Federal Register / Vol. 82, No. 187 / Thursday, September 28, 2017 / Notices 45339 

29Applicants are not requesting and the 

Commission is not providing any relief for 

transaction fees received in connection with any 

Co-Investment Transaction. 

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

2 17 CFR 240.19b–4. 

3Commission Delegated Regulation (EU) No. 153/ 

2013 dated 23 February 2013. 

4Regulation (EU) No. 648/2012 of the European 

Parliament and of the Council of 4 July 2012 on 

OTC derivatives, central counterparties and trade 

repositories. 

5Section 3.1.2.C of the ESMA Opinion On 

Portfolio Margining Requirements under Article 27 

of Commission Delegated Regulation (EU) No. 153/ 

2013 dated 10 April 2017 (the ‘‘ESMA Opinion’’). 

advisory agreements with the Regulated 

Funds and the Affiliated Funds, be 

shared by the Regulated Funds and the 

participating Affiliated Funds in 

proportion to the relative amounts of the 

securities held or being acquired or 

disposed of, as the case may be. 

14. Transaction Fees.29 Any 

transaction fee (including break-up, 

structuring, monitoring or commitment 

fees but excluding brokerage or 

underwriting compensation permitted 

by Section 17(e) or 57(k)) received in 

connection with any Co-Investment 

Transaction will be distributed to the 

participants on a pro rata basis based on 

the amounts they invested or 

committed, as the case may be, in such 

Co-Investment Transaction. If any 

transaction fee is to be held by an 

Adviser pending consummation of the 

transaction, the fee will be deposited 

into an account maintained by the 

Adviser at a bank or banks having the 

qualifications prescribed in Section 

26(a)(1), and the account will earn a 

competitive rate of interest that will also 

be divided pro rata among the 

participants. None of the Advisers, the 

Affiliated Funds, the other Regulated 

Funds or any affiliated person of the 

Affiliated Funds or the Regulated Funds 

will receive any additional 

compensation or remuneration of any 

kind as a result of or in connection with 

a Co-Investment Transaction other than 

(i) in the case of the Regulated Funds 

and the Affiliated Funds, the pro rata 

transaction fees described above and 

fees or other compensation described in 

Condition 2(c)(iii)(B)(z), (ii) brokerage or 

underwriting compensation permitted 

by Section 17(e) or 57(k) or (iii) in the 

case of the Advisers, investment 

advisory compensation paid in 

accordance with investment advisory 

agreements between the applicable 

Regulated Fund(s) or Affiliated Fund(s) 

and its Adviser. 

15. Independence. If the Holders own 

in the aggregate more than 25 percent of 

the Shares of a Regulated Fund, then the 

Holders will vote such Shares as 

directed by an independent third party 

when voting on (1) the election of 

directors; (2) the removal of one or more 

directors; or (3) any other matter under 

either the Act or applicable State law 

affecting the Board’s composition, size 

or manner of election. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2017–20757 Filed 9–27–17; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–81680; File No. SR–ICEEU– 

2017–010] 

Self-Regulatory Organizations; ICE 

Clear Europe Limited; Notice of Filing 

and Order Granting Accelerated 

Approval of a Proposed Rule Change 

Relating to Amendments to the ICE 

Clear Europe CDS Risk Policy 

September 22, 2017. 

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 

September 15, 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 and order to solicit 

comments on the proposed rule change 

from interested persons and to approve 

the proposed rule change on an 

accelerated basis. 

I. Clearing Agency’s Statement of the 

Terms of Substance of the Proposed 

Rule Change 

The principal purpose of the 

proposed rule change is to amend ICE 

Clear Europe’s CDS Risk Policy relating 

to portfolio margining, as described 

below, to comply with Article 27 of 

Commission Delegated Regulation (EU) 

No. 153/2013 3 (the ‘‘Portfolio Margining 

Limitation’’). 

II. Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

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 III 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 

(a) Purpose 

ICE Clear Europe proposes to adopt 

amendments to the CDS Risk Policy 

relating to portfolio margining. The 

changes discussed herein apply to all 

cleared credit default swap (‘‘CDS’’) 

products. 

