation Unit’’. 

The consideration for purchase of 

Creation Units of each Fund generally 

will consist of the in-kind deposit of a 

designated portfolio of securities 

(including any portion of such securities 

for which cash may be substituted) (i.e., 

the Deposit Securities (as defined 

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62496 Federal Register / Vol. 79, No. 201 / Friday, October 17, 2014 / Notices 

below)) and the Cash Component (as 

defined below) computed as described 

below. Together, the Deposit Securities 

and the Cash Component constitute the 

‘‘Fund Deposit,’’ which will be 

applicable (subject to possible 

amendment or correction) to creation 

requests received in proper form. The 

Fund Deposit represents the minimum 

initial and subsequent investment 

amount for a Creation Unit of a Fund. 

The Cash Component will be an 

amount equal to the difference between 

the NAV of the Shares (per Creation 

Unit) and the ‘‘Deposit Amount,’’ which 

is an amount equal to the market value 

of the Deposit Securities, and serves to 

compensate for any differences between 

the NAV per Creation Unit and the 

Deposit Amount. 

BFA will make available through the 

National Securities Clearing Corporation 

(‘‘NSCC’’) on each business day, prior to 

the opening of business on the 

Exchange, the list of names and the 

required number or par value of each 

Deposit Security and the amount of the 

Cash Component to be included in the 

current Fund Deposit (based on 

information as of the end of the 

previous business day) for the 

applicable Fund. Such Fund Deposit is 

applicable, subject to any adjustments 

as described below, in order to effect 

purchases of Creation Units of Shares of 

a Fund until such time as the nextannounced Fund Deposit is made 

available. 

The identity and number or par value 

of the Deposit Securities may change 

pursuant to changes in the composition 

of a Fund’s portfolio and as rebalancing 

adjustments and corporate action events 

occur from time to time. The 

composition of the Deposit Securities 

may also change in response to 

adjustments to the weighting or 

composition of the component 

securities constituting a Fund’s 

portfolio. 

The portfolio of securities required for 

purchase of a Creation Unit may not be 

identical to the portfolio of securities a 

Fund will deliver upon redemption of 

Fund Shares. The Deposit Securities 

and Fund Securities (as defined below), 

as the case may be, in connection with 

a purchase or redemption of a Creation 

Unit, generally will correspond pro rata 

to the securities held by such Fund. 

Each Fund reserves the right to permit 

or require the substitution of a ‘‘cash in 

lieu’’ amount to be added to the Cash 

Component to replace any Deposit 

Security that may not be available in 

sufficient quantity for delivery or that 

may not be eligible for transfer through 

the Depository Trust Company (‘‘DTC’’) 

or through the continuous net 

settlement system of the NSCC. Each 

Fund also reserves the right to permit or 

require a ‘‘cash in lieu’’ amount in 

certain other circumstances, including 

circumstances in which (i) the delivery 

of the Deposit Security by the 

authorized participant would be 

restricted under applicable securities 

laws or (ii) the delivery of the Deposit 

Security to the authorized participant 

would result in the disposition of the 

Deposit Security by the authorized 

participant becoming restricted under 

applicable securities laws, or in certain 

other situations. The Adviser represents 

that, to the extent the Trust permits or 

requires a ‘‘cash in lieu’’ amount, such 

transactions will be effected in the same 

manner or in an equitable manner for all 

authorized participants. 

Creation Units may be purchased only 

by or through a DTC participant that has 

entered into an authorized participant 

agreement (as described in the 

Registration Statements) with the 

Distributor. Except as noted below, all 

creation orders must be placed for one 

or more Creation Units and must be 

received by the Distributor in proper 

form no later than the closing time of 

the regular trading session of the 

Exchange (normally 4 p.m., Eastern 

time) in each case on the date such 

order is placed in order for creation of 

Creation Units to be effected based on 

the NAV of Shares of a Fund as next 

determined on such date after receipt of 

the order in proper form. Orders 

requesting substitution of a ‘‘cash in 

lieu’’ amount generally must be received 

by the Distributor no later than 4 p.m., 

Eastern time. On days when the 

Exchange or other markets close earlier 

than normal, a Fund may require orders 

to create Creation Units to be placed 

earlier in the day. A Fund may also 

require orders to create Creation Units 

to be placed earlier in the day, as 

approved by the Trust’s Board of 

Directors (‘‘Board’’) and as disclosed to 

investors. A standard creation 

transaction fee will be imposed to offset 

the transfer and other transaction costs 

associated with the issuance of Creation 

Units. 