The amendments are intended to 

comply with the Portfolio Margining 

Limitation implementing the European 

Market Infrastructure Regulation 

(‘‘EMIR’’),4 which requires that where 

portfolio margining covers multiple 

different instruments, the amount of 

margin reduction that the clearing house 

may offer can be no greater than 80% of 

the difference between the sum of the 

margins for each product calculated on 

an individual basis and the margin 

calculated based on a estimation of the 

exposure for the combined portfolio. By 

contrast, where the margin reduction 

relates to positions in the same 

instrument, the clearing house may 

apply a margin reduction of up to 100% 

of that difference. The European 

Securities and Markets Authority 

(‘‘ESMA’’), the competent authority 

with respect to this requirement under 

EMIR, has issued an opinion 

interpreting this requirement in the 

context of CDS to provide 5 that (i) 

credit derivatives on different 

underlying names or indexes (including 

two series of the same index) should be 

considered different products; and (ii) 

credit derivatives on the same 

underlying name or index with different 

maturities or coupons may be 

considered as the same product. 

According to ICE Clear Europe, the 

effect of this is to require that credit 

derivatives on different index series of 

the same index family be considered 

different instruments under the 

Portfolio Margining Limitation and that 

therefore portfolio margining for such 

instruments must be limited to 80% of 

the gross margins. 

To implement the Portfolio Margining 

Limitation, ICE Clear Europe is 

amending its CDS Risk Policy such that 

when calculating the spread response 

charge (which provides portfolio margin 

45340 Federal Register / Vol. 82, No. 187 / Thursday, September 28, 2017 / Notices 

6The 99.5% VaR MC benchmark serves as a 

minimum initial margin level. 

7 15 U.S.C. 78q–1. 

8 17 CFR 240.17Ad–22. 

9 15 U.S.C. 78q–1(b)(3)(F). 

10 17 CFR 240.17Ad–22(b)(2). 

11 17 CFR 240.17Ad–22(e)(6)(v). 

reductions across a variety of correlated 

positions, including positions in 

different series of the same index), the 

99.5% Value-at-Risk (‘‘VaR’’) Monte 

Carlo (‘‘MC’’) benchmark 6 used in the 

calculation will have a minimum 

amount equal to 20% of the portfolio 

gross 99.5% MC VaR requirements. The 

gross requirement is defined for this 

purpose as the sum of the requirements 

at risk factor level for single names (for 

single-name CDS) and index series level 

(for index CDS) (i.e., without portfolio 

margin offsets across such products). 

ICE Clear Europe is required to 

implement the Portfolio Margining 

Limitation by September 30, 2017. 

(b) Statutory Basis 

ICE Clear Europe believes that the 

proposed amendments are consistent 

with the requirements of Section 17A of 

the Act 7 and the regulations thereunder 

applicable to it, including the standards 

under Rule 17Ad–22.8 Section 

17A(b)(3)(F) of the Act 9 requires, among 

other things, that the rules of a clearing 

agency be designed to promote the 

prompt and accurate clearance and 

settlement of securities transactions 

and, to the extent applicable, derivative 

agreements, contracts, and transactions, 

the safeguarding of securities and funds 

in the custody or control of the clearing 

agency or for which it is responsible, 

and the protection of investors and the 

public interest. In addition, Rule 17Ad– 

22(b)(2) 10 requires that a registered 

clearing agency that performs central 

counterparty services establish, 

implement, maintain and enforce 

written policies and procedures 

reasonably designed to use margin 

requirements to limit its credit 

exposures to participants under normal 

market conditions and use risk-based 

models and parameters to set margin 

requirements. Furthermore, Rule 17Ad– 

22(e)(6)(v) 11 requires that each covered 

clearing agency establish, implement, 

maintain and enforce written policies 

and procedures reasonably designed to 

cover, if the covered clearing agency 

provides central counterparty services, 

its credit exposures to its participants by 

establishing a risk-based margin system 

that, at a minimum uses an appropriate 

method for measuring credit exposure 

that accounts for relevant product risk 

factors and portfolio effects across 

products. 