Shares of a Fund may be redeemed 

only in Creation Units at their NAV next 

determined after receipt of a redemption 

request in proper form by the 

Distributor and only on a business day. 

BFA will make available through the 

NSCC, prior to the opening of business 

on the Exchange on each business day, 

the designated portfolio of securities 

(including any portion of such securities 

for which cash may be substituted) that 

will be applicable (subject to possible 

amendment or correction) to 

redemption requests received in proper 

form on that day (‘‘Fund Securities’’). 

Fund Securities received on redemption 

may not be identical to Deposit 

Securities that are applicable to 

creations of Creation Units. 

Unless cash redemptions are available 

or specified for a Fund, the redemption 

proceeds for a Creation Unit generally 

will consist of a specified amount of 

cash, Fund Securities, plus additional 

cash in an amount equal to the 

difference between the NAV of the 

Shares being redeemed, as next 

determined after the receipt of a request 

in proper form, and the value of the 

specified amount of cash and Fund 

Securities, less a redemption transaction 

fee. Each Fund currently will redeem 

Shares for Fund Securities, but each 

Fund reserves the right to utilize a 

‘‘cash’’ option for redemption of Shares. 

A standard redemption transaction fee 

will be imposed to offset transfer and 

other transaction costs that may be 

incurred by a Fund. 

Redemption requests for Creation 

Units of a Fund must be submitted to 

the Distributor by or through an 

authorized participant no later than 4 

p.m. Eastern time on any business day 

(or such earlier time as approved by the 

Board and as disclosed to investors), in 

order to receive that day’s NAV. The 

authorized participant must transmit the 

request for redemption in the form 

required by a Fund to the Distributor in 

accordance with procedures set forth in 

the authorized participant agreement. 

Determination of Net Asset Value 

According to the Registration 

Statements, the NAV of each Fund 

normally will be determined once each 

business day, generally as of the 

regularly scheduled close of business of 

the New York Stock Exchange (‘‘NYSE’’) 

(normally 4 p.m., Eastern time) on each 

day that the NYSE is open for trading, 

based on prices at the time of closing, 

provided that (a) any Fund assets or 

liabilities denominated in currencies 

other than the U.S. dollar will be 

translated into U.S. dollars at the 

prevailing market rates on the date of 

valuation as quoted by one or more data 

service providers, and (b) U.S. fixedincome assets may be valued as of the 

announced closing time for trading in 

fixed-income instruments in a particular 

market or exchange. The NAV of each 

Fund may be determined, and the 

Underlying Funds may be valued, at 

such earlier time as approved by the 

Board and as disclosed to investors. The 

NAV per Share of each Fund will be 

calculated by dividing the value of the 

net assets of each Fund (i.e., the value 

of its total assets less total liabilities) by 

the total number of outstanding Shares 

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Federal Register / Vol. 79, No. 201 / Friday, October 17, 2014 / Notices 62497 

21The Bid/Ask Price of each Fund will be 

determined using the mid-point of the highest bid 

and the lowest offer on the Exchange as of the time 

of calculation of a Fund’s NAV. The records relating 

to Bid/Ask Prices will be retained by the Funds and 

their service providers. 

22Under accounting procedures followed by the 

Funds, trades made on the prior business day (‘‘T’’) 

will be booked and reflected in NAV on the current 

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

be able to disclose at the beginning of the business 

day the portfolio that will form the basis for the 

NAV calculation at the end of the business day. 

23According to the Registration Statements, the 

IOPV calculations will be estimates of the value of 

each Fund’s NAV per Share using market data 

converted into U.S. dollars at the current currency 

rates. The IOPV price will be based on quotes and 

closing prices from the securities’ local market and 

may not reflect events that occur subsequent to the 

local market’s close. Premiums and discounts 

between the IOPV and the market price may occur. 

This should not be viewed as a ‘‘real-time’’ update 

of the NAV per Share of the Funds, which will be 

calculated only once a day. The quotations of 

certain Fund holdings may not be updated during 

U.S. trading hours if such holdings do not trade in 

the United States. 