The proposed amendments to the CDS 

Risk Policy would apply a 20% floor to 

the 99.5% VaR MC aspect of ICE Clear 

Credit’s spread response margin 

component calculation, based on the 

gross margin requirement without 

portfolio offsets. The amendments are 

being made in order to comply with the 

Portfolio Margin Limitation imposed 

under EMIR, as set out in the ESMA 

Opinion, and may in some cases result 

in higher initial margin requirements for 

market participants. ICE Clear Europe 

believes that the amended requirement 

(as with the current methodology) 

represents an appropriate risk-based 

margin framework to take into account 

portfolio risk reduction and related 

portfolio effects in a manner that will 

continue to enable the clearing house to 

mitigate the risk of clearing member 

default. In ICE Clear Europe’s view, the 

amendments are therefore consistent 

with the requirements of the Act and 

Commission regulations set forth above. 

(B) Clearing Agency’s Statement on 

Burden on Competition 

ICE Clear Europe does not believe the 

proposed rule changes would have any 

impact, or impose any burden, on 

competition not necessary or 

appropriate in furtherance of the 

purposes of the Act. The changes are 

being proposed in order to implement 

that Portfolio Margining Limitation 

under EMIR. The amendments will 

affect all CDS Clearing Members and 

CDS market participants. ICE Clear 

Europe does not believe the 

amendments will impact competition 

among CDS Clearing Members or other 

market participants, or affect the ability 

of market participants to access clearing 

generally. As noted above, the 

amendments may increase initial 

margin requirements with respect to 

some portfolios, because of the 

limitation on margin reductions as 

compared to the current methodology. 

Although this may affect the cost of 

clearing for some market participants, 

any increased costs will reflect the 

requirements imposed under the EMIR 

Portfolio Margining Limitation and the 

risk management benefits for the 

clearing house that are designed to be 

obtained through the Portfolio 

Margining Limitation. As a result, ICE 

Clear Europe believes that any impact 

on competition is appropriate in 

furtherance of the purposes of the Act. 

(C) Clearing Agency’s Statement on 

Comments on the Proposed Rule 

Change Received From Members, 

Participants or Others 

Written comments relating to the 

proposed amendments have not been 

solicited or received by ICE Clear 

Europe. ICE Clear Europe will notify the 

Commission of any comments received 

with respect to the proposed rule 

change. 

III. 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–2017–010 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–ICEEU–2017–010. 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, 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 Web site viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE., 

Washington, DC 20549, on official 

business days between the hours of 

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

filings will also be available for 

inspection and copying at the principal 

office of ICE Clear Europe and on ICE 

Clear Europe’s Web site at https://

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

regulatoryFilings. 

All comments received will be posted 

without change; the Commission does 

not edit personal identifying 

information from submissions. You 

should submit only information that 

Federal Register / Vol. 82, No. 187 / Thursday, September 28, 2017 / Notices 45341 

12 15 U.S.C. 78s(b)(2)(C). 13 15 U.S.C. 78q–1(b)(3)(F). 14 17 CFR 240.17Ad–22(b)(2). 15 17 CFR 240.17Ad–22(e)(6)(v). 16 15 U.S.C. 78q–1. 17Commission Delegated Regulation (EU) No. 

153/2013 dated 23 February 2013. 

18See 15 U.S.C. 78q–1(b)(3)(I). 

19 17 CFR 240.17Ad–22(b)(2). 

20 17 CFR 240.17Ad–22(b)(2). 

21 17 CFR 240.17Ad–22(e)(6)(v). 

22 17 CFR 240.17Ad–22(e)(6)(v). 

23 15 U.S.C. 78s(b)(2)(C)(iii). 

24 15 U.S.C. 78s(b)(2)(C)(iii). 

25 15 U.S.C. 78s(b)(2)(C)(iii). 

26 15 U.S.C. 78q–1. 

27 15 U.S.C. 78s(b)(2). 

28 In approving the proposed rule change, the 

Commission considered the proposal’s impact on 

efficiency, competition and capital formation. 15 

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

you wish to make available publicly. All 

submissions should refer to File 

Number SR–ICEEU–2017–010 and 

should be submitted on or before 

October 19, 2017. 