24Currently, it is the Exchange’s understanding 

that several major market data vendors display and/ 

or make widely available IOPVs taken from CTA or 

other data feeds. 

of a Fund, generally rounded to the 

nearest cent. 

The value of the securities and other 

assets and liabilities held by each Fund 

will be determined pursuant to 

valuation policies and procedures 

approved by the Board. 

Except as described below, each Fund 

will value fixed-income portfolio 

securities, including money market 

instruments and U.S. government 

securities, using prices provided 

directly from one or more brokerdealers, market makers, or independent 

third-party pricing services which may 

use matrix pricing and valuation 

models, as well as recent market 

transactions for the same or similar 

assets, to derive values. Certain money 

market instruments with maturities of 

60 days or less will generally be valued 

on the basis of amortized cost. 

Repurchase agreements and reverse 

repurchase agreements generally will be 

valued at par. 

Exchange-traded options are [sic] 

generally will be valued at the mean of 

the last bid and ask prices as quoted on 

the exchange or the board of trade on 

which such options are traded. Futures 

contracts, including U.S. Treasury 

futures contracts, will be valued at their 

last sale price or settle price as of the 

close of the applicable exchange. 

Swap agreements and other 

derivatives will generally be valued 

based upon quotations from market 

makers or by a pricing service in 

accordance with valuation procedures 

approved by the Board. 

Investments in other investment 

companies will be valued using market 

valuations. Investment companies that 

are exchange traded will generally be 

valued using the last reported official 

closing price or last trading price on the 

exchange or other market on which the 

fund is primarily traded at the time of 

valuation. Investment companies that 

are not exchange traded will be valued 

at their net asset value. 

Generally, trading in U.S. Treasury 

futures, non-U.S. securities, U.S. 

government securities, money market 

instruments and certain fixed-income 

securities is substantially completed 

each day at various times prior to the 

close of business on the NYSE. The 

values of such securities used in 

computing the NAV of each Fund will 

be determined as of such times. 

When market quotations are not 

readily available or are believed by BFA 

to be unreliable, each Fund’s 

investments will be valued at fair value. 

Fair value determinations will be made 

by BFA in accordance with policies and 

procedures approved by the Trust’s 

Board. BFA may conclude that a market 

quotation is not readily available or is 

unreliable if a security or other asset or 

liability does not have a price source 

due to its lack of liquidity, if a market 

quotation differs significantly from 

recent price quotations or otherwise no 

longer appears to reflect fair value, 

where the security or other asset or 

liability is thinly traded, or where there 

is a significant event subsequent to the 

most recent market quotation. A 

‘‘significant event’’ is an event that, in 

the judgment of BFA, is likely to cause 

a material change to the closing market 

price of the asset or liability held by a 

Fund. 

Availability of Information 

The Funds’ Web site 

(www.ishares.com), which will be 

publicly available prior to the public 

offering of Shares, will include a form 

of the prospectus for a Fund that may 

be downloaded. The Funds’ Web site 

will include additional quantitative 

information updated on a daily basis, 

including, for the Funds, (1) the prior 

business day’s reported closing price, 

NAV and mid-point of the bid/ask 

spread at the time of calculation of such 

NAV (the ‘‘Bid/Ask Price’’),21 and a 

calculation of the premium and 

discount of the Bid/Ask Price against 

the NAV, and (2) data in chart format 

displaying the frequency distribution of 

discounts and premiums of the daily 

Bid/Ask Price against the NAV, within 

appropriate ranges, for each of the four 

previous calendar quarters. On each 

business day, before commencement of 

trading in Shares in the Core Trading 

Session on the Exchange, each Fund 

will disclose on its Web site the 

Disclosed Portfolio that will form the 

basis for such Fund’s calculation of 

NAV at the end of the business day.22

On a daily basis, a Fund will disclose 

for each portfolio security or other 

financial instrument of each Fund the 

following information on the Funds’ 

Web site: Ticker symbol (if applicable), 

name of security or financial 

instrument, number of shares (if 

applicable) and dollar value of 

securities and financial instruments 

held in the portfolio, and percentage 

weighting of the security and financial 

instrument in the portfolio. The Web 

site information will be publicly 

available at no charge. 

In addition, a basket composition file, 

which includes the security names and 

share quantities required to be delivered 

in exchange for each Fund’s Shares, 

together with estimates and actual cash 

components, will be publicly 

disseminated daily prior to the opening 

of the NYSE via NSCC. The basket 

represents one Creation Unit of a Fund. 

Investors can also obtain the Trust’s 

Statement of Additional Information 

(‘‘SAI’’), each Fund’s Shareholder 

Reports, and the Trust’s Form N–CSR 

and Form N–SAR, filed twice a year. 

The Trust’s SAI and Shareholder 

Reports are available free upon request 

from the Trust, and those documents 

and the Form N–CSR and Form N–SAR 

may be viewed on-screen or 

downloaded from the Commission’s 

Web site at www.sec.gov. 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. 

Information regarding the previous 

day’s closing price and trading volume 

information for the Shares will be 

published daily in the financial section 

of newspapers. Quotation and last sale 

information for the Shares of each Fund 

and the shares of the Underlying Funds 

and any exchange-traded funds held by 

each Fund will be available via the 

Consolidated Tape Association (‘‘CTA’’) 

high-speed line. Quotation and last sale 

information for U.S. exchange-listed 

options contracts cleared by the Options 

Clearing Corporation will be available 

via the Options Price Reporting 

Authority. In addition, the Indicative 

Optimized Portfolio Value (‘‘IOPV’’),23

which is the Portfolio Indicative Value 

as defined in NYSE Arca Equities Rule 

8.600(c)(3), will be widely disseminated 

at least every 15 seconds during the 

Core Trading Session by one or more 

major market data vendors.24 The 

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62498 Federal Register / Vol. 79, No. 201 / Friday, October 17, 2014 / Notices 

25See NYSE Arca Equities Rule 7.12. 

26FINRA surveils trading on the Exchange 

pursuant to a regulatory services agreement. The 

Exchange is responsible for FINRA’s performance 

under this regulatory services agreement. 

27For a list of the current members of ISG, see 

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

components of the Disclosed Portfolio for a Fund 

may trade on markets that are members of ISG or 

with which the Exchange has in place a 

comprehensive surveillance sharing agreement. 

dissemination of the IOPV, together 

with the Disclosed Portfolio, will allow 

investors to determine the value of the 

underlying portfolio of each Fund on a 

daily basis and to provide a close 

estimate of that value throughout the 

trading day. The intra-day, closing and 

settlement prices of exchange-traded 

portfolio assets, including investment 

companies, money market instruments, 

futures and options will be readily 

available from the securities exchanges 

and futures exchanges trading such 

securities and futures, as the case may 

be, automated quotation systems, 

published or other public sources, or 

on-line information services such as 

Bloomberg or Reuters. Such price 

information on fixed income portfolio 

securities, including money market 

instruments, and other Fund assets 

traded in over-the-counter markets 

including bonds and money market 

instruments is available from major 

broker-dealer firms or market data 

vendors, as well as from automated 

quotation systems, published or other 

public sources, or online information 

services. 

Additional information regarding the 

Trust and the Shares, including 

investment strategies, risks, creation and 

redemption procedures, fees, portfolio 

holdings disclosure policies, 

distributions and taxes is included in 

the Registration Statements. All terms 

relating to the Funds that are referred to, 

but not defined in, this proposed rule 

change are defined in the Registration 

Statements. 

Trading Halts 

With respect to trading halts, the 

Exchange may consider all relevant 

factors in exercising its discretion to 

halt or suspend trading in the Shares of 

the Funds.25 Trading in Shares of a 

Fund will be halted if the circuit breaker 

parameters in NYSE Arca Equities Rule 

7.12 have been reached. Trading also 

may be halted because of market 

conditions or for reasons that, in the 

view of the Exchange, make trading in 

the Shares inadvisable. These may 

include: (1) The extent to which trading 

is not occurring in the securities and/or 

the financial instruments comprising 

the Disclosed Portfolio of a Fund; or (2) 

whether other unusual conditions or 

circumstances detrimental to the 

maintenance of a fair and orderly 

market are present. Trading in the 

Shares will be subject to NYSE Arca 

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

forth circumstances under which Shares 

of a Fund may be halted. 