IV. Commission’s Findings and Order 

Granting Accelerated Approval of the 

Proposed Rule Change 

Section 19(b)(2)(C) of the Act 12

directs the Commission to approve a 

proposed rule change of a selfregulatory organization if it finds that 

such proposed rule change is consistent 

with the requirements of the Exchange 

Act and the rules and regulations 

thereunder applicable to such 

organization. Section 17A(b)(3)(F) of the 

Act 13 requires, among other things, that 

the rules of a clearing agency be 

designed to assure the safeguarding of 

securities and funds which are in the 

custody or control of the clearing agency 

or for which it is responsible and, in 

general, to protect investors and the 

public interest. Rule 17Ad–22(b)(2) 14

requires that a registered clearing 

agency that performs central 

counterparty services establish, 

implement, maintain and enforce 

written policies and procedures 

reasonably designed to use margin 

requirements to limit its credit 

exposures to participants under normal 

market conditions and use risk-based 

models and parameters to set margin 

requirements. Furthermore, Rule 17Ad– 

22(e)(6)(v) 15 requires that each covered 

clearing agency establish, implement, 

maintain and enforce written policies 

and procedures reasonably designed to 

cover, if the covered clearing agency 

provides central counterparty services, 

its credit exposures to its participants by 

establishing a risk-based margin system 

that, at a minimum uses an appropriate 

method for measuring credit exposure 

that accounts for relevant product risk 

factors and portfolio effects across 

products. 

The Commission finds that the 

proposed rule change is consistent with 

Section 17A of the Act and the relevant 

rules thereunder.16 The proposed rule 

change is designed to comply with the 

Portfolio Margining Limitation of 

Article 27 of Commission Delegated 

Regulation (EU) No. 153/2013.17 As 

interpreted by ESMA, this limitation 

will not permit complete margin offsets 

between different cleared instruments, 

which in the CDS context means CDS 

with different reference entities, 

including different versions of the same 

index. Instead, any margin reductions 

resulting from the portfolio margining of 

different CDS instruments must be 

limited to 80% of the difference 

between the sum of the margins for each 

instrument calculated on an individual 

basis and the margin calculated based 

on a combined estimation of the 

exposure for the combined portfolio. 

Margin reductions from portfolio 

margining of the same CDS instruments, 

i.e. on the same underlying name or 

index, even with different maturities or 

coupons, can be applied without 

limitation. ICE Clear Europe has chosen 

to implement this requirement by 

limiting the margin reductions 

calculated from the 99.5% VaR MC 

aspect of its spread response 

methodology to 20% of the gross margin 

requirement without portfolio offsets. 

The Commission has reviewed the 

proposed rule change, including the 

changes to ICE Clear Europe’s policies 

and procedures, as well as data on the 

estimated impact of the proposed rule 

change on margin requirements. Based 

on this review, the Commission finds 

that the proposed rule change is 

designed to implement a more 

conservative approach to portfolio 

margining reductions than under ICE 

Clear Europe’s existing spread response 

calculation methodology and is 

therefore consistent with assuring the 

safeguarding of securities and funds 

which are in the custody or control of 

the clearing agency or for which it is 

responsible. The approach is risk-based 

and does not impose unduly 

conservative margin requirements that 

would impose a burden on competition 

not necessary or appropriate in 

furtherance of the purposes of the 

Exchange Act.18

For the same reasons, the Commission 

further finds that the proposed rule 

change is consistent with Rule 17Ad– 

22(b)(2),19 in that any additional margin 

collected based on this more 

conservative approach should support 

ICE Clear Europe’s risk management 

functions and ability to limit its credit 

exposures, consistent with Rule 17Ad– 

22(b)(2).20

Similarly, the Commission further 

finds that the proposed rule change is 

consistent with Rule 17Ad–22(e)(6)(v).21

The proposed rule change does not 

eliminate portfolio margin reductions. 