Trading Rules 

The Exchange deems the Shares to be 

equity securities, thus rendering trading 

in the Shares subject to the Exchange’s 

existing rules governing the trading of 

equity securities. Shares will trade on 

the NYSE Arca Marketplace from 4 a.m. 

to 8 p.m. Eastern time in accordance 

with NYSE Arca Equities Rule 7.34 

(Opening, Core, and Late Trading 

Sessions). The Exchange has 

appropriate rules to facilitate 

transactions in the Shares during all 

trading sessions. As provided in NYSE 

Arca Equities Rule 7.6, Commentary .03, 

the minimum price variation (‘‘MPV’’) 

for quoting and entry of orders in equity 

securities traded on the NYSE Arca 

Marketplace is $0.01, with the exception 

of securities that are priced less than 

$1.00 for which the MPV for order entry 

is $0.0001. 

Surveillance 

The Exchange represents that trading 

in the Shares will be subject to the 

existing surveillance procedures 

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.26 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 Exchange’s current trading 

surveillance focuses on detecting 

securities trading outside their normal 

patterns. 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 of the Funds, 

exchange-traded equity securities, 

futures and options contracts with other 

markets and other entities that are 

members of the ISG, and FINRA, on 

behalf of the Exchange, may obtain 

trading information regarding trading in 

the Shares of the Funds, exchangetraded equity securities, futures and 

options contracts from such markets and 

other entities. In addition, The 

Exchange may obtain information 

regarding trading in the Shares of the 

Funds, exchange-traded equity 

securities, futures and options contracts 

from ISG member markets or markets 

with which the Exchange has in place 

a comprehensive surveillance sharing 

agreement.27 In addition, FINRA, on 

behalf of the Exchange, is able to access, 

as needed, trade information for certain 

fixed income instruments reported to 

FINRA’s Trade Reporting and 

Compliance Engine (‘‘TRACE’’). 

With respect to its exchange-traded 

equity securities investments, a Fund 

will invest only in equity securities that 

trade in markets that are members of the 

ISG or are parties to a comprehensive 

surveillance sharing agreement with the 

Exchange. To the extent that a Fund 

invests in options, not more than 10% 

of such investment would be in options 

whose principal trading market is not a 

member of ISG or is a market with 

which the Exchange does not have a 

comprehensive surveillance sharing 

agreement. The Fund will invest only in 

futures contracts that are traded on an 

exchange that is a member of the ISG or 

with which the Exchange has in place 

a comprehensive surveillance sharing 

agreement. 

In addition, the Exchange also has a 

general policy prohibiting the 

distribution of material, non-public 

information by its employees. 

Information Bulletin 

Prior to the commencement of 

trading, the Exchange will inform its 

Equity Trading Permit (‘‘ETP’’) Holders 

in an Information Bulletin (‘‘Bulletin’’) 

of the special characteristics and risks 

associated with trading the Shares. 

Specifically, the Bulletin will discuss 

the following: (1) The procedures for 

purchases and redemptions of Shares in 

Creation Unit aggregations (and that 

Shares are not individually redeemable); 

(2) NYSE Arca Equities Rule 9.2(a), 

which imposes a duty of due diligence 

on its ETP Holders to learn the essential 

facts relating to every customer prior to 

trading the Shares; (3) the risks involved 

in trading the Shares during the 

Opening and Late Trading Sessions 

when an updated IOPV will not be 

calculated or publicly disseminated; (4) 

how information regarding the IOPV 

and Disclosed Portfolio for a Fund is 

disseminated; (5) the requirement that 

ETP Holders deliver a prospectus to 

investors purchasing newly issued 

Shares prior to or concurrently with the 

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Federal Register / Vol. 79, No. 201 / Friday, October 17, 2014 / Notices 62499 

28 15 U.S.C. 78f(b)(5). 

confirmation of a transaction; and (6) 

trading information. 

In addition, the Bulletin will 

reference that each Fund is subject to 

various fees and expenses described in 

the Registration Statements. The 

Bulletin will discuss any exemptive, noaction, and interpretive relief granted by 

the Commission from any rules under 

the Act. The Bulletin will also disclose 

that the NAV for the Shares will be 

calculated after 4 p.m. Eastern time each 

trading day. 

2. Statutory Basis 

The basis under the Act for this 

proposed rule change is the requirement 

under Section 6(b)(5) 28 that an 

exchange have rules that are designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, to remove 

impediments to, and perfect the 

mechanism of a free and open market 

and, in general, to protect investors and 

the public interest. 

The Exchange believes that the 

proposed rule change is designed to 

prevent fraudulent and manipulative 

acts and practices in that the Shares will 

be listed and traded on the Exchange 

pursuant to the initial and continued 

listing criteria in NYSE Arca Equities 

Rule 8.600. The Exchange has in place 

surveillance procedures that are 

adequate to properly monitor trading in 

the Shares in all trading sessions and to 

deter and detect violations of Exchange 

rules and applicable federal securities 

laws. The Adviser has implemented a 

‘‘fire wall’’ with respect to its affiliated 

broker-dealers regarding access to 

information concerning the composition 

and/or changes to a Fund’s portfolio. 

FINRA, on behalf of the Exchange, will 

communicate as needed regarding 

trading in the Shares of the Funds, 

exchange-traded equity securities, 

futures and options contracts with other 

markets and other entities that are 

members of the ISG, and FINRA, on 

behalf of the Exchange, may obtain 

trading information regarding trading in 

the Shares of the Funds, exchangetraded equity securities, futures and 

options contracts from such markets and 

other entities. In addition, the Exchange 

may obtain information regarding 

trading in the Shares of the Funds as 

well as underlying equity securities, 

futures and options contracts from ISG 

member markets or markets with which 

the Exchange has in place a 

comprehensive surveillance sharing 

agreement. A 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. With respect to its exchangetraded equity securities investments, a 

Fund will invest only in equity 

securities that trade in markets that are 

members of the ISG or are parties to a 

comprehensive surveillance sharing 

agreement with the Exchange. To the 

extent that a Fund invests in options, 

not more than 10% of such investment 

would be in options whose principal 

trading market is not a member of ISG 

or is a market with which the Exchange 

does not have a comprehensive 

surveillance sharing agreement. 

The proposed rule change is designed 

to promote just and equitable principles 

of trade and to protect investors and the 

public interest in that the Exchange will 

obtain a representation from the issuer 

of the Shares that the NAV per Share of 

each Fund will be calculated daily and 

that the NAV and the Disclosed 

Portfolio for each Fund will be made 

available to all market participants at 

the same time. In addition, a large 

amount of information is publicly 

available regarding the Funds and the 

Shares, thereby promoting market 

transparency. Moreover, the IOPV will 

be widely disseminated by one or more 

major market data vendors at least every 

15 seconds during the Exchange’s Core 

Trading Session. On each business day, 

before commencement of trading in 

Shares in the Core Trading Session on 

the Exchange, the Funds will disclose 

on their Web site the Disclosed Portfolio 

that will form the basis for a Fund’s 

calculation of NAV at the end of the 

business 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 Funds will include a form of 

the prospectus for the Funds 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. Trading in Shares of 

a Fund will be halted if the circuit 

breaker parameters in NYSE Arca 

Equities Rule 7.12 have been reached or 

because of market conditions or for 

reasons that, in the view of the 

Exchange, make trading in the Shares 

inadvisable, and trading in the Shares 

will be subject to NYSE Arca Equities 

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

circumstances under which Shares of a 

Fund may be halted. In addition, as 

noted above, investors will have ready 

access to information regarding a Fund’s 

holdings, the IOPV, the Disclosed 

Portfolio, and quotation and last sale 

information for the Shares. 

The proposed rule change is designed 

to perfect the mechanism of a free and 

open market and, in general, to protect 

investors and the public interest in that 

it will facilitate the listing and trading 

of additional types of actively-managed 

exchange-traded products that will 

enhance competition among market 

participants, to the benefit of investors 

and the marketplace. As noted above, 

FINRA, on behalf of the Exchange, will 

communicate as needed regarding 

trading in the Shares of the Funds, 

exchange-traded equity securities, 

futures and options contracts with other 

markets and other entities that are 

members of the ISG, and FINRA, on 

behalf of the Exchange, may obtain 

trading information regarding trading in 

the Shares of the Funds, exchangetraded equity securities, futures and 

options contracts from such markets and 

other entities. In addition, the Exchange 

may obtain information regarding 

trading in the Shares of the Funds, 

exchange-traded equity securities, 

futures and options contracts from 

markets and other entities that are 

members of ISG or with which the 

Exchange has in place a comprehensive 

surveillance sharing agreement. In 

addition, as noted above, investors will 

have ready access to information 

regarding a Fund’s holdings, the IOPV, 

the Disclosed Portfolio, and quotation 

and last sale information for the Shares. 