The proposed rule change allows for 

portfolio margin reductions of 100% 

where the margin reduction relates to 

positions in the same instrument. Where 

the portfolio margining covers multiple 

different instruments, the proposed rule 

change limits the margin reduction to 

no greater than 80%, consistent with 

EMIR. The Commission finds that this is 

a reasonably designed method for 

measuring credit exposure that accounts 

for relevant product risk factors and 

portfolio effects across different 

products consistent with Rule 17Ad– 

22(e)(6)(v).22

In its filing, ICE Clear Europe 

requested that the Commission grant 

accelerated approval of the proposed 

rule change pursuant to Section 

19(b)(2)(C)(iii) of the Exchange Act.23

Under Section 19(b)(2)(C)(iii) of the 

Act,24 the Commission may grant 

accelerated approval of a proposed rule 

change if the Commission finds good 

cause for doing so. ICE Clear Europe 

believes that accelerated approval is 

warranted because the proposed rule 

change is required as of September 30, 

2017 in order to comply with the 

Portfolio Margin Limitation under 

EMIR, as interpreted by ESMA. 

The Commission finds good cause, 

pursuant to Section 19(b)(2)(C)(iii) of 

the Act,25 for approving the proposed 

rule change on an accelerated basis, 

prior to the 30th day after the date of 

publication of notice in the Federal 

Register, because the proposed rule 

change is required as of September 30, 

2017 in order to comply with EMIR. 

V. Conclusion 

On the basis of the foregoing, the 

Commission finds that the proposal is 

consistent with the requirements of the 

Act and in particular with the 

requirements of Section 17A of the 

Act 26 and the rules and regulations 

thereunder. 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,27 that the 

proposed rule change (File No. SR– 

ICEEU–2017–010) be, and hereby is, 

approved on an accelerated basis.28

45342 Federal Register / Vol. 82, No. 187 / Thursday, September 28, 2017 / Notices 

29 17 CFR 200.30–3(a)(12). 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4Commentary .02 to NYSE Arca Rule 8.200–E 

applies to Trust Issued Receipts that invest in 

‘‘Financial Instruments.’’ The term ‘‘Financial 

Instruments,’’ as defined in Commentary .02(b)(4) to 

NYSE Arca Rule 8.200–E, means any combination 

of investments, including cash; securities; options 

on securities and indices; futures contracts; options 

on futures contracts; forward contracts; equity caps, 

collars, and floors; and swap agreements. 

5On June 2, 2017, the Trust filed with the 

Commission a registration statement on Form S–1 

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

(‘‘Securities Act’’) relating to the Fund (File No. 

333–218453) (the ‘‘Registration Statement’’). The 

description of the operation of the Trust and the 

Fund herein is based, in part, on the Registration 

Statement. 

6The Baltic Exchange, which is a wholly owned 

subsidiary of the Singapore Exchange Ltd (‘‘SGX’’), 

is a membership and an independent source of 

maritime market information for the trading and 

settlement of physical and derivative shipping 

contracts. According to the Baltic Exchange, this 

information is used by shipbrokers, owners and 

operators, traders, financiers and charterers as a 

reliable and independent view of the dry and tanker 

markets. 

7The Reference Indexes are published by the 

Baltic Exchange’s subsidiary company, Baltic 

Exchange Information Services Ltd (‘‘Baltic’’), 

which publishes a wide range of market reports, 

fixture lists and market rate indicators on a daily 

and (in some cases) weekly basis. The Baltic 

indices, which include the Reference Indexes, are 

an assessment of the price of moving the major raw 

materials by sea. The indices are based on 

assessments of the cost of transporting various bulk 

cargoes, both wet (e.g., crude oil and oil products) 

and dry (e.g., coal and iron ore), made by leading 

shipbroking houses located around the world on a 

per tonne and daily hire basis. The information is 

collated and published by the Baltic Exchange. 

Procedures relating to administration of the Baltic 

indices are set forth in ‘‘The Baltic Exchange, Guide 

to Market Benchmarks’’ November 2016 (the 

‘‘Guide’’), including production methods, 

calculation, confidentiality and transparency, 

duties of panelists, code of conduct, audits and 

quality control. According to the Guide, these 

procedures are in compliance with the ‘‘Principles 

for Financial Benchmarks’’ issued by the 

International Organization of Securities 

Commissioners (‘‘IOSCO’’). The Guide is available 

at www.balticexchange.com. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.29

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2017–20750 Filed 9–27–17; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–81681; File No. SR– 

NYSEArca–2017–107] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing of Proposed 

Rule Change Relating to Listing and 

Trading of Shares of Breakwave Dry 

Bulk Shipping ETF Under NYSE Arca 

Rule 8.200–E, Commentary .02 

September 22, 2017. 

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 8, 2017, 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 substantially prepared by the selfregulatory organization. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to list and 

trade the shares of Breakwave Dry Bulk 

Shipping ETF under NYSE Arca Rule 

8.200–E, Commentary .02 (‘‘Trust Issued 

Receipts’’). The proposed change is 

available on the Exchange’s Web site at 

www.nyse.com, at the principal office of 

the Exchange, and at the Commission’s 

Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

self-regulatory organization included 

statements concerning the purpose of, 

and basis for, the proposed rule change 

and discussed any comments it received 

on the proposed rule change. The text 

of those statements may be examined at 

the places specified in Item IV below. 

The Exchange has prepared summaries, 

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

of the most significant parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to list and 

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

under NYSE Arca Rule 8.200–E, 

Commentary .02, which governs the 

listing and trading of Trust Issued 

Receipts: Breakwave Dry Bulk Shipping 

ETF (the ‘‘Fund’’).4

The Fund will be a series of ETF 

Managers Group Commodity Trust I (the 

‘‘Trust).5 The Fund and the Trust will be 

managed and controlled by their 

sponsor and investment manager, ETF 

Managers Capital LLC (the ‘‘Sponsor’’). 

The Sponsor is registered with the 

Commodity Futures Trading 

Commission (‘‘CFTC’’) as a commodity 

pool operator (‘‘CPO’’) and is a member 

of the National Futures Association 

(‘‘NFA’’). Breakwave Advisors LLC 

(‘‘Breakwave’’) is registered as a 

commodity trading advisor with the 

CFTC and will serve as the Fund’s 

commodity trading advisor. ETFMG 

Financial LLC will be the Fund’s 

distributor (‘‘Distributor’’ or ‘‘Marketing 

Agent’’). US Bancorp Fund Services LLC 

will be the Fund’s ‘‘Administrator’’ and 

‘‘Transfer Agent’’. 

The Fund’s Investment Objective and 

Strategy 

According to the Registration 

Statement, the Fund’s investment 

objective will be to provide investors 

with exposure to the daily change in the 

price of dry bulk freight futures, before 

expenses and liabilities of the Fund, by 

tracking the performance of a portfolio 

(the ‘‘Benchmark Portfolio’’) consisting 

of a three-month strip of the nearest 

calendar quarter of futures contracts on 

specified indexes (each a ‘‘Reference 

Index’’) that measure rates for shipping 

dry bulk freight (‘‘Freight Futures’’). 

Each Reference Index is published daily 

by the London-based Baltic Exchange 

Ltd 6 and measures the charter rate for 

shipping dry bulk freight in a specific 

size category of cargo ship—Capesize, 

Panamax or Supramax. The three 

Reference Indexes are as follows: 

Capesize: the Capesize 5TC Index; 

Panamax: the Panamax 4TC Index; and 

Supramax: the Supramax 6TC Index.7

The Fund will seek to achieve its 

investment objective by investing 

substantially all of its assets in the 

Freight Futures currently constituting 

the Benchmark Portfolio. The 

Benchmark Portfolio will include all 

existing positions to maturity and settle 

them in cash. During any given calendar 

quarter, the Benchmark Portfolio will 

progressively increase its position to the 

next calendar quarter three-month strip, 

thus maintaining constant exposure to 

the Freight Futures market as positions 

mature. 

The Benchmark Portfolio will 

maintain long-only positions in Freight 

Futures. The Benchmark Portfolio will 

hold a combination of Capesize, 

Panamax and Supramax Freight 

Futures. More specifically, the 

Benchmark Portfolio will hold 50% 

exposure in Capesize Freight Futures 

contracts, 40% exposure in Panamax 

Freight Futures contracts and 10% 

exposure in Supramax Freight Futures 

contracts. The Benchmark Portfolio will 

not include and the Fund will not invest 

in swaps, non-cleared dry bulk freight 

forwards or other over-the-counter