The proposed rule change would benefit 

investors by providing them with 

additional choices of transparent and 

tradable products. 

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 other 

actively-managed exchange-traded 

products that hold fixed income 

securities and will enhance competition 

among market participants, to the 

benefit of investors and the marketplace. 

mstockstill on DSK4VPTVN1PROD with NOTICES

62500 Federal Register / Vol. 79, No. 201 / Friday, October 17, 2014 / Notices 

29 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 17 CFR 240.19b–4(f)(6). 

4See Securities Exchange Act Release No. 71341 

(January 17, 2014), 79 FR 4213 (January 24, 2014) 

(Order Approving SR–FINRA–2013–042). On April 

3, 2014, FINRA filed with the Commission for 

immediate effectiveness a proposed rule change to 

amend Rules 6160, 6170, 6480, and 6720 to permit 

an ATS that trades both TRACE-Eligible Securities 

and equity securities (OTC Equity Securities or 

NMS stocks) to use two MPIDs, rather than a single 

unique MPID, if each MPID is used exclusively for 

either TRACE-Eligible Securities or equity 

securities. See Securities Exchange Act Release No. 

71911 (April 9, 2014), 79 FR 21316 (April 15, 2014). 

5See Regulatory Notice 14–07 (February 2014). 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

No written comments were solicited 

or received with respect to the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 45 days of the date of 

publication of this notice in the Federal 

Register or within such longer period 

up to 90 days (i) as the Commission may 

designate if it finds such longer period 

to be appropriate and publishes its 

reasons for so finding or (ii) as to which 

the self-regulatory organization 

consents, the Commission will: (a) By 

order approve or disapprove such 

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–2014–114 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–2014–114. 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 

a.m. and 3 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– 

NYSEArca–2014–114 and should be 

submitted on or November 7, 2014. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.29

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–24683 Filed 10–16–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73340; File No. SR–FINRA– 

2014–042] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing and 

Immediate Effectiveness of a Proposed 

Rule Change Relating to the 

Implementation Date of Market 

Participant Identifier Requirements for 

Alternative Trading Systems 

October 10, 2014. 

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 October 

2, 2014, Financial Industry Regulatory 

Authority, Inc. (‘‘FINRA’’) filed with the 

Securities and Exchange Commission 

(‘‘SEC’’ or ‘‘Commission’’) the proposed 

rule change as described in Items I and 

II below, which Items have been 

prepared by FINRA. FINRA has 

designated the proposed rule change as 

constituting a ‘‘non-controversial’’ rule 

change under paragraph (f)(6) of Rule 

19b–4 under the Act,3 which renders 

the proposal effective upon receipt of 

this filing by the Commission. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

FINRA is proposing to postpone until 

February 2, 2015, the implementation 

date of the requirement that alternative 

trading systems (‘‘ATSs’’) use unique 

market participant identifiers (‘‘MPIDs’’) 

when reporting order and trade 

information to FINRA. 

The proposed rule change does not 

make any changes to the text of FINRA 

rules. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

FINRA 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. FINRA has prepared 

summaries, set forth in sections A, B, 

and C below, of the most significant 

aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, Proposed Rule 

Change 

1. Purpose 

On January 17, 2014, the Commission 

approved SR–FINRA–2013–042, a 

proposed rule change to (i) adopt Rule 

4552 to require ATSs to report to FINRA 

weekly volume information and number 

of trades regarding securities 

transactions within the ATS; and (ii) 

amend Rules 6160, 6170, 6480, and 

6720 to require each ATS to acquire and 

use a single, unique MPID when 

reporting information to FINRA.4 Rule 

4552 was implemented on May 12, 

2014, and the MPID requirement for 

ATSs is currently scheduled to be 

implemented on November 10, 2014.5

The proposed rule change postpones the 

implementation date for ATSs to 

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